Head of Mackenzie’s resource team explains why Canada has underinvested in minerals extraction, and what a political change means for investors
Benoit Gervais looks at Canada with a view to what the country does well. Like many within and without Canada these days, he’s focused on the wealth Canada still has in its ground. Gervais is an SVP and Portfolio Manager at Mackenzie Investments, and the Head of the Mackenzie Resource Team. He recently authored a report on Canada’s resource wealth. The report highlights Canada’s traditional strength in the resource sector, outlining why much of that wealth was under-exploited for the past decade and how a shift in global and domestic politics is reopening opportunities in the minerals and mining sector.
Gervais explained to WP that domestic investors have also spent much of the last decade shifting away from Canada’s traditional strengths. He outlined why many Canadian investors, advisors, and even domestic equity funds have been underexposed to Canadian minerals and mining names. He highlighted the reasons why Canadian advisors may now want to be re-introducing this area back into their clients’ portfolios.
“We spent the last 20 years telling people to go global and invest globally, and they have done well, especially the US indexes,” Gervais says. “They’ve done so well that even Canadian equity managers have blended in some global components, particularly in the US. We found in a study last year that the average Canadian equity fund is underweight resources by 10 per cent. The TSX is 33 per cent resources, energy, materials, but the average Canadian equity fund is only 23 per cent… The average Canadian has less than 1 per cent allocations to precious metals, but the index is at 12 per cent. We’re late to the party.”
Gervais attributes this underinvestment in minerals and mining largely to the appeal of US and global markets. Though he notes that the trend towards ESG investing in the past decade also played a role. Globalization and the appeal of tech allowed Canadian investors to ignore the ‘dirty’ components of the economy if they were mined and produced abroad to focus on services and technology. Gervais notes, however, that this shift moved investors more towards US-listed investments.
The broad macro shift inaugurated by US President Donald Trump’s tariff policy, however, has forced a re-examination of what can be produced where. The tariffs, Gervais explains, have capped a broad global shift towards deglobalization, reindustrialization, and rearmament which have also increased the demand for critical minerals. Add to this the need to build out power and computing infrastructure for the ongoing AI boom, and suddenly it looks like there’s a lot of wealth in the ground in Canada.
The Mackenzie report identifies seven strategic clusters across Canada that hold the promise of critical minerals. That includes copper in British Columbia, iron for ‘green steel’ in Labrador and Quebec, tungsten, zinc, and copper in the Yukon, nickel in Sudbury, lithium in Quebec, Uranium in northern Saskatchewan and Alberta, and Potash in southern Saskatchewan. It’s a compelling picture of a huge array of materials, but Gervais notes that this wealth can face impediments to extraction.
While access to these mineral-rich sites may seem the most obvious barrier, Gervais also argues that Canadian mineral extraction suffers from over-consultation, permitting issues, and a lack of capital investment. He notes new investments and incentives in the recent federal budget designed to make this process easier, but the process from starting a project to extracting minerals is roughly seven years long on average. Given the new federal government’s mandate to explore and produce, however, Gervais sees the beginnings of a change.
For investors and advisors, that change may well represent an opportunity in Canadian equities that Gervais argues has not yet been fully priced in. He argues that as more government initiatives and private developments are initiated, we will see Canadian equity names in the mining and materials, as well as engineering services performing better. While resetting clients onto these names may take some additional education work on the part of advisors, Gervais argues that the place to start, rhetorically, is a discussion of what Canada does well.
“The underlying theme is de-globalization, infrastructure, and the economy of doing, there will be satellite opportunities from that,” Gervais explains. “But people might not own a collection of construction-engineering companies the way they will own US tech companies. If it’s my job to convince the average Canadian to invest, we should begin by owning what we do well.”
