Rick Rule, Sprott US Holdings
Rick Rule has dedicated his entire professional career to natural resource investing. In addition to the knowledge and experience gained in a long career as a licensed stock broker and founder of Global Resource Investments Ltd., he has a worldwide network of contacts in the natural resource and finance worlds.
In 1993, Rick financed Silver Standard (Stock Profile - TSX:SSO & NASDAQ:SSRI) for $2 million when the company's valuation was less than $10 million. Through a few tough cycles in the mining sector he maintained his support for the company.
Today, Silver Standard has the largest in-ground silver resource of any publicly-traded primary silver company, with a pipeline of 15 projects ranging from grassroots exploration to production in Argentina, Peru, Mexico, Canada, Chile, and the United States. The valuation of Silver Standard is nearly $1.3 billion.
Mr. Rule currently serves as Chairman of Sprott US Holdings. Sprott US Holdings is active in securities brokerage, segregated account money management and investment partnership management involving both equity and debt instruments, across the entire spectrum of the natural resource industry. The company manages a number of Sprott Global investment funds including Diversified Resources, Precious Metals and Resource Income.
Collectively, Rick manages close to a billion dollars through investment partnerships and investment management firms. Mr. Rule is a frequent speaker at industry conferences, and is regularly interviewed for radio, television, print and online media outlets concerning natural resource investment and industry topics.
With a substantial amount of success in the mining sector under his belt we are delighted to connect with Rick Rule in our Top Mining Minds series.
What factors will drive the mining markets over the next 12 months?
We think the trend in non-precious metals commodities is down for the next twelve months, as a consequence of very weak demand from all major economic regions. We think major extractive industry shares will have trouble gaining market traction as well, partly in response to softening product prices, but also in the face of tighter credit markets constraining growth spending, and increasing pressure for higher social takes.
The junior market will bifurcate. The lower quality companies (at least 70% of the TSXV) will continue lower, as they strive to reach their intrinsic value ($0.00) in the absence of market support and financing. The strong will begin to rebound sharply, driven by seller exhaustion, increased merger activity, and what we believe will be a very strong discovery cycle.
The dam should break shortly in the financing markets, as managements adopt a more realistic set of valuation assumptions in the face of critical capital needs. This will be offset by the biggest population of suspensions and delistings since the early nineties.
What should investors be doing right now?
Be ready to aggressively participate in what will be a once in a decade financing calendar, and buy secondary market securities in companies with PEA or PFS stage projects where the net asset value exceeds the sum of upfront capital costs and enterprise value; where IRR’s exceed 30% and where paybacks are less than three years.
What are your top picks and why?
I’m a longer term player. Gold and silver development plays that are financially accretive will do well over the next 18 months. Looking longer term, uranium and the platinum group metals can only go higher.
To read more from our Top Mining Minds series - CLICK HERE.