Is a rout in junior mining equities still coming? Rick Rule

Though Rick was up in Toronto this week for board meetings, we connected for a quick call on investment strategy.

Are you still keeping the powder dry for private placements?

Yes, I am. You can make good money in after-market securities, but extraordinary money is made by funding exploration success in private placements where you also obtain warrants. Although we believe a rising tide will float all ships, we are particularly attracted to private placement propositions that add a warrant into the investment mix.

Do you think that the companies are going to come around to our terms?

The issuers have been very restrained in the last 18 months in terms of accepting capital at the rates that were offered by the capital markets. We would expect that more issuers would be forced to come to market over the next 12 months, both as a consequence of running out of their existing capital and also because the market will expect them to develop their project portfolio — rather than to just survive.

What about the idea of having a bear market rout, where half or more of the ‘juniors’ go out of business or are delisted? Is that still coming?    

Speculators need to be cognizant of the fact that 50 or 60 percent of the companies in the junior resource sector are non-viable. In a rational market, the bottom half of the issuers should cease to exist. The last
period of dramatic culling that the industry enjoyed was in 1991 and 1992, and the industry desperately needs a repeat, although that repeat may not be convenient for speculators that didn’t do qualitative research on their holdings.

What about what you’re doing with your personal assets? 

I think that in terms of speculation, it’s important to say that all of my personal assets go into the exploration investment partnership funds, managed by me, or into the natural resource lending or income partnerships. As a consequence they are largely involved in privately-negotiated debt or equity transactions with public and private junior resource companies. Virtually all of my speculative capital, I should say.

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