Investment Opportunities: Rick Rule emphasizes the potential in conventional oil and gas, suggesting that major companies like Exxon Mobil are undervalued and present significant investment opportunities.
Government Influence: Rule discusses the impact of government policies on resource sectors, noting that governments often target profitable industries like coal and oil for revenue, which can affect investment strategies.
Rare Earths and Geopolitics: The podcast highlights the strategic importance of rare earths and the geopolitical dynamics, particularly the US and China's efforts to secure supply chains, which could influence market trends.
Uranium Market Dynamics: Rule explains the unique structure of the uranium market, where long-term contracts provide price and volume certainty, making it an attractive investment despite past volatility.
Mining Sector Challenges: The conversation touches on the challenges facing the mining industry, including a lack of young talent and the need for innovative financing solutions like streaming and royalties.
Commodity Insights: Various commodities are discussed, with Rule expressing cautious optimism about nickel and tin, while predicting further challenges for lithium and vanadium.
Precious Metals Outlook: Rule suggests that while silver has had a good run, its price movements are closely tied to broader precious metals bull markets, which are driven by generalist investor interest.
Currency and Economic Perspectives: He shares a contrarian view on the US dollar, suggesting it might be overhated in the short term, but sees long-term devaluation as a significant risk, potentially benefiting gold prices.
Transcript
The government sees their job is to steal. What they exist for is to take money from one constituency and deliver it to constituencies that vote for them. So the idea that the government will penalize the oil and gas business is true. But when the margin is there, they'll penalize the coal business, the gold the gold business or or any other business. All righty, Rick Rule. It's been a year, a very eventful year in in markets. So, we're excited to to have you back on to to pick your brain about what's what's hated, what's unloved, what people aren't talking about enough, and where the the sort of opportunities are in in the resource world. So, let's start the conversation right there. What what is the sort of part of the markets that you find most neglected at the moment? >> I would say conventional oil and gas. Um, it's a very very good business. It's a big It's a business that, you know, the big thinkers, Greta Thornberg and people like that uh have suggested aren't going to exist in 2032 or whatever it is. Um, you know, when securities analysts do net present values on oil and gas companies, they tend to ignore the tail. They tend to believe that they aren't going to enjoy any cash flow after 2032 2033. I'm pretty convinced that for the balance of your life, never mind mine, that oil and gas is going to be a pretty robust business. So if I had to if I had to put my finger on the biggest opportunity on a global basis, it's certainly oil and gas. I would suggest that even the biggest of the big big and the best of the best like Exxon Mobile are probably selling at a 50% discount to their net present value if you understand that those net present values are very long cash flow curves and the tail the net present value tail is extremely fat. So that would probably be the one um that attracts me the most. It's also a very good business. You know, in the mining business, uh, you know, we all pray for return of capital employed and the oil and gas guys talk about return on capital employed. It's a very, very different point of view. It's a better business. Not meaning to insult miners, of course, but uh, you understand the point there. Uh, >> I always find that fascinating, Rick, because e Exxon, you know, is the descendant of like Standard Oil, a company that started well over 150 years ago. and it goes through es and flows of consolidation and and separation and recently we have seen a number of big deals and consolidation. So when when you think about making that bet do you think about like you say going for the Exxons of the world or going going down the curve and and buyouts to come? You know, when I was a broker, uh, I used to encourage clients who didn't have resource portfolios to buy market beta to start their portfolios with the best of the best. Uh and then after they had accomplished that, after they had accomplished starting a for a portfolio in an unloved sector, then I would take them down the quality trail, take more risk in hopes of greater reward. But what you learn in resource businesses is that when the sector returns to favor, just the beta, defining the beta as the extent to which that sector outperforms the broad market is often incredible. And too often people have the strategy right, but they screw up the tactics. You know, they buy some package of nothing nowhere juniors uh thinking that because the gold price ran, those juniors are going to run, forgetting those juniors don't have any damn gold, you know. And so when I constructed oil and gas portfolios for people, I would begin by buying the best of the best by owning the beta uh and not exposing the customer to any operational risk whatsoever. And then to the extent that the client uh exhibited some taste for volatility, some patience uh and some willingness to learn uh then we would take the client down the quality trail looking for more alpha. And that's still the same today. If I was constructing an oil uh an oil portfolio today, I would start with Exxon. >> And and how do you think about the the sort of evolving role in in governments here? because I I totally hear hear the bet, but I I can't help but think about what we saw in the coal industry here in in Queensland recently and you know, for for those unfamiliar, just a massive jacking up of the royalty rates after after the fact, after the investments have been made. So, does that perhaps tweak how you think about this bet jurisdictionally? >> Yeah, but that's the same for all commodities. Um, at the risk of sounding too American, uh, and certainly this is a reflection on American politics, government sees their job is to steal, uh, what they exist for is to take money from one constituency and deliver it to constituencies that vote for them. And so the idea that the government will penalize the oil and gas business is true, but when the margin is there, they'll penalize the coal business, the gold the gold business or or any other business. Uh their job, they would say their job is to equalize or transfer wealth. I would suggest to you their job is to steal. You'll notice that governments aren't particularly a hindrance uh in a sector where the selling price of the product is below the cost of production. They're smart enough to know that you can't steal nothing. But when an industry starts to deliver the free cash flow that the Australian coal industry does, there was a famous American bank robber, I forget the guy's name, Willie Sutton, I think it was, and a guy said, "Well, so Mr. Sutton, why do you rob banks? He said, 'Well, because that's where the money is, and I think that's the way the governments think. Um, they don't pay any attention to a sector uh until there's some lowhanging fat fruit uh that they can distribute to their constituents and then of course they go to steal it. >> We we pray of these periods of super profits in commodities where, you know, commodity prices randomly flex up for one year in every 10. And um unfortunately now that comes with the risk that you'll never have a super profit again. >> And you know it's easy to steal from the coal business because they're hated. >> Oh yeah. >> You know uh they do bad things. They put smoke in the air and all that kind of stuff. And listen, I'm um you know I'm all for reducing the amount of delletterious material piped into the air and pumped into the water and stuff. Here's a couple things that maybe the Australian politicians should reflect on. One, uh, around the world when people talk about carbon, uh, emerging in frontier markets suggest that carbon quotas shouldn't be established nationally, but rather per capita. We don't like that in the west because we don't have too many capitas. Uh, the other thing they should suggest is that historical carbon loadings matter. uh and they believe that the big economies that contributed all the carbon pollution prior to 10 years ago uh should be penalized for that. Uh which is to say Australian voters need to understand that if you're going to equalize the cost of carbon around the world on a per capita basis, uh Australians are going to really be punished for their past successes. Uh the other side of the coal trade that makes me laugh uh is that people say it's a declining business. They say it's going the way of the dodo. The problem with that is that the biggest year on history for coal demand was 2024. It's set to be eclipsed in 2025. So those people are ignoring math. The government wasn't, of course. They decided to steal where the money was. Um but the other thing is people say, well the f you know the future is what you have to look at. the future. The future is alternative energy. I think I noted once talking to you guys a year or two years ago, and these are slightly old statistics, but humankind has spent about $5 trillion now on alternative energies, and we've reduced the energy market share of fossil fuels from a high of 83% 40 years ago to a low of 81% today. A $5 trillion investment has reduced the market share of fossil fuels by two% in 40 years. That's an inconvenient truth for certain people. Not, by the way, for the politicians who've decided to steal money from the Queensland coal shareholders. Uh I'm afraid that cash cow will enrich them for years to come, but others need to consider that. >> Yeah. Yeah. Yeah, I mean the the the flip side of that one as well is that total energy demand around the world keeps keeps growing. So while whilst just 2% the the pie gets bigger and bigger there. While we're on the the topic of government and specifically the the US government as we touched on earlier, I can't help but ask about the the recent actions in the the rare earths world. I think this is pretty monumental news that we've seen come out come out of the states and it's going to be replicated here in Australia and I suspect in in other parts of the world as well. How did you kind of digest that all to to start with Rick? >> Rick's talking about rare earth. Now there's a a rare earth deposit in Malawi that is um gonna literally going to come into construction now as a result of the entire dynamic being underwritten by Luca and the Australian government recently that deposit Kakang Gundai I think it is Malawi delegates from there and Lindian the operator of that project all going to be at Africa down under mate. >> So you're going to want to get up to speed on Africa downunder which is kicking off next week September 3rd to September 5th. >> We're going to be there this time next week. >> We are. We're gonna be there. Come join us. Tickets are in the show notes. Hear Dom tell you all about it right now. >> You know, we hear a lot of uh misconceptions and and opinions about Africa a lot of the time from people who who don't actually uh ever travel to Africa. So it's, you know, it literally is straight from the source in this regard. So Malawi, for instance, we can hear from the minister there about how they're trying to establish uh a mining industry. we have uh the deputy minister from South Africa, you know, such a complicated convoluted history of mining, but they are really trying to um redraw the script there. Uh so it'll be interesting to hear from her. The the Ghana Minister Ghana has been in the news a lot recently with a few battles over gold fields and a few other things. Um we'll be able to hear from him firsthand what you know what their what their approach is to new foreign investment. And then other exciting ones that we haven't heard a lot about Egypt, you know, Angle Gold have just paid $2 billion for the Sakari mine. Uh it's the only mine in Egypt, huge 450,000 ounce producer. Uh but they've never really seen a lot of foreign investment other than that, not even exploration. So the Egyptian minister's coming, which you know, he's coming to Western Australia to try and c new investors and find explorers and establish companies to come and invest in their country. So, you know, you can get a real inside running whether you're looking to pick up projects there yourself or, you know, buy equities in in these these emerging companies who are prepared to to take that high-risk approach, then you're going to get the inside track on on which countries are serious about attracting investment and which are perhaps uh not so serious. >> Got to get your tickets. >> Well, uh, as a citizen, as a taxpayer, I think it's disgusting. Um, as a speculator, uh, I guess it's my job if they're going to steal from me to steal some back. Uh I I note not so much in the rare earths because the United States other than Mountain Pass which isn't really a mine uh in the uranium business in the United States. I went from being absolutely reviled 5 years ago from being somebody who speculated in Hiroshima Nagasaki and Three-Mile Island to now these morons want to subsidize me. And I have to say I felt cleaner when I was reviled. Uh I think what you say is true. I think industrial policy in the west has become afraid enough, particularly the Chinese, and the threat by the Chinese to weaponize access to rare earths, that they will spend an awful lot of money to establish a um China secure um supply chain. And I I think what you see in rare earths, you're going to see in a lot of different places. I think it's unfortunate personally. Um, I want no government nexus in any part of my life, but in particular in my wallet, but given that it's going to occur, uh, I'm sort of duty bound to take the money. >> And, and how do you think more broadly about that that anti-China or kind of independence supply lines? Because like you say, it's not it's not just rare earths. It's going to happen in every single I mean we're speaking about it in in copper as well with with projects and and tariffs as as these sorts of things. So are there are there other sort of thoughts that come to mind apart from the the sheer concern of the the government plundering money there? >> As you can gather from my earlier response, um I'm not much of a politician. I don't know much about politics, but I've done a lot of business in China. uh and I would prefer a circumstance where we were cooperative with them. Um my experience in China has been largely good. I'm not trying to say it's been all good, but there's no place on the planet where my experience has been largely good. My preference would be although we know we're going to compete with each other, that we understand that we need to cooperate too and find avenues of cooperation. uh that's probably not very popular with jingoistic voters uh who would, you know, prefer to have someone of a different hue that they could hate. Uh by the way, uh on both sides of the Pacific, uh the Chinese themselves are not short of jingoistic morons. uh despite my preference uh what the Chinese are doing today uh which is to say utilizing their economic surplus uh unonymity of purpose uh foreign policy to secure their supply chains is exactly what the US did in the 1950s and 1960s. It's exactly what Europe did in the 1970s, what Japan did in the 1980s. We in the United States resent the fact that we have a competitor. Uh we have a competitor that seems to be more predisposed to education, more predisposed to savings, uh less predisposed to whatever it is that America's predisposed to. So it makes perfect sense to me that we're getting out competed. on on that point, Rick, to to tie it back to the rare earth in particular. I think 12 months ago, you said that that easy money in uranium had already been made. Has the easy money in rare earths already been made? >> I don't think so. Um, for the simple reason that in the uranium side, we had a fair number of reasonably good deposits that were delineated as far back as pre Fukushima. And you could see a deposit. Well, boss is a great example. Uh you could see a deposit that had been delineated that you understood you understood the path to prosperity. But before they had a chance to have a problem, the stock was up by five or 600%. Ur uranium the easy money for me and by the way I I think the big money is likely ahead of us, but we can talk about that later. The easy money is when the sector passed from being hated to being tolerated. Uh as recently as a year ago, uh you'd go online and these people who had been ridiculous bulls on uranium four or five years ago, people who had uranium as part of their internet handle were bemoning the day that they ever learned to spell uranium and were being beginning to tout, you know, some crypto or something like that. The hate that uranium encountered as a consequence of the stupidity of the speculators who was com who were commentating was unbelievable. And it occurred to me that all uranium had to do was become unhated. And that's what happened. >> And and your point on the the the big money there, how do you see that playing out? >> Oh, listen. Uh that's really exciting. Well, no, it isn't exciting. That's well it's an it's exciting to people who think and invest. Um you know not to the rhetoric type. The structure of the uranium market is changing and it's changing a lot. Uh right now uranium is the only commodity in the world where producers and consumers uh can sign contracts of 5 years duration, 10 years duration, 15 years duration that specify price and volume. What that means is that if you're a uranium developer, you can know with some certainty how much uranium you're going to sell and who you're going to sell it to. And for how much? And to the extent that you are a uranium junior who had no hope of financing your deposit into production, you had to sell it and you had to sell it to a fairly narrow range of buyers. Now uh you can do two things. You can sign a fixedpric contract to build the mine with Westinghouse Kamico and you can sell contracts so that you can specify the price and volume 15 years out with investment grade counterparties. Tokyo Electric Power, China General Nuclear, Southern Companies. There is no other resource sector on the planet that has certainty as to price and terms over time with credit grade counterparties. Mercifully [Laughter] for this, you know, quiet old lender Rick Rule uh or quiet old speculator Rick Rule, not one investor in a thousand has cared about the implications of price and volume certainty over time. Uh it's interesting this slavish focus on the spot market. Most days the spat physical uranium trust does more dollar volume than the spot uranium market is. The spat market has become the spot market. The tail is truly wagging the dog and the volumes are ridiculously low. Uh but people pay attention to it because it's an easy to grasp or or easy to obtain data point. useless uh except uh you know to sell newsletters or get speculative pulses going. Uh it really isn't an indication of the market which its volatility will tell you and its volume will tell you if nothing else does. But speculators pay slavish attention to it a factoid sort of. So, so your what what you're talking about with the the price and volume certainty is effectively like an infra an infrastructure akin funding dynamic that can can transform the capital flow into the sector. >> Yeah, exactly. Um, as a lender, uranium is the only subject on the the only commodity on the planet where if the contracts are set up, the lender knows the volume of material that can be sold and the price it will be sold for. in every commodity-based construction loan I've ever made in my life, and I've made billions. I've done it with my fingers crossed because I had no earthly idea two years from now what the selling price of the commodity would be or who who my minor or oil company would sell it to. uh there is a startling degree of certainty uh around price and volume in the uranium business that uh if the terms are disclosed to the lenders uh should give the lender a lot of comfort relative to other businesses and should ultimately reduce uh the cost of capital to particularly below investment grade uranium developers. I would suspect that the certainty too over the next five years will be comfortable to securities analysts. You know, if you're a lazy old securities analyst, say Rick Rule, uh, and you're trying to do a net present value calculation on a uranium developer, but you don't know how much they can sell or for what price. You know, uh, that discounted net present value analysis becomes voodoo. It turns out over the last 50 years, most of what I've done has been voodoo. Uh, and the idea that uh, it becomes less voodoo is very attractive to me. >> You know, who's a very big Rick Raw fan? He told me, >> tell me. >> Uh, Joel. Joel. So, we've been talking about Jason O, who COO at Axis Mineral Services, Ken Crush Rocks. But Joel Joel, CEO there, mate. He'll hate the fact I'm talking about him. Shout out Joel. Um, I know he's a big Rick Rule fan. He'll be listen to this one. So, we've got we we've got to talk about We've got to talk we've got to put Joel next to Rick Rule. >> We do. >> And talk about the people mineral services. >> What do they do, mate? >> Mate, they crush big rocks into small rocks. That's the one thing you've just got to get into your mind out there. If you need to crush big rocks into small ones, Axis Mineral Services are the company. They have the track record as well, Trav. I know you know this. They've worked with all the top caliber mining operations in the gold fields and they're expanding. >> They they do crush big rocks into little rocks. They've got an ability to sort out small rocks from each other. >> They they they can now actually give you an entire front end of your circuit. The plant on a BO model, if there's a problem like your your rocks are too hard, well, guess what? They can bring in dynam dynamic innovative solutions. Like nothing is too foreign for these guys. I'm even talking about like HPGR like that's a possibility all thanks to the fact that Axis Mineral Services they've now got this enhanced capability. They're part of the Robex Construction Group and what does that mean? Things are possible that have never been done before. >> They've got engineering fire firepower, financial firepower and they have a team that just gets it done. Can't understate this one enough mate. All you have to do is bring your problem to them and they will serve the solution to you on a platter. >> Mate, you see the team buyin they've got. So they put they put up a little snippet of of money of mine and there were like eight people that all shared that. Now that is that is buyin. That's a team with camaraderie that that has real buy into this business. >> That's a team you'd want to hire for a job. >> You know what? So get in touch with Axis Mineral Services. >> Go Axis. There's there's a couple added details that that make it all quite quite interesting. So firstly, a lot of these restart projects that we we speak about. You mentioned Boss Paladin. Another one that comes to mind have seen sort of numerous stumbles in in getting to that name plate >> number and then there seems to be a real apprehension in the market from the investor perspective to to sign up to that price guarantee because that that's you know apparently locking away the the magical upside. We see it more in the in the gold market where there's this massive trend to be an unhedged gold miner. Now, >> investors want the volatility, mate. Don't take that away from >> They're there for the commodity. So, how do you take on board those those two sort of notes? >> You know what? I'm an old man. Uh you can have some of my upside if you take away my downside. I'm really good with up. >> Oh, no. These uranium companies will still give you downside. I promise you that. >> I mean, you know, we we pick on uranium companies not not attaining name plate capacity. I've been around the gold business for 50 years. And to be honest with you, it's much more frequent than not. Uh you know, when guys announce economic completion, you'll notice it often isn't two or three quarters uh until the operation shakes in and they reach name plate capacity. It seems that economic completion, name plate capacity are very different things. Oh, >> my f my favorite is Yeah. when they they announce commercial production, but but it never made money and then it go and then it goes broke. Yeah. What was commercial like? you had a day where it made money like I don't know. >> So, you know, I take what you say about the go the uranium industry. uh there's a relatively small number of data points but I suspect that what you talk about is ubiquous and you know not I mean frankly not just in mining if if the three of us started a carpet mill you know we had some big building and in the front comes wool and cotton and oil whatever goes into a carpet what comes out the back to begin with isn't carpet you know it takes a way to shake it takes a while to shake these big plants in irrespective of what they're making sadly It it it brings me to another kind of question as well. Get thinking about getting these minds online. Rick, you you know, you you're in the the the loan making world as well. How do you think about the the dir of natural resource institutions, funds specifically set up to invest? You know, we see it here in Australia, there's less and less of them. How how do you think about that and and what that does to future demand and supply? Well, as a check writer, I think it's a wonderful thing. Uh the idea that I have fewer competitors, especially young smart ones, seems to me to be a very good thing. Uh for the industry, of course, is not a good thing. Uh in truth, uh I think the biggest challenge the industry faces, other than rapacious governments, uh is the der of young people coming into the sector. Uh, I look at the mining industry and it isn't just because of my age, but the people I see, it's very much like I'm looking in the mirror. You know, old fat bald white guys. Uh, we've been there for 50 years. We have experience, but we don't have legs anymore. uh and we meaning the mining industry, we're not we're not going to be able to fill the skills gap. We're not going to be able to fill it at the rock face. We're not going to be able to fill it in the mill. We're not going to be able to fill it in the boardroom. That's going to be a challenge for us. It will take care of itself over time. You know, markets always work. And if you have a shortage of people, uh, what you have to do for a while, like we had to do in the early part of the 1970s when mercifully I came into the market, is you have to pay those people too much. Uh, which is a good circumstance. That's how we that's how we cured this the shortage in the early part of the decade and 70s and it's how we'll do it again. But it's going to be a challenge. What one of the other market-based iterations we've seen on on that financing front is the the move towards streaming as well as royalties becoming ever kind of bigger. What do you make of this kind of presence and and do you think there's a natural band that we we get close to hitting upon there? >> No, I think it's strangely rational. Uh I think that the speculators in particular, no the investors too, uh are willing to pay more for precious metals cash flow isolated in a royalty or stream. Uh what that means is that uh when I'm competing with Randy Smallwood over at Weeden and I'm a lender, uh he knows that that cash flow to him is going to be valued at 16 or 17 times cash flow. Uh if I'm looking for a 15% internal rate of return as a lender, he's going to beat me all day long as he should. He's a lowerc cost provider of capital because the capital markets are give it will give it to him. Particularly cash flow that comes from a you know lead zinc operation, silver cash flow that comes from a lead zinc operation or gold cash flow that comes from a copper operation. The equities markets will give that cash flow in a copper rapper six times cash flow whereas they'll give it 15 or 16 times cash flow in a streaming um rapper. And a lot of people uh have said to me that they think that the big streaming deals are over, that the big royalty deals are over. I heard that at my conference in Boca Raton. Uh and that's Hokum. Uh the copper business in particular probably in 10 years faces between 100 and $150 billion in front-end capital expense. And to the extent that they can sell the gold silver byproduct cash flow from that copper production at some number like 14 or 15 times cash flow uh and use that to obviate uh more equity when they're selling at fairly low multiples of cash flow themselves uh or premium price debt they're be well advised to do that. The second thing that's happening is that a lot of host governments in frontier markets would like to own larger pieces of their resource industry, politically palatable, all that kind of stuff, but they don't have any money uh and they're constrained uh by arbitration agreements from stealing it. So, they have to buy it. Uh buying something when you don't have any money is a bit of a challenge. And what I suspect is going to happen is that those companies will jawbone with the companies, those countries, pardon me, will jawbone with the companies and they will finance the companies take by selling a stream. Uh I believe that we haven't seen the biggest streaming or the biggest royalty deals that we're going to see. I believe that the next 10 years we'll see literally multibillion dollar streaming deals and perhaps royalty deals uh increasingly host governments uh are receiving royalties some of them extraordinarily generous on gold production uh but somehow managing to squander all the money uh old money all gone send new money and I suspect that one of the ways that they will get new money is that they'll sell those royalties to the royalty companies. So I believe that the next 10 years for the royalty and streaming business will be even better than the last 20 have been uh which have been pretty good. So, so take take for example uh Panama who I think I think Panama has a has a phenomenal royalty over Cobra Panama and you suspect that like it's not beyond the realm of possibility that the country Panama will sell their royalty over that asset to the likes of Franco. >> Yeah. part of the royalty. Uh, one way that they might reach a fiscal agreement with Panama, who wants more money, is to give Panama some upside on the gold price or the copper price. That's called a stream. And Panama then can turn that into cash. Understand that the president of Panama, despite whatever pretenses he might have, doesn't care very much what happens to the government till after he's out of office. he wants to spend money now. So the construction of a 20-year stream and then the monetization of the stream in this guy's term is extremely attractive to him and as a consequence I think will resolve a lot of problems. >> Watching that one closely. Yeah. And and but I suppose like you know first first quantum they've they've utilized streaming um in in a in in a more forthcoming way than than most miners out there more most recently in relation to um their their Zambian copper assets where they they were pretty advanced I believe to to sell down a minority stake to either Minara or Japanese trading house. Neither of those eventuated but they they've opted for streaming instead. I I can tell you with certainty that every big mining company in the world, particularly in the copper business, is looking at streaming transactions to finance construction. There are no exceptions [Music] >> that they might have a an added competitor with the with the trend of gold companies coming in and and looking at at copper assets as well. Do you do you think that gets larger and larger with these these big gold names looking at uh copper assets individually or copper companies for takeovers? >> I think that'll depend on uh how Beric manages regard uh Beric has done better in the market of late simply because their gold margins have been increasing. But the market doesn't like, I don't think, Beric migrating to the copper business. I've always been sort of Catholic myself as to where my cash flow comes from. My apologies to Catholics. Um, you know, to me, cash is cash and I'd take it from sand and gravel, but I suspect that uh gold companies that are perceived as being too copper dependent uh will suffer a lower cash flow multiple. But time will tell if Bareric if Bareric makes a huge success of Reiko. Uh if the market accepts uh that cash flow should it occur uh at a reasonable multiple uh I think that's probably a good avenue of growth for the gold mining companies. They need to be careful because traditionally the copper miners have been much more efficient miners. Um I think it would be probably easier for a copper miner to come and operate successfully in the gold space than vice versa. Uh the copper miners have had a lower, pardon me, a higher cost of capital than the gold miners have for a long time. Uh they've had even more price volatility than the gold miners have had for a very long time. They're pretty good miners uh in comparison. Maybe not good miners as an example compared to Agniko Eagle, but they're pretty good miners. Uh, and I think the gold companies might find that to be a hugely competitive league should they choose to go down that route. >> Should should they choose to go down that route? Uh, or should should the cash flow at Rico occur? What how are you thinking about the um the potential that a that a barrack breakup could pan out over the next next couple of years like a you know >> probably be a good thing. Um >> uh but I mean there was a time 40 years ago when Bristol listened to me. That was a long time ago. He hasn't needed a check from Rick for four decades. So uh >> he's finally signaled that his his departure is is um coming in a in a couple of years. They've started a search for a replacement and and the company famously, you know, doesn't have an obvious next Bristo. Yep. >> Yep. Um I mean there's there's something to be said for keeping the company together in the sense that size itself increasingly is a determinant of trading volume uh and share price and hence cost of capital on the other hand if the capital markets can show Bristo or or show Bristo's successor that uh the value of the sum of the parts is substantially greater than the price of the whole then the board has to listen because it is a cost of capital gain. Uh Beric certainly gets penalized as an example for their West African assets despite the success of those assets and they seem to attract a a premium price for the Northern Nevada assets despite the failure of the Northern Nevada assets for several years to make make their AI AISC targets. Um so I mean perhaps uh perhaps a breakup is in the cards. I don't know. >> Evolutions. Jake Klene down here in Australia, Rick, sort of said a while ago that that eight feels like a a natural number of assets for a for a mining company to have or an upper limit of of assets for a mining company to have. What What do you kind of think of that? And you know, with with in mind that that Baro holds a bit more than that. >> Uh I I think it's less important than the quality of the minds. Uh, I like what Pneumont did finally. You know, Pneumont grew for size sake and they grew and they grew and they grew and they grew taking over elomerations of tier 2 mines. I'm not saying they were small shitty mines, but they weren't great mines. Uh, and what Newmont did after they bought Newest is they really cleaned house. Uh, I don't know how many mines they sold, 11 or 12. uh and they were probably minds that could benefit from the care and attention that they would get from a management team who was focused on that one mine. What it allowed New Pneumont to do was focus their attention on the mines that mattered. You know, the 5 million ounce deposits, the 10 million ounce deposits, the deposits that were making 400, 500,000 ounces. So, I think it's less important the number of mines that somebody operates uh than the quality of the mines they operate and in particular the concentration. Uh I I'm an old guy now, you know, I'm old and fat and lazy. Uh but I would hate to be a CEO and a COO or a COO and have to fly to visit mines on four continents. I wouldn't like that. Uh I interviewed uh Amomar Aljundi who is the CEO of Agniko Eagle at my conference a month ago and was talking to him about the reason for the absolute and relative success of Agniko Eagle and he said you know really we're a really good construction company and a pretty good allocator of capital but we try to operate in areas where we have an infrastructure advantage. age over our peers. It's it's not that hard to figure out. There were other things he said, you know, their their corporate culture where he believes they treat their people better and as a consequence of that his turnover is a third of what other mining companies were. But an important thing that he said is that they don't seek to be all things to all people. That uh they are looking for centers of critical mass. And if over time they don't develop the critical mass, they sell the assets there, go back to doing what they do. And I think that's an important statement. I don't think that there's a numerically correct number of operations that somebody can operate. I think operating synergies matter and I think uh you know size, scale and durable competitive advantage matters. Yeah, that that um the the rumor mill is always full of or what what is Agneo buying in Australia for example and and and of course they do talk about the the fact that Western Australia has the geology um that is you know one one of the best but but I'm I'll constantly be skeptical that they're going to come here in the next 5 years because they don't have an infrastructure advantage here. They'd have to acquire an infrastructure advantage here. And I think they've done enough work to to realize that it's much more complex and higher cost and the infrastructures um yeah it's not quite the advantage that they think it is. Yeah. >> Right now they define or at least Amar defined uh competitive advantage to me uh as uh construction and operation in cold remote sites. That doesn't seem to describe Western Australia to me. No, no. >> The last time I looked, y'all had a shortage of glaciers. >> I got to bluff. No, you'll find some snow sometimes. >> A real shortage on the on the thinking about, you know, construction and and, you know, kind of gets me thinking about engineering and all these other parts of the mining business. You know, can't help but note Rick, a lot of your investments uh are tied up in like mining adjacent type businesses as well. So obviously um in spatu there's there's a a big sort of shareholding. So these picks and shovels ways of playing the market are are pretty fascinating and we've seen like in the in the last month in particular the mining services business here in Australia have just skyrocketed. They've >> multiple expansion is the only way you can explain it. Substantial multiple expansion. >> Substantial multiple expansion. Exactly. And yeah, I mean, I'm curious just to to pick into this with you because it's a a trend you play in a in a slightly different way, tacking on to a potential bull market in in commodities via a picks and shovel type approach. >> I understand two businesses only. Uh, one is natural resources fairly broadly defined, mining, oil and gas, agriculture and forestry. I understand fisheries enough to avoid it. I'm no good at it. Uh and I understand conventional financial services. And so the intersection of financial public services, a wealth manager, an asset manager, an insurance company, a bank that services the mining or the oil and gas industry suits me perfectly. Uh I understand their underwriting criterion. I understand how they think because that's what I've done for 50 years. Uh, I've been a fairly unsuccessful mining services investor. I've been a successful oil and gas services investor only because it's such a good business that it was tough to screw it up. You know, uh, you buy somebody with a durable technological advantage like Schlumbumberge in a business that doesn't go away and they do well. But to be honest with you, the temptations that I've had, and they've been many over 50 years, to to uh involve myself in physical picks and shovels as it relate to mining, I'd be embarrassed to show you the results. Uh the companies that you talk about like Sprat, which is to say offering financial services to miners, um that's been a very different story. I I've done well there >> when No, I compete with those guys when, you know, if I was going to look at a quarter for McCory, I'd know what I was looking at. Uh because I've borrowed to them. I've been in syndicates. I've competed with them. Uh you know, I've bought them beer. I've almost thrown beer at them. Um so I I I have the ability to understand what they do. uh and that has been I think responsible for my comfort in financial services related to mining >> is there's not a third type of business you understand well well to you Rick being media businesses >> no I'm just learning that um you know I started I started rural investment media with no idea how I was going to monetize it to be honest with you sort of ready fire aim and mercifully my customers told me how to monetize it I found by the way rich people are very generous with information as to how you can service them better. Uh the success in rural investment media has been evolutionary, but I have a lot to learn in that business. Having fun learning it. I've got a great team. >> Yeah. Well, I I asked the question kind of tongue and cheek, but um but but but genuinely, how important is the the the media business to um to the deal access that you get in in the investment space? >> Not really. Um it I think it's going to become increasingly important. What happened to me is I forgot to die. You know, I lived a long time and the people that I grew up with, the people that I was a pup with uh turned out to be, you know, movers and shakers. And so I got included in deals because I had checks that cashed. Uh, and for old times sake, uh, unfortunately for me, you know, the guys I grew up with are either dead, uh, or like Pierre Lasand, increasingly long of tooth. So, keeping myself relevant with a 100,000 subscribers is probably my next line of defense. >> To to touch back on the the Sprat investment, because that's that's one you've held for for some time. Do do you think it's understated an understated way of of playing a natural resource boom? You know, the the ways in which they can make money off the back of growth in in commodities through the the various products. And there's similar type ways you can play that here in in Australia as well is sort of notable in its size in in your portfolio. It kind of seems >> I I think it's safer and it's capital light. uh which is attractive. Um it's also of course a business I understand uh the margins in that business are very very high. Uh there's a plethora of low fee products in particular the physical trusts in that in that business 35 or 40 basis point products but they're 35 or 40 basis point products where there's very little effort required to run them. So your gross is your net. Uh if you think about 40 basis points on $ 35 billion, it ends up being a very large sum and it's highly leveraged to higher AUM. The higher AUM occurs two different ways. Organically, uh as the gold price goes up, uh more people are attracted to gold oriented investments and the value of the gold owned by Sprat itself goes up. So the management fee goes up at the same time uh that the multiple accorded to that cash flow goes up. I would be surprised frankly if four years from now or five years from now SPAT didn't manage a hundred billion and I think they could manage a hundred billion dollars in passive products with effectively the same AU uh pardon me overhead as they pay today. uh and that would be very attractive for shareholders at that point in time. I suspect a h 100red billion aum uh somebody like you know credit Swiss or Manulife or Black Rockck uh somebody who was trying to build a natural resource expertise and failing because they were 20 years late would just say you know what I'll have that sprat thing. Um that's sort of the way I think it ends. I think they get to 100 billion AUM, they become um globally relevant. Uh and then I think we enjoy a bittersweet exit. Fascinating sort of way that that could play out. And we've sort of seen very sort of small steps to to similar type actions in the in the local sort of brokerage market down here. >> Yeah. >> I I want to change tack now, Rick, and and run through a bunch of commodities. And the the top of that list is lithium. And and why that's top of the list, even though we've spoken about it a fair bit lately, is that you you said a year ago that perhaps it'll take two years >> and lithium will be a four-letter word. It'll be, you know, completely bombed out and hated, and the last year has been pretty rough, but it it seems we've seen a a kick up in in prices recently. Do you think this is temporary and and there's more hate to to sort of come or how do you see >> I do I I do I think there's more hate to come. Uh when we talked about it last year that was I'm glad you brought that up. That was unusually precient. I thought you were going to bring up something stupid that I said I'm delighted that you you managed to dredge out something smart. >> I don't think you said anything stupid. >> It was all clever. There's a few >> wonders never cease. Um you'll recall the lithium boom. There wasn't a shortage of elemental lithium. there was a shortage of processing capacity uh and it was a critical component uh of these lithium-ion batteries. So the price spiked. Uh people started looking for lithium and we found a lot. We hadn't found it before because we weren't looking for it. You know, we had plenty. So we found a lot and investor expectations were extremely high. Uh we probably found 150 deposits. I don't know how many deposits. Maybe six or seven of those go to production. Uh so the shakeout where you take the 150 aspirants down to, let's be generous, 10 that succeed is going to piss a lot of people off. Um they aren't going to like it. Uh they don't like it so far, but they ain't seen nothing yet. Um, and I think on top of that, I'm no technology guy, but I note Chevron, Accidental, Berkshire Hathaway, all investing fairly heavily in direct lithium extraction from brines. I'm not smart enough to know if they make that work, but if they make it work, then things get truly ugly. Uh I think I said a year ago I was brought up in both the oil and gas and the geothermal business and I always thought of uh lithium as a waste element uh or as something that you could use in small doses to calm your nerves because it was a waste element. You know it fouled your equipment. Um I when lithium is really truly hated uh really truly hated uh then I think there'll be good opportunities there because I think you you'll be able to pick up companies that have a billion dollars into a deposit that have hundred million market caps. Uh and that's always a pleasant circumstance. >> There's there's one one commodity that I think is in a hated bucket. I'm toying. I've never never had exposure to it before, but I'm I'm flirting with it. Um, venadium. >> I'm uh attracted to venadium. Thus far, my attraction has been very painful. Um, uh, I was uh, you know, I got attracted to the venadium market five or six years ago when most people couldn't spell it. >> And the consequence of that, I concentrated my bet on something called Largo. >> Oh. which originated a a physical venadium product which didn't work. >> And the consequence of my genius is I'm down sort of 60%. >> Yeah. They just did a $6 million value. >> They just did a $6 million secured loan on the physical product that Yeah. It's it's funky, but you kind of like you look at it and you think >> either the prices need to turn in the next six months because that's that's when they got to repay it or um No, >> I think I think Venadium's a good idea. I think you need to be patient. I think it's going to be extremely volatile. Um uh and there's a lot of applications for lithium. The venadium redux battery uh being a new application, but the old applications use a lot of value, use a lot of volume, pardon me, and they have very very very high value. Making steel stronger is a good thing. Uh so you're probably on to something. It's a very small market and the people who participate in the lithium market need to be as patient as me which is rare. Uh and they need to be very tolerant of volatility. The other thing I would caution is that many uh lithium mines that pardon me venadium mines that have grade don't have size and you can be sort of right uh if you get a small mine and still not make any money. That's really hard on you. You know, you get everything right except for the mine and you still lose money. >> Yeah. You talk you talk about that phenomenon where like as a as a as a taxpayer, you're filthy, but as a speculator, um, you see opportunity and I I I I have a suspicion Venadium is going to fall into that category and we'll see something stupid from government that capital. >> I think you're right. Yep. I mean, there's no doubt it's a critical metal. uh I haven't seen very many uh fields of human endeavor where government participation ever caused any net good. I wonder why mining would break that train. >> A another commodity that has seen substantial government rulings change its sort of structure is is nickel. We've we've touched on it a couple times. Are you are you thinking it's bombed out enough, Rick? >> You know, I'm always early, so I've been buying some sulfide nickel stocks. Guarantee they're going to fall another 20% if I'm getting long. Um, I'm a sucker for sulfide nickels. They've treated me extraordinarily well in my life. They're rare beasts. I also I think maybe you guys talked to me last time after I flew back over the Lateric nickel fields in southern Suluese. Um you know that's a disgusting site. Uh it's a truly disgusting site and I don't know how much longer the Indonesian government or the Indonesian people will put up with that and to the extent that the operators are forced to exercise normal constraints with regards to the environment the cost advantage enjoyed by later nickels uh changes very very very rapidly. The same comment with regards to rare earths. By the way, you know, they're not rare. We haven't looked for rare earths because the Chinese have produced them to so cheaply. What a lot of people don't note is that environmental standards in western China are advancing very rapidly and the environmental destruction that the Chinese uh allowed and were willing to endure in Singyang are a thing of the past. Uh, one of the things that they don't talk about so much is that the cost of producing rare earths in China is going up very quickly. And that would suggest that the economic incentive price for the rest of the world uh doesn't suffer as much from the Chinese advantage as the market thinks it does. the same way in l in nickels that I think the price in in the price advantage enjoyed by the Indonesian latters begins to dissipate as they're forced to adapt uh western world environmental standards or if energy prices go up. It's that process is extremely energy dependent. >> Another commodity just on on on the wrap-up, Rick, silver. Silver's had a a great run and I I suspect you might think the the early money's been made there. >> Yeah, silver is an enigma to me. It's treated me very well. You confuse yourself thinking about it as an industrial metal, which of course it is. But the price moves are all they all coincide with precious metals bull markets. I don't know why it is, but I know that it is true that precious metals bull markets begin with the fear buyer. They begin with gold. in effect, gold bullion. And as the advance in the gold bullion price goes faster than the cost of producing gold, the gold company margins start to go and leadership in the precious metals bull market goes from physical gold to the best of the best gold producers, which is what we've seen this year. Then it goes to the best of the rest. You know, the money moves down the quality trail. At some point in time, increasing free cash flows and the momentum of the sector itself validates the precious metals narrative to the generalist investor and when the generalist investor comes into the resource space, I don't know why. I suspect because of the lower unit value, silver goes crazy. I mean, absolutely crazy. I've watched it happen three times in the past. And by the way, uh when that happens, you won't need Rick Rule to tell you it happened. uh people who haven't lived through that bull market drives themselves just literally crazy with a move from I don't know $31 to $33.75 or something like that. Uh we will see in this uh bull market uh that kind of move on a daily basis uh happening several days in a row. Silver was such a fantastic one because there's just not that many great ways to to play it here on on the ASX and and in Australia more broadly. So, it's it's kind of forgotten about a little bit, but I get from >> No, no, no. There's there's silver bugs out there. You just got to interact with them. >> They're out there. Just the ways of playing it in Australia are finer, whereas at the Americas, you have the the deposits and the the companies in in much more abundance. >> You know, you all were you all were spoiled. You had Broken Hill, which was one of the greatest silver mines in the world in drag. Uh, and then you had Canington. So, although you haven't had a lot of starts, you had a lot of finishes or at least a couple spectacular finishes, it's very difficult to duplicate those successes. Um, uh, I think that to the extent that the punter community in Australia begins to reward, uh, the silver narrative, uh, the Australian GEO probably will do pretty good work in the American Cordier era. I'm not sure uh how many primary silver deposits Australia itself will yield, but I note that the Australian investor is becoming much less ethnosentric than he or she used to be. It used to be one of the best ways in the world for a foreign investor to get value was to buy a nonAustralian asset in an Australian company during an Australian bare market where you guys I mean you guys even viewed the New Zealanders as ws you know. Uh >> that day is from my point of view sadly over. >> One more commodity that I've got to ask you about Rick. Tin >> I'm attracted to the tin business. Um, again, it's very difficult to play it. Um, you know, the easily the best tin name in the world is Alphaman. Uh, unfortunately, it's located in the worst part of one of the worst countries on the planet. Um, that's been a challenge. Uh, but I'm I'm quite attracted to tin. Uh, tin is one of those unheralded high-tech minerals. uh you don't have microcircuitry without tin period full stop and the whole world is microcircuitry you've you've explained a sort of similar narrative in the in the PGM space and you've laid it through the physical would you do the same here >> uh the problem with tin in terms of the physical I I looked at it a long time ago when I was with because we looked at the success that we enjoyed with the physical uranium trust and said where can we do this in uh what happens with materials uh like tin and nickel and copper uh is that the price to move it and the price to store it relative to the price of the commodity is a bit too low. Uh it's something that might work as an example for me personally as a speculator. You know, buy a bunch of tin in some warehouse, Koala Lampur or something like that and leave it there. Uh you know, do something smart, nothing. uh but in terms of making it a financial product, the relationship between storage cost, shipping cost and the price of the commodity itself means that the overhead around running the physical trust makes it less attractive to the investor base than say platinum and palladium or gold or even silver. I should tell you an anecdote. you know, it's brought uh we owned on behalf of investors a lot of gold, billions of dollars worth of gold. And I was as a consequence of that allowed into the Royal Canadian Mint to see this gold. And I have to tell you that the pile of gold that constitutes a few billion dollars is distressingly small. Uh it's really unimpressive. Uh, after my disappointment, I was ushered into the room where our silver was. That was much better, much more satisfying. It looked like billions of dollars worth of stuff. I tell you that partially to amuse you, but partially to say that I'm skeptical about the efficacy of investment products, physical investment products, uh, around commodities where, uh, you know, the price relative to scale isn't good. I've got, um, last one for you. You always get asked what your contrarian views are and and you are a contrarian through and through. That's your identity. So, what's your most consensus view in commodity markets and uh and the mining sector right now? >> I'm afraid I'm grow I'm I've uh I've grown to accept the most crowded trade, which is the anti-US dollar trade. Uh and I I I sort of believe the dollar is probably overhated in the near term. Uh as an investment theme for a decade, I think it's still very much intact. Um our uh political class seems to do a wonderful job of promoting the anti-dollar. Uh every time I watch our political leadership, I feel more comfortable with the anti-dollar trade. Uh I remember however uh and my friend uh Joel Litman reminds me of this at our conference, the famous quote that the US dollar is the worst currency in the world with the sole exception of all of the others. And uh while I feel bad about the US dollar in isolation, I feel less bad about it relative to other currencies. Um all of that by way of saying it wouldn't surprise me to see gold take a breather. If the US Federal Reserve doesn't whack US interest rates, if they whack US interest rates, that'll show the world's savers that any concern uh for the legitimacy of the US dollar is a thing of the past in US society. uh if they don't cut interest rates uh I suspect that the dollar price run in the very near term I would define very near term as less than a year is overdone. I I literally am pained to say that I believe that the political and social reality of the United States is such that the US dollar in absolute terms not relative to the Australian dollar or other currencies but rather in absolute terms will lose 75% of its purchasing power in the next 10 years. Uh I lived through that before in the decade of the 1970s according to the office of management budget the US dollar lost 75% of its purchasing power in 10 years. Um that was a character builder and I'm already a character. Uh it wouldn't surprise me uh one must remember in the decade of the 70s when the dollar lost 75% of its purchasing power that the gold price increased 30fold. I'm not suggesting that the gold price is going to go up 30fold. already up 12fold since 2000. But it wouldn't surprise me at all to see the nominal gold price in US dollar terms mirror the decline in purchasing power of the US dollar which would suggest a three or fourfold exp uh expansion in 10 years. So overbought now uh a commodity of necessity over a decade. Fantastic, Rick. The uh the the parallels to the 70s are a super interesting one which we've sort of stewed over a few times in the past, but I think they're they're endlessly sort of fascinating and you could talk about them at length that >> despite not living through the 70s like yourself. >> Have to have that experience for ourselves. Thanks. Uh thanks again for making the time and coming on Money of Mine, Rick. As always, it's great to chat. >> Always a pleasure. I look forward to visiting with the Australian audience. I look forward next year to uh coming down, looking around, speaking at a couple of conferences. I look forward to being down there. I've been gone too long. >> And there we go, mate. Plenty of contrarian wisdom sprinkled in there throughout. A massive thank you to our fantastic partners for making it all happen. Sanvic ground support, focus, the platform by market tech, Axis mineral services, and last but not least, get your tickets to Africa Down Under next week. Huru. >> Now remember, I'm an idiot. JD is an idiot. If you thought any of this was anything other than entertainment, you're an idiot and you need to read out a disclaimer.
Hanging Out in Hated Places with Rick Rule
Summary
Transcript
The government sees their job is to steal. What they exist for is to take money from one constituency and deliver it to constituencies that vote for them. So the idea that the government will penalize the oil and gas business is true. But when the margin is there, they'll penalize the coal business, the gold the gold business or or any other business. All righty, Rick Rule. It's been a year, a very eventful year in in markets. So, we're excited to to have you back on to to pick your brain about what's what's hated, what's unloved, what people aren't talking about enough, and where the the sort of opportunities are in in the resource world. So, let's start the conversation right there. What what is the sort of part of the markets that you find most neglected at the moment? >> I would say conventional oil and gas. Um, it's a very very good business. It's a big It's a business that, you know, the big thinkers, Greta Thornberg and people like that uh have suggested aren't going to exist in 2032 or whatever it is. Um, you know, when securities analysts do net present values on oil and gas companies, they tend to ignore the tail. They tend to believe that they aren't going to enjoy any cash flow after 2032 2033. I'm pretty convinced that for the balance of your life, never mind mine, that oil and gas is going to be a pretty robust business. So if I had to if I had to put my finger on the biggest opportunity on a global basis, it's certainly oil and gas. I would suggest that even the biggest of the big big and the best of the best like Exxon Mobile are probably selling at a 50% discount to their net present value if you understand that those net present values are very long cash flow curves and the tail the net present value tail is extremely fat. So that would probably be the one um that attracts me the most. It's also a very good business. You know, in the mining business, uh, you know, we all pray for return of capital employed and the oil and gas guys talk about return on capital employed. It's a very, very different point of view. It's a better business. Not meaning to insult miners, of course, but uh, you understand the point there. Uh, >> I always find that fascinating, Rick, because e Exxon, you know, is the descendant of like Standard Oil, a company that started well over 150 years ago. and it goes through es and flows of consolidation and and separation and recently we have seen a number of big deals and consolidation. So when when you think about making that bet do you think about like you say going for the Exxons of the world or going going down the curve and and buyouts to come? You know, when I was a broker, uh, I used to encourage clients who didn't have resource portfolios to buy market beta to start their portfolios with the best of the best. Uh and then after they had accomplished that, after they had accomplished starting a for a portfolio in an unloved sector, then I would take them down the quality trail, take more risk in hopes of greater reward. But what you learn in resource businesses is that when the sector returns to favor, just the beta, defining the beta as the extent to which that sector outperforms the broad market is often incredible. And too often people have the strategy right, but they screw up the tactics. You know, they buy some package of nothing nowhere juniors uh thinking that because the gold price ran, those juniors are going to run, forgetting those juniors don't have any damn gold, you know. And so when I constructed oil and gas portfolios for people, I would begin by buying the best of the best by owning the beta uh and not exposing the customer to any operational risk whatsoever. And then to the extent that the client uh exhibited some taste for volatility, some patience uh and some willingness to learn uh then we would take the client down the quality trail looking for more alpha. And that's still the same today. If I was constructing an oil uh an oil portfolio today, I would start with Exxon. >> And and how do you think about the the sort of evolving role in in governments here? because I I totally hear hear the bet, but I I can't help but think about what we saw in the coal industry here in in Queensland recently and you know, for for those unfamiliar, just a massive jacking up of the royalty rates after after the fact, after the investments have been made. So, does that perhaps tweak how you think about this bet jurisdictionally? >> Yeah, but that's the same for all commodities. Um, at the risk of sounding too American, uh, and certainly this is a reflection on American politics, government sees their job is to steal, uh, what they exist for is to take money from one constituency and deliver it to constituencies that vote for them. And so the idea that the government will penalize the oil and gas business is true, but when the margin is there, they'll penalize the coal business, the gold the gold business or or any other business. Uh their job, they would say their job is to equalize or transfer wealth. I would suggest to you their job is to steal. You'll notice that governments aren't particularly a hindrance uh in a sector where the selling price of the product is below the cost of production. They're smart enough to know that you can't steal nothing. But when an industry starts to deliver the free cash flow that the Australian coal industry does, there was a famous American bank robber, I forget the guy's name, Willie Sutton, I think it was, and a guy said, "Well, so Mr. Sutton, why do you rob banks? He said, 'Well, because that's where the money is, and I think that's the way the governments think. Um, they don't pay any attention to a sector uh until there's some lowhanging fat fruit uh that they can distribute to their constituents and then of course they go to steal it. >> We we pray of these periods of super profits in commodities where, you know, commodity prices randomly flex up for one year in every 10. And um unfortunately now that comes with the risk that you'll never have a super profit again. >> And you know it's easy to steal from the coal business because they're hated. >> Oh yeah. >> You know uh they do bad things. They put smoke in the air and all that kind of stuff. And listen, I'm um you know I'm all for reducing the amount of delletterious material piped into the air and pumped into the water and stuff. Here's a couple things that maybe the Australian politicians should reflect on. One, uh, around the world when people talk about carbon, uh, emerging in frontier markets suggest that carbon quotas shouldn't be established nationally, but rather per capita. We don't like that in the west because we don't have too many capitas. Uh, the other thing they should suggest is that historical carbon loadings matter. uh and they believe that the big economies that contributed all the carbon pollution prior to 10 years ago uh should be penalized for that. Uh which is to say Australian voters need to understand that if you're going to equalize the cost of carbon around the world on a per capita basis, uh Australians are going to really be punished for their past successes. Uh the other side of the coal trade that makes me laugh uh is that people say it's a declining business. They say it's going the way of the dodo. The problem with that is that the biggest year on history for coal demand was 2024. It's set to be eclipsed in 2025. So those people are ignoring math. The government wasn't, of course. They decided to steal where the money was. Um but the other thing is people say, well the f you know the future is what you have to look at. the future. The future is alternative energy. I think I noted once talking to you guys a year or two years ago, and these are slightly old statistics, but humankind has spent about $5 trillion now on alternative energies, and we've reduced the energy market share of fossil fuels from a high of 83% 40 years ago to a low of 81% today. A $5 trillion investment has reduced the market share of fossil fuels by two% in 40 years. That's an inconvenient truth for certain people. Not, by the way, for the politicians who've decided to steal money from the Queensland coal shareholders. Uh I'm afraid that cash cow will enrich them for years to come, but others need to consider that. >> Yeah. Yeah. Yeah, I mean the the the flip side of that one as well is that total energy demand around the world keeps keeps growing. So while whilst just 2% the the pie gets bigger and bigger there. While we're on the the topic of government and specifically the the US government as we touched on earlier, I can't help but ask about the the recent actions in the the rare earths world. I think this is pretty monumental news that we've seen come out come out of the states and it's going to be replicated here in Australia and I suspect in in other parts of the world as well. How did you kind of digest that all to to start with Rick? >> Rick's talking about rare earth. Now there's a a rare earth deposit in Malawi that is um gonna literally going to come into construction now as a result of the entire dynamic being underwritten by Luca and the Australian government recently that deposit Kakang Gundai I think it is Malawi delegates from there and Lindian the operator of that project all going to be at Africa down under mate. >> So you're going to want to get up to speed on Africa downunder which is kicking off next week September 3rd to September 5th. >> We're going to be there this time next week. >> We are. We're gonna be there. Come join us. Tickets are in the show notes. Hear Dom tell you all about it right now. >> You know, we hear a lot of uh misconceptions and and opinions about Africa a lot of the time from people who who don't actually uh ever travel to Africa. So it's, you know, it literally is straight from the source in this regard. So Malawi, for instance, we can hear from the minister there about how they're trying to establish uh a mining industry. we have uh the deputy minister from South Africa, you know, such a complicated convoluted history of mining, but they are really trying to um redraw the script there. Uh so it'll be interesting to hear from her. The the Ghana Minister Ghana has been in the news a lot recently with a few battles over gold fields and a few other things. Um we'll be able to hear from him firsthand what you know what their what their approach is to new foreign investment. And then other exciting ones that we haven't heard a lot about Egypt, you know, Angle Gold have just paid $2 billion for the Sakari mine. Uh it's the only mine in Egypt, huge 450,000 ounce producer. Uh but they've never really seen a lot of foreign investment other than that, not even exploration. So the Egyptian minister's coming, which you know, he's coming to Western Australia to try and c new investors and find explorers and establish companies to come and invest in their country. So, you know, you can get a real inside running whether you're looking to pick up projects there yourself or, you know, buy equities in in these these emerging companies who are prepared to to take that high-risk approach, then you're going to get the inside track on on which countries are serious about attracting investment and which are perhaps uh not so serious. >> Got to get your tickets. >> Well, uh, as a citizen, as a taxpayer, I think it's disgusting. Um, as a speculator, uh, I guess it's my job if they're going to steal from me to steal some back. Uh I I note not so much in the rare earths because the United States other than Mountain Pass which isn't really a mine uh in the uranium business in the United States. I went from being absolutely reviled 5 years ago from being somebody who speculated in Hiroshima Nagasaki and Three-Mile Island to now these morons want to subsidize me. And I have to say I felt cleaner when I was reviled. Uh I think what you say is true. I think industrial policy in the west has become afraid enough, particularly the Chinese, and the threat by the Chinese to weaponize access to rare earths, that they will spend an awful lot of money to establish a um China secure um supply chain. And I I think what you see in rare earths, you're going to see in a lot of different places. I think it's unfortunate personally. Um, I want no government nexus in any part of my life, but in particular in my wallet, but given that it's going to occur, uh, I'm sort of duty bound to take the money. >> And, and how do you think more broadly about that that anti-China or kind of independence supply lines? Because like you say, it's not it's not just rare earths. It's going to happen in every single I mean we're speaking about it in in copper as well with with projects and and tariffs as as these sorts of things. So are there are there other sort of thoughts that come to mind apart from the the sheer concern of the the government plundering money there? >> As you can gather from my earlier response, um I'm not much of a politician. I don't know much about politics, but I've done a lot of business in China. uh and I would prefer a circumstance where we were cooperative with them. Um my experience in China has been largely good. I'm not trying to say it's been all good, but there's no place on the planet where my experience has been largely good. My preference would be although we know we're going to compete with each other, that we understand that we need to cooperate too and find avenues of cooperation. uh that's probably not very popular with jingoistic voters uh who would, you know, prefer to have someone of a different hue that they could hate. Uh by the way, uh on both sides of the Pacific, uh the Chinese themselves are not short of jingoistic morons. uh despite my preference uh what the Chinese are doing today uh which is to say utilizing their economic surplus uh unonymity of purpose uh foreign policy to secure their supply chains is exactly what the US did in the 1950s and 1960s. It's exactly what Europe did in the 1970s, what Japan did in the 1980s. We in the United States resent the fact that we have a competitor. Uh we have a competitor that seems to be more predisposed to education, more predisposed to savings, uh less predisposed to whatever it is that America's predisposed to. So it makes perfect sense to me that we're getting out competed. on on that point, Rick, to to tie it back to the rare earth in particular. I think 12 months ago, you said that that easy money in uranium had already been made. Has the easy money in rare earths already been made? >> I don't think so. Um, for the simple reason that in the uranium side, we had a fair number of reasonably good deposits that were delineated as far back as pre Fukushima. And you could see a deposit. Well, boss is a great example. Uh you could see a deposit that had been delineated that you understood you understood the path to prosperity. But before they had a chance to have a problem, the stock was up by five or 600%. Ur uranium the easy money for me and by the way I I think the big money is likely ahead of us, but we can talk about that later. The easy money is when the sector passed from being hated to being tolerated. Uh as recently as a year ago, uh you'd go online and these people who had been ridiculous bulls on uranium four or five years ago, people who had uranium as part of their internet handle were bemoning the day that they ever learned to spell uranium and were being beginning to tout, you know, some crypto or something like that. The hate that uranium encountered as a consequence of the stupidity of the speculators who was com who were commentating was unbelievable. And it occurred to me that all uranium had to do was become unhated. And that's what happened. >> And and your point on the the the big money there, how do you see that playing out? >> Oh, listen. Uh that's really exciting. Well, no, it isn't exciting. That's well it's an it's exciting to people who think and invest. Um you know not to the rhetoric type. The structure of the uranium market is changing and it's changing a lot. Uh right now uranium is the only commodity in the world where producers and consumers uh can sign contracts of 5 years duration, 10 years duration, 15 years duration that specify price and volume. What that means is that if you're a uranium developer, you can know with some certainty how much uranium you're going to sell and who you're going to sell it to. And for how much? And to the extent that you are a uranium junior who had no hope of financing your deposit into production, you had to sell it and you had to sell it to a fairly narrow range of buyers. Now uh you can do two things. You can sign a fixedpric contract to build the mine with Westinghouse Kamico and you can sell contracts so that you can specify the price and volume 15 years out with investment grade counterparties. Tokyo Electric Power, China General Nuclear, Southern Companies. There is no other resource sector on the planet that has certainty as to price and terms over time with credit grade counterparties. Mercifully [Laughter] for this, you know, quiet old lender Rick Rule uh or quiet old speculator Rick Rule, not one investor in a thousand has cared about the implications of price and volume certainty over time. Uh it's interesting this slavish focus on the spot market. Most days the spat physical uranium trust does more dollar volume than the spot uranium market is. The spat market has become the spot market. The tail is truly wagging the dog and the volumes are ridiculously low. Uh but people pay attention to it because it's an easy to grasp or or easy to obtain data point. useless uh except uh you know to sell newsletters or get speculative pulses going. Uh it really isn't an indication of the market which its volatility will tell you and its volume will tell you if nothing else does. But speculators pay slavish attention to it a factoid sort of. So, so your what what you're talking about with the the price and volume certainty is effectively like an infra an infrastructure akin funding dynamic that can can transform the capital flow into the sector. >> Yeah, exactly. Um, as a lender, uranium is the only subject on the the only commodity on the planet where if the contracts are set up, the lender knows the volume of material that can be sold and the price it will be sold for. in every commodity-based construction loan I've ever made in my life, and I've made billions. I've done it with my fingers crossed because I had no earthly idea two years from now what the selling price of the commodity would be or who who my minor or oil company would sell it to. uh there is a startling degree of certainty uh around price and volume in the uranium business that uh if the terms are disclosed to the lenders uh should give the lender a lot of comfort relative to other businesses and should ultimately reduce uh the cost of capital to particularly below investment grade uranium developers. I would suspect that the certainty too over the next five years will be comfortable to securities analysts. You know, if you're a lazy old securities analyst, say Rick Rule, uh, and you're trying to do a net present value calculation on a uranium developer, but you don't know how much they can sell or for what price. You know, uh, that discounted net present value analysis becomes voodoo. It turns out over the last 50 years, most of what I've done has been voodoo. Uh, and the idea that uh, it becomes less voodoo is very attractive to me. >> You know, who's a very big Rick Raw fan? He told me, >> tell me. >> Uh, Joel. Joel. So, we've been talking about Jason O, who COO at Axis Mineral Services, Ken Crush Rocks. But Joel Joel, CEO there, mate. He'll hate the fact I'm talking about him. Shout out Joel. Um, I know he's a big Rick Rule fan. He'll be listen to this one. So, we've got we we've got to talk about We've got to talk we've got to put Joel next to Rick Rule. >> We do. >> And talk about the people mineral services. >> What do they do, mate? >> Mate, they crush big rocks into small rocks. That's the one thing you've just got to get into your mind out there. If you need to crush big rocks into small ones, Axis Mineral Services are the company. They have the track record as well, Trav. I know you know this. They've worked with all the top caliber mining operations in the gold fields and they're expanding. >> They they do crush big rocks into little rocks. They've got an ability to sort out small rocks from each other. >> They they they can now actually give you an entire front end of your circuit. The plant on a BO model, if there's a problem like your your rocks are too hard, well, guess what? They can bring in dynam dynamic innovative solutions. Like nothing is too foreign for these guys. I'm even talking about like HPGR like that's a possibility all thanks to the fact that Axis Mineral Services they've now got this enhanced capability. They're part of the Robex Construction Group and what does that mean? Things are possible that have never been done before. >> They've got engineering fire firepower, financial firepower and they have a team that just gets it done. Can't understate this one enough mate. All you have to do is bring your problem to them and they will serve the solution to you on a platter. >> Mate, you see the team buyin they've got. So they put they put up a little snippet of of money of mine and there were like eight people that all shared that. Now that is that is buyin. That's a team with camaraderie that that has real buy into this business. >> That's a team you'd want to hire for a job. >> You know what? So get in touch with Axis Mineral Services. >> Go Axis. There's there's a couple added details that that make it all quite quite interesting. So firstly, a lot of these restart projects that we we speak about. You mentioned Boss Paladin. Another one that comes to mind have seen sort of numerous stumbles in in getting to that name plate >> number and then there seems to be a real apprehension in the market from the investor perspective to to sign up to that price guarantee because that that's you know apparently locking away the the magical upside. We see it more in the in the gold market where there's this massive trend to be an unhedged gold miner. Now, >> investors want the volatility, mate. Don't take that away from >> They're there for the commodity. So, how do you take on board those those two sort of notes? >> You know what? I'm an old man. Uh you can have some of my upside if you take away my downside. I'm really good with up. >> Oh, no. These uranium companies will still give you downside. I promise you that. >> I mean, you know, we we pick on uranium companies not not attaining name plate capacity. I've been around the gold business for 50 years. And to be honest with you, it's much more frequent than not. Uh you know, when guys announce economic completion, you'll notice it often isn't two or three quarters uh until the operation shakes in and they reach name plate capacity. It seems that economic completion, name plate capacity are very different things. Oh, >> my f my favorite is Yeah. when they they announce commercial production, but but it never made money and then it go and then it goes broke. Yeah. What was commercial like? you had a day where it made money like I don't know. >> So, you know, I take what you say about the go the uranium industry. uh there's a relatively small number of data points but I suspect that what you talk about is ubiquous and you know not I mean frankly not just in mining if if the three of us started a carpet mill you know we had some big building and in the front comes wool and cotton and oil whatever goes into a carpet what comes out the back to begin with isn't carpet you know it takes a way to shake it takes a while to shake these big plants in irrespective of what they're making sadly It it it brings me to another kind of question as well. Get thinking about getting these minds online. Rick, you you know, you you're in the the the loan making world as well. How do you think about the the dir of natural resource institutions, funds specifically set up to invest? You know, we see it here in Australia, there's less and less of them. How how do you think about that and and what that does to future demand and supply? Well, as a check writer, I think it's a wonderful thing. Uh the idea that I have fewer competitors, especially young smart ones, seems to me to be a very good thing. Uh for the industry, of course, is not a good thing. Uh in truth, uh I think the biggest challenge the industry faces, other than rapacious governments, uh is the der of young people coming into the sector. Uh, I look at the mining industry and it isn't just because of my age, but the people I see, it's very much like I'm looking in the mirror. You know, old fat bald white guys. Uh, we've been there for 50 years. We have experience, but we don't have legs anymore. uh and we meaning the mining industry, we're not we're not going to be able to fill the skills gap. We're not going to be able to fill it at the rock face. We're not going to be able to fill it in the mill. We're not going to be able to fill it in the boardroom. That's going to be a challenge for us. It will take care of itself over time. You know, markets always work. And if you have a shortage of people, uh, what you have to do for a while, like we had to do in the early part of the 1970s when mercifully I came into the market, is you have to pay those people too much. Uh, which is a good circumstance. That's how we that's how we cured this the shortage in the early part of the decade and 70s and it's how we'll do it again. But it's going to be a challenge. What one of the other market-based iterations we've seen on on that financing front is the the move towards streaming as well as royalties becoming ever kind of bigger. What do you make of this kind of presence and and do you think there's a natural band that we we get close to hitting upon there? >> No, I think it's strangely rational. Uh I think that the speculators in particular, no the investors too, uh are willing to pay more for precious metals cash flow isolated in a royalty or stream. Uh what that means is that uh when I'm competing with Randy Smallwood over at Weeden and I'm a lender, uh he knows that that cash flow to him is going to be valued at 16 or 17 times cash flow. Uh if I'm looking for a 15% internal rate of return as a lender, he's going to beat me all day long as he should. He's a lowerc cost provider of capital because the capital markets are give it will give it to him. Particularly cash flow that comes from a you know lead zinc operation, silver cash flow that comes from a lead zinc operation or gold cash flow that comes from a copper operation. The equities markets will give that cash flow in a copper rapper six times cash flow whereas they'll give it 15 or 16 times cash flow in a streaming um rapper. And a lot of people uh have said to me that they think that the big streaming deals are over, that the big royalty deals are over. I heard that at my conference in Boca Raton. Uh and that's Hokum. Uh the copper business in particular probably in 10 years faces between 100 and $150 billion in front-end capital expense. And to the extent that they can sell the gold silver byproduct cash flow from that copper production at some number like 14 or 15 times cash flow uh and use that to obviate uh more equity when they're selling at fairly low multiples of cash flow themselves uh or premium price debt they're be well advised to do that. The second thing that's happening is that a lot of host governments in frontier markets would like to own larger pieces of their resource industry, politically palatable, all that kind of stuff, but they don't have any money uh and they're constrained uh by arbitration agreements from stealing it. So, they have to buy it. Uh buying something when you don't have any money is a bit of a challenge. And what I suspect is going to happen is that those companies will jawbone with the companies, those countries, pardon me, will jawbone with the companies and they will finance the companies take by selling a stream. Uh I believe that we haven't seen the biggest streaming or the biggest royalty deals that we're going to see. I believe that the next 10 years we'll see literally multibillion dollar streaming deals and perhaps royalty deals uh increasingly host governments uh are receiving royalties some of them extraordinarily generous on gold production uh but somehow managing to squander all the money uh old money all gone send new money and I suspect that one of the ways that they will get new money is that they'll sell those royalties to the royalty companies. So I believe that the next 10 years for the royalty and streaming business will be even better than the last 20 have been uh which have been pretty good. So, so take take for example uh Panama who I think I think Panama has a has a phenomenal royalty over Cobra Panama and you suspect that like it's not beyond the realm of possibility that the country Panama will sell their royalty over that asset to the likes of Franco. >> Yeah. part of the royalty. Uh, one way that they might reach a fiscal agreement with Panama, who wants more money, is to give Panama some upside on the gold price or the copper price. That's called a stream. And Panama then can turn that into cash. Understand that the president of Panama, despite whatever pretenses he might have, doesn't care very much what happens to the government till after he's out of office. he wants to spend money now. So the construction of a 20-year stream and then the monetization of the stream in this guy's term is extremely attractive to him and as a consequence I think will resolve a lot of problems. >> Watching that one closely. Yeah. And and but I suppose like you know first first quantum they've they've utilized streaming um in in a in in a more forthcoming way than than most miners out there more most recently in relation to um their their Zambian copper assets where they they were pretty advanced I believe to to sell down a minority stake to either Minara or Japanese trading house. Neither of those eventuated but they they've opted for streaming instead. I I can tell you with certainty that every big mining company in the world, particularly in the copper business, is looking at streaming transactions to finance construction. There are no exceptions [Music] >> that they might have a an added competitor with the with the trend of gold companies coming in and and looking at at copper assets as well. Do you do you think that gets larger and larger with these these big gold names looking at uh copper assets individually or copper companies for takeovers? >> I think that'll depend on uh how Beric manages regard uh Beric has done better in the market of late simply because their gold margins have been increasing. But the market doesn't like, I don't think, Beric migrating to the copper business. I've always been sort of Catholic myself as to where my cash flow comes from. My apologies to Catholics. Um, you know, to me, cash is cash and I'd take it from sand and gravel, but I suspect that uh gold companies that are perceived as being too copper dependent uh will suffer a lower cash flow multiple. But time will tell if Bareric if Bareric makes a huge success of Reiko. Uh if the market accepts uh that cash flow should it occur uh at a reasonable multiple uh I think that's probably a good avenue of growth for the gold mining companies. They need to be careful because traditionally the copper miners have been much more efficient miners. Um I think it would be probably easier for a copper miner to come and operate successfully in the gold space than vice versa. Uh the copper miners have had a lower, pardon me, a higher cost of capital than the gold miners have for a long time. Uh they've had even more price volatility than the gold miners have had for a very long time. They're pretty good miners uh in comparison. Maybe not good miners as an example compared to Agniko Eagle, but they're pretty good miners. Uh, and I think the gold companies might find that to be a hugely competitive league should they choose to go down that route. >> Should should they choose to go down that route? Uh, or should should the cash flow at Rico occur? What how are you thinking about the um the potential that a that a barrack breakup could pan out over the next next couple of years like a you know >> probably be a good thing. Um >> uh but I mean there was a time 40 years ago when Bristol listened to me. That was a long time ago. He hasn't needed a check from Rick for four decades. So uh >> he's finally signaled that his his departure is is um coming in a in a couple of years. They've started a search for a replacement and and the company famously, you know, doesn't have an obvious next Bristo. Yep. >> Yep. Um I mean there's there's something to be said for keeping the company together in the sense that size itself increasingly is a determinant of trading volume uh and share price and hence cost of capital on the other hand if the capital markets can show Bristo or or show Bristo's successor that uh the value of the sum of the parts is substantially greater than the price of the whole then the board has to listen because it is a cost of capital gain. Uh Beric certainly gets penalized as an example for their West African assets despite the success of those assets and they seem to attract a a premium price for the Northern Nevada assets despite the failure of the Northern Nevada assets for several years to make make their AI AISC targets. Um so I mean perhaps uh perhaps a breakup is in the cards. I don't know. >> Evolutions. Jake Klene down here in Australia, Rick, sort of said a while ago that that eight feels like a a natural number of assets for a for a mining company to have or an upper limit of of assets for a mining company to have. What What do you kind of think of that? And you know, with with in mind that that Baro holds a bit more than that. >> Uh I I think it's less important than the quality of the minds. Uh, I like what Pneumont did finally. You know, Pneumont grew for size sake and they grew and they grew and they grew and they grew taking over elomerations of tier 2 mines. I'm not saying they were small shitty mines, but they weren't great mines. Uh, and what Newmont did after they bought Newest is they really cleaned house. Uh, I don't know how many mines they sold, 11 or 12. uh and they were probably minds that could benefit from the care and attention that they would get from a management team who was focused on that one mine. What it allowed New Pneumont to do was focus their attention on the mines that mattered. You know, the 5 million ounce deposits, the 10 million ounce deposits, the deposits that were making 400, 500,000 ounces. So, I think it's less important the number of mines that somebody operates uh than the quality of the mines they operate and in particular the concentration. Uh I I'm an old guy now, you know, I'm old and fat and lazy. Uh but I would hate to be a CEO and a COO or a COO and have to fly to visit mines on four continents. I wouldn't like that. Uh I interviewed uh Amomar Aljundi who is the CEO of Agniko Eagle at my conference a month ago and was talking to him about the reason for the absolute and relative success of Agniko Eagle and he said you know really we're a really good construction company and a pretty good allocator of capital but we try to operate in areas where we have an infrastructure advantage. age over our peers. It's it's not that hard to figure out. There were other things he said, you know, their their corporate culture where he believes they treat their people better and as a consequence of that his turnover is a third of what other mining companies were. But an important thing that he said is that they don't seek to be all things to all people. That uh they are looking for centers of critical mass. And if over time they don't develop the critical mass, they sell the assets there, go back to doing what they do. And I think that's an important statement. I don't think that there's a numerically correct number of operations that somebody can operate. I think operating synergies matter and I think uh you know size, scale and durable competitive advantage matters. Yeah, that that um the the rumor mill is always full of or what what is Agneo buying in Australia for example and and and of course they do talk about the the fact that Western Australia has the geology um that is you know one one of the best but but I'm I'll constantly be skeptical that they're going to come here in the next 5 years because they don't have an infrastructure advantage here. They'd have to acquire an infrastructure advantage here. And I think they've done enough work to to realize that it's much more complex and higher cost and the infrastructures um yeah it's not quite the advantage that they think it is. Yeah. >> Right now they define or at least Amar defined uh competitive advantage to me uh as uh construction and operation in cold remote sites. That doesn't seem to describe Western Australia to me. No, no. >> The last time I looked, y'all had a shortage of glaciers. >> I got to bluff. No, you'll find some snow sometimes. >> A real shortage on the on the thinking about, you know, construction and and, you know, kind of gets me thinking about engineering and all these other parts of the mining business. You know, can't help but note Rick, a lot of your investments uh are tied up in like mining adjacent type businesses as well. So obviously um in spatu there's there's a a big sort of shareholding. So these picks and shovels ways of playing the market are are pretty fascinating and we've seen like in the in the last month in particular the mining services business here in Australia have just skyrocketed. They've >> multiple expansion is the only way you can explain it. Substantial multiple expansion. >> Substantial multiple expansion. Exactly. And yeah, I mean, I'm curious just to to pick into this with you because it's a a trend you play in a in a slightly different way, tacking on to a potential bull market in in commodities via a picks and shovel type approach. >> I understand two businesses only. Uh, one is natural resources fairly broadly defined, mining, oil and gas, agriculture and forestry. I understand fisheries enough to avoid it. I'm no good at it. Uh and I understand conventional financial services. And so the intersection of financial public services, a wealth manager, an asset manager, an insurance company, a bank that services the mining or the oil and gas industry suits me perfectly. Uh I understand their underwriting criterion. I understand how they think because that's what I've done for 50 years. Uh, I've been a fairly unsuccessful mining services investor. I've been a successful oil and gas services investor only because it's such a good business that it was tough to screw it up. You know, uh, you buy somebody with a durable technological advantage like Schlumbumberge in a business that doesn't go away and they do well. But to be honest with you, the temptations that I've had, and they've been many over 50 years, to to uh involve myself in physical picks and shovels as it relate to mining, I'd be embarrassed to show you the results. Uh the companies that you talk about like Sprat, which is to say offering financial services to miners, um that's been a very different story. I I've done well there >> when No, I compete with those guys when, you know, if I was going to look at a quarter for McCory, I'd know what I was looking at. Uh because I've borrowed to them. I've been in syndicates. I've competed with them. Uh you know, I've bought them beer. I've almost thrown beer at them. Um so I I I have the ability to understand what they do. uh and that has been I think responsible for my comfort in financial services related to mining >> is there's not a third type of business you understand well well to you Rick being media businesses >> no I'm just learning that um you know I started I started rural investment media with no idea how I was going to monetize it to be honest with you sort of ready fire aim and mercifully my customers told me how to monetize it I found by the way rich people are very generous with information as to how you can service them better. Uh the success in rural investment media has been evolutionary, but I have a lot to learn in that business. Having fun learning it. I've got a great team. >> Yeah. Well, I I asked the question kind of tongue and cheek, but um but but but genuinely, how important is the the the media business to um to the deal access that you get in in the investment space? >> Not really. Um it I think it's going to become increasingly important. What happened to me is I forgot to die. You know, I lived a long time and the people that I grew up with, the people that I was a pup with uh turned out to be, you know, movers and shakers. And so I got included in deals because I had checks that cashed. Uh, and for old times sake, uh, unfortunately for me, you know, the guys I grew up with are either dead, uh, or like Pierre Lasand, increasingly long of tooth. So, keeping myself relevant with a 100,000 subscribers is probably my next line of defense. >> To to touch back on the the Sprat investment, because that's that's one you've held for for some time. Do do you think it's understated an understated way of of playing a natural resource boom? You know, the the ways in which they can make money off the back of growth in in commodities through the the various products. And there's similar type ways you can play that here in in Australia as well is sort of notable in its size in in your portfolio. It kind of seems >> I I think it's safer and it's capital light. uh which is attractive. Um it's also of course a business I understand uh the margins in that business are very very high. Uh there's a plethora of low fee products in particular the physical trusts in that in that business 35 or 40 basis point products but they're 35 or 40 basis point products where there's very little effort required to run them. So your gross is your net. Uh if you think about 40 basis points on $ 35 billion, it ends up being a very large sum and it's highly leveraged to higher AUM. The higher AUM occurs two different ways. Organically, uh as the gold price goes up, uh more people are attracted to gold oriented investments and the value of the gold owned by Sprat itself goes up. So the management fee goes up at the same time uh that the multiple accorded to that cash flow goes up. I would be surprised frankly if four years from now or five years from now SPAT didn't manage a hundred billion and I think they could manage a hundred billion dollars in passive products with effectively the same AU uh pardon me overhead as they pay today. uh and that would be very attractive for shareholders at that point in time. I suspect a h 100red billion aum uh somebody like you know credit Swiss or Manulife or Black Rockck uh somebody who was trying to build a natural resource expertise and failing because they were 20 years late would just say you know what I'll have that sprat thing. Um that's sort of the way I think it ends. I think they get to 100 billion AUM, they become um globally relevant. Uh and then I think we enjoy a bittersweet exit. Fascinating sort of way that that could play out. And we've sort of seen very sort of small steps to to similar type actions in the in the local sort of brokerage market down here. >> Yeah. >> I I want to change tack now, Rick, and and run through a bunch of commodities. And the the top of that list is lithium. And and why that's top of the list, even though we've spoken about it a fair bit lately, is that you you said a year ago that perhaps it'll take two years >> and lithium will be a four-letter word. It'll be, you know, completely bombed out and hated, and the last year has been pretty rough, but it it seems we've seen a a kick up in in prices recently. Do you think this is temporary and and there's more hate to to sort of come or how do you see >> I do I I do I think there's more hate to come. Uh when we talked about it last year that was I'm glad you brought that up. That was unusually precient. I thought you were going to bring up something stupid that I said I'm delighted that you you managed to dredge out something smart. >> I don't think you said anything stupid. >> It was all clever. There's a few >> wonders never cease. Um you'll recall the lithium boom. There wasn't a shortage of elemental lithium. there was a shortage of processing capacity uh and it was a critical component uh of these lithium-ion batteries. So the price spiked. Uh people started looking for lithium and we found a lot. We hadn't found it before because we weren't looking for it. You know, we had plenty. So we found a lot and investor expectations were extremely high. Uh we probably found 150 deposits. I don't know how many deposits. Maybe six or seven of those go to production. Uh so the shakeout where you take the 150 aspirants down to, let's be generous, 10 that succeed is going to piss a lot of people off. Um they aren't going to like it. Uh they don't like it so far, but they ain't seen nothing yet. Um, and I think on top of that, I'm no technology guy, but I note Chevron, Accidental, Berkshire Hathaway, all investing fairly heavily in direct lithium extraction from brines. I'm not smart enough to know if they make that work, but if they make it work, then things get truly ugly. Uh I think I said a year ago I was brought up in both the oil and gas and the geothermal business and I always thought of uh lithium as a waste element uh or as something that you could use in small doses to calm your nerves because it was a waste element. You know it fouled your equipment. Um I when lithium is really truly hated uh really truly hated uh then I think there'll be good opportunities there because I think you you'll be able to pick up companies that have a billion dollars into a deposit that have hundred million market caps. Uh and that's always a pleasant circumstance. >> There's there's one one commodity that I think is in a hated bucket. I'm toying. I've never never had exposure to it before, but I'm I'm flirting with it. Um, venadium. >> I'm uh attracted to venadium. Thus far, my attraction has been very painful. Um, uh, I was uh, you know, I got attracted to the venadium market five or six years ago when most people couldn't spell it. >> And the consequence of that, I concentrated my bet on something called Largo. >> Oh. which originated a a physical venadium product which didn't work. >> And the consequence of my genius is I'm down sort of 60%. >> Yeah. They just did a $6 million value. >> They just did a $6 million secured loan on the physical product that Yeah. It's it's funky, but you kind of like you look at it and you think >> either the prices need to turn in the next six months because that's that's when they got to repay it or um No, >> I think I think Venadium's a good idea. I think you need to be patient. I think it's going to be extremely volatile. Um uh and there's a lot of applications for lithium. The venadium redux battery uh being a new application, but the old applications use a lot of value, use a lot of volume, pardon me, and they have very very very high value. Making steel stronger is a good thing. Uh so you're probably on to something. It's a very small market and the people who participate in the lithium market need to be as patient as me which is rare. Uh and they need to be very tolerant of volatility. The other thing I would caution is that many uh lithium mines that pardon me venadium mines that have grade don't have size and you can be sort of right uh if you get a small mine and still not make any money. That's really hard on you. You know, you get everything right except for the mine and you still lose money. >> Yeah. You talk you talk about that phenomenon where like as a as a as a taxpayer, you're filthy, but as a speculator, um, you see opportunity and I I I I have a suspicion Venadium is going to fall into that category and we'll see something stupid from government that capital. >> I think you're right. Yep. I mean, there's no doubt it's a critical metal. uh I haven't seen very many uh fields of human endeavor where government participation ever caused any net good. I wonder why mining would break that train. >> A another commodity that has seen substantial government rulings change its sort of structure is is nickel. We've we've touched on it a couple times. Are you are you thinking it's bombed out enough, Rick? >> You know, I'm always early, so I've been buying some sulfide nickel stocks. Guarantee they're going to fall another 20% if I'm getting long. Um, I'm a sucker for sulfide nickels. They've treated me extraordinarily well in my life. They're rare beasts. I also I think maybe you guys talked to me last time after I flew back over the Lateric nickel fields in southern Suluese. Um you know that's a disgusting site. Uh it's a truly disgusting site and I don't know how much longer the Indonesian government or the Indonesian people will put up with that and to the extent that the operators are forced to exercise normal constraints with regards to the environment the cost advantage enjoyed by later nickels uh changes very very very rapidly. The same comment with regards to rare earths. By the way, you know, they're not rare. We haven't looked for rare earths because the Chinese have produced them to so cheaply. What a lot of people don't note is that environmental standards in western China are advancing very rapidly and the environmental destruction that the Chinese uh allowed and were willing to endure in Singyang are a thing of the past. Uh, one of the things that they don't talk about so much is that the cost of producing rare earths in China is going up very quickly. And that would suggest that the economic incentive price for the rest of the world uh doesn't suffer as much from the Chinese advantage as the market thinks it does. the same way in l in nickels that I think the price in in the price advantage enjoyed by the Indonesian latters begins to dissipate as they're forced to adapt uh western world environmental standards or if energy prices go up. It's that process is extremely energy dependent. >> Another commodity just on on on the wrap-up, Rick, silver. Silver's had a a great run and I I suspect you might think the the early money's been made there. >> Yeah, silver is an enigma to me. It's treated me very well. You confuse yourself thinking about it as an industrial metal, which of course it is. But the price moves are all they all coincide with precious metals bull markets. I don't know why it is, but I know that it is true that precious metals bull markets begin with the fear buyer. They begin with gold. in effect, gold bullion. And as the advance in the gold bullion price goes faster than the cost of producing gold, the gold company margins start to go and leadership in the precious metals bull market goes from physical gold to the best of the best gold producers, which is what we've seen this year. Then it goes to the best of the rest. You know, the money moves down the quality trail. At some point in time, increasing free cash flows and the momentum of the sector itself validates the precious metals narrative to the generalist investor and when the generalist investor comes into the resource space, I don't know why. I suspect because of the lower unit value, silver goes crazy. I mean, absolutely crazy. I've watched it happen three times in the past. And by the way, uh when that happens, you won't need Rick Rule to tell you it happened. uh people who haven't lived through that bull market drives themselves just literally crazy with a move from I don't know $31 to $33.75 or something like that. Uh we will see in this uh bull market uh that kind of move on a daily basis uh happening several days in a row. Silver was such a fantastic one because there's just not that many great ways to to play it here on on the ASX and and in Australia more broadly. So, it's it's kind of forgotten about a little bit, but I get from >> No, no, no. There's there's silver bugs out there. You just got to interact with them. >> They're out there. Just the ways of playing it in Australia are finer, whereas at the Americas, you have the the deposits and the the companies in in much more abundance. >> You know, you all were you all were spoiled. You had Broken Hill, which was one of the greatest silver mines in the world in drag. Uh, and then you had Canington. So, although you haven't had a lot of starts, you had a lot of finishes or at least a couple spectacular finishes, it's very difficult to duplicate those successes. Um, uh, I think that to the extent that the punter community in Australia begins to reward, uh, the silver narrative, uh, the Australian GEO probably will do pretty good work in the American Cordier era. I'm not sure uh how many primary silver deposits Australia itself will yield, but I note that the Australian investor is becoming much less ethnosentric than he or she used to be. It used to be one of the best ways in the world for a foreign investor to get value was to buy a nonAustralian asset in an Australian company during an Australian bare market where you guys I mean you guys even viewed the New Zealanders as ws you know. Uh >> that day is from my point of view sadly over. >> One more commodity that I've got to ask you about Rick. Tin >> I'm attracted to the tin business. Um, again, it's very difficult to play it. Um, you know, the easily the best tin name in the world is Alphaman. Uh, unfortunately, it's located in the worst part of one of the worst countries on the planet. Um, that's been a challenge. Uh, but I'm I'm quite attracted to tin. Uh, tin is one of those unheralded high-tech minerals. uh you don't have microcircuitry without tin period full stop and the whole world is microcircuitry you've you've explained a sort of similar narrative in the in the PGM space and you've laid it through the physical would you do the same here >> uh the problem with tin in terms of the physical I I looked at it a long time ago when I was with because we looked at the success that we enjoyed with the physical uranium trust and said where can we do this in uh what happens with materials uh like tin and nickel and copper uh is that the price to move it and the price to store it relative to the price of the commodity is a bit too low. Uh it's something that might work as an example for me personally as a speculator. You know, buy a bunch of tin in some warehouse, Koala Lampur or something like that and leave it there. Uh you know, do something smart, nothing. uh but in terms of making it a financial product, the relationship between storage cost, shipping cost and the price of the commodity itself means that the overhead around running the physical trust makes it less attractive to the investor base than say platinum and palladium or gold or even silver. I should tell you an anecdote. you know, it's brought uh we owned on behalf of investors a lot of gold, billions of dollars worth of gold. And I was as a consequence of that allowed into the Royal Canadian Mint to see this gold. And I have to tell you that the pile of gold that constitutes a few billion dollars is distressingly small. Uh it's really unimpressive. Uh, after my disappointment, I was ushered into the room where our silver was. That was much better, much more satisfying. It looked like billions of dollars worth of stuff. I tell you that partially to amuse you, but partially to say that I'm skeptical about the efficacy of investment products, physical investment products, uh, around commodities where, uh, you know, the price relative to scale isn't good. I've got, um, last one for you. You always get asked what your contrarian views are and and you are a contrarian through and through. That's your identity. So, what's your most consensus view in commodity markets and uh and the mining sector right now? >> I'm afraid I'm grow I'm I've uh I've grown to accept the most crowded trade, which is the anti-US dollar trade. Uh and I I I sort of believe the dollar is probably overhated in the near term. Uh as an investment theme for a decade, I think it's still very much intact. Um our uh political class seems to do a wonderful job of promoting the anti-dollar. Uh every time I watch our political leadership, I feel more comfortable with the anti-dollar trade. Uh I remember however uh and my friend uh Joel Litman reminds me of this at our conference, the famous quote that the US dollar is the worst currency in the world with the sole exception of all of the others. And uh while I feel bad about the US dollar in isolation, I feel less bad about it relative to other currencies. Um all of that by way of saying it wouldn't surprise me to see gold take a breather. If the US Federal Reserve doesn't whack US interest rates, if they whack US interest rates, that'll show the world's savers that any concern uh for the legitimacy of the US dollar is a thing of the past in US society. uh if they don't cut interest rates uh I suspect that the dollar price run in the very near term I would define very near term as less than a year is overdone. I I literally am pained to say that I believe that the political and social reality of the United States is such that the US dollar in absolute terms not relative to the Australian dollar or other currencies but rather in absolute terms will lose 75% of its purchasing power in the next 10 years. Uh I lived through that before in the decade of the 1970s according to the office of management budget the US dollar lost 75% of its purchasing power in 10 years. Um that was a character builder and I'm already a character. Uh it wouldn't surprise me uh one must remember in the decade of the 70s when the dollar lost 75% of its purchasing power that the gold price increased 30fold. I'm not suggesting that the gold price is going to go up 30fold. already up 12fold since 2000. But it wouldn't surprise me at all to see the nominal gold price in US dollar terms mirror the decline in purchasing power of the US dollar which would suggest a three or fourfold exp uh expansion in 10 years. So overbought now uh a commodity of necessity over a decade. Fantastic, Rick. The uh the the parallels to the 70s are a super interesting one which we've sort of stewed over a few times in the past, but I think they're they're endlessly sort of fascinating and you could talk about them at length that >> despite not living through the 70s like yourself. >> Have to have that experience for ourselves. Thanks. Uh thanks again for making the time and coming on Money of Mine, Rick. As always, it's great to chat. >> Always a pleasure. I look forward to visiting with the Australian audience. I look forward next year to uh coming down, looking around, speaking at a couple of conferences. I look forward to being down there. I've been gone too long. >> And there we go, mate. Plenty of contrarian wisdom sprinkled in there throughout. A massive thank you to our fantastic partners for making it all happen. Sanvic ground support, focus, the platform by market tech, Axis mineral services, and last but not least, get your tickets to Africa Down Under next week. Huru. >> Now remember, I'm an idiot. JD is an idiot. If you thought any of this was anything other than entertainment, you're an idiot and you need to read out a disclaimer.