Sprott monthly market update: How to identify a worthy private placement investment
When making private placement investments, it's imperative to understand what the company will do with the money. You are basically providing catalytic capital to an unanswered question, and Rick Rule has found that 80% of issuers fail to sufficiently answer what that question is. This takes them out of the picture as a smart investment.
The funding an investors provides should fundamentally change the affairs of the company, and you should get a warrant which is a right to contribute more capital at a fixed price over a fixed period of time. In this interview, Rick gives great advice on the right questions to ask including what is the thesis, what is the process proposed to test the thesis, and the probability of each outcome.
During his 40 years in mining, Rick has learned that pure silver equities ultimately outperform other precious metals equities. Most silver is produced from byproducts, not primary silver, so finding a pure play is hampered by scarcity. The silver price should run further than gold, and silver equities will outperform the metal. There's a small chance gold will go down if confidence in government, central banks and the economy goes up.
We are seeing a few weeks of rest in the junior mining space, and many are predicting a massive rally this fall. Markets move up when there are more buyers than sellers, and down when the opposite occurs. Both the metals, and mining equities markets are extremely well bid. If there is a break in the market it's likely to be on the upside, not the downside.
Watch Interview with Rick Rule
Talking points from this week's interview:
- Current generation is inept at managing collective and political affairs
- Lack of public confidence is likely to drive precious metals much higher
- Cleaning up the mess is not likely to be completed in this generation
- Opportunities are abundant at high quality investment events
- Ivanhoe Mines is a company that may prove to be a 20 or 50 bagger
Rick Rule began his career in the securities business in 1974.. He is a leading investor specializing in mining, energy, water, forest products and agriculture. Rick founded California-based Global Resource Investments, Ltd., which grew into a much larger organization with significant affiliated companies. As Director, President, and Chief Executive Officer of Sprott US Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.