Foreign Affairs Committee on April 4th, 2012

[Nolan Watson]

Sierra Leone is a place where there are many opportunities to help a lot of lives. It's a very poor country. The average GDP is only about $1,000 a person per year, and there's not a lot of good wealth dispersion, so it's a very tough place to operate. There are a lot of very poor kids, a lot of orphans. But it's a place with a lot of hope.

One of the criteria we had as a charity going in was to find a country in which we believed the government was doing the right things to allow an economy to thrive, if the right businesses and the right charities came in and actually started making a difference. We felt Sierra Leone was one of those countries, and that's proving itself to be true.

On the charity side of things and the building schools side of things, we found it difficult to raise funding. It's easy for me to raise money in business, to convince people that I'm going to give them a return. It's very challenging for me to raise money for charities—telling them “you're not going to make any money from this”.

One of my frustrations operating in Sierra Leone is that the only major businesses I have an opportunity to go to, asking for money to help support schools that we may want to build, are British companies. It would be a lot easier for me to go to a Canadian company that I know, because I do business in the Canadian industry, and say, how be we partner up? It's just not an opportunity that I have.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Is your foundation supported by British companies in part that are doing business—

[Nolan Watson]

No, we're solely supported by Canadian private citizens.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Okay. Very good.

Your company invests in other mining companies that are active, I think you said, not in Africa—so presumably in places such as Central and South America. Do you invest in companies that do development work, build schools, build hospitals, invest in training?

[Nolan Watson]

Many of the opportunities in mining tend to be in developing countries, which because of the political risk haven't had as much historical mining, so a lot of deposits are still sitting there. One of the things you have to understand in the mining industry is that you will not get a mining project going forward unless you support the community, unless you have the backing of the community, unless you have the backing of the people.

Anytime we've ever been involved in investing in a company that's had to operate in a developing country, they have had to, out of sheer, pure selfish necessity, build schools and build hospitals and those types of things. If you want your permits and you want the backing of the people, it's something you need to do.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Is it true to say that you as an investor look for companies that have that broad vision, because you know they're more likely to be successful if they do those sorts of things?

[Nolan Watson]

I would say yes. We are often asked by our institutional investors what countries we are willing to go into and invest in. Often I say that it's not the country as much as it is the company and how they're operating in that country.

If I can invest in a company that I think has the backing of the people because it's doing the right things there, that investment is safer than is an investment in a company that is fighting the people and trying to stop blockades and those types of things.

So we specifically look for companies that already have the backing of the people and are doing those specific types of things.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Can you give us some examples?

[Nolan Watson]

Absolutely. We have invested in an asset in Brazil, for example, that is in a very poor community. We've invested in the mining company that has built the mine there. They have gone out and built schools and put programs in the community and have tried to garner the support of the community. They have hired hundreds of local people in the community who otherwise wouldn't have had jobs. There are numerous examples like that.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

I have one quick question. You mentioned the idea of—I'll put it in succinct terms—naming rights: the idea that if companies that helped to build schools were allowed to put their name on the school, that would benefit the reputation of the company. Can you expand on that a little? Why is that important to the company? What's the value to a company?

[The Chair, Conservative, Dean Allison]

Respond very quickly, because we're out of time.

[Nolan Watson]

Very quickly, it's that the companies need the support of the communities, and that's one way to get it. It's the same concept as advertising.

I think that if our government is going to facilitate these types of things, they should expect the companies to pay for any benefit they get.

[The Chair, Conservative, Dean Allison]

Thank you very much. That's all the time we have.

We're going to turn it back over to Mr. Dewar.

Welcome back. We haven't seen you for a couple of months.

[Paul Dewar, NDP, Ottawa Centre, ON]

I was on a little walkabout.

[The Chair, Conservative, Dean Allison]

That's good. We're glad you found your way back to the committee.

You have five minutes, sir.

[Paul Dewar, NDP, Ottawa Centre, ON]

It's good to be back.

Thanks to our witnesses.

Some of the stories we're hearing remind me that my mother grew up in a one-company town not far from here. It was a pulp and paper town. The company supplied the housing. The company supplied pretty much everything. That was fine at the time, but there was consideration for how things could develop. Over time there were institutions built up, there was governance, there was taxation, and lo and behold, if you go to that same town now, you'll find that there is a mix in the economy and in governance, and that it is no longer beholden to just a company.

I say this without prejudice. It's an observation about how things evolve.

It seems to me that we're talking about development in these terms. We are now, in my opinion, regressing to looking at companies providing things that normally would be provided by government. I'm hearing Mr. Watson say it's good to have capacity being built up. It's about how you get there.

I say it's regressive, because when I was in Congo—we talked about Congo—I was talking to government officials and to ministers there and talking about the flight of capital out and the lack of investment in. I was saying you should be doing this and looking at that. They said, why don't you get your act together and talk to other countries, because the flight of capital out of here is enormous, and it's not because we don't want it here; it's because there's a lack of understanding of the capacity we need.

I'm going to put my question to you, Professor Campbell. You see that our government has decided to go down the path of partnering through CIDA with some of the biggest mining corporations in the world. I think you both agree that Canada has the biggest mining footprint on the entire planet. Now we've decided to go down this route whereby we're going to partner with mining companies to help develop capacity.

I want your comment. If you've looked at this, what are the long-term implications of going down this path—I think it was a $26 million announcement this past fall—and working with mining companies to develop capacity?

[Dr. Bonnie Campbell]

First, I think we're completely blurring what international development means in Canada. Second, we're implicating the Canadian government and the Canadian people in projects for which we don't have the criteria to do any kind of follow-up, and we haven't given ourselves the mechanisms to see what is actually going on on the ground, which is a very dangerous position.

Just before coming, I read last night the most recent Norwegian Council on Ethics report. I'm referring to the 2011 report. Since 2008, two of the companies with which our government is now partnering have been in the list of companies in which the Norwegian government refuses to invest its pension funds. They follow up; they find very telling things. I have never understood why our country, where mining investment is much more important, cannot have the same kind of rigour in following up where we are accountably as a people and as a government. It's not just about companies.

In terms of the impact this policy is going to have, these are projects that are building short-term social licence. They're about charity, not about development. The clock, in terms of where expectations are now on the African continent, is not where it was 25 or 30 years ago at the time of the Lagos plan of action, when these same problems were brought out. The thinking is in a very different place.

Where Canada is now, in terms of understanding the messages that are coming out of Africa and just not paying attention to them, is going to have very long-term detrimental impacts on our own reputation internationally.

[Paul Dewar, NDP, Ottawa Centre, ON]

I think charity is fine; I have nothing against charity. I think economic development is better. The role of government, speaking frankly from this side, is not just to develop charity; it's about developing economic capacity. I think that's the consensus among most governments.

I thank you for that comment, because I think it's important to look at the long-term interest. We've just seen what has happened with SNC-Lavalin, for instance.

If you want a cautionary tale over there, take a look at what has happened in that case. Once you get into these partnerships, you start to blur the line. Right now, that is going to be fought out in the courts, and Canada's name will be on it, not just SNC-Lavalin's name alone, because you will have been partnering with them.

If you look at the implications of this development policy, in the end what would you like to see us do? You named three things, out of your presentation. What is the one that you would like to highlight the most in terms of what Canada should be doing?

[The Chair, Conservative, Dean Allison]

Dr. Campbell, that's all the time we have, but you can give a very quick answer.

[Dr. Bonnie Campbell]

It is absolutely indispensable that we have oversight over the operations of Canadian companies; that we have mandatory ways of doing the follow-up. In the round table report, you had the standards, reporting mechanisms, and an ombudsman. It is absolutely indispensable and urgent that we have this kind of oversight, so that Canadian companies respect international human rights, labour, and environmental obligations.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're going to finish up with Ms. Grewal. You have five minutes.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Thank you, Chair. My question is directed to Mr. Watson.

Thank you for coming to our committee to share your expertise.

As you have said, you lived in a country called Sierra Leone for some time. I too lived in a west African country, a neighbouring country called Liberia. In fact, I lived there for almost ten years, and my parents lived there for 25 years. Both my sons were born in Liberia and left in 1990 when a civil war took place.

Coming to the question, it can be understood that building and operating gold mines is very difficult work, as they are in a remote location with little infrastructure and support and require well-trained professionals to operate safely. Sandstorm Gold's expertise lies not in the first phase of operating mines but rather in the evaluation, analysis, and valuation of gold-mining assets as well as in structuring gold purchase agreements.

The company claims that its aim is to be intricately involved in financing its partners for the long term to ensure that both parties benefit from each transaction. It can be understood that developing countries may become dependent on these mining facilities, as they dictate all levels of social interaction within communities. My question concerns Sandstorm Gold's attitude towards their activities in developing countries.

In your opinion, Mr. Watson, what role does corporate social responsibility play in Sandstorm Gold's operations? What do you feel are the necessary conditions needed to establish and ensure productive and long-term partnerships and relationships between the private sector and local communities?

[Nolan Watson]

Thank you very much.

Just to clarify what Sandstorm actually does, it is a business, so it is exactly what you say, but we will go in and will provide capital for someone to build their asset; then we allow them to continue to operate it. So although we don't actually do the activities on the ground, we monitor them in advance and monitor their progress. We monitor their compliance with various things.

We try to focus wherever we can on organizations that we believe are going to be able to operate that mine successfully for decades to come. To that extent, we need to ensure that we are only dealing with people who are doing a good job environmentally, doing a good job socially, doing a good job in getting the support of the community. We spend a lot of time doing that. That's our job.

If we make an investment in a company that is not doing those things, we risk losing the money of our Canadian investors. That's what we focus on.

I have been to many countries. I was in Peru last week meeting with government officials and in remote, very poor communities. There are people there who have no hope of an education and no hope of medical facilities, if certain projects don't go forward in their communities. I am a firm believer, though, that this business needs to be done responsibly and needs to be done in a way that reflects well on Canada as a whole. That's something that I think is very important.

Just to address a previous comment that was made about our reputation being affected by our companies, if we have any misconceptions that our Canadian government's reputation is not currently affected already by what companies are doing, whether or not we support them, we're kidding ourselves. The business that Canadians are doing and the way they portray themselves reflects on us, full stop.

To the extent that we can be involved and have public-private partnerships and do types of things that can provide a mechanism for oversight, so that we can actually monitor the impact of what they're doing upon our reputation, that's very important.

Canada has a lot to offer. Canadian mining companies have a lot to offer. Our Canadian government has a huge amount to offer. I believe that if we work together to find the right mechanisms.... We're in the infancy in this type of model, and there are more oversight things that need to be put in place and improvements that need to be made. But I think we're headed down the right path, anyway.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Could I stop my time, Mr. Chair? I'll pass it on to Mr. Van Kesteren.

[The Chair, Conservative, Dean Allison]

Yes, if you had the time, you could do that, but you're out of time.

I'm sorry, Mr. Van Kesteren.

That's all the time we have. I want to thank the witnesses for taking the time to be here today. We appreciate the dialogue and the discussion that goes back and forth.

We're going to suspend the meeting for a couple of minutes, just to get in our new witnesses.

Thank you.