Rick’s Rules

Rick Rule illustration: Graeme Berglund for CEO.CA

“Rick Rule rules the junior mining world with his checkbook,” is how Tommy Humphreys starts a recent post at CEO.ca. “And he’s not afraid to remind you of it,” I would add.

The resourceful speculator founded California-based Global Resource Investments, which he sold to Sprott in 2010, and now serves as chairman of Sprott U.S.A. The CEO.ca interview is one that all junior mining speculators will enjoy – particularly those with dry powder to take advantage of some of the deals currently on offer on the TSX Venture.

As Rule puts it, “The money that can be made when goods are on sale in volatile markets is extraordinary if one doesn’t buy the sector, but buys individual issues which are irrationally priced down.”

In January 2012, I joined a few other investors crowding around Rule as he held forth at an empty table at the Cambridge show, taking questions about junior resource stocks from all comers. I asked him if he liked Lumina Copper.

“I wrote the first cheque for the original Lumina,” he replied, before adding that he didn’t like it so much at current levels – the stock was then trading at about $14. Rule then segued into his distaste for the current government of Argentina, whose anti-business actions were a burden that Lumina and its shareholders had to bear. Had I lightened up on Lumina – which was defying the pending Venture death rattle – at the time, I’d be richer for it.

By the time Rule did a segment with BNN’s Mark Bunting early last month, Lumina shares had dropped to $8 and Rule had good things to say – “spectacular deposit in Taca Taca” – but with the customary caveat about Argentina.

I wonder what Rule thinks of Lumina now, with a stock value of $8 and a preliminary economic assessment in hand showing an NPV of $2.3 billion (at conservative long-term metal prices). Lumina’s Taca Taca copper-gold porphyry in Salta province, Argentina hosts 28 billion pounds of copper and 7 million ounces of gold in all categories, making it one of the world’s largest undeveloped copper assets. I expected Taca Taca to get taken over last year; I’m fairly confident it will be sold to the highest bidder later this year.

Disclosure: I own Lumina shares. All investors should do their own due diligence and read my disclaimer.

Lumina Copper’s PEA shows NPV of $2.1 billion | World of Mining

Lumina Copper: Good things come to those who wait | World of Mining

Sprott USA Chairman Rick Rule: This is turning into a long rant, but you asked for it | CEO.ca

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