The US military has made its largest investment in Canada’s mining sector in decades, spending millions amid a looming battle among nations to control the supply of cobalt.

On Tuesday, the Pentagon announced a $20m grant to help build a cobalt refinery in the province of Ontario, saying the investment will “create a more robust industrial base capable of meeting growing demand across both the defense and commercial sectors”.

In recent years, cobalt has emerged as a “key precursor material” in the race to build the batteries that power electric vehicles, electronics and military hardware batteries. With China controlling nearly 80% of the global cobalt market, the United States has looked for novel ways to diversify its supply chain among allied nations.

The multi-million dollar grant was made by the US Department of Defense through the Defense Production Act, a statute meant to expand domestic production capability, and will aid in the construction of the facility in northern Ontario. The Canadian government is contributing an additional USD$3.6m to the project.

Electra Battery Materials says when the operation, located between the town of Cobalt and Temiskaming Shores, is up and running, it will be North America’s only cobalt sulfate refinery, capable of producing battery-grade materials. The company has been vocal about its aims reducing China’s market share in critical minerals processing.

Electra currently has an agreement with South Korea’s LG Energy Solution, to deliver 80% of Electra’s cobalt sulfate production for the first five years in operation. But the company says there are “no strings” attached to the Pentagon money, and no requirement to send any production to the USA.

The investment by the Pentagon marks the third since Joe Biden visited Ottawa in 2022. It is notable as the first large investment since the second world war, when the US poured money into Quebec’s aluminum industry in order to secure a steady supply of the coveted material.

Earlier this year, the US said it would help fund copper, gold, graphite and cobalt processing projects in Quebec and the Northwest Territories, but these grants totalled less than $15m.

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