FOS hopefuls Read this connect the dots and be patient.....Sprott owns 20% plus of FOS..IMO we will see FOS and Sprott involved in the 15 bagger Rule talks about here........
This is worth reading and may help in understanding what's going on and how to prosper. Some really good info in here:
Extracted from interview with Rick Rule by Small CapPower,com , February, 2013.
"SmallCapPower: Great. The Canadian junior market and the resource juniors continue to struggle as investors shy away from them despite the TSX and Dow Jones trading at very good levels. When do you see the junior markets starting to perform again? Rule: That's a very tricky question. I have to give a nuanced answer. Most of the companies on the [Toronto Venture Exchange (TSX V)] are worth nothing. They have no net present value. And we need to have a cleansing on the exchange. We need to have a period like, 1991, 1992, and 1993, where dozens of companies got delisted every month. We need for the bottom half of the exchange at least to go to its intrinsic value, which is zero. So we are going to feel like we're in a bear market in the TSX V for probably 18 months. What that will disguise is that the best 10% of the companies on the TSX V have probably already bottomed. The market is going to start to bifurcate and the bifurcation will be those companies that can raise enough money to continue to add value and those companies that can't. You're starting to see a plethora of financing of companies doing nickel deals and raising $300,000. The ability that company has to employ the $300,000, to add value and exploration, is nil. These guys are raising money to pay for working capital deficits and salaries with no hope of generating any benefit to shareholders. So we need to wash this irrational activity out of the market. What you are going to see in 2013 is that some of the better market participants, some of the people who understand the nature of exploration and are good at stock picking, are going to have absolutely stellar performance years. My own performance in the period 1998, 1999, 2000, 2001, 2002 – that is the last truly ugly bear market that we saw in resources – was absolutely superb. The old vets are going to do very, very, very well in 2013 because they can separate the wheat from the chaff. And as I say, my suspicion is that the best 10% of this market has already bottomed and is going to head up from low levels. This is going to occur for three reasons. One, we are starting from a cheap base. Some of the better companies that are listed on the exchange are down by 90% from their 2010 highs. So they're simply oversold. They will come back because the sellers are exhausted and the buyers will dominate. The second reason is, in the oil and gas and mining space, between them, there are probably 50 companies that will be taken over by larger companies. There will be consolidation, and this consolidation will add both cash and hope in the system. There will also be amalgamation, that is, horizontal amalgamations where three or four companies merge, reduce their combined G&A by 75%, and become viable rather than nonviable entities. But the third thing that's going to happen that people aren't counting on right now is that because we have funded exploration very well for 10 years and because that's what it takes, we're coming into a discovery cycle. We talk about the fact that this market hasn't performed, but the industry hasn't given the market very many reasons to perform. There haven't been very many discoveries. If you look at 2012, which was a dismal market from anybody's point of view, and you look at companies like Reservoir Minerals, $0.26 to $3; Gold Quest, $0.06 to $2; Africa Oil, $0.80 to $10; you will see that the market performs
when the industry gives it an excuse to perform. And as a consequence of having spent 10 years in the exploration cycle and being well-funded from 2003 to 2013, the industry is, I believe, on the cusp of a discovery cycle that will really, truly surprise people. So from my point of view, while 2013 and part of 2014 will feel dismal to market participants who as a whole don't know how to segregate between the good, the bad, and the ugly – the part of the market that matters, the best 10% of the juniors, has already bottomed and is going to be heading up. And some of the upside move in some of the companies that make discoveries will be will experience, the same way they experienced it in 2003 and 2004. SmallCapPower as explosive as the moves that we've just talked about, 10-fold or 15-fold. What could be really, really, really pleasant is participating in 2013 in private placements with some of the better issuers that have to issue full warrants to attract cap ital… and then experiencing the 15-bagger that comes from exploration success, not only with the underlying stock but with the full warrant. Because that turns a 15-bagger into a 25-bagger and that's the thing that people : Great . In today's environment, when you are looking for new investment opportunities in reso urce companies, what do you look for before putting money in? Rule: People. You want people who have been successful or serially successful and you want them to have been successful at an activity that's very similar to the activity that they're undertaking for you. It's not enough that somebody has been successful in mining. We said many times that somebody who comes to you and says that he's a good mining man because he operated a gold mine in archean terrain in French-speaking Quebec [isn't] going to be successful exploring for copper in tertiary volcanics, young rock, in Spanish-speaking Peru. The exploration process is different, the production process… archean terrains are different than tertiary volcanics. And certainly there are cultural difference between French-speaking Quebec and Spanish-speaking Peru. You need to back people who are engaged in activities that they have specific success relating to. That's important. The second thing is that this is a capital-intensive business. Companies that don't have rational balance sheets relative to their expenditures – in other words, people who don't have capital – can't succeed in a capital-intensive business. And the last thing that's important is scale. There are seductive stories. Stories in particular appeal to entrepreneurial business-building investors that have to do with, as an example, discovering small mines and using the cash flow from small mines to avoid dilution, building a major mine from humble beginnings. It's a wonderful, seductive story. The problem is it doesn't work. Everything that can go wrong with a big mine can go wrong with a small mine, but a small mine can never make you big money. And taking risks that one has to take in exploration speculation, one needs to take those risks in anticipation of very, very large targets. So what you need in summary is management with technical skills that are specific to the task at hand. Either capital in the treasury or capital readily available to them, to undertake the task at hand. And you need scale in terms of the task that the company's assigned itself. SmallCapPower: Great. And finally, what are you doing with your own money right now in the microcap world and why? Rule: We're aggressive right now. Sprott-wide on behalf of clients and on behalf of ourselves, we are being very aggressive. Particularly we're aggressive in the private-
placement space. We would like to provide the capital to people to finish dreams that they started during the last decade, but are undercapitalized to continue it now. Particular sectors, we love the platinum and palladium space. We believe that the price of platinum and palladium has to go up. And importantly because of the utility associated with the commodity, we believe it can go up. We're very specific in terms of the platinum and palladium companies that we're investing in. But we like the space physically, and we like the space in terms of exploration, production. If we're involved in exploration activities, production activities, that could be mechanized. The labor-intensive South African model is broken, so we like that space. We like the gold and silver space. In particular, unusually for us, we like the preliminary economic assessment phase or the pre-feasibility phase. We see five projects – which we're unwilling to name for competitive reasons of course – where the net asset values established in the pre-feasibility study are substantially larger than the sum of enterprise value. And front-end capital costs where internal rates of return are in the 30% range and where payoffs are three years or less. In each of these particular cases, we are highly confident that either the market will return to rationality in terms of the pricing associated with these or the names will be acquired. In either case we'll make good money. We are also attracted to sub-$300 million or sub-$400 million market cap Canadian oil and gas resource plays where you have large numbers of proved, undeveloped resources on the books and the ability to invest fairly large amounts of money with very repeatable and very acceptable internal rates of return. And finally, we're very attracted to an exploration model among the juniors that we refer to as the prospect generator/joint venture model… where companies assemble intellectual capital teams that have definable, specific technical or regional skills, develop targets, and farm those targets out to other mining companies who do the heavy capital-intensive listing… where our companies recognize that their true asset is their knowledge base rather than the properties. We're attracted to those four sectors and we expect each of them to materially reward Sprott and materially reward the Sprott clients on both sides of the border
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