On this week's Stansberry Investor Hour, investing veteran Rick Rule returns to the show for the fifth time. Rick is president and CEO of Rule Investment Media and a director at Sprott. He joins Dan and Corey to talk about the trend of global electrification and all things copper.
Dan and Corey kick off the podcast by discussing a crucial topic – the global net-zero-emissions target set by institutions, corporations, and governments. To achieve this ambitious goal by 2050, there will need to be an increase in green-power generation and electric vehicles. Notably, both of these innovations heavily rely on copper. A significant rise in demand for this essential resource would lead to higher copper prices. Corey adds...
This just contributes [to] my idea of commodity prices being higher in general for the next decade or two.
Rick then joins the conversation to share his profound insights on the electrification of the world. The copper talk continues, with Rick passionately emphasizing that achieving net-zero emissions is an inevitable and vital goal. Dan raises pertinent questions about copper production not being able to keep pace with demand. Rick agrees with him about this concerning trend...
Our economy has underinvested in copper exploration, copper development, and copper production for a very long time, because copper has been too cheap no matter what we do. We're going to run into supply problems around copper.
The discussion later progresses to the issue of copper being priced in U.S. dollars. Rick points out that the purchasing power of the U.S. dollar has decreased by a staggering 98% since the establishment of the Federal Reserve, rendering copper almost absurdly cheap. However, this situation won't last forever. As the quality of copper deposits diminishes over time and the industry faces the challenges of extracting lower-grade ore, prices should climb.
Finally, Dan and Rick cover the two major copper-producing nations that have been at the forefront of meeting this demand... Chile and Peru. While Chile's mining industry is threatened by shifting political priorities, Peru grapples with the influence of nongovernmental organizations. To hear them explore the challenges and opportunities that lie ahead for copper mining in these crucial regions, listen to this week's podcast.
President & CEO, Rule Investment Media
Rick Rule is the president and CEO of Rule Investment Media. He began his career in the securities business in 1974 and has been principally involved in natural resource security investments ever since. As a world-renowned resource investor, Rick has specialized in mining, energy, water utilities, forest products, and agriculture. He also has originated and participated in hundreds of debt and equity transactions with private, pre-public, and public companies. And he served as founder of Global Resource Investments for nearly two decades before leading Sprott U.S. for 10 years as president and CEO.
Dan Ferris: Hello, and welcome to the Stansberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and The Ferris Report, both published by Stansberry Research.
Corey McLaughlin: And I'm Corey McLaughlin, editor of the Stansberry Digest. Today, Dan talks with longtime friend of the show, Rick Rule, founder of Rule Investment Media.
Dan Ferris: And today I have a lot of things to say about copper because it's what's on my mind lately, and Corey has some thoughts about bitcoin and the U.S. dollar that he'd like to share.
Corey McLaughlin: And remember, if you want to send us a note, send it to [email protected] to tell us what's on your mind.
Dan Ferris: That and more right now on the Stansberry Investor Hour.
Yeah, I have copper on the brain so I can't talk about anything else right now. I've been writing about copper for days and days here.
Corey McLaughlin: In the brain or just on the brain? Yes. OK.
Dan Ferris: Yeah. [Laughs] On the brain, figuratively speaking of course.
Corey McLaughlin: Oh, OK.
Dan Ferris: So basically the upcoming July issue of The Ferris Report is all about copper, and I give what I think the No. 1 copper stock that you must, must own is. And I've recommended a really great copper stock in Extreme Value, too, so both the newsletters I cover are into this. You know, I've been following the story and stuff and I know something about it, but when I really started digging in, there are some takeaways that I didn't expect, like of course everybody wants to be long copper because of the green energy push, right?
There's this big target of net-zero that basically institutions, governments and other institutions, corporations representing 91% of global GDP have committed to this net zero-emissions target by 2050. So in order to do that, there has to be a lot of new so-called "green power generation" and electric vehicles, and all those things are loaded with copper. Just loaded with it. Electric cars are three to four times as much copper as an internal combustion engine car, etc., and it's like that for all the technologies.
You know, there's much more copper per megawatt in a wind turbine than there is in a fossil fuel generating plant. And there's no substitute for copper. It's highly conductive, highly electrically conductive, it's highly malleable, you can shape it any way you want, and it's highly ductile, you can stretch it out and make wires out of it. They use aluminum for the long-haul transmission wires because it's lighter, but it doesn't conduct as well so they have to use thicker wires and there's some corrosion problems and maintenance issues.
It's just not a viable substitute. And silver is a slightly better conductor, but of course it's 100 times more expensive, so not a viable substitute. If you want to do something electrically, you've got to have copper. So this green thing, that's a big part of the story, but that's not most of the demand, I found out. Most of the demand, like the growth in demand, which S&P Global predicts it'll double basically between now and 2050, and the greatest amount of that is still – you know, in terms of the tons demanded, will still be just traditional demand, a lot of which, about half of which is just construction – homes, wiring, and plumbing and things and doorknobs and all kinds of other stuff, and other buildings and other kinds of infrastructure.
I was just like, oh, OK, so the demand is – like no matter what, the green energy thing is like gravy, right? But what really freaked me out is the supply-demand equation.
Corey McLaughlin: Yeah, I remember reading some of this before and it struck me too when I heard it.
Dan Ferris: Yeah. So just like one little statistic that I found in a really credible source, an S&P Global report called "The Future of Copper," it says, "The amount of copper required between 2022 and 2050 is more than all the copper consumed in the world between 1900 and 2021." Yeah, I found another one that said this. All the copper ever mined –" and we've been using copper for like – one source said 11,000 years and another one said 8,000 years, so all the copper ever mined is like 700 million tons, and it said in the next 22 years we're going to need about 700 million tons – or in a 22-year period I think leading up to 2050, something like that.
I was like, whoa. You know, it's just these huge amounts, and they're not finding it, like they're not making big, new copper discoveries. And the grades of copper have fallen, you know, and we'll talk about this with Rick Rule today too. You know, I've got to talk to him about it because it's on my mind, and he knows a lot about this as well. But I just thought the demand normally, plus the green demand, versus a supply situation in which there's just no big new copper mines really, one of my sources that I looked at, like there's a credible thesis, and I put it in my report, that copper, which is below $4 a pound, will kind of have to go to $10 based on historical trends.
Corey McLaughlin: That's what I was just thinking, running through my head. Price higher. The companies that mine it or are able to find it, it'd be good for them. And then also this just contributes – it fits in line with my idea at least of just commodity prices being higher in general for the next decade or two as this whole – as you're saying, anyway, just given what's happened in the world recently, but then throw the green energy push as fuel, if that's a pun, onto everything. Yeah. I remember reading some statistics and some research – I think it was from us actually – on the copper supply and how it's just dwindled over the last couple of years too significantly.
So it's in a place of weakness already, and demand, if these initiatives are to come to fruition, will be picking up for a long time. You know what? This also reminds me – last week we talked about the 10-cent nickels and they were trying to put more copper in them to lower the price of the cost of making them. That's going to be problematic if the price of copper goes up, right?
Dan Ferris: Yeah. You know, I found out about – I was doing some research about this thing, and it said that pennies are – I think it's like 97.5% zinc and 2.5% copper. [Laughs] So that little bit of copper is just blowing the whole thing out. It's just crazy.
You know, they're going to be made of who knows what, aluminum or something soon. I think they were made of aluminum at one point, weren't they? During the war or something, during World War II. I talk about the war like it was, you know, 10 years ago or something. [Laughs] All right. So anyway –
Corey McLaughlin: So we should look for that in your reports coming up.
Dan Ferris: Yep. Yep, this Wednesday. Yeah. But you have a particular issue on your mind that we want to talk about that you e-mailed me about this morning. You know, I had to chuckle at it. Maybe you can tell the listeners what's on your mind here.
Corey McLaughlin: OK. This is somewhat related as we're talking about real things pulled from the ground, I suppose. RFK Jr., who most people probably know is running for president, said at a recent fundraiser that he wants or has an idea to back the dollar by actual things, like make it a hard currency again. Perhaps start with very small amounts – backing T-bills with hard currency like gold, silver, platinum, and the kicker, bitcoin. He's been a bitcoin proponent, and on its own I think it's fairly significant for a presidential candidate who's making a lot of headlines to be kind of overt in a pro-crypto stance.
I think that's just significant on its own whether it happens or not. I think it just tells you a lot about where we're at right now and that this can be a viable option if he's elected. A lot of it, you know, whether it happens or not is a whole other thing, but I think it's interesting that the idea is being floated out there. I know our Crypto Capital folks and our editor Eric Wade have a lot to say about this as it relates to kind of the future of currencies and the financial system just generally speaking as well. Yeah, it's – what I found is maybe there's a little hope that something like this could happen.
I don't know. He's talking about a very small amount to start off with, you know, 1% of the dollar assets, but you've got to start somewhere, and I guess it's better than zero.
Dan Ferris: Yeah, and he seems to understand the issue, because I'm reading through some of what's been out in the press and he says fiat currency was, "invested to fund wars."
Corey McLaughlin: Right.
Dan Ferris: And he prefers hard currencies because they make it more difficult. Then he says you can't just print money to fund the war and tax the public through the hidden tax of inflation. So yeah, the fact that any presidential candidate thinks this is worth discussion – and, you know, some of his ideas are kind of out there, I guess – or I'll put it this way, he's willing to talk about things other people just don't talk about.
Corey McLaughlin: Right. I read a quote from him recently that said, yeah, I've been saying these things for years but now for some reason people are finally listening to me.
Dan Ferris: [Laughs] Yeah. Yep. And I think it's a similar appeal probably to like Donald Trump because he just sounds different and doesn't talk like other sort of mainstream, typical-sounding political candidates who all sound so much the same, even when they espouse the opposite views. Somehow they all sound like – just so similar. I never believe them. I always think they sound very canned.
I've heard like – what's his name? – Vivek Ramaswamy is a Republican candidate, and I won't even vote because I just think they're all the same and I don't think any of them will do anything hardly – even if they espouse the opposite view, they get in office, they all do the same thing. They make the government bigger. Period. So I heard him talking and I even agreed with a point or two that he was making, but I thought, boy, he just sounds so smooth. He reminds me of Obama.
I don't trust that at all, you know? I don't trust it at all, and I don't any politicians making promises. But I do agree when you said, hey, there's some hope here, and he just wants to back 1% of outstanding – 1% of issued T-bills he says would be backed by hard currency – gold, silver, platinum, or bitcoin – is the quote. I think that's really cool. I wouldn't mind that at all.
Corey McLaughlin: No. I wouldn't mind it at all. I mean, this is what we've been talking about for a long time, and it's –
Dan Ferris: It won't happen.
Corey McLaughlin: – which means it probably won't happen.
Dan Ferris: [Laughs] Yeah.
Corey McLaughlin: But perhaps there's hope. He's been taking bitcoin, accepting bitcoin as campaign donations too, which is interesting to me. So he actually kind of believes in this. A couple months ago he called it inviolable right to hold and use bitcoin. That was at a bitcoin conference back a couple months ago.
Dan Ferris: How about that?
Corey McLaughlin: We'll see. Something to keep an eye on if he makes it to the debate stages, I suppose. It'd be nice to hear an actual financial debate in front of the country and people that don't normally pay attention or don't really – aren't aware of just how much of the fiat-currency system has so much to do with what's going on in the country. I just think people generally just don't understand it for no fault of their own.
Dan Ferris: Yeah. The problem – I agree. They don't understand. The problem is it's one of incentives. No matter – if Ron Paul was the president, you know, if you can print money, you will. I'm not saying Ron Paul would want to print money, but it would get printed somehow. I'm sure of that.
Corey McLaughlin: Right. Yeah. I was always a big Ron Paul fan when I first heard his message too. I was like, oh my gosh, this makes so much sense. Thank you.
Dan Ferris: Too much, in fact. Yeah. Too much for the world. But it's insidious, and I think that, you know, it doesn't matter who the candidate is, who the president is, there's a whole juggernaut that's in motion and can't be stopped. Slightly hopeful, anyway.
Corey McLaughlin: Can you imagine a world where the dollar is actually backed by real assets, like actual real estate that already exists? Gold again, bitcoin – and I think it's possible. It's not impossible. You know, it would change a lot of things, but that's definitely not impossible.
Dan Ferris: No, it used to be that way. Yeah, gold was money. The century from basically the end of the Napoleonic Wars, 1815 to 1914 was a century of deflation and monetary strength, generally speaking. I mean, there were episodes in there, but overall it was a century of monetary strength, you know, strong money, gold money. There's a little piece by Global Fin Data on that called – it was actually called "A Century of Inflation," and the opening was about the century of deflation, and the rest of it was about the century of inflation that followed when the Federal Reserve started in business in 1914, the year after the Federal Reserve Act was passed.
Corey McLaughlin: Sounds familiar.
Dan Ferris: Yeah, we know this works. I mean, we know – you know, gold being real money works, and people who say it doesn't, well, they're just not paying attention to history, I don't think. And it's great. It's like copper. Part of my report on copper, I said you can't print copper. [Laughs]
Corey McLaughlin: Right, right.
Dan Ferris: You can't print gold. You have to dig them out of the ground and that costs something.
Corey McLaughlin: Right. I've always said I don't care what it is the dollar would be backed to. It could be baseball cards or marbles or whatever, like I don't really care what it is. I just want something to be tied to it. I just think a lot of the problems we have – you know, when you cut interest rates to zero and devalue the currency, it just devalues everything. It just devalues hard work or the culture.
Dan Ferris: Human beings. Yeah.
Corey McLaughlin: It devalues it all. At least clawing that back is a good start. You know, maybe we're getting there with 5% interest rates, so maybe that's a start.
Dan Ferris: It is. In a world where all the money is debt, you know, it's – fiat is printable, but it's all debt is the problem. The government issues money by issuing debt, so –
Corey McLaughlin: Yeah, it's imaginary.
Dan Ferris: Yeah. Debt is at the heart of every – usually big increases in private debt buildup – it's at the heart of every financial crisis. You know, all the big ones. There's lots of private debt building up. And as we're pointing out, it's embedded in the very system of money that we have.
So somebody proposing that we fix that is welcome, but we know it's never going to happen. It's a juggernaut. It's not going to change – these things don't change until they have to, right? They don't change until you're Zimbabwe or something, you know, or Weimar or whatever.
Corey McLaughlin: Right.
Dan Ferris: And even then, you know... ? All right, well on that happy note, [laughs] –
Corey McLaughlin: Zimbabwe.
Dan Ferris: – you have an even happier – yeah, Zimbabwe, yay, you know? The $100 trillion bill of Zimbabwe. That's where we're headed in the U.S., folks. [Laughs] And on that happy note, let's talk with my good friend Rick Rule. We actually talked with him a few days ago and recorded it a few days ago, and by the time you folks are listening to this, I'll be in Florida, and Rick and I will be in Florida at his annual conference that he's been putting on for decades and decades.
Nothing like it. You meet people that you just can't meet anywhere else. Robert Friedland will be there. And cross your fingers. I want to see if I can try to get an interview with him. Lots of other folks. I mean, Jim Rickards, Danielle DiMartino Booth.
There's just lots of people. And even Bill Bonner and other folks who I've known for years and years. So anyway, maybe I'll shut up and we'll let Rick tell us about the event since it's his event, All right? So let's do it right now.
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All right. It's time for our interview, and today's guest is my old friend and president and CEO of Rule Investment Media, Rick Rule. Rick, welcome back to the show once again.
Rick Rule: Dan, it's always a pleasure. Thank you for having me back.
Dan Ferris: You bet. So for purely selfish reasons, I would like to talk a little bit directly about your upcoming event, because I'm going to talk in it, and I want lots of people to hear me talk. The thing that I want to impress upon people about these events is Rick knows everybody, and it shows. Every time he does any kind of an event, he gets people like Robert Friedland, Bill Bonner will be there of course, Robert Quartermain, Jim Rickards, Sean Roosen from Osisko, and just on and on and on. We could go right down the list.
And some crazy guy named Dan Ferris, too. You know, it's one thing to know all these people, but how do you get Robert Friedland to show up at a thing like this? Doesn't he have to come from China or something? [Laughs]
Rick Rule: Yeah, Robert's been a consistent supporter of the conference. I think that has to do with the fact that I've been a consistent investor with him for 40 years. [Laughs] And during bad times, I've been very useful to Robert. I think too that Robert, as an example, appreciates my constituency, which is value-oriented, not fad-oriented. So I think it's useful both to Robert and to myself, in direct answer to the question.
But really, let's go to why that's so. Let's go to the value offered up by the conference. The first thing that I want to tell your listeners is that this is not a Johnny-come-lately conference. This conference has existed for almost 30 years. I've put it on, as my staff tells me now, for 22 of those 30 years. So the conference has stood the test of time.
I think that's one important part of the reason that I'm able to attract the Robert Friedlands and the Dan Ferrises of the world. They're familiar with the product, and the product itself has a franchise. Why does it have a franchise? Well, in the first instance, we present a worldview, a contrarian worldview, a libertarian worldview, a value-oriented worldview that isn't commonly accessible by people in general media. You will not see what we have to say on NBC or ABC or the BBC.
Jim Rickards talking about the financial system as the former chief counsel of Long-Term Capital Management, something that almost brought down the world financial system. Danielle DiMartino Booth talking about the Fed from inside the belly of the beast. Grant Williams, a wonderful commentator who out polls me as best speaker at my own conference. Bill Bonner, who built a small mailing list from the National Taxpayers Union to the largest independent financial publisher in the world. It is important for people who appreciate an alternative worldview, a libertarian worldview, that these ideas are articulated and understood if you agree with that worldview, and I think you must, to be a precious metals or natural resources investor.
We have wonderful portfolio managers and analysts, people who have been involved in these markets for 30 and 40 years. Not the kind of analyst that you might see at a newfangled mining conference, people who couldn't spell lithium eight years ago, but rather people who have been through the thick and thin of natural resources and precious metals markets so that they can tell you how to implement the strategies that you might hear about from the big-picture thinkers, the paradigm guys. But it gets much better than that.
We have what we call the living legends, the Bob Quartermains, the Ross Beatys, the Bob Friedlands, the third generation of Lundins, people who have built multibillion-dollar natural resource companies from scratch, talking about the lessons that they learned, talking about how they did it, talking about how you allocate capital during bad markets. By the way, this process of building multibillion-dollar companies has made these people very good investors themselves. One of the things I like to do is ask these guys to name three companies that they've invested in that they don't run, other people's companies.
These are great investment tips, but they're also very, very educational. This is where the rubber meets the road. These are not analysts who failed at supermarkets and then failed at crypto and have parachuted into gold. These are people who have built multibillion-dollar companies in natural resources and precious metals, which is useful. Perhaps more importantly, Dan, at most conferences, the exhibitors are regarded as advertisers.
At my conference, because the attendees have told me this, they're regarded as content. Every public company exhibitor that exhibits at our conference is owned by the directors of the conference in their own portfolios. Sadly, Dan, as you know, not every stock that I buy goes up, although enough have gone up that I've done fairly well over time. But it does mean that the process is honest. It does mean that the exhibitors are vetted. This is important, because the attendees have told us that they want the exhibitors to be vetted.
Now we're going to give people between 50 and 55 hours of programming in four days. Whether you attend virtually, that is to say through the livestream, or whether you attend live, you will have access to all of the conference tapes for six months, because it's impossible to absorb 55 hours of programming in four days and get all the value from it that you might. I put on these conferences, and I typically review the tapes three or four times in the six months post conference so that even I, the producer of the conference, can get the total value out of the conference, which I couldn't do, in fact, live. Importantly, Dan, for 22 years, we have offered a gold-plated money-back guarantee.
If you pay to attend the conference virtually or in person, and for any reason you don't think that you got your money's worth, e-mail me and I'll give you your money back. I'm delighted to say that for 22 years we've delivered enough value for attendees that we've had to refund less than one-tenth of 1% of the tuition's charge. That notwithstanding, we are confident enough that we will deliver value, that there is an absolute gold-plated money-back guarantee. If you didn't think you got your money's worth, e-mail me. I'll give you your money back.
Dan Ferris: Wow. So after sitting through the whole thing for four days and then thinking about it, they e-mail you and they can still get their money back. That's pretty good.
Rick Rule: You know, I had two people last year e-mail me and say the content in the conference was more advanced than I was capable of processing. In fact, it was over my head. In effect, they're saying I want my money back because you did too good a job. That's OK. That's OK.
Dan Ferris: [Laughs] Right.
Rick Rule: The risk is mine. You know, what I've learned – everybody told me I couldn't do this because of freeloaders. I might have had to refund money to 10 freeloaders in 22 years.
The truth is that most people who come to a specialized conference like this have a very specialized need for information, and I found them to be very, very good people.
Dan Ferris: Right. It's incredible that you can do this for four days, a four-day event. That's pretty rare anymore. You know, you don't see that much.
Rick Rule: I take energy from it. Now that isn't to say that on my flight home I don't sleep fairly well. I, in fact, do. But the truth is, I thrive on this event, and it's important that your listeners, those who are fortunate enough to be able to attend the event live, understand that not all of the knowledge comes from the podium to the audience. If you have 500 people in attendance who are high net worth investors, who are striving, spending money and spending time trying to get ahead, there's an awful lot of knowledge in the room too, and accessing that knowledge at dinner, accessing that knowledge at breakfast, accessing that knowledge on the two different boat cruises that we do, which is to say absorbing all of the experience in the crowd, is worth at least as much money as absorbing the knowledge that comes off the dais.
Hell, simply walking around the exhibit hall, following Robert Friedland at a discreet distance, seeing what companies he invests in and stops at and what questions he's asking is probably worth the price of admission.
Dan Ferris: Yeah. Yeah, Bob Friedland is worth the price of admission. That's for sure. And listeners can learn a lot more about it and even sign up for the livestream if they can't make their way to Florida at RickEvent.com, www dot R-I-C-K event dot com. Well, now that we've done a little pitch for the event, I want you to know that I'm sitting here looking at screens full of stuff about copper, and there's a headline that says, "So You Want Wind Turbines but You Don't Want Copper Mines."
I find this topic of copper demand for the so-called green energy transition interesting because while roughly 91% of the global economy of organizations, governments, corporations, etc., that account for roughly 91% of the global economy have committed to this net-zero-emission goal by 2050, there are physical limits to this. I am bullish on copper, and I want to continue to be, but I wonder about those physical limits, and I figure if anybody knows something about them, it would be you. I was wondering how worried should I be that they can pull off enough of this so that we will see a real increase in copper demand over the next, just call it, decade or more?
Rick Rule: I think that the increasing electrification of the world, irrespective of net zero in 2050, is inevitable and necessary. I would remind many people that the story isn't just about Tesla and electrification of automobiles. It's about 1 billion people on Earth who have no access to electricity whatsoever and would like to live like you and I live. It's about the fact that 2 billion people on Earth have no access to affordable and nonintermittent electrification and would like to live like you and I do.
It's about the fact that the last great experiment we had in raising the material living standards of humankind occurred in China where we advanced 450 million people from rural penury to at least a lower-middle-class existence. Dan, the world needs more electricity, and not a little more, a lot more. Do we need wind? Absolutely. Do we need solar? Yeah.
But not in Germany where the sun doesn't shine. Do we need nuclear? Of course. And you know what? We need fossil fuels too. The generation of this electricity, the distribution of this electricity, and the utilization of this electricity requires copper. Lots and lots and lots of copper.
But let's put energy transmission and net zero in context. By the way, we're going to do a lot of this context at the conference. Goldman Sachs reports that the world over the last 40 years has spent almost $5 trillion on alternative energy generation, and as a consequence of increasing energy markets, we have reduced the market share of fossil fuels from a high of 81% all the way – 82%, I'm sorry – all the way down to 81%. A $5 trillion investment has reduced the market shares of fossil fuels by 1%.
So are we going to need more copper? Yeah, absolutely. Are we going to obviate the use of fossil fuels by 2032 the way our illustrious president says? Eh, no way. Reverting back to copper, even without the increase in demand that we see from the electrification of the world, our economy has underinvested in copper exploration, copper development, and copper production for a very long time because copper has been too cheap.
No matter what we do, absent a global depression, we're going to run into supply problems around copper based on current utilization, not based on increased utilization. So in the context of copper, assuming that we don't have an ugly recession or depression, we're going to experience supply shortages, inevitable supply shortages, no matter what we do within five years. If you overlay the demand for copper that will come not merely as a context of electric vehicles and distributed storage, which is a fancy way of saying batteries in the rich world, if you add back the increase in material living standards for the poorest of the poor, something by the way that we've done a great job of for the last 40 years, we are going to experience shortages. We're going to have to invest more in exploration for copper, we're going to have to spend more in mine development for copper, we're going to have to increase sustaining capital investments around incumbent copper mines, and we're going to have to change the way that we regulate and tax the copper business worldwide.
There are increasing social rents by way of taxes and royalties, and increasing social rents too that are indirect by way of regulation. Many of your listeners, Dan, Americans, will be horrified to know that one of the best copper discoveries in the world is in the United States. It's called resolution. It was discovered 30 years ago, when I had hair.
It is over 1 billion tons of 1.5% copper, three times the average mine grade worldwide, and it's been stuck in permitting for 25 years. It will likely be stuck in permitting for another five years. Now this might be convenient for the owners in the sense that they're finally able to build the thing right when the world has a desperate shortage of copper, but it speaks to a broader policy perspective in a world where material living standards are dependent on natural resource activities. You know, if it's tangible, if it wasn't grown or it wasn't mined, it doesn't exist.
The big thinkers seem to have a very difficult time grasping that. They think that prosperity can be legislated somehow, that material progress for humankind can somehow be conjured by the thinking class. It can't.
Dan Ferris: Yeah, you'd think if all of these big thinkers, as you call them – I like the term – are so committed to all of this transformation from a fuel-intensive economy, let's just say, to a mineral-intensive economy, that they would kind of pave the way for the production of more minerals, but they seem to be doing the opposite. Earlier this year, in January, there was a Reuters story I saw that says "U.S. Bans Mining in Parts of Minnesota, Dealing Latest Blow to Antofagasta's copper project"... the exact thing that we need tons more of.
Rick Rule: And it's actually a copper-and-nickel project. I mean, you know, if you look at that project, it's a battery project.
Dan Ferris: Yeah.
Rick Rule: So on the one hand, you have the president saying we need more alternative energy, and for alternative energy to work, we need energy storage, we need batteries. But somehow I guess he thinks he can legislate copper or something like that. It has to be mined. Now in truth, as a natural resource investor, President Biden may very well be my best friend.
Dan Ferris: Oh, sure.
Rick Rule: What he does is he constrains supply, which means that the owners of existing supplies, old, fat, bald white guys like myself get richer and richer as a consequence of his idiocy. And while I don't condone idiocy, investors need to understand that perversely these regulations are in some senses their best friend. But they're not good for humankind.
Dan Ferris: Right. And in the long term, our listeners – I know these are the kinds of things they're focused on, and I know one of them in this discussion will be the copper price, and I've been doing some research because I'm writing about copper for my newsletter in the next issue. That's why I'm on this topic. I noticed a couple of things.
First of all, the copper price late last century and up to about 2005 this century was sort of bouncing around in the 60-cent-to-$1.50 range. After that, it's more volatile and bouncing around in $2 to $5, just call it. During that time also, I saw another chart that showed the decline in grades of copper grades over the last couple of centuries, and then I saw another chart about the incentive price rising. These things all come together. Do I have this right?
Rick Rule: You do. You forgot one.
Dan Ferris: OK. What is it?
Rick Rule: That one is the difference between nominal pricing and real pricing. You're pricing them in U.S. dollars, and the purchasing power of the U.S. dollar since the establishment of the Federal Reserve is down by 98%. In real terms, copper's so cheap it's almost free, but that part is coming to a screeching, screeching halt, precisely for the reason that you identified, the average mine grade for a copper mine in 30 years has declined from 1.5% to less than 0.5%. [Laughs] And, you know, Dan –
Dan Ferris: And they're deeper too, aren't they? The new discoveries.
Rick Rule: Or they're in political jurisdictions that we're less familiar with. Your viewers should, in a sense, look at me as an icon for the copper business because the mines all look like me, 70 years old, bald, fat, and past their prime.
Dan Ferris: [Laughs]
Rick Rule: The big copper mines of the world, think Bingham Canyon, 160 years of age. You know, the deposit does not get better with age. This is not fine wine. Grasberg, 65 years of age... Escondida, the newcomer, 40 years of age... El Teniente, 110 years of age. Humankind is living off these wonderful mega deposits that were discovered and put into production 40, 50, 60, 100 years ago. You do not stand on the lip of a copper mine, throw in water and fertilizer, and have it grow more cotton – copper, pardon me.
You also do not attend a great, big political forum and legislate copper into existence, despite the preferences of the big thinkers. You have to go find this stuff, which is traditionally in district scale exploration a 10-year process. Then you have to permit it, which if the United States is any indication, is a 25-year process. Then you have to finance it, then you have to build it. So understand in that context the value of existing long-lived, permitted, producing reserves.
Dan Ferris: Yes. I'm a big fan of those.
I'm a big fan of the leverage an investor can get on those when they're still in the ground and the price is moving. It can do wonderful things for you. So maybe – I think we've actually done a reasonable job of teaching about fishing. Maybe we should throw a fish or two out there. You got a fish or two that you want to throw out in the copper space?
Rick Rule: I'd be happy to do that, happy to do that. If you have the courage to take political risk, one of my longest standing recommendations will be at the conference by the way, which is Ivanhoe Mines, the highest grade new copper deposit in the world, a company that's absolutely gushing cash, and by the way, is about to put the highest grade zinc mine in the world into production, and after that will put one of the highest grade but certainly the largest platinum and palladium mines in production. Ivanhoe Mines will be at the conference.
Is there risk? Absolutely. They produce in South Africa and they produce in Congo, two challenging countries, but three absolutely world scale deposits. Investors that don't have a sense of humor for that type of risk would probably do well to look at companies like Freeport. If you look at Freeport on a net-present-value basis, they're selling at a discount to the net-present value of their existing cash flows using a discount rate that's three times the rate of the U.S. 30-year Treasury, and you get the upside for free.
I think that investors who don't want to do a lot of work and a lot of time would be well advised putting into their portfolios the very largest, the very most solvent natural resource companies in the world, so ones that focus on tier one assets, that have best quartile all in sustaining costs, best quartile return on capital employed, and by the way, fairly generous dividend policies. Do they have names? Sure. BHP is a name.
Is it cheap? On an absolute basis, yes. On a relative basis, no. Rio Tinto, you know, absolutely world-class asset base. Will it get hurt in a recession? Absolutely. Will it survive the recession and pay a wonderful dividend stream for 30 years?
Yes, absolutely. If you can take the risk of a more aggressive company, Glencore. Lots and lots and lots of political problems, but think about this. Two years ago, understanding that despite the wishes of the big thinkers, Glencore went on a coal acquisition rampage. They bought out a minority interest in a coal mine with 35 years of proved reserves, and they paid 1.5 times trailing cash flow for this interest.
Think about paying 1.5 times trailing cash flow for an asset with a 35-year reserve life. So are there opportunities in this space? Absolutely positively. Our conference specializes in copper explorers and producers that are at an earlier stage and not as well known, companies with more risk and more torque, and we will have those. We will have a $200-million-market-cap Australian company that controls one of the largest new discoveries, as an example, in Chile.
Is there risk? Of course. This thing hasn't been financed to production. But it's within 30 miles of Tidewater, the Pan-American Highway goes right through it. It's next to a town, a copper mining town, so that they have access to a wonderful asset called copper miners. There are all kinds of opportunities in the copper space. The question is what type of opportunity fits your needs and your risk tolerance as an investor?
Dan Ferris: Right. You mentioned Chile. We had a guest on recently who was talking about it. What do you make of the political situation there right now? I never thought of Chile as a place with a lot of political risk. I thought that was one of the cool things about it, but maybe I was kind of wrong about that. [Laughs]
Rick Rule: Chile is snatching defeat from the jaws of victory. If you look at the success of Chile in the last 40 years, it's been partially a consequence of their natural resource endowment and partially a consequence of fairly good policies and politics. Chile has moved from a poor nation to a rich nation. It's not a middle-income nation anymore. It's a wealthy nation, particularly in the Latin American context.
There are pressures now for redistribution rather than creation, which is to say that we're going through the Americanization of Chile. I think that's very sad, but I also understand it to be true. Make no mistake, it's still not a bad place to invest in mining. It's just getting worse. It has a wonderful geological endowment. It has wonderful infrastructure.
It has wonderful management, wonderful, talented, skilled workers. It has, like California, this wonderful thing that stores water in the form of snow in the winter and delivers it via gravity in the summer. You know, it has all kinds of wonderful attributes. It has a nice ocean which supplies them with things like fish, but more importantly, cheap access to world markets. Unfortunately, one if its attributes, which used to be a political understanding of the nature of the Chilean economy, is fading fast.
Dan Ferris: So almost 40% of global production is between Chile and another country nearby called Peru.
Rick Rule: Peru.
Dan Ferris: Which I don't talk about. I don't know anything about it, and I don't hear it discussed. When people say copper, the next word they say is Chile, but nobody ever talks about Peru.
Rick Rule: Peru, at the federal level, seems to be getting a little bit better as an investment destination. There is a very active NGO presence in Peru to disrupt mining at the local level. Some of the NGOs are self-described green NGOs. Others of the NGOs are what I would describe as red or pink NGOs, but most of them are watermelons, which is to say green on the outside but pink in the center.
Dan Ferris: [Laughs]
Rick Rule: The consequence of that is that the local politics around mining in Peru is very often challenging.
Dan Ferris: OK. I see. So then one would have to assess that maybe on a, what, project by project or company by company basis?
Rick Rule: Yeah, absolutely. I think project by project and company by company. It is possible – the Lundin family has shown this – it is possible with focused local engagement that the benefits of mining, particularly if they're demonstrated before the project has started, can overwhelm these NGOs. The Lundins have done a wonderful job of going into communities eight or 10 years before they propose to begin to mine them, providing jobs for locals and site preparation, subsidizing churches – pardon me, subsidizing schools – drilling water wells, doing the type of community engagement that counteracts the NGOs describing Marxist greed in environmental terms.
But what you need is an outfit that has the will and the tenacity to do this. So there are successes – in fact, a rising tide of successes as the mining industry has learned from successful efforts that they can't leave it to the host governments to create the right circumstances. You know, there's social rents in mining and are often charged by the center. So we have a saying in mining that the rents go to the capital and the regions get the shaft. All of the money from taxation and royalties of course goes to places like Lima and Santiago, and the rural areas, which host the mines, traditionally have gotten very little of the social rent.
Mercifully, that's changing. Mercifully, the mining industry is beginning to be able to show the local community how to salvage mor and more of the social rent, which is extracted from the ore body by the capital.
Dan Ferris: I see. Are we saying that too much investment by mining companies is diverted to the capital?
Rick Rule: Absolutely.
Dan Ferris: Or are we saying that actually – OK. I just want to make sure.
Rick Rule: I mean, I think any is too much, but that's a bit extreme. But there is some value. Traditionally, what's happened in Peru, as an example, is that the social rents for mining, which is to say the value-added taxes, the income taxes, the royalties, the payroll taxes, all those kinds of things, accrue to the big thinkers in Lima to be distributed as they see fit, and the regions that bear the cost of mining, the regions that, you know, host the facilities, while they get jobs, which is a wonderful thing, typically do not get compensated for the infrastructure that mining uses, as an example. In areas where there are very large copper mines that generate very large economic surpluses, there are still circumstances where the surrounding villages, were it not for the mining companies, wouldn't have water, wouldn't have schools, wouldn't have power except for the mine.
And they wonder when the NGOs say, the foreigners are stripping all the wealth out of the country, given that they can see the wealth being generated but they can't see the wealth being employed because they're not in the capital, believe the pinkos, believe that story.
Dan Ferris: Right. So I think you actually answered a question that I sort of had bouncing around in the back of my head, which does this dynamic then create an opportunity for the mining company to be a better friend to the region and to sort of demonstrate that in an overt way?
Rick Rule: I need to say for the last 10 years we've become much, much, much better at that. When I was growing up, not so much, you know? You had to get approval from the capital, so you went and pandered to the capital, and the capital would enforce their will on the region even with a gun, if necessary. We have learned since that social license is local as well as national, and the companies have done a much, much, much better job at playing politics on both ends.
It might be that when you undertake a local project that you give the central government credit for it. Let's say that you build a school in the local community. You say at the suggestion of my good friend, the Ministry of Education. A lot of the villagers understand that, and the politician understands it too.
Dan Ferris: You know, Rick, it's a weird world to find a libertarian-oriented guy operating in.
Rick Rule: It's a weird world for a libertarian guy to operate in. I recognize that in a battle of power, I have the idea and they have the gun, and I am aware of the asymmetry in that circumstance, and so I do the best I can with what I have.
Dan Ferris: Yeah. [Laughs] Money is not a bad weapon, just – you know?
Rick Rule: It helps, it helps.
Dan Ferris: But it's not a gun. Yeah, it's not a gun, but it's not a bad weapon. All right. We've actually come to the point where I ask my final question, which you've answered many times, and it is the same question for every guest no matter what the topic, even if it's not a financial topic. The question is simply if you could leave our listeners with one thought today, besides going to Rickevent.com, which I will remind them again and again, I promise, besides going to Rickevent.com, what one thought would you like to leave our listeners with today?
Rick Rule: The best investment is in yourself. Invest in your own education. Invest in the construction of your own paradigm. The biggest opportunity that you have and the biggest risk that you face is very conveniently located. It's to the left of your right ear and to the right of your left ear. And to the extent that you invest in yourself, before you invest in the product of your education, you will do much, much, much better, whether the way that you exercise that is by subscribing to Dan's newsletter or coming to my conference or by some other mechanism.
Determine what it is that you're trying to accomplish and invest in yourself. That's the word that I would leave you. The other word I'd leave you is, you know, this is a rough world. Be kind. [Laughs] You know? Be kind.
Dan Ferris: Yeah.
Rick Rule: It's good for the world and it's good for you. You come away feeling better about yourself. And the same circumstance applies there. When you're being kind, educate yourself on what that means to you. Educate yourself in terms of your target, educate yourself in terms of your technique, educate yourself in terms of what you're trying to achieve, and then use that education to be kind.
Dan Ferris: All right. We got a two-for-one. Very nice. Listen, Rick, it's always a pleasure to talk with you, and thanks once again for giving us your time and coming back.
Rick Rule: Thank you. I look forward to hosting you physically in Boca Raton – Raton [different pronunciation]. I'm sorry, I pronounced it incorrectly. I look forward to having you down there. I look forward to seeing many of your subscribers in person and probably many more virtually in the comfort of their own home.
Dan Ferris: Yeah. Great. All right, Rick. Thanks a lot, and I'll see you soon. See you in a few days.
Rick Rule: Thank you, sir.
Dan Ferris: Many mainstream analysts are predicting that stocks will recover soon, but I say we'll instead witness a cash frenzy unlike we've experienced in 21 years before stocks recover, and I'm urging Americans not to buy a single stock until they see it. I predicted the Lehman Brothers crash in 2008, and I called the top of the Nasdaq in 2021, but this – this is the number-one most important thing to pay attention to for 2023. And I'm not talking about another market crash or politics or inflation or any of these other things.
As all this unfolds, the financial consequences of what I'm talking about could last for several decades if you don't understand what's happening. There will be winners and losers, and now is the time to decide which one you'll be. This is why I strongly encourage you to read about my warning totally free today. It's all spelled out in a free report we've put together. Get the facts yourself.
Go to StockDeadzone.com to get your free copy of this report. You can learn how to get my four steps to prepare for what's coming. Again, that's StockDeadzone.com for a free copy of this new report.
Always a pleasure to talk with my old friend Rick, and of course, like I admitted during the interview, I had him on for selfish reasons because I want you to go to www.RickEvent.com and, you know, either come to Florida, or if you can't make it to Florida, you know, do the livestream. If you're a mining investor and you don't know Rick Rule and you don't know all these people that he knows, you've missed something. If you want to make money in mining stocks, and I know a lot of you do, there's no substitute for what he knows.
There's no substitute for who he knows. He's just one of the biggest people, especially in that exploration space. You know, in Vancouver, in Toronto, like everybody knows who he is and he knows who they are. He's educated me a lot about people to get with and people to avoid. So, you know, like I said, if you are a mining investor, go to RickEvent.com and sign up for this thing, and do what he says.
There's going to be 55 hours of stuff over four days. You won't be able to take it all in. And if you really want to make money in mining, you will access it. I think you get six months of access if you sign up for the livestream, which is pretty cool, and you'll want to go back and study it, as Rick said, he does. I mean, if he goes back and studies it, you and I sure need to.
And you'll want to, because you'll want to learn all this and you'll come away feeling a lot smarter and being a lot smarter about mining. You know, I hope you also enjoy the education that we got about Chile and Peru and copper and all the rest of it. It's always like that when we talk to Rick, isn't it? All right.
Well, that's another interview, and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as we did. We provide a transcript for every episode. Just go to InvestorHour.com. Click on the episode you want. Scroll all the way down, click on the word "transcript," and enjoy.
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