Rare Earth Metals: The Next Big Opportunity? Here’s What You Need to Know – Rick Rule

Rare Earth Metals: The Next Big Opportunity? Here’s What You Need to Know – Rick Rule

Kitco News special coverage of the rule Symposium natural resource investing is brought to you by G mining Ventures hey everyone I’m Jeremy sapper this is kco news welcome back to our coverage of the Rick rule Symposium in boka ratton Florida it’s been a great show so far lots of optimism on the air and our next guest says don’t expect that to go away anytime soon but stresses to do your own due diligence no stranger to our Kitco audience and the man behind this Symposium let’s welcome Rick rule hey Rick as always great to see you pleasure to be with you and thank you for coming down supporting the show I appreciate that yeah it’s quite the show I was just talking to you a little bit off camera there’s so much momentum here investors seem to be very very optimistic about the future tell me why you go through all the work to put this show on well for one I enjoy it uh I was lucky enough early in my career to benefit from a lot of mentors who spent a lot of time teaching me and I’ve decided that towards the end of my career that I would do the same thing it seems disingenuous to have accepted other people’s help and not pass it Forward yeah and you’ve been doing these CEO interviews it does seem more of an educational balance trying to you know educate investors as to what to look for I would argue that one of the reasons that you find this investor group optimistic is because we’ve schooled this investor group through the rules rule classroom for years as to how to do proper due diligence which means that they’ve had better results than other investors which means they’re optimistic true okay talk to me about some of the companies that are here because obviously you’re invested in them and I speaking about due diligence Rick I mean you’re a master of it you’ve been in this industry a long time what do you look for when you’re going into those Investments it’s important to note I guess that I started my career in in credit I wasn’t one of these narrative unbridled upside investment banker types I was worried about my downside before my upside so due diligence has been important to me in small companies it starts with people most exploration properties are actually liabilities they’re an excuse to spend money with very little hope of profitable outcome right so it’s all about people if you recognize as an example that exploration is really a technology business a knowledge business then the quality of the scientist and the quality of the process is what is important you will find too this sounds elitist but it’s true that a small group of people account for a disproportion amount of the performance so you try to hang out with people who have been serly successful and you avoid simultaneously those and there are lots of them who have been serly unsuccessful speaking of a lot of them it’s interesting because when you talk to people a lot of people stick out stay out of the commodity sector because they go okay maybe that company doesn’t have much they got cash they got an overblown share structure and they pay themselves too much money how do you stay away from those types of deals well that one’s pretty easy uh we have 200 hours of instructional programming at the rural classroom but really it gets down to common sense read the income statement read the balance sheet we had a young man 20 years ago now an intern who did some work for us pulling 25 tsxv companies at random and we found to our horror two smallest statistical survey to be really real but the median tsxv exploration company spent 60% of capital raised on GNA how’s that going to work how is it going to work yeah it’s interesting because when you kind of look at it I mean I saw you at pedak last time we interviewed you in Vancouver and we’re getting those all-time highs on the gold prices we’ve seen that new level now 2300 it’s broken out where we don’t think it’s going to go necessarily below knock on wood um talk to me about your forecast here I mean it’s a momentum time well I need to tell you I’m I’m always leery about forecasts particularly mine uh I have a belief that gold is going higher because I have a belief that in objective terms the US dollar is going lower I should qualify that I still think the US dollar will likely be the strongest currency in the world which is to say that in terms of purchasing power it will fall less r rapidly than other currencies but if you believe like I do that the real decline in purchasing power of the US dollar is more like 75% compounded than 2.6 compounded you understand the strength in gold was interesting I was talking to an interviewer yesterday who said uh you know Rick when do you think the gold price is going to move and I said well in the year 2000 in the year 2000 it was $256 now it’s $2,400 it’s gone up in price 8.4 % compounded for 24 years it has been moving it’s done its job and I think that’s what investors need to pay attention to true and you know this goes back to what you were saying on stage yesterday I was watching you talk and you were really trying to let the audience understand that it’s like if you’re looking at your stock price every day don’t get into here what is the advice for people wanting to enter the commodity space well any space the money in equities is made in the Delta between what a company is worth remember that a share is only fraction ownership in a business it’s nothing else uh it’s the Delta between the value and the price and then the expected value in an exploration company you need to look at their process if they’ve done some trenching an example to validate surface sampling and now they’re going to drill for the third dimension uh what’s the target size they have what’s the probability of success how long will the test take how much will a test cost uh what would be the likely value of the result what’s the probability of that result you derive then an expected value and it’s the value that drives your decision not the price right right so just kind of you know if you’re investing in that company stop watching it let them execute and how many times have you watched the stock price you know go down 50% during your investment 70% how volatile well that really depends on uh my conviction yeah uh I the statistic that’s relevant to your audience and they’ll hate it uh is that my average 10 bagger or better has required 5 years to come to fruition and has exposed me to at least one but often two 50% declines in the share price if you have done sufficient work on the company if you’ve kept up to speed with the company uh these price declines uh become tolerable if you are uncertain as to your investment if you haven’t done the work they’re terrifying how do you manage expectations for investors when they say you know gold prices are alltime high so that means my stock must be going high because I’m in invested in a gold company how you know how do we create the narrative to look at more than just that well one of the things that you try to do politely is if they’re in the exploration business say understand these people are looking for gold they don’t have any yet if the price of something that you don’t have any of goes up it shouldn’t matter much to the intrinsic value of your investment you have to ground people uh in reality I I think the other thing is that what you are interested in is shaped by the macro but how you make money is shaped by the micro you make money at the firm level you don’t make money with big predictions the second thing about that your audience really needs to understand is if you are uh making an investment based on a long-term Trend don’t have a short-term strategy right if you think that the copper price could double in five years don’t have a three-week Outlook don’t have a three-month Outlook don’t have trauma holding a copper stock over a long weekend when when these evaluations for a lot of these juniors are at the levels that they are are you anticipating a lot of m&a from the Biggers absolutely positively a lot of m&a bigger companies a properly structured merger right is a wonderful thing you reduce General and administrative expense relative to assets under management because you don’t need duplicate management you offer up more opportunity sets for the allocation of capital with a broader base larger companies have greater trading liquidity which means generally higher share prices which means they have a lower cost of capital in a capital intensive business very very very virtuous set of circumstances talk to me about the future I mean we had noi prins on stage yesterday she she was great we’re going to have her on our show uh you know there’s a lot of talk about this Rare Earth medals and the transition this green and energy trans transition that’s taking place and it doesn’t mean that you know obviously silver is going to be around a long time but some of these rare earth metals what’s the future look like for this business I think Rare Earth Rare Earth business is extremely uh the Outlook is extremely bright I would caution investors that it is devilishly difficult to understand mercifully I’ve been trying to understand it for 30 years and while I still don’t I know who does and so I’m able to make a series of phone calls to decipher you know it’s difficult even to pronounce the names of individual Rare Earth companies on a very broad scale the applications are increasing rapidly and rare Earths seem to be uh beginning to be understood in a geopolitical context we haven’t looked for rare Earths because for 30 years they’re not rare we haven’t looked for them because the Chinese have produced them so efficiently and cheaply that nobody could compete with them two things on that the first is that there does seem to be some discussion of geopolitical rather than economic allocation of rare Earths so there are implications for companies in Supply chains that don’t include China around Rare Earth but the second thing is that the Chinese efficiency in rare Earths has come with devastating environmental consequences in Far Western China and the Chinese themselves are no longer willing to tolerate that so the price of rare earth is going to increase not merely because of geopolitical competition but rather because the Chinese are beginning to employ Western environmental standards in the extraction of rare Earths and that’s the game changer that most people don’t recognize so is the west then in this fight I mean China’s kind of taken over that battle but governments are noticing governments are absolutely noticing and rare Earths aren’t rare uh any place that you have old Aran rocks read Northern Canada uh pegmatites uh we know the geological environments that rare Earths exist in we haven’t looked for them because they are too cheap that’s over I mean that’s over we have at this conference meteoric resources in Australian listed junor with an enormous Rare Earth Discovery in Brazil this isn’t the last people need to understand with rare Earths you need to know about the composition that is to say which of the Rare Earth elements you have and you need to learn about the Metallurgy and extraction which is devilishly difficult but there are some truisms across deposits irrespective of commodity which is to say that bigger is better and grade is King uh understand those worry less uh I would say about where gigantic deposits are and worry more about getting gigantic deposits in your portfolio you know you turn on the cable news nowadays it’s filled with when is the Fed going to cut what when’s the interest R when is this going to happen how do you bust through the narrative and really invest in a bare Market which we’re seeing now well bare markets are what I like the most uh I’ve learned in uh commodity style investing and which is most of what I do that you are either a contrarian or you’re going to be a victim uh if you’re a contrarian if you’re in a market the side of favor say uranium in 2022 when I used to pound the pulpit at Kito uh it’s difficult to explain to people that they are better off buying something when it’s out of favor and cheap than they are after the narra has been proven by price for me it involves 45 years of having that pounded into my head by exposure to reality um bare markets are the financial term that people would otherwise used for sales why would you buy a winter coat uh for $500 when you could buy it for $250 when a coat’s marked off by 50% people are excited when a stock is marked off by 50% people are horrified all they have to do is give their head a shake buy stocks the way they buy coats so are we at that loan now I mean have everyone Tak a haircut we’re well off the bottom we’re well off well off the bottom how do management deal with these evaluations I mean cost of capital is so expensive you don’t want to blow up your share structure what’s the deal here going to guys like you I would argue that the cost of capital isn’t expensive I would argue that the mining industry is over not underfunded interesting I would argue that of the 3,000 Junior companies in the world listed around around the world not just Canada probably 450 are viable uh therefore 2450 are unviable the fact that they can raise Capital At Any Price means that capital is too broadly available I have found despite this alleged Capital shortage I’ve probably participated in 35 financings in the last two years 28 29 were over subscribed and I got cut back so for high high quality companies for good people capital’s very very very available uh I I I’m going to offend perhaps some of your advertisers but for the lame the Halt and the blind Capital shouldn’t be available yeah that’s an interesting way of putting it uh to say the least okay talk to me then about the strategy going forward in terms of what you’re going to be doing here next year at the show well the exhibitors here uh are always companies that are in my portfolio we don’t let somebody on the floor of this conference in a public company if we don’t own them uh sadly there’s no guarantee that because I own it the share price goes up but there is a guarantee that the uh process is honest uh I believe that the gold bull market continues I believe that we’re coming into the time in the gold bull market where silver begins to outpace Gold so all other things being equal uh you may see an increasing numbers an example of silver Juniors here but I really believe that size is what matters so what you’re likely to see here as opposed to other country uh other conferences is very large deposits in Commodities that may not be in favor at this conference uh deposits that where the uh the value of recoverable reserves and resources exceeds $20 billion it might be that be rutile or graphite uh or copper or zinc but the overall theme is that size Matters what you’ll see at my conference too is that I have a different view of political risk than most people I believe every jurisdiction is lousy that there are no good jurisdictions I would rather have a great deposit in a tier three country than a tier three deposit in what is perceived to be a great country so you will see see more Geographic uh uh dispersal and you’ll see more Frontier and Emerging Markets represented is that just oversight regulatory challenges more costs added on from governments is that I think a lot of it has to do with the fact that those Nations have been much less thoroughly prospected and explored when I look around the world at the countries that have treated me the best as an investor from the simple lens of cash in cash out the country that stands out around the world to me the best has been Congo hard country uh the worst cash in cash out and aggravation was the People’s Republic of California uh by far and people would suggest that California is riskless it’s riskless to me because I won’t invest there people talk about permitting regimes uh the resolution copper deposit controlled by Boo and by Rio and BHP in Arizona allegedly a tier one mining jurisdiction has been stuck in the permiting morest for 26 years and people tell me to down is risky well said uh before I let you go cuz obviously you’re a busy man at this show you know we had Keith NM on speaking of somebody that you know well uh they have their own mint as it seems but he was talking more about the institutional money lacking in this sector as opposed to the retail well I think that’s true uh the general not the generalist the specific gold investor uh the activist has had a very difficult time they’ve had a difficult time for two reasons the sector has had difficult performance really since 198 too relative to other sectors I mean we had the period 2000 to 2010 which was good but other sectors were good too the other thing is that the uh active uh gold managers haven’t generally beat the indexes of the ETFs uh investors out there are saying why should I pay 200 basis points to underperform a product that I can buy for 30 basis points very valid question now for myself in the large companies I don’t buy the ETFs either what I believe is that you buy the five or six best companies in the sector to gather to to grab data in a bull market I’m willing to underperform the index a bit if I can drisk it if I can buy the franos the agnos uh the wheatens the highest quality highest margin companies that are the best Capital allocators Ironically in a RI roaring bull market the more marginal companies do better I’d rather at age 71 for the beta part of my portfolio give up a bit of The Upside in return for trading away all the downside risk well said all right Rick rule appreciate it thanks again for having us here thank you for your support of the conference it means a lot to me of course I’m Jeremy Z for all of us here at Kito news thank you for watching we’ll be here all week with more great content to come stay tuned Kitco News special coverage of the rule Symposium natural resource investing is brought to you by G mining Ventures [Music]

Jeremy Szafron, Anchor at Kitco News, interviews Rick Rule at the Rick Rule Symposium in Boca Raton, Florida. Rule shares his insights on the current mining environment, investment strategies in bear markets, and the future of rare earth metals. He also delves into the critical importance of due diligence, the role of management in mining investments, and the growing trend of mergers and acquisitions. Additionally, Rule explores the evolving dynamics of silver in the commodities market and provides valuable advice for both new and seasoned investors. This conversation is packed with actionable insights and perspectives essential for anyone interested in the commodities and mining sectors.

Coverage of the Rick Rule Symposium 2024 is sponsored by G Mining Ventures (https://gmin.gold/en-US)

Follow Jeremy Szafron on X: @JeremySzafron (https://twitter.com/JeremySzafron)
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00:00 – Introduction
01:10 – Importance of Due Diligence in Mining
02:45 – Avoiding Poor Investments
04:30 – Current Trends in Gold and Silver
05:50 – Investment Advice for Commodities
07:20 – Volatility and Long-Term Strategy
08:40 – Mergers and Acquisitions in Mining
10:05 – Future of Rare Earth Metals
12:00 – Investment Strategies in Bear Markets
13:30 – The Role of Management in Mining
15:00 – Understanding Political Risks in Mining
16:30 – Advice for New Investors

#Gold #Silver #Mining #RickRule #KitcoNews #InvestmentStrategies #Commodities #RareEarthMetals #PreciousMetals #MergersAndAcquisitions #BearMarket #InvestmentAdvice #BocaRaton #NaturalResourceInvesting #MarketAnalysis #EconomicOutlook #FinancialInsights #InvestorEducation #LongTermInvesting #ResourceStocks
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