00:00 Welcome to the Rule Classroom Plus. This is Steve Barton and thank you for tuning in. We are back to take your questions and ask Rick himself. Rick, how are you, sir? I think you were muted.
00:20 There we go. Somebody unmuted me. Answer that is life is good, sir. I hope you're good as well. Yes, doing well. Doing well. Any opening thoughts? None whatsoever. We should get right to it. I mean, there's been a lot happening. Obviously, I guess some people are happy about the higher gold price. I'm of mixed minds. I'm still looking to buy gold.
00:39 So my own preference would probably be for the gold price to be lower as opposed to higher, but I realize that's personal preference. Everybody, and I'm not the right one to comment about it, but everybody's obviously talking about the fact that the US government created a bunch of dollars out of thin air by printing them, lent them to the Japanese to buy yen.
01:02 I guess because the US government didn't want the Japanese government to sell US Treasury bonds, which they hold in abundance. Life gets stranger and stranger. Everyone needs to understand the simple fact that printing more US dollars with no additional backing makes the existing ones worth less. It's important that people understand through all the fog.
01:26 The truth is creating more currency out of thin air does not increase the value of the existing currency, but rather decreases that value. So it's important for people to understand that. That's interesting you say that because I just got back from Japan. So I was there when that happened.
01:46 And when I pulled money out of the ATM the first time, I got 164 yen for $1. And the second time I did it, I only got 157. That dynamic there. I was literally getting a haircut and the guy had the news on and I told Gloria, I said, "Oh, they did it again." Can you go into a little bit more of that? What exactly are they doing?
02:11 That's fairly simple. They wanted to strengthen the yen. So the US government loaned the Japanese a bunch of US dollars which they exchanged for yen. So the yen went up in dollar terms. The dollar went down in yen terms and you got screwed. Okay.
02:33 The bottom line's always the same. The citizens always get it. Okay. Maybe as a chartist, over the weekend I realized that the odds — I'm playing odds here — but the odds of gold going down to the price range of 3500 to 3600 got significantly lower and I'm trying to move more cash into bullion and I was getting alerts from Chase that to do that at over 10 grand per transaction is — I'm getting a nasty gram.
03:07 It's a first world problem, but why do they do that? Why is it that you can't move cash like that? The US government has decided that any cash transaction over $10,000 is a suspicious activity in and of itself. And so the financial services institution is required to fill out a suspicious activity report.
03:31 SAR. And by definition any cash transaction, whether or not you just take the cash out of your own account or whether you use the cash to buy gold, is a suspicious transaction. It's reportable to the Treasury. I have done it hundreds of times. And my belief is that all of these suspicious activity reports go in some building somewhere never to be looked at again unless they decide they want Steve Barton.
03:58 And then they search their database for suspicious activity reports on Steve Barton, and they come after him. When I still ran a brokerage firm myself, Global, and later Sprott Global, we learned that the failure to file suspicious activities reports depending on what your transaction volume was, was also a suspicious activity.
04:26 And so what I did was I looked at my customer base and I thought, who in my customer base engages in the most suspicious activities? Those include things like wiring money back and forth to Dubai, lots of foreign transactions, transactions with emerging and frontier markets.
04:42 And I decided that the most suspicious customer that Global had was this guy named Rick Rule. So everything that Rick Rule did, I filed a suspicious activity report on, figuring that by filing enough suspicious activity reports on myself that the firm would beat its suspicious activity report quota.
05:00 Interestingly, I got a call from Treasury and the gentleman from Treasury said, "What are you doing?" And I told him. "Why?" I said, "If the guy in charge of the firm is engaging in suspicious activities and we don't file a suspicious activity report, I think that that might cause the Treasury alarm."
05:17 And I remember him saying, "You don't have to do this." And I said, "Fine, put it in writing. I'll be happy not to do it." And we never heard from him again. Okay. All right. So just fill out one of those forms and then I should be good to go. You don't even have to fill it out. Maybe they ask you — they're not required to do this — but they might ask you why you're engaging in the transaction.
05:40 I used to have to do that. And I remember on one of those things when they asked me the purpose of the transaction, it had to do with a wire of US dollars cash to Hong Kong Shanghai Bank in Vancouver BC. And I actually said, "to purchase physical gold to hold outside the United States." Put that on the request for information form because it's not illegal to hold gold outside the United States and so I decided I may as well tell him. And again, never heard any more
06:10 from him about it again. Okay. All right. Good to know. Okay. Thank you. I appreciate that. Okay, right into questions here. John wants to know, he says, "Any rankings or opinion on Bunker Hill Mining and Silver One?" Bunker Hill is restarting Bunker Hill mine in Idaho while Silver One is developing the Candelaria project.
06:34 I have no ranking on Silver One. I have a six rating on Bunker Hill. Okay. Surin wants to know your opinion or outlook on the lithium industry and also on Standard Lithium. I don't have a ranking on Standard Lithium and I need to say I'm very cautious on lithium. The alleged shortage that we had seven years ago was not a shortage of primary lithium.
07:04 It was the fact that lithium demand grew fast enough that we had a shortage of processing capacity. During this shortage the second largest lithium producer in the world SQM reported that they had 185 years of reser— that's wrong, 85 years of production at current demand. So we didn't have a shortage of lithium.
07:26 We had a shortage of lithium processing capacity. The price for processed lithium skyrocketed and everybody and their brother started looking for lithium. Because we hadn't looked for it before. We hadn't found much. But when we started looking for it, we found a lot. At the same time that we found a lot, the bottleneck in processing capacity went away.
07:48 So we're oversupplied in lithium now. I would suspect of the 150 lithium juniors that were spawned during the so-called shortage, probably five or six have developable projects, which means that 140 to 145 don't have developable projects. The second thing that concerns me about the lithium business is that each of MidAmerican Energy, part of Berkshire Hathaway, Occidental Petroleum, Chevron, and Exxon believe that they can make direct lithium extraction work.
08:21 Direct lithium extraction is where you take lithium rich brines, often produced for free as a co-product of oil and gas, and strip the lithium out of it. If your lifting and production costs of lithium begin to approach free from direct lithium extraction, that'll be very hard on the hard rock lithium producers. I'm not an expert in technology.
08:43 In fact, anything but. So I don't know that direct lithium extraction will work, but I'm interested that people who are a lot smarter than I, say the folks at Exxon, believe it will. I know from my own background in oil and gas and also from my background in geothermal that until very recently, 15 years ago, lithium was regarded as waste.
09:05 It was something that fouled your equipment in geothermal and oil and gas exploration. So for all those reasons I would be careful about the lithium business. Okay. Vig wants to know your thoughts and ranking on Marimaca Copper.
09:34 I have Marimaca as a four. The stock has been on fire, but so are the drilling results. As many people know I am a bull about the copper business long term. I had expected the copper price to be much weaker this year. I had expected that the increase in oil prices as a consequence of the conflict in the Gulf would lead to a greater degree of economic weakness around the world.
09:51 A consequence of that would be lower copper demand and a consequence of that would be lower copper prices. I also thought that higher interest rates would make inventory in copper by speculators particularly in China more expensive. I was wrong. The copper price has been much stronger this year than I had anticipated. The consequence of that is that even the development stage copper stories, the Marimacas, the Hot Chilis, the ATEXes of the world have done very well.
10:20 Okay. Roy wants to know your ranking and analysis on Eagle Nuclear Corporation. No comment. Don't know enough to comment. Okay. Dan wants to know, "Hi Rick and Steve. What does Rick think about Founders Metals? It has a project in Suriname. A lot of good interceptions, but no resource. It has two mining companies as a shareholder, B2Gold and Gold Fields. To have two big miners as a shareholder, is it better for shareholders?"
10:45 To have two big miners as shareholders for an exploration stage company is excellent. I don't own Founders. I know the people. I have a high regard for the people at both B2 and Gold Fields. So I look fondly on that. It's important to know that exploration in Suriname is really expensive.
11:12 You are in a tropical rainfall environment. Most access and egress is by helicopter. So you have to fly everything including helicopter fuel. So you need to understand that your cost per meter drilled as an example there is going to be very very high. Your need for capital is going to be continuing.
11:31 The beauty of having two mining companies as shareholders rather than one or worse yet none is really twofold. One is adult supervision. The people at Founders logically can rely on both B2 and Gold Fields for technical expertise. Often the companies have a lot of technical expertise which they will lend to the junior at no charge which is a good thing.
11:58 The second is that major mining companies are seldom stock traders, which is to say if those two companies own 10% of the float each, the float is actually much smaller than it appears, making the resulting shares more volatile both to the upside and to the downside. The third thing is why it's good to have two as opposed to one company: if they do make a successful discovery, it's tough to have an auction with one bidder.
12:24 If there was only B2 in place and they owned 10 or 20% of the company, they would be perceived by other mining companies as having a head start in any bidding process, in any auction. Having two creates dynamic tension, which is a good thing. Yeah, that's a good point. Victor wants to know, "What are your thoughts on these Canadian energy names, Tourmaline, Birchcliff, and Strathcona?"
12:55 I own Tourmaline and Birchcliff. I have a reasonably high regard for Strathcona. I just don't see them performing as well as Tourmaline. To own Birchcliff, you need to be a continued bull on North American, but particularly Canadian natural gas. And you have to believe that the impediments involved in moving more Canadian natural gas to liquefied natural gas export facilities on BC is going to go ahead.
13:20 I'm cautiously optimistic about that despite the fact that the prime minister of Canada, Mr. Carney, is on record for being anti-fossil fuels, anti-carbon. He has a very aggressive spending agenda. And I think he knows as a former banker that the thing that Canada does best in terms of their economy is produce oil and gas.
13:38 So I'm cautiously optimistic that Mr. Carney will overcome his anti-carbon bias and facilitate the movement of more gas hydrocarbons from Alberta out to BC. The consequence of that is that I continue to hold both Birchcliff and Peyto which are gassy names. Okay. And Vig wants to know: Orogen Royalties, 200 million market cap against maybe 80 to 100 million of net asset value.
14:08 The premium buys 14 partner funded drill programs as a lottery. Beyond exploration odds and First Majestic consideration, should I price in any other risks? The only risk that you would have is whether or not management's expectations have been sated by their extraordinary returns to shareholders to date.
14:35 People who aren't familiar with Orogen might not know that they originated a deposit in Nevada which was sold to Anglo for a return to shareholders that was really a dramatic return to shareholders and in fact everything that's left over in Orogen was icing on the cake to be honest with you. As the questioner pointed out, inside Orogen, in addition to having a substantial cash hoard, you have the Ermitano royalty operated by First Majestic and the already proven upside to Ermitano, a new discovery at Ermitano being prosecuted by First
15:17 Majestic. On top of that you have an exploration strategy that identified the asset, the Walker Lane asset, which was sold to Anglo, which is attracting a lot of attention. As was pointed out, you have 13 or 14 generated projects already farmed out to industry, meaning that you have a carried interest in 13 or 14 projects.
15:46 This is a premium priced company and I would suspect that it deserves the premium. I'm a very large shareholder of Orogen. Okay. Aaron wants to know: Rick, Agnico's quarter 2 filings show they sold 261 million of their junior equity portfolio in the quarter, more than three times what they bought.
16:12 And their MD&A says the proceeds funded their own share buyback. If the best acquirer in the business is selling juniors to buy itself, what does that tell us about where we are in the cycle? Not necessarily anything. I understand the nature of the question, but I think that Agnico looked at what they thought that their junior portfolio was worth in terms of prospectivity.
16:35 In other words, they thought about what those juniors could be worth and they juxtaposed it to what they know that they're worth and they decided that a bird in the hand is worth two or three in the bush. It's important to know for Agnico that they don't have to enjoy any exploration success.
16:51 They grow for 5 years based on development assets. It's also very important to know in Agnico that year after year after year for 20 years there's been a positive reconciliation between, on the negative side, the gold ounces produced and, on the positive side, the conversion of resources to reserves.
17:13 In other words, they have through the drill bit upgraded more ounces from resources to reserves than they've produced by way of reserves every year, even while adding to the resource category by the drill bit. There is some suggestion that Agnico doesn't need to explore, or doesn't need to joint venture explore with third parties, given the strength of their pipeline and the strength of their near-operation exploration potential.
17:46 I don't happen to be one of those. I happen to believe that for highly competent technical teams, one of the best ways in the world that you can add value is via the drill bit. And I also believe that joint venturing with juniors, including owning equity in the juniors, is the most efficient way to do exploration.
18:07 But a really good financial case can be made for the opposite. Piggybacking on that, I was talking with Joe Mazumdar out at the symposium and he's of the mind that big miners like Agnico are going to be more likely to start investing in developers than they are than a junior miner that got the mine up and running and now they're producing.
18:33 Do you kind of see the same thing or what do you think? I think that depends on who the major is and who the junior is. Certainly in a period of time before, well maybe coincident with, the delivery of the prefeasibility study, before the project has been financed and before the permits are obtained — the boring part of the land curve — the majors have a lot more patience.
19:03 The retail investor and the institutional investor in the absence of any interesting news often sells. That's a very opportune time for a major mining company that has a much longer term time frame to get involved. There are other companies who look at their exploration pipeline and find their exploration pipeline wanting; they want to get involved pre-development.
19:32 And so I really think it depends on the nature of the project and I also think it depends on who the acquirer is. Okay. Tarso wants to know, "What is Rick's perspective on Jason Simpson becoming CEO of Equinox Gold? And how do you believe Ross Beaty will influence the company now in his role as chair?"
19:56 I haven't talked to Equinox about the change of plans with regards to the CEO. I think it's interesting and it's something I need to do. With regards to Ross Beaty, I can answer that question very well. Ross Beaty ostensibly retired six years ago.
20:19 And what that actually means is that when the weather is very nice on Bowen Island, June, July, August, and part of September, Ross Beaty is actually retired. He's paddling around his kayak. He's working in his garden. He's taking long hikes. I pray he doesn't get killed on them. He does frontier canoeing in the Northwest Territories. However, end of September into early October when the weather gets lousy, the days are short and it starts to rain, Ross Beaty lasts about 4 days in terms of inactivity before he comes back to work.
20:44 So you can expect almost no contribution from Ross on Equinox or any other economic topic for the balance of the summer. And you can expect Ross back working 14-hour days beginning in October. By the way, I've known Ross for 50 years. This is a firsthand observation.
21:09 Okay, we pray for rain. Scott wants to know. He says, "Does the recent announcement of Westinghouse IPO change the long-term view of Cameco?" Not for me. I think what happens is that they've looked at the capital needs they have with the projected buildout of the US nuclear fleet and they've decided that they can't stand that equity.
21:32 They can't stand that capital infusion on their own balance sheet. They're going to need other people's money. What they're saying is that they believe that the scheme that the Trump administration has of funding 10 different 1 gigawatt reactors in the United States using Westinghouse technology is going to go ahead.
21:55 They're expressing confidence in that. That will make money for Cameco throughout the Cameco value chain. It will take the Westinghouse engineering earnings off of the Cameco balance sheet and income statement, but it will add back nuclear fuel supply, nuclear fuel processing. It'll add back a lot.
22:17 So depending on the price and terms, it's extremely positive. Okay. Yeah. Cameco, well, all the uranium equities have had a nice pullback lately. Been buying. You recently came out with an article on Substack on exactly that. It seems like you believe that we're probably in the little trough section right now where it's a good time to be buying.
22:38 You know, I'm not a timer, Steve. I'll leave that to you technical guys. When I look at what the uranium business is going to do in the next 10 years, I'm really unconcerned with timing the market. What I try to do is on days that are very bad days, when the NexGens or the Camecos sell off for whatever reason — the prime minister of Japan sneezed or something like that — I try to buy stock.
23:03 And that's really what I do. I don't have any uranium equities that I would sell for any price near the current price. So I'm only interested really in down moves. The only thing that gets me to act is when stocks are cheaper. When the stocks go up, I'm not particularly a seller.
23:19 So I have no interest in up days. It's just down days. Okay. All right. Yang wants to know, "What's up, Yang? How you doing?" A narrow vein orogenic underground mine. Recent infill drilling and reconciliation showed a large local grade variability against the model. Historical outcomes of orogenic underground mines like this one have been mixed.
23:43 Sean has cushioned the build by over financing it, but management only owns about 1% of the equity. How do you handicap a narrow vein underground mine when management is good but ownership is low? I don't own Osisko Gold. Sean has done something else. He's drilled the living S out of this thing. He's got a lot of data points and he continues to drill.
24:08 So despite the grade variability, despite the fact that the structure shrinks and swells a lot, which makes it tough to mine, you have unusually good data. That being said, for the reason that the questioner explained in the question, I'm not a shareholder of Osisko Gold. It should be noted that Sean and I disagreed once before, which was on the selling price for Osisko itself.
24:31 And in that circumstance, I was willing to settle for the original hostile bid. He wasn't. And as a consequence of him being right and me being wrong, he made me 35% more on my money over three or four months. So, you disagree with Sean at your peril. That being said, one needs to stick to one's guns and it is precisely the discontinuous nature of both grade and structure that has kept me from owning the company.
25:03 Okay. Jonas wants to know, "Rick, do you have a current rating and opinion on [ARO] Resources?" I don't have a ranking on ARO. It's something I need to do. I'm familiar with that project, but I'm familiar with it from 25 years ago and a lot has changed.
25:26 Okay. Got a lot of questions coming in here. We're pulling the questions from the Rule Classroom Plus. So if you're watching on YouTube or X or any other outlet, follow the link down below or go to ruleclassroom.com and that is where we are pulling the questions. He also wants to know what do you think of Vizsla Silver's recent team developments and timeline?
25:48 I'm not going to comment on the timeline. For the questioner, we've dealt with Vizsla Silver fairly substantially at the Rule Classroom, including a half-hour long interview with Craig Perry from Vizsla. The timeline is complex because they have to make a deal, which they won't admit that they have to do. They have to make a deal with the cartel.
26:10 And you are not going to see a press release from Vizsla saying "we've made a deal with the people who murdered 10 of our employees." That's not the kind of thing you're going to see. You are going to see an agreement that says "we are satisfied with the current security arrangements that we enjoy in the state of Sinaloa and as a consequence of that we're resuming major construction."
26:33 But any question about timeline necessarily involves negotiations that the company is forbidden from engaging in but must engage in and you aren't going to be able to monitor that. Nor am I. With regards to the staffing, I think the fact that they have been able to add some senior Mexican staff given that their predecessors got murdered is an attractive feature.
26:58 It would suggest that people who know believe that it is either safe or becoming safe. Okay. Tyber wants to know, "Good afternoon, everybody. I would like to get Mr. Rule's take on Hecla Mining and B2Gold." I am not a Hecla shareholder. They respond extraordinarily well to higher metal prices, and I will say they're generating a good amount of cash.
27:26 Now, their 20-year asset allocation track record is not good. The amount of reserve and resource that they add from the margin that they generate from selling an ounce of gold or an ounce of silver is negative, which is to say over 20 years they've destroyed as opposed to added capital. So I'm not a Hecla shareholder. They are extremely leveraged to the silver price and if people listening believe that the silver price is going to spike up, Hecla is leveraged to it, both in the context of being a high-cost large volume silver producer but also being an
27:59 American silver producer, and Americans tend to pay more whether they should or not for American silver. And I'm sorry, what was the other company? B2. B2 I'm a large shareholder of. B2 is cheap. It may get cheaper. There has been management transition. The founder of the company, good friend of mine, Clive Johnson, has retired.
28:22 Clive is a unique human being. And I suspect that his replacement will be in a conventional sense a better manager. I'm not sure that his replacement will be able to do things like fly to Mali when Mali is ripping up all kinds of existing contracts and very quietly sit down with the leadership at Mali and resolve his differences before they became as difficult as they became for people like Barrick. Clive was a unique human being.
28:51 He has been able to, as an example, permit, build, and operate a mine in Russia successfully. He's operated in the Philippines. When Duterte shut down Western mining companies, Clive was able to operate in the Philippines without halt. Whether or not this new guy is successful or as successful is up to reason.
29:15 Clive told me that the reason that he felt he was able to step down now was because finally the Canadian project, which was way over schedule and way over budget, was on track. In other words, he believes that he has successfully completed that track. If he is able to do that, if we see Goose begin to produce at nameplate capacity, I think you'll see the same recovery in B2 shares that you saw in Equinox shares when they overcame the bogey of a past due, over budget Canadian construction project. If you look at
29:55 B2 on a sum of the parts basis, they're one of the cheapest intermediate producers in the world. Cheap on par with OceanaGold, better than OceanaGold in the sense that B2 has two tier one deposits where OceanaGold is more a collection of tier 2 deposits. So from my point of view, it's a very good speculation.
30:22 In order to speculate, you have to be able to handicap a new management team and you have to be able to handicap the political risk inherent in operating in Namibia, the Philippines, and Mali. Okay. B2Gold. Thomas, we saw him out at the symposium. Good to see you, Thomas. "Would love to hear Rick's views and ratings on Cheniere Energy, Texas Pacific Land, and Viper Energy."
30:55 Viper is currently unranked. I suspect I will reinitiate it with a five. I have Cheniere as a five. Really, on a valuation basis, it should be a six, but they're in a really sweet spot in terms of the liquefied natural gas business right now. As long as the Gulf crisis continues and the world is unable to access Qatari gas, Cheniere's the best game in town. I don't think that lasts.
31:24 But they're coining money right now. I mean, they're just absolutely coining money. It's like they have the only ice cream stand in town on a 110 degree day. Really truly ridiculous. Texas Pacific, for longtime holders, despite the fact the stock has done very well, I have as a four. The thing that's changing in Texas Pacific is they are not merely leasing land to grazing or leasing land for oil and gas.
31:52 They are increasingly a water producer and water storer in West Texas. I note that their water revenues have grown from effectively zero five years ago to $160 million this year. I expect that to continue. Texas Pacific is something I've owned for close to 30 years and for people who don't have my patience, people who are traders, probably Texas Pacific is not the right name.
32:24 Okay. Eric wants to know, would like to know your assessment and ranking for Noble Corp. and Transocean. I have no opinion on Noble. I have no ranking on Transocean although I own it. I believe — and the reason I have no ranking on it is because I've been involved as an analyst in oil field services for 40 years and as a consequence of watching my own analytical skills in oil field services for 40 years,
32:59 I don't have much faith in them. I own RIG just like I own Halliburton and Schlumberger because I think that the industry has deferred a tremendous amount of sustaining capital investment and new project investment and they're going to have to play catch-up in that investment for the next five or six years. And there's going to be catch-up really all across the industry.
33:26 But there's going to be catch-up in the type of offshore frontier basins that Transocean does particularly well. Okay. William wants to know, "Would appreciate Rick's view on Arizona Metals." No view. Okay. Martin wants to know, "What are your thoughts on antimony-gold explorer Critical One Energy, management, Howells Lake deposit, and their drill results, and the antimony space in general?"
34:03 Antimony space in general, it's too small an industry for me. I really try to restrict my own account to tier one deposits or potential tier one deposits. I define tier one arbitrarily as a minimum of $10 billion in in-situ recoverable reserves and resources but preferably $20 billion, and very few antimony or vanadium or titanium deposits ever approach that magnitude, which means I'm predisposed against them because they're usually tier 2 or tier three deposits.
34:35 They can do very well in the market because somebody can point to the big picture around a restricted material and appeal to investors' feelings as opposed to the way they think. They can sell a narrative as opposed to reality. But the consequence of that is that I don't rank the company and I'm unlikely to rank the company in the future.
34:55 Okay. Pierre wants to know, "Hello Rick. Mid year last year, you had Alamos Gold as a four, commenting it had delivered at a good rate over the prior two years and it was becoming difficult to continue delivering at this rate. The stock is back down and only about 20% higher, and a lot of things have changed.
35:17 How do you rate it now?" I had downgraded Alamos from a four to a five based on price appreciation. But the fact that it's back down again and the fact that they have a very very nice pipeline means I've restored it to a four from a five. Disclosure: I am an Alamos shareholder. I'm also a personal friend of 40 years standing with John McCluskey, the CEO.
35:50 Okay. Oh this is interesting. Ali wants to know, he says, "I'm curious to hear Rick's take on hedge funds' solvency, on those that were involved in the yen carry trade and the impacts of being forced to sell their yen for the dollar. What impact can this sudden rush to liquidity have on US denominated assets?"
36:19 I think this will be a passing storm. I think that the factors around the US dollar are varied enough that the circumstance around the yen intervention will be out of the market in 10 days. Whether or not some of the hedge funds involved in the yen carry trade were too leveraged to continue to exist, I don't know. You'll recall back 15 years, in the convergence trade, maybe 20 years, where Long-Term Capital Management was betting on convergence across markets.
36:55 They were betting on the difference between the volatility employed in futures markets and the volatility experienced. And they were betting on a trend that was in motion and continued to be in motion. The problem was that there was a hiatus and they were so leveraged that they couldn't take a second or third standard deviation event.
37:16 What we saw in the very near term in the US dollar-Japanese exchange rate which you experienced, Steve, at the ATM machine, was certainly a second standard deviation hiccup and if there was, as was possible, a hedge fund that was 30 or 40 or 50 to 1 leveraged, that may have been an existential mistake for them. But I don't know enough about the population of hedge funds that were in that trade. I've engaged in the yen carry trade on and off for years, being able to assemble high quality US dollar yield assets and borrowing, using them as collateral,
37:59 Japanese currency to fund them. I'm not in that game any longer. I haven't been in that game since 2022, but it was an extremely reliable game for 20 years if you weren't overly leveraged. When you look at the fact that there was structural depreciation in the Japanese yen relative to the US dollar and that the Japanese interest rate was substantially below the US dollar,
38:26 the idea that you would borrow at 1% in a currency that was almost certain to decline and you could invest that money at 5% in a currency that at least relative to the other was going to appreciate — for 20 years that was a good trade. But if you took the trade to its illogical conclusion, which is to say if you had the ability and the stupidity to leverage that trade 30 or 40 or 50 to one, when the trade reversed itself for brief periods of time, which markets do, you got stopped out.
38:54 And I was always — I wouldn't say not greedy enough — but I was always intelligent enough that I ran that trade on sort of 50% equity. Okay. Yeah, just in case that happened, you weren't screwed. Let's see. Will wants to know. He says, "Rick, you've been clear that copper faces a structural supply deficit from roughly 30 years of underinvestment and very long project timelines.
39:20 A lot of copper equities have jumped significantly just this week with the metal near all-time highs. Are there any names you follow that you think have lagged that move or that still look relatively undervalued for the multi-year case?" I would say that among the large names that haven't moved as much as they should have, Teck probably stands out. Normally I favor the biggest and lowest cost producers.
39:50 The valuation gap between Teck and its peers relative to its pipeline, I think is impressive. The leverage is probably in the tier 2 names. But frankly I wish somebody would have asked me that question three weeks ago. The tier 2 names are up uniformly 12, 15, 20% in two weeks. I hate — I mean you always get the questions during a period of time when the stocks have outperformed relative to the subject.
40:24 So I think it's all interesting. I feel hugely attracted to the whole sector five years out. I feel like the sector has over rewarded me in 2026. Okay. Yeah, Ivanhoe Mines was probably 20% cheaper just a week ago. It's had a nice bump.
40:48 I think what happened with Ivanhoe is that the market saw the performance of the Kipushi zinc mine. I think the performance in Ivanhoe had much less to do with copper where the news was bad by the way. But the news from the zinc mine was pretty spectacular. Spectacular particularly given the transportation charges that Ivanhoe has, the local politics, which is to say the governor of their province controlling trucking out of the province and blocking the ability of Ivanhoe and other people to ship by rail.
41:15 We do that in the states too before we get too self-congratulatory about it. But the results that Kipushi generated this quarter were really truly spectacular results. Okay. Josh wants to know, "What does Rick think about Pierre Lassonde's Cadillac Mines and their Kerr-Addison project?" Huge upside in the Cadillac camp.
41:44 But the market is going out with what I see as an absurd valuation relative to the proven and probable reserves and resources. Pierre's had an amazingly hot hand in the last 10 years. It isn't just Franco-Nevada — things like ATEX and Aura. I mean Pierre has probably delivered $5 billion worth of value to shareholders in the last 10 years.
42:16 The consequence of that is the Cadillac, which as its name suggests is in the Cadillac part of the Abitibi. It's a truly spectacular land position bolting onto Agnico Eagle basically everywhere. Four past producers I think on the project including Kerr-Addison, which was a fairly major one.
42:40 What bothers me about it is the valuation. I'm just not willing to pay up like that without a lot more by way of reserve and resource. Okay, Gordon has a natural gas question. "Hi Stephen, Rick. At $2.65 per million BTUs, is US natural gas near its liquidation price?"
43:14 If liquidation price means, is that price so low that producers can't make money on it? That's a loaded question. $2.65 if you're a primary gas producer in a gas field like the Hugoton — $2.65 is below your cost of production. If you're an oil producer in the Permian Basin and you're making $80 a barrel on your oil, your gas is free.
43:41 And for them, any price north of a nickel makes money. So for the US natural gas business as a whole, $2.65 is fine compensation. If you're a primary gas producer, let's say that you are in a gas centric part of say the Eagle Ford or some formation like that, you are not happy at $2.65. If you're Occidental or EOG or somebody that's producing a whole bunch of byproduct gas and you're making an absolute fortune on your oil well,
44:17 the gas price almost doesn't matter. Okay. He's got a follow-up. "And like oil, could years of underinvestment cause a supply shortfall by 2029 or 2030?" Yes. I'll go so far as to say absent a depression or a really really really ugly synchronized global recession, that rather than "could," I would suggest that the word is "will."
44:45 Okay. And of the US producers EQT and Range Resources, which one do you think is most positioned to benefit? I own EQT because there is less of an oversupply in the Marcellus where they operate than there is in the Midcontinent or in Texas where the others operate.
45:10 In addition to owning EQT, I own Devon which has just completed a merger that is both synergistic and strategic. So I own those two. Okay. You mean the one with Coterra? Correct. Dimitri wants to know about Lotus Resources. "Clearly a troubled company, but how far can you fall from the basement window?"
45:50 Lotus with their balance sheet and with their moderate as opposed to horrible grade can fall to zero. It's important that you know that. We had an interview with Lotus here at the Rule Classroom a couple years ago that I think was very instructive and very useful. And I think that the management team perhaps with some prodding was unusually candid. But that's a company that's going to need to be refinanced.
46:11 Okay. Hans has a follow-up. What ranking do you give Lotus? Lotus is currently unranked, but if I was going to bring them back, I'd bring them back at a seven. I don't like bad balance sheets. All right. Jacob wants to know, "Sometimes I see juniors extend the duration of expiring warrants for 12 months seemingly for no reason. Is there a typical reason for doing this?"
46:31 Yeah, they need the money. The warrants are expiring. They aren't in the money. They're hoping that the warrants come back in the money in the course of a year. And they hope that they have the ability to convert the warrant into stock and the stock into cash and the cash into salary for them.
46:52 Okay, that was candid. All right. Torsten wants to know, "Greetings from Vietnam." Good to have you, international audience. "Vista Energy seems to be a fast growing low-cost producer in the Vaca Muerta with a very experienced management. What is your take on Vista and what's your current ranking?" I don't have Vista ranked, but on the face of it I agree with his assessment.
47:18 Okay. Let's see. Helen, what's up Helen? How you doing? Okay, follow up on — okay, we hit that one. Talon: latest results. Have you had a chance to look at them? I have. I think they're decent. I don't think it's as good as Talon's latest promotion, which is spectacular. I haven't changed my ranking because the results I would say have been outstripped by the promotion.
47:48 Okay. And she's asking, any lumber stocks you like? No. I'm expecting continued softness in the US housing market as a consequence of an affordability problem. I own some lumber stocks which will ultimately be sold by my estate. I think it's a very good business long term, but there is nothing that tempts me in the market now.
48:15 Okay, Jason wants to know, are you happy with the drill results so far for Emperor Metals? Also, do you have a ranking for it as well? I have Emperor as a six. The only reason I have them as a six is they were a real darling at our conference. And the consequence after the conference is that the stock got bid up too much.
48:40 I like the entire Abitibi for reasons that I've said, but many people on this call probably weren't here for earlier calls. The Abitibi, for those attendees who don't know, is a stretch of territory across Ontario and Quebec that's one of the major gold producing regions in the world. For many years, the smaller deposits in the Abitibi, like the two controlled by Emperor, were orphans, meaning that although they were decent deposits, they weren't large enough to justify the building of a mill.
49:10 And the consequence of that is that they stayed unbuilt, but were good periodic stock performers for four different bull markets. Two years ago at the Natural Resources Investment Symposium I asked the CEO of Agnico Eagle, Ammar Al-Joundi, about that thesis and he said "you got it wrong this time, Rick. There is so much more infrastructure in the Abitibi, so many more roads, so much more power, so many more mills, that the deposits that in prior cycles couldn't justify a standalone mill won't have to, because producers like us that have
49:46 mills in the region will buy and truck the ore from the mine to our mills." It's that reason that caused me to include Emperor in my own account and in the conference — the realization that their deposits which wouldn't have advertised a mill in the past don't have to advertise a mill in the present. And I would have them as a five except the share price has done so well since the conference.
50:12 Yeah. The work ethic of Alex too. He had an interesting story. He said he sat through one of your presentations 15 years ago and wrote down everything you suggested an explorer should be looking for in building a mine. And that's literally how he built Emperor Metals. Flattery gets you everywhere.
50:38 Let's see. Jason's got a follow-up. Do you have a ranking for Equinox and White Gold? I have no ranking for White Gold. The jury is still out there. Equinox I have as a five. I need to visit with Equinox in terms of the change of management and what that has to do in the near term with the change of strategy.
51:02 It would also be useful to see one, but better yet two more quarters from their Canadian operation. That was a really troubled operation and I want to see that shake in. If it shakes in at nameplate capacity, cash is really going to gush through that company. Then the question becomes, where does it go? What assets do they build next? But the cash generative capabilities that they have, including the Valentine deposit, pretty spectacular.
51:39 Okay. Christopher wants to know thoughts and rankings on Scorpio Gold and Mayfair. The Scorpio is too small for me, so I don't own it. I don't rank it. Mayfair, I'm trying to bring myself up to the point where I do a ranking. Again, the resource statement around that deposit is different than the reserve statement.
52:09 And I'm having trouble in my own mind getting a million minable ounces there. And if I can't get a million minable ounces, I'm not going to rank it. I haven't been able to do it yet. Okay. Tier one deposits.
52:34 Or strong tier two. I'm not that picky, but it's got to be — I've got to see a million in-situ recoverable reserves. Okay. Helen wants to know, do we have a book list for oil and gas? A booklet? I don't know what that means. Oh, a book list. Like a book. No, I don't. I'm working in a different part of my life on an oil and gas boot camp. And probably because we haven't talked about oil and gas around my constituency for 20 years, we're going to have to provide a reading list to people before the boot camp.
53:07 When we do boot camps now in subjects like copper or silver, the students that we deal with are usually well informed enough about mining that they can keep up in the boot camp. If we impose an oil and gas boot camp on the same student body, we're going to have to give them some prerequisites before the boot camp.
53:30 And so we're going to work on that. Okay. Probably those of you who attended the conference noted the presence of Keith Hill. And I hope that the presence of Keith Hill indicates that the conference next year will be 15 to 20% oil and gas. Okay. Pierre wants to know comments and ranking on Dakota Gold.
53:54 I have Dakota as a five. I am due for a talk with Bob Quartermain who has kicked himself upstairs to chairman from CEO. I like what they've done at Richmond Hill. I need to know more about the foot wall and hanging wall deposits. I don't think there's any doubt that Richmond Hill becomes a mine. I think we're far enough along there that it becomes a mine.
54:24 The question becomes now how big? What I always liked about Dakota was the fact that Richmond Hill had all the earmarks of the Wharf mine which is right across the property line, but there was also the ability to drill off en echelon structures to the original Homestake deposit. And in my mind, although Quartermain has never — he's been smart enough never to humor me about this —
54:54 there were a lot of reserves and resources that were sterilized when Barrick gave the mine to the state of South Dakota. And if Bob was to return this thing into production, he could probably pay the state of South Dakota an amount of money that would be welcome in their state budget in return for getting back the original Homestake reserves and resources.
55:17 It's that upside that keeps that stock ranked more aggressively than it otherwise would be in my portfolio. Okay. Yeah, because Richmond Hill, Maitland — it's probably all one connected. There's going to be a lot of mines there, right?
55:39 It's one event for sure. It's one event. They're different styles of mineralization. It isn't impossible that there would be three different production facilities there, hopefully feeding a common mill. What intrigues me is the potential that exists at depth that's already developed that isn't included in anybody's mine plan or anybody's calculation.
56:05 Okay. Oh, Asymmetric Research. Let's round out here. We're tapping on the hour. He says, "Hi guys. Hope you're well." Doing well. He says, "International Petroleum. Does Rick have a three ranking yet?" I don't have a three ranking yet, but they're really truly knocking on it. I have an upcoming call next week with the whole Lundin family where I look forward to getting an update on International Petroleum.
56:31 They've done a spectacular job. For the listeners who don't know what International Petroleum is, it's a cold lake deposit, a heavy oil deposit in northern Alberta. Some of you — I think Williamson's on this call — we've been around that deposit since Discovery West 30 years ago. So it's a deposit that we know reasonably well.
56:52 The Lundins are producing about 50,000 barrels a day out of it. They're making so much money that they are able to move into phase three self-funded without debt while maintaining substantial dividend payments to shareholders. If my view of the last report was correct, before the phase three redevelopment they have about 12 or 13 years of proved developed producing reserves in phase one, phase two, so it's not like there's going to be any particular hiatus in cash flow, at least any particular hiatus that's
57:29 unrelated to the oil price. Okay. Let's do one more here from Zaperis. She's asking, or he's asking, where are the classroom questions being picked from. So you can submit them ahead of time. There'll be a post in the calendar section under Rule Classroom Plus and you can put them there if you can't make the live session.
57:49 And then after that wherever you put it here works because we see it. Just quick thoughts on Sovereign Metals. I get asked that question every week. The answer never changes. Sovereign is a company that will either cost you half your money or make you 10 times your money. It is one of the largest, if not the largest, undeveloped rutile deposit in the world and simultaneously one of the world's largest graphite deposits.
58:20 There has been some concern about the graphite quality. I'm not smart enough to tell you whether those concerns are justified. As for Rio Tinto pulling out of it, the reason that they did it is they pulled out of the zircon and rutile and graphite business. They sold Richards Bay. They're not in that business anymore.
58:40 For those people who were hoping for a quick takeover by Rio, those hopes are dashed. I was always afraid that Rio was going to take over the company at an insufficient premium. So for me, I either had a very good outcome or a very bad outcome. People need to know that there's going to be no quick resolution with regards to Sovereign.
59:07 They're going to need to do more process and more metallurgical work there. You need to understand that Malawi is under capacity in terms of regulatory strength which means that permitting is going to take longer than would otherwise be the case because the regulators don't have sufficient experience to regulate. And this is in a truly backwards part of the world.
59:28 So the feasibility study is going to have to include things like basic infrastructure that you take for granted elsewhere. But again, to make a really long story short, this is a company that's going to tax your patience and it's a company that's going to cost you 50 cents on a dollar or make you 10 or 15 times your money.
59:53 Okay. All righty. Tapping on the hour here. Any final thoughts, Rick? No. Thank all of you who attended the conference. We had the staff call today going over what we did right and what we did wrong at the conference. Looking forward to bringing you a much better product next year and I think this last year was the best conference that we've done in 31 years of doing the conference and I'd like to thank everybody on the call, particularly the Rule Classroom members who attended the conference. The
1:00:30 utilization that I saw taking place in real time of the lessons taught at the Rule Classroom were spectacular. Particular congratulations to those attendees who self-organized into posses to coordinate their assault on the exhibitors. That was truly spectacular work. It made an old man very very happy. So thank you for that.
1:00:53 Awesome. Good deal. Well, thank you very much for your time, Rick. Always enjoy our talks. Thanks all. Thank you guys. Thank you for tuning in. You guys have a wonderful rest of your day and we'll talk to you next time. For more content like this, check out these videos right here.