When markets turn: what Rick Rule told IMARC about cycles, capital and contrarian investing
When Markets Turn: What Rick Rule told IMARC About Cycles, Capital and Contrarian Investing
Last week I had a late call-up to chair the Mines and Money Investment session at the International Mining and Resources Conference (IMARC) in Sydney, and the privilege of welcoming Rick Rule to the stage. If you have heard Rick speak before, you know he doesn’t waste a room.
Few investors have read the resources cycle better. Rick has navigated, and profited from, almost every major commodity boom and bust since the 1970s. His keynote, Cyclical Capital Markets and Contrarian Investing, could not have been more timely. Markets are turning, and the question in the room was what comes next.
Hubris, humility and the wind in your sails
Rick was candid about his own lessons. In the 1970s, as a very young man, he enjoyed spectacular success as gold ran from US$35 to US$850 an ounce. He assumed the money had something to do with his genius rather than the wind in his sails. “When that market collapsed I found out just how smart I was, which is to say not very.”
His broader point is that we use our recent experience to predict the future, and in most cases it turns out to be wrong. A rising market flatters everyone. The test is what you do when the wind drops.
Seek out boredom
“The cure for high prices is always high prices, and the cure for low prices is always low prices.” It is one of Rick’s oldest lines and still one of his best.
To be a contrarian, he argued, you have to do difficult things. Seek out boredom. Find markets with no momentum. Find markets that are dead, that aren’t attracting research reports and that don’t have the money, or the will, to attend conferences like IMARC. Better yet, find commodities that are hated.
There is a lesson in that for companies sitting in an unloved commodity. Being out of favour is not the same as being uninvestable. Contrarian capital goes looking for exactly those names. Your job is to make sure that when it finds you, the story is clear, the asset is front and centre and the numbers stand up.
The copper maths doesn’t add up
Rick’s macro case for copper shows why the asset matters so much. He was clear he was using copper as an illustration, not making a single-metal call.
At London Metals Week last year, he heard that the world’s top ten copper producers would need to spend around US$250 billion, in 2025 dollars, over the next decade just to hold current production steady. He sees three problems with that.
- They don’t have it. That capital has to be found, and finding it is a large problem in its own right.
- Holding steady isn’t enough. The market is already in deficit. We use more copper than we produce. Spending US$250 billion only stops the deficit growing.
- Demand keeps climbing. The figure makes no allowance for growth in global copper demand.
So will the world run out? “Run out of copper we won’t,” Rick said. Uses that deliver very high value to consumers will keep being supplied. Less economic uses, and those that are easily substituted, will change.
For explorers and developers, that is the opportunity. A structural deficit and a capital gap of that size mean the money has to go somewhere. But it goes to projects, not price narratives. Which is exactly where Rick took the conversation next.
Show us the money
Rick also joined Mark Kristoff, CEO of Traxys, for a separate IMARC session on where mining capital is coming from, and why. It made a natural companion to the keynote. If the keynote was about reading the cycle, this was about who gets funded once it turns.
The money is there. It’s choosier.
Rick’s headline was not that capital has dried up. It hasn’t. The money is available, but investors are far more selective about which projects and which management teams get it.
That is a harder message for a junior board than “the market is closed”. A closed market is nobody’s fault. A selective market means the capital is going somewhere else, to someone who made a better case.
Back the person, not the pitch
Rick’s first filter is leadership. The dominant figure in a company, whether that is the CEO or the major backer, should have a record of repeated success. And that success needs to be directly relevant to the job in front of them. A strong track record in one part of the mining value chain does not automatically transfer to another.
A commodity price is not a project
Rick mentioned a company that talks mainly about the zinc, copper or gold price, but doesn’t actually own a deposit of it, is a warning sign.
We see this in investor presentations all the time. Five slides on the macro case for a metal. One slide on the asset. Rick’s view is that sophisticated money reads that ratio as a tell. The commodity story should support the project story, not stand in for it.
Name the question, the odds and the funding
Rick’s framework for a prospect (which is also remarkably simple structure for an investor presentation):
- Identify the single most important unanswered question about the project.
- State your probability of answering it successfully.
- Show exactly how you will fund the work to get there.
He added a caution for founders. Successful entrepreneurs tend to be overly optimistic about what they can achieve with the resources they have. That optimism is often why they succeed, but it is also why companies need to test it hard against the cash, people and time they actually have.
The lender’s lens
Mark Kristoff brought the debt side of the ledger. To attract financing, a project generally needs good grade, well-proven metallurgy, de-risked processing technology and genuine market demand for its product.
From there the questions are commercial: Does the project make economic sense? Does it stay competitive through the commodity cycle and on the cost curve? How risky is the path from idea to execution?
He was also direct on policy. Permitting remains one of the biggest obstacles to mine development. Governments can help by streamlining approvals and delivering the infrastructure projects depend on: power, water and roads. Government debt instruments have a role. Picking “national champions” or offering price support for products is where it becomes problematic.
What this means for ASX mining companies
For listed small and mid-cap resources companies, the practical takeaways relate to how you tell your story:
- Lead with the asset. The deposit, the grade, the metallurgy. Macro tailwinds belong in the supporting cast.
- Make management credibility specific. Show the relevant wins, not a list of titles.
- Put the next question front and centre. What are you trying to prove next, what are the odds and how is it funded?
- Be honest about the path to execution. Lenders and investors will find the risks anyway. It is better they hear them from you, with a plan attached.
None of this is new to good operators. What has changed is how little patience the market has for anything else.
If your investor story currently leans harder on the commodity price than on your project, we should talk. That is exactly the work Investability does with ASX resources companies every day.
Get in touch with the team.
Author: Dannika Warburton
Dannika is Founder and Principal of Investability, an investor relations and media relations consultancy based in Australia and Hong Kong, with over 15 years capital markets experience across investment banking, institutional sales and IR.
