Prime Minister Mark Carney’s first federal budget proposes billions of dollars in tax incentives and planned direct investment to advance domestic critical minerals projects as part of a broader industrial strategy meant to position Canada as a resource powerhouse and steel the country against a volatile geopolitical landscape.

Budget 2025, announced on Nov. 4, included a plan to create a $2 billion Critical Minerals Sovereign Fund that will make “strategic investments” in critical minerals projects and companies, a First and Last Mile Fund focused on getting near-term critical minerals projects to production, new funding for working with allied countries to stockpile critical minerals for national security and an expansion of the eligibility for the Critical Minerals Exploration Tax Credit (CMETC) to include 12 new minerals and metals with defence, semiconductor, energy and clean technology applications.  

These measures came just days after Natural Resources Minister Tim Hodgson announced 26 new investments and partnerships with allied countries under the G7 Critical Minerals Production Alliance. The government said these investments could unlock $6.4 billion of critical minerals projects, including offtake agreements with Nouveau Monde Graphite and Rio Tinto. The government also issued an order in council designating critical minerals essential to defence and security, enabling the government to establish domestic stockpiles.

Photinie Koutsavlis, vice-president of economic affairs and climate change at the Mining Association of Canada (MAC), told CIM Magazine in an interview that critical minerals miners have struggled to advance their projects in recent years, due to a combination of slow permitting times, lack of access to capital and infrastructure challenges in remote locations. In addition, she said China’s ability to dominate markets across a range of commodities can make some projects “uneconomic.”

She said both the budget promises and the G7 announcements that preceded them suggest the government now understands those challenges. She called the proposed investments “Christmas for the mining sector,” but also said the government needs to move quicker than it has in the past to implement them. 

“It takes some time to get mines built; we have to start building them now so that when prices do start creeping up [alongside] demand…we have the ability to capture that market,” she said.

Mining Association of British Columbia president and CEO Michael Goehring said in an interview the budget was “good news for Canadian and allied supply chains. It’s a geopolitical imperative to accelerate supply chains and critical minerals that are subject to market manipulation.” 

Building strategic capacity 

The new Critical Minerals Sovereign Fund, which will receive $2 billion over five years starting in 2026-27, will back critical minerals projects through equity investments, loan guarantees and offtake agreements. The budget also set out $50 million for Natural Resources Canada to support the delivery of the fund. 

“I’m glad to see we’re starting to put up more of our own money in critical minerals,” Heather Exner-Pirot, senior fellow and director of energy, natural resources and environment at the Macdonald-Laurier Institute, said in an interview. “It was a mistake to not invest in our own projects and wait for the U.S. to invest,” she said, referencing recent U.S. government investments in two Canadian critical minerals companies, Trilogy Metals Inc. and Lithium Americas. 

The government also sees critical minerals as part of its defence industrial strategy. The budget earmarked $443 million over five years to Natural Resources Canada and Innovation, Science and Economic Development Canada for developing “innovative critical minerals processing technologies,” supporting joint investments with allied countries in Canadian critical minerals projects, and developing a critical minerals stockpiling mechanism “to strengthen Canadian and allied national security.” 

Exner-Pirot noted that Canada is one of the “very few” mineral exporters in the NATO alliance. “Most European countries in NATO are mineral importers, so it’s important we do this,” she said.

Todd Stone, president and CEO of the Association for Mineral Exploration British Columbia, also highlighted in an interview the expansion of CMETC eligibility to include bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin and tungsten as part of this effort. 

“It’s not like we’re going to have the second largest navy or army tomorrow, but…where we can step up is the provision of the critical minerals that our allies need for their defence industries,” he said. “Expanding the tax credit to include those critical minerals is just a really smart way to deploy resources to help those projects move forward faster.”

He said the organization was pleased to see the CMETC extended for another two years.

Tax incentives and midstream investments 

In addition, the budget announced plans to expand eligibility for the Clean Technology Manufacturing Investment Tax Credit to support polymetallic extraction and processing, as well as to add antimony, indium, gallium, germanium and scandium to the list of eligible critical minerals. It also proposed to create a “productivity super-deduction,” which would be a collection of tax incentives that will allow businesses to write off a larger share of new capital investments, such as in machinery, equipment and technology, right away.

The First and Last Mile Fund will receive $371.8 million over four years, starting in 2026-27, to support the development of critical minerals projects and supply chains at the upstream and midstream segments. The fund will absorb the previous Critical Minerals Infrastructure Fund and its existing funding, which the budget said would enable it to provide up to $1.5 billion in support through to 2029-30.

MAC advocated for the development of the fund in its pre-budget submission. Koutsavlis said she is hoping to see funding for regional infrastructure such as roads or rail in the upstream portion. At the midstream segment, she said the government should focus its capital on building up domestic processing capacity. Canada has seen four smelters close in the past decade, and the one remaining copper smelter, Glencore’s Horne facility in Quebec, has had challenges getting enough feedstock, she said. Meanwhile, China controls about 69 per cent of processing capacity of rare earth elements globally.

“There’s been a lot of discussions, in terms of how do we keep that value in Canada—how do we keep mining it, refining it, smelting it and turning it into products we use and need in Canada,” Koutsavlis said. However, she noted that the government could face a “timing” challenge of making sure there are enough mines to supply any new smelters.

Faster approval and stronger partnership

The budget set out $213.8 million over five years, starting this year, for the Major Projects Office (MPO) that launched in August and its Indigenous Advisory Council. It also proposed to provide $10.1 million over three years, starting this year, to Crown-Indigenous Relations and Northern Affairs Canada to support Indigenous rightsholders during consultation on national interest projects.

The MPO will “structure and coordinate” private sector, provincial and territorial and federal funding for projects, and a key priority will be to help more projects get to a final investment decision within a two-year window, the budget said.

The Canada Infrastructure Bank will also be given an additional $10 billion in capital and will have an expanded mandate to include any nation-building projects that have been referred to the MPO, “regardless of sector or asset class.”