What the proposed Anglo Teck merger means for Canada's mineral industry
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Summary
In September, a proposed $53 billion merger between Vancouver-based tech resources and British mining giant Anglo American was announced, making it the second largest mining deal in history. The proposed merger would create one of the world s largest copper producers headquartered in Vancouver, but with major foreign ownership and global influence. Now, local bands are raising the alarm saying the deal moved ahead without their consultation.
Transcript
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Hello Western Standard viewers, today we are looking at one of the biggest resource stories
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in Canada in recent times and what it could mean for the country's control over its own
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mineral wealth. In September, the proposed $53 billion merger between Vancouver-based
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tech resources and British mining giant Anglo-American was announced making it the second largest
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mining deal in history. The proposed merger would create one of the world's largest copper
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producers headquartered in Vancouver, but with major foreign ownership and global influence.
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Now, local bands are raising the alarm saying the deal moved ahead without their consultation.
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This merger raises the question, who really benefits from our resource wealth?
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Canadians or multinational corporations? Joining me is Maximilian Hess. He's the founder of London-based
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political risk firm Enmetena Advisory and an analyst of the mining sector with an interest
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in Anglo-American's international operations. Max, thanks for joining us.
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Well, right off the bat, Anglo-American has a massive global reach with subsidiaries such as
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De Beers. If foreign mergers such as the one between them and tech keep consolidating control
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over Canadian mines, do you think the country risks losing strategic control of its resource
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I think that's precisely the issue at risk here. This is not only a question for Canada,
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but a question for the world today. We live in an era of resource nationalism where there's
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particularly intense competition between both companies and states over the future of a lot
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of these resources. In this proposed merger, that's one of the key factors that has Anglo-Americans
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so interested in tech, in particular for its copper assets.
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But as we've seen this be billed as a supposed merger of equals, it's actually Anglo-American
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that will emerge with nearly two thirds of the shares and Canada would be losing one of its largest
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remaining mining companies on the Canadian listing, as the new listing would be in London with Anglo-American's
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existing one. This would weaken Canada's leverage not only over control of its own assets, but in terms of its
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geo-economic position in dealing with the future of these resources and resource competition between Canada and the United States,
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Canada and Europe, Canada and China, and so on and so forth.
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Okay, well, previously De Beers operated in Canada through the Victor Diamond Mine project in northern Ontario,
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and it was a project that faced a major criticism for environmental damage and for failing to deliver promised benefits
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to local communities. Do you think that history should disqualify the company from future Canadian expansion?
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I don't know if I would go quite so far as to say it should disqualify it from future Canadian expansion,
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but it does show that there needs to be additional attention paid to the company's past track record in Canada,
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as well as elsewhere. De Beers is also currently in the process of being sold. Anglo-American wants to remove it
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ultimately from the future company that it is creating here, and this comes amid a major downturn in the diamond prices.
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If you ask De Beers, their success story has always been helping the development of the country of Botswana,
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but we now see a real crisis in that country due to those low diamond prices De Beers trying to get out at this time,
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and real questions over how that country is going to continue to develop, grow, and invest these resources.
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So it has a track record of getting out when the going gets tough,
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and then leaving local authorities, whether they be in Ontario or whether they be in Botswana,
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Do you think this proposed merger as well could mark a moment where Canada shifts from being a resource nation
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to simply a resource platform for firms like Anglo-American?
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Well, in some ways it has been a strength of Canada that it does have a relatively low-touch regulatory environment
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for the mining sector to attract global miners to come be based there and leave.
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But now they're considering leaving because other countries have engaged in similar kinds of competition
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and potentially would have even less regulatory oversight over them.
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Canada wants to ensure, however, that it has key regulatory oversight over its own domestic mining base in the future,
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and any move to bring the listing outside of Canada would have a real negative impact on that.
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I think that Canadian mines will still continue to be profitable,
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and Canada will still have a very large and thorough mining sector,
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but ultimately who controls it, whether at the corporate level or at the national level, are really at stake here.
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Well, Canada promotes itself as well as a leader in responsible mining,
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yet much of its mineral sector is owned or financed by foreign interests.
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Do you think that undercuts the federal government's ability to align extraction with national or indigenous priorities?
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It's a difficult balance to be struck, for sure.
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I think Canada is genuinely a leader in these matters.
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The question here is whether it becomes weaker and being able to exercise that influence going forward.
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So Canada has a better track record on that, certainly, than a lot of other regulatory environments do.
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But if this listing goes ahead and other Canadian resources continue to be sold out of Canadian-majority ownership,
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then the ability for the Canadian authorities to decide how they want to shape the global mining sector going forward,
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It will always be that the products are mined in one place, sold in another, refined in often yet another.
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But Canada has had an important role in that and, in many ways, a force for good compared to some of the other environments.
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And as well, if the federal government does approve this merger without indigenous consent,
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you do think that that could undermine Canada's credibility as an ethical source of critical minerals for the global market?
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That is perhaps going one step too far, the questions around indigenous consent and the like very, very heavily from country to country.
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I think Canada has been a leader in that model, and it has been a country that has shown that you can have a successful,
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profitable, and good-growing mining sector when still taking local communities' concerns into account
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and ensuring that after projects are done, that the necessary costs are paid to ensure that the impacts on the landscape
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and on the livelihoods of the people are addressed.
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So Canada would weaken its position in terms of being able to set an example for others, is certainly how I would put it.
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And also, do you think ongoing land disputes in places such as British Columbia
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deter capital investment in Canada's resource sector,
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or does a clear consultation make projects less risky over the long term?
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I think clear consultation makes projects less risky over the long term.
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Of course, you have very big differences in a state-by-state and a province-by-province approach,
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whether it be in Canada or the United States or elsewhere.
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In some ways, Canada has a federal system that allows a lot of decisions to be made locally by local governments.
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Of course, there will be disagreements between indigenous communities in certain areas
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and the provincial-level government amongst them,
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but it allows that process to play out on that level rather than have a federal regulator say
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one rule applies for all, and I think that is very important.
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And also as well, how do global investors balance Canada's political reliability
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against growing uncertainty around consultation and environmental compliance?
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Well, I think one of the arguments that critics of reviewing the merger would have
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would be to say, you know, Canada needs to join this global rush to deregulate,
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to, you know, allow business to flourish and have that competition.
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I think those arguments miss the point, whereas that Canada is really an island of stability
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in the environment that we see now where the United States is taking stakes in key mining companies.
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Both China and the United States are imposing controls on where certain products can be sold,
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whereas Canada is broadly very supportive of continued global trade on these matters.
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So Canada has brought in new powers to allow the government to review these kind of transactions.
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And the question is, is what is that review aiming to achieve?
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If that review is aiming to achieve priority for Canada's interests
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and in which that interest is a continued flourishing of the global market,
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then I think it is further evidence of that stability that investors have historically welcomed in Canada
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rather than a sign that Canada is slipping down that same slope that the United States and China, for example, are.
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And from an investor standpoint, is the greater long-term risk to Canada's mining sector over-regulation
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or maybe underestimating indigenous environmental blowback?
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Both are risks that any investor will certainly have to consider
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and what may be a larger risk at one point or another changes very much from time to time.
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Today, it is this example of geo-economic competition
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and states looking to bring resources under their control
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in a way that disadvantages others that is the primary risk.
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And that is what I think Canada should be focused on trying to address and mitigate here.
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Well, thank you for your time, Max. I really appreciate it.
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Thank you so much, David. It's been a pleasure.
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For The Western Standard, this is David Winnick.