Rick Rule — Evaluates 9 Resource Stocks: the financing-cutback tell, prospect generators as "technology companies," and why you don't chase a conference star

1:54 The whole second half is a fork on US interest rates

• Branch one — the market keeps control of the long end: "if the market asserts control, continues to assert control over the long bond and the 10-year rate rises and the 30-year rate rises, that'll be tough on commodity prices. It'll result in a stronger US dollar. Commodities including gold are priced in dollars, so it should be hard."
• Branch two — politics wins: "if you see political pressure in the United States from Congress and the president… a downward manipulation of interest rates, if you see an active Fed pushing interest rates down, that will signal to the market, to savers, that the US government is more concerned about short-term US politics than they are the sanctity of the dollar."
• The payoff of branch two is stated without hedging: "If that happens, you'll see gold scream. Absolutely scream." He also thinks branch one is self-correcting — "I think unfortunately that corrects itself."

2:47 His own call: soft balance of year, and August is the worst month there is

• "My own anticipation for the balance of the year is a fairly soft market."
• The relative call favours equities over metal: "I think you will see that the equities do a little bit better simply given the severity of the contraction that we saw, February to July."
• Seasonality, stated as fact and as timing context for anyone watching the tape: "August is traditionally the worst month in precious metals equity, so you're right in the middle of it right now."

3:18 The softness never reached the financing market — nobody is paying warrants

• "Among the better junior companies, at least with regards to financings, that softness didn't occur."
• The tell: "almost no decent issuer in the junior market has to give up warrants to attract money, which doesn't suggest to me that money is scarce." A warrant is a free call option thrown in to sweeten a placement — when issuers stop having to give them, buyers have lost their leverage.
• Host confirmation from the other side of the table: Andy has done "a few financings really in the past 6 months… none of them were with warrants, which was to my disappointment. But also, as a shareholder, that was a good thing."

3:42 Even his lead order got cut back — the strongest capital-availability signal in the archive

• "In several recent financings, the most recent of which was Arras Mining, that I participated in… despite them regarding me as an attractive shareholder and despite giving them a lead order, I got cut back."
• Why that is diagnostic: "I'm a high-profile investor. People like to talk about the fact that I'm a shareholder. And in a circumstance like that where capital is allegedly tight, I'm finding myself getting 50 or 60 or 70% of what I've indicated for."
• Conclusion: "which suggests, at least for the higher quality companies, that capital is much less short than the industry suggests."

4:36 The flip side: if a bad junior can still raise, it's overpriced

• "For the lame, the halt, and the blind — which is most juniors — the fact that they can raise money on any terms means they're overpriced."
• He wants the failures to happen: "some of those companies, mercifully, weren't able to obtain capital. The sooner they go broke and go out of business, the better off the industry will be."
• Historical calibration: when he formed the Explo partnerships in the early 1990s "for high-quality juniors there were five or six bidders in the market" — and the returns on those partnerships are what "sponsored so many other institutional investors in the marketplace," creating the competition he now faces.

7:08 Why the 31st symposium was the first that met his own bar

• Four reasons, in his order: 31 years of one-percent-better compounding; the calibre of the attendees ("the idea… that all of the knowledge goes out from the dais to the assembly is wrong. There's a lot of knowledge in the assembly" — four sophisticated family offices this year).
• Third and most striking: "about 75% of the live attendees were students of the Rule Classroom… they came to the conference armed with the tools for evaluating companies that we teach at the classroom," self-organising into "posses… that would coordinate their interrogation of the exhibitors."
• Fourth, an enforced house rule on speakers: they must integrate into the event, not "cop a fee, give a speech, and leave" — those who won't "are encouraged to speak at other people's conferences."

10:40 The free stack — recordings, portfolio rankings, 350+ hours of classroom

• Symposium recordings carry the same unconditional refund as the event: of 2,300 livestream attendees, "six people… asked for their money back and four people gave us the reason, the fact that the course material was too sophisticated for them."
• Free rankings at ruleinvestmentmedia.com — "list your natural resource stocks, I will for free evaluate them. Rank them 1 to 10, 1 being best, 10 being worst" — with a live caveat: "I'm a little behind on the database… consider submitting them now and then submitting them 3 weeks from now," though "80 or 85% of the companies will have consistent rankings."
• Rule Classroom: "well over 300 hours" (later "in excess of 350 hours") of free instructional programming, weekly free Thursday Q&A when he's in town, and contributors beyond Rule — Joe Mazumdar, Adrian Day. Submission filter: "no crypto, no pot stocks, no tech stocks, just resources."

14:36 Ecora: coal royalties recycled into copper, and a maturity clock that has run

• The pivot: two Queensland coal royalties that "would eventually run out of coal," in a commodity "the market didn't like… despite the fact they made a boatload of money from it," redeployed "into other kinds of royalty, in particular copper."
• The clock, which is the actual thesis: royalties bought to come into play "in the 5-to-7-year time frame… Importantly, they made those investments 4 years ago. So, 5 to 7 years is imminent now." Producing royalties go "from three to nine" with no help from the copper price.
• The horizon rule that goes with it: "a 3-to-5-year time frame requires 3 to 5 years. So, don't buy a stock with a 5-year time frame if you have trauma holding stock over a long weekend."

17:35 Royalty managers are simply better people than exploration promoters

• The generalisation: "the managers who are attracted to the royalty business relative to the higher rhetoric exploration business tend to be higher quality people."
• The evidence he offers is a 25-year cohort comparison — "I look back to Brian Dalton, who built Altius. I've owned Altius since it was a 10 cent stock. Now it's a $55 stock. When I compare Brian with the young entrepreneurs that I met at the same time that he was coming into the business, I'm struck with the uniformly high quality of the entrepreneurs and managers in the royalty space."
• Why it should be true: "it's a better business and I think it attracts better businessmen and women than other parts of the industry." Both host and guest independently describe the royalty CEOs they met as reminding them of accountants — and treat that as praise.

20:40 Empress Royalty: the discount is gone, the flexibility isn't

• Entry vs today: "I bought them because they were selling at half NAV. The idea that I could buy 50-cent pieces for 25 cents with these same durable competitive advantages is no longer true… relative to the royalties and the cash that it enjoys today, [it] is fully priced."
• What's better than at entry: "their debt is extinguished, they have 20 or 25 million dollars in cash and gold, and they still have access to the durable competitive advantage with Endeavour Financial… their financial flexibility now is much greater than it was when I bought them."
• The moat is captive deal flow plus an unfashionable niche: "royalties in smaller transactions, often with private companies. Which means that they have a little bit of a knowledge moat around their business" — and "everything that could go wrong with a big mine can go wrong with a small mine," so the record of "no failures" in frontier private mining is the thing being paid for now. "You're buying into execution now."

23:48 Revival Gold: buying mines that closed on price, not on geology

• The setup: two past producers that "shut down 20 years ago as a consequence of low gold prices. They didn't shut down because they ran out of gold" — uneconomic at "250 or 300 dollars an ounce," bought "dirt cheap," then re-engineered and drilled so that "they made the deposits better than they were when they bought them."
• The industry truism behind it: "the best place to look for gold is in the shadow of a head frame of a gold mine," and drilling off the reserves a previous owner left behind "is a time-honored tactic."
• The three ways it breaks: management takes its eye off the ball; permitting (mitigated — "at least Mercur is on patented land"); or "I could be wrong about the gold price. The gold price skated these assets on side and could skate them off sides, too."

26:55 Don't chase a conference star — use good-till-cancel limit orders

• The mechanism he is warning about: a star turn at the symposium meant "his share price advanced really dramatically after the conference… I think we've used up every seller in the universe right now. And if you only have buyers and no sellers, the market in the very near term can get very very strange."
• The instruction: "form an opinion as to the value of the company and then use good till cancel limit orders. Don't chase this one when it's ripping." (A good-till-cancel limit order sits on the book at your price until it fills or you pull it — it removes the decision from the moment.)
• He applies the same warning to Kenorland — "they've been at the conference long enough to develop a cult around Zach Flood. So, this is a stock not to chase." The host runs the same rule independently: "I do not chase… I'll just wait until it comes to my liking where I like the price and I'm comfortable averaging in."

28:48 GoGold: doing something he has already done, in a country that has to want him

• The screen in one sentence: "he's involved in an activity that describes his past success. He's doing something that he already knows how to do, which is something I like a lot" — with the receipts, "I was an investor with Brad in his two prior companies… neither of those companies were overnight successes, but they were both spectacular successes."
• The permit was political, not technical: "the property has been permittable for 3 and 1/2 years. The constraint has been Mexican federal politics. The president of Mexico is anti-mining, which she says, but she's pro-vote" — and community support was the currency that bought the approval.
• What is not permitted matters as much: only "the first of what I think will be two underground mines… the open pit mine has not yet been permitted." The trajectory: from 2,000 oz/month of tailings production that "pays for all their G&A" to "250 or 300,000 oz of gold a year" — for people who can sit through two more permits.

32:15 Amarc: a career built the hard way, and Freeport's 200 geoscientists for free

• The person: Diane Nicholson "grew up in mineral exploration, when women didn't do that… it wasn't necessarily the friendliest environment in the world," coming up under Bob Dickinson, who "cared about whether she could find copper." He wants listeners to price in "the grit that was required."
• The institution: Amarc is "an outgrowth of the Hunter Dickinson Group… this will be their fifth or sixth success in porphyry copper exploration in British Columbia" — repeatability, not a single hit.
• The partner: "they have adult supervision in the part of Freeport McMoRan… Diane is backed up by a technical team of probably 200 geoscientists who aren't on Amarc's payroll."

35:17 What a prospect generator actually is: a technology company

• The definition: "prospect generators are basically technology companies… companies that use their human capital to develop exploration theses around tracts of land and then sell the concept to third parties. Very much like the way a molecule for a drug company in biochemistry, biotechnology might be done."
• The self-knowledge that makes it work: "they recognize that their skill sets are technical but that their most important capital is human capital. They use their talents and other people's money."
• The unpriced benefit: "if you farm a project out to Newmont, you have 200, 250 geoscientists at Newmont that are working for you indirectly and you don't have to pay for them. Newmont pays for them." He learned it in 1970s oil and gas, on an over-pressured sour-gas well: "there were 30-something engineers involved with that well and I was happy for every damn one of them. And I only had to pay for two."

37:32 Kenorland: one royalty carries the price, everything else is free

• The asset: "their second exploration asset, Frotet, which they joint ventured with Sumitomo Metals is going to be a mine. Zero doubt in my mind. And they have a 4% uncapped royalty on a project that I think will produce at least 4 million ounces of gold."
• The valuation read: "most of the value in Kenorland, most of the pricing in Kenorland is accounted for by the value of the Frotet royalty" — with a marketability check that turns paper into a number, "I'm very confident that they could sell that royalty to Franco or Wheaton or Osisko or anybody else that they wanted right now."
• So the exploration machine comes free: a team "absolutely superb at developing very large grassroots concepts, staking the ground, doing the preliminary work, the geophysical work, the geotechnical work, the surface sampling, developing an exploration thesis, then bringing in a major mining company once they have derisked it to drill it."

39:23 Headwater: the EMX team, the EMX portfolio, and Newmont's chequebook

• Provenance: "Headwater comes out of another prospect generator that I helped found. EMX, now EMX Royalty. The Headwater team was part of the EMX team… one of the best teams of explorationists active in the US" — and "the Headwater guys actually took the EMX portfolio and built a new company around it so that they could focus on it."
• Fit with the partner: "their exploration ground is prime hunting ground for Newmont. And so, their key third-party funding partner is in fact Newmont."
• Two structural notes: "the stock is fairly closely held," and he discloses being "one of the founding shareholders."

41:26 Latin Metals: idea flow you can't buy, on a float that can move

• Same screen: "a guy who's been serially successful as an explorer in Latin America who is exploring in Latin America… a person whose prior successes are germane to the task at hand."
• The asset that isn't on the balance sheet: "a very, very, very deep network of contacts among geologists, prospectors, landowners, small miners in Chile, Argentina, Peru… an unusually good idea flow. When he is able to stake those ideas, he has a ready market for turning them."
• The structure: "like many of Jeff Phillips' companies, this is intelligently structured… the share float relative to the total outstanding issuance is fairly tight. So, any good exploration news can be expected to generate an outsized share price move — assuming, of course, that there is some successful news."

43:48 NG Energy: Colombian cash flow, a Venezuelan option, four nationalisations

• Sourcing: "I was introduced to NG by a speaker at the conference this year, Keith Hill… He built a lot of the Lundin business in offshore emerging markets. I've done business with Keith for 35 years… He made me a boatload of money."
• The shape of the bet: "there is a lot of work for them to do in Colombia. But the upside, the icing on the cake, is Venezuela" — with an unnamed US family control shareholder that is "a household name in the energy business," which is why "it stands to reason that they are likely to get this Venezuelan concession."
• His own Venezuela record is the risk disclosure: "I've been involved in four exploration projects in Venezuela. And I've had four exploration successes… And I've had all four successes nationalized. So, take all of this with a grain of salt." Gate: "don't own this one if bad headlines out of Venezuela will freak you out, because you will get them."

47:13 The unpronounceable-jurisdiction premium

• The setup: "right now, nobody cares about conventional oil and gas exploration. Most people don't care about oil and gas… They don't believe the juniors belong there. Well, I've made a fortune among juniors who were involved there."
• The second layer of hate: "people don't like jurisdictions that they can't pronounce or spell, like Colombia, Venezuela, Namibia, Guyana. I love them."
• The receipt: "my duration investing with the Lundins took me to Sudan and New Guinea and Mauritania and all kinds of places other people can't pronounce. And the consequence is I got to make a lot of money that they missed."

48:23 Invest in yourself — the one return you can compute

• "Invest in yourself is really important. And it really doesn't matter your age. I'm 73 years of age. I've been in this business for 50 years and I learn new stuff every week."
• The arithmetic he applies to himself: a young investor "is going to get more benefit from compounding at her age than I am at 73. That's simple arithmetic. So, her return on capital employed investing in herself is to be higher than mine. But everybody needs to do it."
• Closing behavioural note from the host, endorsed by Rick: management teams reward tough questioning — "CEOs or a VP of exploration will come up to me and thank me for asking hard, engaging questions… learn how to ask hard engaging questions, and don't be shy about it. And this is your money."