This is a very brief summary of what was a lengthy interview. Don’t rely on this summary. Watch the full interview which is linked at the end of this post.

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TLDR

Rick Rule is preparing for a conference featuring vetted mining companies. He sees potential in a $2 million market cap company but won’t disclose the name. He discusses the importance of market timing, investment strategies, and recent significant events in the mining sector, including a heap leach pad failure and a potential acquisition in the uranium space.

Rick Rule Interview

What $2M stock does Rick Rule like?

There is a $2 million market cap company I am buying but I will not reveal the name. These tiny market cap companies often have significant upside potential if managed by a competent team and positioned in a promising market sector. My interest was more for educational purposes, emphasizing the unique opportunities such small companies can offer in the right conditions.

How do you deal with liquidity issues in such small stocks?

I actively manage my positions by being in the market on bad days when sellers are more likely to offload shares at lower prices. I also use strategies like calling up management for block trades or contacting other shareholders directly. I take advantage of market downturns, where panicked or margin-call-driven sellers are more likely to offload shares at lower prices.

Do you use level two data in these trades?

I do not rely on level two data for these trades as the market for such small stocks often operates through iceberg orders and off-market transactions. In the sub-$1 million market cap space, most trades occur through iceberg orders, which are not reflected in level two data. Thus, my strategy involves patience and market presence during volatile periods rather than relying on visible bid-ask spreads.

Why wouldn’t you bring a $2 million company to your Florida conference?

Such a small company wouldn’t benefit from the exposure and could lead to stock price manipulation. The conference focuses on more substantial companies with vetted prospects. Including a $2 million company could result in undue speculation and volatility, which would not serve the interests of serious investors.

What matters most in micro-cap investments?

The team is the most crucial factor in micro-cap investments. Competent, experienced managers are essential for success, even more so than the asset itself. The quality and track record of the management team are critical in determining the potential success of micro-cap companies. These teams need to navigate significant challenges and possess the expertise to develop projects effectively.

What do you think about the heap leach pad failure at Victoria Gold’s Yukon mine?

Mining is inherently risky, and such failures, though unfortunate, are part of the business. The most important outcome is the preservation of life. Financial losses can be managed and mitigated, but the safety of miners should always be the primary concern.

Have you invested in companies with similar failures before?

Yes, I have experienced worse failures, such as the tailings dam failure involving BHP and Vale, which resulted in significant financial and human losses. It’s important to have a diversified portfolio to absorb such shocks and the critical nature of safety and environmental diligence in mining operations.

Would you consider buying Victoria Gold after the 90% drop?

I would consider buying if my analysis showed that the rebuild costs and future cash flows made the investment attractive relative to its current depressed price. The decision to buy would depend on a thorough analysis of the costs to rebuild, the timeline for restarting operations, and the projected cash flows. If the investment case remains strong after these considerations, it could present a compelling opportunity. As of yet, I have not done that analysis, so I am not buying the stock.

What are your thoughts on Paladin’s offer to acquire Fission Uranium?

I support the deal, noting that it could lead to more consolidation in the uranium sector, which I view positively. I hope NextGen might also bid for Fission, as those assets should be combined. Consolidation in the uranium sector could drive efficiency and value creation. The strategic fit of Fission’s assets with NextGen and the potential benefits of such a merger are notable.

How do you feel about Paladin being listed on the TSX?

I believe that if Paladin engages with North American investors, a TSX listing could significantly increase liquidity and investor interest. A TSX listing could enhance Paladin’s visibility and attract more North American investors, provided the company actively engages with the market. This could result in higher trading volumes and a broader investor base.

What are your current thoughts on the gold market?

I see a discrepancy between the rising gold price and stagnant gold equity prices. I believe retail participation in gold stocks will increase, leading to significant gains in the sector. Central banks have been significant buyers of gold, but retail investors are just beginning to enter the market. I expect this increased retail interest to drive gold stock prices higher, creating substantial opportunities for investors.

What are you focusing on these days?

I am focused on the difference between price and value, especially in the natural resources sector, which I believe is in a “sweet spot” for investment, particularly in energy and gold. Identifying and investing in undervalued assets with significant upside potential is key. The natural resources sector presents attractive opportunities driven by favorable market conditions and strong fundamentals.

Full Rick Rule Interview

This Rick Rule interview covers topics like market strategies, investment in micro-cap stocks, and recent significant events in the mining industry, such as the heap leach pad failure at Victoria Gold’s Yukon mine and the implications of Paladin’s offer to acquire Fission Uranium.