The federal government has launched its long-awaited Indigenous loan guarantee program, a move advocates say will help Canadian critical minerals infrastructure get built more quickly, and facilitate increased direct First Nations ownership in resource projects.
Ottawa’s budget released Tuesday outlines a program that would provide up to $5-billion in loan guarantees and be “sector agnostic” – meaning that oil and gas projects could be eligible. In the months leading up to the budget, advocacy groups including the First Nations Major Projects Coalition had worried a federal loan program might rule out oil and gas projects because they don’t line up with Ottawa’s plans to reduce greenhouse gas emissions.
The coalition and other groups said a federal loan guarantee program should be sector agnostic, in part because the oil and gas sector already has working relationships with many Indigenous communities, and because those communities want to set their own investment priorities.
A federal loan guarantee program will help Canada develop important infrastructure including new mines, said coalition chief executive director Niilo Edwards.
“It’s a game changer in terms of filling a financing gap for Indigenous participation as equity owners in major projects across the country – and will empower free, prior and informed business decisions to take shape,” Mr. Edwards said.
Free, prior and informed consent is a right held by Indigenous peoples in the United Nations Declaration on the Rights of Indigenous Peoples, which Canada in 2021 pledged to implement.
“This is about a tectonic change in Canada, to say that it’s a national priority for us as a country to undertake reconciliation,” said Qasim Saddique, a principal consultant at Suslop Inc., which is working with Marten Falls First Nation to move forward development in Ontario’s Ring of Fire mining region.
“This is a massive opportunity for Nations who are typically told historically that ‘if you want to participate in major projects, bring the capital to the table.’ ”
With the federal government as a guarantor, First Nations could see loans granted up to 500 basis points lower than they would normally qualify for, Mr. Saddique estimates. And since Ontario’s loan guarantee program is limited to electricity infrastructure projects, the new federal program opens up access to other sectors, including mining. But easier access to capital also comes with increased responsibility to do in-depth diligence on projects to make sure the investment case makes sense, Mr. Saddique said.
“That’s certainly something we will be advising our clients on,” he added. “Is this project financeable by the market on its own, or is it a marginal project?”
In the Ring of Fire, federal loan guarantees could facilitate Indigenous communities buying stakes in mining projects, as well as in infrastructure such as road projects into the region, and in mining services businesses, such as drillers and helicopter companies.
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Marten Falls is leading federal environmental impact assessments into roads into Ontario’s Ring of Fire and co-leading another assessment alongside Webequie First Nation. The roads, which require a minimum of $2-billion in funding, would connect both the two Indigenous communities and the isolated Ring of Fire mining camp to the provincial highway network about 300 kilometres to the south.
Martin Turenne, chief executive officer of FPX Nickel Corp., said the Indigenous loan program is good news for the capital-starved Canadian mining sector. Vancouver-based FPX is developing a nickel project in central British Columbia.
“If capital can flow from First Nations partners to help support the development of the next generation of mining projects, and specifically critical minerals mining projects in Canada, I see that being very much of interest to the sector,” he said.
“It goes hand in hand with a collaborative approach, and a consent-based approach to decision making, project design and to permitting.”
Indigenous communities can find it difficult to arrange conventional loans because of multiple factors, including Indian Act provisions that restrict the use of on-reserve assets as collateral.
In its fall economic statement this past November, Ottawa said it would work on developing an Indigenous loan-guarantee program, with details to come in this year’s budget.
Several provinces have previously launched Indigenous loan guarantee programs.
Ontario launched its Aboriginal Loan Guarantee Program in 2009. As of March, 2023, 11 loan guarantees amounting to about $500-million had been approved under the program, according to the Ontario Financing Authority.
Alberta launched its Alberta Indigenous Opportunities Corp. in 2019. As of this past March, AIOC said it had backed seven deals that provided more than $680-million in loan guarantees to 42 Indigenous groups in the province.
Saskatchewan announced an Indigenous loan guarantee program in 2022 and British Columbia announced a $1-billion loan guarantee program in its February, 2024, budget.
Pierre Gratton, president of the Mining Association of Canada, said the loan-guarantee program could allow Indigenous communities to invest in stable revenue-generating projects that service the mining sector, such as power stations.
“Anything that helps to deepen participation in the mining sector by Indigenous communities is something we welcome,” he said.
Wendy Stueck
Niall McGee