THE AUSTRALIAN OCTOBER 30, 2013
We can't invest mid-market and top market. We have to invest when the locals are on strike."
He says the junior mining sector is still ridiculously underpriced and predicts it could get worse before it strengthens.
Mr Rule became head of the US arm of the $US9 billion ($9.45bn) Canadian resource investment house Sprott in 2010 when Sprott acquired his Global Resource Investment fund. His fund has a range of Australian-based investments, including Regis Resources, Orbis Gold, Papillon Resources, Hot Chili, Sirius Resources and Peel Mining.
"We're extremely attracted to the management team at Regis," he said.
"For its size, it is probably the best accumulation of intellectual capital in the industry, and we suspect that as the industry returns to favour over the next three or four years it will be a must-own name for gold institutions."
Although Sprott is open to any opportunity, one area it is keen to invest in is Australian precious metals companies with African projects. "Australians are particularly effective explorers and developers in Africa, but Australian investors tend to be more attracted to companies with Australian assets," Mr Rule said.
"We are impressed with the success of management teams in other countries and believe that success deserves a premium -- a premium which mercifully we don't have to pay."
Mr Rule's message to the miners is that while global capital markets appear shut, Sprott's door is open. While the Australian market can still raise $300m and $400m figures, the $10m- $30m raisings are where it is struggling, and that is where Mr Rule is focused. Sprott is particularly interested in guaranteeing equity raisings.
Mr Rule said his most spectacular Australian investment was Paladin Energy, which he bought into at 10c after meeting managing director John Borshoff at the 1998 Diggers and Dealers conference in Kalgoorlie, Western Australia. The stock then tanked to about 1.5c when uranium was deeply out of favour, at which time Mr Rule topped up. By 2006 the stock was at $10, with uranium prices soaring and investors back in love with mining stocks.
As a contrarian investor, he says he left the stock before uranium once again fell out of favour.
