Rick Rule

Globally, the oil industry has underinvested in sustaining capital to the tune of ~$1B per day. It doesn’t become a problem until it becomes a problem. When the Strait of Hormuz shut down, 20% of world oil supplies (but, more importantly, 50% of world export oil supplies) got shut down. That reduced productive capacity meant that we had to begin rationing by price. 

The high prices we’re seeing today are in anticipation of shortages. On a global basis, we’ve thus far been able to maintain consumption of crude as a consequence of floating inventory and strategic reserves held in various countries. If the conflict goes on for 2-3 more weeks, you will see oil rationed by price. That will be very scary. 

If the conflict goes on, the prices you see today are a mere harbinger of things to come.

He thinks so. Some countries like Japan have 200-220 or so days of supply. Other countries like Sri Lanka and Pakistan have one week of supply. The price escalations that we’ve seen are anticipatory, they don’t reflect actual shortages.

We’re going to run out of strategic supplies and floating inventories very, very quickly if the floating reserves stored north of the Strait of Hormuz aren’t released soon.

We saw in the aftermath of the Arab oil embargo that higher energy prices acted as a non-governmental tax on other investment arenas and also on the consumer. That left less capital for other sectors of the economy. Proved to be very negative for the economy and contributed to higher inflation during the 1970s.

If the crisis is prolonged (and he’s not suggesting it will be), the potential for a shock in the economy and to inflation is greater than people recognize. He’s not trying to be a harbinger of doom, and you don’t have to rearrange your life. He’s not a geopolitical analyst. But it’s a contingency that people have to consider.

He’s a uranium bull for the next 10 years as a result of structural changes in the business. Also, uranium is the obvious winner from the Gulf conflict. Increasing US production. A bull on this name over time. 

His preference, however, is CCO.

He’s a uranium bull for the next 10 years as a result of structural changes in the business. Also, uranium is the obvious winner from the Gulf conflict. His preference in the space.

It’ll absolutely be good for the FOM shareholders because copper and zinc cashflows can be revalued at the same cashflow metrics that gold enjoys. He’s less certain for the other shareholders; traditionally, cashflows from base metals have been valued by the market at below-average multiples relative to those for precious metals.

High-quality management. Good deposit, progressing steadily. Seems to enjoy local community favour. Should benefit from a very, very good 5-year outlook for copper. He’s long this name.

Good in terms of capital employed. Wants to see it reduce yield to shareholders and increase sustaining capital investments and new project investments. If you’re underweight energy, you need to get long. He’s very bullish on Canadian oils, but he loved them better at $60 than he does at $100.

Fine on return of capital. Wants it to reduce yield to shareholders and increase sustaining capital investments and new project investments. If you’re underweight energy, you need to get long. He’s very bullish on Canadian oils, but he loved them better at $60 than he does at $100.

In the 5-year timeframe, he’s bullish copper. Near term, he’s concerned. Second-tier copper producer. He likes mines that are among the lowest cost but the highest return of capital. High-quality management, but jury’s still out on it as an investment.

One outcome of the Gulf conflict is that (at least in the near term) it will tip the worldwide economy into some form of recession. Seeing weakness in the copper market now as a consequence of higher interest rates wreaking havoc with copper speculators. Also seeing weaker worldwide demand for all kinds of inputs (at least inputs that aren’t being transported through the Gulf), and copper is one of those. 

There’s a dichotomy between his very near-term outlook (weak) and his 5-year outlook (extremely strong).

He’d be a buyer, which is really saying something because he already owns a lot of it. And despite its premium price relative to rest of the gold market. Will benefit from big transactions still ahead.

He has a Buy on it, despite its premium price relative to rest of the gold market. Big transactions are still ahead, and it will be a beneficiary of that.

Loves the whole space. It’ll do surprisingly well over the next 5 years. The way that copper mines are financed includes selling byproduct streams on gold and silver. The really big transactions are still ahead, and the market doesn’t recognize that yet.

Neither is in the lowest-cost quartile in the space. IMG is the most-improved gold story in Canada. He is a gold bull, but neither would be in his Top 20.