Interview with Rick Rule: The Sprott Natural Resource Symposium
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By Allen M. Alper Jr.
on 7/5/2016
The Sprott Natural Resource Symposium is coming up later this month. I talked with Rick Rule
about: current market opportunities, the companies attending the Sprott Natural Resource Symposium,
why Sprott is interested in these high potential juniors, and why everyone interested in the
resource sector should attend.
Allen Alper Jr.: This is Allen Alper with Metals News. Why don't you tell me, with this
current market environment and the big rebound that junior miners have had, why would people want to
attend this Sprott Natural Resource Symposium?
Rick Rule: Well, I think there are really three reasons. First of all, the move that you've
seen in the junior bull market, if past is prologue, is just the down payment on what's to come.
We're in very, very early innings. Remember that the bear market that preceded this bull market was
a market that took the index down by 90%. We've since staged a 60% recovery, which is another way of
saying we're still down 80%. This market has a long way to run.
The second thing is that the fundamentals behind this bull market are very much intact and
by the fundamentals, I mean the direction of commodity prices, in particular gold. It's my belief,
personally, that the most important determinant of the gold price is really the price of the U.S.
10-year treasury. That is the U.S. dollar based price of gold. The U.S. 10-year treasury has been in
a bull market for 35 years. The yield has declined from 15 to 1.75, which gives you an idea of the
magnitude of the run. Arithmetically, a yield falling from 15 to 1.75 doesn't have much further to
fall, which is a different way of saying that the bond doesn't have much further to rise. My
suspicion is that the 35 year bull market of the U.S. treasury is close to an end and if that's
true, the 35 year bear market in gold is much closer to the end than to the beginning. I think that
you're going to get help from the gold price which will help the market.
The second thing is that I think we're bottoming in the rest of the commodities complex. It
wouldn't surprise me if we bumped along the bottom for 18 to 24 months, but I think 18 to 24 months
from now we'll have a synchronous bull market in gold and other materials similar to the synchronous
bull market that we enjoyed in the 2002, 2006 time frame, which was spectacular.
Now, with specific regard to the conference, at the conference you will have the opportunity
to meet thought leaders in natural resources and you'll have the opportunity to meet 55 selected
companies. It's important to be selective because the games that will occur in this bull market
won't occur across the 1,500 o4 2,000 company universe in natural resource markets. They will be
concentrated, just like they have been in all prior bull markets in the best 10 or 20% of the
juniors and by having the advantage of listening to people who have successfully made their living
through bear markets and bull markets and by meeting companies that have been vetted by experts,
rather than chosen simply by their ability to write a check to advertise, you'll have a leg up early
in a bull market that has a long way to run.
Allen Alper Jr.: Excellent. You think there's still a long way to go. The juniors have moved
quite a bit and some people are thinking that might be all they have. What indicates to you that
it's still going to be able to have an 80% upside from here?
Rick Rule: You know, Allen, in the very near term we absolutely could have a consolidation and
in fact, a consolidation of 15 to 20% decline would be normal, natural, and in fact healthy. That
doesn't mean it's going to happen, but the truth is that the nature of bull markets and bear markets
is that bear markets are the authors of bull markets and vice versa. The bear market that we just
went through was maybe the mother of all bear markets. We had a 90% decline which tells you how far
that we have, at least in theory, to run.
The other thing that makes me particularly attracted to this coming bull market is the
natural direction of commodity prices in the next five years is higher. If you look at commodities
as an example, like oil, it's estimated by the International Energy Agency that it takes by $60 and
$65 U.S. for the oil industry to recover its costs, including the costs of capital. You make this
stuff for $65 a barrel and you sell it for $45 a barrel. You lose $20 on 95 million barrels a day
and you try to make it up on volume. That doesn't work. If you believe, Allen, that seven years from
now you'll be able to turn the key right in your car and your car will start, that means that you
believe in higher oil prices and higher oil prices will have a dramatic impact on the shares of
junior oil companies.
The same thing for copper. It's estimated that the copper industry needs $3 a pound U.S.
worldwide to earn their cost to capital. Problem is they only get paid $2 a pound for the copper. If
the copper prices goes up by $1, which is another way of saying 50% from here, the impact on the
shares of the better copper juniors will be extraordinary and the truth is if the price of copper
doesn't go up seven years from now or eight years from now, you'll hit the switch and no electricity
will come out. If you believe that you're going to have electricity when you hit the switch seven or
eight years from now, it means that you believe the copper price is going to go up in the next five
years.
Think about that.
Allen Alper Jr.: Okay, so you've made a compelling argument for why the market is going to
continue to go up and why people should go to the Sprott Natural Resource Symposium. Now, how do
they do that? What should they do at this point?
Rick Rule: Set the date on your calendar. Go to the Sprott Vancouver website and sign up.
It's interesting that this conference survived all through the bad markets. In fact, when we
took this conference over from Agora three years ago, less than 300 people attended. We were able to
bring in about 450 people two years ago and 570 people last year. It's a testimony to the value of
the conference that it grew all through the bear market. This year, I would anticipate that we would
have between 700 and 800 highly intelligent investors listening to speakers like Jim Rickerts,
speakers like Doug Casey, speakers like John Embry, and rubbing shoulders with high-net-worth
investors who spend a lot of time in the sector themselves, in the company of 20 of the most
prominent, most influential natural resource oriented newsletter editors in the country. It's going
to be a lot of fun and people who pay attention will make money.
Allen Alper Jr.: Yeah. What type of junior mining companies will they have access to at this
conference?
Rick Rule: That's a great questions, Allen. Our attendees over the years have told us that they
consider the exhibitors to be content too. They consider them to be investment opportunities and the
consequence of that is that exhibitors, public company exhibitors that have not been vetted by
Sprott, are not allowed to exhibit.
Now, just because we vetted them and we own them doesn't mean they're going to be
successful, but what it does mean is that we know the companies well enough that we've invested our
own money in them.
Allen Alper Jr.: Great. What's your track record been like picking investments in these
companies?
Rick Rule: Well, my track record in the last four years, like everybody else's, was pretty
difficult, but the truth is both Eric Sprott and myself have, over the long term, been extremely
successful investors, as in evidence by the fact that Sprott manages in excess of $9 billion today.
Allen Alper Jr.: You have a little bit of experience.
Rick Rule: This will, depending on how you count it, be my fourth or my fifth natural resource
market cycle. I've been in the game since the mid-1970s. It's treated me extraordinarily well and I
would not be surprised if this is the best bull market cycle that I will even experience.
Allen Alper Jr.: Well, thank you very much for your time. I think this is a great time for
people to get in. Oh, I do have one other question. Do you see that a lot of people have started
taking advantage of this or did a lot of people miss the turn on this?
Rick Rule: The clients who have been with us for two or three prior bear markets are all over
this thing. You have to have lived through a cycle to understand the opportunities that are
available early in a bull market. People who became clients of ours at the top of the last bull
market, that is people who came in at 2009, 2010, people who believed the narrative at the top are
still too shell shocked to participate. People who have been clients of ours for 20 years or 25
years, who have been through a few of the cycles are responding very aggressively and very
enthusiastically.
Allen Alper Jr.: Excellent. Excellent. Well, thank you very much for your time. Do you have
anything else that you'd like to add?
Rick Rule: Just I'm looking forward to seeing you up there, Allen. Vancouver, in addition to
being a great place to make money, is a great place to spend time in the summer. It's a great place
for families. The weather will be nice. The place is incredibly beautiful. There's a plethora of top
quality restaurants. Although I will work you very hard all day gathering information, there will be
plenty of time in the late afternoon and early evening to enjoy all the charms of the city, which
are plentiful.
Allen Alper Jr.: I'll look forward to it. Thank you.
Rick Rule: Thank you, sir.
http://www.naturalresourcesymposium.com/?ref=FTVLS763/
Barbara Perriello, Michelle Sedita and Michael V. Whetstine
Event Directors, Opportunity Travel
+561-243-6276 or +800-926-6575.
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