Sask. Cashing In

By Schlesinger, Joel | Winnipeg Free Press, September 29, 2012 | Go to article overview

Sask. Cashing In


Schlesinger, Joel, Winnipeg Free Press


Natural-resources riches paying off -- thanks to socialism

Saskatchewan isn't just a place that you wish you didn't have to drive through to get to Alberta and B.C. on vacation anymore.

Nor is it merely the habitat of rabid Riders fans.

These days, our flatland colleague to our left also happens to be the belle of the ball when it comes to natural-resource development potential, says Tom MacNeill, president of 49 North Resources.

It's almost as though overnight, Saskatchewan has gone from a place from which even its own people fled to one of Canada's "have" provinces that contributes equalization transfer payments so we "have-not" provinces can make ends meet.

And today's resource capitalist, thirsty for future profits, largely has socialism to thank for what MacNeill and other resource-industry insiders foresee as a long-term economic boom in the making.

"We've got all the resources the world wants, and the irony is half a century of socialism has kept them all nicely in the ground, so now we can extract them at much higher prices and with much more profitability," says MacNeill, whose firm trades on the S&P/TSX Venture Exchange.

It used to be that investors shunned Saskatchewan because its governments had made it too expensive to carry out risky resource exploration and development.

That is, until about a decade ago, when the provincial government substantially cut its resource royalties from a high of 65 per cent in 1982 to 15 per cent or less.

"My point of view is this: We had a half a century of socialism that actually scared capital away," MacNeill says.

Those dark ages for capitalists started in 1944 with the election of Tommy Douglas and the Co-operative Commonwealth Federation (CCF), the forerunner of today's New Democratic Party, he says.

This continued until successive NDP premiers Roy Romanow and then Lorne Calvert reversed the trend to make the province a more attractive place to raise capital.

Today, under the Saskatchewan Party, a conservative movement that evolved from the crumpled heap of Grant Devine's Progressive Conservatives, the province has become even more business-friendly.

Of course, the world's hunger pangs for what Saskatchewan has in the ground -- potash, uranium, oil, gas, food, etc. -- hasn't hurt either. Nor has the fact the U.S. Federal Reserve recently announced open-ended money-printing to the tune of $40 billion a month until inflation sets in and the economy roars back to life.

Increased demand and inflation often mean good things for resource producers. More people and more money chasing finite hard assets that the world can't live without have a way of increasing the value of natural resources, MacNeill says.

But the fact Saskatchewan has a long history of flirting with socialism has created a unique opportunity not found anywhere else in North America. It's as if Saskatchewan's economy has been cryogenically frozen for 50 years.

Today, it's thawed out and looking like Alberta did 50 years ago -- only more diverse in resources, he says.

Alberta's geology is mostly sedimentary rock and dirt, where oil and gas are often found. Saskatchewan has a lot of that, too, so it's also energy-rich. At the moment, the province produces about 500,000 barrels a day of crude oil, and rising. But it has something else.

A little less than half of Saskatchewan's geology comprises the Precambrian Shield, rich in minerals such as uranium, copper, zinc, gold and rare-earth elements used to produce smart phones and green products such as rechargeable batteries.

Despite the bounty, it's a fairly long road to full development because Saskatchewan didn't build capital markets in decades past as Alberta, B.C. and other provinces did.

So although it has two of the biggest and best resource companies in the world -- Cameco and Potash Corp. -- there isn't much below that. …

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