By Tekoa Da Silva
I had the chance to sit down once again, with Rick Rule, Chairman of Sprott U.S. Holdings. It was a fascinating interview, as Mr. Rule discussed the general state of the resource equity market, along with his most favored segment of the space – exploration. More specifically, the prospect generators.
“Twenty years of underinvestment and malinvestment in exploration,” Rule explained, “has [created] a circumstance where major, mid-tier, and intermediate mining companies, are now crowding back into the exploration space, after having laid off their exploration staffs.”
“I was [recently] at a party given by a very famous mining entrepreneur,” Rule proclaimed, “and the CEO of a major mining company … came across the room to where I was sitting and sat down next to me and said, ‘Rick, you have me right where you want me – the board has said we need to increase emphasis on exploration but we’ve de-emphasized exploration for [the last] 10 years – our pipeline is empty and we’re understaffed.'”
“That [discussion was] the best endorsement for prospect generation that could possibly be given,” Rule stated.
At a time of increasing demand for high-quality deposits, the equity side of the exploration market is, “Unknown, unloved, unwanted – perfect,” Rule noted.
“The setup in prospect generators is probably the best in my career … Most people don’t know what they are … so there’s no competition from most investors. Investment bankers hate them [prospect generators] because they raise money from other mining companies rather than through written [bank] offerings.
“So there’s no research from the sell-side because they never get to do any underwritings to support them,” Rule added.
As a final comment Rule noted that, “All of a sudden, the prospect generators, which are unknown and unloved, have customers flocking to them. A circumstance where your business gets better and better, and your share price gets worse and worse – is a speculator’s dream. And that’s the circumstance that confronts us right now.”
To watch the full video interview with Mr. Rick Rule, Chairman of Sprott U.S. Holdings, Click here.