Rick Rule, President & CEO, Sprott U.S. Holdings

FOCUS: Precious Metals Stocks

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MARKET OUTLOOK:

Precious metals, and precious metals equities markets continue to be very well bid, with zero and negative sovereign rates being the primary driver. Precious metals equities are outperforming gold because of margin expansion, recovery from prior oversold positions, and institutional rebalancing.

The rest of the resource space is very soft, a victim of weak global economic activity, and a hangover from excess capacity developed during the last bull market. Very weak commodities markets are ultimately self-correcting, as negative operating margins eliminate productive capacity, a function Sprott refers to as "supply destruction. " Sprott sees significant developing opportunities in other resource markets.

A particular focus of mine will be in stressed investment grade debt, and high yield debt in resource industries. We believe that the "energy junk debt" market looks like an developing " train wreck" beginning in the fourth quarter of this year, and extending through all of 2017, resulting in once in a decade investment opportunities, as indiscriminate selling sweeps through an illiquid market.

Top Picks:

Ivanhoe Mines (IVN.TO)

The best collection of development assets, in one company in my career. Better yet, backed by the most successful mining financier of this generation, Robert Friedland. One company controls the best undeveloped copper asset in the world, the best undeveloped PGM asset in the world, and one of the best undeveloped (and the highest grade) polymetallic assets in the world.

Nevsun Resources (NSU.TO)

Spectacular performance from their operating Bisha mine in Eritrea, transitioning to a zinc rich portion of the deposit, in time for a rebound in zinc prices. A pristine balance sheet, and robust income statement, and an unparalleled growth profile as a consequence of their Reservoir Minerals takeover. A generous, earned dividend makes the wat more pleasant.

Northern Dynasty Minerals (NDM.TO)

It is an ultra-high risk optionality play. One of the biggest, and highest grade copper gold deposits in the world, it is subject to a legal and political dispute. In our opinion, a political resolution with Alaskan Indigenous owners would solve the legal dispute, and both sides have ample incentive to reach a mutually beneficial agreement. This will be a binary outcome, a huge win, or a substantial loss, and the time frame is indeterminate.

Past Picks:  August 12, 2015

Alterra Power (AXY.TO)

• Then: $0.51
• Now: $0.67
• Return: +31.37%
• TR: +31.37%

Franco-Nevada (FNV.TO)

• Then: $60.94
• Now: $101.97
• Return: +67.33%
• TR: +70.00%

Ivanhoe Mines (IVN.TO)

• Then: $0.66
• Now: $1.78
• Return: +169.70%
• TR: +169.70%

Total Return Average: +90.36%

Twitter: @SprottGlobal

Website: www.sprottglobal.com