Categories: Base Metals / Energy / General Market Commentary / Precious Metals
Topics: General Base Metals / General Energy / General Market Commentary / General Precious Metals

Rick Rule on the Future of the Junior Resource Market

Rick Rule on the Future of the Junior Resource Market


Sprott US Holdings’ President and CEO, Rick Rule, talks about the junior resource sector in 2016 and the future, particularly on precious metals, copper, lithium and uranium.

Investing News Network: Coming into 2016, what were your thoughts on the junior resource sector?

Rick Rule: It was pretty clear to us in 2015 that the sector was well oversold. We didn’t know where or when the market would respond. But it’s worthy to note, looking back in terms of that question, that the junior resource sector measured by the TSXV fell by 50 percent and then fell by 50 percent and, for good measure, fell by 50 percent again. The market was down by 90 percent and the truth is, assuming that there was on-going demand for stuff in the world, the market would recover at some point in time. We believe that to be inevitable. We didn’t realize, necessarily, that it was imminent.

INN: Were your predictions for 2016 correct? Did you see the recovery coming that quickly?

RR: My prediction in terms of direction was correct, my prediction in terms of the percentage gains that occurred as quickly as they did was certainly not correct. The idea that the index could recover a hundred percent in six or seven months seemed a fantasy that I could not aspire to.

INN: Was that the biggest news for the junior resource sector this year, the speed of that recovery?

RR: I think so, I think there were two pieces of news that were interesting. One we could have predicted, the other we couldn’t. The speed of the recovery, I think, had more to do with the oversold nature of the sector and how small the aggregate market cap was. In other words, it didn’t take a lot of money to move the sector. It’s just that there was no money in it. What surprised us and what was part of that was the extraordinary prices that were paid by the industry for high quality deposits. I’m thinking about Reservoir Minerals (TSXV:RMC) and Kaminak Gold (TSXV:KAM) in particular, there is a dearth of very good projects in the industry and the major mining companies paid a price for buying lousy projects in the last decade. The prices that were paid by smart buyers for high quality projects was a very welcome surprise this time.

INN: Looking forward now, we’re on the cusp of 2017, we’ve just had a major political election in the US, what are your thoughts for the resource sector in 2017?

RR: If the resource sector that you’re referring to is primarily precious metals, I think the direction is a little lower first because there’s a lot of confidence in the economy, and then much higher. I think, if you will, the fix — and I don’t mean a conspiratorial fix — I think the set of circumstances exists where an increase in the gold price, is pretty well baked in the cake.

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