Business Brief: Ottawa’s risky mining bet

Good morning. Ottawa is betting big on critical minerals to strengthen Canada’s economy, but many of the mining projects it’s backing come with considerable financial risks. With taxpayers helping foot the bill, the question is whether the potential payoff will be worth it. More on that below.

Up first

In the news

Steel: Mélanie Joly has given Stelco’s U.S. owner 15 days to honour its job commitments or potentially face legal action over planned layoffs.

Venture capital: Ottawa is rolling out $1.75-billion in funding to boost Canada’s venture capital sector, though the plan falls short of demands from early-stage startup investors.

Trade: Canada and Turkey have announced a strategic partnership to deepen co-operation on energy, defence and trade, as Ottawa seeks to reduce its reliance on the U.S.

In focus

The price of building Canada’s mining future

It’s Jeff Jones here, energy and resources editor at Report on Business. A top focus for our coverage is the objective championed by Prime Minister Mark Carney and his government to build everything everywhere. Energy, infrastructure, mining – Mr. Carney touts major projects as the way to shore up a national economy that’s under attack by U.S. President Donald Trump.

So far, large chunks of this promised construction boom are set for funding by various arms of the federal government. That is, you and me. Exhibit A: the proposed Pacific Link oil pipeline to the West Coast from Alberta. Federally owned Trans Mountain Corp. is responsible for 45 per cent of that multibillion-dollar project, which is now deemed to be in the national interest.

Critical minerals are also a core focus of the hoped-for construction boom. But working mines often start with small prospectors, which do not have the financial wherewithal to build projects themselves. In addition, lenders fear the risks inherent in early-stage development, and stay away. Enter, once again, the feds.

For this weekend’s big read, mining correspondent Niall McGee has taken a hard look at some of the projects the government has decided to back to expand Canada’s position in the global race for critical minerals. Those include such minerals as graphite, palladium, dysprosium and terbium (check out the story to find out what those are used for). Many are led not by transnational players, but by junior companies that have not developed mines of their own.

Niall has spent months digging into this issue. His reporting shows the government is aware that there are numerous risks, but sees its role as necessary to bridge a funding gulf in mine development.

“Junior mining is one of the riskiest parts of the market to invest in. Blow-ups and cost overruns are endemic. So it seems almost inevitable that the taxpayer is going to suffer some losses,” Niall tells me.

“The government is also more or less admitting that the ride is going to be rough. The people I spoke to made it clear the priority isn’t to actually make money but to encourage the private sector to get on board.”

History shows that some flops are highly likely, but that a few of the proposed projects will attract private capital as properties are de-risked and construction gets underway.

Should the Canadian taxpayer play the role of mining financier of first resort? Read the feature to draw your conclusions.

Charted

Despite years of warnings about household debt, Canadians are sitting on nearly $20-trillion in net worth, thanks largely to rising investments. That financial cushion has helped keep the economy resilient, but a stock market downturn could put it to the test, investment reporter Tim Shufelt writes.

Quoted

Canada’s chief trade negotiator says there’s no timeline for resuming formal trade talks with Washington, despite ongoing communication between the two countries.

Up next

More files we’re following

By the numbers: Statistics Canada reports August retail sales and September manufacturing sales.

Before the bell: Earnings include American Express and Rogers Communications.

Morning update

Global markets drifted lower as a rout in global tech shares eased, after concerns over the ​enormous funding needs of AI had hammered Wall Street.

Wall Street futures were mixed, while TSX futures were in the red.

Overseas, the pan-European STOXX 600 was down 0.58 per cent in morning trading. Britain’s FTSE 100 fell 0.54 per cent, Germany’s DAX declined 0.89 per cent and France’s CAC 40 gave back 0.78 per cent.

In Asia, Japan’s Nikkei closed 0.34 per cent lower, while Hong Kong’s Hang Seng gained 0.69 per cent.

The Canadian dollar traded at 71.39 U.S. cents.