Paul Gruner is the President and CEO of Det’on Cho Corporation, the economic development arm of the Yellowknives Dene First Nations. Since 1988, Det’on Cho has grown into the third largest employer in the Northwest Territories, and contains 15 companies in the resource sector, including Diavik Diamond Mine and DeBeers Snap Lake Mine.
This week, Paul and I sat down to discuss the shift towards Indigenous-led businesses in the Arctic, and what role the resource sector might play in COVID-19 recovery.
Det’on Cho is 100% owned by the Yellowknives Dene First Nations. Do you think we’re moving away from the notion of Indigenous “consultation” to an era of more equity partnerships among Indigenous and non-Indigenous corporations? Is that where we should be headed?
Well Indigenous groups aren’t all the same, just like any other business or jurisdiction around the world. They’re at different stages of maturation for business acumen. So I would say that for groups like ours, equity ownership and being a material part of the business is absolutely critical. But for some other, more emerging groups, they might be more invested in partnerships and joint ventures. They have to get in the game somehow. So I think it’s incredibly important as we continue to have groups with material participation. You have to bring Indigenous groups into the fold, and then work alongside them. We’ve seen some great successes, for example in Alaska, which has three Indigenous groups worth over a billion dollars, despite a small population relative to the rest of America. Those groups are involved in the resource sector and construction, and when they diversified, some were able to go international like Red Dog mine.
You need to have some access to capital to be able to play at that level, but it takes time. If you start down that path and be part of the process, once you get there, you can start to have a fairly robust economic environment.
We hear all the time about the ‘infrastructure gap’ in the arctic. Is that something that requires a change in policy from the federal level, or will change to development come from the grassroots and private businesses? Is that even the right question to ask?
It’s a very good question. When you look at the three Territories in Canada, you have 30% of Canada’s land mass and a very low population density. The first problem we have there is a very low tax base, which makes the territories reliant on Federal transfer dollars to support infrastructure. So, in order to bridge that infrastructure gap, the government needs to get private companies to participate.
One of the challenges that we have is this; say the government contributes a billion-dollar project, for a road corridor such as the Slave Bay geologic road. That one billion dollars, even at a 75% backstop still leaves you with a difference of 250 million dollars, which the Territory must pay. And when you’re talking about small jurisdictions like this, even 250 million is a huge hurdle that unfortunately the Territories can’t cover. So it’s very hard in those cases, because you need infrastructure to guarantee a business, but you need to overcome the backstop.
So I think we need to talk about nation building projects where Canada comes in and 100% backstops those projects in the best interests of Arctic sovereignty, and access to resources.
The other side is, if you’re backstopping projects, you should be working with Impact and Indigenous groups, and instead of just contributing a backstop, you contribute equity for those groups. And now they instantly have an opportunity to contribute to those projects, and it’s something that they can put on their balance sheet to leverage for greater economic opportunities down the road.
Ultimately, the investment community needs to back these projects, as there simply is too much risk right now for investors to really play a part. So if we’re going to be serious about the development of infrastructure, we need to really drill down on mitigating the risk factor, and ensure that Indigenous communities play a real role in it, with a federal backstop. Then we can go out with a strategic plan to acquire investor dollars and make this an attractive opportunity.
So our discussion so far has been about normal circumstances, but of course with COVID-19, this is anything other than business as usual. What are some of the biggest challenges that Det’on Cho is facing right now because of COVID?
I mean COVID-19 is obviously very challenging, and we cannot let our economy grind to a halt because of it. The consequences of that are also very far reaching. A large piece of the Arctic economy is the resource sector; there’s a large amount of diamond resources in the North. Where gold is currently doing well as a global hedge against uncertainty, diamonds as a luxury item, are not.
With that in mind, we’ve got to look at how we can keep a strong, reliable resource sector, and ask what we can do to diversify employment. We had a strong tourism sector as well in the Arctic, but with COVID-19, you’re optimistically looking at a 3 or 4 year recovery period.
So we’ve got to do what it takes to ensure that we keep employment and business practices at a local level. We’ve been relatively lucky from a public health standpoint, being isolated in the Territories with closed borders. But we need to start opening up safely to work on that resource sector, and make the Arctic an attractive place for the investment community to put their dollars.
Do you see the resource sector as playing a larger role in COVID-19 recovery?
I do, absolutely. The resource sector is one that will always be required and I think Canada has very robust ethical practices that are needed around the world. You need minerals from the ground to create the materials for green technology, and I think it’s a mistake to view the mining sector as a bad thing. I would much rather see a resource sector in Canada, and in the North particularly, that we embrace with good strong management training, labour laws, Indigenous involvement and engagement. Other places around the world don’t have that.
I think we have an opportunity here for Canada to be a leader for the environment, labour, Indigenous rights, etc. and it’s something that we can be proud of and that the world needs to develop our mineral resources.
You see ethics as a competitive advantage then?
Absolutely. The thing we offer in Canada is political certainty, as companies know they can invest in a political environment with future stability. So why wouldn’t we be investing in that?
Learn more about Det’on Cho at: http://www.detoncho.com/