Resource World Magazine

20 www.resourceworld.com A P R I L / M A Y 2 0 1 8 RESOURCE WORLD: Should the recent volatility on the stock mar- kets frighten mining stock investors? RICK RULE: If mining stock investors are frightened about vola- tility, they shouldn't be mining stock investors. Mining stocks are both cyclical and volatile. That isn't the fault of the mining busi- ness necessarily; it's probably the fault of the speculator. Volatility is a tool when properly employed – not a risk. Cyclicality is the occasional presence of sales that are deeply discounted market conditions and volatility is simply the greater frequency of sales. If you regard volatility as a risk rather than an opportunity, you should perhaps consider whether you should be in speculative investments or not. I personally love volatility. RW: Would you say corrections are a sign of a healthy market? RR: Absolutely. There's no market that goes straight up or straight down. As an example, backing and filling [quick price upswing followed by a gradual decline], if you will, in a bull mar- ket is extremely healthy and if one has a sense of the value of a stock, price declines which are unaccompanied by value declines are the finest possible circumstance for a speculator. RW: How do you and your brokers react when there are big sell offs? RR: Going back to the last question, we believe that money is made in the delta between price and value. People focus slavishly on price because it's easy information to obtain. But price informa- tion has no net present value if you don't have an opinion as to the underlying value of the company. Big sell offs in a stock where we are convinced that we understand the value proposition offered up by the stocks are gifts from God as far as we're concerned. If we think that a stock is worth a dollar and could be worth three dol- lars in a year as a consequence of some exploration success and it sells off from 80 cents to 40 cents, that's the best circumstance for us. RW: While the Dow had huge swings, the Venture Exchange didn't plunge nearly as bad. Is this because commodities have an intrinsic value or do junior mining investors have a firm faith in the future for mining stocks and commodities? RR: I can't answer that because I believe that the junior mining industry taken as a whole is absolutely valueless. If you merged every listed junior company in the world into one company, say Junior Explorco, that company would lose somewhere between $2 billion and $5 billion a year. Investing in the junior sector as a whole is a recipe for failure. Investing in a sub set of juniors or investing in juniors individually can be extremely lucrative as I have learned myself. But investing in the entire industry, which of course is impossible, is a recipe for failure. There's no real cor- relation in any circumstance at all between the Dow and the junior markets and the attempts to look for correlations are probably counterproductive for investors. RW: Has the decline of independent brokerage houses now taken over by banks hurt the junior mining stock sector? RICK RULE INTERVIEW Rick Rule offers his own unique and highly successful approach to investing by Ellsworth Dickson Rick Rule. Photo courtesy Sprott U.S. Holdings, Inc. No stranger to attendees of resource investment conferences, Rick Rule, President and CEO, Sprott U.S. Holdings, Inc., usually addresses standing room only crowds with his "Road less Travelled" way of looking at investing in mining stocks.

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