US resources investor Rick Rule says most mining minnows worthless – by Matt Chambers (The Australian – October 30, 2013)

LONG-TIME US resources investor Rick Rule is in Australia to take advantage of what he sees as a once-in-a-decade opportunity to pick up stocks in struggling mining companies.

But the Sprott Global Resource Investments chairman has a stark message for the junior sector and its investors: most of the more than 800 junior miners listed on the Australian Securities Exchange are worthless.

“In the good times, from 2003 to 2011, the excesses here and in Canada and on (London’s secondary exchange) AIM were legendary,” said Mr Rule, in Melbourne to deliver the opening speech at today’s Mines and Money conference.

“We need to exorcise all of those sins from the system, which is a different way of saying perhaps 60 or 70 per cent of the junior listings here are truly valueless.

“One would hope that those (equity) issuers ultimately go to their intrinsic value, which is zero, and open up more space for the best 30 per cent of your issuers, the best of which are truly world class.”

Mr Rule, who has been investing in resources for 40 years, is here at a time when local resource investors have vacated the market and juniors, even those with decent projects, are struggling to stay afloat.

It is a strategy he successfully employed in 1990 and in 1998-99.

“When this market is in favour, the local punter is excited and (when) London and the Far East are up, it gets horrifically overpriced, but when the sector falls from favour it gets ridiculously underpriced,” he said.

“The idea that we can invest in the sub-$500 million market-cap space in absolute best-of-breed management at what are, from our point of view, world-beating valuations, is very attractive. We can’t do it mid-market and top market. We have to do it when the locals are on strike.”

He says the junior mining sector is still ridiculously underpriced and predicts it could get worse before it strengthens.

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