Canada to take equity stakes in critical mineral projects under new $2B sovereign fund

Canada launches a $2 billion critical minerals sovereign fund to take equity stakes in mining projects, expand tax credits, and counter China’s dominance in global supply chains.

Canada is moving to deepen its role in the global energy transition through a sweeping new federal budget plan that includes taking direct equity stakes in critical mineral projects. The initiative, announced Tuesday in Ottawa, is designed to open up new mining ventures and strengthen Canada’s position as a major international supplier of strategic minerals.

The budget establishes a $2 billion “Critical Minerals Sovereign Fund” over five years to support equity investments, loan guarantees, and offtake agreements. Ottawa also plans to expand the exploration tax credit list by adding a dozen more critical minerals, extending incentives to materials used in electric vehicles, batteries, clean technology, and defence manufacturing.

Expanding Canada’s critical minerals list

Many of the minerals newly added to the list — including tin, tungsten, and chromium — are key inputs not only for the battery and EV supply chain, but also for semiconductors, defence technologies, and renewable energy systems.

“The scale of the opportunity for Canada on critical minerals is massive,” said Rachel Samson, vice-president of research at the Institute for Research on Public Policy.

“There’s pretty much unlimited funds that we could allocate to that, and it’s likely going to pay off.”

Aligning with G7 partners against China’s dominance

The move follows last week’s signing by Energy Minister Tim Hodgson of Canada’s entry into the G7 Critical Minerals Production Alliance, aimed at countering China’s control of the global supply chain.

China remains the world’s dominant producer and refiner of critical minerals, holding an average 70 % market share across 19 of 20 key minerals, according to the International Energy Agency (IEA). Its control is even stronger in rare earth element refining, where it accounts for 91 % of global production — essential for electric vehicles, wind turbines, and advanced defence systems.

Samson said Canada’s willingness to take equity positions and sign long-term offtake agreements marks a strategic shift:

“That’s going to be significant because right now China has the market power to influence commodity prices, which leads to low levels of investment in projects in Canada.”

Funding for upstream and midstream development

The budget also earmarks $371.8 million over four years to advance upstream and midstream critical mineral projects, focusing on bringing near-term developments into production.

Additionally, Ottawa plans to consolidate its existing critical minerals infrastructure fund—worth $1.5 billion over three years—into the new sovereign vehicle, streamlining government support for mining infrastructure and processing capacity.