An employee pushes a charges crate in the packaging area of a Eurenco plant in Bergerac, France, in 2024. The French state-controlled company plans to work with Nalagx to build a new explosives plant in Canada.LUDOVIC MARIN/AFP/Getty Images
A new Canadian company plans to build the country’s biggest explosives factory since the Second World War with the help of France’s state-controlled Eurenco, Europe’s top maker of military explosives and propellants.
Patrick Gagnon, a former Liberal MP who is the managing partner of Ottawa’s the Parliamentary Group, a government relations and lobbyist firm, said his new company, Nalagx Corp., and Eurenco will announce a letter of intent Tuesday in Paris to finalize negotiations on building the factory.
In an interview, Mr. Gagnon said the project, with a potential value of US$1-billion over several years, would generate 500 direct jobs in Canada. The products would be “energetic” materials – propellants and explosives – for artillery shells and gun ammunition. They would be exported largely to Europe’s NATO countries, which are rebuilding their arsenals after decades of underinvestment.
“Our agreement is a concrete illustration of the rebirth of the defence industry in Canada,” said Mr. Gagnon, Nalagx’s CEO.
Thierry Francou, Eurenco’s CEO, said in a statement that the letter of intent “reflects our commitment to working hand-in-hand with strategic partners in Europe and beyond, to strengthen industrial sovereignty and ensure security of supply for our European and NATO customers.”
In an interview with The Globe and Mail, he added that the negotiations with Nalagx are going well and that the two companies expect to have a formal agreement in early 2026. “We need additional capacity for explosives and propellants in all the NATO countries,” he said. “Today, the most important market is Europe, but we expect to sell products in the U.S. and Canada too.”
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Nalagx is backed by Canadian and U.S. private equity firms, whose identities were not revealed. Jared Mintz, the New York private equity executive who is Nalagx’s chief financial officer, said two financing tranches are being arranged to build separate explosive and propellant plants on the same “campus.”
The first, worth US$406-million, has private equity funding commitments of about US$100-million. Nalagx is in talks with Canadian commercial banks and the country’s export-credit agency, Export Development Canada, for loans that would cover the rest of the package.
The second tranche, worth US$200-million, has about US$50-million in private equity commitments so far, Mr. Mintz said. Again, the goal is for banks and the EDC to cover the rest, though no final agreements have been reached.
Eurenco CEO Thierry Francou says his company expects to have a formal agreement with Nalagx in early 2026.BRUNO FAHY/AFP/Getty Images
Eurenco is not investing directly in the explosives and propellant sites; it will operate the factories for a fee structure, which is under negotiation.
Nalagx is looking for a manufacturing site that ideally would be close to rail links and a shipping port, Mr. Gagnon said. It has identified five potential sites in Canada.
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The company knows that confirming a manufacturing location may be difficult, given the potential dangers of factories that make explosives. In 1917, during the First World War, Halifax was virtually leveled when a French cargo ship laden with high explosives collided with a Norwegian ship. The French ship caught fire, triggering a detonation that killed 1,963 people and injured some 9,000 more.
Canada does make ammunition. The biggest supplier is Quebec’s General Dynamics Ordnance and Tactical Systems-Canada Inc., which is owned by General Dynamics Corp. GD-N of Virginia. Its 1,200 employees make a broad range of ammunition, as well as shell casings and hand grenades, for the Canadian Armed Forces.
Materiel for the 105-mm and 155-mm tank and artillery shells is in particularly high demand as Ukraine scours the planet for ammunition in its fight to repel Russian forces. European countries, including Germany, Czechia and France, have been the biggest suppliers. Mr. Gagnon says the Canadian military would be a Nalagx customer, though probably only a small one.
Eurenco is owned by French state holdings agency Agence des participations de l’État. It has 1,500 employees and annual sales of about €450-million ($732-million). Its four production sites, including one in Sweden, make explosives, propellants and military fuels.
As defence spending climbs among NATO countries, Eurenco has been expanding its operations. Last month, it teamed up with Poland’s state-run arms group, PGZ, to produce charges and propellants for artillery shells. The joint venture will see the construction of three factories that will concentrate on the output of 155-mm shells.
Mr. Gagnon said the Nalagx-Eurenco project “is the biggest and most important private-sector investment in this particular field in Canada since World War II.”
Canada was once one of the world’s biggest makers of munitions. During the Second World War, it made about 1.9 million artillery shells a month.