Ann: Quarterly Activities Report, page-17

Famous mining investor Rick Rule says the mining industry would be better off if 85% of the listed exploration companies globally became extinct.

In an interview with *’s Christina Morrissey, Rule was asked who will fund the explorers and how the next generation of tier 1 mineral deposits will be found.

“I hope it comes from the bankruptcy of all the pretenders,” he says.

“Let’s say there are 2000 junior miners worldwide. I would suspect only 300 of them would have a reason to exist.

“The mining business would be better off if 1700 of them became extinct. But they are cockroaches; very, very tough to kill.”

Veteran investor Rick Rule.

‘Shocking’ lack of spend on actual exploration

About 20 years ago Rule had a young intern, who he assigned the job of pulling 25 TSX venture companies at random and reporting the insights he gleaned from their balance sheets and income statements.

“What he found shocked even me,” Rule says.

“The median spend on general administrative expense across 25 randomly selected companies was over 60% of the capital raised by those companies.

“Less than 40% went in the ground.”

If you merged every junior explorer in the world into one company, and that company was called Junior ExploreCo, on a very good year that company would lose US$2bn. In a bad year it would lose US$6bn.

“The exploration industry isn’t underfunded; the industry is overfunded,” he says.

“You say we need more money spent on exploration? Of course we do, when 65% of the money is spent on G&A [General and Administrative], and less than 40% in the ground.

“Society has underinvested in exploration for at least three decades. And it’s been OK, because we have lived off the surplus discoveries from the ’60s, ’70s and ’80s when we did invest substantial amounts of money in exploration.

“But that party is coming to a screeching halt.”