Rick Rule on Oil Stocks & Mining Strategy

Host (Bill Powers): You are listening to Mining Stock Education.

Rick Rule: Looking at my own performance over 40 years, I'm an average allocator in oil field services and supplies, and I'm a good allocator in upstream. So I prefer to be where I'm a good allocator. The US names I gave you give you a median 3.75% current yield dividend. The Canadian names I gave you give you a 6% basic yield. So assuming that I'm early, which I almost certainly am, the time value of money objection is obviated by the dividend.

Bill: Thanks for tuning in to Mining Stock Education. I'm your host, Bill Powers, and today you're going to hear from the one and only Rick Rule from Rule Investment Media. Rick, thanks for coming back on the show. You've been traveling. You were in London. I appreciate you taking the time. And I have a question for you about where you've made the majority of your money when it comes to junior miners. Has it been what you refer to as the easy money off the bottom, where you get positioned in advance, and that's the majority of the profits you see in a commodity upcycle?

Rick: That's a complicated question. I have made the majority of my money backing very high-quality people where my entry took place during bad markets -- which is to say where they needed me and the market wasn't competing with me for stock allocation. And by the way, the vast majority of my money has come about from fairly few of the overall allocations that I've made. Probably 10% of my starts made me 85% of my money. The big winners, it's important to note, have all involved good people, unpopular entry times, long holding periods, and the ability or willingness on my part to subject myself to a lot of volatility. Specifically, I don't think I've ever had a 10-bagger -- or if I have, I haven't had very many -- that didn't expose me to a 50% decline in share price during some part of the period that I held a stock.

So I would say really the lessons are persistence, tenacity, a focus on high-quality people, the willingness to write checks during depressed market conditions, and no interest whatsoever in small projects.

Bill: Rick, over the last few years, I've listened to you tell the market when you take money in your uranium juniors, even when many are still bullish. You say you take money in some of your gold and silver. So when do you reach what you call the point of no concern, where your initial capital is off the table and you leave a little there to run? Do you have any rules of thumb that guide your investing in that regard?

Rick: I don't. It has to do with competing opportunities. In other words, I try to shift my money to where I think the risk-adjusted opportunities are the best. I was going to say I've got too many thumbs already, but we'll leave that alone.

The easiest money to be made with juniors is the hate trade. That's the easiest money. You'll recall interviewing me some time ago when the junior silver miners were absolutely hated after the aborted silver squeeze. There was a huge constituency that had come into silver, bid up all these things, capitalized quickly, and then fled them en masse and hated them. The silver juniors were stupidly cheap because people hated them. They had no momentum except downward momentum, and social media was replete with disgust. We saw the same thing in the uranium business.

The easiest money to make is to buy hate. And if you have that as a strategy, even though there's room left in the stock, when the stock goes from hated to tolerated, you take enough money off the table that you get the rest of it for free. There's a strange saying on Wall Street that there's always a bull market somewhere, which is another way of saying something's always overpriced. The corollary to that is there's always hate somewhere. And so you need to monetize part of the hate trade. It's really important to do.

The other part of selling well always has to do with valuation.

Rick: Whenever I buy a position in anything -- big or small, whenever I make a loan, whenever I do anything -- I write myself a one-page handwritten memo about why I did it, what can go right, what can go wrong, what my target is, and what will cause me to sell, both on the good side or the bad side. And I revisit those memos. It's important to remember why you did something, what your time frame was, what your state of mind was, what's changed.

So valuation matters a lot to me. If I think the current valuation of a company -- and this is subjective of course -- is $100 million, and I believe that there is an unanswered question that has the possibility of the company being worth $500 million in five years, and if I have the opportunity to buy that company at a $150 million market cap -- if I like the people, a 50% premium to valuation with the anticipation of a five-year triple -- I'm probably okay with that. What happens in bull markets is that you get the price appreciation that you'd hoped for over time before the unanswered questions are answered. At that point in time, you sell enough stock that you get the rest for free. You absolutely positively do that.

And if you've already done that -- if you're already in a free-ride position -- you look at the money you have tied up in that stock relative to other opportunities that the market hasn't recognized, and you allocate capital according to what you think the best outcome for you is.

Warren Buffett has talked about this at length. Warren Buffett says you structure your portfolio like a small hog farmer. There's a certain elegance to that statement. Your portfolio -- your cash -- is the trough, and you decide there's room at the trough for ten pigs. If you decide you're going to introduce a new feeder pig to the herd, you've got to sell off an old fat one. In other words, you allocate your money according to what you believe is the best juxtaposition of risk-to-reward.

Many people won't do that. They hold on to stocks because they've gone up. In other words, as the stocks become less cheap and less attractive, people want to hold them, which is pretty silly in terms of opportunity cost.

Bill: I invested in a couple of private miners some years ago, Rick. They're still private. They haven't successfully gone public, which means they're illiquid. I think about my opportunity cost had I been in just some of the major producers in the gold and silver sector -- I would have tripled my money with less headache. Can you share some of your insights on opportunity costs from making a mistake like perhaps I just did?

Rick: Well, it's lovely that you talk about that because I believe you've had a pretty successful ten years despite your modesty in describing your mistakes.

What happens after ten years is that beta becomes more attractive to you than alpha. Which is to say, if you believe that we're in a gold bull market and the bull market has some legs, the first thing you want to do is make sure that you participate in that market with as little risk as you can. If you believe, like I believe, that the gold price will do well for ten years and that a composite of gold stocks will appreciate at roughly double the gold price, the first thing you want to do is capture as much of that beta as you can with as little operational risk as you can, and speculate with what's left over.

I believe -- and this is for educational purposes, don't take what I'm going to say next as gospel -- but I believe I'm predicating my portfolio assumptions on the fact that the US dollar loses 75% of its purchasing power over ten years in an absolute sense, not a relative sense. I don't mean relative to the Canadian dollar or the Australian dollar. I mean absolutely. Bill, you and I as Americans will lose 75% of our dollar purchasing power domestically over the next ten years. I believe as a consequence, it's more likely than not that the nominal gold price -- that is, the gold price priced in US dollars -- will increase roughly symmetrically with the decrease in purchasing power. So I'm suggesting to you that over ten years I believe the gold price will triple.

Rick: And I believe that the gold equities in composite will double the move in the gold price. Five or six hundred percent over ten years is a pretty good return. I don't feel the need to amplify that return too much by taking a whole bunch of alpha risk, where I take on company risk -- in other words, where I risk losing money even though the gold price triples -- for the bulk of my gold portfolio, which is to say my non-bullion portfolio. I have my bullion in a different basket.

I'm in names like Franco, Wheaton, and Agnico, where I believe I'm taking no enterprise risk and no management risk, and capturing as much of the gold beta as I can. I'm also, as you know, an alpha speculator, but I do that in a different part of my portfolio.

I suspect that a lot of your new subscribers are purely alpha chasers. They've seen some of the penny dreadfuls absolutely scream. They've bought into the gold thesis hook, line, and sinker without perhaps thinking as much as they ought to about why, and what could go wrong. They are searching for maximum upside, not the juxtaposition between upside and downside. And I hope that through listening to podcasts like this, they become somewhat more self-honest and perhaps more discerning.

Bill: Rick, when you were a broker, would your clients get more frustrated with you at times during a bull market than even a bear market?

Rick: Yeah. You know, a good broker -- and I wasn't in that regard -- is a good psychologist. He or she is a babysitter. Clients, oddly and psychologically, were more punished by foregone profit than by absolute loss.

Not just as a broker, Bill -- as you know, I've been grading people's natural resource portfolios for free for 35 years. I'm told I've graded almost 100,000 portfolios over that period. I've taught a lot doing that, but I've learned a lot too. I've learned what investors and speculators get right and what they get wrong.

As a broker, you have a smaller data set and the people you deal with are disproportionately represented in your psyche. You're tempted to personalize the response and ignore statistics. With regards to the ranking database -- and we have over 60,000 rankings with timestamps --

Bill: You can learn a lot by looking at that database. Have you done any further studies with it? Any insights you can share?

Rick: Oh, I mean, all kinds of insights I can share. You can see investor greed and corporate larceny writ large. You can see companies that you knew at the time were pure promotions, and the outsized impact that those promotions had on the psyche of speculators who didn't take the time to understand their portfolios.

The other thing you can see is the incredible increase in value that occurs to concentrated portfolios relative to diverse portfolios. One of the most common speculative mistakes I see is the tendency of speculators to follow what I call the "got a hunch, bet a bunch" theorem -- which is to say they get a tip from Bill Powers, they get a tip from Doug Casey, they get a tip from Rick Rule, and that's sufficient cause to buy the stock. Gold is going up, so I'm going to buy Amalgamated Arvar Explorations, which I learned three years later didn't have any gold. They were looking for it.

I have asked people on your podcast to constrain the number of different companies they own to the number of hours per month they are prepared to spend working on their portfolio. And by working on the portfolio, I don't mean listening to Rick Rule. I mean reading quarterly reports, reading annual reports, reading proxy statements, reading insider filing statements. Any number of portfolios that I've graded over 35 years have had a hundred stocks, and I know these people weren't spending a hundred hours.

Rick: The second most common mistake, Bill, is duration. I found that the vast majority of the people whose portfolios I graded had fairly sound strategies, but they had terrible tactics. The strategies they were talking about could easily take five years to play out, but these same people had trauma holding stock over a long weekend. If you have a five-year strategy and you're employing a three-month tactic, it's problematic for you.

The third thing is a lack of self-honesty. This came through in the interviews I did -- I've interviewed a couple thousand people because their portfolios amused me and I wanted to find out more about the thinking that went into them. One example: people are loath to sell a stock until they "break even," which is to say the psychological torture is worth more to them than the financial torture.

I'd go over somebody's portfolio with them, starting at the A's. Let's make one up: Amalgamated Arvar. The holder would say to me, "Well, Rick, what do you think about Amalgamated Arvar?" And I'd say, "Well, until this conversation, I was blissfully unaware of its existence. What do you think about it? Well, I don't think I like it. Well, why did you buy it? Well, I bought it because Bob Bishop recommended it. Well, Bob Bishop's been retired for sixteen years. What do you think of it now? Well, I don't know anything about it now. Well, why don't you sell it? Well, I can't sell it. Why can't you sell it? I paid $4 for it. Now it's selling for 40 cents. And if I sell it, I'll lose $3.60."

Then you have to say, "No, you've already lost the $3.60." The question is: what are you going to do with the remaining 40 cents? If you like it, you ought to buy more. If you liked it at $4, you ought to like it at 40 cents. If you don't like it, you ought to sell it and use that 40 cents for something else.

Bill: Definitely. People are not self-honest.

Rick: And too many of them are lazy. And mercifully, I've had fifty years to learn how to do that myself, and thirty-five years of compiling data about the mistakes other people make, which has been really useful to me.

So for the retail investors listening to us -- if they're looking at a newsletter writer, what is the proper and ethical role of a newsletter writer in this junior mining ecosystem? And what should they look for?

In a newsletter writer, you need to find a technique or bias that you can identify with. In other words, the newsletter writer can't tell you what to do. The newsletter writer could and should suggest investment themes and specific names. And you should know enough about the newsletter writer's psyche and technique that you're willing to consider what he or she recommends.

You should know something about the person's pedigree. You should know something about their process. Is the letter writer a geologist? If not, do they employ a geologist? In other words, how do they make their decisions? And is that decision-making process something you can't or won't do for yourself, but is it consistent with what you're trying to accomplish -- the rewards you're seeking and the risks you're willing to take?

I have loved paying for newsletters because there are 3,000 junior mining companies worldwide and I can't follow 3,000 companies. New ones pop up every month. And I hate getting cold-called from young brokers. So I'm not aware of all of them. The fact that there are ten or twelve people out there doing some of my research for me -- where I understand their bias and know how to consume the information they send me -- is extremely useful. If I get one idea from Joe Mazumdar -- I think Joe charges about $1,200 a year for his letter -- that one idea probably saved me $5,000 worth of research. In other words, it's paid for itself three times over. Huge deal.

Rick: If by contrast I'm asked to subscribe to the Schlem, Schmuck & Schmo newsletter published from a second-floor office over a thrift shop -- probably not much use, never mind the subscription cost. I don't want to burden myself with having to read it.

Bill: So the personal responsibility theme comes through in everything you share, Rick.

Rick: Absolutely. A lot of people want easy answers, and easy answers usually end up resulting in smaller portfolios.

Bill: Because most aren't willing to do the hard work -- another theme you lift up -- which leads to arbitrage and opportunities for the rest of us.

Rick: Right. Well, you need to define who you are and what you're trying to accomplish. I'm not a trader, and I'm old enough and frankly rich enough that -- you know, when I was in college, Bill, I was a pretty good trader because I had no money. I had a lot of time. I had a lot of aggression. I had the good fortune of living in Vancouver, the epicenter of junior mining stocks, in a real bull market. And I remember very well that my goal in a trade might be four new tires and a dinner for two. In other words, I was extremely focused. And because I was extremely focused, I was an okay trader.

But my goal was always to build up sufficient capital that I could be an investor. And when I did that, I lost interest in trading entirely.

Bill: On that, do you think you need to bring a trader mentality when you see the juniors quickly get overvalued?

Rick: No, I don't think so at all. The price information -- which is what a trader uses -- is only valid if you have a value expectation. It's the delta between price and value that matters.

If I make an investment in something and one of two things happens -- something goes wrong, which is to say my investment thesis is disproven -- I don't care about the price. I sell. It's gone. When the reason to own a stock goes away, the stock goes away. No ifs, ands, or buts. Hope is not one of my strategies.

The other thing that happens in bull markets is that your price expectation is met before the company has accrued the value that you thought would have justified that price. In that case, you're not a trader. You're a value investor and you got paid in nine months what you had expected to take five years to achieve. That's not trading. I call it "pounce broking." And I am, to be sure, a pounce broker.

Bill: Some of these stocks in the niche metals -- like antimony and tungsten -- have been on fire, Rick. Like one company, Nova Minerals, NVA on the NASDAQ, went from a few bucks to $80 in about three months when the DoD funded it. Did you play any of these niche metals on the DoD funding theme?

Rick: Absolutely no fear of missing out. None. A niche metal where a new producer could crater the market by 50%, or where the promised government support doesn't happen -- and government's in the business of lying, let's get that straight -- irrespective of what the rewards might be, those are not of interest to me.

The profits you talked about are of interest to me. People ask me why I wasn't in Bitcoin. The truth is, I was. I bought some Bitcoin in a moment of weakness. I'm a friend of a guy named Tik Tara who was a real expert. I bought some Bitcoin and it promptly went crazy. And I had a discussion with myself: what did I do to deserve this money? What do I know about Bitcoin? What changed other than the fact that the price doubled? And that caused me to sell it. And I'm actually proud of that decision. The people who know I sold it at $800 on the way to $100,000 say, "Don't you feel stupid about that sale?" And I say, "No. I turned $400 into $800 very quickly. I'm happy about it."

And I feel the same way about foregone profits where the profit wasn't at least a strong probability based on reality, as opposed to story. That's of no interest to me.

Rick: They say the three most popular commodities among stock promoters are thorium, fraudium, and scamium. And I have no interest in any of those three commodities at all. No matter how strategic scamium might be. The whole government runs on scamium, but despite that, I pay my taxes the old-fashioned way.

Bill: So as a staunch libertarian, you're not generally in favor of government funding private industry. However, you've told me in the past that with the solar industry you had to deploy capital there for your clients because the probability of returns was so high.

Rick: There were guarantees in wind and solar. They made it impossible to lose. They gave you upfront tax credits that reduced your investment by 60 or 65%, then they guaranteed feed-in tariffs. And on top of that, they guaranteed the debt you took on to private lenders. There was no way in some of those investments that you couldn't get a 12% return on equity. Do I feel dishonest about that? Yes, absolutely. But I also felt constrained to deploy capital when I saw the opportunity -- there were opportunities to do that in size for a couple of family offices where I could deploy $10 million on their behalf at what was effectively a guaranteed 12% return.

My political philosophy notwithstanding, I had an obligation to the client to either do it for them or show it to them so they could do it for themselves. The attorney-client relationship is a sanctified relationship, and it supersedes political philosophy.

So when you see something like MP Materials -- the rare earth project in your favorite mining state of California -- where they guarantee a price floor, obviously you're not for that, but how do you think it impacts the rare earth market here in the States?

Rick: I don't think it's going to impact things below MP an awful lot because there aren't an awful lot of real competitive deposits in the United States. By the way, Mountain Pass isn't either -- it's been bankrupt three times in my career. Investing in Mountain Pass is further evidence that government money is dumb money. The mining business of course loves dumb money. There's no greater consumer of dumb money that I know of than the mining business. And the government's the dumbest money of all. So in essence, it's a marriage made in heaven.

What is interesting is that the interest of government in mining tells me a couple of things. It tells me that the politics of the United States and popular opinion has changed -- particularly in the uranium space. Bill, when you and I first started talking and I was a very aggressive uranium speculator, uranium was truly hated. People used to comment on my social media posts saying I was a despicable human being for profiting off Hiroshima, Nagasaki, Chernobyl, Three Mile Island, and Fukushima.

Now those same people want to subsidize me. That's an interesting change in opinion, which is bullish for the sector. I need to say I felt cleaner when they hated me than I do now when they subsidize me. But I guess having been in the uranium space for seven years, I'm willing to take dumb money too -- provided it doesn't come from my clients, at least directly as shareholders, of course it does. [laughs]

Bill: Rick, you're the largest shareholder of Sprott because you sold your prior business to Sprott. What is your exit strategy with that position? And does your exit strategy differ from or happen before Sprott creates its own exit strategy?

Rick: I think Sprott will create its own exit strategy. Sprott has become one of the two or three most important brand names in natural resource and precious metals investing. Brand turns out to be important.

Sprott is also a unique investment opportunity. You probably have forty investment vehicles out there, including several

Rick: publicly traded ones. If you buy one of the publicly traded ones -- which I of course encourage you to do as a shareholder -- one of their ETFs, the silver trust, the gold trust, the uranium trust, any of those things -- you get really best-of-breed product design and best-of-breed fiduciary management, but you pay them a management fee, let's say 40 basis points, and that goes to the parent company. If you own the parent company, you get an indirect interest in all forty products. And rather than pay a fee, you get paid a dividend.

So from an arithmetic point of view: would you prefer diversification and a 1.8% dividend, or would you prefer single-risk exposure and paying a 40-basis-point fee? The arithmetic is all around owning the parent.

And by the way, while I got a fair bit of stock from selling my businesses -- I sold them two businesses: what is now their lending business, and then my own business -- I've also bought stock in the market. I sold some stock a couple years ago to get myself down below 10%. What was happening was that the regulators, because I was a 10% shareholder of Sprott, were combining my shareholdings with Sprott's shareholdings on individual issues for insider filing purposes, which really constrained my ability to buy and sell stock. So I sold enough Sprott to get myself down to 9.99999%.

As to your question about the exit: we are in a precious metals and natural resources bull market. Sprott's AUM is growing very quickly. It eclipsed $50 billion US, and the management fees grow commensurate with AUM, which grows much more quickly than overhead, which is very pleasant. Interest in dividends over the last two years has grown fairly substantially. Costs are well under control. They pay their staff very well, which they should -- they have very high-quality people -- but the margin increases.

What I think happens is that when Sprott AUM crosses $100 billion, one of the huge financial supermarkets that wants to lumber into natural resources will say, "Should I spend five years and $3 billion establishing market share in natural resources, or should I just buy Sprott?" And I think Sprott will come to be named after a Manulife or a Credit Suisse. I think my exit will be taken care of in the market.

Bill: Not BlackRock?

Rick: BlackRock? Sure. I don't really think that's Whitney George's choice. Whitney is the CEO of Sprott, but he's also a large investor -- something like a 5% shareholder. He will do what's right for shareholders, and to the extent a bid comes in that values Sprott fairly or better yet unfairly, I suspect Whitney will take it on behalf of shareholders. My Spidey sense tells me that happens in a three-to-five-year time frame.

It'll be bittersweet for me, I have to say. The whole young team at Sprott -- I was around in their formative years and I love watching them mature. I love watching that team gel. I love Whitney's leadership. I love watching the AUM grow. You know, I still have the jersey hung up, even though I don't wear it.

Bill: So what are the companies in your portfolio? Sprott being one of them. What do those natural resource holds look like?

Rick: Well, not just the natural resource sector. Battle Bank -- you know, I'm celebrating retirement by starting a new bank, by the way. Not an activity that's recommended for people who want leisure. Battle Bank, if it outlives me, will likely become a permanent part of my trust.

I have a private insurance business in the property casualty space around environmental bonding and remediation. It's a permanent business. It's at the top of the capital stack in natural resources, even ahead of secured credit.

I suspect --

Rick: -- that I'll always have some physical gold. I save in gold. I maintain liquidity in short-term US dollar deposits, but I save in gold, and have since the year 2000.

I think ExxonMobil will very well be a permanent portfolio holding for me. I believe ARC Resources in Canada, as long as the current management team stays in place, will be permanent. I suspect Freehold Royalty will be permanent. I suspect Franco-Nevada and Wheaton Precious Metals will be permanent. I'll know within five years whether Agnico Eagle will be permanent. It wouldn't surprise me to see BHP become permanent.

You'll notice those are all beta names. Those are irreplaceable assets. I think you're going to see a period in time where inflation works through to the upfront capital costs around resource development, which means that existing, built, financed, permitted mines and oil fields with long duration are worth a lot more than the market currently thinks.

Now, if things go crazy -- and they easily could in the next ten years -- and if I'm mentally competent, and if I see sectors that are roundly hated that I understand, some of those positions that I believe are permanent might become impermanent. I'm 72 years of age now. If I was 85 and I thought Exxon was selling at 250% of NPV and community bank stocks in certain states were selling at 50% of NPV after a period of inflation, I'd probably take the money out of Exxon and buy community banks. But ex that -- if the market doesn't get stupid -- those would be my permanent portfolio positions.

Bill: Thank you for sharing that, Rick. You've mentioned you're putting money in oil, and a large percentage of your portfolio is now in oil. Can you give us any more specifics -- like offshore drillers, service providers, Schlumberger, ExxonMobil?

Rick: I own Schlumberger and Halliburton, but I need to say that looking at my own performance over forty years, I'm an average allocator in oil field services and supplies, and I'm a good allocator in upstream. So I prefer to be where I'm a good allocator.

The names I own there -- I won't name all of them because there's a long list -- but the principal names: I'm a very large shareholder of Exxon and I've been buying today. I'm a small shareholder in Occidental. It's got a troubled balance sheet and I don't like troubled balance sheets, but it has the best inventory relative to market cap of undeveloped A-grade locations, which I do like. Side note: the United States is running out of high-quality development locations. We've drilled through probably 85% of our inventory, and places like the Anadarko and Permian -- Occidental has an outsized share of what's left over. And I own a bit of Chevron because I like the refining and marketing franchise.

I've stepped back into Canada in a big way, because although I don't like the current prime minister, I like him more than the last one. This guy -- Carney -- is not a good guy, but he's numerate. The last guy was a narrative clown. And I think Carney recognizes that as much as he dislikes carbon, he needs the money because he loves to spend. And I think that pragmatism will allow some headroom in the oil and gas business in Canada. Canadian oil stocks are, as a consequence of political risk, much cheaper than US stocks.

So in Canada I own Suncor and I own CNQ because you kind of have to. I own Freehold Royalty, which I love. I own Prairie Sky Royalty, which I like but I like their asset spread more than their track record with regards to investment allocation. I love ARC. I love the management team there. I also own Tourmaline because they're just a serial outperformer. Every year for ten years,

Rick: particularly when they do something I don't like and it works, my respect for them increases.

And I like the beta in Canadian natural gas. So I own Peyto and Birchcliff, which I think are the two highest-quality Canadian natural gas names. I own a smattering of juniors, which I'd prefer not to share because people will buy them because I own them, rather than doing their own work.

And by the way, I've reviewed about fifty juniors in the last year in the oil and gas space. And what I do now is I benchmark them against Exxon -- potential upside, discount to market, potential downside -- and invariably I go to Exxon.

Bill: What percentage of the time -- like 98%? [laughs]

Rick: I mean, I can make a case that XYZ Junior is going to go up tenfold. But I can think of a lot of reasons why it wouldn't. I think Exxon is selling at a 40% discount to NPV. I think the nominal oil price goes from $60 to $85, and I think the NPV of Exxon -- with the higher oil prices and with the maturation of Guyana and the development locations they got from Pioneer -- goes up threefold. So I'm buying a five-year threebagger at a 40% discount to NAV. And by the way, those are probabilistic, not possibilistic.

Probable is a way better number than possible.

Bill: Thank you for sharing those names and why you're buying them, Rick.

Rick: And assuming I'm early, which I always am -- the US names I gave you give you a median 3.75% current yield dividend. The Canadian names I gave you give you a 6% basic yield. So assuming I'm early, which I almost certainly am, the time value of money objection is obviated by the dividend.

Bill: So are you more heavily weighted in Canadian names, given the greater dividend?

Rick: No, I'm much more heavily weighted in the US because of Exxon and because of some other legacy positions -- Texas Pacific, BlackRock, the US oil and gas royalty sector. Those are positions I've had for 25 years. They became large positions organically: I reinvested dividends and the share price went up. I haven't made new allocations because I haven't had to. But the one I've made massive new allocations to over the last three years has been ExxonMobil.

Bill: Flipping back to the precious metals sector -- Contango Ore and Dolly Varden Silver are merging. Were you a shareholder of either?

Rick: I was a Dolly Varden shareholder. I had been a Contango Ore shareholder. It had very nice initial share price performance -- it exceeded every level of greed I had -- so I sold the stock. I sold enough Dolly Varden that I was at the point of no concern, but I was still a Dolly Varden shareholder at the time of the merger. I recently interviewed both CEOs about the proposed merger. Those who care can find that interview at the Rule Classroom channel on YouTube.

Comments on the merger: the market's going to like it. They will, as a consequence of the merger, reduce combined G&A fairly substantially, which is lovely. The lower G&A relative to AUM for cash flow is a great thing. There are some interesting operational synergies. I don't think the synergies are as strong as they suggest they are, but that's okay -- I hope they can make them work. The strategy around direct shipping and focusing on the north, where they're good, is sound. And particularly the admission by Shawn Khunkhun that Rick Van Nieuwenhuyse is a better guy than he is at taking a line to production, as opposed to finding one, is refreshing.

There is an evident respect and regard between the two companies, so the cultural challenges around the merger look like they're going to be small. Larger companies enjoy greater trading liquidity, a higher probability of inclusion in more indexes, and as a consequence, greater trading volume, which leads to higher share prices and a lower cost of capital. There will be near-term weakness as disappointed shareholders on both sides are taken out, but over the course of the year

Rick: those people will be flushed through, and the greater trading liquidity -- along with the NYSE listing and access to at-the-money ATM financing -- means the transactional cost of capital is going to fall from somewhere between 6.5% and 7% fully loaded to somewhere around 1%. Our game is cost of capital. You lower your cost of capital, you've done a good job.

Bill: Rick, what do you think about Fresnillo moving beyond Mexico into Canada and buying Probe? What's your commentary there?

Rick: Idiocy. Well, maybe it isn't idiocy. There is no mystery over the fact that the family that controls Penoles, which controls Fresnillo, is held in very low regard by the president of Mexico. And if your primary focus is in a country where the political class doesn't like you, maybe you have to move. I don't know what durable competitive advantage Fresnillo believes they have in Ontario. I can't imagine it's much.

I was struck when I saw the news of that merger. I had very recently interviewed Ammar Al-Joundi, the CEO of Agnico Eagle. What he said was that acquisitions for them had to allow them to leverage existing infrastructure and build out a greater regional focus -- that they had several durable competitive advantages. He considered Agnico Eagle to be an absolutely superior construction company, but one with particular strength in the Arctic and the north. He suggested to me there were opportunities for Agnico Eagle in the greater Rabbit Lake area of Ontario and Quebec because they had so much infrastructure in place that they could buy a deposit that wasn't big enough to advertise a mill, without building a mill -- just truck the material to their own mill. Leveraging existing infrastructure.

He showed me a five-year roadmap to growth without a further acquisition. I would challenge Fresnillo to explain the acquisition of Probe.

Bill: Some say it's because they want to pivot out of Mexico so that Mexico doesn't pull the rug out from under their business. Is there any legitimacy to that?

Rick: Sure. They are experiencing antipathy at best from the president of Mexico. From the point of view of a control shareholder and management, I absolutely understand it. From the point of view of a shareholder, I would much rather be invested in Ontario through somebody that has experience in Ontario.

I would point out too that the president of Mexico is going to be gone in two and a half years. She will be a thing of the past. And I think it's likely that in 2026, at least six permits in Mexico will be issued. So the cloud that has overhung Mexico as a consequence of delayed permitting will begin to lift. Fresnillo will not be a beneficiary of that, let's get that straight.

But what will be evident in Mexico is that mining companies that have demonstrated strong local support -- in other words, where the permitting approval will accrue to the political benefit of the president -- will be permitted, provided that they have California or British Columbia-style environmental practices. We've been told by good Mexican clients that six permits will be issued in the near term, which I think will begin to change the outlook the rational part of the mining industry has for Mexico. That ultimately could benefit Fresnillo.

I believe that North American companies -- particularly those where the executives explore Mexico from suburban Toronto --

Rick: will be at a competitive disadvantage to Mexican operations operated by Mexicans. That's one of the reasons I'm a shareholder in Luca Mining. Luca has, from my point of view, a couple of strikes against it -- two small mines -- but I own them anyway. Because Luca has shown the ability to apply the Mexican touch to Mexican assets, to deal with local sociology, presumably including narcotraffickers, to take assets that were misunderstood because they were operated from 3,000 miles away, focus capital and attention on them, and return them to profitability. I think that's going to be a real theme around the world, including in Mexico.

Bill: Rick, thank you for your insights today. Before you go -- I know I got an email that the Rule Symposium is going to be in Boca Raton again. Share about that with listeners, and anything else you're offering.

Rick: Well, first of all, let's do the free stuff. Anybody who wants to can go to my website, Rule Investment Media, list their natural resource stocks, and I'll rank them for free. No obligation. I'll comment on individual issues where I think my comments might have value. That's ruleinvestmentmedia.com. Please, no crypto, no pot stocks, no tech stocks. Don't ask an old guy to do what you do as well.

While you're at it, visit the Rule Classroom. There's over 300 hours of programming there. 15,000 members discussing things, absolutely positively for free. Can't beat free. Free of course comes with a money-back guarantee.

But the best thing I do is the symposium, and that's not free. We've been putting it on for about thirty years. It is the single finest high-net-worth retail natural resources investment symposium on the planet. It's the only one that makes you the following guarantee, whether you attend live or via livestream: a solid gold money-back guarantee. If for any reason you don't think you got your money's worth, we give you your money back.

We hold this over four days -- July 6th through 10th -- either in Boca Raton or from the comfort and convenience of your own home. In either case you'll receive access to the recordings for a year, and you'll need them because we give you 48 hours of programming in four days, more than you can possibly endure and absorb. I put on the conference and I have to listen to recordings.

So hopefully, Bill, you'll have a link. It's Rule Symposium, July 6th through 10th in Boca Raton, either live or via livestream. I encourage live if you can do it. There's a lot that goes on at a conference that's informal -- at the coffee machine or better yet at the bar, in conversations that take place privately at booths or with the speakers. But if you can't make it, I get it. Some 1,400 people from 33 countries attended via livestream. And of those 1,400 people, three requested refunds. So that was a fairly satisfied group.

It's the best work I do. A labor of love. We've had outpourings of support from attendees, from exhibitors, from speakers -- a veritable love fest. And we'd like you to love us, too.

Bill: Yeah. No, I enjoyed it. I was surprised how many couples were there -- I don't know if people made a vacation out of it in Boca Raton. I don't remember as many couples in Vancouver when you used to hold it there.

Rick: Well, the resort is not a bad place. Central Florida -- southern Florida -- is hot that time of year. When we held it in Vancouver, one problem was it was so nice that people played hooky. They'd walk up Robson Street, have a beer on a deck, watch the world go by. Nobody in their right mind goes out in southern Florida midday. But the resort -- if you went to book a room there this time of year, it'd be $1,200. And I turn that room to you in July for $320, because I bring them so many guests at a point in the year that's a little soft for them. They give me exhibit space -- they get even with me on the food and beverage, mind you -- but they give me the exhibit space, which means I can lower the cost to attendees. It's all economics. But some spouses who don't attend the conference come year after year because they enjoy the place: the Atlantic Ocean beaches, the pools, the spa, the restaurants. It's a hell of a resort.

Bill: Yeah, it was very nice. Well, thank you for your insights today, Rick.

Rick: Pleasure, Bill. Thanks for the opportunity to visit with your audience.