Key Takeaways:
- Canada Growth Fund is investing US$25-million into Ontario rare-earths recycler Cyclic Materials Inc.
- The investment is part of Ottawa’s push to build a stronger supply chain in critical minerals and reduce reliance on China.
- Cyclic plans to remove permanent rare-earth magnets from end-of-life products and extract raw rare earths at a separate facility in Kingston.
- The company’s technology could reduce the need to mine new earth elements globally, lessening environmental degradation.
- Canada Growth Fund has made 16 investments totalling $4.9-billion to date, with a focus on clean Canadian technologies in the resource sector.
Introduction to Canada Growth Fund’s Investment
Canada Growth Fund is investing US$25-million into Ontario rare-earths recycler Cyclic Materials Inc., marking the second early-stage, clean-technology, critical-minerals financing for the fund in just over a week. This investment is part of Ottawa’s push to build a stronger supply chain in critical minerals, with the goal of reducing the country’s reliance on China and diversifying away from the United States during the trade war. Canada Growth Fund, which was set up in late 2022, is an arm’s-length government fund with $15-billion at its disposal to invest in clean Canadian technologies in the resource sector that have the potential to operate at a large scale.
Cyclic Materials Inc.’s Technology and Plans
Cyclic Materials Inc. plans to remove permanent rare-earth magnets from end-of-life products, such as used electric-vehicle motors, on a commercial scale at a "spoke" plant in Arizona, and then extract raw rare earths at a separate "hub" facility in Kingston. Both plants are currently under construction. The company’s technology has the potential to reduce the need to mine new earth elements globally, which could also considerably lessen environmental degradation. The money raised from Canada Growth Fund will be invested into Cyclic’s Kingston plant, and put toward research and development in Canada. According to Ahmad Ghahreman, the company’s co-founder and chief executive officer, "Cyclic is at a pivotal moment in its growth," and the investment from Canada Growth Fund will enable the company to access financing that ensures its growth in Canada and globally.
Challenges in Rare-Earths Recycling
The recycling of rare-earths elements is only a tiny part of the global supply chain, accounting for less than 1 per cent. China dominates the global supply chain of mined and processed rare earths, supplying about 85 per cent to 90 per cent of the market. Past Canadian attempts to commercialize recycling technology haven’t always panned out, with Toronto-based Li-Cycle Corp. being a notable example. Li-Cycle once had a promising lithium ion battery recycling technology, but it was forced to seek creditor protection last year due to substantial cost overruns as it attempted to scale up its production. Many of the company’s assets were subsequently acquired by Glencore PLC. Mr. Ghahreman, who worked as a technical adviser for Li-Cycle from 2018 to 2022, is aware of the challenges involved in rare-earths recycling, but is confident that Cyclic’s technology can be successfully ramped up.
Canada Growth Fund’s Investment Strategy
Canada Growth Fund is one of several federal funding arms, alongside Export Development Canada and the Canada Infrastructure Bank, that are ramping up investment into Canadian critical-minerals companies. According to Yannick Beaudoin, CEO of Canada Growth Fund Investment Management, the fund typically takes more risk by buying equity in companies compared with the lower-risk loans that both EDC and CIB grant. Canada Growth Fund invests in projects that are close to a final investment decision, have or are about to get permits, and need capital to build or expand a mine. The fund has made 16 investments totalling $4.9-billion to date, with a focus on clean Canadian technologies in the resource sector. While the risk is elevated in the case of both Cyclic and Mangrove, the dollar amount in play is much lower than some of Canada Growth Fund’s large-scale project investments, where the risk is also considerably lower.
Conclusion and Future Prospects
The funding from Ottawa into Cyclic is part of a US$75-million Series C equity raise led by U.S. asset manager T. Rowe Price Associates Inc. The success or failure of many of Canada Growth Fund’s investments won’t be known for a long time, as most are years away from making money. However, according to Mr. Beaudoin, the majority of its investments are "tracking on plan," meaning the companies are hitting their milestones. As Canada continues to invest in clean technologies and critical minerals, the country is poised to play a significant role in the global supply chain, reducing its reliance on China and promoting sustainable development. With the investment in Cyclic Materials Inc., Canada Growth Fund is taking a crucial step towards building a stronger supply chain in critical minerals and promoting the growth of clean Canadian technologies.