Frank Giustra on Another Missed Opportunity for Canada
23:11 Share

I've been looking forward to this, getting a chance to talk with Frank Giustra. You know him, he's been a winner of the Order of Canada. So heavily involved in philanthropic endeavors, though, both globally and domestically through the Giustra Foundation. I know lately he's been spending a huge amount of time as co-chair of the Crisis Group, an independent nonprofit NGO committed to preventing and resolving deadly conflict.

obviously busy in this time of year. But I first met Frank over 40 years ago. We were both starting at Merrill Lynch. But here's the thing. The next thing I know, he was the head of Yorkton Securities and helping that firm become a leading investment banker for the resource industry. I mean, he has a long history in Canada's mining industry, president and CEO of Fiore Group, which focuses on natural resources. And that's what I want to talk to Frank about today. First of all, Frank, very much appreciate finding time for us.

Great being here, Michael, as always. Well, I want to just start. Let's talk the broad picture for a second. It would seem to me this is a pretty good time to be coming into mining right now. I mean, I'm thinking I just read India, by the way. I think it was on Friday. I read that India wants some huge amount of copper, you know, for what they're doing there. And that's not a rare story. I mean, I'm seeing that every second day. I feel like we're not even close to meeting that demand. So it seemed like a pretty good time to be at least looking at this industry. Yeah.

Yeah, India is not alone, by the way. It's the entire planet. And here's what's happened. So at this moment in time, we're facing in the next 15, 20 years, a very severe shortage deficit of the critical minerals that are going to be necessary to get us to net zero by 2050.

I've spoken to heads of senior mining companies. I've read all the analyst reports. No one knows where these metals are going to come from. And let's talk about what those metals are. You mentioned copper. Obviously, that's the primary battery metal. But there's cobalt, nickel, manganese, graphites, and lithium. All of those are critical minerals for our energy transitions.

And we don't know where they're going to come from. And now the only country on the planet that was well prepared was China.

China's been quietly for 20 years now, two decades, have been quietly investing around the world, helping to build infrastructure and emerging economies, all for one purpose, to get their hands on the resources that they need, both energy and metals. Okay. And they've spent probably $1.3 trillion in 165 countries, 20,000 projects in low and middle income countries, and

building infrastructure to secure those resources. The rest of the world woke up to this about a year ago. And I started noticing when I was approached by some American representatives a year and a half ago, suggesting that people like myself, because I've been financing mining worldwide for a long time, why aren't we

competing in Africa. And Africa has become the battleground, if you're going to call it such a thing. And I think we're heading towards a resource war, global resource war, and the battle lines are being drawn. And the biggest...

continent where those battle lines are being drawn is Africa. And as you know, as you mentioned, I'm the co-chair of the International Crisis Group, so we're well aware of all of the deadly conflicts that are taking place. And there are dozens of them taking place across Africa, whether it's jihadists in the Sahel and the French fighting them, them backing off, then the Wagner group from Russia coming in. Now you've got Saudi Arabia, you've got Qatar, UAE, Turkey, all

All of these countries, the United States is still fighting a 20-year counterterrorism campaign that has achieved nothing except create more terrorists. But at the end of the day, you had several civil wars taking place, military coups. There were nine military coups in the last three years in Africa.

All of this is happening because there's a prize. Whether they say it or not, the prize is the mineral wealth, the resource wealth of these countries. And like the Wagner Group, which is now called, they've rebranded, by the way, since their fearless leader got blown up in a plane. They're now called the Africa Corps. But same gig. They basically lend their protectionism.

protection services to regimes that need protection either from their own people or from jihadist movements. And in return, they get mineral concessions and they make billions from this stuff. So that was that's sort of the background. And you mentioned earlier, the deficit is real. Copper alone, we're going to have to mine more copper in the next 15 years than we mine the entire history of this planet.

We're going to need four times, somewhere between four and six times the critical minerals that we consume today. We're going to need them by 2040. And again, no one knows where they're going to come from. So you've got all this fighting going on, the conflicts. Latin America, where I've done a lot of business, you've got a very, the environment has changed very quickly. There's a lot of social unrest.

They're raising the taxes and royalties on mining companies at the same time that these mineral deposits are being depleted and the grades are getting lower and lower, meaning you have to move more dirt to get the same amount of ore. Peru, Chile, Ecuador, all of these places have issues. And so this is happening all of the time when the world is experiencing deglobalization.

You know, we're getting the balkanization of supply chains, French shoring, offshoring. And, you know, Canada makes statements like we will ban China from investing in our critical minerals. China makes statements like we're going to ban the export of graphites. Indonesia talking about creating an OPEC system.

style cartel for battery minerals. There are countries everywhere, even the DRC in Africa, which is one of the biggest metals producers there, especially for cobalt and nickel and copper. They're basically suggesting they want their state-owned mining company to get off-takes from the local mining companies so that they can keep the metals themselves as opposed to exporting them out. So all of this is taking place and

Here we are in Canada, second largest landmass on the planet, with almost every critical mineral that's needed exists in Canada, largely unexplored. The best mining expertise on the planet in terms of whether it's capital markets, technical, engineering, legal, accounting, environmental. We have thousands of firms that specialize. We're a global leader in mining expertise. We could be a global powerhouse in critical minerals.

And we're not doing anything about it. And we're starved for capital. The government is not really implementing the kind of visionary policies that countries like China, Saudi Arabia, now the U.S., you know, is looking to secure the metals around the world through various arrangements with other countries by, again, investing in infrastructure. And here we're sitting in Canada with all of this wealth.

and potential job creation work projects, and we're doing nothing about it. And it's just tragic. We could be an absolute global powerhouse in these minerals that are going to do nothing but go up in price. Because if you have this deficit, the only way you can meet the demand is if you raise the prices. And so that's going to happen. Things like copper and nickel and cobalt are going to go through the roof someday.

And we have all this wealth and we're doing anything about it. And it's just tragic. This is why I went public with that article about our own pension funds and our investing in Canada, which I think is absolutely tragic. And, you know, we can talk about that if you like. But there's an opportunity here. But it needs vision. It needs a bold vision. It needs leadership that I don't think we have currently. And it does need government help. And I can give you the list of things that the government can do

to help solve the problem.

Well, I mean, I find it really worrisome. We had an opportunity in oil and gas too, that we did just about everything we could not to take advantage of it. And again, I hope people are listening closely to what you're describing. On the one hand, people are going, oh yes, we know we're going to have a renewable and EV revolution. On the other, the fact is we don't even have close to the minerals necessary to take even a couple of steps because there was no planning for it whatsoever. And then three, Canada is so well positioned. I mean,

You know, the good Lord's handed us an opportunity here. We've got the resources, as you outlined beautifully. And of course, you're having direct experience this right now, looking at crises around the world with the crisis group. I mean, this is a safe place to be doing it.

I'm flabbergasted. Have you talked to some of the government officials? You know so many in the mining industry in this country. What are they saying? Because I can't afford to lose this. Yeah, I've talked to a lot of the industry people. I've not talked to government. I tried to get a meeting with the Federal Minister of Mines and Resources, and I couldn't get a meeting with him yet. But, you know, I've only started this campaign about bringing this issue to the

public awareness only a few weeks ago when I was made aware about our pension funds. And that is the part that is just absolutely, I'm flabbergasted that we can't get our heads around that our own pension funds, which manage about 35% of Canadian savings, have decided to invest more in China than they do in their own Canadian economy.

And if you compare it, you look at the direct comparison is Australia. OK, almost a similar economy, mineral wealth. They have their they call them superannuation funds. They're the same as our pension funds. And they made a decision to invest in Australia, whereas we have only.

25% of the assets under management invested in Canada, they have 60%. Whereas we only have 3% of pension fund money invested in public equities. The rest is in long-term government bonds, which, by the way, is a losing trade in an inflationary environment. But we only have 3% invested in Canadian public equities. They have 25%. They protect their mining industry. One of the largest dealers here in Canada, which does mining,

Most of the mining underwriting work in Australia says every time that they do a deal, the big orders come from the pension funds, from the superannuation funds. And they have more invested, the Aussie pension funds, more invested in their lithium producers than we have in our entire mining industry in this country.

And that is just unacceptable, unacceptable. And, you know, so what the pension funds were, whereas, you know, 30, 40 years ago, they were 80 to 90% invested in Canada. We've left. We're building China's economy.

To me, it's both comic and tragic that we're exporting our capital, our savings to grow China's economy when we're in a battle for critical minerals and we're not investing in our own country. And then we have the temerity to complain. You remember the takeover of tech was BC's crown jewel of mining.

And they tried to split tech into two components, the base metals and the coal company. Guess who blocked that split? The Chinese Sovereign Wealth Fund, which was one of the largest shareholders after the Japanese government in our largest mining company.

BCI, our British Columbia pension fund with $233 billion under management didn't have a single share of tech. And then the premier of British Columbia has the temerity to complain, oh my God, this can't happen. We can't lose our crown jewel. We're going to lose thousands of jobs.

But they do nothing about it. And we're sitting on $233 billion and they don't own any tech shares? I mean, to me, that's where the disconnect is happening. You know, there's a lot of talk. Yeah, we're going to do this. We're going to do that. You have to do something about it. And they're not. You know, we have capital. And if you think about it,

And I've been doing this for close to 45 years. As you know, we started together in this industry and I've been in the mining game for 40 years. And I've made most of 95% of my wealth outside of Canada. I've invested very little in Canada because it takes forever to get anything done here. So I just find this really tragic. But there's a solution.

And I can give you the laundry list of solutions how to fix this, but it needs bold and visionary and forward-looking policy makers.

I'll get into that in a second because, but first let me just, you just reminded me, I mean, we used to have Inco here. We used to have Alcan. We used to have Falcon Bridge, Miranda, Gold Corp. You know, I mean, there's a long list of names that I think people who aren't in the industry recognize. Well, we've lost their head offices. Well, think about the impact then. I'm just inviting people. This is serious stuff. You know, you've impacted an expertise in the workforce. Oh, research and development. Yeah.

Let alone, you know, Frank, I'm always on about this, but we demand certain public services and yet we're not prepared to earn them. I mean, can you imagine the revenue we're saying no to here? You know, and I say, we've been through this movie already. We forgo tens of billions of dollars in oil and gas. This is the opportunity of the EV and the renewable revolution, for goodness sakes. This is a government that's pushing it on the federal level. You know, fair enough. Well, God, let's take advantage of it.

I mean, I think it's a unique position, you know, as a safe country and the mining expertise. And oh, my gosh. I mean, as you see, my head's exploding here. And not to mention that this is a money making opportunity. This is a wealth creation opportunity. This is not a charity case. We're talking about the minerals that the entire planet is going to need in amounts that we don't have yet because it needs to be found, developed and mined. And that's a very long process.

But here's what's happened. So several things that have happened that have starved our industry here in Canada of capital. First of all, pension fund aside, we used to have dedicated mining funds in this country. I think in 2010, our total funds under management were dedicated just mining, were $16 billion. Today it's under $3 billion. So we've lost the institutional support for this sector.

As you mentioned, we lost our senior producers who traditionally helped not only explore, because if you think about it,

Traditionally, junior mining companies find 55% of the discoveries and the seniors find the rest, 45%. So we've lost our seniors. And they also provided funding to junior mining companies. So we've lost that capital as well. And one of the reasons, which is the part I find ironic here, is with all of this ESG movement, mining was...

a carbon emitting industry so yes a lot of the funds divested of their mining holdings because there was money is considered dirty which it isn't if it's done at the industrial level it certainly is if it's done informally and illegally as as it happens many countries around the world but industrial miners are very responsible they do you know they do it in an environmentally safe way um so

The ESG has caused all of these institutions to divest their mining interests, which I think is, you know, maybe they're well-meaning, these policymakers that create all these rules, but they haven't connected the dots. How do you get from here to net zero with all those critical minerals?

So I call it woke without wisdom because they haven't really – these minerals are not going to fall out of the sky. You've got to go find them. You've got to develop them, and it takes capital. And like I said, the juniors, which have traditionally fallen 55% of the global discoveries, are –

I've never seen a market like this so starved for capital where it's almost impossible to raise money in the capital markets because the institutions have gone and it's just become very difficult. So that's number one problem. Number two problem this country has is permitting.

It takes 12 to 15 years to permit a new mining project. I've done mining projects throughout Africa and Latin America where it takes us between 12 and 24 months or 18 to 24 months, depending on how lucky you get. You have a set time period. There's no uncertainty.

You know that if you do everything right in your permitting process, you're going to get your permits within two years. Here it takes 12 to 15 years. Investors, that's why we're not getting any capital. We have both provincial and federal permitting process. We should streamline it into one process and make it more efficient so that these mines can get into production. There are a ton of mines here, British Columbia and the Yukon and Ontario, Quebec, that have been in the permitting process forever.

And there's so much uncertainty that investors, as you know, the one thing investors don't like is uncertainty. They need to know what is the certainty of the outcome, then they can make a decision. So you've got that problem. And then you've got the lack of infrastructure in the remote parts of Canada where a lot of these minerals exist, or we think they exist. The Ring of Fire in Ontario, up in the Arctic near Inunavut. You need roads, you need ports, you need hydroelectric power, or even small plants.

modular nuclear reactors, which I think you can use in certain very, very remote places. But that is going to require infrastructure investment. This is where the government can come in. And we can even talk about public-private partnerships, matching funds, low-interest loans, increasing the flow-through amount on the flow-through shares for remote regions to make it even more attractive for investors to take risk to find these minerals in the Arctic and other places.

There's a laundry list of things you can do here. But again, it requires a government that understands the game, knows what to do, and is bold enough and has a vision like China or Saudi Arabia. You know, Saudi Arabia has this Vision 2030. China has this Belt and Road Initiative. These are long-term visions that require long-term capital. So they have their sovereign wealth funds that have these long-term visions.

view on investing, our pension funds could act in the same way because pension funds traditionally take a long-term view. So that's why I've been harping on this whole pension fund thing because it's capital that is currently sitting in either invested in economies elsewhere, private equity,

ETFs, you know, index funds, which, you know, I don't do anybody any good. And long term government bonds. I mean, how are you going to grow an economy by investing long term government bonds? That's the we need a different type of investing mentality in this country.

I'd say a couple of things jump out immediately. First is back to the irony. This is a government that talks about renewable resources. This is a rather renewable energy. They talk about electric vehicles by 235. And I can tell just between us, Frank, the biggest blowback I've ever had doing the broadcasting I do for 40 years is

was talking about, oh, that's all good. Where are you getting it from? I think literally, I would talk the practicality of it and been very keen on the minerals for a number of years, because I felt it was inevitable we were going in the direction. But

But it was like the people who were pushing it didn't even understand, well, you will need copper, you know. It was that elementary. And I don't see any progress. I know the government in the last budget finally talked about, you know, critical minerals and had a fund set aside. But it's got to be put into action, as you say. It's nothing without...

I just find that so ironic that they're the obstacle. Yeah, they're definitely the obstacle. Michael, that fund, which you just mentioned, only $300 million is available so far and only half of that money is available for what I'm talking about, going out there, finding and developing it.

the actual mineral ore bodies, the rest is about downstream infrastructure and all sorts of things. It's not a lot of money. We're going to need literally billions of dollars. And some of it's got to come from outside of government. And I think, again, our pension funds are sitting on, I think, $3.5, $4 trillion of Canadian savings. And to me,

You have to invest in your own country somewhat. I mean, it's ridiculous. We're investing almost zero in our own country. You know, sure, of course, you have to maximize returns. That means you have to look at markets all over the world. But, you know, again, use the Australian example. They've kept their industry at home. They won't allow...

Brookfield tried to take over Origin Energy, the company in Australia, and their Aussie pension funds blocked it. And they came right out and said it. The reason we're not going to... We don't want to lose this. This is going to be an important part of our energy transition, this company. We don't want to lose it. They were very clear about it. And look at us with tech. We couldn't even find the votes to stop because the Japanese and the Chinese owned the majority of tech. And so, again, I think...

We have to be sensible and we're not being sensible. You know, you have to be practical and know how you're going to get from A to B. And I don't see that anywhere. I just see a lot of talk. And, you know, it's tragic because we could create a lot of wealth for this country, a lot.

And that's a key we'll leave with is that the amount of jobs we're talking, government revenue, if you want the EV revolution, the trends, you know, the renewable energy trends, you need this stuff. We need to get practical. We're 10 years late in that, in my opinion, but we need to get practical. Frank, you've gone a long way, though, to help clearing that up. And I hope you keep doing it. And I'll tell you, one of the things they should do is phone Frank Giustra. And I'm being serious.

phone people like yourself long, you know, and you wrote your article with Pierre Bisonette, you know, people who've been in the business. We have those people available to the government. So it takes leadership. And so far it's been lacking. Frank, not from you though, but we appreciate very much. I'll keep, I'll keep at it, Michael. Well, do, do, do please. But very much appreciate you finding time for us. My pleasure as always.