EXCLUSIVE: Ken Hoffman On Biden's IRA Bill, What It Means For The EV Supply Chain And Why If It's Not NAFTA, It's A No-Go

The Inflation Reduction Act, a landmark federal bill enacted last year, is set to bolster critical mineral exploration, mining and production over the coming years.

The bill, which was signed into law by President Joe Biden in August 2022, aims to curb inflation, partly through investing in energy production, specifically clean energy.

Canada, being a close ally of the U.S. and a NATO country, is set to benefit from some of the $1.75 trillion investment because the country has one of the largest mining industries in the world, accounting for a large portion of Canada’s economy.

"In the U.S. they don’t want to mine, but they want to buy from sources deemed localized, deemed acceptable to U.S. regulators. Canada, we love you. This is where it will come from,” Ken Hoffman said during his keynote speech at the Prospectors and Developers Association Conference (PDAC) on Sunday.

Canada isn’t the only country set to benefit from the bill and there are numerous countries that have critical minerals and important metals, such as copper and nickel, that will be completely left out of the U.S. electrification effort — and not just China.

Where Will Critical Minerals Come From?

“What does the IRA mean? It means they need to produce batteries in North America. It means they need to have a certain percentage of the battery with quote-unquote, domestic content,” said Hoffman, the co-head of the EV battery materials research group and senior expert at McKinsey & Company, while pointing to a color-coded chart of the world at the conference.

Hoffman then went on to point out that countries included in the North American Free Trade Agreement (NAFTA), specifically Canada, the U.S. and Mexico, will be the most important, followed by countries with free trade agreements with the U.S. “and then there’s everybody else,” Hoffman said.

“If I have a lithium mine in Argentina and a lithium mine in Chile, in Chile you count the OEM's (original equipment manufacturers) in the U.S. want your materials, if I’m in Argentina, no,” he added.

Hoffman then explained how important it is for automakers to be able to access the financial incentives the U.S. government will provide for EVs that are produced in North America.

“The big move will be away from China. It's a geopolitical world,” Hoffman said, adding, “Why? Jobs. The move from a combustion engine to an EV will [cause the loss of] millions of jobs.”

“Governments want to keep as many jobs as possible [at] home and so they’re putting in this legislation to try to keep those jobs local, and boy are they incentivizing that. You will see that here and we do think this is going to set up a major, major shift,” he said. “Watch how big Canada becomes. Watch how big Australia becomes. If you look lithium, watch how big Chile will become.”

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Photo: KPs Photography AND Film via Shutterstock