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Rick Rule Rates Your Natural Resource Portfolio and Shows How US Tax Payers Save with Sprott Trusts

on 7/17/2018

Rick Rule, who is President and CEO at Sprott US Holdings Inc., is one of my favorite people to interview, as his wit and intellect are only exceeded by his experience and knowledge of natural resource investment strategies. Rick is a highly experienced investor and speculator, focusing on public and private issuers in natural resource industries. He has personally structured, led and participated in hundreds of privately placed debt and equity issuances for resource companies operating globally, and domiciled in Australia, Canada, Chile, Great Britain, New Zealand, Sweden, Switzerland and the United States. Rick has over thirty years of experience in metals, mining and the natural resource sector in general, and is a presenter at hundreds of resource and investment conferences.

Today we are examining the services that Rick has put together to help the resource investor. Also, he has offered to give Metals News Readers the unique opportunity to have their portfolio ranked by Rick himself. These services offer significant benefits for US gold investors. Receiving insight from Rick on your natural resource portfolio is invaluable for the natural resource investor.

Allen Alper Jr.:                  This is Al Alper Jr. with Metals News. I'm here interviewing Rick Rule. And Rick, what I'd like to ask you today is a little bit about your products and why they're so valuable to the US market?

Rick Rule:                            Well I think that Sprott is unique in that it is an investment manager that focuses just on natural resources. We don't offer products, if you will, for the investors entire wallet. We stick to natural resources. We are a useful investment sponsor because unlike most brokers, we use our own money. We show clients opportunities in which Sprott Inc. and its partners are also co-investing. And it's important to note that we manage money and offer investment services from, in terms of spectrum, middle class retail investors all the way through to the largest institutional investors in the world.

                                             We're extremely well capitalized, with well over 300 million dollars in current assets on the balance sheet and no debt. Given our predilection for gold investments, it's important that people know that we eat our own cooking. We run a very solvent shop in a very insolvent world. And we can help people, really across their portfolio. We run low cost equity ETFs. We run customized, managed accounts.

                                             We're involved in natural resource lending business, and those opportunities are available to high-net-worth, and ultra-high-net-worth individuals. And we also offer New York Stock Exchange listed physical commodity trusts: The Sprott Physical Gold Trust. The Sprott Physical Silver Trust. The Sprott Physical Platinum and Palladium Trust. And also our newly acquired Central Fund, Gold and Silver Trust. So we really can help investors in precious metals and natural resources across the investing spectrum.

Allen Alper Jr.:                  How would these trusts compare to other vehicles?

Rick Rule:                           Well I think the beauty of the trust is that they're New York Stock Exchange listed, the cost associated with them is very low. When people go to buy physical gold from many bullion dealers, they buy the gold at spot plus a three and a half percent markup. When they go to sell the gold, they sell the gold at spot less than three and a half percent markup. And they pay storage and insurance along the way. Meaning that theoretically if you did a 24 hour turnaround between buying and selling, you'd lose seven percent overnight.

                                             Depending on the commission that your broker charges you, buying and selling a New York Stock Exchange listed trust is 25 basis points. One quarter of one percent. So it's a much more economical and much safer method for owning physical gold and silver.

                                             Importantly also for US taxpayers, complying US taxpayers, when you own physical gold and silver or when you own physical ETF's, which are regarded as surrogates for physical. To the extent that you made capital gains, you pay tax at the collectable, or ordinary income tax rate. But when you own the Sprott Trust products, those are taxed at the capital gains rate. So high income US taxpayers enjoy a fairly substantial tax benefit by owning the Sprott Trust as opposed to owning the physicals directly.

Allen Alper Jr.:                  So as a US citizen, I will get a significant tax break going with a Trust compared to some sort of physical ETF?

Rick Rule:                           Correct. And you will save yourself a lot of cost, and fees, and aggravation along the way. I can't tell you how many times, in a 40 year career in precious metals, I've talked to customers, who took physical possession of their gold or silver and tried to hide, or bury, the bullion at home to avoid the exchange fees. This is extremely risky. The consequence of having something valuable at home, like physical bullion, is an invitation to people that you normally would not invite over to your house for lunch.

                                             I constantly warn people about, what I call, Midnight Gardening. The idea that you are owning gold and silver to avoid the risks inherent in the political economy, while exposing yourself to the risks of people coming by your house with guns to relieve you of your gold and silver is sort of a strange proposition.

Allen Alper Jr.:                  Absolutely. I've actually heard a lot of presentations where people advocate storing piles of cash or bullion in their mattresses.

Rick Rule:                           I have too and it scares the hell out of me.

Allen Alper Jr.:                  Yeah. Well, this sounds like a little better way of dealing with gold. So what were the four trusts again?

Rick Rule:                           The Sprott Physical Gold Trust. The Sprott Physical Silver Trust. The Sprott Physical Platinum and Palladium Trust. And finally, The Sprott Central Fund Trust. Which is both gold and silver. All New York Stock Exchange trading.

Allen Alper Jr.:                  So what are you thinking right now, as far as your outlook on physical metal?

Rick Rule:                           I own physical metal for different reasons from most people. I own it personally, as sort of catastrophe insurance. Gold has held its purchasing power through many different circumstances, over a very long period of time. And so I regard gold and silver personally, as insurance. Meaning, oddly, that although I own a lot of them, I'm not necessarily anxious for them to go up in price. Though if you think about it, there's no form of insurance that you own, that you're anxious to get paid on. Auto insurance means you had a wreck. Life insurance means somebody died. Home insurance means you had a fire. I regard gold as political catastrophe insurance. So I sleep better owning it.

                                             The gold stocks are different. You own gold stocks because you want to make money. You own gold stocks because you want to see a company do better than other companies. And I believe that in the next 18 to 24 months, the gold stocks offer a really compelling opportunity. They have lagged the price of gold and other commodities for 18 months, and I think they're due for a catch up. They are also becoming better run companies. They are emphasizing rather the leverage to gold, emphasizing rational allocation of capital, efficient operations. And free cash flow growth.

                                             And finally, I think we're coming into the mergers and acquisition phase in the gold business. Where the big ones eat up the little ones, and there's also sideways mergers. So for three reasons, the outlook I have for the gold equity's, maybe not in the two month or three month time frame, but certainly in the 12 to 18 to 24 month timeframe is very strong.

Allen Alper Jr.:                  Great. That's great to know. What else should our high-net-worth readers/investors know about Sprott?

Rick Rule:                           I think the final thing that your high-net-worth investors should be looking at is participating in the junior market, the sub 250 million market cap market, as often as they can in the private placement side of the business. So that they have the ability to allocate capital to companies that will give them warrants. Warrants being the ability, but not the obligation to buy more stock at a later date, if their speculation has been successful. And Sprott is, I believe, the largest US retail distributor of private placements from Canada and Australia, in the United States. So if you have the sophistication and the wealth to participate in the private placement business, there is no better way to be a speculator than through private placements, and there is no better place to access private placements than through Sprott.

Allen Alper Jr.:                  And there's something you do directly with that, isn't there?

Rick Rule:                           I do. I manage several pools that invest directly in the private placements, which is one of the reasons why Sprott is so dominating in the market. Many of our competitors go to a company and say, “We will try to raise you 10 million dollars.” I, as a consequence of the size of Sprott and the pools I manage, am able to say to the company, “I will deliver you 10 million dollars.” And we make those placements available to our clients.

                                             But from the issuers point of view, the successful completion of the offering, isn't a when, it's an if. That's one of the value propositions that Sprott offers up to its clients. The fact that we have over 300 million dollars in current assets on the balance sheet, and the fact that we manage, in various ways, shapes, or form, or administer over 12 billion dollars, gives us unparalleled access to private placements, because we can assure the issuer that the private placement will be completed.

Allen Alper Jr.:                  Now, if some of our high-net-worth investor/readers are interested in that, how would they get in touch with you? What should they be looking at?

Rick Rule:                           The first way is, they can always email me. That's the best way to get in touch with me. And to give people, either high-net-worth, or non-high-net-worth, the opportunity to get to know Sprott, I would like to offer all of your listeners and readers the opportunity to email their natural resources portfolios to me. It's important that they put both the name and the symbol in the text, and I will email them back, on an absolutely no obligation basis, my rankings of the companies that are in their natural resources portfolio. If the people that are submitting portfolios are interested in investing in private placements, please indicate that in the text and we will begin to develop a relationship so that we can offer private placements, where appropriate, to those investors.

Allen Alper Jr.:                  That sounds excellent. Thank you very much for talking with us and sharing your insights.

Rick Rule:                           I thank you for the opportunity to talk about our services with your audience.

Allen Alper Jr.:                  We all appreciate you sharing your knowledge with us.

Rick Rule:                           Thank you sir.

You can always email Rick Rule at, and Rick has offered all MetalsNews readers/investors the opportunity to have their natural resources portfolio ranked by Rick Rule. Just email your natural resources portfolios to Rick. It's important to put both the name and the stock symbol for each stock in your portfolio in the body of the email. Rick will then get back, with his rankings of the companies that are in your natural resources portfolio, on an absolutely no obligation basis.


Sprott US Holdings Contact Information:
Contact Sprott


Sprott U.S. Holdings, Inc.
1910 Palomar Point Way, Suite 200
Carlsbad, CA 92008

Brokerage Services
Sprott Global Resource Investments Ltd.

Separately Managed Accounts
Sprott Asset Management USA, Inc.



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