Rick Rule

 President and CEO Sprott U.S. Holdings Inc. 

 

Mr. Rule has dedicated his entire adult life to many aspects of natural resource securities investing. In addition to the knowledge and experience gained in a long and focused career, he has a worldwide network of contacts in the natural resource and finance worlds. As Director, President, and Chief Executive Officer of Sprott US Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.

Mr. Rule is a frequent  speaker at industry conferences, and is interviewed for numerous radio, television, print and online media outlets concerning natural resource investment and industry topics. He is frequently quoted and referred by prominent natural resource oriented newsletters and advisories.  Mr. Rule and his team have long experience in many resource sectors including agriculture, alternative energy, forestry, oil and gas, mining and water. Mr. Rule is particularly active in private placement markets, having originated and participated in hundreds of debt and equity transactions with private, pre-public and public companies.

Show highlights:

Rick has 40 years experience in natural resource finance and financial services.  Focuses on natural resources and infrastructure associated with them.  Sprott is best known for precious metals and mining.

Primarily money managers.  Clients get benefit of Sprott’s research.  A challenging sector, but one that has been good for Sprott because they have focused on it.  You are either a contrarian or you will become a victim.

Resource based businesses are very cyclical.  Very capital intensive, so producers can’t respond readily to price signals.  Extravagant bull markets are followed by bear markets.

At the federal level, we have $20 trillion on-balance sheet liabilities, and $100 trillion off-balance.  That doesn’t include pension funds and non-federal government debt.  Two options: default, or inflate away the net present value of those obligations.  The dollar isn’t the worse currency;  it has the biggest parachute though.

How can listeners invest in organics?  Most ag is privately held and only a small list of ag stocks can be bought.   LMNA -large citrus and avocado producer.  BWEL – large cotton and tomato producers.

More interested in water markets than food markets.  Drought will resurface.  People that own water rights will do quite well.  Look to invest in farmland with water rights or construct portfolios of the few stocks with farmland and water rights.

T. Boone Pickett – bought Texas land to get into water development.  Dr. Burry of “The Big Short” is 50% invested in water rights now.

Sprott is buying farms mostly in the upper midwest.  These have lower production costs than Ogallala Aquifer farms because of access to water.  Water is always valued more highly for municipal use than ag uses.  Future Holy Grail of water business is selling water rights to municipalities.

GMO issues.  People need to express preference for non-GMO with their wallet – there must be a market response to labeling and economic incentives for non-GMO crops.  All food we eat has been genetically modified for 200 years by selective breeding.  Potential for soil toxicity with Roundup is the concern.

Cotton industry employs latest ag techniques.  Concern over growing huge acreages of a monoculture crop.

Gold has 30 times the investable base of silver.  Original gold base still exists, but 50% of silver is used in industrial applications and gets used up, so the supply of silver in reference to gold is much less.  Gold moves first, but silver moves furthest.

The easiest found deposits of gold and silver are outcroppings and have been found.  Need better technology to discover underground gold and silver deposits.  Will be in areas with a political risk to them, such as west Africa or Afghanistan.

Rare earth minerals – aren’t very rare.  They have a broad distribution, not a lot of incentive to explore for them because of high western Chinese production levels.  Used in manufacture of any electronic gizmo product.

Can we make solar more effective?  Getting better every quarter.  Is now competitive without subsidies with other forms of power.  Improvement in battery technology is needed, plus volume sales.  Tesla’s battery factory will have an impact.  Have seen much improvement in collectors – new solar panels look like roof tiles.  Future of solar power is very bright.  Is good for the silver business.  Solar is most efficient where demand for air conditioning is at its peak.

Tips on mining stocks?  For people who don’t want to do the work to pick stocks, ETF funds wold be best way to start.  Stick to highest quality companies, e.g. Wheaton, Franklin Nevada for specific stocks.

How does Sprott invest in solar?  Have invested in some solar infrastructure.  Solar is intermittent energy, needs major investment in the grid to handle distributed energy and storage.  Tesla solar-powered cars could have zero fuel cost after the initial investment in the car.

Weakness in the oil price has more to do with weakness in the global economy.  Oil is an efficient energy source.  Total cash cost for a new barrel is $60/barrel, now selling it for $40.  Selling below cost is impairing capacity.  Sustaining capital investments aren’t being made.

Mainstream Republicans, all Democrats and the deep state loathe President Trump.  He’s picked 50 battles, probably diluted his energy too much to win any of them.

Man made global warming – widespread belief in it will continue to gain support and carbon will be taxed.

Future for wind energy?  It won’t work now, absent subsidy.  Is a politically expedient energy.  It’s an intermittent energy and people don’t like to live in windy areas.  Need to invest in the grid to make use of it.

We haven’t upgraded the web infrastructure in many years, nor much physical infrastructure.  We wait until things break, and given the level of existing debt, it will be a challenge to find the money to fix it.

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Rick Rule with good insights on the investment potential of all natural resources from solar to oil, June 22, 2017



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