I had the chance to sit down once again with Rick Rule, Chairman of Sprott U.S. Holdings. It was a fascinating discussion, as Rule discussed resource speculation in Africa and his experience participating in world-class deposit discoveries made over the last few decades.
“As a place to [discover] world-class deposits, I would suggest to you that Africa and Central Asia are the last great frontiers [for resource exploration]” explained Rule. “Political and social challenges have kept them from being as thoroughly explored as Western nations.”
“The part of resource speculation that interests me is exploration,” Rule continued. “And the subset of explorers that interests me most are the prospect generators — people who use their investment and commercial acumen (frankly their courage), to explore virgin or semi-virgin terrain, and then bring in joint venture partners to drill. Unfortunately, there aren’t very many prospect generators in Africa, so the universe that I have to explore is fairly small.”
Rule further explained that combining high-quality exploration efforts with well-endowed and underexplored geological terrains, makes truly historic discoveries possible.
“I’ve been fortunate in my life to participate in a few [world class African resource discoveries],” said Rule. “The Africa Oil Corp. discovery of a billion barrels of oil in Northern Kenya, [was] previously an [unexplored] place. Paladin [Energy]’s uranium discoveries in Namibia and Malawi — which ran the stock from 10 cents to 10 dollars — [is] a very fond memory as you might imagine. [Other examples include,] Tenke Mining’s tremendous [copper] success in the Congo [and] Moto Gold’s 10 million oz. gold success at Kibali.”
“[So] my outlook for Africa is very bright, but that isn’t to suggest there aren’t great challenges,” he warned.
One of the perceived challenges of investing in Africa is political risk. Rule indicated that political risk represents “Actions taken by government [that] deprive me of legitimately generated wealth. [But] by that standard, of course, the jurisdiction that I live in, California, is probably one of the riskiest jurisdictions in the world. It’s just that we look at risk differently … risks that look like us, risks that we understand, risks that we participate in creating are regarded as somehow less venal. People will hate to hear this, but I love to say it — money stolen by white people, [speaking] English, according to the rule of law, is just as gone as money that’s stolen more efficiently by traditional methods.”
While Western resource markets may present greater political risk, “Western institutional investors (primarily generalists) have [ironically] painted Africa as a do-not-go[-to] place,” Rule added.
“[But] I think the opportunities are larger than the risks, if you are willing to take those risks,” Rule concluded. “[And] what appeals to me are the exploration companies … the companies that can take exploration concepts (and social risk) … and discover very large deposits.”
To watch the full video interview with Rick Rule, Chairman of Sprott U.S. Holdings, click here.
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