Rick Rule, founder and chairman of Sprott Global Resource Investments Ltd. wrapped up a mining conference in Vancouver this week by offering up a list of stocks that he would own. Below is the list.
Ivanplats Ltd. (TSX: T.IVP, Stock Forum)
Trading at $2.30 this week, Ivanplats has a market cap of $1.16 billion, based on 503 million shares outstanding. The 52-week range is $5.45 and $2.24.
Reasons to buy: Ivanplats is headed by Robert Friedland, one of the world’s leading mining entrepreneurs. His previous successes include the Voisey’s Bay nickel find in northern Labrador and Oyu Tolgoi copper project in Mongolia.
The Ivanplats portfolio includes the Kamoa copper discovery in the Democratic Republic of Congo (DRC), one of the largest undeveloped discoveries of its kind in the world. The same can be said of the Platreef platinum-palladium project in South Africa and Kipushi zinc project, which is also located in the DRC.
Reasons not to buy: Two of the company's key projects are located in the DRC, one of Africa's most notorious trouble spots. The company is burning through around $20 million a month and Rule said it will cost roughly $7 billion to put the three projects into production.
Lydian International Ltd. (TSX: T.LYD, Stock Forum)
Trading at $1.52 this week, Lydian has a market cap of $197.8 million, based on 130.2 million shares outstanding. The 52-week range is $2.56 and $1.31.
Reasons to buy: A technical report for the company’s Amulsar gold silver project in south-central Armenia estimated that the project contains 2 million ounces of recoverable gold reserves and 3.7 million ounces of silver. The study projects a 28% internal rate of return. Rule believes Armenia needs the tax revenue and will therefore back the US$416 million project.
Reasons not to buy: As the company's flagship project is in the feasibility stage, the company will need to raise equity. Management expertise lies in exploration, as opposed to mine development. “If they build this thing, [President and CEO Tim Coughlin] is going to have to fire himself,’’ Rule said. The political risk is ubiquitous.
Sprott Inc. (TSX: T.SII, Stock Forum)
Trading at $3.15 this week, Sprott has a market cap of $563.7 million, based on 178.9 million shares outstanding. The 52-week range is $5.98 and $2.55.
Reasons not to buy: Investment performance recently has been “pathetic,” Rule says. The business is 100% dependent on natural resources, a sector that is "degrading."
Reasons to buy: Deep bench strength. No debt on the balance sheet. Highly experienced management. The resource sector is cyclical.
Sprott Physical Platinum & Palladium Trust (NYSE: SPPP, Stock Forum).
Traded recently at $9.27, leaving a market cap of $254.8 million, based on 28 million shares outstanding. The 52-week range is $10.75 and $8.26.
Reasons to buy: Since the platinum mining industry is unable to cover its cost of capital, prices for both platinum and palladium must go up, in Rule's view. Also SPPP is trading at a discount to the spot price of platinum and palladium.
Rockgate Capital Corp. (TSX: T.RGT, Stock Forum)
Trading at 16.5 cents this week, leaving the company with a market cap of $19.3 million, based on 116.9 million shares outstanding. The 52-week range is 67 cents and 16 cents.
Reasons to buy: $25 million in the treasury, a measured and indicated resource of 30 million pounds of uranium at the Falea Uranium-Silver-Copper project in Mali, West Africa. “I hope it becomes a 50 million pound deposit,’’ Rule said.
Toscana Energy Income Corp. (TSX: V.TEI, Stock Forum)
Trading at $15 this week, Toscana has a market cap of $58 million
Reasons to buy: High quality management, stock trades at 20% discount to net asset value, yielding at 11%.
Cameco Corp. (TSX: T.CCO, Stock Forum)
Trading at $22.45 this week, Cameco has a market cap of $8.9 billion, based on 395.4 million shares outstanding. The 52-week range is $23.49 and $16.50.
Reasons to buy: Rule is bullish on the price of uranium and Cameco is the world’s leading producer of the commodity.
Uranium Participation Corp. (TSX: T.U, Stock Forum)
Trading at $5.23 this week, Uranium Participation has a market cap of $556.2 million, based on 106.3 million shares outstanding. The 52-week range is $5.80 and $4.69.
Fission Uranium Corp. (TSX: V.FCU, Stock Forum)
Trading at 71 cents this week, Fission has a market cap of $106.1 million, based on 149.4 million shares outstanding. The 52-week range is 73 cents and 52 cents.
Denison Mines Corp. (TSX: T.DML, Stock Forum)
Trading at $1.29, Denison has a market cap of $580.3 million, based on 450 million shares outstanding. The 52-week range is $1.75 and $1.04.