00:00:00 - 00:00:25
Lance Mortlock
Welcome to our next episode of the Energy Drivers Podcast, I’m Lance Mortlock and I’m your host for today’s chat with EY’s own Theo Yameogo, Partner and America’s Metals and Mining Sector Leader. Throughout our series, we invite Canadian industrial and energy leaders to discuss key issues, provide insights, and ask challenging questions.
00:00:26 - 00:00:42
Lance Mortlock
Today, we are focused on the metals and mining industry, a sector at the heart of the energy transition. We’ll delve into the current challenges it faces and the strategic direction it’s taking here in Canada in the future. Theo, it’s a pleasure to have you on the podcast.
00:00:43 - 00:00:45
Theo Yameogo
Thanks for having me, Lance.
00:00:46 - 00:01:00
Lance Mortlock
You’ve had a fascinating professional journey, Theo. For our listeners who haven’t had a chance to meet you, could you share a bit more about your time at EY, your responsibilities at the firm and how you came to be where you are right now?
00:01:01 - 00:02:12
Theo Yameogo
Yeah, I mean, Lance you and I talk a lot about coming into Canada as a new country and making sure we get integrated and also contribute in the great country and its future. You know, I started with humble beginnings in Burkina Faso, in West Africa. And I came here more than 20 years ago, and I worked in the mining sector as a mining engineer and rock mechanics person. And it’s after an MBA that actually came into consulting. So, I know mining industry really well. I was also lucky enough to see it transform since 2002 to today.
And nowadays what I do is actually help clients solve newer problems. Some problems I also ancient, but we are helping them solve all these and I coordinate our practice in Canada, the United States, but also across the Americas. So, there’s big teams behind me that are really, really sharp and that are helping us maintain the reputation of EY with clients, but also just within the industry.
00:02:13 - 00:02:30
Lance Mortlock
And when you think about the industry, Theo, metals and mining, it’s crucial to the energy transition, right? And so, from your standpoint, what should industry leaders be focusing on strategically in the coming years in mining and metals to get this right? Because it’s so complex.
00:02:31 - 00:03:55
Theo Yameogo
Yeah, I’m glad you asked me this question because just yesterday we released, our you know, what we call, it’s basically our top publication across the firm globally.
So, we call it EY Top 10 Business Risks and Opportunities in Metals and Mining. And why do we do it yearly? It’s because every year we gather enough information with clients and also we research to identify the burning platforms that companies should address in the coming years. And this is the year 16 since we’re doing it. So. we know most of the trends, we understand the pairing between the top 10 and the macroeconomic factors. And it’s very interesting that you mentioned critical minerals, because we all know we need to invest more in critical minerals, so that we can support the energy transition that we talk about. And capital came as the number one risk to metals and mining companies because we need to invest more to produce those minerals in enough quantity. But we also need to transform mining so that when we are producing those critical minerals, they are coming out very, very environmentally friendly and embedded in social responsibility.
00:03:56 - 00:04:35
Lance Mortlock
One of the things that you and I have talked about a lot over the years is resource nationalization. And when we look across the globe in metals and mining, we are seeing nationalization where countries are expropriating assets, refusing grant authorizations, applying disadvantageous tax regimes to foreign suppliers. And so when you see that protectionism that’s happening, how do you see that trend impacting the mining and metals industry and what we need to do at the scale we need to do it to transition? Do you know what I mean?
00:04:36 - 00:06:34
Theo Yameogo
Yeah, I understand. So I think seven, eight years ago we actually had resource nationalism on the top 10 risk. But it was a different flavour compared to what we’re seeing today. So today we bundle it all under geopolitics. Yeah. And the reason is because it’s really more a geopolitical play. Recently I was talking to a publication, and I actually said that it’s less full-fledged nationalism, it’s more of a preferred protectionism, and that’s what we’re seeing. But it’s anchored in geopolitics. So for example, there’s a mining company, a Canadian mining company moved their headquarters or is moving their headquarters to Ecuador, so that they can actually get the Chinese funding, that they cannot get if the headquarter is here. So, I go to Latin America a lot for our clients and our colleagues. In Latin America, some of these topics that we have in Canada or the US are not even topics, because it’s just that Latin America have a problem getting capital for certain regions. So that’s why I call it, you know preferred protectionism. And we had an acquisition in Canada, the last month, by a South African company, but it never came out as an issue. Nobody even talked about it. Yet it was like close to $2 billion acquisition of a crown jewel in precious metals. So it’s really choices by government. And I think last year when published our report, we hinted at the fact that 60% of the world GDP was getting election year.
00:06:35 - 00:07:20
Lance Mortlock
And I think the status in the last 12 months, 4 billion people on the planet will be voting in national elections. I mean, it’s astounding the amount of change that’s happening right now in a sea of a huge amount of risk and uncertainty.
When you bring it kind of closer to home, Theo, in terms of Canada, do you think that this country is also mirroring some of that protectionism? Where we see, for example, the federal government announced a 100% import tariff on Chinese-manufactured EVs. What’s your take on such measures? Do we need to do it? Because we know the Chinese can produce EVs far cheaper than we can. Do we need to make these measures, does it make sense for Canada? What’s your take on that?
00:07:21 - 00:08:43
Theo Yameogo
Well, any economics books will say that it’s just a waste of time or some sort of slowing down the evident outcomes that will come up. I think there’s a lot in the world because I grew up in different parts of the world. I think there’s a lot in the world that are just coincidences, and then it can push a certain direction. If we had a different political party in power, it would probably be a different story. And the fact that we are in a minority government with some really crazy deals happening between different parties doesn’t make it that we getting the right decision that all the country will understand. So it’s deals. I don’t believe, I think the world is a big village and anybody trying to carve out an area thinking they can protect it is just wasting time until the next political party comes in, or some serious geopolitical context will erase it. You know, I remember when [then-German Chancellor Angela] Merkel decided that she was not going to do nuclear anymore. That’s a decision in the vacuum when France and everybody else around is doing it.
00:08:44 – 00:08:49
Lance Mortlock
And then Nordstrom two got blown up and Germany’s whole world changed exactly overnight. Overnight.
00:08:50 – 00:09:05
Theo Yameogo
And that’s how I see the world. The ones that have enough to eat tend to be very dogmatic on what to do until they get in a situation when they have needs, and then everything changes.
00:09:06 - 00:09:30
Lance Mortlock
Well, and what was amazing about the Germany story was how quickly they built LNG facilities. You know, and I talked about this on a previous podcast, it took us 14 years to build one LNG facility on the west coast of Canada. It took Germany a matter of months to do the same. So, where there’s a will, there’s a way, as the saying goes.
00:09:31 - 00:10:12
Theo Yameogo
Absolutely. I think we haven’t reached a situation in Canada when we are in crisis yet. Yeah. I think, if you think about it, what we saw in COVID is a reflection of how things can change quickly if we get in crisis. So I have high hopes that as a country, we’ll do the right thing when the time is right. I believe that we need to do more. The $1.5 billion in the credits that the government is giving, I did many other interviews media before, and I said it’s really minimal. It takes about $6 billion to build a proper mine. So having $1.5 billion to build one.
00:10:13 - 00:10:45
Lance Mortlock
Yeah. It’s not a lot. So talking about that, let’s double-click on that a little bit.
So we’ve seen investments in Canada around battery manufacturing facilities. But where my mind goes is that’s great. But if you look at the vertical integration of the value chain, we also need more mines. Do you think we are set up for success in this country to get the mines that we can to feed these battery plants and compete with the pace and scale that we see in the US and in China?
00:10:46 - 00:11:41
Theo Yameogo
So, this question is interesting because that’s the second time I’ve been asked this question. I was on BNN the other day and Andrew asked me the question around, okay, where are those mines that will feed this system that we’re building? I think there’s a misunderstanding by the OEMs, Canada being a mining country. We are a mining country, but we’re heavily precious metal producers. We haven’t gone and explored enough for most of the critical minerals. We don’t have many copper mines. We have the nickel in Sudbury, but there’s a lot of things we need to produce to feed all these plants that we approved. And there has not been a clear embrace of the mining sector by the feds.
00:11:42 - 00:11:47
Lance Mortlock
Consequently, you’re not getting the policies and the regulations that you need to support the scale of investment that needs to happen.
00:11:48 - 00:12:23
Theo Yameogo
Even the education of the cabinet. Can we one day put somebody in innovation that knows nothing about innovation? Can we one day put somebody in charge of, let’s say, health care, but they have no background in health care? So it’s cultural. And I think that it could change because, as we continue to change government and change leaders, we will realize more and more that we should be the go-to globally for that energy transition for metals and minerals.
00:12:24 - 00:12:39
Lance Mortlock
I hope so, yeah. And on the regulatory piece, Theo, what kind of reforms would you like to see in the mining space that would speed up, in an environmentally responsible way, the scale of investment we need in mining? What does that look like? What are the 2 or 3 things you would change?
00:12:40 - 00:12:46
Theo Yameogo
I think the first thing is that, to create an agency and cut the tape between feds and provinces.
00:12:47 - 00:13:13
Lane Mortlock
So complex, isn’t it. And it’s the same in oil and gas. It’s a capital allocation decision. If you’re wanting to bring money into this country and invest in oil and gas or invest in mining and metal, then you have to navigate between province and rules at the federal level. These companies are like well, I’ll just go somewhere else where it’s easier to do business. I realize I’m grossly oversimplifying that.
00:13:14 - 00:14:19
Theo Yameogo
But, no, I’m with you.
Do you know what’s interesting in this one, too, is as a firm and even some mining companies, we go advise other countries to set up these one-stop-shop agencies, so that you don’t have to jump in between different ministries. So we should take that approach if we want to go faster. We should also think about standing up something particular for critical minerals because it’s not the same. Lots of people talk about, oh you know, cyanide this, I said you’re talking about gold mining. You’re not talking about something that needs a plant like lithium. You’re not talking about something that needs, nickel is already really mature in Canada, but we haven’t hunted for more copper, we haven’t hunted for more cobalt and graphite, and uranium is also good. We finally have it in the list of the critical minerals in Canada. But it looks like we did it quietly, we didn’t want to talk about it, but it’s actually going to be critical in, in providing nuclear power to the world. And we have the best.
00:14:20 - 00:14:24
Lance Mortlock
Have you seen anything in the US that you particularly like that we could learn from in this country?
00:14:25 - 00:15:34
Theo Yameogo
Unfortunately, at this point, we are far ahead of the US. We are far ahead of the US when it comes to mining and metals. There’s a report that came out, maybe the Bloomberg one, but we reproduced a report finding in our top 10 business risk and basically shows that it takes something like first 5 to 6 years to get a mine approved in Zambia or Tanzania somewhere, but it takes 29 years in the US, because the US has a more complicated approval structure between the counties, the states and the feds. And even within the feds, there are different groups. The Bureau of Land Management is not the Department of the Environment. So, we have clients in the US that are still awaiting an approval, so typically what ends up happening in the US is that depending on who’s running the White House, you get direct approvals.
It’s like a veto approval, until the next guy comes in right.
00:15:35 - 00:15:55
Lance Mortlock
My advocacy for the sector has always emphasized Theo’s Canada’s potential to extracting and globally supplying its resources. Given our ethical and environmentally sound practices, do you believe Canada should and could position itself as a global supplier, a global leader for those reasons?
00:15:56 - 00:17:55
Theo Yameogo
Yes. And I and actually believe that we could even add a premium to it. So our clients call it “greeniums,” which is a green premium. And I talk to many CEOs in the iron ore business that are thinking about it. We know that in Europe there are companies in the Nordics that actually have signed agreements on premiums because they are producing with hydro power, and things like that, especially on copper and zinc. And I think Canada, as a country, we are known to be peaceful as a country, and we are also known to be more ahead when it comes to environmental stewardship, which was the number two risk in the top 10 we released yesterday. So I talked to media yesterday and I said that a kilogram of lithium produced in Québec or produced in Alberta has higher quality in terms of the reputation of it. So it’s not just that the production is going to be low-carbon footprint, is going to be like according to regulations, it’s going to be something we do with the support of the communities. But its even the fact that we know it’s going to be an ethical kilogram of lithium.
So we shouldn’t sell it on the market with the same kilogram of lithium that comes from elsewhere that doesn’t have the same to Canada. So we’re always being seen as leaders in the metals and mining sector for our integrity, for our transparency and the quality of our technical people. So we should make sure it shines. It’s just unfortunate that in the policy and political landscape, we have not seen those leaders advocating for it.
00:17:56 - 00:18:28
Lance Mortlock
How do we like one of the things that strikes me is that we think small in this country. We don’t think big and bold like the Americans or the Chinese or other parts of the world, even Australia. Chile. Yeah. How do we get past that? How do we start to, as a culture, as a society here, think big and think bold and start to sort of scale at a rapid pace because frankly, we need to get to net zero. And Canada could play and should play a big role in that. Do you know what I mean?
00:18:29 - 00:19:24
Theo Yameogo
Yeah, I tend to believe, Lance, that some generations are tainted because they, again, they’re not hungry. And I believe strongly in educating the next generation on the value and the power of Canada in the mineral sector. To me, that’s the fundamental thing. The political will can come and go, but if we want to step up, we need younger people to see the value and be aware, so that they can push the boundaries. To me, that’s what’s critical. It’s not the political parties can come and go, but there’s a level where the population forces politicians to listen and we haven’t reached that.
00:19:25 - 00:19:31
Lance Mortlock
Before we conclude, do you have anything else that I should have asked, could have asked that you wanted to share with our listeners.
00:19:32 - 00:20:32
Theo Yameogo
I’ll just conclude by saying that, for me, the minerals and metals sector is going to continue to be the new frontier for this country. We still have a lot of regions we haven’t even explored. I used to give the example that up until the 2000s, we were convinced as a country that we’d never have diamonds in this country. And then by 2004, we were like the third or fourth biggest producer of diamond in the world. Yeah. So the same with the critical minerals, and what we call the energy transition metals.
We need to really invest in exploration. But to invest in exploration is to have clarity that you’re going to get support from governments and from the population. So that’s also something we need to do. But we are one of the best places in the world for minerals and we should make it shine and carry the flag on it.
00:20:33 - 00:20:41
Lance Mortlock
Awesome. That’s a great way to conclude. I always feel like when I talk to you, I learn something new. So thank you for joining the podcast Theo.
00:20:42 - 00:20:43
Theo Yameogo
Thanks, Lance. And thanks for having me.
00:20:44 - 00:22:22
Lance Mortlock
We’ve had another enlightening discussion on the evolving landscape of the metals and mining sector, and its integral role in the Canadian and global energy transition.
For our listeners, if you have any questions or comments, feel free to reach out to EY via the attached contact details. As we wrap up another insightful conversation, here are a few key takeaways from my conversation with Theo. Firstly, the importance of metals and mining continues to grow. Theo highlighted the critical role that this sector plays in the Canadian global energy transition, and as we move towards a more sustainable and energy-efficient future, the demand for critical metals and minerals is going to skyrocket.
Secondly, Canada is strategically moving towards vertical industries. And what I mean by that is that, reflecting on global trends, Canada is actively building vertical industries adjacent to the metals and mining sector, such as EV manufacturing. The strategic direction aimed at enhancing national security and economic resilience positions Canada, I think, as a leader in sustainable extraction and processing of critical minerals.
And finally, capital and regulatory agility is key to becoming a global supplier, for Canada to realize its ambition of becoming a global supplier. As Theo points out, significant capital investment and regulatory agility will be essential to success. So once again, thanks to our listeners for joining yet another great podcast. We’ll see you at the next episode.
