M&A activity has been top of mind at this year’s PDAC convention — here Rick Rule of Sprott shares his thoughts on how to profit.
M&A activity has been top of mind for investors at this year’s Prospectors & Developers Association of Canada (PDAC) convention, and for Sprott’s (TSX:SII,OTC Pink:SPOXF) Rick Rule the trend is positive.
“I think the mergers are a wonderful thing for the mining business and the mining investment business,” he said at the sidelines of the show.
“When a takeover occurs at a premium, the shareholders of the acquired company get liquidity and they get hope — two great ingredients in a market. Intelligent mergers … also benefit the acquirer. Larger companies, more liquid companies, enjoy higher share prices and a lower cost of capital.”
He added, “thirdly, one of the things that the mining industry really suffers from is too much general and administrative expense. There’s too many management teams, too much management compensation. In a merger you have the ability to shed redundant managers.”
In terms of how investors can play the current M&A trend, Rule had one key suggestion.
“You should look to companies that are going to be acquired, particularly if you’re a trader. The real money will be made backing the teams that buy the assets that get shed by the majors,” he said.
However, Rule added, that money won’t come easily or quickly — “it will be tough, and it will take three or four years” from where we are now.
Finishing up, he encouraged market participants to remember to invest in themselves.
“I think the most important trend for investors is their own education — mastering their emotions, understanding that this is a cyclical business. Bull markets, which people love, are risky; bear markets are sales, when goods are on sale,” commented Rule.
Watch the interview above for more insight from Rule on M&A activity, the gold price and more. You can also click here to view our full PDAC 2019 interview playlist on YouTube.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.