Title: Rick Rule: Copper Has WAY More Potential Than Gold Show: VRIC Media (Daryl Thomas interview, recorded after the Rule Symposium in Boca Raton) Guest: Rick Rule — Rule Investment Media Date: 2026-08-14 URL: https://youtu.be/mfhDfeJuY6Y Length: 47:43 Note: YouTube auto-transcript pasted by Stephen; (mm:ss) cues real; wording verbatim (fillers/stutters mostly left as captured). Auto-caption name garbles: "Wheaten/Weaten" = Wheaton Precious Metals (WPM), "Franco" = Franco-Nevada (FNV), "Agniko/AgO" = Agnico Eagle, "Bareric/Beric/Barrack" = Barrick, "Pneumont" = Newmont, "Oiana" = OceanaGold, "Katango/Kantango" = Contango ORE, "Dolly" = Dolly Varden Silver, "Seabbridge" = Seabridge Gold, "Kenro's" = Kinross, "Arakipa" = Arequipa, "Eoras/Accoras" = Ecora, "Altiuses" = Altius, "Arano" = Orano, "Rossb" = Ross Beaty, "trrona" = trona.
00:00 At the time of this recording, gold is trading above $4,400 an ounce. But according to our next guest, that is not the biggest story unfolding in the mining sector. Behind the scenes, the world's largest copper producers need roughly 250 billion just to maintain current production. And they don't have the capital.
00:17 So where does that money come from? I mean, think about it. $250 billion. And which companies could be the biggest beneficiaries if a new financing boom is about to begin? In this conversation, Rick shares his outlook on gold, interest rates, royalty companies, and mergers and acquisitions he believes investors should be watching closely.
00:39 Hello everyone, welcome to the Vancouver Resource Investment Conference. How you all doing today? Hello everyone, welcome to VRIC Media, your most trusted voice in metals and mining. I'm your host Daryl Thomas and today we have the pleasure of interviewing legendary investor and CEO of Rule Investment Media Rick Rule himself.
01:06 How you doing today Rick? >> I'm doing well Daryl the better for seeing you recently at our conference in Boca Raton. Thanks for coming down. >> Yes. Yes. The conference was definitely a success. You know, I was surprised at how many people knew me virtually, you know, from being virtual.
01:27 And so, you know, I'm used to going to the conference, I'm seeing like about 12 people, you know, hanging around Rick, picking his brain and such. You know, you tend to draw these big crowds around you and such. And so, people are watching us virtually and they want to connect with us in person. I think that's a benefit of attending these conferences.
01:43 Well, and a testament and a testimony to the 10 years of hard work that you've put in building your channel and building the VRIC channel. Yes, they came to see me, but they were hanging out with you, too. So, it's just a function of all the time and effort you put in, which is great.
01:58 >> Yeah. Thank you for that. So, gold and silver have began to move up. Are you viewing this as a short-term bounce or do you think something more fundamental is at play or maybe the debasement trade is back on? Just curious in how you're viewing this. >> I hate to admit it, but I have no earthly idea, Daryl.
02:19 Yes, I believe that the gold prices we've talked about for a long time will do very well over the next 10 years. I think the next three or four months could be problematic. If the interest rate, the nominal interest rate continues to increase. That should, if it continues to occur, continue to strengthen the dollar.
02:39 Gold is a denominator in dollars and it also because a foregone interest rate makes holding gold more expensive. In the near term a rising interest rate if it continues should be hard on the precious metals price. I think what you're seeing in the gold market in the very near term is people who are increasingly believing that despite the fact that there is political pressure to allow the interest rate to rise, there's more political interest in suppressing the interest rate.
03:14 And make no mistake, if the politics forces the interest rate to decline, if we send a signal to the market like we sent to the market in 1975, that short-term American politics are more important than the sanctity of the US dollar, then you'll see gold rip. Now, whether or not that happens or not is anybody's guess.
03:36 I'm, as you well know, Daryl, no political analyst. >> Mhm. Yeah. So, there's a lot of fear that the Fed could hike rates. I think there was a couple of big institutions that gave like a 30% chance of a rate hike this past Fed meeting before the past Fed meeting and they decided to hold rates. There's also the thought around, you know, if the Fed hikes rates, it's going to make it very expensive for the United States government, which is already at a huge deficit and such.
04:08 How do you think this is some type of game that's being played to try to trick investors like the Fed's going to hike rates? Do you think the Fed could hike rates and would that cause some damage? Curious in your thoughts on that. >> I don't think they're smart enough to trick anybody. I think there's a discussion going on behind the scenes from people who believe that the interest rate should be set by the market.
04:32 And the political class who doesn't believe that the market should do anything, that you know they believe that they should do everything. When you listen to the policy prescription by the new Fed head he seems fairly intelligent. The idea that the Fed shouldn't communicate with the market, that the Fed's intention shouldn't be something that causes the market to go up or down.
05:00 The fact that ultimately the market should set interest rates. These are all beneficial ideas. The idea that either the economic oligarchs or the political oligarchs would allow this to happen in isolation without taking into account their interests I think is problematic. I think too unfortunately that the vast majority of American voters are more concerned about the level of their car payment and whether or not they can buy a house than they are the overall strength of the economy or the fact that debt and deficits
05:39 are really stealing from our children's future. Most voters, I'm afraid, are more concerned about their own present than they are their children's future. The consequence of that is that there's a lot of political pressure to continue government spending and to have artificially low interest rates.
05:58 >> Could you see something like some yield curve control? So we see the long end of the curve continues to put pressure on a lot of dynamics and but we know historically the Fed comes in and buys the government debt, backstops the government and typically tries to suppress interest rates.
06:24 So do you see that being like the ultimate case for gold to go a lot higher >> if they fail? Absolutely. I think what you're seeing on the long end of the yield curve is the market beginning to reassert control over the Fed. The Fed has been printing short-term paper and using the proceeds to buy the long debt, but that application of proceeds hasn't been sufficient to reduce long-term interest rates.
06:51 The Fed has still managed fairly successfully to constrain artificially short-term interest rates, but it would appear that they've lost control of the 10-year and the 30-year. It's instructive, I think, that when the United States assisted Japan in defending the yen a couple of weeks ago, that what the United States government did was print US dollars and lend them at very very low interest to the Japanese so that the Japanese could buy in yen without selling Japan's own hoarding of US treasuries. The Japanese have $1.6
07:36 trillion dollars in US treasuries and rather than selling those treasuries for US dollars and using that to defend the yen the US government lent them newly issued US dollars. That says a lot about the treasury's concern for the float on US treasuries and the aftermarket for US treasuries given the printing needs of the US government and those aren't pleasant thoughts. Mhm.
08:10 How are you looking at China with the Shanghai gold exchange and getting rid of a lot of the paper trading against gold and defending I guess defending the average people who buy gold in those regions from these volatile price swings and things of that nature. How are you viewing that? I think any interference by a government in markets is a bad thing.
08:38 But I do like the fact that the Chinese are building an alternative system for trading gold, taking control of the gold trade out of COMEX and out of the LBMA at least partially and democratizing markets for gold. Creating more markets for gold is I think a very good thing.
09:01 I think the LBMA fix is an example is an anachronism that really benefits nobody except perhaps the member banks and I think the whole system that we have in the United States with regards to COMEX metals futures could use a competitor. If the Chinese have decided to do away with paper claims and merely honor deposit receipts or physical, I think it would be great to let the market decide.
09:34 I hope that the Chinese will be more open to allowing foreigners unimpeded access to their gold market so that the Shanghai market has the ability to truly compete on an international basis. But I like the idea that we have six or seven different trading facilities with six or seven different market protocols. I think that the market should allow people to pursue their own interests with multiple service providers and an exchange is merely a service provider.
10:08 >> Mhm. Yeah, definitely. Okay. Yeah, I appreciate your thoughts on that. So, let's jump into some money-making tactics and so let's see if I can unlock some of Rick's secrets on this interview. I noticed sometimes when I interview you and I ask a certain question, I'm like, I think I unlocked one of Rick's secrets.
10:28 So, let's see if we're able to get into that. So based on my years of interviewing you, one thing that I've noticed, and I've mentioned this in multiple other interviews and conversations I've had with investors is that you typically sell when prices get euphoric >> and then you buy when prices are depressed.
10:52 And we talked in Boca Raton, you said, "Hey, I'm going to be buying gold." Gold was at 4,000. So now gold has risen another 300 bucks, 400 bucks. Curious if you are selling into this or if you are holding. >> I'm about to get a pretty good paycheck from the conference. You know, we pay all the expenses and stuff like that.
11:14 I'm about to get a pretty good paycheck. And I suspect about half that paycheck will go into physical gold. And I'm pretty price insensitive, Daryl. I don't know what the future holds, but I don't suspect that any of this gold will find its way out of the market for 10 years, unless we have a liquidity-driven event where other asset classes really fall dramatically in price and where the consequence of that is that my greed inspires me to sell some gold and buy some other kind of asset class. Absent
11:52 that, absent a 2008 style event, it wouldn't surprise me if the sell decision for my personal gold was made by my heirs. >> Mhm. >> You know I consider gold to be an insurance asset, a savings asset or in a sense wealth itself. >> So I'm a systematic saver in gold.
12:20 Yeah, >> there are times when, as you suggest, >> there's excess liquidity on the downside, which is to say there's a rout of selling. And in those circumstances, I front-end my savings, which is to say I shift other savings assets, say US dollar denominated savings assets into gold out of, if you will, a current paycheck rather than a future paycheck.
12:47 But normally I'm merely a systematic saver, which is to say whenever I experience a liquidity event, some or sometimes a substantial part of that liquidity goes into gold. >> Mhm. Okay. So I didn't preface this question. I'm referring to the equities. So >> I know gold is money. You know that's our insurance policy.
13:11 So with the equities, right, we have >> I apologize. I misunderstood the question. >> No, no. I didn't clarify it. But I just said gold. So >> yep, >> equities have I mean they fallen dramatically and then we've had a big rally. So I think I was buying Wheaton at $104. >> Yep. >> It's run up to about $135.
13:33 >> and many other equities. And so is that something you like — what I've noticed over time is like even with uranium, hey the price is getting too far ahead of itself. I'm gonna sell some. >> Are you seeing that with this recent rally? >> No, you're not seeing enough euphoria in the gold stocks yet to have them be a trading sell.
13:56 I will say that I am beginning to emphasize smaller, riskier stocks now. Partially the reason for that, Daryl, is you know, I'm 73 years old. I already own a lot of Franco and a lot of Wheaton and a lot of Agnico. And when you see increases in price like this, any generalist money that comes in the space goes into the best names.
14:20 I believe, and I think we'll talk about this later in the interview, that we're coming into a real strong M&A market. And so, I'm trying to use some of my morning money more speculatively than I did last year, the year before, trying to anticipate some of these M&A targets and trying to buy them.
14:40 In other words, I'm becoming right now more speculative. Not because at age 73 I should be more speculative, but rather because the investment part of my portfolio is pretty full. >> Mhm. Okay. So, what are you typically looking for in some of these junior explorers and such? So, I recently did our mergers and acquisition course that Jay Martin put on with our commodity university and he gave me some things to think about and so I'm curious what are you looking for whenever you're thinking of like
15:16 someone could be a target for an acquisition or M&A. >> First of all, very simply delta, which is to say I'm looking for something that's worth a lot more than it's selling for. That's really simple except for that it requires you to do the work. What constitutes value? Well, first of all, size. Size matters.
15:41 A half million ounce deposit is much less liable to attract a solvent bidder than a 10 million ounce deposit. 10 million ounce deposits are much much more rare. So, I'm looking for those very few deposits that will make a difference to a big solvent acquirer. 5 million ounces plus or better yet 10 million ounces where it would be available.
16:06 I'm also looking to strategic purchases. Daryl, you may remember two years ago at our conference in Boca Raton when I interviewed Ammar Al-Joundi from Agnico Eagle and I got a really interesting insight there. I was talking to him about deposits in the Abitibi that were orphans but had also been orphans in the last four cycles and the fact that there were some deposits that couldn't amortise the production facilities necessary to build and profit from them and how I had learned to avoid those. And he
16:41 Ammar corrected me and said even deposits that don't meet my own size criterion don't necessarily need to amortize mill construction because they're within trucking distance of an existing hungry mill. So strategic acquisitions which is to say assets that are located close to assets which are operating and controlled by solvent partners becomes important, really truly accretive acquisitions. But something else is happening now. The Equinox Orla acquisition and before that the Equinox Calibre acquisition
17:22 weren't strategic acquisitions, they were tactical acquisitions. Ross Beaty and his group have figured out that if they buy reasonably high-quality assets that simply the growing size of the company, simply the growing trading liquidity of the company, index inclusions which gets them more passive buying raises the share price and cuts the cost of capital. In that context where the strategic nature of the assets is less important what you really need to look at is heft and sustainability. So you look
18:01 for companies that are selling at a substantial discount to value where that value could be enhanced if they were part of a larger whole. In that sense I think one example would be B2Gold which is selling at a real discount to the net present value of its cash flow. A discount that will be erased by the way when as and if they successfully get their northern Canadian operation producing at nameplate capacity.
18:34 I would suggest that the other one that makes place from a tactical viewpoint because of its discount would be OceanaGold. So I'm looking for those types of things. I'm looking for strategic acquisitions and I'm looking for tactical acquisitions. In particular, I'm looking for acquisitions of size.
18:58 One looks as an example at B2 which has two potential tier one assets in it. An acquirer could theoretically acquire B2 and sell off the tier 2 assets to reduce the purchase price associated with getting the tier one assets. That would really make a difference to an acquirer. >> Okay.
19:24 So, when you're looking at the — I'm just going to backtrack a little bit because I have a couple threads I want to pull on. So, when you're looking at the size of the discovery and deposit, you're looking at at least around 5 million ounces. >> I mean general, but preferably more. And so, what stage are you looking at? Are you interested more like when they're resources? Because I imagine when they're resources, the price of the equities are cheaper than when they become reserves.
19:57 >> If I feel good about the resources, the answer to that is absolutely yes. I remember back to when Barrick bought Arequipa, there were only 11 drill holes in that deposit. And it sold for a billion dollars. There are deposits where the geology is so profound and the size and the grade are so great that there's not a great stretch of imagination for the major to come down into the space.
20:28 The Kinross acquisition of Great Bear back four years ago in really bad times in the mining business tells you that an extraordinarily high-quality early stage discovery is worth speculating on because it becomes a must own asset. For less sterling assets, as an example million ounce deposits in the Abitibi that likely will require an acquirer to have a much better sense of resource definition because there's less room for failure, then you need more data — an acquirer to validate his or her strategy probably needs a bankable feasibility
21:11 study. But if you look — and by the way this next name is not a recommendation it's just an illustration — if you look, as an example, at Snowline Gold, 10 million ounce plus deposit in the Yukon in the middle of nowhere, way far back, but a very large, very high-grade deposit.
21:33 There will come a time when the acquirers looking at that deposit won't be willing to play chicken with the market or with each other anymore. I suspect that that deposit will be gone long before it's drilled off and long before it's delineated because at 10 million ounces plus in a jurisdiction that's at least believed to be low risk that becomes a strategic asset for any number of acquirers.
21:58 >> Okay, got it. So you mentioned that you know how close the projects are to infrastructure, other major production projects that are already in production. I'm curious in your thoughts on companies like Seabridge that has a huge resource but I hear there's a lot of issues around the infrastructure in building it out.
22:32 >> I need to disclose conflicts. I own Seabridge. >> Yeah. >> So, take what I say in that context. I'm also personally friends with Rudi Fronk who runs Seabridge. One positive around Seabridge, it's huge. It may be the largest undeveloped gold project in the world. And an acquirer that comes in has solved his or her depletion problem for a decade.
23:03 >> Yeah. >> And these big majors have a depletion problem. It's one way to solve a balance sheet problem for a very very long time. The bad news is capital intensity. There's extraordinary upfront capital cost to build that thing. I suspect that the feasibility study needs to be updated because there's been substantial inflation in construction and other costs and Rudi has signaled to the market including at our conference that they're down to one bidder, which is to say he's
23:42 talked with the 12 or 13 companies that have signed confidentiality agreements and he's agreed to engage in exclusive negotiations with one. It's very difficult to have an auction with one bidder. >> There's no deal tension with one bidder. And I suspect that at $5,500 gold, that bidder would have to have been aggressive because at $5,500 gold, you amortize that upfront capital expense much more quickly than you do at $4,400 gold.
24:16 So, I think the pressure is off the acquirer as a consequence of softer gold prices. And it wouldn't surprise me, although Rudi Fronk believes I think that the Tudor Gold litigation isn't particularly an issue. I think that the acquirer given that there's only one in the line and given that gold is currently at $4,400 has the luxury of allowing Rudi and Tudor to work out that difficulty as opposed to them having to work out the difficulty themselves.
24:53 You should probably interview Rudi. He's a very smart guy and allow him to contest what I just said, which I'm sure he'll do very vigorously. But I think the bottom line here is that at $5,500, time is on the side of Rudi. At $4,400, given that there's one bidder, time is on the side of the bidder. >> Yeah. I could see that.
25:17 Those power dynamics and leverage dynamics shifting there. >> So, which major do you think have the most depletion problem? Is it all of them or is it like >> all of them? Yeah, all of them. I mean, none of them have been making sufficient sustaining capital investment. I guess the only one that doesn't have a 5-year depletion problem that I'm aware of is Agnico. I should change that.
25:47 Agnico and Gold Fields. The rest of them have some challenges. They've got some mid-range development projects. I think assuming that Barrick and Newmont can work out their differences and Fourmile gets added back into the Northern Nevada pipeline that for 5 years eliminates the challenges in front of Newmont and Barrick.
26:16 If it doesn't they have a depletion challenge. >> Yeah. Okay. All right. So, a couple other companies, Contango and Dolly, how are you viewing that recent, I think it was a merger, right? >> Yeah. >> I think it was an intelligent merger. I also thought it was instructive that Shawn Khunkhun, who I think did a great job shepherding Dolly over six or seven years, recognized two things in the market.
26:47 The first is that a lot of the exploration and delineation at Dolly had taken place, that the next stage was construction and operation and he also understood that combining those two companies gave you the heft and scale that would allow you to attract more index buying and he was emotionally mature enough to decide that Rick Van Nieuwenhuyse had more experience in the construction development and operation side and stepped down as CEO.
27:22 That's a remarkably selfless and intelligent action particularly for a guy of his relative youth. If I had a criticism of the combined company, it's that there's no tier one deposit. There's a collection of tier 2 deposits. There's a clearly delineated strategy. There's lots and lots of free cash flow.
27:48 So there's lots of financial resources to further their game plan. The game plan given the range of assets that they control is attractive. If I had a criticism, it's just that there's no tier one or even strong tier 2 asset. There's some fairly high quality tier two and tier three assets at least by asset size.
28:12 >> Mhm. Okay. So, when you say they're these tier 2 assets, I know Dolly Varden was silver. I mean, they focused on silver, right? And we know that silver has this deficit problem. I mean, I don't know how many tier one silver deposits there are, if there are any.
28:34 So curious your thoughts on that. >> Dolly's silver deposit, the old Dolly Varden mine is a high quality but small silver deposit. Dolly did a good job expanding that deposit and they added a gold deposit called Homestake Ridge which sits topographically higher in the same structure. The challenge has been to tie those two deposits together.
28:59 Tying those two deposits together, which could give you a strong tier 2 deposit or even a tier one deposit, has been viewed by the combined companies as less important than maximizing near-term direct shipping opportunities, which is to say smaller but higher grade opportunities that can be brought to market sooner and generate more free cash flow and net present value.
29:27 The idea is to use the cash flow from Contango's existing Alaska gold mine to develop Lucky Shot, which they believe is a near-term high-grade direct shipping producer, and then use that free cash flow to develop another deposit, which is at Tidewater that is high-grade direct shipping or backing the old Dolly high-grade silver operation or the exploration campaign necessary to integrate the Homestake Ridge deposit and the Dolly deposit into one much larger mineralized system for later after the company has developed two or three
30:19 smaller high-grade direct shipping operations. And I think the market likes that strategy. I don't, but I'm not a market. >> Okay. So, pivoting to some other acquisitions. So we had Wheaton Precious Metals buy the stake from BHP in the Antamina Mine, which they already have many streams on and such.
30:46 And so I was doing the math on that. You know, this happened a while ago, right? >> Right. And I couldn't make sense of the math. And so, I think it was 20% of spot price of silver. Silver was ripping during that time. Has definitely come down since then. Curious in your thoughts on those types of acquisitions for royalty and streaming companies.
31:10 >> Hugely important question, Daryl. Hugely important question. I really want all your listeners to pay attention to the next part of this interview. The world needs a lot more copper. You're going to have to bear with me here. The world needs a lot more copper. And it is estimated that the biggest copper mining companies in the world need to spend $250 billion — $225 non-escalated non-inflated dollars — to maintain current levels of copper production.
31:43 There's a couple problems with it. The first is they don't have $250 billion dollars. And the second problem is that those costs are escalating rather quickly. So if you take that as the basis of what I'm going to say next, cash flows that are precious metals related, particularly silver related, in a stream byproduct credits from copper mines sell at higher multiples in the market than copper cash flow does.
32:12 If BHP had mined that ore and sold the silver, it would have been valued as though it were copper. It would trade in the market at six or seven times cash flow. Isolated in a silver stream, it trades at 15 times cash flow. So you have a smaller company Wheaton Precious that has a lower cost of capital than a bigger company BHP.
32:36 This is a transaction that is literally accretive to BHP shareholders and Wheaton shareholders simultaneously. This is a true win-win transaction. And it's a transaction that the market's going to see a lot more of because that $250 billion capital stack is going to require 30 billion or 35 billion or more, as much as 75 billion of unconventional finance of which streaming is an important part from the Wheaton buyer.
33:09 In addition to the fact that that silver stream is worth more, these very high quality deposits, very long life deposits generally produce substantially more ore than they are thought to possess when they file their feasibility study, which is to say big deposits get bigger. And this is an uncapped stream, which is to say, you don't just get access to the silver that is in place at the time that you do the transaction, but you get access to the silver that's discovered subsequent to that, and you don't have to pay the sustaining costs,
33:51 the discovery costs, the development costs associated with producing and discovering that silver. This is a wonderful transaction for both parties and it's a harbinger I think of things to come. One of the most frequent criticisms I see of mining industry financial services executives when they talk about my Franco thesis and my Wheaton thesis is that the great big transactions that built those companies 20 or 30 years ago are a thing of the past and that's exactly wrong.
34:25 The copper development boom that we absolutely have to see in the next 10 years will require vast amounts of capital and a substantial portion of it is going to come from streaming agreements. There are very few companies in the world that are large enough to allocate capital to the major miner in three and four and 5 billion chunks.
34:49 Franco and Wheaton are two of those. Now I believe that the need for capital is going to be so great that it will exceed the appetite and the capabilities of both Franco and Wheaton which means I think increasingly those credit facilities are going to be syndicated. So the Triple Flags, the companies of that ilk, the Osisko royalties, the Royal Golds and perhaps even the third tier royalty companies as well as some very large hedge funds likely will participate in this largesse as well but the principal beneficiaries will be Franco and Wheaton who will be
35:25 the architects of these very very large facilities. This is a very important trend that most people aren't paying attention to at all. >> Okay. So, why do you think people aren't paying attention to that? >> Yeah, Daryl? I think — oh, this sounds ugly. I think most people don't do any work.
35:51 >> They want to feel, not think. They want to say, well, the silver price is going up. As a consequence of that Wheaton should do well. They don't want to get in the weeds with the idea. And understand that I'm talking about an idea that'll play off over four years or 5 years or 10 years or something like that.
36:11 A lot of folks don't care too much about becoming rich. They want to live rich. They're concerned with a speculation that could help them buy a nicer car or something like that. >> Mhm. Yeah. >> You know, this is an important consideration for somebody who actually wants to make money and is actually prepared to do the work and take the risk necessary to make money.
36:35 This is not for tourists in the space. There's a lot of folks, Daryl, and you've met them at the conferences who are very concerned about finding a 17 cent stock which could become a 25 cent stock. They don't need to spend an awful lot of time on fundamentals doing that. Mhm. >> You know, it's just like they went to the racetrack and bet the fattest horse, you know.
36:57 >> Yeah. For sure. I mean, I learned something from you with just what you just shared. So, you know, for me, I'm like, yeah, this is in the weeds for sure. >> You know Daryl I had this profound realization end of 2025 at Metals Week in London where the mining industry and the metal fabricators were talking about the inevitable shortage of copper that we were going to have.
37:31 There's nothing that we can do, nothing at all that we can do to avert a shortage in copper. The big guys are understanding this and the big financial institutions are understanding it too. There will be construction finance available but nobody is going to finance 100% of the cost of developing a mine. >> These are huge capital needs.
37:54 And one of the most logical ways to do that is a silver stream. If you're like BHP and you're pointing out that the market price of your company is at a substantial discount to the value of the sum of the parts, equity, which is to say raising equity to build mines, is extremely expensive because you're raising $60.
38:17 You're raising equity capital at a price that substantially undervalues the free cash flows that the company will exhibit over 10 years. So equity is very expensive. Debt might cover 65 or 70% of the cost of the mine. So you got to find that other 30 or 40 while minimizing equity dilution. So things like offtakes where commodity producers pay an upfront price to market the copper that comes off the deposit or royalties or streams will become an increasingly important part of that capital stack.
38:56 In a capital stack where the dimension of the capital stack is immense. >> Yeah. That's an important point, you know, cuz for me like when I think of 250 billion, I'm thinking of like the government just, you know, they print 250 billion easy, you know, but when you put it in the context of this sector, that is a huge amount of capital.
39:22 >> It is a huge amount of capital. And you know, to be honest, I think the government's going to give them some. I think that's too bad as a taxpayer. Well, I'm of mixed minds. You know, as a shareholder, the mining industry loves dumb money and there's no money in the world as dumb as government.
39:39 So, I think part of the capital stack will come from government. And to the extent that BHP can find a way to steal from the taxpayers, I'm sure they're going to do it. But my hope is that mostly they have to rely on the streamers as opposed to relying on me. With this huge capital need, what do you think about the royalty companies that focus on copper like the Ecoras, the Evolve royalties, and so on.
40:08 >> Well, I'm bullish on the whole copper industry. I think one of the things that's going to happen in the context of this funding need that I see is that the funding need will be so great that the Ecoras and the Altiuses and the Elementals, even the third tier royalty companies will have the ability to participate in syndicated interests.
40:37 I also think that at least the nominal price that the market pays for copper five years from now will be dramatically higher than it is today. And to the extent that you can buy a royalty that pencils even in mid single digits at today's copper price, if you've bought the right copper asset with long production life, you'll be surprised at what the net present value of that deposit is 5 years from now.
41:05 >> Okay. Yeah, appreciate that. Okay. So the last acquisition I want to talk about still in the commodity sector but Uranium Royalty and Sweetwater. We did talk a little bit about it at the Rule Symposium. I had some time to go in and see how beneficial this could be for Uranium Royalty.
41:31 And so I want to start with your thoughts on this. So we have Uranium Royalty now has acquired a royalty that's going to bring in cash flow to the company. And so I know some of the royalties are on mines that are in development and some of them are still in the exploration phase which that isn't bringing in the capital yet.
41:56 They do have a couple of royalties on Cigar Lake and McArthur River through I think it's Orano and now you have this acquisition of Sweetwater that is already producing some cash from their projects and so curious your thoughts on that acquisition. >> A very fully priced acquisition.
42:25 These assets were bought by Orion not too long ago, three years ago or something at a substantial discount to what Uranium Royalty is paying. So don't confuse this with a cheap acquisition. Whether or not it proves to be cheap in the fullness of time is interesting. It represents a bit of mission drift given that a lot of the cash flow from the assets as I understand is from soda ash or trona operations.
42:48 Importantly however it makes Uranium Royalty as I understand the transaction one of the largest fee simple real estate owners in the country and they have upside on all the fee land mineral interest. My feelings are mixed about the acquisition particularly given the markup that occurred since Orion bought. Okay.
43:23 So when investors are looking at these mergers and acquisitions, what are some of the red flags that investors should be thinking about? >> I think the principal red flag is probably a velocity of transactions that's substantially higher than other companies in the sector. What that suggests is that the acquirer is overpaying.
43:52 That's why he or she is getting the majority of the transactions. Unless a company has some structural advantage to its competitors. Nations Royalty as an example has a structural advantage. They're an Aboriginal controlled royalty company that is trying to make deals with Aboriginal communities in Canada. It makes sense that they would have a wall around their business.
44:16 They would be able to out compete other royalty companies as a consequence of cultural familiarity and frankly ethnicity. That would be one example. A different example might be Alexandra Woodyer and her company Empress Royalty where they in effect become the royalty arm of Endeavour Financial and at least ostensibly could involve themselves in Endeavour's deal flow.
44:46 But in the tertiary royalty companies in particular where you're seeing much more rapid deployment of capital than in the industry as a whole, assuming that they don't have any durable competitive advantage but rather merely beating out other guys at auction, that suggests that they may be overpaying. If the commodity prices that I and I think you believe will come to pass in 5 years, this overly aggressive expansion may be a good thing.
45:20 It may be that they're making a market call that's right, but it suggests that on a net present value today, they may be overpaying. >> Okay. Yes, that's a good frame to have for that. Well, Rick, appreciate you for your time and all of this valuable information here. Where can people connect, learn, all of that? Two commercials.
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47:00 >> Yep. For sure. >> Yeah. Rick, appreciate you for your time, and coming on the show today. >> Great. Thank you. I look forward to seeing you somewhere sometime. The very latest, I guess, up at VRIC in Vancouver next January. >> Yes, indeed. And you all be sure to hit the subscribe button if you haven't subscribed yet, and would love to have your support there.
47:23 Thank you all. If you enjoyed this interview today and found it valuable, I encourage you to click the link that is pinned in the comments as well as the description to the commodity university as we go deeper into what drives commodities and commodity pricing and we also jump into different dynamics of this industry.
47:39 And so encourage you to click that link to learn more. Check it out.