Rick Rule on BNN Market Call (November 12, 2015)

Rick Rule, chairman of Sprott Global, made an appearance on BNN Market Call last night discussing precious metals stocks. BNN host Catherine Murray sat in for regular host Mark Bunting.

Rule said that weak global demand is the cause of the price slide in many commodities. For investors with a long time horizon, this is good news.

Regarding timing of when we might see the end of the bear market, Mr. Rule thinks precious metals are at the beginning of an end. However, base metals are 18-24 months away.

If the U.S. raises interest rates it will be bad for the gold price in the very, very near term.

Viewer Questions on Mining Stocks

  • Precipitate Gold – Does not own it. Has no plans to own it. Sees no reason to own it in the next 18 months. Likes the people but much better names.
  • Fission Uranium – Uranium price might take another 2 years to change.  Company failed to merge with Denison which was a bad thing probably to the share price in the short term. Mr. Rule is a Fission buyer with a long-term horizon. Fission has the cash/access to the cash to continue to fund exploration.  Sprott knows the management team and geological team well.
  • Premier Gold – Rick does not hold Premier but it is held in other Sprott accounts. Any help you would get on Premier would be from the gold price. Group has access to cash.
  • Argonaut Gold – We are not buyers of Argonaut. Does not see catalyst to move stock higher expect for maybe the gold price.
  • First Quantum – Two thing to consider: very soft copper price and a balance sheet stressed with debt. First-tier assets with good management. It could be a couple years before the copper price changes.
  • Roxgold – Roxgold is currently producing (Rick is wrong here).  Sprott is not a current buyer but not a seller either.
  • Kaminak Gold – We own a lot of Kaminak Gold. Sprott has known and followed Eira’s career for a long time. A great deposit located in a tough environment. Eira’s prior success make Kaminak a worthwhile bet. If Eira is paid a fair price, Mr. Rule thinks she would not be hesitant to sell.

Rick’s past investment ideas

  • Dundee Corp – A mistake. Very good people. Deteriorating balance sheet caused Sprott to exit the stock.
  • Delphi Energy – We have been massacred in Delphi but continue to buy the stock including today. Very high opinion of the asset and the management team. Sprott would be willing to provide help if they needed it.
  • Altius Minerals – Has a big royalty package. Company has done a phenomenal job. Brian Dalton is a superb businessman. Mr. Dalton has a lot of cash and is an extremely disciplined investor. Has an interest in iron and Labrador (hint hint, my guess Labrador Iron Ore royalty).

More questions on Mining Stocks

  • Silver Wheaton – Silver Wheaton is attractive from a price point. Issue with CRA will be overhang on the stock. Sprott owns the stock and believes the litigation will overhang the stock and could cause a sell-off.
  • Peregrine Diamonds – Rick does not own. He believes Peregrine is the most exciting Canadian diamond discovery. The diamond business is technical and Rick does not trust his own expertise to consider owning diamond stocks.
  • Lake Shore Gold – Sprott has a large holding and has been around the company since its formation. The company has done a very good job of turning around operations.
  • B2Gold – We like B2. Good management team with a good pipeline of growth. Best in class for an intermediate growth producer.
  • Cameco – Rick is a Cameco shareholder and intends to become a bigger one. Rick remains attracted to the uranium space – cost of producing is far above current spot price. Commodity prices go up because of demand creation or supply destruction. In this case it will be supply destruction.
  • Newmarket Gold – Does not have a long-term view on Newmarket. High-quality people but Rick does not own it.
  • Detour Gold –  If you think gold is going up, buy gold before you buy any gold stock. Detour Gold is fully priced but the Canadian gold stocks will be higher in the next 18 months. Your downside is maybe 20% before someone like Goldcorp says thank you.
  • Silver Standard – Sprott has been in and out of Silver Standard for many years but is currently out.  Owns 10% of Pretium Resources. Fairly fully priced so will need implementation success or higher metal prices.
  • Lucara Diamond – Lucars is operated by the Lundin family. Has been a tremendous success story. Earnings on a quarterly basis are “lumpy” due to high-quality diamonds. Does not own it.
  • Dalradian – Sprott participated in the last financing and received a 5-year warrant. Suspects stock is fully priced in today`s environment. An overhang of warrants is in the market so Dalradian will suffer from market boredom.

Rick Rule’s Top Investing Ideas

  • Franco Nevada – If you are going to be in the gold business why not start with the best. Royalty business is phenomenal. Franco Nevada if they could has the opportunity to enter base metals streams with the current market weakness.
  • Nevsun Resources – Very unpopular idea. I love it. In an area where everyone hates – Eritrea. People do not like Eritrea.
  • Altius Minerals – People who can afford the risk of being in the junior mining sector have to own. Fantastic balance sheet and this is an attractive price. Stock is not well known.

Words of Wisdom for these tough times. TSX Venture is down 87% over the last couple years so is theoretically 87% cheaper.

Rick Rule “You must be a contrarian or you will be a victim.”

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