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Rick Rule: How to Find the Best Junior Mining Investments

Tom welcomes back the legendary investor Rick Rule to discuss his nosy questions for the junior mining business. It’s important to know the value proposition of a company before one focuses on share price. Successful investors form opinions as to value. The idea being to get it more correct than other investors. A share represents fractional ownership in a business. What is the business worth and what are the risks. If a series of things go right, what will be the value. Researching juniors requires great effort.

Investing in yourself and your education is always timely. It’s likely as the dollar rises that equity prices decline in juniors. If you want to maximize your return, then attempt to buy when things are on sale. Hone your skills and examine private placements if you’re an accredited investor.

Junior miners are destroyers of capital, and if consolidated into one company, they would lose billions a year. However, ten percent of them can perform fantastic. The purpose of these questions is to eliminate those that will likely underperform.

The management of a company is of critical importance. You want to consider the probability that a particular group of people will be successful. Interestingly, four percent of management teams produce over sixty percent of the returns. Your aim is to hang out with serially successful people. That one percent of issuers that have generated forty percent of the returns. It isn’t worth your while to only participate in someone’s first success.

You want teams that are flexible enough to recognize when they need to reposition or add job positions as the nature of projects change.

You should develop a schedule for outcomes from unanswered questions of juniors. Should the answers to a series of questions work out, you should expect decent returns.

Two red flags can be the cost of general administrative expenses compared to actual work in the ground. The second is a company with unrealistically low budgets for work that typically costs quite a bit more.

Successful people should be excited about their project and more than willing to talk. They should love to participate because it flatters them.

Talking Points From This Episode

  • Importance of asking high-quality questions to junior management.
  • Evaluating the potential of the unanswered question.
  • Red flags and the importance of finding the best management teams.

Time Stamp References:
0:00 – Introduction
0:39 – High-Quality Questions
4:53 – Opportunity On Sale
7:24 – Destroyer of Capital
9:17 – Sedar & Edgar
12:10 – Liquidation Value
15:15 – Considerations
23:05 – Personnel Turnover
25:22 – The Value Proposition
31:08 – Red Flags
34:00 – Capitalization & Time
42:08 – Company Goals
45:14 – Skin in the Game
48:35 – Favorite Question
51:43 – Access to Info
56:24 – Age of Mis-Information
1:00:18 – Probability Application
1:02:16 – 20/20 Hindsight
1:04:38 – Future Dollar Outlook
1:09:21 – Metals & Price Discovery
1:13:56 – Rule Metals Symposium

Guest Links:

Rick Rule has dedicated his entire adult life to many aspects of natural resources securities investing. Besides the knowledge and experience gained in a long and focused career, he has a global network of contacts in the natural resources and finance sectors.

Mr. Rule is a frequent speaker at industry conferences and is regularly interviewed for radio, television, print, and online media outlets concerning natural resources investment and industry topics. Prominent natural resources-oriented newsletters and advisories frequently quote him. Mr. Rule and his team have expertise in many resource sectors, including agriculture, alternative energy, forestry, oil and gas, mining, and water.

Mr. Rule is particularly active in private placement markets, having originated in hundreds of debt and equity transactions with private, pre-public, and public companies.

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