Sprott Monthly Market Update with Rick Rule: 2018 Is Going to Be a Great Year for Gold Miners
Rick feels the market needed time to consolidate the gains from 2016 and this was accomplished in 2017. Many mining companies were able to put in strong corporate performance and generate cash relative to the gold price. Gold did better in the face of a strong U.S. dollar than many believed and has outperformed the gold equities. This coupled with good corporate performance, and low expectations will likely lead equities higher in 2018.
Rick has just returned from meetings with a lot of retail and large institutional investors from around the world. There is a lot of smart money waiting on the sidelines. Rick says, “Perhaps I am an incurable optimist, but it feels not too hot, not too cold, just right.”
Rick doesn’t see the negative attitudes towards mining stocks since he begins with this basic assumption: “If there are a thousand mining companies in Canada, eight hundred of them will return to their intrinsic value which is zero. If you buy the sector, you will go broke.” He would argue that the better juniors are still selling at a good value. You make money buying individual stocks, and you should start with the best of the best juniors.
He expects that from a speculative position the uranium equities will perform well due to the supply cuts and because 2017 used up the sellers. He feels the rally will be short lived because companies will issue shares to stay afloat. The cutbacks are good news as they were not due to market manipulation but the economic realization that they were losing cash with every pound produced. These two companies realized that they could likely sell their resource base for $60 a pound in a few years.
Talking Points From This Week’s Episode:
• Rick feels 2017 was a good year for the resource sector especially oil, copper, and zinc.
• Many institutional and retail investors are interested in the sector.
• Uranium cutbacks are good news for the sector.
• Long-term uranium price is still dependent on Japanese reactor restarts.
Rick Rule began his career in the securities business in 1974. He is a leading investor specializing in mining, energy, water, forest products and agriculture. Rick founded California-based Global Resource Investments, Ltd., which grew into a much larger organization with significant affiliated companies. As Director, President, and Chief Executive Officer of Sprott US Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.