Resource World Magazine

26 www.resourceworld.com J U N E / J U L Y 2 0 1 9 R ick Rule, President and CEO of Sprott U.S. Holdings, Inc., is one of the most popular speakers at vari- ous resource investor conferences around North America. If you can get a seat, you will be treated to his critical thinking that enables him to zero in on mining stocks that have the best chance of capital gains. Rick spoke to Resource World from his office in Carlsbad, California. RESOURCE WORLD: In one of your recent presentations, you spoke about profiting from mergers & acquisitions, royalties & streaming companies and prospect gen- erators. Are those areas still the ones you focus on? RICK RULE: They are. We would also probably focus on extraordinary explo- ration successes, were we to see them. Unfortunately the slowdown in explora- tion expenditures over the last 10 years has meant that new high quality explora- tion successes are fairly rare. But, in direct answer to your question, where we are see- ing opportunities today to deploy capital are prospective beneficiaries from mergers and acquisitions which we see as a very important trend. Also, royalty and streaming, which we do not see as overpriced relevant to the rest of the market, and of course, prospect gen - eration given the dearth of exploration that has taken place that some would say for 10 years while others would say for 30 years. RW: How do you choose the best roy- alty and streaming companies? RR: The best are, in fact, the biggest. I think that at the top of the league are prob- ably Franco-Nevada and Wheaton Precious Metals with Royal Gold up there too. There's opportunity throughout the space. What constitutes the best really depends on the individual need of the investor. For generalist investors, who want to dip a toe into the mining space, certainly you get better market performance with less risk by buying Franco and Wheaton – better performance than what you'd get that with the mining companies themselves. For more sophisticated investors or speculators, coming down the quality trail a bit, but sticking with well-financed companies with great free cash flows, com - panies like Anglo Pacific, Sandstorm Gold and Altius Minerals, for example, make a great deal of sense. For people who are more aggressive still, the royalty creators that have enjoyed success – I'm thinking now in the context of EMX as an example – offer a lot of opportunity. RW: For choosing the best prospect gen- erators, do you use the traditional criteria of good management and great geology? RR: We do that. We're also looking at more statistical screening as proof of good management because good management is, of course, subjective. What we're looking to specifically is third party expenditures; that is, prospect generators that actually generate projects that get drilled by other people. Specifically, we are looking at third party expenditures as a function of the capital spent by the company in G&A and generative expenses too; in other words, companies that enjoy substantially more third party expenditures in relation to money that they themselves spent running the company and generating the prospects that got farmed out. RW: The price performance of gold must be disappointing for gold stock investors. What is your opinion of gold and its near- term future? RR: My near-term track record unfortu- nately is unblemished by success like most people. Buffet famously said that forecast- ing tells you a lot about the forecaster but very little about the future. I remain positive about the gold price in the longer term as a consequence of the fact that I'm a little bit bearish on US trea - sury securities. In the near-term, nobody can tell. The truth is, one of the problems with regards to expectation regarding the gold price is simply expectation. Gold has done for investors what it's supposed to do. If you take gold back two decades as an example, the gold price is up some 500% over 20 years, which is to say that is has maintained its purchasing power. If you take it back 40 years, of course, it has done much better. The difficulty, in my opinion, with speculators, is that they have outsized LEGENDARY MINING STOCK INVESTOR AND FINANCIER OFFERS INSIGHTS INTO HIS REMARKABLE SUCCESS Rick Rule on winning strategies for mining stock investors by Ellsworth Dickson Rick Rule, President and CEO of Sprott U.S. Holdings, Inc. INVESTMENT

• Cover