(Kitco News) - Margins are still a struggle for the miners despite energy costs coming down, said Rick Rule, president and CEO of Rule Investment Media.
Rule Spoke to Kitco Mining on Wednesday at the 2024 Precious Metals Summit Beaver Creek in Colorado. Rule is also the former CEO and President of Sprott U.S. Holdings.
Rule said it is a good market to invest in. He sees opportunities due to the disparity between rising commodity prices and stagnant equity prices. He focuses on companies with proven management teams and large-scale projects. Rule is open to investing in jurisdictions with perceived political risk.
But a lot of juniors are too small to make it, said Rule.
“Most of the juniors are subscale. They are so small that general administrative expenses consume most of the capital they raise,” said Rule.
“Those companies are doomed to fail. I suspect that three quarters of the juniors that are public worldwide — Australia, Canada, the United States, Great Britain — are valueless, absolutely valueless.”
Rule said the cost of oil has dropped, which helps, but other costs keep climbing.
“Energy costs have moderated, which is a good thing,” said Rule. “But the social take, which is to say taxes, royalties… things like that are increasing — at about 15 percent compounded. Labor costs are going up, spare parts are going up, finished steel is going up.
“I think there will be continued disappointment among investors about the fact that the margins, the producing margins, aren't increasing as fast as one would hope, given the increase in gold price.”
Rule said investors have to keep scale in mind. Bigger is better.
“Everything that can go wrong with a big mine can go wrong with a small mine,” said Rule. “But a small mine can never make you big money.”
Standing out is key, Rule said. It is a crowded field.
“I ask companies today about their social media strategy,” said Rule “If they don't have one, that's the end of the discussion.”
Coverage of the 2024 Precious Metals Summit Beaver Creek in Colorado is sponsored by Newcore Gold.
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