Canada is poised to benefit from being at the intersection of several powerful investment themes, including energy growth, rising demand for metals and critical minerals and the buildout of AI infrastructure. 

To better understand how these themes could shape capital allocation over the coming decade, BMO hosted “Investment Opportunities in Canada Across Energy, Metals and Mining and Data Centers”, a digital event featuring: 

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  Camilla Sutton, Head, Equity Research, Canada and the UK, BMO (moderator) 

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  Randy Ollenberger, Oil and Gas Equity Analyst, BMO 

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  Matt Murphy, Metals and Mining Analyst, BMO 

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  John Gibson, Industrial and Energy Services Equity Analyst, BMO 

Camilla Sutton kicked off the conversation by asking whether Canada has the resources, infrastructure and policy support to attract significantly more capital over the next decade. 

When it comes to Canadian oil and gas production, Randy Ollenberger said that producers have everything they need to deliver meaningful production growth and attractive, sustainable returns to shareholders.  

“The Canadian oil and gas sector is contemplating growth for the first time in more than a decade,” he said. “They are among the best in the world in terms of cost structures and what that does is it gives them an advantage in pulling additional cash flow out of the businesses to return to shareholders.” 

As recently as five years ago, many in the industry had to choose between investing in growth or buying back shares and paying dividends but that’s not the case today. New technology has dramatically improved well productivity and reduced energy use per barrel, meaning Canadian producers now have some of the lowest sustaining capital requirements in the world.  

“They need to invest less money to maintain their businesses,” Ollenberger explained. “They can return cash to shareholders, they can repair balance sheets and they can grow.” 

For context, he said many companies in the energy sector are approaching zero net debt, which means they can generate significant cash flow. Using a conservative estimate of US$70 per barrel, the four largest oil sands producers could generate about C$700 billion in cash flow over the next decade while requiring only about C$150 billion in sustaining capital to maintain their businesses. Even with additional spending on carbon mitigation measures, the industry would still have attractive free cash flows.  

Canada, he adds, now only needs the price of oil at US$50 a barrel to justify additional growth. 

Although the U.S. has been the primary consumer for Canadian oil and gas, Ollenberger said that relationship could shift, especially with Venezuelan production re-entering the picture. Oil flows from the South American nation to the U.S. remain relatively modest for now, but his point is that production is not declining.  

That potential shift in energy flows gives Canada a compelling reason to diversify its energy exports. For Ollenberger, the opportunity lies in Asia, especially since the type of oil produced in Canada is well suited for jet fuel and diesel, where demand is growing.  

To meet that demand, though, Ollenberger said Canada needs more pipeline capacity flowing west. “That’s really what we need to start thinking about, because if oil demand is continuing to grow, someone needs to meet that demand growth.”  

It’s no secret that Canada has an abundance of natural resources. The challenge has often been how to access it. The question for investors is whether the greatest opportunities lie in the mines, supporting infrastructure, or the downstream processing capacity. 

As Matt Murphy explains, some mining districts in the country could benefit significantly from investment in infrastructure. Some of those regions include Northern British Columbia, which has some big copper and gold deposits, and the Yukon. “Capital is still the major constraint,” he said. 

Instead of asking miners to shoulder that cost up front, there could be an opportunity for infrastructure finance funds and pension plans to partner with the mining sector to fund roads, power and buildings with the mining companies signing up as long-term customers.  

Canada’s attractiveness as a mining jurisdiction should also be strengthened by the fact that the country offers access to clean power, a strong rule of law, high safety standards and growing policy alignment. 

More infrastructure investment would solve the capital shortage and meet the growing need for those commodities, said Murphy “and we do not think they have to sacrifice returns to do it. The mining sector has actually delivered better returns than other TSX sectors for five years running,” he noted.  

BMO’s commodities team sees several opportunities right now, such as copper, which is seeing strong demand from the buildout of AI data centers and a challenging supply picture. Other areas that are attractive include gold, particularly amid concerns over debt sustainability and central bank diversification, and niche critical minerals such as gallium and germanium, which are vital inputs to drones.  

“We think we’re in a good resources bull market here,” he said. 

Energy and minerals may dominate discussions about Canada’s resource advantage, but data and the infrastructure that supports it could become an equally important growth story for the country. 

“People are underestimating the amount of capital being allocated to this sector,” said John Gibson. We estimate this number to be US$2-3 trillion in North America alone, just on the physical build, so excluding anything compute or chip related.  

So far, Canada has only touched a fraction of the 200-gigawatt build expected to come online over the next decade. “The spend is real, and it’s only going to grow as demand for AI grows and usage of AI grows.” With access to power, a cooler climate, water availability, and growing political support, the country is well positioned to capture much more of this spend going forward.  

“Canada seems to be open for business, and we have support for some of the major industries and players that are going to play a role in all our lives over the next 10 years,” said Gibson. “Canada has a framework to develop these things in the right fashion and I think that’s what’s going to direct more capital to this country.”