Rick Rule: A Generational Precious Metals Bull Market Is JUST STARTING
Summary
Commodities Cycle: Rick Rule projects we are roughly two years from a raging commodities bull market, with near-term softness tied to weaker global growth.
Precious Metals: He is bullish on gold and silver, expecting continued earnings surprises as analysts model lower gold prices than spot, drawing more institutional flows.
Gold Stocks: Despite higher share prices than 18 months ago, he argues valuations remain attractive on a free cash flow NPV basis if current gold prices hold, while warning of inevitable 25–30% drawdowns.
Copper: A structural supply shortfall from decades of underinvestment and permitting bottlenecks supports higher prices, with demand resilience driven by electrification and rising living standards.
Oil & Gas: The sector remains his best risk/reward, citing global underinvestment, incentive prices above current realizations, and eventual price discovery as supply tightens.
Oilfield Services: He highlights Schlumberger (SLB) as a core way to play deferred sustaining capex and new project needs across the industry.
Venezuela: Recent political developments are unlikely to quickly boost supply; infrastructure neglect and entrenched power structures imply long lead times before meaningful output growth.
Portfolio Approach: Emphasizes patience, tolerance for volatility, and focusing on management quality and capital allocation over short-term price moves.
Transcript
Were you getting concerned that you might have missed the rally in gold and silver stocks? [music] Well, my guest today says, "We are still 2 years away from a raging [music] bull market in the commodity sector." His name is Rick Rule. If you like mining stocks, you've probably heard of him. And he'll be one of our keynote speakers [music] at the upcoming Vancouver Resource Investment Conference January 25th and 26th. [music] Check out vicia.com for tickets now. And here is my conversation with the legend, Mr. Rick Rule. [music] Enjoy. >> This is Jay Martin. >> Here I am with Rick Rule. Rick, it's great to have you back on the program. Thank you for making the time. >> Pleasure to be back with you, Jay. I look forward to uh seeing you at your upcoming conference in Vancouver >> right around the corner. Yeah, we're going to talk about that. And there's a whole bunch of stuff I want to go through with you today. Given our last conversation, we talked about the oil and gas sector a lot. I want to ask you about your perspective or thoughts on Venezuela, that whole situation, if it impacts any of the companies you're positioned in, your thesis, any of that. But before we get to that, I'd like to hand the first couple questions off to our Commodity University membership, which you visited uh last month, and they knew you were coming on today. They're big fans of yours and had a couple questions for you. So, we're going to start there. given that VR is only a couple weeks away, their questions pertained to interviewing junior mining CEOs. And so, uh, one of the questions for you, Rick, was if you're not a new investor, but you are new to the mining sector, you're at a conference like the VRIC, and you have 10 or 20 companies on your short list that you want to go and talk to. Could you suggest a standardized maybe three simple questions that a new investor could hit every CEO with that they could then cross reference and compare answers after the fact? I would dearly love to get it down to three, but three doesn't tell me enough to make an investment decision personally. >> Uh in the exploration side of the business, which is mostly what you focus on in your conference, um I really think you start with people. Uh you try to find people who have been successful in the past at mining, but particularly people who've been successful at the task at hand. So if the task at hand is exploring in British Columbia, uh does the team have experience in in accreted terrain uh in epiothermal gold or copper gold pferies uh preferably in BC? Which is to say if their experience is operating a producing mine in French-speaking Quebec, but the task at hand is exploring rather than producing in younger terrains in Western Canada, the experience, while real isn't particularly valid. So you start with the people uh and the task at hand. The second question that I think you have to ask after you've gotten through the people because people let you know if you care about the answers to the other questions you ask them. [laughter] You know, are they worth talking to? Uh the next question is tell me what the most important unanswered question is. uh with junior companies you as the knowledge around the company's asset base increases the value of that asset base increases and the share price can increase. So ask them what the most important unanswered question is that uh that they're going to ask and the related questions uh how long will it take to find out and how much money will it take to find it out and do you have that money? Probably 80% of the time, Jay, that I've asked that question about underserved questions of the last 40 years, the management team has said to me, hm, I never [clears throat] thought about it in that context, which is to say they don't have a plan. To them, the most unimportant important unanswered question is, will I still be drawing a salary in 18 months? And while I can understand their interest in that question, it's of no interest to me whatsoever. >> Mhm. Uh and then the third thing I would ask so that you can ascertain your downside is if you broke up the company today uh and sold the assets in your company to third parties, what would it liquidate for? I'm not trying to say that you have to buy dimes on the dollar, but if the company has a $50 million market cap and the liquidation uh of their assets to willing buyers, knowledgeable buyers is a million bucks, you need to understand that your potential downside is 98%. And you need to take the upside in the context of the downside. So, if I had to limit it to three questions, it would be who are you and why should I care what you have to say? uh how are you going to add value for me in the next 12 to 18 months, which is to say the unanswered question. And what's my downside look like? >> Yeah. No, I appreciate that. I I appreciate that. And when it comes to vetting the people, Rick, if you're newer to the business, what resources would you point them to? Because you could just start by vetting resumes and look, you know, I mean, where I often encourage people to start is what was their previous employment, right? And you kind of mentioned this like were they in a comparable not industry but company and asset prior to >> yeah I'd give them a chance to brag. Uh I'd say um what have you done in the past that leads me to believe that you'll be successful in this regard. Uh tell me about your past successes particularly your past successes in tasks related to the task at hand. Uh, and then just for fun, say, uh, tell me about your more important board members. What do they bring to the party? Are they friends of yours? Uh, or do they do something, uh, gerine? Uh, tell me about your CFO, too. How was he or she chosen? You have to raise a lot of money in the next 10 years. Have these people raised two years, pardon me. Have these guys raised money before? you know uh somebody should be able to answer those questions and you need to be able to answer the to ask the question in the correct frame. Uh tell me about your past successes but particularly those successes at a task that closely resembles the task at hand. Mostly if you ask that question uh it'll disqualify 80% of the companies that you ask the question to. Then you need to decide uh if you're going to make uh an intelligent speculation or if your technique is more like got a hunch, bet a bunch. >> How much do you vet the capital partnerships and relationships of a company? You know, there's been a lot of capital raised in the junior mining sector over the last year. And when that paper comes free trading, sometimes it can be disastrous for the company. They didn't have a lot of options when they went to raise money. money hasn't been available in abundance for about, you know, 10 years. I actually think you probably dispute that, but but I digress. Taking the wrong money, taking short-term money can have disastrous consequences when that hold comes off the stock. How do you vet that? >> I think it's important. It was probably question number 15 for me. Uh probably should should be more important. I uh I do a lot of work with Jeff Phillips and with him it's all about structure. Um, I'm less concerned I am concerned with who is in the cap table. Obviously, uh, I'd like to be involved with investors who I know and love and trust. Uh, people who will be there, people who aren't warrant strippers, but I'm more concerned uh, with how they spend the money and what they spend the money on. I'm less concerned uh about the market price of the company over the next 6 months and I'm much more concerned about how they add value over the next year and a half. I found Jay unfortunately that most of the real money I've made >> uh has come from positions that I've owned for five years, six years. Uh and most of those positions have caused me to face at one point in time or another 50% share price declines >> Mhm. >> from my you know one of my acquisitions. So I've I've come to understand that for me share price activity in the near term is much less important to me than um value creation is. >> Yeah. If I uh if I determine that the value proposition is really truly in my favor and the share price falls by half, uh in my declining years now, I'm almost certain to be a very large buyer. >> Mhm. Uh, I'm almost certain to believe if I like the stock for a buck, thought it was going to three and it falls to 50 cents, I have enough courage in my conviction and my experience now, that I'll likely be a very large buyer. >> I think it's it's very important to pay attention to what you just said, Rick, because I don't know if you can learn that lesson the easy way. I I think you just have to put the reps in. You have to be in the market. you have to go through that emotional distress seeing a correction and then making the wrong choice and then experiencing that duress. Uh having said that you can take shortcuts and one of them is by paying attention to people who have been in the market for decades uh and have come out on top you know good markets and bad and I just really want to encourage people to sit with that what Rick said is that it's a duration game it's a patient game it comes with guaranteed volatility but the biggest wins you've ever experienced that was the cost of those wins right and it's important to keep that front and center >> yeah that's correct and [clears throat] part of the cap table there are some investors out there a lot of investors out there who are good investors, but there are some investors who think very similar similarly to me. Uh, and the fact that they're present on the cap table is important to me. Uh it means that people who do high quality work uh who bring more than money who are similarly patient uh have the same thesis uh that I do having perhaps approached the problem from a different point of view have come to the same conclusion uh that's psychologically helpful to me as an example if I uh if he if I see Dundee Jonathan Goodman in a name uh particularly if it's a development name and I know that his team has vetted it, pulled it apart. Um I feel a lot better. >> Mhm. [snorts] Yeah, that makes sense. Um you know, it's not wrong to investigate a tip, but you should be damn sure you know a lot about the person who gave you the tip, right? And uh I I think about the last 15 years I've spent in this industry and and anything of value that I've I've built or accomplished. Um the greatest to me has been access. When I think about what's my real asset that I've accomplished or acquired in this industry and it's access to the right minds who I can ask questions and trust the answers who when I get a suggestion I can feel very confident the diligence has been done. uh and that community and that network and the access that network's definitely been the lynch pin for me. >> Well, that's certainly where your conference and my conference come in. Uh there [clears throat] are a lot of highquality people, speakers, exhibitors, uh some other attendees uh and having uh access to have a conversation with them uh over coffee, at the bar, however it occurs uh can be invaluable. Mhm. >> Uh, another thing that's uh, interesting about access Jay is a lot of your attendees and a lot of my attendees will say, "Well, Rick, uh, you can talk to the CEO. Uh, he or she will talk to you." Well, if a CEO won't talk to you, they're telling you something very important. Uh, they're telling you that their cost of capital doesn't matter, that they aren't passionate. Uh, I know for a fact that, uh, if a retail investor calls Bob Quartermain, Bob Quartermain's going to call him back. He's going to accord them respect. Uh he cares about his shareholders. He cares about potential shareholders. This is not a Bob Quartermain commercial. It's just to say that there's an A player out there who's 70 years of of age >> who will talk to shareholders or potential shareholders uh and there's some other wouldbe superstars in their 30s that think that they're too important to talk to investors. Guess who you want to invest with. So a person who won't talk to you is telling you something very important. They're telling you that they don't value you and they don't care about their cost of capital. >> Really good information. >> Yeah, 100%. And I I will make it a Bob Cordain commercial. You know, we're opening up the conference victor and Ross Bey because, you know, it's a two-day event. There's six stages. There's tons of content. People are going to hear all variety of predictions, forecasts, analysis, ideas, all of this. And you know, the way I want to open the show up is through the lens of decades of experience from people who have constantly outperformed yourself, Ross, and Bob. Different applications in the industry, but unique perspectives as a consequence. And if people can begin the two-day learning experience through that lens, I think all the better. And that's why we're setting the show up that way. So, I'm looking forward to that panel. It'll be our opener on on the first day of the event. Now, let me ask you, Rick, uh, just going through kind of commodity by commodity right now. Um, you mentioned before we hopped on here that registration for your event is is occurring at a pace twice as fast as last year. You know, I can say the same thing. It feels a bit hot right now. Having said that, I think we're early in the long cycle of the precious metals or or metals rally. What's your take on 2026? Is there any metals that you're eyeing right now and you're like, it's too pricey right now, but I think there might be an opportunity. I just have to be patient. Does anything come to mind? >> Nothing's hated anymore, Jay. >> Uh, you know, when you and I talked five years ago, the social media postings around uranium were 30 to1 negative. >> That's just as good as it gets. You know, there's a lot of hate and I don't see anything that's hated right now. Um, which is too bad. Uh, I agree with your assessment. I think that we are in the midst of a precious metals bull market that will be one for the ages. Uh one that'll be reminiscent of the 70s when I came in the in the business. Uh one that will take the top off of our imagination because we've been beaten so thoroughly since. Uh I think uh we're two years out from a raging commodities bull market, too. I think we have to deal in the interim uh with maybe softer commodity prices that are a consequence of declining global economic growth. The very soft oil quote and the relatively soft copper quote uh relative to production shortfalls tells me that we're having trouble selling material. Uh but I think that that problem begins to alleviate itself. And I also think that supply shortfalls will be greater than potential demand shortfalls. So I I think we're going to have two bull markets. Uh the biggest opportunity risk relative to reward that I see in the resource space is still the oil and gas business. >> Mhm. >> For all the reasons that I talked the last time that you and I visited. But if you're a believer that today's gold price holds, and I am, I mean, yes, we will have periodic de declines and they'll be ugly. But if you believe that the long trend long-term trend of gold is steady or up, which I believe the gold stocks are not expensive, uh they are certainly priced higher now than they were 18 months ago, but the net present value of those companies free cash flows at $4,200 gold is way way way higher than it was at $2,500 gold. Yeah, >> I did net present value calculations on Agniko Eagle uh in my last three conferences where they've been an exhibitor and the stock is by my metric uh which is to say the net present value of free cash flows cheaper after the stock has doubled than it was before it doubled as a consequence of the fact the net present values are higher. The other thing that your listeners need to pay attention to which is a little subtle is that we are going to continue to get earning surprises, good ones. The reasons for that is as follows. Uh despite the fact that the strategists on Wall Street and Bay Street are characteristically talking about five and $6,000 gold, the analysts are using 3,200 in their earnings forecasts. So, if your forecast is predicated on $3,200 gold, you're selling gold for 4,200. It's kind of tough not to have an earnings surprise. So, uh I I suspect the people that have the bigger names, the bigger producers, uh and some of the intermediate producers are going to have a continuation of uh last year's uh positive earning supplies shocks, which will inert the benefit of everybody. Now I that's a very cheery note. Uh, one of the things that happens when you interview a guy of my age that's been in the market as long as I is I always have to throw the counterpoint in, and I do despite the fact that I believe in higher, probably sharply higher nominal gold prices over 10 years, we will absolutely positively, without a doubt, experience a 25 or 30% price decline at some point in time. Uh, I would urge people to study history. In the 1970s bull market, the price of gold went from $35 to $850. An epic run. And in the middle of that, in 1975, the gold price fell by half and the gold equities fell by more. So, speculators need to steal themselves temperamentally and financially for volatility. Uh it's interesting to note that that 50% decline in the gold price didn't derail the gold bull market. The people who got shaken out by it missed a move from $100 an ounce to $850 an ounce. An eight-fold move in six years. [clears throat] Uh it's a test of character. Uh but that's coming. Make no mistake. You know, the earning surprises I think are important to pay attention to because you could make the assumption that institutional money needs to wait for those earning reports before they can move in a major way and some will move first and others later. But after exposure to consistent earnings reports that are beating expectations, more institutions will probably be mandated to gain exposure to the gold sector. Do you think that's correct, Rick? And you know, how far are we down that path in terms of general percentage of institutional money that's got exposure to gold thus far? >> The institutional allocations, the overall investment allocations to gold or dimminimist >> still, but they're twice what they were. I mean, one one indication that we're in a precious metals bull market, and you and I have talked about this before, a key indicator of that is that when the generalist money comes into the precious metals space, uh, silver begins to outpace gold. >> I don't know why that is. Perhaps it's because of the lower unit cost. I just know that in the three prior bull markets that have occurred in my lifetime, when the generalist investor comes into the precious metal space, when they're attracted by uh the momentum in the price of gold, silver begins to outpace gold. And I think we've seen that this year, but we've seen it dramatically in the last 3 months. So that does suggest um the beginnings of generalist participation uh in the gold space. Uh it was estimated by JP Morgan Chase two years ago that the market share of precious metals uh relative to all asset classes in investment and savings markets in the United States meant that the the market share of precious metals was less than 1/ half of 1% which is to say 1/ half of 1% of the asset value of all savings investment classes in the United States was invested in precious metals. uh that number is now ostensibly up to something like 75. >> It isn't even 1%. Uh so I would suspect that there's a lot of room left. JP Morgan Chase doesn't have statistics uh going back to 1981, but they suggest by dead reckoning that the market share of precious metals relative to other asset classes in 1981 was between six and 9%. Um they also say that they believe that the median market share of precious metals relative to other asset classes over the last 40 years not all of which have been good for gold is 2%. So uh if the market share would revert to mean which is what I think is going to happen >> demand [clears throat] for precious metals and precious metals related securities increases three to fourfold. Uh which tells you something about the magnitude of the market that I think is in front of us >> now. Walk me through. You made a very bold statement that I I have to ask that we're maybe two years out from a raging commodities market and then you pointed to the copper quote and the oil co quote softness being an indicator there. Um can we start with copper? There's uh and walk me through your thinking there. Two years until and then raging bull market. I want to pick that apart a little bit. There's two years of consensus production deficit in the copper business, which is to say we're using more copper than we're producing. In the face of that, 7% of world copper supply came offline in 2025. Uh Grassburg, Cula, Cobra, Panama, the Cadelo difficulties. Uh if you have a market that's in supply deficit and 7% of supply comes offline, the rebalance of supply and demand would suggest a 25 or 30% increase in the price of copper. Instead, we had 6%. That tells me that demand is much weaker than people anticipated it being. uh otherwise that discipline pardon me that deficit would have found uh a different price equilibrium in the market to balance supply and demand. The same thing on the oil side. People talk about the oil glut uh while uh the biggest swing producer in oil, which is to say the United States has crusted in terms of sale production headed down. Uh $55 oil uh doesn't work for a lot of producers. The International Energy Agency says that the incentive price, the price at which global oil and gas companies earn their cost of capital is $60 plus. So you make the stuff for 60 plus, you sell it for 55, you do it 102 million times a day, which is to say you lose $5 a barrel 102 million times a day, you know, it gets pretty ugly. >> Uh and that's borne out by the sustaining capital investments of the oil and gas industry. uh depending on who you listen to the industry on a global basis including the state controlled firms is underinvesting in sustaining capital to the extent of somewhere between a billion and $2 billion a day. Uh while that may or may not impact the company's abilities to produce in 2020 26 or even 2027 it begins to bite two or three years out. It's a capital intensive business. If you don't add capital someday you have no business. Venezuela's in the news. You know, for the last 22 years, they've deferred sustaining capital investments and their daily production has fallen from 3,300 barrels to 800,000 3.3 million barrels, I'm sorry, a day >> to 800,000 barrels a day. They've had 80% production declines. That's what happens when you defer sustaining capital investments and you eliminate new project investments. And that's happening around the world. It's reminiscent of the last 12 years in the sort of hard rock or hard commodity space, right? The starvation of capital leading to the consensus 2-year copper deficit were probably staring in the face. But that's what you're talking about when you say the oil sector is collectively underinvesting >> in future supply to maintain current supply. That's what we're saying. The replacement ratio effectively and >> and the investment that we've seen in the in the mining side uh I think has been mis misinterpreted. Okay. >> Uh in the first instance, there's a lot of malinvestment. Uh there have been a lot of juniors who haven't been trying to explore. They've tried to twin a previously successful hole so that they can raise the next financing so they can salary it. >> That's not the same as exploration. >> So we have been guilty both of underinvestment and of malinvestment for a very long time. Uh I would argue in the copper space uh we have underinvested for 30 years. And that isn't a deficit that you're going to be able to make up in five years. There's absolutely no curing it. We're going to have price discovery. Not like the copper not like the copper price discovery that we're having right now, >> right? >> Uh and and the same thing in oil and gas. Um the oil and gas valuations aren't as dramatic as they were during COVID. you know, when the oil price briefly went negative, settled out around 20 bucks a barrel, >> but we're going to have uh we're going to have price discovery in the oil and gas business. >> So, that that adds a bit of clarity to what I heard you say about copper when you said, you know, two-year consensus deficit and the price is not responding like it may have because demand's been weaker than we thought, right? Um and my next question therefore was what's going to change that? Why would we suddenly see demand pick up? And if you haven't answered that, awesome. But what you just >> doesn't have to. The supply is going to fall faster. >> That's okay. That's Yes. The 30 years of underinvestment. Yeah, we're just beginning to realize that. >> They say the largest copper mine in the United States producing copper mine is one called Bingham Canyon. >> It's produced for a hundred years. It is the largest copper mine in the US. When you fly into Salt Lake, >> uh you can see it. >> Uh it looks like a moon crater. Uhhuh. >> Uh we need to discover, we need to put in production a new Bing and Canyon every year. [clears throat] And the problem is we don't have any uh right now. >> We got to go find them and develop them. >> Uh and well, one example around copper is resolution. uh a very very very high quality copper project in the United States, allegedly a tier one location in Arizona between two copper mines. >> Uh highway goes across the property, rail grows across the property, power goes for water next to a town full of copper miners. Couldn't be any better. Uh great deposit, over a billion tons of one and a half% copper, three times the average grade worldwide. The thing's been stuck in permitting for 28 years. permitting is a problem. Underinvestment for 30 years is a problem. Now that the copper price is up, greedy governments around the world are doing what greedy governments do. Uh nationalizing mines, uh increasing social rent, taxes. U there's no resolving this problem except for by price. The other thing that people need to understand about copper is that the utility of copper relative to its price is so great. I mean so great uh there's probably you know in an electric vehicle there's probably $1,500 $1,700 worth of copper that allows the sale of a $70,000 Tesla. Let's say the copper price doubles. It almost doesn't change the finished price of the Tesla. >> Mhm. Uh but let's get away from luxury items. There's a billion people on earth who have no access to primary electricity at all. None. We've done a great job in the last 40 years raising the material living standards of the poorest of the poor. Uh and over the next 20 years, I think we solved that problem entirely. Think about the utility of copper to them. Think about going from not having any access to electricity to having the beginnings of the lifestyle enjoyed by J. Martin and Rick wrote uh there is a lot of price elasticity in copper because the utility generated by copper relative to the cost to purchase it is so high >> and a relatively I guess what you're saying is like an inelastic demand right some metals if the price of gold skyrockets some people are going to buy a lot less of it you know if the copper price triples >> uh people will use aluminum wire as an example they'll right to aluminum for copper. They will take a less competent material for a lower price. >> But that's over time. Uh right now the co the right now the substitution makes no sense because copper is so efficient. And of course rising energy prices will increase the uh finished price of aluminum too, >> right? Okay. I'm glad we Yeah. close the circle on that because you know there's a lot of there's like two main camps I find in in copper forecasts and the bulls would say oh look at you know EV demand look at renewable energy infrastructure look at AI data centers like all of this stuff we're going to see demand just go parabolic and the bears would say yeah maybe but we're probably staring in the face some kind of a globally coordinated recession and that's going to crush demand and I don't know which one of those >> that's a worthwhile consideration. >> Okay, >> that I mean a a synchronized global recession or depression >> uh moderates demand enough that we can absorb the supply shortfalls. Not not pleasantly. [laughter] Uh I'm less concerned within a 50% move in copper in substitution. It takes a long time for the fabrication industry >> change. The cure for high prices is always high prices. The cure for low prices is always low prices. But these cures take time. Uh, and the cures are usually less dramatic in a market the size of copper, >> right? And and what I'm hearing you say is regardless of those maybe catalyst that may boost demand, it doesn't matter so much because the real symptom is the 30 years of underinvestment, >> the issue is truly truly truly supply. And the other thing is the um the wonderful job we as a species have done uh raising the material living standards of the poorest of the poor. We've taken three billion people on earth from being being desperately poor and created a circumstance where there's only two billion people and they're poor as opposed to desperately poor. This is a wonderful set of circumstances. Uh it's required a lot of copper. It's going to require a lot more copper and it's a wonderful thing. We should we should hope for that. Even you know the decade well the decade that you came in business 2000 to 2010 really. >> Yeah. uh you know the big story then in commodities was China coming into the market lifting uh 400 million people from rural penury to a reasonable lifestyle even in China they suggest there's 200 million more people surplus people in the countryside who they need to move uh into this millennium uh and that takes copper but you you look beyond China you know you look to Malawi you look to Indonesia you look to India uh a billion people on Earth uh have no access to power. Another billion and a half people have substandard access to power. It isn't just the copper that you use to generate power or to move the power to them. It's the copper that they use once they have access to power to wire their house. Wonderful set of circumstances. >> Is that those are the general numbers? Hey, a billion people in the world with no power. An additional billion and a half with substandard access. So, two and a half billion with substandard access or no access at all. >> Correct. >> Wild. Wild >> big number. And yes, I'm not saying AI isn't important and electric vehicles aren't important. >> Uh I'm saying that there's a base load of demand that people ignore. >> Yeah. No, I I like it. I like it because it kind of gets back to simplicity and less speculative. Now, just to go over back to the oil sector here, um if at present in general the industry is selling at $5 under uh the incentive price according to the International Energy AY's estimates, low prices are the cure for low prices. Um we've been underinvesting in new supply to the tune of 1 to2 billion. What's the time frame for that number, Rick? >> Per day. >> It was per day. All right. I thought you said per day. I just wanted to clarify it. [laughter] All right. So that that kind of lays the investment opportunity out. But I guess the logical question would be why is that the case? Why are we selling under the incentive price? And what do you expect to change and how? >> Uh two things. I think global demand is weaker than we think. uh in particular the growth in Chinese demand has stopped and [clears throat] on the US side the application of legislation and technology has changed the world's largest importer into an exporter. >> What's happened that people haven't noticed in the last 10 years is that in the United States we've drilled most of our tier one locations. >> Uh we've drilled about the industry says 85% of our tier one locations given the current cocktail of technology and cost of capital. So US production uh has crested absent new technology. Uh if if there are new technologies on the horizon that have the same change as horizontal drilling uh as multi-stage fracturing as three and four-fold seismic. uh particularly if those technological changes involve better reservoir mechanics that is recovering more of the oil discovered in a formation then that number changes but utilizing current technology the United States has drilled about 85% of its tier one locations now a tier one location is partly resource partly technology partly tax and partly cost of capital uh we have very low cost of capital right now uh if we have more convergence around cost of capital higher as a consequence of inflation uh then the incentive price needs to go up. Of course uh there are questions in the oil market around the reappearance of Russia in the oil market. I need to say first of all the Russians didn't disappear. Uh what they did is they affected the price. when the when the Russians couldn't sell for world price, they accepted a $15 discount and all of a sudden Russian oil became Indian oil or Iranian oil and it was okay. But the other thing is that assuming that the Russians were able to reenter the market tomorrow, they have been real prime culprits in the lack of sustaining capital investments. It seems that the Russians have had something else to do with their money for the last four years. uh and the consequence of that is that their ability to re-enter the market I think will be similar to their ability to re-enter the market in 1990, 1991, 1992, the last time the Russians needed money. So I think those fears are overdone. Uh the real fears are the standard ones. Uh how much will government steal? >> Mhm. >> Um you know that's a that's a real open question. uh including of course in Canada. >> Now the last we spoke you walked me through a few of your energy positions. Uh I think Exxon was a core position, Chevron, but you also mentioned a handful of service companies like Hallebertson, Schlumbberger and you know as of today short short term since um Maduro was captured some of these companies have bounced about 10%. I think SLB is up around 10 or 11%. Uh so so a couple questions. Does this event in Venezuela adjust your thesis in any way? Does a easy 10% gain so quickly cause you to take some principle off the table? Uh walk me through your thinking there, Rick. >> I don't trade news usually uh because I usually learn that the news isn't. Uh as an example, my Schlumbumberge thesis is that we will need to make up for a lot of deferred sustaining capital investment uh and a hiatus of new project investment and Schlumbumber is the center of that. I mean truly the center of that. There's a whole bunch of oil field service names, >> but I'm not smart enough to know who the be who who they all are. Okay? >> So I try to concentrate my money on the best what I don't have to know. And the best is named Schlumbumberge. The circumstance in Venezuela is nuanced. I think the first thing is that we haven't affected regime change. We've kidnapped Maduro. Those are different. Uh the government is still intact. Uh and the government is by and large Maduro's supporters. No, they're probably a little chasened, [laughter] but it's worth knowing that all the people who are in power there are in power because Maduro put them in power. And below the federal government in Venezuela at state and local levels, he stacked that. and his predecessor Chavez stacked that for 25 years. Those folks aren't gone, they're there. So to the extent that everything has changed uh because the henchman is now in US custody is a bit naive, the ease with which the United States extricated Baduro. I'm not a security analyst uh national security analyst but the ease by which he was uh extricated tells me that there were probably some elements in the Venezuelan government who cooperated. You know, the fact that we were able to build a full-scale replica of his house in Texas, including architectural detail, uh, tells me that we knew a fair bit about that house, you know, and the fact that we were able to get in there and get him before the Venezuelans were aware, >> you know, it tells me that we had some friends or at least we purchased >> Mhm. some information uh inside, but it still remains that there is likely to be substantial domestic opposition to US interference in Venezuela from Venezuelans. And so we're going to need to see how this evolves before we make definitive conclusions about >> Yeah. >> we're going to work all this through. Yeah. >> I mean, there was mostly mainstream media talked about a sea change in Venezuela. What we've seen so far has been the kidnapping of the president. That's it. >> Yeah. And as you mentioned, the the vice president who's now taken the seat, Deli Rodriguez, >> her her brother was Hugo Chavez vice president. It's a very entrenched group. >> Yep. Their father who was also Jorge Rodriguez was the founder of the social league who kidnapped the American executive in like 1976 held it for three years. Jorge was captured, died under torture. It's his kids that are now the establishment and participated in building this elite group within the socialist regime. And to imagine they're not deeply entrenched and going to hold on to power with sort of their right and left hand which are the military and police leadership which are very entrenched as well. and control the ports and the trade and uh it's not a deep bench of diverse thinkers. Right. It strikes me as like you've been handpicked as you mentioned. Anybody who's stepping outside the lines in a socialist dictatorship is typically purged and what's left is a bunch of people who think and and believe the same thing. Um and it's curious to me that anybody might believe but this time it's going to be easy, right? We got the henchmen and now we can affect change. we have a bunch of people in country who are going to play ball with the American strategy. But it's >> I I agree with that completely. They've had 25 Well, the opposition has had 25 years to leave the country. Uh right, >> a lot of the opposition is in Calgary and Houston, >> Costa Rica, Panama, Brazil. >> Yeah. So, >> so I mean obviously the deepest oil reserves in in the world and to me I guess it's a bit unknown what state that infrastructure is in how quickly a restart could actually occur uh would strike me as not quick but what's your take and and do you think that's going to impact at all uh the price of oil just from a supply standpoint? >> I don't think it's going to impact it for the from the supply standpoint for a while. There's people need to understand there's three opportunities there. The first is restoring production. >> Okay, >> that has been diminished through neglect. The second is that the conventional oil exploration potential of the Marbo basin is very high. The third of course is the oil sands. The Oronokco oil sands are substantially larger than the Aabaska oil sands in Canada, but they're capital intensive. Uh they're not going to supply any particular challenge to Canada. That is to say those oil sands Mark Ibo will uh but they're not going to the their oil sands aren't going to aren't going to in the best circumstance present much competition to Canada for 5 years. They will uh should they be developed begin to uh diminish the potential valuation of the Aabaska oil sands because there will be an alternative for the US Gulf Coast refining industry which is oriented towards heavy sour cruds.
Rick Rule: A Generational Precious Metals Bull Market Is JUST STARTING
Summary
Transcript
Were you getting concerned that you might have missed the rally in gold and silver stocks? [music] Well, my guest today says, "We are still 2 years away from a raging [music] bull market in the commodity sector." His name is Rick Rule. If you like mining stocks, you've probably heard of him. And he'll be one of our keynote speakers [music] at the upcoming Vancouver Resource Investment Conference January 25th and 26th. [music] Check out vicia.com for tickets now. And here is my conversation with the legend, Mr. Rick Rule. [music] Enjoy. >> This is Jay Martin. >> Here I am with Rick Rule. Rick, it's great to have you back on the program. Thank you for making the time. >> Pleasure to be back with you, Jay. I look forward to uh seeing you at your upcoming conference in Vancouver >> right around the corner. Yeah, we're going to talk about that. And there's a whole bunch of stuff I want to go through with you today. Given our last conversation, we talked about the oil and gas sector a lot. I want to ask you about your perspective or thoughts on Venezuela, that whole situation, if it impacts any of the companies you're positioned in, your thesis, any of that. But before we get to that, I'd like to hand the first couple questions off to our Commodity University membership, which you visited uh last month, and they knew you were coming on today. They're big fans of yours and had a couple questions for you. So, we're going to start there. given that VR is only a couple weeks away, their questions pertained to interviewing junior mining CEOs. And so, uh, one of the questions for you, Rick, was if you're not a new investor, but you are new to the mining sector, you're at a conference like the VRIC, and you have 10 or 20 companies on your short list that you want to go and talk to. Could you suggest a standardized maybe three simple questions that a new investor could hit every CEO with that they could then cross reference and compare answers after the fact? I would dearly love to get it down to three, but three doesn't tell me enough to make an investment decision personally. >> Uh in the exploration side of the business, which is mostly what you focus on in your conference, um I really think you start with people. Uh you try to find people who have been successful in the past at mining, but particularly people who've been successful at the task at hand. So if the task at hand is exploring in British Columbia, uh does the team have experience in in accreted terrain uh in epiothermal gold or copper gold pferies uh preferably in BC? Which is to say if their experience is operating a producing mine in French-speaking Quebec, but the task at hand is exploring rather than producing in younger terrains in Western Canada, the experience, while real isn't particularly valid. So you start with the people uh and the task at hand. The second question that I think you have to ask after you've gotten through the people because people let you know if you care about the answers to the other questions you ask them. [laughter] You know, are they worth talking to? Uh the next question is tell me what the most important unanswered question is. uh with junior companies you as the knowledge around the company's asset base increases the value of that asset base increases and the share price can increase. So ask them what the most important unanswered question is that uh that they're going to ask and the related questions uh how long will it take to find out and how much money will it take to find it out and do you have that money? Probably 80% of the time, Jay, that I've asked that question about underserved questions of the last 40 years, the management team has said to me, hm, I never [clears throat] thought about it in that context, which is to say they don't have a plan. To them, the most unimportant important unanswered question is, will I still be drawing a salary in 18 months? And while I can understand their interest in that question, it's of no interest to me whatsoever. >> Mhm. Uh and then the third thing I would ask so that you can ascertain your downside is if you broke up the company today uh and sold the assets in your company to third parties, what would it liquidate for? I'm not trying to say that you have to buy dimes on the dollar, but if the company has a $50 million market cap and the liquidation uh of their assets to willing buyers, knowledgeable buyers is a million bucks, you need to understand that your potential downside is 98%. And you need to take the upside in the context of the downside. So, if I had to limit it to three questions, it would be who are you and why should I care what you have to say? uh how are you going to add value for me in the next 12 to 18 months, which is to say the unanswered question. And what's my downside look like? >> Yeah. No, I appreciate that. I I appreciate that. And when it comes to vetting the people, Rick, if you're newer to the business, what resources would you point them to? Because you could just start by vetting resumes and look, you know, I mean, where I often encourage people to start is what was their previous employment, right? And you kind of mentioned this like were they in a comparable not industry but company and asset prior to >> yeah I'd give them a chance to brag. Uh I'd say um what have you done in the past that leads me to believe that you'll be successful in this regard. Uh tell me about your past successes particularly your past successes in tasks related to the task at hand. Uh, and then just for fun, say, uh, tell me about your more important board members. What do they bring to the party? Are they friends of yours? Uh, or do they do something, uh, gerine? Uh, tell me about your CFO, too. How was he or she chosen? You have to raise a lot of money in the next 10 years. Have these people raised two years, pardon me. Have these guys raised money before? you know uh somebody should be able to answer those questions and you need to be able to answer the to ask the question in the correct frame. Uh tell me about your past successes but particularly those successes at a task that closely resembles the task at hand. Mostly if you ask that question uh it'll disqualify 80% of the companies that you ask the question to. Then you need to decide uh if you're going to make uh an intelligent speculation or if your technique is more like got a hunch, bet a bunch. >> How much do you vet the capital partnerships and relationships of a company? You know, there's been a lot of capital raised in the junior mining sector over the last year. And when that paper comes free trading, sometimes it can be disastrous for the company. They didn't have a lot of options when they went to raise money. money hasn't been available in abundance for about, you know, 10 years. I actually think you probably dispute that, but but I digress. Taking the wrong money, taking short-term money can have disastrous consequences when that hold comes off the stock. How do you vet that? >> I think it's important. It was probably question number 15 for me. Uh probably should should be more important. I uh I do a lot of work with Jeff Phillips and with him it's all about structure. Um, I'm less concerned I am concerned with who is in the cap table. Obviously, uh, I'd like to be involved with investors who I know and love and trust. Uh, people who will be there, people who aren't warrant strippers, but I'm more concerned uh, with how they spend the money and what they spend the money on. I'm less concerned uh about the market price of the company over the next 6 months and I'm much more concerned about how they add value over the next year and a half. I found Jay unfortunately that most of the real money I've made >> uh has come from positions that I've owned for five years, six years. Uh and most of those positions have caused me to face at one point in time or another 50% share price declines >> Mhm. >> from my you know one of my acquisitions. So I've I've come to understand that for me share price activity in the near term is much less important to me than um value creation is. >> Yeah. If I uh if I determine that the value proposition is really truly in my favor and the share price falls by half, uh in my declining years now, I'm almost certain to be a very large buyer. >> Mhm. Uh, I'm almost certain to believe if I like the stock for a buck, thought it was going to three and it falls to 50 cents, I have enough courage in my conviction and my experience now, that I'll likely be a very large buyer. >> I think it's it's very important to pay attention to what you just said, Rick, because I don't know if you can learn that lesson the easy way. I I think you just have to put the reps in. You have to be in the market. you have to go through that emotional distress seeing a correction and then making the wrong choice and then experiencing that duress. Uh having said that you can take shortcuts and one of them is by paying attention to people who have been in the market for decades uh and have come out on top you know good markets and bad and I just really want to encourage people to sit with that what Rick said is that it's a duration game it's a patient game it comes with guaranteed volatility but the biggest wins you've ever experienced that was the cost of those wins right and it's important to keep that front and center >> yeah that's correct and [clears throat] part of the cap table there are some investors out there a lot of investors out there who are good investors, but there are some investors who think very similar similarly to me. Uh, and the fact that they're present on the cap table is important to me. Uh it means that people who do high quality work uh who bring more than money who are similarly patient uh have the same thesis uh that I do having perhaps approached the problem from a different point of view have come to the same conclusion uh that's psychologically helpful to me as an example if I uh if he if I see Dundee Jonathan Goodman in a name uh particularly if it's a development name and I know that his team has vetted it, pulled it apart. Um I feel a lot better. >> Mhm. [snorts] Yeah, that makes sense. Um you know, it's not wrong to investigate a tip, but you should be damn sure you know a lot about the person who gave you the tip, right? And uh I I think about the last 15 years I've spent in this industry and and anything of value that I've I've built or accomplished. Um the greatest to me has been access. When I think about what's my real asset that I've accomplished or acquired in this industry and it's access to the right minds who I can ask questions and trust the answers who when I get a suggestion I can feel very confident the diligence has been done. uh and that community and that network and the access that network's definitely been the lynch pin for me. >> Well, that's certainly where your conference and my conference come in. Uh there [clears throat] are a lot of highquality people, speakers, exhibitors, uh some other attendees uh and having uh access to have a conversation with them uh over coffee, at the bar, however it occurs uh can be invaluable. Mhm. >> Uh, another thing that's uh, interesting about access Jay is a lot of your attendees and a lot of my attendees will say, "Well, Rick, uh, you can talk to the CEO. Uh, he or she will talk to you." Well, if a CEO won't talk to you, they're telling you something very important. Uh, they're telling you that their cost of capital doesn't matter, that they aren't passionate. Uh, I know for a fact that, uh, if a retail investor calls Bob Quartermain, Bob Quartermain's going to call him back. He's going to accord them respect. Uh he cares about his shareholders. He cares about potential shareholders. This is not a Bob Quartermain commercial. It's just to say that there's an A player out there who's 70 years of of age >> who will talk to shareholders or potential shareholders uh and there's some other wouldbe superstars in their 30s that think that they're too important to talk to investors. Guess who you want to invest with. So a person who won't talk to you is telling you something very important. They're telling you that they don't value you and they don't care about their cost of capital. >> Really good information. >> Yeah, 100%. And I I will make it a Bob Cordain commercial. You know, we're opening up the conference victor and Ross Bey because, you know, it's a two-day event. There's six stages. There's tons of content. People are going to hear all variety of predictions, forecasts, analysis, ideas, all of this. And you know, the way I want to open the show up is through the lens of decades of experience from people who have constantly outperformed yourself, Ross, and Bob. Different applications in the industry, but unique perspectives as a consequence. And if people can begin the two-day learning experience through that lens, I think all the better. And that's why we're setting the show up that way. So, I'm looking forward to that panel. It'll be our opener on on the first day of the event. Now, let me ask you, Rick, uh, just going through kind of commodity by commodity right now. Um, you mentioned before we hopped on here that registration for your event is is occurring at a pace twice as fast as last year. You know, I can say the same thing. It feels a bit hot right now. Having said that, I think we're early in the long cycle of the precious metals or or metals rally. What's your take on 2026? Is there any metals that you're eyeing right now and you're like, it's too pricey right now, but I think there might be an opportunity. I just have to be patient. Does anything come to mind? >> Nothing's hated anymore, Jay. >> Uh, you know, when you and I talked five years ago, the social media postings around uranium were 30 to1 negative. >> That's just as good as it gets. You know, there's a lot of hate and I don't see anything that's hated right now. Um, which is too bad. Uh, I agree with your assessment. I think that we are in the midst of a precious metals bull market that will be one for the ages. Uh one that'll be reminiscent of the 70s when I came in the in the business. Uh one that will take the top off of our imagination because we've been beaten so thoroughly since. Uh I think uh we're two years out from a raging commodities bull market, too. I think we have to deal in the interim uh with maybe softer commodity prices that are a consequence of declining global economic growth. The very soft oil quote and the relatively soft copper quote uh relative to production shortfalls tells me that we're having trouble selling material. Uh but I think that that problem begins to alleviate itself. And I also think that supply shortfalls will be greater than potential demand shortfalls. So I I think we're going to have two bull markets. Uh the biggest opportunity risk relative to reward that I see in the resource space is still the oil and gas business. >> Mhm. >> For all the reasons that I talked the last time that you and I visited. But if you're a believer that today's gold price holds, and I am, I mean, yes, we will have periodic de declines and they'll be ugly. But if you believe that the long trend long-term trend of gold is steady or up, which I believe the gold stocks are not expensive, uh they are certainly priced higher now than they were 18 months ago, but the net present value of those companies free cash flows at $4,200 gold is way way way higher than it was at $2,500 gold. Yeah, >> I did net present value calculations on Agniko Eagle uh in my last three conferences where they've been an exhibitor and the stock is by my metric uh which is to say the net present value of free cash flows cheaper after the stock has doubled than it was before it doubled as a consequence of the fact the net present values are higher. The other thing that your listeners need to pay attention to which is a little subtle is that we are going to continue to get earning surprises, good ones. The reasons for that is as follows. Uh despite the fact that the strategists on Wall Street and Bay Street are characteristically talking about five and $6,000 gold, the analysts are using 3,200 in their earnings forecasts. So, if your forecast is predicated on $3,200 gold, you're selling gold for 4,200. It's kind of tough not to have an earnings surprise. So, uh I I suspect the people that have the bigger names, the bigger producers, uh and some of the intermediate producers are going to have a continuation of uh last year's uh positive earning supplies shocks, which will inert the benefit of everybody. Now I that's a very cheery note. Uh, one of the things that happens when you interview a guy of my age that's been in the market as long as I is I always have to throw the counterpoint in, and I do despite the fact that I believe in higher, probably sharply higher nominal gold prices over 10 years, we will absolutely positively, without a doubt, experience a 25 or 30% price decline at some point in time. Uh, I would urge people to study history. In the 1970s bull market, the price of gold went from $35 to $850. An epic run. And in the middle of that, in 1975, the gold price fell by half and the gold equities fell by more. So, speculators need to steal themselves temperamentally and financially for volatility. Uh it's interesting to note that that 50% decline in the gold price didn't derail the gold bull market. The people who got shaken out by it missed a move from $100 an ounce to $850 an ounce. An eight-fold move in six years. [clears throat] Uh it's a test of character. Uh but that's coming. Make no mistake. You know, the earning surprises I think are important to pay attention to because you could make the assumption that institutional money needs to wait for those earning reports before they can move in a major way and some will move first and others later. But after exposure to consistent earnings reports that are beating expectations, more institutions will probably be mandated to gain exposure to the gold sector. Do you think that's correct, Rick? And you know, how far are we down that path in terms of general percentage of institutional money that's got exposure to gold thus far? >> The institutional allocations, the overall investment allocations to gold or dimminimist >> still, but they're twice what they were. I mean, one one indication that we're in a precious metals bull market, and you and I have talked about this before, a key indicator of that is that when the generalist money comes into the precious metals space, uh, silver begins to outpace gold. >> I don't know why that is. Perhaps it's because of the lower unit cost. I just know that in the three prior bull markets that have occurred in my lifetime, when the generalist investor comes into the precious metal space, when they're attracted by uh the momentum in the price of gold, silver begins to outpace gold. And I think we've seen that this year, but we've seen it dramatically in the last 3 months. So that does suggest um the beginnings of generalist participation uh in the gold space. Uh it was estimated by JP Morgan Chase two years ago that the market share of precious metals uh relative to all asset classes in investment and savings markets in the United States meant that the the market share of precious metals was less than 1/ half of 1% which is to say 1/ half of 1% of the asset value of all savings investment classes in the United States was invested in precious metals. uh that number is now ostensibly up to something like 75. >> It isn't even 1%. Uh so I would suspect that there's a lot of room left. JP Morgan Chase doesn't have statistics uh going back to 1981, but they suggest by dead reckoning that the market share of precious metals relative to other asset classes in 1981 was between six and 9%. Um they also say that they believe that the median market share of precious metals relative to other asset classes over the last 40 years not all of which have been good for gold is 2%. So uh if the market share would revert to mean which is what I think is going to happen >> demand [clears throat] for precious metals and precious metals related securities increases three to fourfold. Uh which tells you something about the magnitude of the market that I think is in front of us >> now. Walk me through. You made a very bold statement that I I have to ask that we're maybe two years out from a raging commodities market and then you pointed to the copper quote and the oil co quote softness being an indicator there. Um can we start with copper? There's uh and walk me through your thinking there. Two years until and then raging bull market. I want to pick that apart a little bit. There's two years of consensus production deficit in the copper business, which is to say we're using more copper than we're producing. In the face of that, 7% of world copper supply came offline in 2025. Uh Grassburg, Cula, Cobra, Panama, the Cadelo difficulties. Uh if you have a market that's in supply deficit and 7% of supply comes offline, the rebalance of supply and demand would suggest a 25 or 30% increase in the price of copper. Instead, we had 6%. That tells me that demand is much weaker than people anticipated it being. uh otherwise that discipline pardon me that deficit would have found uh a different price equilibrium in the market to balance supply and demand. The same thing on the oil side. People talk about the oil glut uh while uh the biggest swing producer in oil, which is to say the United States has crusted in terms of sale production headed down. Uh $55 oil uh doesn't work for a lot of producers. The International Energy Agency says that the incentive price, the price at which global oil and gas companies earn their cost of capital is $60 plus. So you make the stuff for 60 plus, you sell it for 55, you do it 102 million times a day, which is to say you lose $5 a barrel 102 million times a day, you know, it gets pretty ugly. >> Uh and that's borne out by the sustaining capital investments of the oil and gas industry. uh depending on who you listen to the industry on a global basis including the state controlled firms is underinvesting in sustaining capital to the extent of somewhere between a billion and $2 billion a day. Uh while that may or may not impact the company's abilities to produce in 2020 26 or even 2027 it begins to bite two or three years out. It's a capital intensive business. If you don't add capital someday you have no business. Venezuela's in the news. You know, for the last 22 years, they've deferred sustaining capital investments and their daily production has fallen from 3,300 barrels to 800,000 3.3 million barrels, I'm sorry, a day >> to 800,000 barrels a day. They've had 80% production declines. That's what happens when you defer sustaining capital investments and you eliminate new project investments. And that's happening around the world. It's reminiscent of the last 12 years in the sort of hard rock or hard commodity space, right? The starvation of capital leading to the consensus 2-year copper deficit were probably staring in the face. But that's what you're talking about when you say the oil sector is collectively underinvesting >> in future supply to maintain current supply. That's what we're saying. The replacement ratio effectively and >> and the investment that we've seen in the in the mining side uh I think has been mis misinterpreted. Okay. >> Uh in the first instance, there's a lot of malinvestment. Uh there have been a lot of juniors who haven't been trying to explore. They've tried to twin a previously successful hole so that they can raise the next financing so they can salary it. >> That's not the same as exploration. >> So we have been guilty both of underinvestment and of malinvestment for a very long time. Uh I would argue in the copper space uh we have underinvested for 30 years. And that isn't a deficit that you're going to be able to make up in five years. There's absolutely no curing it. We're going to have price discovery. Not like the copper not like the copper price discovery that we're having right now, >> right? >> Uh and and the same thing in oil and gas. Um the oil and gas valuations aren't as dramatic as they were during COVID. you know, when the oil price briefly went negative, settled out around 20 bucks a barrel, >> but we're going to have uh we're going to have price discovery in the oil and gas business. >> So, that that adds a bit of clarity to what I heard you say about copper when you said, you know, two-year consensus deficit and the price is not responding like it may have because demand's been weaker than we thought, right? Um and my next question therefore was what's going to change that? Why would we suddenly see demand pick up? And if you haven't answered that, awesome. But what you just >> doesn't have to. The supply is going to fall faster. >> That's okay. That's Yes. The 30 years of underinvestment. Yeah, we're just beginning to realize that. >> They say the largest copper mine in the United States producing copper mine is one called Bingham Canyon. >> It's produced for a hundred years. It is the largest copper mine in the US. When you fly into Salt Lake, >> uh you can see it. >> Uh it looks like a moon crater. Uhhuh. >> Uh we need to discover, we need to put in production a new Bing and Canyon every year. [clears throat] And the problem is we don't have any uh right now. >> We got to go find them and develop them. >> Uh and well, one example around copper is resolution. uh a very very very high quality copper project in the United States, allegedly a tier one location in Arizona between two copper mines. >> Uh highway goes across the property, rail grows across the property, power goes for water next to a town full of copper miners. Couldn't be any better. Uh great deposit, over a billion tons of one and a half% copper, three times the average grade worldwide. The thing's been stuck in permitting for 28 years. permitting is a problem. Underinvestment for 30 years is a problem. Now that the copper price is up, greedy governments around the world are doing what greedy governments do. Uh nationalizing mines, uh increasing social rent, taxes. U there's no resolving this problem except for by price. The other thing that people need to understand about copper is that the utility of copper relative to its price is so great. I mean so great uh there's probably you know in an electric vehicle there's probably $1,500 $1,700 worth of copper that allows the sale of a $70,000 Tesla. Let's say the copper price doubles. It almost doesn't change the finished price of the Tesla. >> Mhm. Uh but let's get away from luxury items. There's a billion people on earth who have no access to primary electricity at all. None. We've done a great job in the last 40 years raising the material living standards of the poorest of the poor. Uh and over the next 20 years, I think we solved that problem entirely. Think about the utility of copper to them. Think about going from not having any access to electricity to having the beginnings of the lifestyle enjoyed by J. Martin and Rick wrote uh there is a lot of price elasticity in copper because the utility generated by copper relative to the cost to purchase it is so high >> and a relatively I guess what you're saying is like an inelastic demand right some metals if the price of gold skyrockets some people are going to buy a lot less of it you know if the copper price triples >> uh people will use aluminum wire as an example they'll right to aluminum for copper. They will take a less competent material for a lower price. >> But that's over time. Uh right now the co the right now the substitution makes no sense because copper is so efficient. And of course rising energy prices will increase the uh finished price of aluminum too, >> right? Okay. I'm glad we Yeah. close the circle on that because you know there's a lot of there's like two main camps I find in in copper forecasts and the bulls would say oh look at you know EV demand look at renewable energy infrastructure look at AI data centers like all of this stuff we're going to see demand just go parabolic and the bears would say yeah maybe but we're probably staring in the face some kind of a globally coordinated recession and that's going to crush demand and I don't know which one of those >> that's a worthwhile consideration. >> Okay, >> that I mean a a synchronized global recession or depression >> uh moderates demand enough that we can absorb the supply shortfalls. Not not pleasantly. [laughter] Uh I'm less concerned within a 50% move in copper in substitution. It takes a long time for the fabrication industry >> change. The cure for high prices is always high prices. The cure for low prices is always low prices. But these cures take time. Uh, and the cures are usually less dramatic in a market the size of copper, >> right? And and what I'm hearing you say is regardless of those maybe catalyst that may boost demand, it doesn't matter so much because the real symptom is the 30 years of underinvestment, >> the issue is truly truly truly supply. And the other thing is the um the wonderful job we as a species have done uh raising the material living standards of the poorest of the poor. We've taken three billion people on earth from being being desperately poor and created a circumstance where there's only two billion people and they're poor as opposed to desperately poor. This is a wonderful set of circumstances. Uh it's required a lot of copper. It's going to require a lot more copper and it's a wonderful thing. We should we should hope for that. Even you know the decade well the decade that you came in business 2000 to 2010 really. >> Yeah. uh you know the big story then in commodities was China coming into the market lifting uh 400 million people from rural penury to a reasonable lifestyle even in China they suggest there's 200 million more people surplus people in the countryside who they need to move uh into this millennium uh and that takes copper but you you look beyond China you know you look to Malawi you look to Indonesia you look to India uh a billion people on Earth uh have no access to power. Another billion and a half people have substandard access to power. It isn't just the copper that you use to generate power or to move the power to them. It's the copper that they use once they have access to power to wire their house. Wonderful set of circumstances. >> Is that those are the general numbers? Hey, a billion people in the world with no power. An additional billion and a half with substandard access. So, two and a half billion with substandard access or no access at all. >> Correct. >> Wild. Wild >> big number. And yes, I'm not saying AI isn't important and electric vehicles aren't important. >> Uh I'm saying that there's a base load of demand that people ignore. >> Yeah. No, I I like it. I like it because it kind of gets back to simplicity and less speculative. Now, just to go over back to the oil sector here, um if at present in general the industry is selling at $5 under uh the incentive price according to the International Energy AY's estimates, low prices are the cure for low prices. Um we've been underinvesting in new supply to the tune of 1 to2 billion. What's the time frame for that number, Rick? >> Per day. >> It was per day. All right. I thought you said per day. I just wanted to clarify it. [laughter] All right. So that that kind of lays the investment opportunity out. But I guess the logical question would be why is that the case? Why are we selling under the incentive price? And what do you expect to change and how? >> Uh two things. I think global demand is weaker than we think. uh in particular the growth in Chinese demand has stopped and [clears throat] on the US side the application of legislation and technology has changed the world's largest importer into an exporter. >> What's happened that people haven't noticed in the last 10 years is that in the United States we've drilled most of our tier one locations. >> Uh we've drilled about the industry says 85% of our tier one locations given the current cocktail of technology and cost of capital. So US production uh has crested absent new technology. Uh if if there are new technologies on the horizon that have the same change as horizontal drilling uh as multi-stage fracturing as three and four-fold seismic. uh particularly if those technological changes involve better reservoir mechanics that is recovering more of the oil discovered in a formation then that number changes but utilizing current technology the United States has drilled about 85% of its tier one locations now a tier one location is partly resource partly technology partly tax and partly cost of capital uh we have very low cost of capital right now uh if we have more convergence around cost of capital higher as a consequence of inflation uh then the incentive price needs to go up. Of course uh there are questions in the oil market around the reappearance of Russia in the oil market. I need to say first of all the Russians didn't disappear. Uh what they did is they affected the price. when the when the Russians couldn't sell for world price, they accepted a $15 discount and all of a sudden Russian oil became Indian oil or Iranian oil and it was okay. But the other thing is that assuming that the Russians were able to reenter the market tomorrow, they have been real prime culprits in the lack of sustaining capital investments. It seems that the Russians have had something else to do with their money for the last four years. uh and the consequence of that is that their ability to re-enter the market I think will be similar to their ability to re-enter the market in 1990, 1991, 1992, the last time the Russians needed money. So I think those fears are overdone. Uh the real fears are the standard ones. Uh how much will government steal? >> Mhm. >> Um you know that's a that's a real open question. uh including of course in Canada. >> Now the last we spoke you walked me through a few of your energy positions. Uh I think Exxon was a core position, Chevron, but you also mentioned a handful of service companies like Hallebertson, Schlumbberger and you know as of today short short term since um Maduro was captured some of these companies have bounced about 10%. I think SLB is up around 10 or 11%. Uh so so a couple questions. Does this event in Venezuela adjust your thesis in any way? Does a easy 10% gain so quickly cause you to take some principle off the table? Uh walk me through your thinking there, Rick. >> I don't trade news usually uh because I usually learn that the news isn't. Uh as an example, my Schlumbumberge thesis is that we will need to make up for a lot of deferred sustaining capital investment uh and a hiatus of new project investment and Schlumbumber is the center of that. I mean truly the center of that. There's a whole bunch of oil field service names, >> but I'm not smart enough to know who the be who who they all are. Okay? >> So I try to concentrate my money on the best what I don't have to know. And the best is named Schlumbumberge. The circumstance in Venezuela is nuanced. I think the first thing is that we haven't affected regime change. We've kidnapped Maduro. Those are different. Uh the government is still intact. Uh and the government is by and large Maduro's supporters. No, they're probably a little chasened, [laughter] but it's worth knowing that all the people who are in power there are in power because Maduro put them in power. And below the federal government in Venezuela at state and local levels, he stacked that. and his predecessor Chavez stacked that for 25 years. Those folks aren't gone, they're there. So to the extent that everything has changed uh because the henchman is now in US custody is a bit naive, the ease with which the United States extricated Baduro. I'm not a security analyst uh national security analyst but the ease by which he was uh extricated tells me that there were probably some elements in the Venezuelan government who cooperated. You know, the fact that we were able to build a full-scale replica of his house in Texas, including architectural detail, uh, tells me that we knew a fair bit about that house, you know, and the fact that we were able to get in there and get him before the Venezuelans were aware, >> you know, it tells me that we had some friends or at least we purchased >> Mhm. some information uh inside, but it still remains that there is likely to be substantial domestic opposition to US interference in Venezuela from Venezuelans. And so we're going to need to see how this evolves before we make definitive conclusions about >> Yeah. >> we're going to work all this through. Yeah. >> I mean, there was mostly mainstream media talked about a sea change in Venezuela. What we've seen so far has been the kidnapping of the president. That's it. >> Yeah. And as you mentioned, the the vice president who's now taken the seat, Deli Rodriguez, >> her her brother was Hugo Chavez vice president. It's a very entrenched group. >> Yep. Their father who was also Jorge Rodriguez was the founder of the social league who kidnapped the American executive in like 1976 held it for three years. Jorge was captured, died under torture. It's his kids that are now the establishment and participated in building this elite group within the socialist regime. And to imagine they're not deeply entrenched and going to hold on to power with sort of their right and left hand which are the military and police leadership which are very entrenched as well. and control the ports and the trade and uh it's not a deep bench of diverse thinkers. Right. It strikes me as like you've been handpicked as you mentioned. Anybody who's stepping outside the lines in a socialist dictatorship is typically purged and what's left is a bunch of people who think and and believe the same thing. Um and it's curious to me that anybody might believe but this time it's going to be easy, right? We got the henchmen and now we can affect change. we have a bunch of people in country who are going to play ball with the American strategy. But it's >> I I agree with that completely. They've had 25 Well, the opposition has had 25 years to leave the country. Uh right, >> a lot of the opposition is in Calgary and Houston, >> Costa Rica, Panama, Brazil. >> Yeah. So, >> so I mean obviously the deepest oil reserves in in the world and to me I guess it's a bit unknown what state that infrastructure is in how quickly a restart could actually occur uh would strike me as not quick but what's your take and and do you think that's going to impact at all uh the price of oil just from a supply standpoint? >> I don't think it's going to impact it for the from the supply standpoint for a while. There's people need to understand there's three opportunities there. The first is restoring production. >> Okay, >> that has been diminished through neglect. The second is that the conventional oil exploration potential of the Marbo basin is very high. The third of course is the oil sands. The Oronokco oil sands are substantially larger than the Aabaska oil sands in Canada, but they're capital intensive. Uh they're not going to supply any particular challenge to Canada. That is to say those oil sands Mark Ibo will uh but they're not going to the their oil sands aren't going to aren't going to in the best circumstance present much competition to Canada for 5 years. They will uh should they be developed begin to uh diminish the potential valuation of the Aabaska oil sands because there will be an alternative for the US Gulf Coast refining industry which is oriented towards heavy sour cruds.