At the Sprott/Stansberry Natural Resource Symposium held in Vancouver in late July, Rick Rule, chairman of Sprott U.S. Holdings Inc., spoke with The Northern Miner about the state of the mining industry and its future.
The Northern Miner: When will the bear chew the juniors right to the bone? When is that point of no return?
Rick Rule: I would’ve told you 2014 but I was wrong. What I didn’t anticipate about this market is I didn’t take into account the strength of the bull market. Bear commodity markets end one of two ways: either through demand creation or supply destruction.
Demand creation occurs when the price of the commodity gets so low the utility to consumers is high enough that demand returns and there’s economic recovery.
The other is supply destruction, the same kind we had at the turn of the century. We destroyed resources through the 1990s and ate through production capacity to the extent that when demand came back a little bit, the industry couldn’t supply and we had those price spikes in 2002 to 2006.
But what happened in the 1998 to 2002 bear market is that the juniors went into it already weak, whereas now they went into it incredibly strong. Juniors today had gorged on cash in the last decade and the amount of destruction they could absorb was greater than what I had anticipated.
TNM: What are some things this bear market has taught us?
Read the complete article at NorthernMiner.com/news/interview-rick-rule
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