Rick Rule Says These Mining Stocks Could Be the Next 10X Winners - Rule Classroom Plus

The world will need much more energy of all forms than most people recognize, and demand for liquid hydrocarbons (oil and gas) will not peak until 2060 or 2065, not 2030 as many investors believe, meaning structural demand will remain strong for decades.

“The world is going to need a lot more of all forms of energy than most of us recognize. We have been operating as investors and financeers uh on the belief that demand for liquid hy hydrocarbons which is to say oil and gas is going to is going to peak uh in 2030 which isn't true. It's going to peak in60 or 2065.”

Coal liquification is a technology that has been in place for a long time; South Africa under sanctions used motor fuel synthesis, a coal conversion process, demonstrating that converting coal to liquid fuels is not new technology.

“The liquification of coal is something a technology that's been in place for a very long time. South Africa during sanctions as an example had motor fuel sess which was a consequence of coal conversion. So that technology isn't new.”

Capushi is the highest-grade zinc deposit on the planet, scheduled to come online as part of Ivanhoe's development portfolio.

“Uh for those of you who don't know the highest grade zinc deposit on the planet”

For drill-hole plays, having one measurement of the third dimension (depth from vertical drilling) is important, but that single measurement doesn't define the play—it's preliminary data.

“the fact that you now have one measure of the third of the third dimension is an important variable but it's not a copper stock it's a discovery stock”

Rick prefers investment circumstances where he understands probabilities well enough to control his own mental reaction to them, which he does not have in lithium due to uncertainty about direct lithium extraction technology viability.

“I like circumstances that I understand well enough that I can control in my own mind reaction to the probabilities which I don't have in lithium.”

Schlumberger's investment case is not contingent on Iran escalation; instead, it rests on systematic underinvestment in sustaining capital by the oil industry for years, which will create structural shortages in oil supply beginning around 2029, necessitating investment to which Schlumberger will be a prime beneficiary.

“The case for Schlumbumberge is not contingent on Iran. Iran is news. The case for Schlumbumberge involves the systematic underinvestment in sustaining capital by the oil industry for years. No matter what we do, Iran or not, we'll have structural shortages in the oil supply beginning, I believe, in 2029. And the only way to address those uh that underinvestment is to invest. and Schlumbumberge will be an absolutely prime beneficiary.”

Rule is aware that most of his competitors are equally ignorant of technological constraints but lack his self-awareness about those constraints.

“I get asked technology questions all the time and I'm very aware of my technological constraints. Note that most of my competitors aren't aware of their technological constraints which [32:51] are just as great as mine.”

Both Triple Flag and O Royalty trade at relative discount via any metric to both Franco and Wheaton, and either the market will arbitrage away the value discount or one or both companies will be taken over by bigger ones because cost of capital is an important variable in mining and the market usually addresses valuation discrepancies through takeovers.

“I think the market's getting both right and I note that they both trade at a relative discount via any metric to both Franco and Wheat Weaten. I think either the market arbitragees some of the value discount away or ultimately one or the other or both of those companies get taken over by one of the bigger ones. uh a truism is that your cost of capital uh is an important variable in mining. It's a capital intensive business and if the market doesn't arbitrage away valuation discrepancies, the market usually does uh by way of a takeover.”

The street incorrectly believes Wheaton's big transactions are behind them when in fact the future will bring substantial streaming transactions from the copper industry's required $225 billion in constant dollars that must be spent to maintain production, representing 40-50 billion dollars worth of streaming transactions to complete.

“What I particularly like about Weed and Precious is the fact that the street believes the big transactions are behind them. that the wonderful transactions that built Franco and Wheaten are think of the past which is wrong. Uh the future particularly the 250 billion constant $225 that the copper industry must spend to maintain production means that there is a huge future for streaming gold and silver cash flow from future copper mines. uh my size of the market estimates that there's 40 to50 billion dollars worth of streaming transactions to do”

Smaller deposits in the Abbott Tibby that were previously orphaned because they weren't large enough to support a mill will no longer be orphaned because new regional infrastructure allows them to feed existing productive capacity without requiring new mills.

“the smaller deposits in the Abbott Tibby which were orphans in earlier years because they weren't large enough to amvertise a mill won't be orphans this time around because enough new infrastructure has been built in the Abatibby the deposit which is fairly adjacent to existing productive infrastructure can be put into production without a mill.”

Early-stage exploration and prospect generation are inherently risky and time-intensive businesses, and investors should build portfolios of 4-6 prospect generators rather than own them in isolation to diversify success probability.

“Understand that early stage exploration, even including prospect generation, which is the safest financial mechanisms for investors to participate, is a risky business and a time-centric business. If you're going to participate in prospect generation, uh I I would suggest that you build yourself a portfolio of four or five prospect generators...I wouldn't own uh any prospect generator in isolation.”

Rule does not think in near-term investment timeframes; instead, he juxtaposes market cap relative to ascribed value in a 3-5 year timeframe because short-term outlooks confine one to unnecessarily small numbers of stocks and expose one to risks of time preference.

“I don't think in near terms. I don't do that. Uh I juxtapose what I see as the market cap relative to the value that I ascribe the company in three to five year time frame. So much can go wrong in short-term time frames that I found that by constraining myself to short-term outlooks that I confine myself to an unnecessarily small number of stocks and I expose myself also to all of the risks of time preference.”

Rule has been involved in four exploration projects in Venezuela with four successes (100% success ratio), but all four exploration successes were subsequently expropriated through nationalization, suggesting resource nationalism risk is a persistent constraint on Venezuelan investment returns.

“I have been involved in exploration projects in four times in Venezuela and I've enjoyed four successes 100% success ratio which is the most of any country in the world. On the downside, I've had all four exploration successes expropriated. I've been nationalized four out of four times.”

Fortuna Silver has successfully transitioned from high-grade underground South American predominantly silver mines to globally focused West African open-pit operations, which is difficult to accomplish, and trades at discount partly due to political risk but has mitigated this by operating in five countries rather than one.

“Fortuna is an operator which has successfully made the transition from high-grade uh underground South American predominantly silver but silver gold mines to a much more globally focused but increas increasingly West African operator uh in open pit environments. It's difficult to change operating theaters. it's difficult to change mining methods and Fortuna seems to have done it. Uh they're also cheap uh as a consequence I think of the political risk. They've done something to mitigate the political risk which is to say that they're in five countries regarded as lousy countries as opposed to just one country that's regarded as a lousy country.”

Newmont has no project in the world that offers the same ability to maintain current production levels, let alone increase production, making KSM strategically critical to Newmont's production profile regardless of acquisition price pressure.

“On the other hand with regards to pneumont if you look at their development pipeline and you look at the opportunities that they have to maintain uh their current levels of production there's no project in the world that offers new mod the same ability never mind to maintain production but in fact to increase production.”

Rio Tinto backed off the Sovereign project because they sold out of the titanium business by selling Richard Bay, making the project no longer relevant to them, and this backing off probably allows Sovereign to continue being financed and potentially reach Rule's goal of 10x return without Rio's underbidding power.

“Riotinto backed off of Sovereign because they sold out of the titanium business. They sold Richard Bay. uh there's no particular point in increasing their position in uh a deposit which is no longer of any use to them. Uh from my point of view that's probably useful. Uh I understand that getting paid now uh is in some senses getting it preferable to getting paid later. I was very concerned about the fact that Rio being the only bidder would be able to underpay for sovereign.”

Experienced management teams can derive market-adjusted prices for advanced exploration projects with 10+ year production timelines using probabilistic net present value analysis, and the Almadeex royalty portfolio sale to Empress Royalty for $3.5 million demonstrates that non-producing royalty portfolios can command significant valuations despite lacking immediate cash flow.

“uh which is to say that experienced management teams are able to do probabilistic net present value uh assumptions and the consequence of that is that you can derive at least a market adjusted price for advanced exploration pro uh projects that likely won't produce revenue for 10 years but could 10 years from now produce really substantial revenues. the fact that a a uh a collection of non-producing royalties was able to be sold to an extremely knowledgeable buyer for $3.5 million despite the fact that there's no prospective cash flow says a lot about the royal about the value of royalty assets on a carefully chosen exploration portfolio.”

To the extent China can use coal reserves, particularly low-grade coal, to replace some oil and gas demand, this benefits China but does not detract from the attractiveness of the oil and gas thesis overall.

“To the extent that the Chinese are able to use some of their coal reserves, mostly lowgrade coal uh to replace some of their demand for oil and gas. I think it's to the benefit of China, but I don't think it detracts from the overall attractiveness of the oil and gas thesis at all.”

Aerys Minerals is not a copper stock but rather a discovery stock that drilled a spectacular hole but remains probably 100 holes away from understanding the deposit, and an increase in copper price provides no benefit to early-stage discovery without proven copper resources.

“No, Aerys is not a copper stock. They're a discovery stock. They drilled a really, really, really, really good hole. Uh, but they're probably a hundred holes away from understanding the deposit. Uh, it may very well be my favorite discovery stock right now. uh an increase in the copper price when you haven't proven that you have very much copper uh should not be of any benefit to you.”

King Fisher Metals is attractive because Barrick Mining, which had no assets in the region, came in with a very generous above-market bid, and the deposit size is truly amazing, though it is located in the middle of nowhere in a remote and very rugged part of the Golden Triangle.

“I'm attracted to King Fischer. I don't own it. Uh the fact that Bareric came in having no assets in the region. Uh with a very very very generous above market bid says an awful lot. Um certainly when I look at the size of the prize, uh this is attractive. Now people need to understand this deposit is in the middle of nowhere. Uh fact it's a long way from nowhere. While the region itself enjoys a lot of favor, the region being the golden triangle, uh these guys are in a remote and very very very rugged part of it.”

Aerys Minerals benefits from having spent 10 years assembling a high-quality portfolio of exploration projects in Kazakhstan before drilling, demonstrating the value of pre-drill geophysical work and project selection rather than luck.

“a group of people who had the good sense to go to a country Kazakhstan way before it was popular and assembled a team who understood both poor free exploration and Kazakhstan. uh who were able over 10 years to put together a great inventory of exploration projects, [clears throat] ran some geohysical work on one particular project, had a huge target, drilled it and drilled a spectacular hole drill hole.”

After owning Wheaton and Franco, most portfolios should consider Triple Flag and O if they have done the analytical work, given the sophistication of the question being asked suggests the questioner is in that position.

“I would suggest that for most portfolios uh after uh the owner of the portfolio has bought Wheaton and Franco that they consider if they've done the work coming down the valuation space uh and given the sophistication of the question that was asked I suspect that the questioner is in that position uh that they broaden their portfolio by acquiring uh either or both of triple and O.”

Rule views Sovereign Minerals as a binary outcome: he will either lose 50% of his investment or make 10x his investment, with little middle ground, because the deposit could be either insignificant or among the most important rutile and graphite deposits in the world.

“I have always regarded Sovereign as a company where I will either lose 50% of my investment or I'll make 10 times my investment”

Ivanhoe is not a place for cowardly money but rather for aggressive money, and substantial operational risks exist in Congo including social risks, political risks, and hydroelectric plant operation risks that could derail asset maturation.

“Ivanho is not a place for cowardly money. Uh it's a place for aggressive money...In the Congo lots can go wrong socially, lots can go wrong politically, lots can go wrong with the operation of the hydro plant. Um I mean a lot can go wrong.”

Ivanhoe's second-half mining will be more conservative with lower output, which is being offset by increasing free cash flow from the smelter, and investors should evaluate Ivanhoe across four dimensions: whole deposit net present value relative to share price, Capushi development potential, Platreef's scheduled online timeline, and exploration upside in the Western Forlands.

“With Ivano, you're really thinking about four things. You're thinking about the value of the whole or the price of the whole relative to the value which is to say the net present value of the deposit over 30 years not to the half. Secondly, you're thinking about what happens when capushi comes online if capushi comes online. Uh for those of you who don't know the highest grade zinc deposit on the planet. Uh third, you are thinking about uh the Plat Reef uh the largest undeveloped uh platinum palladium deposit on the planet which is slated to come online the end of next year.”

Rule has sold enough Ivanhoe that he no longer has any cash balance in the position, meaning he has recouped his cost basis and holds the remainder for free, allowing him to be very patient with the company's maturation timeline.

“I've sold enough Ivanho that I no longer have any uh cash balance in the position which is to say I've sold enough I have the rest for free so I can afford to be very patient”

Bravo Mining is one of the best undeveloped platinum-palladium discoveries in the world in the last 10 years, and it is strategically important that it avoids South African and Russian political risk exposure, which has historically constrained platinum-palladium investor returns.

“I think this is one of the best undeveloped um platinum and palladium discoveries in the world in the last 10 years...platinum and palladium investors have had to accommodate themselves to social and political risks in uh South Africa, Zimbabwe or Russia and I would rather take that risk assuming that the rewards were similar in Brazil.”

The Coffee Deposit is a good deposit with significant geological merit, but infrastructure access is challenging, and Rule is waiting for the updated feasibility study to understand whether the company proposes bridge/highway access or riverborne transportation solutions.

“Coffee deposit is a good deposit. Uh I will look forward to seeing the updated feasibility study particularly with regards to infrastructure access and degress. You know whether or not they're going to propose to build a a bridge a highway into there or whether they're propose whether they're proposing to use riverborn transportation. Uh the deposit itself is good. The infrastructure is challenging.”

Ned Goodman was a value investor, credit analyst, and risk analyst who measured both downside and upside, willing to accept 50% losses in exchange for 10-15x upside in situations where he felt asymmetry was extreme, and was a fair-minded team builder who ensured all organization members shared in success.

“Ned was a value investor...he was a credit analyst, too. uh and most exploration investors look solely to the upside. Ned measured the downside as well as the upside. Uh Ned was also very adult with regards to risk. Uh he was willing to accept the possibility, sometimes even the probability that he would lose 50% of his money, but he would only do that in circumstances where he felt he could make 10 or 15 times his money if he was right.”

Jonathan Goodman at Dundee acting as godfather/overseer of Magna Mining's capital deployment provides governance assurance that the management team will not be frivolous with the $120 million, reducing capital misallocation risk.

“I'm delighted that uh Jonathan Goodman uh at Dundee is the godfather here, which is to say sometimes when somebody takes on $120 million uh they become a bit frivolous. I don't think that Jason would be a would be particularly frivolous, but the fact that he has Johnny Goodman sitting on his right shoulder uh probably ensures that.”

Franco and Wheaton will have to share streaming opportunities with smaller companies like O and Triple Flag, and the opportunity may cascade even further down the food chain to smaller streaming companies, creating opportunity for companies across a wide range of market caps.

“those opportunities will have to be syndicated. Which is to say Wheaten won't be able to eat the whole opportunity. Franco won't be able to eat the whole opportunity. They will almost certainly have to share those opportunities with companies like O uh and Triple Flag. And my suspicion is they may have to share them even farther down the food chain.”

NG Energy is partially a speculation on activities they may or may not undertake next door in Venezuela and on the backing from sophisticated energy investors, and while the Colombian assets have geological upside, they face social, political risks and infrastructure constraints that make the company highly speculative at this juncture.

“NG Energy is partially a speculation on the activities that they may or may not undertake next door in Venezuela and the backing that the company enjoys from some very sophisticated uh energy investors...There are social and political risks in Colombia and there are also constraints with regards to infrastructure and political and social constraints around increasing the infrastructure.”

Rick ranks Sovereign at a 5 and is unconcerned about Rio Tinto's exit; his actual concerns are about Malawian society's maturation to mining and questions about processed metal energy recoveries and product saleability, which won't be answered until 18 months out.

“I have sovereign at a five. Uh, I need I'm completely unconcerned about Riotinto, by the way. Uh, we need to get that out of the way. Uh, a lot of people were looking for a quick outcome, and I understand that people's time preference is real, but it doesn't matter. Uh I'm concerned about the maturation of [snorts] uh Malawian society to mining and I'm concerned in particular about the processed metal energy and the recoveries and the salailability of the produced products.”

China is encouraging transactions in physical gold rather than contractual gold and is attempting to change the nature of gold trading in China, likely due to concern about speculative excesses in Chinese metals markets.

“I don't think so. Uh I think they're trying to change the nature of gold trading in China. Uh which I like. Uh I think they're doing it for their own purposes. Uh and I think that they were concerned about some of the speculative accesses that were taking place uh in Chinese metals markets...They're in they're encouraging uh transactions in physical as opposed to contractual gold.”

Rule sold his Azimut position and discontinued following it when the company transitioned from being predominantly a prospect generator to being predominantly base metals/sle risk exploration, violating his original investment thesis.

“I sold my estimate and I discontinued following them when they went from being predominantly a prospect generator to being predominantly sle risk exploration...when they cease to be what I wanted to buy, I cease to own them.”

Rule will not increase his Luca position until the company either reduces all-in sustaining costs substantially or merges with Gold Group (or completes a three-way merger to consolidate the structure), requiring clear evidence of structural improvement before additional investment.

“I'm not going to increase the size of my position in Luca until they either uh drive down all in sustaining costs substantially or merge with their sister company...there needs to be a three company amalgamation. So far there was a two company amalgamation.”

CBridge trades at approximately 9 cents per dollar of NPV at $4,000 gold price, implying the market assigns roughly 1 in 10 probability that KSM will ever find its builder, and using logical deduction based on cash flow multiples, Newmont appears to be the likely buyer rather than a copper producer because gold trades at higher cash flow multiples than copper.

“CBridge trades at about 9 cents per dollar of NPV at $4,000 gold, implying the market assigns roughly 110 probability that KSM will ever find its builder...Using logical deduction, it would logically be a gold producer rather than a copper producer because gold trades at a higher cash flow multiple than copper. And looking among the major gold producers, the only gold producer that has a major investment in the region would seem to be pneumont.”

KSM's upfront capital cost almost certainly exceeds $7 billion and is perhaps higher, with mining industry inflation in upfront capex running between 8 and 10% per year, and consumables and opex increases (particularly fuel) increasing at similar rates, making project timing a critical investment consideration.

“Remember that the upfront capital cost of this project almost certainly now exceeds $7 billion and is perhaps higher. Note too that the mining industry itself has said that the inflation in upfront capex is running between 8 and% 8 and 10% a year. Similarly uh the increases in consumables and opex in particular fuel are increasing to a like amount.”

Both Centaurus Metals and Meteoric Resources are binary outcome investments similar to Sovereign, with Centaurus further ahead in development with less debate about outcomes, while investors are more at the mercy of nickel prices and final feasibility study outcomes for Meteoric.

“I would suggest that uh both Well, Centaurus in particular is further ahead. There's less debate as to the outcome there. You are more uh at at the mercy of nickel prices and what the uh final feasibility looks like.”

Recon Africa's deeper Ellen choke test results validate the deposit by confirming mobile oil and gas in both upper and lower horizons, but whether the well itself is economic and what completion problems may exist are separate questions from the deposit validation.

“What I like is the fact that there's live mobile oil and gas uh in the upper horizons and the lower horizon. To me, what this what this test did is it validated uh it validated the deposit. Whether or not this well works is a very different question.”

Mott Resources' initial drill result was one of the better exploration results of the decade and caused Rule to buy more stock, but the second result was mixed with one great hole, one okay hole, and one negative hole, making it difficult to assess how much of the target was negated by the dry hole.

“the initial drill result was one of the better bore for drill results of this decade. Certainly got my mind. Uh it made me buy a little stock too. Ready, fire, aim. Uh the second drill result was mixed. One great hole, one okay hole, one dust. And I haven't been able to figure out from my own perspective how much of the target was negated by the duster.”

Collective Mining is fairly early in the development pipeline and entering the boring part of the development curve where community issues must be solved, but the current share price understates the likely value of the deposit.

“it is fairly early in the development pipeline. So we're coming into the boring part of the las curve, you know, where we're trying to solve community issues and all that kind of stuff. But it does feel like the current share price understates the value the um the likely value of the deposit.”

Magna Mining received a $120 million investment from Alpana for expansion of copper production in the Sudbury basin, and while Rule would have preferred less capital raised to reduce risk and more capital raised later, he believes the management team has excellent capital deployment history and the capital will allow them to pursue acquisition of adjacent distal mineralization in the basin.

“Uh I thought it was a useful financing. I uh probably would have preferred for them to raise a little less money uh and uh remove some of the risk associated with the deposit and raise more money later...What they're really trying to do is uh acquire substantially all the distal mineralization in the Sudbury basin. Uh and I think that this $120 million gives them some strategic advantages with regards to that.”

Luca has dropped significantly in price, allowing believers in the thesis to buy more, and Rule likes the management team's competence in buying underutilized Mexican assets and improving them, but remains concerned about the company's dual management structure with both gold group and Luca, and about high all-in sustaining costs and small deposit sizes.

“Uh, I like the fact that it dropped in price. Uh, it allows people who believe in their thesis to buy more. I'm still concerned about the fact that the management team has two companies uh gold group or or uh you know gold group and Luca and I won't be buying more Luca until they combine the two companies...I'm troubled too by the fact that both the deposits are small deposits. There's no big deposit...I'm attracted to the obvious competence that this management team has in buying underutilized assets in Mexico that are misunderstood by gringo owners uh and by lavishing love and attention and local knowledge and making these deposits produce well.”

Identifying a single preferred bidder eliminates an auction, and with gold at $4,000, the preferred bidder faces less time pressure than they would have at $5,500 gold, allowing them to wait for resolution of turf conflicts or for gold prices to rise before acting.

“the spanner, if you will, in the discussion is that by identifying one company as the preferred bidder, uh Rudy likely has eliminated an auction...Uh and at $4,000 gold, I think the bidder is under less time pressure than that bidder was under $5,500 gold.”

Rule doesn't believe that the countries Fortuna operates in are actually lousy countries; rather, the market's negative perception has created valuation opportunity.

“Uh but the fact that those countries are regarded as lousy countries, I don't believe them to be by the way. uh has uh negatively impacted the market capitalization.”

Wheaton Precious Metals trades at a discount from its high, but Rule doesn't share concerns about management transition because he knows the new CEO and has known him for 30 years; he was trained under Randy Small for a long time and Randy remains as chairman, making the transition comfortable.

“there's some concern about management transition. I don't share that concern. Uh I know the new CEO and I've known him for 30 years. He's trained under Randy Small for a very long time and Randy stays on as chairman. So I'm comfortable with man management transition.”

A hypothetical $10,000 investment in Riverside at 10 cents per share in 2020 grew to approximately $60,000 in value by the time of the conversation due to the combination of stock appreciation (from 10 cents to 20+ cents) plus two spin-offs (Capitan Silver and Blue J), demonstrating the power of spin-off reinvestment.

“I did a a breakdown uh of a hypothetical $10,000 investment into Riverside back in uh 2020 at you'd got it at 10 cents a share. Now it's at about 20 something cents a share. So, you got a double there. But what it doesn't show on the stock chart is the two spin-offs, Cappy Tan Silver and uh Blue Bluebird. Blue J...And I by my back of the envelope math, it was something like your 10K investment was worth over 60 now because of those spin-offs.”

Abra Silver's newly selected leadership team enjoys confidence of institutional investors worldwide and includes people with substantial in-country Argentina experience dating back to Argentine Gold 25 years ago, making them well-positioned to navigate Argentine sociology, politics, and project financing.

“I have a high regard for the people in Abra and I think that the team that they have selected is a team that enjoys the confidence of institutional investors worldwide [clears throat] and that this will be an important team an important team to accomplish the financing of this deposit. This is also a team that has substantial incountry experience in Argentina uh going all the way back to Argentine gold 25 years ago”

Riverside Resources has not yet enjoyed any exploration success but has spun off enough companies and given enough stock in spin-offs that Rule has long since recouped his investment and made significant profits, demonstrating Jean Mark Stanny's skill in creating shareholder value through spin-offs.

“they have not yet enjoyed any exploration success, but they have spun off enough companies and given me enough stock in the spin-offs that I have long since recouped all of my investment in Riverside and made a lot of money.”

Bravo Mining is excellent, and Rule loves it, though he is slightly concerned that the company is entering the nickel business in addition to platinum-palladium, and he has known Luis Acavo for 20 years and regards him as a force of nature.

“I love Bravo. Um, I'm a little concerned that they're going into the, uh, nickel business, too. Uh, I've known Luis Acavo now for about 20 years...he's a force of nature and is a great deposit.”