Contrarian Investment Opportunities in Natural Resources

Maurice Jackson of Proven and Probable has recently interviewed Sprott U.S. Holdings CEO Rick Rule, a well known specialist and “old hand” in the natural resource space. This is quite a wide-ranging and interesting interview, so we decided to present it to our readers. Below you find a summary and our comments on the main topics discussed, a video/podcast of the interview,  as well as a download link to a PDF file of the transcript for later reference.


Sprott US Holdings CEO Rick Rule


A summary of the main topics discussed and a few brief comments:


  1. Silver, Platinum and Palladium

Rick provides his views on non-gold precious metals, all of which have a large industrial demand component. Many of the ideas he presents in this context are fairly widely known but he also mentions a few issues which are rarely discussed and are probably not on the forefront of most investors’ minds. This includes e.g. his view on why silver supply-demand fundamentals are notoriously difficult to forecast, it seems there are a number of important drivers are actually not all that well known.

With respect to PGMs we would note that at current prices – particularly the prices for platinum and rhodium – it seems quite likely to us that a contrarian opportunity is close at hand. As a general remark to this we should point out that there were frequently time periods in the past (of short to medium duration) in which platinum prices moved independently of the trend in other precious metals and commodities more generally.

  1. “Energy Metals” (Lithium, Copper, Uranium)

In this segment Rick talks about metals like lithium, which has become a focus of investors with the increasing popularity of electric vehicles, but also other base metals that are likely to continue to benefit from the rising prosperity of people in emerging markets and the concomitant growth in energy demand.

Some of our readers may recall the Q1 2018 Incrementum conference call (see: “The Future of Copper” for the details), which was attended by special guest Gianni Kovacevic, the chairman of Copperbank, who spoke to us at great length about the effects of this development on the future demand for copper, a topic Rick touches upon as well.

Another energy metal Rick discusses in some detail in this interview is uranium, which certainly looks like a potential contrarian opportunity as well, given its current price.

  1. Project Generators

There is a brief detour on project generators in natural resources. We actually quite like a number of companies in this sub-sector – they work in a specialized niche that looks highly promising to us. Briefly, what these companies do is this: they build up portfolios of undeveloped and/or under-explored mineral land packages that appear to have potential (either by purchasing them outright or by staking) and then try to discover viable deposits. Once they have done so, they either spin off the discoveries into separate companies, or they sell them wholly or partly to financially strong senior mining companies with the wherewithal to develop them.

Monetization can take many forms which are sometimes mixed, ranging from outright cash payments to exploration/development commitments in exchange for majority stakes, to royalties on future production. This allows project generator companies to proceed with looking for the next viable deposit without having to dilute existing shareholders. The best of them occasionally even manage to create immediate returns for their shareholders in the form of special dividends upon project monetization and/or the distribution of free shares in projects that are farmed out and spun-off. We only regret that this part of the interview is a bit short, but we will definitely return to this topic in a future post. As Rick notes “these companies are neglected, which is odd” (as they are on average among the most successful companies in the exploration space). Naturally this neglect is precisely what creates great opportunities in this sector.

  1. Agricultural Sector: Agricultural Real Estate, Water and Water Rights

This is another very interesting area about which we have at best superficial knowledge. We were for instance blissfully unaware that there are in fact listed farming companies that have noteworthy ownership of water rights harboring great potential to increase in value, as they are scarce while water is obviously an indispensable resource. As a rule, water rights are privately owned and therefore inaccessible to most investors. It is good to know that there are actually a few exceptions (obviously, one has to do a lot of due diligence and analyze these businesses in great detail before one can tell with certainty which ones harbor the greatest potential in the context of water rights, but Rick provides us with a good starting point).

  1. Sprott Inc.

Sprott itself is a publicly traded company (symbol on the TSX: SII; in the US OTC market: SPOXF). As Rick Rule quite reasonably points out, the Sprott brand name is likely to become highly attractive in a bull market for natural resources, and particularly in a precious metals bull market, as Sprott is best known for its PM exposure and expertise. Even now, with precious metals essentially going nowhere, the company seems to be doing quite well, as evidenced by this brief summary Rick provides:I can tell you that it’s a prudently run company. We have no debt. We increased our EBITA in the last two years by roughly 50%. We earn and pay a generous dividend.”

Rick mentions that through conferences the company organizes it regularly brings together very interesting companies and high quality presenters (such as Doug Casey, Jim Grant, Grant Williams, Jim Rickards, David Stockman et al.), helping to educate investors in the process (as an aside, Jim Rickards is a fellow member of the Incrementum Advisory Board). The intellectual capital brought to these conferences and the networking opportunities they provide are no doubt of great value. In this interview segment our friend Jayant Bhandari (and a frequent contributor to this blog) also gets a well-deserved plug for his upcoming “Capitalism and Morality” symposium.


Sprott Inc. (SII), daily in Canadian dollars (TSX quote) – the company has evidently done well, despite the absence of a precious metals bull market since 2011. Investing in it is one way in which one can “buy Rick Rule”.


In 45 minutes these subjects can of course not be discussed in as much detail as one would like – but the interview definitely provides interesting ideas and useful pointers for further research. Without further ado, here is the interview:


Maurice Jackson interviews Rick Rule – investing in natural resources


Download link to the transcript:

Maurice Jackson Interviews Rick Rule – Investing in Natural Resources (PDF)




Emigrate While You Can... Learn More




Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.


Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA


Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Pushing Past the Breaking Point
      Schemes and Shams Man’s willful determination to resist the natural order are in vain.  Still, he pushes onward, always grasping for the big breakthrough. The allure of something for nothing is too enticing to pass up.   From the “displays of disbelief, revealing touching old-fashioned notions” file... [PT]   Systems of elaborate folly have been erected with the most impossible of promises.  That prosperity can be attained without labor.  That benefits...
  • The Myth of Capitalism - A Book by Jonathan Tepper
      Crony Capitalism vs. Free Markets Many of our readers are probably aware of the excellent work our friend Jonathan Tepper does for Variant Perception (VP)*****, a financial research boutique that really does bring a unique perspective to the table*. Jonathan (with co-author Denise Hearn) has just added a new book to his résumé, which is going to be released on 12 November: The Myth of Capitalism (MoC) – Monopolies and the Death of Competition** (a link to the official site is at the...
  • Three Cheers for James Riley!
      Going All In All people, of both good and questionable character, share a singular talent.  They excel at taking something that’s tolerable in moderation, and then pushing it to the outer limits of absurdity.  Why live with restraint when you can get radical?   A fairly famous stretch of LA riverbed graffiti... [PT] Photo credit: saber   Public and private debt levels, NASDAQ stock valuations, the federal register, face tattoos, canned energy drinks.  You name...
  • Crumbling Piles of Sand
      Just a Little Avalanche or an Implosion? A few years ago, we briefly discussed the dynamics of sand piles in these pages, which are a special field of study in mathematics and physics (mathematically inclined readers can take a look at two papers on the subject here:”Driving Sandpiles to Criticality and Beyond “ (PDF) and  'Games on Line Graphs and Sand Piles “(PDF) – unfortunately two other studies that used to be available have in the meantime disappeared from the...
  • When Fake Money Becomes Scarce
      Remaining Focused A rousing display of diversions this week assured the American populace was looking every which way but right under its collective nose.  Midterm elections.  White House spats with purveyors of fake news.  The forced resignation of Attorney General Sessions...   Old drug warrior (otherwise recused) on his way home to Alabama...   Sideshows like these, and many more, offered near limitless opportunities to focus on matters of insignificance.  Why...
  • Fun and Profit - Precious Metals Supply and Demand
      While Not Saving The Planet, Let Us At Least Have A Good Time The price of gold went up seven bucks, and that of silver rose eight pennies. For many people, the attraction to gold and silver began with a desire to protect themselves from the monetary train wreck of 2008. That often grew into a sense that gold is the solution to that problem.   The post 2008 GFC monetary train wreck: US true broad money supply is expanded by more than 153% in a mere decade, as the Fed takes...
  • Wizard’s First Rule – Precious Metals Supply and Demand
      The Last to Go Terry Goodkind wrote an epic fantasy series. The first book in the series is entitled Wizard’s First Rule. We recommend the book highly, if you’re into that sort of thing.   An image from the title page of Terry Goodkind's best-selling fantasy epic “Wizard's First Rule”. We'd be at bit wary of standing around on that stone-slab bridge to be honest. [PT]   However, for purposes of this essay, the important part is the rule...
  • US Stock Market - Re-Coupling with a Panic Cycle?
      The Mighty Gartman Investment newsletter writer Dennis Gartman (a.k.a. “the Commodities King”) has been a target of ridicule at Zerohedge for a long time. His pompous style of writing and his uncanny ability to frequently make perfectly mistimed short term market calls have made him an easy target.* It would be quite ironic if a so far quite good recommendation he made last week were to turn into the call of a lifetime (see ZH: “Gartman: 'We Are Officially Recommending Shorting...
  • Roger Barris for Congress!
      Economic Man Threatens to Leave You Alone if Elected This one is mainly for readers residing in that glorious water source for California commonly known as Colorado. In case you are not aware of it yet, Roger “Economic Man” Barris, an occasional contributor to this site, is running for Congress in Colorado on a Libertarian Party ticket. We will briefly explain why you should vote for Roger, but first two pictures:   Roger Barris, Libertarian Party candidate for the House...
  • It's Not That Day Just Yet - Precious Metals Supply and Demand
      Degrees of Urgency Monday was Veterans Day, a bank holiday in the US. The prices of gold and silver dropped $23 and $0.61 respectively. “But isn’t gold supposed to go up when...?”   Warren Buffet and Aragorn discuss what to do with the gold. Aragorn wants it, because he knows that even if it's not today, “that day” will come. [PT]   Why? Because everyone else will bid it up. Why? Because they expect someone else to bid it up. Why? Warren Buffet is...
  • Revisiting the Halloween Effect
      From Crash Danger to End-of-the-Year Ramp   [Ed note by PT: we are unfortunately a week late in posting this issue of SI, which didn't reach us in time due to a technical problem. We decided to post it belatedly anyway: for one thing, the effect under discussion is normally in effect until the end of the year; for another, the statistical validity of this information goes beyond the current year, as it is a recurring phenomenon. Lastly we would note that we have a strong...

Support Acting Man

Item Guides

Austrian Theory and Investment


The Review Insider


Dog Blow


THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts


Gold in USD:

[Most Recent Quotes from]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


Mish Talk

Buy Silver Now!
Buy Gold Now!