Sprott Monthly Market Update with Rick Rule: Resource Opportunities in Uranium, Cobalt, and Gold
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Sprott has seen broadly increasing client and institutional interest which has been lead by strong private placements. This interest is being driven by 2017 commodity performance, and now the equities show good value. Rick feels that some of the companies like Agnico-Eagle are likely to do quite well over the next couple of years. Increasingly they are being run as real businesses instead of leveraged call options on gold.
Sprott is currently focusing on exploration and discovery plays. They are assessing prospect generators companies. They are also looking for companies with decent drilling results that the market has overlooked. Secondly companies with very competent teams of people who are serially successful. Lastly, they want companies that are already well enough funded to answer their unanswered questions. Rick feels that the exploration sector will wait until 2019 before it moves dramatically.
They are getting better terms on private placements and can attract warrants that are tradeable and detachable. With trade-able warrants, they are often traded for more than their intrinsic value.
The outlook for phosphates and Ag-minerals are extremely bleak, and there is significant oversupply. As a consequence of this bleak supply and demand outlook, there may be opportunities in buying essential commodities when they are below the cost of production.
He discusses the potential demand picture for uranium, copper, nickel and why the world has plenty of lithium.
Cobalt is the first commodity that Rick has seen where the industry is happy to pay more for the product so long as supply can be increased. However, cobalt, as an investment theme has issues with geography as most of it, comes from the Congo, Russia, and Cuba. These are not countries that investors particularly favor.