Mining Narratives for 2023, Top 5% Junior Mining Stock Criteria, Royalties, Streamers with Rick Rule

My guest on the show today is Rick Rule,  Investor, Speculator and Founder of Rule Investment Media. I haven’t had Rick on the show since September 2021 – during that time we’ve seen gold tap $2,000 an ounce and remain just below, lithium craze and much more. I invited Rick on the show to hear what metals and mining narratives he’s been paying attention to in the last 6-12 months and for the next 6-12 months. Rick also does a deep dive on the three reasons why there has been a junior mining MicroCap malaise, his criteria for finding the top 5% junior mining stocks, as well as his thoughts on royalty and streaming companies. Whether you’re an active investor in metals and mining, passively follow or even hate the industry all together, my chat with Rick Rule has nuggets of wisdom for each of you.

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I’m your host Robert Kraft thank you all so much for the support and for tuning in do me a quick favor if you like what you hear at Planet microcap please take two seconds and give us five stars on Spotify or apple this helps with the search engine so that more folks can

Also discover and engage with all things microcap stocks our next investor conference is less than two months away the planet microcap showcased Vancouver is coming up on September 6th and 7 2023 at the Fairmont Waterfront in Vancouver BC be sure to check out uh an episode that I recently did with Paul andreola

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My guest on the show today is Rick rule investor Speculator and founder of rule investment media I haven’t had Rick on the show since September 2021. during that time we’ve seen gold tap two thousand dollars an ounce and remain just below the lithium craze and much more I invited Rick on

The show to hear what metals and Mining narratives he’s been paying attention to in the last six to 12 months and for the next six to 12 months you know Rick also does a deep dive on the three reasons why there has been a junior mining micro

Cap malaise his criteria for finding the top five percent Junior mining stocks as well as his thoughts on royalty and streaming companies whether you’re an active investor in metals and Mining you passively follow or even hate the industry altogether my chat with Rick rule has nuggets of wisdom for each and

Every one of you so thank you again for tuning in to The Planet microcamp podcast and please enjoy my conversation with Rick rule Rick great to see you man how you doing Robert pleasure to be back with you thank you absolutely look it’s been uh it’s been over a year or almost two

Years now since the last time we did an interview together that we put that out on September 2021 and without beating around the bush I figured we’d just get right into it you know um since then we’ve uh we’ve seen gold actually before

We get into it I do want to give a plug the reason I also wanted to invite you on you have your conference coming up in Boca Raton the rural investment Symposium that’s happening July 23rd 27 2023 so I’m sure we’ll put a link in

There for plug for people to go and see that now to get to the nitty-gritty uh like I said since September 2021 you know we’ve seen gold top 2000 an ounce and remain just below that we’ve seen a lithium craze and all sorts of other

Crazes out there so I mean in Europe and when you reflect on the last six to 12 months let’s say what what would you say are the main narratives that you’ve been paying attention to well I I think probably three or uh microcrab resource investors or speculators

Uh the first would be the impact of uh higher interest rates uh and the resedence of fear in the broad economy uh and the impact that that’s had on moderating gold prices gold and to a lesser extent silver in my experience over 50 years have done extraordinarily well when

People are concerned about the efficacy of their purchasing power in other financial instruments uh the increase as an example in the interest pay on 12-month U.S treasuries has gone from one and a half percent to five percent which is to say the competing yields uh to Gold have tripled

Making these instruments relatively more attractive than they appeared in 2000 and two uh despite the fact that we have raised interest rates in the U.S the U.S economy feels at least surprisingly strong uh home sales as an example have declined but housing prices haven’t declined that much probably a gap

Between the bid and the ask but whatever it’s due to the U.S economy seems at least fairly strong stronger than I would have expected with the increase in interest rates that we’ve seen what that means is that there is more confidence both in the U.S economy and also in conventional savings products

Which has uh I think it’s safe to say weakened retail demand for gold you will note that demand for gold among central banks and some institutional investors hasn’t weakened at all but in terms of the aspirations of microcap investors the gold narrative uh that existed in 2019-2020

Has subsided and one consequence of that is the gold oriented equities other than the great big ones uh have Society have subsided too on the other side of the equation um for broad Commodities markets things like copper iron ore nickel to some extent uh and certainly oil and gas

Uh recession fears have really played on those markets it is very clear to anybody who pays attention that in the major industrial commodity groups we’re facing a supply Cliff which means that supplies really begin to falter four or five years out but despite that you see a moderation in the Futures markets for

Commodities and you see very very very soft prices for the major Commodities equities particularly relative to their earnings and their dividend powers I think this is explained by the fact that the market sees a recession in the offing you can have declining supplies if you have declining demand and prices

Don’t move and certainly the inverted yield curve suggests that financial markets think that we’re headed for a recession uh as well I don’t want to weigh in on that Robert by the way I have correctly absolutely corrected called 17 of the last three recessions so I don’t pay too much attention to my

Own forecasting as a as a credit analyst I’m always afraid of credit quality and I tend to be more of a doomster than I ought to be but I think the third part I mean Rick we’re gonna we’re gonna try and stay away from Doom porn today okay you know

That’s our that’s our that’s our goal unless you want so we could go then no I I I think that’s a very good thing the truth is that money is never made by pessimists sometimes money is kept by pessimists but it’s never made by specimens okay I think the micro cap

Malaise in the junior resource Market particularly the mining Market is really uh uh a function of the underperformance of the companies uh it’s a hard thing to say it gives me a lot of hate from the issuers but you’ll need to hear me out I’ll make

You sick before I make you well later in the interview if you merged every Junior Mining Company in the world says let’s say there’s 2500 of them or so into one company you call that company Junior explorco in a very very very good year that business would lose two billion dollars

In an average year probably four billion dollars in a bad year probably 10 billion dollars and ironically uh what they consider to be about a good year which is a year that they could raise a lot of money is a bad year from an Investor’s Viewpoint because they have more money to lose

I suspect that between 80 and 90 percent of the public companies in the world the junior mining companies in the world are lifestyle exercises are worse they’re value traps that doesn’t mean that the whole Market can’t do well on occasion as Doug Casey used to say when the wind

Blows even turkeys can fly uh the question for speculators is how to find a well enough fed turkey that that turkey can survive until the storm comes all that pessimism uh hides a wonderful fact that’s been responsible for My Success my uh successful speculative efforts which is that sort

Of five percent of the sector five percent of the 2500 companies maybe 150 companies generate so much performance that they had legitimacy and even value to the sector we about 25 years 20 years ago had a young uh intern that’s Financial Services speak for slave uh who pulled 25

Tsxv Juniors at random looked at the balance sheets of the income statements going back five years and discovered to his surprise and to my horror that the average Junior spent over 60 percent of capital raised on General and administrative expenses less than 40 percent went in the ground and I think

If you’re looking at the malaise in the micro cap juniors you need to add back recession fears uh increasing confidence and increasing interest rates available to Savers and the underperformance of the sector as a whole uh against that gloomy backdrop uh I’m fairly aggressively buying some of the Juniors

I have done reasonably well over the last 50 years segregating in movie Sense the good from the bad from the ugly most speculators don’t bother to do that for some reason their investment criteria has got to hunch bad a bunch which means when the tsxv uh over an

18-month period is like it is off 45 percent there is no segregation as terms to what in terms of what gets sold off the good Juniors the medium Juniors and the bad Juniors All Fall Down together which means that the price of the good Juniors uh has declined over the last

Two years uh to reflect uh what I think is in many cases great value relative to what existed uh two years ago which was not great value you mentioned at the beginning of the interview too and I’m sorry to turn this into a rant but this is important this

Is what this is why I have you on I don’t I don’t mind to let you cook so just keep just keep cooking you’re good you know you you managed to say at the beginning of the interview that there were always crazes and I think crazes

Are well known and well named people who participate in crazes are crazy uh lithium would be a wonderful example uh a lot of guys who run lithium companies today couldn’t spell lithium seven years ago they failed looking for gold they failed growing marijuana they failed in launching uh some sort of cryptocurrency

And now they’re with the latest code craze uh bit uh pardon me lithium and my suspicion given their track record uh is that they will fail one more time I note too that the population of lithium companies in the world has grown from probably ten seven years ago to probably

200 today what are the probabilities that there are 200 management teams in the world that are experienced in and successful around lithium I would say that the probability of that on a percentage basis is zero uh and I’m not doing this to say don’t speculate on lithium what I am saying is

That you make money in Resources by finding things that are out of favor not hot you have a commodity which is increased in seven years by 400 percent in price markets work the cure for high prices is everywhere and always high prices high prices uh cause

More Supply to come online in the case of the lithium business we don’t need more raw lithium we need more lithium processing capacity at the same time that they cause users of lithium to be more efficient Fabricators or to find substitutes for lithium again I am not saying that if somebody

Explores some God forsaken part of the world and discovers a very very high grade very very high quality lithium mine a mine with say 10 billion dollars in in situ reserves and resources that will be in the best quartile worldwide in all and sustaining costs and the best quartile worldwide

In return on Capital employed that I wouldn’t be attracted to it uh uh I don’t mind being right in any commodity it’s just unusual that you are right in a commodity where you have as many competitors as you do lithium where the price of the commodity has already

Gone up fourfold now it’s interesting for speculators the speculators who buy a narrative the lithium Narrative of course being distributed Power Batteries uh the increase in price validates the narrative and ironically in speculators Minds The Narrative becomes truer even as it becomes valueless the the value in the narrative after the

Price of the commodity has gone up by 400 percent is precisely a quarter is attractive as it was had you adopted the narrative early on and so I I would caution your speculators uh on the fourth probable reason for the malaise in micro cap mining shares which is to

Say investor performance that’s geared that’s geared to reality uh pardon me geared to narrative but rather than geared to math uh the fact that people uh Chase Commodities that are in favor and hot that have experienced rapid share price escalations in favor uh uh or issuing I should say in preference to

Uh Commodities that are out of favor with management teams that are experienced and I would suggest that the investors disenchantment with their own performance is the fourth reason why micro cap stocks are weak and I would say that that very weakness in micro cap resource stocks is precisely the reason why at

This moment I’m attracted to them absolutely all right well there’s a lot that I want to dig in there for but I think the first thing I want to talk about is you know I think you’ve been on here before where we’ve kind of talked

About how like you know mo a good high percentage of Junior miners you know it’s lifestyle right type situation you know uh and and 80 to 95 is in that place but you know let’s talk about that infrastructure itself because listen we’ve gone to all these events and you

Know you know who the players are I mean you were working for your former employer you know you guys uh funded and financed so many of these companies I mean they continue to spread continue to do so today you know so I mean it seems like it’s also kind of a

Fundamental problem of the infrastructure itself where it’s like all right you know listen you as the financer you make money on the deal you probably structure it so there’s a bit of a warrant right and the company doesn’t care all right so my stock price takes to hit whatever that money is now

Going back into my paycheck and you know okay a little bit’s gonna go on the ground and we’re good to go right so I mean that’s a clear fundamental problem in just how the infrastructure works and you know why would any investor want to invest in a in a game where it’s like

All right I know I’m gonna get diluted and they’re gonna be fine but I’m I’m going to be left in the dust I I think the sooner that the investor comes to recognize that the sooner that the circumstance changes uh make no mistake uh Wall Street Bay Street house Street

Exist to take your money it’s your job to make sure that they give you back more than they took from you uh the truth is that most investors most people on the receiving end of outgoing phone calls from Bay Street and Howe Street prefer hearing narrative they prefer

Being excited I was among other things a retail stock broker for 40 years and I know when I got on the phone with most investors and I started in on the math I could feel their eyes drop uh when I talked about Insider selling when I talked about General and administrative expense

Relative to in-ground expense when I talked about all in sustaining Capital when I talked about all of the factors that made a company a good speculation most speculators eyes glazed over uh if rather than that I talked about the potential impact of Trudeau or Obama uh and uh on gold

Uh all of a sudden they got very excited and it’s odd that speculators get excited about the gold price when they’re speculating on companies that don’t have any gold they’re looking for gold so you know I really think that what you say is very true and I think that the

First line of defense is the investor himself or herself there is so much data out there uh and investors need to Avail themselves of it and on my own channel rule investment media you may know that I have now graded over 80 000. individual investor portfolios they submit the portfolios I rank the

Stocks in the in the portfolio one to ten comment on issues where I think I where I think my comments might have value and I’ve learned a lot about how investors act at various points in time and I’ve seen the impact of promotion and narrative on Broad numbers of people I’ve seen the

Same mistakes uh over and over and over again I have asked every uh listener on my channel there’s 80 000 of them uh to consider strongly limiting the number of stocks in their portfolio to the number of hours per month that they’re willing to spend studying the stocks

Reading the annual reports reading the proxy statements reading The Insider filings reading the quarterlies the income statements the balance sheets if you’re going to have 20 stocks you need to spend 20 hours and by 20 hours I don’t mean listening to Jim rickard’s interviews about how the world’s going

To hell in a hand basket although I think you should do that too I’m talking about spending 20 hours per month doing fundamental research on the companies in your portfolio Robert people will send me laundry lists of 80 stocks their portfolios look like mutual funds uh and uh so sometimes I call these

People just for fun to educate myself and they’re usually surprised that I actually study their individual portfolio like this but you know I’ll say okay let’s start at the top right so I don’t know what’s got a in it Amalgamated Aardvark uh you know that’ll be the first Penny Dreadful in the

Account and say oh yeah I was really curious about that what do you think about that Rick and I say well until this moment I was blissfully unaware of its existence I didn’t think about it at all why do you own it oh well let me think

Oh yeah Bob Bishop recommended it oh my God Bob Bishop’s been dead you know he’s been retired for 15 years I I mean that’s the reason you own this talk yeah well when the original stock goes away and Bob Bishop went away the stock has

To go away too oh no Rick I couldn’t sell it why couldn’t you sell it well I paid four dollars a share for it and it’s selling for 40 cents a share now and if I sold it I’d lose three dollars and sixty cents a

Share and then I have to say no sir you’ve already lost three dollars and sixty cents a share the question is what do you do with the last 40 cents if you like it if you liked it at four dollars you ought to love it at 40 cents if you’re

Not willing to sell it you want to buy a bunch do you understand how this discussion um points up uh I think what’s wrong with the junior mining business people will spend hours price comparing and looking at the features around a 400 winter coat uh and then they’ll put fifty thousand

Dollars into speculative stocks uh on the basis of got a hunch better Bunch pretty insane but how do we change this I mean like between you know listen I’ve been interviewing you for years I got Brent on you do a great job Daniela cambon does a great job like I mean

There’s some really good people that are doing good work trying to educate the masses of like uh this you could get killed like because of all these mechanics out there what can change it racks my brain I I think what changes is um an understanding of pareto’s law uh our job

Is to make this information available to people uh pareto’s law teaches you that 80 of the poor performance will be accomplished by 20 of the people by the way it’s a bell-shaped curve so a different 20 of the people will experience eighty percent of the losses

Most of the people will be in that Center at the so-called what did uh man can say the Great unwashed uh what’s interesting to me is that in a large enough population base the these performance dispersal curves uh conformably align I I know that’s wordy but what that means is that if you

Take the 20 that have achieved 80 of the gains uh and you run that 20 through the same performance dispersal curve uh 20 of the twenty percent will generate eighty percent of the eighty percent which means that four percent of the population base in any given activity say junior Mining stock exploration as

An example uh or Junior Mining stock speculation uh four percent of the population will generate 65 of the gains and I’m forced to say although I’m in retirement now that in terms of educating one must reach as broad an audience as one can and then one must concentrate their

Efforts uh on the four or five percent that are apt hard-working students I’m fully prepared to concede that out of my own database you know out of an 80 000 person database I will probably be able to materially affect materially affect the fortune of the four or five thousand people who

Do the work and exert dividend it doesn’t it exert effort it doesn’t mean by the way that I shouldn’t continue to expand effort spend effort on the others it just means in terms of the expectation that I might have uh of doing good which is sort of what I want

To do in my declining years that most of the benefits of my effort will be achieved by a fairly small proportion of my audience at the end of the day if we can affect One Life positively with what we do like it makes it all worth it but all right

So so getting back to the five percent you know talking more uh you know get getting our juices flowing on the five percent that uh you know of the junior miners that you’d say are you know actually doing some real stuff here you know what would you say some of your

Criteria right now for finding that five percent of the 2500. uh first of all staying out of other people’s way uh you either need to go in the front end of Grassroots exploration which everybody hates right now because it’s very variable so you need to go there the fact that everybody

Hates it you know it’s like buying straw hats in winter it’s cheap the other part that’s really cheap uh are the boring part of the lasande curve uh maybe right before the Project’s been financed or after it’s been financed in the construction phase so I’m in front end exploration and I’m in development

Because everybody else hates it I’m also I must admit in the royalty and streaming business simply because it’s such a good business for the investment part of my portfolio the idea that I could be a 90 margin business as opposed to a 18 margin business has some arithmetic appeal to it

Uh so I do that but I think the first thing that you do is stay out of other people’s way to the extent that you can if you have to screen 2500 companies to find yourself 150 they’re investable uh you try to find ways to screen companies so you won’t have to waste

Time looking at them so that you can lavish more love care and attention on the ones that you think might make you some money people end up being hugely hugely hugely important pareto’s law comes back here too most people who go into the mining business as exploration as promoters

Whatever they do never succeed in anything most geologists never find a mind they’re never part of a team that finds a mind but you find other people uh Ralph Roberts comes to not not Ralph Roberts um it doesn’t matter the name but you know you find other people that have

Discovered 10 minds or 12 minds or 15 Minds you find uh people who as property identifiers and Company builders that have been serially successful we call them the Living Legends at our conference uh people like Ross Beatty people like rest in peace Adolf lundeen rest in peace Lucas lundeen

Um people like Bob quarterman uh incredible people uh and sticking as much as you can with people who have been serially successful or at least people who have been successful one time at a task that closely resembles the task at hand is important now Robert if somebody comes on your show

And describes themselves as having been a success in mining but it turns out that that success was operating a gold mine in archaean terrain two billion year old rock in french-speaking Quebec but the task at hand is exploring rather than operating uh for copper gold porpheries in 15 million year old accredited

Terrain in the Spanish-speaking Andean Highlands while they have been a success the success is not related to the task at hand and so it’s important when you look at people that the people not only be successful but that they’d be successful to task at hand and this just doesn’t relate to the

Promoter when you’re looking at these companies and you’re asking hopefully the CEO but if you have to the IR person uh take me through your management team not just the major ego right take me through the management team take me through the chief operating officer take me through the VP of exploration as

The VP of exploration had much experience in this kind of terrain looking for this kind of deposit uh looking in these Rock packages too often somebody wanted to start a mining company went to a Headhunter and they hired a geologist and the geologist doesn’t know bumpkas

About the task at hand now it doesn’t mean that he or she can’t get lucky uh but counting on luck is a very very very bad uh investment technique similarly uh what is the task at hand uh if it’s exploration has the CFO uh been involved in Exploration

Budgeting before has the CFO been involved in budgeting in the Peruvian Highlands does the CFO understand what a reasonable quote for transporting drilling mud by helicopter in the Andean Highlands look like and by the way does the CFO have experience raising money the directors let’s say there’s five directors why was

Each director chosen what specific area of the business does this director oversee or what specific task are they useful at is the director as an example good at access to British or German Capital markets that’s a really good reason to have a director uh is the director a

Skilled explorationist by the way if they’re exploring in Peru do any of them spend time in Peru or do they explore Peru from Vancouver or Toronto just out of curiosity do any of them speak Spanish you know it happens that having Spanish language skills is useful

And correct in Peru so I think people uh are important in addition to the sort of contrarian industry to begin with uh I think too the size of the prize is increasingly important to me what you learn particularly in Exploration is that most of your decisions are mistakes uh

The arithmetic around exploration when I was in university was that one in three thousand mineralized anomalies became a mine you need to do a lot to balance the odds in your favor but one of the things that you can do is understand that if you’re disciplined your failed

Speculations can cost you 25 percent but your successes can make you a thousand percent and that’s wonderful arithmetic a thousand percent gain amortizes a lot of 25 losses and leaves room left over for an acceptable rate of return but it only does it if you are looking for big

Rewards when you’re taking big risks so I would suggest to your listeners that any Target that doesn’t have uh in situ recoverable reserves or resources associated with the target of less than two billion dollars isn’t wasted worth your time a half a million ounce gold deposit has

Every risk associated with it the 5 million ounce gold deposit has but a half a million ounce gold deposit could only make you a little bit of money and a five million ounce deposit could make you a lot of money so if you’re going to

Take big risks you got to be in the game for big Rewards now we get into the weeds a little tiny bit Robert but you got to get in the weeds uh building companies really is uh accomplishing small tasks on the way to a big goal exploration in

Particular is answering a series of unanswered questions learning more about the deposit and its viability it’s important to ask the management team what’s the most important unanswered question that you have in front of you how much value do you think it would add how much does it cost for the test

And what is the time required for the test Robert I would suggest to you that I’ve been answering I’ve been asking that question for 30 years and 80 percent of the companies that I asked the question of have never considered the problem in that regard I suspect it to them the most important

Unanswered question is will I be getting a salary in 18 months and while I understand that’s vital to them it’s of less interest to me frankly uh so this intellectual Pathway to adding value uh answering unanswered questions is important and it’s important that when you ask the question

You ask the following questions how was the exploration thesis developed was it based on the facts at hand or was it developed to mine Bay Street for money uh is the method proposing to test the thesis valid will it yield an answer that the market will care about

Importantly how long will it take Rick not to stop you but what what would how can you tell the difference between a thesis that’s clearly like all right this is just to go race Capital versus okay this is this has this thesis ask how the thesis was developed

Who developed a thesis do they have any expertise I mean you know if the guy was a house painter do you really care what his exploration thesis was um uh and uh ask him or her to explain to you the ground truths that went into the thesis in other words what data

Caused them to develop the thesis mostly when you ask that they don’t have one now it’s it’s like there’s an elephant here or oh there was this mine was discovered here like is that the an example of that like well specific data but there’s no that can that can help a

Lot if somebody says you know listen we’re the best place to look for gold is in the head frame of a gold mine there was a gold mine here it was shut down it was shut down during a period of 250 an ounce gold that is one really good data

Point so then you say okay uh I get it the old timers probably left some gold in the ground because it wasn’t uh economic for them to Discover It 250 gold what data do you have what is the surface expression uh what geophysical data do you have what supports the target you’re

Suggesting that there’s a parallel lens as an example what data do you have to support that there’s a parallel lens I asked this whole series of questions very recently of Bob quarterman uh the chairman of Dakota gold somebody I’ve made money with a long time disclosure I own Dakota gold

Uh and what he’s trying to do is very interesting they’re they’ve Consolidated the old homestake mining District in South Dakota 40 million ounce historic producer and I said so what you’re doing is looking for additional Ledges that somehow people missed over 150 years he said well actually yes first of all uh

Ledges away from the old one but remember 150 years ago they didn’t have access to as an example downhole geophysics you know they had to go by pick over there and we don’t have to do that we can cover you know 30 square miles of claims with geophysics but we’re also looking

For other styles of mineralization hanging wall mineralization football mineralization because any event that in place that much gold uh was profound enough and multi-phase enough that there doesn’t necessarily need to be one style of mineralization and by the way here’s some hanging wall samples in a different Rock package

That uh run six grams gold uh in addition to that if you look to the west of us there’s Wharf resources uh in a very very different style of deposit a surface deposit so we’re actually looking for three styles of mineralization this is a really good answer

Well let’s do that like are you shareholder Wharf just another guy compliance compliance Bob is uh going out I’m not a shareholder of I am I am a shareholder of uh of Dakota but and I use that not to suggest that people uh buy Dakota I’m using it to say

That Quartermaine and his team uh can describe their thesis uh and they can give me the reasons that they give me the way that they developed the thesis two they can tell me uh how much of their budget is geared to testing each piece of this thesis

And how long it will take and how long it will take is important you know if if it’s going to take 18 months to get a yes answer and it’s a yes answer it’s getting a yes answered that causes you to believe that you’re going to get a reasonable return

To your Capital if the time frame that you have yourself for the stock is 90 days and it’s going to take a year and a half 18 months to test the thesis how on Earth are you ever going to be right you need to adjust the time frame that

You have in your own mind as a Speculator with the time frame that is necessary to achieve the result that you’re trying to to achieve and then two you have to have the means uh many times companies have told me when they’ve answered the unanswered question uh um

You know series correctly I say well how much money do you think you need say well let me say 18 months probably going to take five million dollars okay and how much does it take you to run the company for 18 months like the ga oh

Million and a half bucks so you need six and a half million right right how much do you have a million eight well how’s that going to work it takes six and a half million dollars to get a yes answered you got a million eight in

The treasury I mean if you tell me we’re gonna raise some more money at least that’s an honest answer uh if you tell me you’ll effectively have the money raised then I want to know from who on what terms you know if if as an as a Speculator you

Don’t know that they have the means to answer the unanswered question and you in your own mind in terms of your patients don’t have the time the probability that you’re going to succeed is very very low and the fault is yours not the promoters absolutely well let’s I want to shift to

One aspect of the industry that you brought up as one of your I guess I think you said favorite but uh but uh royalties and streamers because amongst our generalist crowd like I’d say that probably gets the most looked at just because you know when it comes to

Speculating sometimes that you know we just went into the weeds for about 20 minutes about how how difficult that can be which that’s not to say people don’t like to do the work you got to do the work even when you’re talking about roses and streamers because hey they’re

Also speculating too but absolutely critical by the way absolutely but so let’s talk about that a little bit you know why what what are not why I think it’s pretty obvious like relatives and streamers you know if they’re investing correctly you could find a mine they’re generating some cash flow and whatnot

You know but in your opinion what are some of your criteria when you’re looking at some of these royalties and streamers as a business and you know just your criteria for the good ones let me start off by saying that generalist speculators who want a position in resources who want the resource beta

Might consider constructing a whole portfolio of royalty and streamers and never going anywhere else in every sector of the extractive market the royalty and streaming companies uh have the lowest risk data which is a very good thing in a rip roaring bull market of course the companies with the highest margins have

The least leverage uh so you will miss part of a bull market but probably over the course of a decade a beta constructed portfolio around royalty and streamers May at least be the best solution that a a a a generalist Speculator could have so editorial out of the way okay um

What I look for and let’s let’s classify mineral royalty companies in three categories uh the majors uh the majors would be Franco you know Wheaton probably a Cisco probably triple flagged uh probably uh did I say oh Cisco yeah a Cisco triple flag you know those kind of

Companies then there are the sort of large intermediates the uh sandstorms the company like companies like that and then there’s the small ones uh the beauty about the large ones by the way they’re not cheap uh they are priced at real premiums but I’ve come to understand that they deserve the

Premiums uh Franco Nevada the largest of the companies the last time I checked had 32 employees including the receptionist they run that assets that asset on a 12 basis point management fee uh they have 90 operating margins which is to say their gross is their net

It’s a very good business and they have royalties on very very very large properties in my experience large properties generate good surprises and small companies and small projects generate bad surprises but really in terms of uh Market beta uh the investor and Speculator has to do a lot less work

With uh Franco and Wheaton because the management teams have proven themselves if you look at 30 years at their track record with deployment of capital it’s excellent and the surprises that you’re going to get from the portfolio are almost always going to be good when you come down those companies even

To the large ones you have to look for some durable competitive advantage enjoyed by the company what is it that will allow them to out-compete for smaller royalties Franco and Wheaton which generate so much free cash and their peers you have to look for a geographic special specialization a commodity

Specialization deep relationships with investment Banks you have to look for some durable competitive advantage or you have to find a company with stabilized assets that’s substantially cheaper than the rest of them if you find one that’s substantially cheaper only two good things can happen one the share price can go up to bridge

The gap or two they get taken over it’s a capital intensive business and over time a weak competitor with a high cost of capital gets taken over by a strong competitor with a low cost of capital when you get down to the Juniors uh asset quality and sustainability is

The first thing you look at will a company exist two years from now do they have time to work the game plan uh what is the company actually worth if you look at the package of Assets in the company and you try to ascertain what you could sell that package of

Assets to a competitor for what the liquidation value would be and you compare that to the share price the Juniors should be at a discount to net asset value because you’re taking more risk and you can measure these net asset values but most importantly with the Juniors you need to look at durable

Competitive advantage and specialization as an example uh disclosure I’m long Empress royalty a very very very small uh royalty company not one for the faint of heart um The young woman who runs the company had worked for years at Endeavor Financial which is one of the most successful mine Finance houses on the planet I have you know structured and raised I don’t know eight ten billion dollars uh and Endeavor has been retained on behalf of empress to originate royalties

For them put them in the royalty package now that’s the durable competitive Advantage it turns out looking back that prior to my investment that the company had raised just shy of 20 million dollars and the net present value of their royalty package was 43 million dollars which is to say their track

Record in terms of return on Capital employed was pretty good and the net present value of 43 million dollars compared with the Enterprise Value then of about 30 million dollars 22 million uh market cap and 8 million in debt so it was selling at a discount

To net asset value there was a durable competitive Advantage uh and there was a very very strong focus on uh royalty generation uh that uh was in third world and Emerging Markets they didn’t try to compete with generalist firms in markets like Australia and the United States

They wanted to compete in Africa they wanted to compete in Latin America and they wanted to compete in circumstances that were either in production or being brought into production where the financing was being done by endeavor that’s the sort of granularity that I think you have to go into if you

Participate in the junior sector very good all right uh and you mentioned some of the majors or shareholder in any of the the major absolutely yeah I mean frankly uh with regards to both uh uh Franco and Wheaton yeah the sale decision will likely be made by my heirs

Uh I’ve owned them for a very long time I’ve weathered several dramatic share price declines I don’t care I have a sense of the value of the business uh with regards to those positions I’m not a Trader uh you know if if I ever got down to uh you

Know two natural resource stocks in my portfolio those would be the two uh for my participation of gold beta I realize that most of your listeners neither have my means nor my patience but I literally mean with regards to Franco uh and uh Wheaton that the cell

Decision will likely be made by my estate very good all right well I I only got you for like 10 or so more minutes so I wanted to kind of close out with you know not not Crystal balling this or anything like that but in terms of narrative you

Know I asked you about the narratives you were paying attention to the last six to 12 months what are the narratives now that you’re paying attention to for the next six to 12 months two things uh what is hated uh Energy’s hated so oil and gas has been a great place to

Be for three years people say what about Alternative Energy what about the fact that Biden hates it Trudeau hates it Greta hates it they hate it I love it uh I think peak oil demand occurs in about 2060. I’ll give you a little statistic uh last 40 years

Our civilization has spent almost five trillion dollars on alternative energies by the way I’m not opposed to alternative energies spend five trillion dollars and they’ve reduced the market share of fossil fuels from a high of 82 percent all the way down to 81 percent five trillion dollars has reduced fossil

Fuels market share by one percent partly because of growing energy markets uh oil and gas is cheap both in terms of beta and Alpha and it ain’t going away despite the best efforts of the big thinkers uranium too uh has uh traumatized people who were attracted to the thesis in 2020 as though

The ensuing three years have been a lifetime the fact that money was raised and deployed by the juniors in 2019-2020 at prices that were often three times the prices today means that if the company’s Outlook is the same the companies are precisely three times more attractive than they were at the time

That they raised the money meanwhile uh the time element with regards to the uranium bull market is done uh to me the Catalyst was always when does the Japanese nuclear Fleet restart we were always going to be fine in the Iranian business in the long term because it’s carbon-free base load power

And the Chinese are building plants like mad among others but the near-term Catalyst was the pace of Japanese restarts when will that occur what year 2023 it’s honest and there’s transformation in the Iranian business from spot Market to term Market the term Market is important because it gives the

Producers the price stability they need for the product that allows them to finance new inventory into production which we’re seeing right now but because of the poor price performance of uranium stocks particularly relative to uh anticipated you know the narrative in 2019-2020 despite the fact that the companies have made material advances in

The last three years they’re selling at half or a third the price which means that they are precisely two or three times more attractive than they were then with the time element used up so I’m certainly attracted to the uranium space uh and I’m attracted to the prospect generators in terms of Grassroots

Exploration using their brains and other people’s money to make Discovery this is something uh that’s not for risk-averse investors or impatient investors the search for 10 baggers for 20 baggers for 30 Baggers necessitates more failures than successes and many people don’t have the psychological stability to endure failure

Uh I do for better for worse and I’m attracted to uh the developers in the boring part of the lasande curve uh if you build large positions particularly in periods of dramatic price declines after oh I should say if the company completes on time on budget for a nameplate capacity these stocks

Completely re-rate and if they don’t get if they don’t re-rate they get taken over and I love both of those things the idea that I can endure 12 or 18 months worth of boredom by the way boredom is better than Terror uh with an outcome that’s probable as opposed to possible

Is the sort of value proposition that I really really like I guess the third thing I look for now is political jurisdictions that are hated uh you don’t find big deposits very often in places that lots of people look uh you have to go places that people

Don’t look for big copper gold deposits I think probably you look for the you look in the tethy and metallogenic build which means you look in some harsh countries Kyrgyzstan Uzbekistan Kazakhstan Pakistan Afghanistan turkey hard places uh Congo Zambia Cambodia when I look at the places I’ve

Made money in the last three years they’re places that other people Fear To Tread I’m not saying that political risk isn’t real by the way I lost a reasonable sum of money a couple years ago in Russia having made a lot of money in Russia for the preceding 20 years so

The political Risk game isn’t uh without risk but I would much rather take political risk personally than technical risk very good all right Rick we covered so much you know how much I appreciate you taking the time speaking with me so where can our audience go and find more

Information on Rural investment media and if it’s not too late to sign up for the Symposium love to see your audience at my Symposium either physically in Boca Raton Florida or virtually you can see my conference now from the comfort of your own home and by the way either

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Come and you didn’t think you get your money’s worth gold-plated money back guarantee tell me you didn’t get your money’s worth and I’ll give you your money back love to see at the conference go to rulesymposium.com learn all about the great speakers learn all about the great exhibitors by the

Way every public company exhibitor there is owned in a sponsored portfolio that doesn’t mean sadly that every stock I buy goes up but it does mean that every exhibitor in my conference has been subjected to enough due diligence that we own them um with regards to the second part of

Your question uh me rule investmentmedia.com as an inducement to your lead to your readers uh if you come there there’s a drop down uh list your resource stocks please no Tech please no pot stocks please no crypto uh I’ll rank those stocks one to ten and I’ll comment

On individual issues where I think my comments might have some value and Rick we’re not talking just like you on 100 shares in the comment like I’m okay no no I’m sorry about the Dropbox drop a laundry list of 100 companies that they’re considering no no I would

Say for the conference like oh the response is like yeah I’m sorry we got 100 shares in this one don’t worry I don’t think For Better or For Worse I don’t think if I’ve done enough work to invest um I want to be right I don’t know

Rick I appreciate you taking the time thank you and uh look forward to our next chat a pleasure and say hi to your family for me we’ll do podcast is for informational purposes only and it’s not an offer or solicitation of an offer to buy or sell Securities snn Network SN

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