Could Canada Provide the Critical Minerals that EVs Need?

Western nations seeking to reduce dependence on China for critical minerals have identified Canada as a potential alternative source.

However, the country faces significant funding challenges that could limit its ability to capitalise on this opportunity.

Key materials used in EVs include lithium, copper and rare earths for motors, with mineral demand for EVs and battery storage projected to grow 30 times by 2040 according to the IEA.

Canada's ambitions to expand its critical minerals sector require substantially more investment than current levels suggest.

Success in this area could enable the nation to strengthen its own supply chains while supporting allied countries in their diversification efforts.

The Royal Bank of Canada (RBC) has published research examining the steps Canada must take to build its sourcing capabilities in this sector.

The critical minerals landscape

Critical minerals are raw materials that governments designate as essential to their economies.

No universal list exists, as nations maintain different criteria for what qualifies as critical based on their specific industrial needs and priorities.

Certain materials appear consistently across national strategies, including copper, lithium, cobalt and nickel.

Growing demand for these materials – driven by expanding EV production and renewable energy infrastructure – has prompted countries to reassess their procurement strategies.

Many nations are now investigating domestic mining potential rather than maintaining reliance on international suppliers.

Six key commodities – cobalt, copper, graphite, lithium, nickel and rare earth elements – are expected to see increased demand across EVs, clean energy infrastructure, space, defence, manufacturing and electronics sectors.

While this represents a significant opportunity, RBC's analysis suggests Canada's shortage of patient, risk-oriented capital could hinder its progress.

Challenges preventing expansion

Canada's geological advantages have not translated into market leadership.

According to RBC, the country supplies just 2% of global output for the six core metals.

The Canadian government suggests this could increase to 14% of total supply by 2040, though achieving this depends on successful project funding and strategic prioritisation.

Among Western nations pursuing supply chain diversification, Canada possesses some of the strongest natural advantages.

Quebec, Canada and Ontario, Canada contain high-grade lithium belts and graphite deposits.

Manitoba, Canada offers substantial nickel resources, whilst British Columbia, Canada holds competitive copper reserves.

Rare earth element deposits are distributed across Newfoundland, Canada, Labrador, Canada and additional regions.

However, the sector remains undercapitalised, creating an urgent need to address funding shortfalls.

The gap between geological potential and actual production highlights systemic barriers that have prevented Canada from capturing a larger share of the global market.

Investment patterns reveal a persistent misalignment between resource availability and capital allocation.

This disconnect has allowed other nations to establish stronger positions in critical minerals markets despite Canada's capabilities.

Addressing these structural challenges requires coordinated action across government, industry and financial sectors to redirect capital towards strategic priorities. Key obstacles include:

• Insufficient focus - between 1999 and 2024, only 11% of Canada's mining capital has flowed to critical minerals development. Gold and precious metals have attracted 70% of investment instead. Australia allocated twice as much capital to critical materials during the same timeframe
• Limited domestic diversity - just 19% of Canada's publicly listed S&P/TSX Composite mining firms are diversified miners, indicating narrow operational focus
• Processing infrastructure gaps - Western nations lack refining and processing facilities, with China controlling 70% of global refining market share for 19 out of 20 most critical minerals. Canada maintains only one active copper smelter/refinery

Pathways to development

Canadian companies must increase capital deployment across the entire value chain.

The Canada Growth Fund (CGF) has completed three mineral investments, including Thompson Nickel Mines in Manitoba, Canada, and has committed funding to Nouveau Monde Graphite facility in Quebec, Canada.

These investments reflect governmental commitment, though substantially more capital is required to achieve meaningful transformation.

Developing mineral corridors and shared processing infrastructure could address multiple challenges simultaneously.

Lithium projects could anchor regional refining hubs, for example. Corridor economics might also encompass logistics, transport and supporting infrastructure.

Collaborative projects and integrated corridors could improve both project financing prospects and sustainability outcomes.

According to RBC, strengthening ties with the US represents another opportunity to close the capital gap.

The US government is deploying significant resources to bolster defence and industrial supply chains, positioning Canada as a potential key supplier through formal partnerships.

Maintaining diversification through alliances with European and Asian nations would complement this strategy, the report suggests.