Resource World Magazine

22 www.resourceworld.com J U N E / J U L Y 2 0 1 6 Rick Rule is Chairman/Founder of Sprott Global Resource Investments Ltd., a major investor and financier of quality min- ing stocks. Rule is a standing-room-only speaker at resource investor confer- ences across North America. He spoke to Resource World from his office in Carlsbad, California. RESOURCE WORLD: With the prices of gold and silver increasing and select precious metal stocks doing well, a new lithium staking rush under way, plus the Venture Exchange up about 200 points, do you think we are finally in a recovery for the junior mining sector? RICK RULE: Yes; however, (from prior recoveries) the recovery will not be straight up. This is a market that will need to digest some of its gains. One risk that your read- ers have, given the disappointments they have suffered over the past five years, is that they may mistake normal bull market con- solidation as having been a false start of a bull market and mistakenly get themselves shaken out of owning a stock. We are now past the bottom, particu- larly in precious metals. Yes, we have had the worst, but just remember, the future is not going to be straight up. There will be higher highs and higher lows but there will still be volatility which is a hallmark of this market. RW: Are the fundamentals in place for precious metal prices to keep rising? If the answer is yes, what are they? RR: Absolutely. Printing money on a global basis is the fundamental reason for precious metals to rise in price. I have said for years that the most important determi- nant of the gold price, on a global basis, not just in the US, is the interplay between gold and the US dollar, particularly the US 10-year treasury. The US treasury has been in a 35-year bull market; the yield having fallen from 15% to 1.8%. Could the yield fall a little more? Sure. But the truth is that the bull market in the 10-year treasury is closer to the end than the beginning. And so the bull market in gold is closer to the beginning than the end. You can't charge a less than zero inter- est rate on gold; it doesn't work that way. So the competition offered by sovereign bonds to gold – the other safe haven investment – is basically gone from a prac- tical point of view for people who will hold gold or bonds. RW: There are now over 50 companies jumping into the lithium space. Is this also a sign that a recovery is underway or the result of pent-up demand to buy electric cars that use lots of lithium? RR: I think that this is a fondness of people who play the Canadian venture market for a good story. There is a near- term shortage of lithium but there are lots of lithium supplies on a global basis. It amuses me that the Canadian dealer net- work talks about impending shortages and the big four lithium producers talk about an oversupply of reserves and resources. This is the modern-day variant of a staking rush where people get wrapped up in the story irrespective of the facts behind it. RW: With the current interest in buy- ing electric cars, plus more wind turbines being built and growing Chinese infra- structure, does this mean the fundamentals Rick Rule on the mining stock recovery How to play the new bull market in mining stocks by Ellsworth Dickson InvestNorthWestBC.ca Find all of the major projects in Northwest BC in one place. allanstroet@bveda.ca iNvESTmENT

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