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Rick Rule: Prospect Generators Explained

On our first interview with Rick in November, we discussed the power of warrants, Platinum Group Metals, and Uranium. In our second interview, we talked about the optionality of a gold asset. For today’s interview, Rick discusses prospect generators and the risk reward benefits that are afforded by this sector.

Rick has helped to finance around 55 prospect generators in his career, which have resulted in 22 economic discoveries and 15 takeovers. He explains that the concept of 15 major wins out of 55, is a very good result when compared to the exploration industry as a whole. For this reason, Rick believes that prospect generators have the potential to far outperform any other group in the exploration sector.

Rick is looking for prospect generators that have several projects, and most importantly farm them out. He explains some of the metrics that he utilizes to identity the best prospect generators.

As an example, Rick discusses Legend Gold Corp. Legend Gold Corp is a prospect generator and Rick Rule owns 28% of the company.

Pulling back, Rick discusses his outlook for the junior market in 2014. Despite not seeing a capitulation phase in this bear market, Rick does now believe that the bottom is behind us. This time around, Rick expects to see a saucer shape recovery, and not a V shape recovery. In twelve to twenty four months, Rick expects that we will be in the midst of a spectacular bull market in resources.

In terms of the precious metals, Rick see certain catalysts such as the US ten year bond yield rising, which could cause substantial spikes in the prices. Without any major catalyst, Rick simply sees a slow edging up in prices for the foreseeable future.

Rick Rule is Chairman of Sprott US Holdings, part of the $10 billion Sprott Group of companies. Rick began his resource-investing career in 1974, and founded Global Resource Investments in 1992. The firm is the only firm in the United States that is exclusively focused on natural resource investments