Energy and mining sectors race to feed unprecedented demand

[Music] Welcome back to Strategic Alternatives from RBC Capital Markets. I'm Trevor Gardner, Head of Investment Bank in Coverage, here at RBC, and today we're bringing together three of our sector leaders to examine what 2026 may hold across energy, power, utilities, and critical minerals. This is a moment where the need for energy and more raw materials is broadly understood. Demand growth tied to electrification, AI, and industrial expansion is running into real supply constraints. Policy shifts, capital costs, and security of supply concerns are shaping investment decisions. And across all of these sectors, clients are asking how to navigate long-dated projects in an environment where stability, visibility, and partnership matter more than ever. To explore these themes, I'm excited to be joined by Chris Redgate, Head of Canadian Energy Investment Banking, as well as Craig Edgar, Managing Director, Power and Utilities, and Fareed Datashav, Global Co-Head of Mining and Metals. Terrific to have you all here. Thanks for having us. Thanks Trevor. Hi Trevor, thank you for having us. Great, so let's start big picture. When we think about macro forces in 2026 and we think of each of your sectors, what are clients really trying to navigate? And Chris, I'll start with you. Trevor, there are a number of key themes that we saw through 2025 that we expect to continue or accelerate into 2026. We are seeing substantial build out of North American LNG and AI data center gas fire demand that is driving significant investment in this really setting the stage for a pretty material natural gas demand growth over the next decade. We've also seen a return of international buyers seeking North American resource and a scarcity of tier one resource in the lower 48 that is driving transaction activity and a renewed interest in Canadian resource. We've seen an increase in investor interest in long duration resource and as a result, so a pretty notable performance of Canadian energy equities in 2025 despite a pretty significant decline in oil prices through the year. And lastly, energy policy in a more supportive regulatory environment in Canada and the US is creating the environment to drive significant investment in the coming years. Craig, how about on your set? I think Chris hit it really well. The obvious force that's driving power demand growth around AI came at a time where we were really already dealing with the forces associated with reindustrialization of the manufacturing economy and electrification associated with vehicles and so on. And when you stack all this on top of each other from a macro perspective, we're just seeing demand growth for power that we haven't seen in generations. We had an industry that was growing at sub or 1% and now we're talking about nine, 10% type growth year over year in the need and demand for power. And so as clients are faced with this insatiable demand, it's having a real effect on how to meet it, how to build assets, how to think about that in the context of a more volatile overall political and policy backdrop. It is very consistent with what Chris and Craig mentioned. On the mining side, I would say copper demand accelerating from electrifications, AI, the data centers, which I think it's fair to say is going to require substantial amount input from critical minerals. Over the next 20 years, we are likely to need a lot more copper than has been consumed over the past 10,000 years combined and that's a lot of copper. And frankly, where we're standing today and considering how difficulties to source finance and develop the copper mines, it's really hard to see where all this copper is going to come from in order to continue to power our global economies. And on top of that, the role that the governments and the sovereign funds are playing in order to secure the supply of the critical minerals. We've seen the government's taken equity stake mine, which is again, something that we haven't seen at least on this scale in the past. So it's really fascinating to actually watch how all that unfolds, but it really presents a great opportunity for us to continue to think close to our clients and support them as they navigate all of this new themes. So let's dive in on 2026. And what are people doing now? As we look out to 2030 and beyond, certainly seeing a significant build out of of LNG export capacity in Canada and the US with an associated requirement for considerable natural gas production growth. The federal government recently formed the major projects office, which has been set up to streamline the regulatory process and really create the conditions to incentivize investment in LNG, energy infrastructure, power generation and transmission, critical minerals and mining projects and other strategic infrastructure. The federal government and the province of Alberta recently signed an MOU that's really the foundation for a potential million barrel a day oil pipeline to the west coast and the pathways CCUS project that would be the world's largest carbon capture project. We see these tailwinds is very encouraging. Our sector has really retooled itself over the last decade with a high degree of capital discipline with clean balance sheets and with a focus on shareholder returns. As we see here today we don't have the price signals that would really encourage significant production growth. But as mentioned, we do see meaningful demand growth and do have companies that are thinking about how to position themselves both on the upstream side and the midstream side for that potential demand growth over time. I think one element here is the project duration here measured in decades, far exceeds the political cycle and so a real focus on resiliency of policy that will allow for returns over these long duration projects. I would say in the power slash utility sector, what I'm seeing across our client base is really that turning the eye to the future and what can they do today to be ready to meet this ever increasing need for capital and need for development and so a lot of focus on capital planning, balance sheet quality, making sure that the enterprise is prepared and ready to meet ever growing challenges and that means diversification in funding, sources, looking at alternatives in both the traditional capital markets but private capital markets establishing those relationships really preparing themselves for that next even larger wave of capital that's needed to meet this demand. And then I think also at least as it relates to the power sector specifically, it's thinking about other supply chain challenges, other diversification of sources of power such as nuclear and how do they really prepare the organization, whether it's putting orders in for turbines, developing capabilities around new nuclear technology and other ways to ultimately meet this demand down the road. I think it's fair to say that for a very long time in the mining sector is being fairly under-invested and under-explored. Again, it takes about 15 to 18 years from exploration to sustainable production and all of that supply, the disappearing while the demand has never been hired basically creates a structural deficit for some of the most important critical minerals. The supply of copper, especially in the last six to 12 months, has been very, very tight. If you look across the top 10 copper mines, seven out of those experienced significant reduction in their production, which was one of the key reasons why the copper price achieves an all-time high. But it's not just that, you know, like it's just the combination of the risks, it's obviously renewed focus on ESG, it's a risk associated with operating certain jurisdictions, it's ability to obtain the social license, the permitting, it takes a very long time. So, ability to sanction, build and finance, the project is going to be absolutely important. But we're talking about project, which calls multi-billion dollars. And this is going to be the major challenge of the sector. How do you bring the partners together? Gone the days when the Congress were building the project by by themselves. There has to be project syndication, has to be a risk sharing. We've seen this most in the last few years and probably previously with the idea of, you know, like syndicate risk, share the risk and build the project. It's fascinating, isn't it? What's happening right now? Because we've got this well-established mismatch of duration. You've got demand that's coming fast and furious right now. And the supply in many cases takes a lot longer to bring on. What makes me optimistic, though, and what's so interesting with our clients right now is the ability of markets and the ability clients to figure that out. It's not easy, but a lot of smart people and a lot of smart teams are thinking about this dynamic right now. So I'd like to explore in each of your sectors. What are some of the things that people are doing to move faster to meet this demand that's here right in front of us? In the power sector in particular, the dynamic you just described is playing out in real time. And the innovation that we're seeing is really multifaceted, but that innovation is leading to newfound partnership. We're seeing the largest financial firms, the largest providers of private capital, partnering up directly with the corporates that have the expertise to build data center power supply, partnering up with the data center, developers that need the supply, and really using that as a way to accelerate the growth to meet this demand. We're starting to see, in a current administration in the United States, at least, the government really leaning into support companies. And so whether that's in the form of loan guarantees, whether that's the form of other ways to provide capital to help bridge some of the needs of the industry to meet this demand. We're really starting to see that accelerate. It's also very consistent across the mining industry. I mean, gone the days when there was only access to capital for the large companies. Now what we seeing across the industry is that if the core of the project is solid, there will be potential options out there a little bit either from the government or you could project financing or you could do a raise like a stream. We've seen given how the record prices for gold and silver. We've seen many companies even the early stage actually funding the projects to the golden stream, which have provided a very attractive cost of capital. We also seeing the project, the syndications either from Japan or the storeable funds. So there are quite a number of options. And Trevor, we touched on the outlook for medium-term natural gas demand. You know, certainly seeing entities positioning for that future man, securing upstream resource from key plays and thinking about other plays to satisfy future demand. We're seeing a lot more interest in integration across sectors, energy sub-sectors and integration across value chains. We are certainly seeing a more interest from buyers to integrate through the natural gas value chain through long-term supply arrangements, partnerships and acquisitions amongst producers, midstreamers, LNG entities and off-takers, power producers and data centers. On the oil side of the equation, certainly realization that there's a finite oil inventory in the lower 48 with most producers sitting on kind of mid-single digit, high-single digit years of tier one inventory. These companies have been acquiring or remaining tier one inventory in the U.S. and many have been acquiring or evaluating opportunities beyond the lower 48 to backfill inventory into the 2030s. It's definitely a change in the environment where I think a lot of companies in all industries for a period of time energy was kind of a given. If you wanted it, you got it. You didn't have to think about it and there is definitely a shift where companies are seeing their consumption needs go up and they really have to think about the security and nature of supply and all forms of their energy are incredibly relevant. Technology, an important part of the equation as well. Each of your sectors have constantly innovated over time, but freed and crack in your sectors. Can you comment a little bit on what's happening today and what people are doing to change the game and use technology to advance and meet some of these needs? I'm glad you asked this question because it is indeed very topical for us on the mining side. We are beginning to see various technologies that are aimed at enhancing the corporate coverage through the various processes. I think it's fair to say that some of those are more advanced than others, but they do take a very long time to get to the desired results. In fact, one of them, which took probably close to 30 years of the research and development is the Rietintos owned Newton technology, which effectively harnesses the power of a bacteria to extract the copper from the primer sulfides. In fact, yesterday, Rietintos announced that they produced the first copper cathode using the Newton technology in 18 months, which is actually much quicker and also more environmentally and cost-efficient than building mills and all the other mining infrastructure that you need to produce a copper through the conventional fashion. This could be the inflection point where technologies such as Newton start playing a more important and pivotal role in helping us balance the copper market, which is extremely exciting. Lots of work still has to be done to commercialize it on a broader scale, but this is, as I said, very exciting news and a huge step forward for Newton. I think that this is really proving out to be an inflection point for the broader power industry around accelerating new technology. I would say to your point, Trevor, it's an industry that has always innovated, but I would say that what we're seeing today, the pace of that innovation and the willingness to consider new technologies has really dramatically increased, and that's across the spectrum. So when we talk about technological advancement, the big one that in the power industry, we're really trying to bridge towards is the reemergence of a nuclear power supply in the form of SMR, small modular reactors that use advanced technology, and most large utility companies today have a plan, or at least are working on getting to utilizing that new technology for power supply, and I think there's broad growing acceptance that that has to be part of the solution, as a means to supply the grid. And then I would say that's also quite interesting. A lot of these larger utility companies have really started to establish what I would characterize as an internal sort of VC function. So when they look at their business, and they look at some of the emerging technologies out there, there's now dedicated resources and people within the eat corporates that are meant to evaluate this new technology and really change the way that we're both supplying and delivering energy to the customer. Terrific. So pivoting to capital formation, M&A, the way that this growth is being fueled and sectors are being optimized. When you look at 25 and look into 26, what stands out to you in terms of deal activity, and what do you see as the potential themes for the upcoming year? And 25 has been somewhat breathtaking in the back half of the year overall for capital markets in terms of the tail ends that we've seen, and hopefully that continues. But what are you seeing in each of your sectors specifically? In terms of deal activity for energy, seeing international buyers, particularly for natural gas and an LNG integrated gas return to Canada and the U.S. In Canada, we've really seen a resurgence of U.S. and international interest from private equity and strategic after almost a decade where we saw a wide range of foreign exits with Canadian domestic buyers. Over the last five years, we've seen a number or the majority of tier one private upstream companies and assets transact, which is really pushing buyers to evaluate public corporate opportunities. 2025 saw a very notable increase in public corporate consolidation in Canada, a trend that we certainly expect to continue into 2026. One other area of activity in Canada has been a creation of provincial and federal indigenous finance, loan guarantee programs. We've seen a number of large energy infrastructure partnerships. We would expect that indigenous participation will be an important element in all large scale infrastructure projects in Canada over the coming years. In our sector, the deal activity that we've seen has really been around capital allocation and companies looking at the businesses that they're in and really trying to decide and define what are the businesses that are meant to be in going forward. And so whether that be electric companies selling their gas subsidiaries to focus on electric growth or large regulated companies divesting non-regulated businesses in order to take that capital and reallocate it back into the core. And then I think we've seen a lot of deals where you're taking the strategics in the industry and doing deals to partner with sources of private capital. The emerging scale and scope of these large diversified sources of financial capital has proven to be a major force for M&A activity in our space, whether that be minority interest type transactions or even at a project level transactions to bring in that private capital to help support the growth. And I think we're definitely going to see that going forward. Of late, we're starting to see the emergence of a trend back towards corporate to corporate combinations, merger transactions. And I think as we again as we move forward, it's really a derivation on the same theme, which is to say with all this growth coming as a strategic enterprise, are we scaled appropriately to meet that growth? Do we need to affect some form of a merger to get scale, size and scale matters when you're talking about very large projects to better prepare the enterprise for the opportunities of the future? I think that scale is a really important point. And against that, we've had a lot of companies be really successful and rewarded by shareholders for returning capital, whether it be in dividends or buybacks or other things. For you, on the mining side, you've already touched on on scale, but maybe you can take us into what you see for the year ahead in terms of M&A and capital formation for your clients. Look, I mean, obviously 2024, 2025 have been very busy and fairly eventful years for global mining M&A. It also coincided with commodity prices reaching all the time high across gold, silver and copper. Going forward, it feels like the combinations with a strong strategic ration, now probably going to be the ones that we expect to be pursued to leverage the infrastructure or the technical expertise and unlock values. The other trend I'm also expecting is this mining company is a general, they have significant amount of infrastructure, and some of the infrastructure is absolutely essential. And the miners want to hold on to us, but some of the other infrastructure may not be essential. And as we know, the cost of capital for some of the pension funds and infrastructure funds is a lot less. So I will not be surprised to see some of the fund raising coming through a potential leveraging the infrastructure that can provide the capital that the miners can more effectively use in driving the mining growth. So overall, I expect the activity levels to continue robust, but the capital allocation is going to be very important. So the miners will be very careful how they spend the money, but they do have options to raise the capital very attractive terms and try to put it back into mining. So when I think about the conversation so far, scale, complexity, convergence between each of your sectors, it's a really, really interesting time. So as our clients are navigating this, what do they need the most from RBC? Great question, Trevor. This podcast is a good example, at least as it relates to the power sector clients because our cross industry multifaceted expertise is something that my clients certainly value. So when you know, facing a large hyper-scaler and looking to understand what it is that's important to that hyper-scaler, they look to RBC to help us translate when thinking about capital sources, whether that be public markets or private markets, looking to RBC to really help them navigate the best cost of capital and the best terms or the best strategic relationships that they can develop to help navigate through this time. And that would extend also to relationships with some of the governmental agencies and funds that are looking to support this build out. So I think the breadth of the RBC franchise across multiple industry groups that are all dealing with the same forces is really noted by clients as important and helpful. Given where we are operating today and given the current regime, like I do believe navigating all of the services going to be quite nuanced and it's a very case specific, but where we could be very helpful is our ability and track record to connect our clients looking to build a scalable project with sovereign investors or the international trading houses or strategic partners, as well as to help our clients navigate potential cross-border M&A. But one thing I always like to say mining is in our DNA being a Canadian heritage bank. We have a deep expertise across the global sector which gives our clients assurance that look we've been around for a very long time and we intend to be around for longer, right? So we look forward to helping to support our clients as I try to navigate through very interesting times. In energy we're seeing significantly more cross-border international interests with global pools of capital looking at opportunities around the world. What RBC brings is a global franchise that can provide perspectives across geographies from cross-functional teams with access to global buyers and pools of capital. We bring highly integrated teams across energy, PUNI, mining, technology, and other industry groups in really close partnership with project finance, corporate banking, debt capital markets, and equity capital markets teams to provide leading expertise on complex global transactions and support financing of very large-scale transactions and projects. When you take it all in, I think the global approach is really important. The consistency, as Farid mentioned, that we've been in front of clients in these sectors for many, many years and will be in the future and doing it together. It's a time when scale is more important than ever as we've talked about and working across the organization, whether it be across geographies or across sectors, is just really, really important. While we all count on and hope for markets to be constructive in 2026, we all know markets are volatile. If we do end up in a place where the market conditions aren't quite as positive as they are today or a little bit different or a little more adverse, importantly, we're going to be there to support our clients in all these sectors in a material way. Because one thing we know is the amount of capital that's required and the amount of projects that need to be developed in the energy demands are not going in reverse, and that's something that we need to be there to help our clients across all sectors deliver on. So I wrap up, I've got one final question for the group. What's a prediction for 2026 that might be a little bit different than what the markets have been focused on over the last year? I think there's been a broad acceptance of many of the themes we're talking about. What we're not hearing about that maybe we should be hearing about a little bit more is what if we're wrong? As an industry, we can't bank on that because we have to, both from an RBC perspective and capital provision perspective and advice perspective, but also for our clients. We have to bet on the affirmative. We have to meet this challenge and meet this need for energy head on, but I think we have to do it in a way that we're also mindful of things like these risks that I'm talking about. And so diversification, thinking about alternatives from a capital provision source, what happens if volatility that you talk about re-emerges in the capital markets, what happens if cost of financing goes up? And I think that's where we can provide real leadership and advice as helping clients not only meet these challenges for more energy, but also prepare them to meet them in a resilient way that if the future isn't as well defined as maybe we think it is today, that they're able to thrive and survive through those challenges. We certainly see very constructive tailwinds for both oil and natural gas, but there are a range of scenarios, technological advancements that could impact that longer-term outlook for both commodities. I think that really drives to the importance of companies that are built to withstand lower commodity prices. And so, well, we're very optimistic, I think, just the importance of continuing to build businesses that can thrive in more challenging environments will be important. I agree with everything said, mining, like energy and the power of business is very global. We have to produce a lot more commodity than has been done for thousands of years, right? I do look optimistic, you know, like in terms of 2020-26 and beyond that, you know, a cross-border corporation, a partnership, that will continue for the benefit of the industry and everything else. Well, that's a great place to wrap. Chris, Craig, Farid, thank you. Into our audience, you've been listening to Strategic Alternatives, the RBC podcast. This episode was recorded on December 5, 2025. Listen and subscribe to Strategic Alternatives on Apple Podcasts, Spotify, or wherever you listen to your podcast. If you enjoyed the podcast, please leave us a review and share the podcast with others. Thank you for listening. This content is based on information available at the time it was recorded and is for informational purposes only. It is not an offer to buy or sell or solicitation and no recommendations are implied. It is outside the scope of this communication to consider whether it is suitable for you and your financial objectives.