Live with Rick Rule and Paul Harris

Da da da.

Hello and welcome to this rule investment newsletter Q&A live stream with me Paul Harris and Rick Rule. This

time we are exploring the opportunity.

Hello Rick, good to see you. Great to

see you at PDAC last week. Good to see you survived. How are you?

you survived. How are you?

>> Uh I'm doing very well. The better for being on with you. a great issue I think a timely issue too uh given all of the turmoil that we've seen in uh global

resource markets but particularly uh in the copper and oil markets uh I hope that the uh thousands of people who read the issue uh were as moved by it uh as I

was and I look forward to this discussion >> excellent well more than 50,000 people viewed that issue so we're setting a new high there uh and we are talking about

this copper the red metal Um you can even get it now in investment size um bars as well. Um and also this is a timely discussion given that on Saturday

April 18th you will be hosting a copper boot camp about investing in the copper space. What can our viewers expect that

space. What can our viewers expect that to include Rick?

Our hope is that this boot camp, like our prior boot camps, will give people in eight short hours, the ability to understand enough about the copper business that they become adequate

investors and speculators. This won't be the end of their their educational journey, of course, uh but it will give them enough of a background, we hope,

that they will be able to evaluate companies better than their competitors.

And they will also need to know about they will also need pardon me how to learn uh more about their craft. We have

always asked that people who attend the boot camps do so in conjunction with the free content already available at the rule classroom. These boot camps are

rule classroom. These boot camps are meant to be used in conjunction with the over 300 hours of educational programming already available in the rule classroom and the rule investment

media uh YouTube website. But in

particular uh the free short course on introduction to natural resource investing is an integral part of these boot camps. For those of you who are

boot camps. For those of you who are listening who have not been to a boot camp, these are eight-hour long deep dive sessions where we attempt to get

you beyond the rhetoric uh beyond what you might read in an investment newsletter that was written by somebody who used to be a technology junkie and failed there. uh something that will

failed there. uh something that will give you enough of a background that you can invest and speculate intelligently in the sector. Uh note to all of you uh

these boot camp sessions are recorded.

That's important to you because we will give you more information in 8 hours than you can absorb in 8 hours. So when

we say it's an 8-hour long course, that's a bit uh incorrect. Uh it's

probably a 16-hour long course, eight hours live uh and then eight more hours reviewing the tapes. At any rate, if you like what we have to say about copper today, if you liked what you read in the

issue and you'd like to know enough about enough about copper to take advantage of the nature of the opportunity that we described, uh I highly suggest that you subscribe to the

boot camp. Remember that the copper boot

boot camp. Remember that the copper boot camps, like all of our other boot camps and like the rural natural resources investment symposium, come with an absolute no questions asked money back

guarantee. If you think for any reason

guarantee. If you think for any reason that we haven't earned the tuition that we charged you, we will refund you 100% of your purchase price, no questions

asked. Paul, I'm delighted to say in 30

asked. Paul, I'm delighted to say in 30 years of offering unconditional money back guarantees, we've had to refund less than onetenth of 1% of the tuitions that we've charged. But that is

everybody's guarantee that we've spent enough time and treasure on the programming that we know we can deliver value.

>> Excellent. Now, we're going to uh dig into some of that today. Copper is one of the triumvirate of key industrial metals which together with steel and aluminium make modern life possible.

Most analysts forecast a supply deficit and higher prices in the future. And so

we are through this issue and through this Q&A, we're going to dig into some of the detail behind that narrative. As

a reminder, viewers can access and subscribe to the rule investment newsletter for free at realickrule.substack.com.

realickrule.substack.com.

And again, why should you listen to me?

I know you're all here to listen to Rick, but why should you listen to me?

From 2003 to 2008, I lived in Copper Capital Santiago in Chile, where I was a copper reporter for Metal Bulletin, which is now Fast Markets, and I became a consultant for the leading copper

consulting group, CRU. Since then and for the past 18 years, I have lived in Colombia. And over the years I have

Colombia. And over the years I have visited many copper mines and projects in Chile, Argentina, Bolivia, Peru, Ecuador Brazil Colombia Central America, and of course, Canada and the

USA. I will give a bit of a summary and

USA. I will give a bit of a summary and then we'll get some comments from Rick and then open up for Q&A for our audience. Now, the basic driver for

audience. Now, the basic driver for copper is economic growth as copper is key a key construction material in electrical wiring, water pipes, etc. And

so as a general rule of thumb, copper demand tracks world GDP growth which in any given year could be you know 1 to 3% peranom. As developing countries get

peranom. As developing countries get richer, their demands for a higher standard of living increases which also drives copper demand. Think of

refrigerators, air conditioning unit, air conditioning units etc. Automobiles all of these are energy and copper intensive and there is no such thing as

a low energyrich country. Countries

going through this process at the moment include China, India, Indonesia, Brazil, Nigeria and these are not small population countries. So as their

population countries. So as their populations seek a higher standard of living, this all translates into higher copper consumption. We could end the

copper consumption. We could end the conversation just here because this is by far the main driver. But this picture is spiced up with other things which are

also driving the copper sorry the copper tunity. We can add in the energy

tunity. We can add in the energy transition. Wind turbines consume a lot

transition. Wind turbines consume a lot of copper. Data centers and AI consume a

of copper. Data centers and AI consume a lot of copper. The grids to carry the power and connect. All of these things require a lot of copper. And of course,

we can also include war in this. War

consumes a lot of copper. There's two

big conflicts raging at the moment in Ukraine and obviously in Iran, which could potentially get much bigger.

The end of the neoliberal consensus and rearmorament is going to be a big driver for copper demand today and going forward. The conflict in Iran, Ukraine

forward. The conflict in Iran, Ukraine and Iran is consuming huge amounts of munitions which will need replacing and restocking. President Trump wants NATO

restocking. President Trump wants NATO members to spend more on defense and they are starting to do so. There is

also a lot of talk about how much copper there is in an EV than an internal combustion engine vehicle. But think how much more copper there is in a tank or an armored personnel carrier. Let's have

some numbers. Total copper demand in 2025 was a record 28.16 million tons which was up more than 800,000 tons or

3% from 2024. Demand is expected to grow by about 40% by 2020 sorry by 2040 to 42 million tons. However, S&P forecasts a

million tons. However, S&P forecasts a production peak of 33 million tons in 2030. Here you can see the the much

2030. Here you can see the the much talked about supply gap or copper deficit starting to form with some analysts predicting the gap will get up

to about 10 million tons per year by the end of the decade which is 20 to 40% of current world supply. Rising demand for copper is outplacing the supply chain

capacity, creating structural market imbalances. Leading diversified miner

imbalances. Leading diversified miner BHP estimates the need to fill this will cost or require some $250 billion of

investment to generate the copper supply that humanity needs. The outlook is colored by output reductions at major mines. In any given year, there are

mines. In any given year, there are production outages of up to 5% of total capacity. Last year, more than 3% of

capacity. Last year, more than 3% of global copper supply faced production issues, including at Grasburg, Kamoa, Cakula Copy Panama Eleniente and

Cabrada Blanca amongst others.

With high prices and a looming deficit, many people including governments question why the copper sector is not expanding its capacity. And the simple answer there is risk. Projects are

getting bigger to generate higher economies of scale which they need to cope with declining copper grades. This

makes projects more costly, more difficult and complicated to permit. And

projects in the multi-billions of dollars means more financial or greater financial risk that extends over longer build times as companies will have to

develop these bigger projects. Project

developments span changing governments and therefore changing conditions and the mining sector is very riskaverse. So

it's not getting into new project development which could take three to five years and cost 5 to10 billion.

They're not taking that lightly.

A great example of the risk was shown yesterday as Mongolia is demanding earlier profit payments and a larger share of revenue from the massive oil togoy copper mine it co-owns with

Riotinto. The government there holds a

Riotinto. The government there holds a 34% stake, but now it wants 60% of the profits. Governments that are looking to

profits. Governments that are looking to increase their share or the government take act in many ways as another disincentive to invest in these big projects.

Spending billions of dollars to develop a mine and then having the government seek to change or move the goalposts is a key risk for the copper miners. And

this is why many projects that are profitable at $4 per pound are not being built even though the copper price is around $6 per pound. In effect, the

pricing is not high enough to face those risks.

This is perhaps one of the key reasons behind some of the mega mergers we are seeing in the space and one of the takeaways there is that it's the big companies think it's easier to go

through antitrust processes than to permit and build new mines. So the

companies are in effect shuffling the pack of projects to increase their own personal exposure to the copper sector rather than building new capacity which is perhaps great for them and their

shareholders but doesn't do anything to fill the copper supply gap.

Now we must also factor in the cyclical nature of the copper market. As with any industrial commodity, it's cyclical and that means the pro the price can drop

precipitously too. We saw this 15 years

precipitously too. We saw this 15 years ago, 101 15 years ago in the super cycle which kicked off in the early 2000s on the back of China's rapid economic development and growth. This saw the

copper prices shoot up to, I think, a maximum of around $4.50 a pound. However, this came to an abrupt

a pound. However, this came to an abrupt halt with the 2008 global financial crisis and led to a significant and rapid decline in the copper price from

$450 a pound. It quickly went below $2 per pound. And it is this fear, this

per pound. And it is this fear, this this situation, this cycle will repeat that also stays copper executives hands and keeps them awake at night and stops

them investing in developing new capacity.

China just issued its lowest growth forecast since 1991 of 4.5 to 5% peranom in its latest 5-year plan. War in Iran,

if prolonged, will likely also cause a sphincterial contraction of e economic activity. The oil price has already

activity. The oil price has already spiked up to over $100 per barrel. This

results, one of the products of this is reduced economic activity. If the

conflict with Iran continues and oil prices stay over $100 a barrel for a prolonged period of time, this is going to likely cause economic contraction,

perhaps even recession. At the same time, copper inventories are building and these things can set up a price decline and more importantly a rapid

price decline.

In the issue, we identified a couple of jurisdictions that are well placed to benefit and provide new copper supply.

Argentina and British Columbia.

Argentina's president Java is adamant that his nation will become a large copper producer and is seeking to incentivize this through the rigy incentive scheme for large investments

that seeks to overcome the variable fiscal and legal conditions that have largely deterred investors in Argentina for decades. Among the benefits of Riggy

for decades. Among the benefits of Riggy status confers upon a project could be 30 to 40 years of tax and legal stability, lower income tax and other

fiscal benefits that reduce risk and increase pro increase profitability.

Projects looking for to to be developed under this regime include mchuan copper and its loss project, Glenor's marrow project and the London mining and BHP

Vunia joint venture. Also active in in Argentina is Alabbrand resources with its Alta project and first quantum minerals with its Takataka project.

These are also moving towards the development and project financing stage.

In British Columbia, projects there are benefiting from changing political currents as Canada seeks to increase mining in response to the critical minerals narrative but also to trump

tariffs as it seeks to reduce its economic dependence on the United States. This is being reflected at the

States. This is being reflected at the provincial level and includes efforts to reduce permitting times and to potentially include federal and provincial funding at the project level

but also for infrastructure that projects require together with higher prices. These things could lift the

prices. These things could lift the copper gold py projects that are typical in British Columbia out of their historic or historical marginality.

uh historically these have been marginal projects but the prevailing factors may change that and make them much easier and more profitable to develop. With

that as an overview to set the tone, let me sort of bring in Rick into the conversation. Um Rick, what excites you

conversation. Um Rick, what excites you about the copper space?

>> Uh the inevitability of a supply shortage. uh it has been at least 30

shortage. uh it has been at least 30 years since the mining industry and the investment industry in general has allocated enough capital to the copper business. The consequence of that is

business. The consequence of that is that the lead times in in order for us to increase supply are very very long and require an awful lot of money. You

don't undo 30 years worth of sin in two or three years. It will take at least a decade. Paul, like you, I was at mining

decade. Paul, like you, I was at mining week in London, uh, and I was struck by the numbers around the copper trade. The

fact that the major mining companies in the world will have to spend $250 billion to maintain copper production where it is, which is already in

structural deficit and ignores a 2% compound annual growth rate. Let's talk

about the growth rate, too.

uh energyintensive economies are rich economies and we've done a good job as humans in the last 40 years reducing absolute poverty but there's still a billion people on earth with no access

to primary electricity. They would like to live like the people on this call and that requires copper. the the growth that you saw in commodity gen uh demand

generally uh around the urbanization of China is something that's continuing on a global basis and this is all good but it all

requires copper. It's worthy to note too

requires copper. It's worthy to note too that when the major mining companies estimate that it'll cost them $250 billion to maintain current production

that that doesn't include input inflation. At mining week, we heard that

inflation. At mining week, we heard that the cost of building a new copper mine, the various inputs around construction are escalating at about 8% compounded

per year, which suggests that a $10 billion build today becomes a $10.8 billion build next year and perhaps a 12 billion build the year after. So

understand that the numbers that we're talking about are constant numbers, but we won't see constant numbers over the next 10 years. We're going to be rapidly increasing numbers.

The third thing that we have to take into account is something that Paul mentioned, but I'd like to mention in more detail, which is to say the social take, the increase in the nominal copper

price uh has increased the greed and lararseny of host governments, not just including the Mongolian government. Uh

it is argued that direct and indirect social take is already the largest fixed and variable expense around the copper industry ahead of capital and ahead of

energy and this can only increase. Uh

what that means is that one needs to be careful in terms of how one selects copper companies. Where are the

copper companies. Where are the opportunities? Virtually everywhere.

opportunities? Virtually everywhere.

uh the very large long lived deposits are valued in the market at today's copper price which has to increase. Why?

Uh new projects will be increasingly expensive to build. But existing

projects don't have to be built. They're

already built. They don't need to be permitted. But in particular, uh lazy

permitted. But in particular, uh lazy analysts, including one named Rick Rule, uh often value copper companies on a net present value basis. uh if you take a

10% discount, any cash flow that you enjoy after year 10 doesn't show up in the valuation. But a 30 or 35 year

the valuation. But a 30 or 35 year copper mine resets that net present value calculation after 10 years back at

100%. The tail on these copper deposits

100%. The tail on these copper deposits is never added added back into the net present value, but it always adds value over time. Finally,

over time. Finally, there's a note of inc there's a note of hope in the capital stack, which is to say, the industry has learned that if you isolate the precious metals cash

flow, particularly a silver cash flow from the product stream of a copper mine, that same precious metals cash flow, isolated in a streaming company,

trades at 15 to 20 times cash flow, where that cash flow, were it valued as copper production, would trade at five to seven times. What that means is that the biggest mining company in the world,

BHP, can sell a portion of their silver stream from Antima to Wheaten Precious Metals, a much smaller company for well over $4 billion, providing a

disproportionate share of the cost needed to build or pardon me, expand that deposit. So in one small not small

that deposit. So in one small not small in one facet of the copper business the problem with regards to the capital stack is being solved by the market. I

would like to draw people's attention to that in this call. Although it isn't a copper centric remark people who believe that the growth period is behind the

streaming companies that the big transactions that built the Franco and the Wheatens and the Oscos are behind us are wrong. The big transactions are

are wrong. The big transactions are ahead. The streaming companies will

ahead. The streaming companies will provide a disproportionate amount of the equity necessary to the majors to spend

250 billion 225 constant dollars in the copper business and this represents an investment opportunity that I don't want to go overlooked on this call. Well,

thank you for that, Rick. And that

Wheaton Silverstream transaction and antimenia really talks to your point uh about how how assets are valued. The net

present value pretty much looks at 10 years. Weeden is very much taken a

years. Weeden is very much taken a multi-deade view on its income stream from uh Antina for for decades, 50 to 70

years if I'm not mistaken. I spoke with Randy uh Smallwood who's the CEO of Wood and Presses Medal shortly after this deal was announced and he he very much said that this kind of stream will

unlock a lot of capital for copper projects. They're already getting a lot

projects. They're already getting a lot of inbound calls from other companies that are looking to do similar and in his words he said it's fiscally irresponsible for any CEO of a copper

company not to do a stream given that Weeden's cost of capital is so much lower. As Rick mentioned, Weeden is a

lower. As Rick mentioned, Weeden is a much smaller company than BHP, but its cost of capital is lower, which is quite an incredible thing when you think about it. Um, I'd like to pick up on one of

it. Um, I'd like to pick up on one of the comments in the in in the in our stream here. Um, in addition to the

stream here. Um, in addition to the comments I made about the conflict in the Persian Gulf potentially being very inflationary, contracting um, economic

development and global growth. Another

fact here that's very pertinent to the copper space is that the the oil production in the Middle East generates a lot of sulfur and sulfur obviously is an input ingredient for the creation of

sulfuric acid which is used in copper leeching particularly in Africa. With

the straight of horm closed it's not only the oil tankers that can't get out.

It's not only the fertilizer shipments that can't get out but it's the sulfur for the sulfuric acid that can't get out as well. Um it's perhaps a little bit

as well. Um it's perhaps a little bit too early to say if this is going to have an impact, but sulfuric acid prices, sulfur prices are already increasing, so there's the potential for

a big impact on copper production, particularly in Africa, as if this conflict continues. Um Rick, you and I,

conflict continues. Um Rick, you and I, we've both mentioned a number of statistics as we began our conversation here. Um there's a lot of noise in the

here. Um there's a lot of noise in the copper space. What are the key figures

copper space. What are the key figures that you really focus on as as you sort frame out your view on the copper space?

>> There's a lot. Uh one of them is hard to put the finger on, which is to say uh the deferred development expense and exploration expense over the last 30 years. I guess the figure there is 30

years. I guess the figure there is 30 years. Uh it has been 30 years since

years. Uh it has been 30 years since there was a concerted effort on the part of the copper industry to expand production. So we're behind the

production. So we're behind the eightball in exploration.

where we have as a consequence constrained development pipelines. One

figure that's very important, Paul, 35 years ago, uh anything below 1% copper was considered waste and the average mine grade in a copper mine worldwide was 1.5%.

The average mine grade, if I'm not mistaken, last year was 44%.

Which is to say that the average mine grade is now a third of what it was three decades ago. Um

and and I think that's fairly profound.

Uh another figure that's terrifying to me is the fact that while copper demand is growing at 2% compounded and if the hype that you hear around electric

vehicles and data centers is true, uh that demand will pick up as opposed to slow down. The $250 billion number that

slow down. The $250 billion number that you heard was designed to maintain current production, not b bridge the gap between supply and demand. So it would

take $250 billion to maintain today's deficit taking or or pardon me not taking into account account 2% compound

demand. And that number itself, the 250

demand. And that number itself, the 250 billion is in constant $225 when in fact the inputs according to the industry around building a copper mine

are increasing at 8% compounded.

>> Okay. Now, um touching on your your 0.44% 44% average mind grade. One of the things that one of the implications of that is that uh the copper miners are

looking to expand and continue to develop their existing projects and to do so uh they need economies of scale and that is resulting in companies contemplating superersizing their

processing capacity. So, for example,

processing capacity. So, for example, going from 90,000 tons per day processing capacity to two or even 300,000 tons per day processing capacity, which is a mind-boggling

amount of rock to move around. And

that's one of the reasons why project costs are increasing. That's why project developments are two, three, four, five billion dollars plus with all the

associated risk there. Um Rick as an investor how do you look to manage the risk that copper projects have given their long gestation and development

time scales?

uh I do that internally in my portfolio by segregating my stocks into at least two buckets which is to say the investment bud bucket

which would have the large multi-jurisdictional multimine projects uh projects with 25 or 30 or 35 year mine lives that have largely been

uh built uh and largely been financed.

uh you do that on a discounted net present value basis but you had have to add back the um value of the tail which we talked about earlier. Uh in terms of managing risks in resources, there are

some risks that you can't manage, which is to say expropri expropriation risk, political risk, um

social theft, uh that's Rick Rule's shorthand for taxes and royalties. Um,

but I also uh am of a believer because the average mine grade worldwide is 0.44 and because

we're just really starting to look for copper again that we're going to have some successful copper discoveries in the next 10 years. And my suspicion is if those copper discoveries have grades

more reminiscent uh of pastimes uh which is to say grades above 1% that they will sell for absolutely eyepopping multiples.

Uh this is decidedly a speculative game.

Uh and in this case you manage portfolio risk by accepting single deposit risk uh in hoping in hoping for disproportionate gains.

The copper exploration also is catching a bid now. Successful efforts Marramaka, Atex, Hot Chile, Aldabaran

uh are attracting institutional capital which goes to say after you have begun to derisk the project a bit uh by

at least defining the target size and getting some of the third dimension into it. that the capital that was absolutely

it. that the capital that was absolutely unavailable uh for deposit delineation four years ago or 5 years ago is decidedly

available today and that's a very very very big change.

the institutional investors and the high netw worth individual investors that participate in this have come to understand I think that the development pipelines of the major multinational

companies are perilously thin and the consequence of that is that if there is a discovery which is economic particularly if there's one that's hyper economic

uh that will be bought and it will be bought for a price that can exceed net asset values uh at current

copper prices as the copper companies factor in the scarcity of these things and the inevitability of at least nominal copper price increases.

>> Thank you Rick. Now um I want to follow up on that your comments there about some of the higher grade projects you mentioned Mara higher grade but it's much smaller.

Will this precipitate a perhaps a change in the structure of the copper sector?

The very large projects are fewer and far between. So for companies that want

far between. So for companies that want to remain copper producers, does that mean they've got to come down in scale and perhaps go for these smaller but richer projects at higher prices they can be perhaps equally as profitable as

as a larger project? What are your thoughts there?

>> I think largely not. I think that they'll spawn the growth of the large independent which is to say that I think the smaller higher grade deposits will be the province of the Anapagastas and the

Hudbays of the world. Uh I think that you'll see the large the very large multinational copper companies the BHPs the Rios probably still the Glenors

focus on tier one deposits focus on very large deposits. I think there's a room

large deposits. I think there's a room for intermediateized deposits uh provided that they're substantially derisked, but I think that you're going to see the increase of a different class

of copper company, which is to say multi- uh jurisdictional multimine, but focused on smaller, higher grade deposits. Hudbay, perhaps first quantum,

deposits. Hudbay, perhaps first quantum, uh Sandstorm, pardon me, Sandfire, um companies like that come to mind.

Capstone, >> Aeropa. Okay. Um yeah it does seem that

>> Aeropa. Okay. Um yeah it does seem that the bigger companies their solution is to supercale and get even bigger and really push the envelope of economies of scale.

>> You know Paul if you look at what BHP could do uh probably first on their dance card if they can afford to do it would simply be to upsize Olympic dam uh

they have a deposit now with what 55 or 60 years reserves that they haven't built bothered drilling for a while.

Current management knows they'll be dead. uh before that comes in merely

dead. uh before that comes in merely superersizing Olympic dam albeit a $2 billion bill is probably the most efficient thing that they could do. And

we have heard a lot of discussions from various big mining companies including uh last year at the natural resources investment symposium at Boca Raton where Agniko Eagle said that their future

investments will almost always be ones that leverage off the capital that they already have sunk in existing projects.

So this upsizing that you talked about earlier in your discussion I think will be a very very important theme for the great big companies.

>> And another aspect there Rick of course is the fact that higher copper prices mean that much lowgrade or that was considered or today is considered waste

that becomes ore very rapidly as you adjust your your cutoff or or your the pricing used in your estimation your resource and reserve calculations. uh

which means a lot of these big mines are sitting on an awful lot of resources that with a a change in how things are calculated can become or and can be brought into production um presumably

following a massive uplift to the size and scale of the plants. Um Rick um we've talked a lot about jurisdictional

risk and how over the extended lifetimes of a copper project you're going to go through various different government cycles. So it's a lot of risk to try and

cycles. So it's a lot of risk to try and piece your way through. What's your

approach to to dealing with jurisdiction risk as an investor?

>> Uh my approach is it's a function of price. Uh my approach is also that

price. Uh my approach is also that countries like commodities are cyclical.

A country that likely can't get worse doesn't.

Uh a country that likely can't get better doesn't. And political risk is

better doesn't. And political risk is almost always a news trade, which is to say short-term, which means it's almost always wrong. But many of us two and a

always wrong. But many of us two and a half years ago were ready to throw in the towel in Chile. It turns out the Chilean voters were ready to throw in the towel in Chile, too. And they

changed the nature of the government, which meant that a government which had been making really truly ugly noises about the industry that feeds Chile uh was allowed to pursue other employment

opportunities. uh and the Chilean

opportunities. uh and the Chilean electorate uh chose in fact to back a government that backed the policies that made Chile relatively prosperous, which is to say a

country that had been viewed as politically risky became less risky in an election. Uh other jurisdictions

an election. Uh other jurisdictions which are perceived as being low risk, read the United States, uh probably are

riskier than people think.

um these news trades are very very very uh difficult and very very dangerous.

You have some countries where your headline political risk is actually very high higher than it's perceived but where political realities are causing the country the the governments to be

somewhat more rational. I think of Canada here uh where the boss of the whole country has said among other things his financial considerations would be driven

by carbon which is why of course he's broke. Um a and in the province of

broke. Um a and in the province of British Columbia, which you mentioned, which has been for two decades stridently anti-mining,

the reality that the socialists in British Columbia ran into was a schism within the socialist parties, the NDP.

On the one hand, their traditional strength, the working-class labor voters, uh, including particularly those in rural communities, favored the mining

industry, while the party elites, uh, you know, hovered around Kitalano and Victoria who were anti-mining have suddenly figured out that within without

the votes, uh, of the rural trade union constituencies that they wouldn't be in power any longer. So the um anti-mining ethos uh of the socialists in some

jurisdictions has been constrained by the traditional uh workingclass labor voter uh to the betterment of all. Uh I

would also uh given my occasional disparagement of of Canada talk about one positive change which is to say that 15 or 20 years of engagement between the

industry and the indigenous communities is finally beginning to bear suit uh bear fruit. Where the industry had

bear fruit. Where the industry had viewed the indigenous communities as obstacles for 20 years. We've learned to our delight that the indigenous

communities are frequently our most effective allies. Uh to the extent that as an example in British Columbia, you have a choice between being regulated by the provincial

government or regulated by the beneficiaries like the Talan First Nation uh always take the indigenous. Uh

and we're seeing and I saw at PDAC this year an incredible embrace uh of extractive industries by their indigenous hosts. Something I've been

indigenous hosts. Something I've been hoping I would see looking at the Canadian scene for over 40 years. Brand

new and important.

>> Okay. And as a reminder to our viewers, please take advantage of our Q&A the chat comment thing to ask any questions.

Now, um Rick, you mentioned Chile. Jose

Antonio Casp is being sworn in as the new president of Chile today. It's

promining and uh people I speak with in Chile expect good things to come from him, positive things for the sector. Um

we haven't tal touched on in our conversation so far, Rick, but I want to bring this up. The the potential for technology to bring about change. Couple

of key things the copper space has been working on for a long period of time. Uh

biolleaching and sulfide leeching. Um as

these things become if if they become viable processing solutions um a small revolution could occur in the space uh by allowing the processing of ores that

currently are unprocessable or too expensive to process or basically just don't make the cut at the moment. What's

your view on the the the opportunity for these technologies to come through and provide the copper that we'll need in the future?

Sadly, I have counterveailing views. The

first is that the oil and gas business has taught me never to bet against technology. The cocktail of new

technology. The cocktail of new technologies that we've seen in the oil and gas business has fundamentally changed the way that business in all aspects is done. That's the good news.

The bad news is that my personal track record around understanding and analyzing technology over four decades is almost unblenmished by success.

Which is to say, I believe the technological uh progress is real. and

I'm very dubious about my own ability to analyze it. Uh I also don't believe that

analyze it. Uh I also don't believe that the techn technological ch uh improvements that we are hoping for you and I will have much impact on copper

economics for the next five years at all. uh I have been uh interested in

all. uh I have been uh interested in bacterial leeching which is to say the cons conversion of sulfides uh or deactivation of sulfides through bacterial leeching since I was at the

University of British Columbia which is in the early early part of the decade of the 1970s.

Um while obviously we've made some strides in that field in the next 50 years, I'm not sure that the next 5 years uh will

be able to feel uh the benefit of those technological improvements. But there

technological improvements. But there are a lot of techn technological improvements that we need to um take into account. uh too much hype goes to

into account. uh too much hype goes to AI, but the ability of mining companies to synthesize all kinds of different

data sets and superimpose them on each other with AI uh is slowly beginning to absolutely re uh uh revolutionize

exploration. Similarly in aid terrain uh

exploration. Similarly in aid terrain uh the use of astster imagery where you can look at photoiated data of the earth's

surface literally from space uh to look at alteration patterns to look at uh macro structures uh this will have an impact. I'm not

sure it'll have as big an impact simply as the fact that we're going back and trying again. Exploration budgets both

trying again. Exploration budgets both uh seniors and juniors have been constrained for 30 years. Uh, and if you don't spend money on exploration, you don't make discoveries. Uh, witness

Paul, eight years ago, uh, nobody had made any lithium discoveries because nobody bothered to look for it. The

stuff was cheap. When we threw some money at the lithium business, when we found when we threw some money at the lithium exploration business, lo and behold, we found lots. In fact, we found

way too much. Uh I'm not sure that that same circumstance awaits us in copper, but a renewed focus on exploration, particularly a renewed focus on exploration in what is hitherto been

concerned considered frontier terrain.

Uh as an example, the tethion or Argentina or Colombia for that matter will bear fruit.

>> Okay. And we can throw in perhaps Saudi Arabia into that mix as well. And I

think in terms of technology, we also got to nod our hat to tip our hat to Robert Freedelland with his typhoon uh geohysics technology which can really penetrate deep into earth which no other

systems can and his pulse development which is looking at u revolutionizing the way of breaking big rocks into small rocks. We've got an interesting question

rocks. We've got an interesting question coming in, Rick, which uh I think is very much in your ballpark and it's about when you're looking at the Lasson curve, how can retail investors such as

our audience enter before the discovery phase? And I'm going to add to that, you

phase? And I'm going to add to that, you know, what what are the risks? And the

risks there are very high because um just I I'll continue to add lib for a little bit. Um looking for big copper

little bit. Um looking for big copper deposits takes a lot of money. Poorfree

deposits take a lot of drilling. Most

juniors do not have the financial capacity to to be able to engage in that without completely blowing out the capital structure. The risk is very high

capital structure. The risk is very high and the timeline to get to something that's further along the lasson curve can be considerable. So with those

caveats, Rick, uh let me turn that over to you. How can a retail investor uh

to you. How can a retail investor uh look to enter and invest in the discovery phase?

>> Work.

I I would say that's the most important.

Uh if you are actually interested in the prediscovery phase, buy the earlier boot camps uh on exploration and prospect generation

uh and review the course material at the rule classroom around how to analyze natural resource uh equities. come to understand the fact

uh equities. come to understand the fact that a small number of people have been responsible for a disproportionate number of discoveries which is to say that Pareto Pareto's law works. So if

you're going to back prediscovery companies back prediscovery companies with teams that have already been successful in copper exploration

hopefully in the same sort of terrain that you're exploring. uh the fact that somebody has been successful, as an example, producing gold doesn't mean they're going to be successful finding

copper. And then be prepared to wait a

copper. And then be prepared to wait a long time and be prepared to spread your bets enough that you can get lucky. I uh

in Arakipa financed a guy who was arguably the best copper explorer on the planet, David Lel, and we went through 35 projects

mercifully with other people's money before uh we made a discovery. And by

the way, that was an accidental discovery. It was a gold discovery. We

discovery. It was a gold discovery. We

were looking for copper pferies. So

people need to be disciplined. People

need to work hard. People need to be willing to take risks. And people need to be willing to to wait a very long time to be successful. If you do that,

uh when I heark back to Erica and I complained about the fact that we went through 35 projects before on the 36th project, uh we hit the long ball home

run. Uh I I need to remind people about

run. Uh I I need to remind people about the reward. Uh that was a stock where at

the reward. Uh that was a stock where at global our average cost was in the 30 or 35 cent range. Uh and it was taken out by Bareric at $30 a share. So the

rewards for being patient, the rewards for working hard, the rewards for being patient around a guy like like David Lel are very high. But if you are one of

those where you are investing prediscovery in an activity that is first of all

chancy and second of all time consuming.

Uh but your tactics are impatient.

You're going to fail. You're just going to fail. That's the way it is. You need

to fail. That's the way it is. You need

to be persistent, tenacious, and hardworking to operate in the prediscovery phase. It's been really

prediscovery phase. It's been really good to me. really really really good to me. And I'm going to begin to emphasize

me. And I'm going to begin to emphasize that again in my own portfolio now that the larger part of my portfolio is filled out. But I would point out I'm 73

filled out. But I would point out I'm 73 years of age. Uh I've done this for almost 50 years.

Uh I can psychologically and financially avoid the uh pardon me afford the risks.

You need to decide for yourself if you can uh afford financially and psychologically the risks of early stage exploration before you before you do it.

>> Okay. I think that's a really good point, Rick, and I'm going to follow up with a you know, some narrative here.

You mentioned David L. A lot of David Lel's thoughts went into the the founding of Solaris Resources, which is has the Warinson development stage project in Ecuador. I think it also has

some exploration properties in Peru and maybe still in Chile as well. And in

terms of um being patient, I think um one Solaris resources and that David lower portfolio which he put together 10 to 20 years before that really illustrate that. But also another thing

illustrate that. But also another thing that really illustrates that is uh the current darlings of the copper space are the London companies and there uh Lucas

Lundine he was active in the Vikunia district 25 30 years ago. Um and now that patience is coming to fruition through the the advancement of Jose

Maria and Fel. Um before it got there those projects were originally owned by NEX. I can't really remember if that was

NEX. I can't really remember if that was Njex Minerals or Njax Resources, but this is going back 10 or 15 years in a very difficult market. Uh Njax split up

uh split the company, spun out, created Hosamir Resources um and Felo Resources to continue the exploration there. Uh

ultimately successful. But Felo, the Felo Doul project, the key hole there was hole 41. that drilled 41 holes in very expensive conditions before they

really hit the big kahuna. Um the

history following that is very well known and as for NJ resources it's now knocking it out the park with the high you know one of the highest grade discoveries in the world at Luna Wasi.

However going back a few years after spinning out Jose resources and Feler resources NJX was basically um you know in some ways a stranded company. the

Londines wouldn't fund it because the market wasn't there and it took a long time for NGX to actually fight for and obtain exploration budget from the

Londines when it came. Um they put it to good use and the Luna discovery is is the result of that. Patience is is a key even if you're one of the biggest

players in the space with access to capital that most juniors can only dream of. very tough space to um to operate in

of. very tough space to um to operate in and be successful. Um Rick, we're sort of gradually running out of time. So, I

want to ask you a a question on a bit of a tangent. We're talking about copper.

a tangent. We're talking about copper.

The gold companies are trying to get into the copper business. You know,

Barrett Gold famously, you mentioned Agnico Eagle Mines. They're starting to invest in in copper deposits or copper businesses with tech resources, for example. Um, why do you think gold

example. Um, why do you think gold companies are starting to move into the red metal?

>> Uh, paradoxically, uh, one of the most economical ways to increase your gold production is to find a copper gold deposit. There are any number of copper

deposit. There are any number of copper mines in the world to make a million dollars a day. Uh, they can be very large and even the byproduct stream

uh, can be very lucrative. The major

gold companies understand that two years from now or three years from now, uh, they're going to have a very difficult time maintaining their current production levels. Right now, the

production levels. Right now, the capital markets are rewarding gold companies that, uh, return capital to the shareholders as opposed to use that

capital for their own growth. The

consequence of that is that these companies are cannibalizing themselves and that they're they're going to run into the same difficulty that Bareric has run into, which is to say declining unit volumes. When the demands of

unit volumes. When the demands of capital markets go from uh physical return to shareholders to maintaining production and then

growing production, it may be that the only avenue of growth available to the major multinational gold mining companies is the copper business.

Certainly, it has been for many years a better business than the gold business.

As I say, there are any number of copper mines in the world that make a million dollars a day or more. Uh there are many more uh tier one copper mines than there

are tier one gold mines. And I think uh one thing that compels the gold mining companies is a mere sense of survival.

Certainly when I talked to Mark Bristo about the decision uh for his Zambian adventure and then Reodik uh what he said is that there are

not very many barracksiz gold mines in the world but there likely were 20 or 30 undeveloped barracksiz copper mines in the world and the best way to grow a gold producer economically

uh is to become a copper gold producer which I think is true today. The markets

in the near term might not reward that.

the markets are looking at pure easy to understand plays as opposed to looking merely at risk adjusted returns on capital employed.

>> Okay. Now, um I want to return to a theme that's very close to your heart, Rick, and that's uh hate.

>> Um you often say that it's best to invest in things where where you sense a lot of hate. putting that optic on the copper space, the different parts of the copper space. Um, do you think the

copper space. Um, do you think the copper space is hated enough at the moment? Is there part of the space that

moment? Is there part of the space that you think is particularly uh meritorious for hate?

>> Uh, I I think if you're looking for hate, uh, you have to look for hate on a companywide bas countrywide basis, pardon me. Uh, you have to go to places

pardon me. Uh, you have to go to places that people hate. Uh there are certainly areas uh pardon me there are certainly segments of the copper business that are

less loved but nothing around copper is hated. Uh

people aren't participating in grassroots exploration because people have made more money on other parts of

the value train lately. So probably the most hated sector in the copper business is early stage or grassroots exploration.

probably early stage of grassroots exploration in a country where the name ends in Stan, which is to say Islamic Central Asia.

Um, I would argue that despite the fact that it's delivered for investors, Congo is still very thoroughly hated, sometimes for good reason. I've been

investing there since 1996, and there have been several years when I wouldn't go there out of concern for my own safety. Uh so certainly the hate is

safety. Uh so certainly the hate is there. I think there are also uh less

there. I think there are also uh less well-known copper districts. I'm

thinking about eastern Angola where it's arguable that the uh Katanga Zambia copper belt uh that sedimentary copper belt goes

under the Kalahari sands coming down into Botswana and Namibia places that are less hated but also less wellknown.

Uh but in direct answer to your question, Paul, uh there's not much hate left in the copper business, the numbers uh around the

intersection of better demographics and declining supply are too well known.

>> Okay, fair enough. an interesting

question come in uh has come in about you know effectively about M&A um and about potentially investing in a smaller company and how can you protect yourself

against that smaller company being taken over by a major um I will preface that answer by saying for most smaller copper companies or explorers they want to be

taken out that is the business plan it's finding something that's big enough exciting enough highrade enough etc easy enough for them to to write a We saw a good example of that last week

with Arizona Sonoran Copper getting a bid from Hud Bay Minerals for its Cactus project in in Arizona. Um Arizona

Sonorin, a Rick Raw Symposium participant company. Um Rick, what's

participant company. Um Rick, what's your thoughts on deploying capital in the junior copper space with an eye on potential M&A

activity going forward? Is that

something to do or is that the wrong reason to buy?

>> Uh, it depends on how much work you're willing to do. If you are willing to look at the mid-tier and lower tier copper companies with a view, a

strategic view as to who might take them over. It's not a bad activity, but it

over. It's not a bad activity, but it requires work uh and it requires time.

The question is, do you want to do that?

Uh I would tell people throughout the history of Arizona Sonora from many people's viewpoint the ultimate outcome was going to be a takeover. We didn't

know by who. Uh George Oglev's job to lower his cost of capital was to pretend that he wasn't going to be taken over that he was going to build it. That's a

negotiating technique. That's how you tell a major mining company, you can't cheapkate me because if you do, I'm going to build it myself. And all the while, while I derisk it, I'm going to

raise the price to you. Uh, somebody who plays that game uh, has to think beyond copper. Somebody has to think, who needs

copper. Somebody has to think, who needs this asset? How much do they need it?

this asset? How much do they need it?

And why are they willing to outbid somebody else? Yes, ultimately had he

somebody else? Yes, ultimately had he built this and took it to production, he might have been taken out by uh, for a higher price. But what about the time

higher price. But what about the time value of money? How long would that have take? Would that have taken? What

take? Would that have taken? What

dilution risk would he run? What

completion risk would he run? Uh what

you often learn in the mining business is that your best bid in a takeover is the best bet you can make. Uh it derisks

your own exposure to the project. It

gives you some profit for sure as opposed to higher profits but in a less certain circumstance.

>> Okay. Um copper is an industrial metal and one of the things I'm getting is if you want to invest in the copper space that is work and for our audience um when you're speaking with the companies the smaller companies who when they say

that they're you know part of their plan is hopefully to get a takeover the the logical next question would be okay who would be a good buyer for you see to what extent they know what they're the

the universe they're operating in. Um,

we're pretty much out of time, Rick. So,

um, maybe I can ask you for a sort of concluding wrap-up comment, please.

>> Well, simply, I don't think you can be a mining investor without being a copper investor. Uh,

investor. Uh, the copper business over time has treated the industry and me extraordinarily well. And I think the

extraordinarily well. And I think the next 10 years, uh, by anybody's estimation, will be a great time to be in the copper business.

It's going to be volatile. Uh there's

going to be pullbacks in the copper price. There's going to be points in

price. There's going to be points in time depending on the countries that you invest in when you're going to be scared to death. That's the nature of the game.

to death. That's the nature of the game.

Keep your eye on the prize. Keep your

eye on the fact that we have underinvested in copper for 30 years.

And the supply shortages are inevitable in the 5 to 10 year time frame. When a

commodity has the type of utility that copper does, uh, and when demand is built in, uh, by increasing living standards among increasing numbers of

human beings and that that corresponds, uh, with declining supplies, sort of a global recession, the only way that you balance supply and demand is by price.

And that price, I would suggest, at least on a nominally basis, is going to be not merely higher, but substantially higher than the price that exists today.

But bear in mind too that that might be a circumstance that takes place four years from now or five years from now.

If you are taking a five-year strategy and employing three months tactics, in other words, if you have trauma holding stock over a long weekend,

you're going to lose. uh if you have enough certainty in terms of the value of the company that you're investing in and you run into volatility uh let's say that you see you think a stock is worth

$5, it's selling for $3 and the stock falls to $2, you will understand that to be a buying opportunity. You won't get panicked out of the stock. But if you don't have an opinion of value, if you

don't know that money is made on the delta between price and value, you are going to lose.

Uh finally, this is a commercial for us.

Uh invest in yourself first. Invest in

your knowledge. Attend the copper boot camp. Use this use the lessons in the

camp. Use this use the lessons in the copper boot camp in conjunction with the lessons that are already for free uh at

the at the the real classroom and reread copper opportunity. Uh that wasn't

copper opportunity. Uh that wasn't written with a view to being of use to you for two days or three days. It was

meant to be the beginnings of a primer on copper investing. Uh the stuff that's in there is going to be relevant three years from now. So reread it. I know you have lives. I know you have kids. You

have lives. I know you have kids. You

have grandkids. You have golf. You have

books. You have whatever you have to the extent that you're going to invest. You

need to get your mind off all those other things for a little while and get your mind into copper.

>> Excellent. Well, that has been the opportunity. Thank you very much, Rick

opportunity. Thank you very much, Rick Rule, for joining me today.

>> Pleasure. Thank you for the issue. And

I'm Paul Harris and this has been the rule investment newsletter Q&A.