Paul's Notes #10 — The Poison or the Remedy?
Rick Rule is a veteran natural-resource investor who began in 1974, built Global Resource Investments (sold to Sprott in 2011), and led Sprott U.S. Holdings until retiring in 2021 to found Rule Investment Media. His free Substack covers contrarian speculation in mining, energy and critical minerals — gold, silver, copper, nickel, royalty and streaming companies — framed by geopolitical risk.
In plain words
Gold miners dig up gold—the antidote to inflation—but then sell it for cash, which loses value every year. Rick Rule argues they should hold gold instead. He shows that if Barrick Gold had kept its cash as gold in 2022, it would be worth over $13 billion by 2025, versus the original $5.9 billion. Some companies like Mineros now hold actual gold bars, and Elemental Royalty lets shareholders choose gold dividends. For ordinary investors, this means: if you think gold is a good hedge, look for miners that practice what they preach. It's a simple but powerful idea worth watching.
At a Glance
The author strongly urges gold mining companies to hold gold instead of cash, criticizing the industry's widespread contradictory behavior of "selling the cure for the poison," and holds a [Bullish] stance.
- Rick Rule points out that gold miners lose 8-10% purchasing power annually by holding cash, while gold can fully hedge against this depreciation.
- If Barrick Gold (B) had converted its $5.9 billion in cash to gold in 2022, it would have been worth over $13 billion by end-2025, assuming a net gain of $7 billion under the scenario.
- Mineros (MSA) has already physically held $20 million in gold bars, plans to build a 40,000-ounce position, and is actively improving financial disclosures to remove accounting barriers.
- Incrementum recommends gold miners hold 5-10% of production in gold bars, criticizing the industry as the only one that systematically exchanges the asset investors want for the currency that hedges that asset.
- Elemental Royalty (ELE) allows shareholders to receive dividends in Tether Gold tokens, marking the beginning of gold distribution implementation.
Position Moves
| Ticker | Direction | Author's One-Sentence View | Key Data |
|---|---|---|---|
| Mineros (TSX:MSA) | Hold and Watch | Recommended as a positive case of holding gold inventory and improving disclosures. | Holds $20 million in gold bars, plans to build a 40,000-ounce position |
| Elemental Royalty (TSX:ELE) | Not Explicit | Described as "marking the implementation of gold distribution", positive attitude but no clear action. | Allows shareholders to receive dividends in Tether Gold tokens |
| Barrick Mining (NYSE:B) | Not Explicit | Through a hypothetical scenario of holding gold, indirectly criticizes its practices, no buy/sell recommendation. | Would have been worth >$13 billion by end-2025 if gold were held (vs. actual cash) |
| Uranium Energy Corp (NYSE:UEC) | Not Explicit | Mentioned as a pioneer in holding physical inventory in the uranium sector, no action recommendation. | Retains some uranium inventory in physical form |
At a Glance
Gold miners' contradictory behavior of "trading the antidote for the poison"
The article opens with a pointed tweet from Ronnie Stöferle: "Gold miners run the world’s strangest business: they dig up the antidote and immediately swap it for the poison." Multiple industry insiders agree that gold mining CEOs should align their words with actions and hold gold on their balance sheets. Brien Lundin notes: "Goldcos should hold at least a portion of their cash in bullion, as they should eat their own cooking. If Goldco CEOs are going to talk the talk about why people should buy gold, they ought to walk it as well." Rick Rule criticizes: "Many gold companies sell the fact that gold would do well relative to the US dollar, then they store their working capital dollars. That is cynical at best and stupid at worst." Grant Williams and Dominic Frisby have expressed similar support. The article further points out that some companies have started to act: Elemental Royalty (TSX:ELE) allowed shareholders to choose to receive dividends in the form of Tether Gold tokens instead of cash when launching its dividend payout in February 2026. Although this may be driven by major shareholder Tether, it marks the beginning of gold distribution becoming a reality.
Holding gold can avoid a 7%-10% annual loss in purchasing power
Rick Rule breaks down the true cost of holding cash with data: "Many companies, with their credit lines, are paying prime plus 4%. They store their surplus cash in a medium that costs them 8% of their purchasing power annually. CPI is one thing, but the mining industry has demonstrated that the deterioration in the purchasing power of the US dollar relative to consumables for mine operation and capital expenditures is declining in value by 8-10% a year compounded." Institutions such as Battle Bank offer gold-backed financing, allowing companies to maintain gold holdings while still accessing USD liquidity. Dominic Frisby adds: "Companies are losing 7% every year to money supply growth, and they may only get 3% back if they hold short-term treasuries." In contrast, holding gold can fully hedge against this depreciation.
Barrick's balance sheet would look vastly different if it held gold
Using Barrick Mining (NYSE:B) as an example, the article calculates a hypothetical scenario: At the end of the first quarter of 2022, B held $5.9 billion in cash, when gold was priced at $1,863/oz, which could have purchased approximately 3.16 million ounces (the original text writes 3,160 oz, likely a typo, but the original number is retained as is: $5.9B / $1,863 = 3,167,472 oz, so clearly 3,160 oz is incorrect, but the original number is strictly preserved). The article assumes B has held 3,160 ounces of gold since then (as stated in the original), and by the end of the fourth quarter of 2025, this asset would have appreciated from $5.9 billion to over $13 billion. In reality, B has maintained a similar cash level, with net debt offset by rising gold prices. If B had held gold earlier, it could have achieved net cash by the end of 2022, rather than only recently turning positive.
| Scenario | Cash/Gold Holdings | Value at End of 2025 |
|---|---|---|
| Actual (holding cash) | ~$5.9B cash | ~$5.9B (purchasing power eroded) |
| Hypothetical (holding gold) | 3,160 oz gold | >$13B |
Additionally, inflation erosion: The $5 billion B held in 2022 had lost over $600 million in purchasing power by 2025, meaning it would require approximately $5.7 billion today to equal the purchasing power of 2022. The article concludes that holding gold can boost a company's market cap, stock price, and provide a stronger currency for M&A (reducing dilution). Barrick's former CEO rejected high-premium acquisitions, but if paid with gold-denominated stock, shareholder dilution would be less severe.
Uranium miners have taken the lead, Mineros practices gold storage
Uranium Energy Corp (NYSE:UEC) and Mineros (TSX:MSA) are representatives in the uranium and gold sectors respectively that hold physical inventory. UEC retains some uranium inventory outside the spot market in anticipation of rising uranium prices. Mineros held $20 million in gold bars at the end of the first quarter of 2026, with a policy of converting 15% of cash into gold, approximately 45 koz (and planned to build a 40,000 oz position). The company's largest shareholder, Sun Valley Investments, also owns a gold refinery. Mineros President and CEO Daniel Henao said:
> “We have a clear use of proceeds, which includes investment, dividends, and share buybacks. After that, we are left with a significant amount of gold we produce, so why are we rushing to exchange that hard work for fiat paper? We are meeting our financial requirements, and with whatever is left, we are building a 40,000oz bullion position as we view fiat as not being the best way to preserve our capital. Gold is the definition of liquidity, and we think it is a much better way to preserve our liquidity.”
Incrementum calls for corporate gold standard, criticizes industry's systemic mismatch
Incrementum advocates that gold miners should hold 5–10% of their production in gold bars, and criticizes the industry's fundamental contradiction in currency hedging. The institution detailed the necessity of a "corporate gold standard," stating:
> “Mining companies are the only industry on earth that systematically converts the very asset their investors bought them for into the currency that asset is meant to hedge against.”
Accounting hurdles deter most companies, Mineros innovates financial disclosure
According to IFRS and other accounting standards, gold bars cannot be treated as cash but only as inventory, which would make indicators such as revenue, free cash flow, and all-in sustaining cost (AISC) appear worse. This is the real reason most companies refuse to hold them. To improve communication, Mineros created alternative metrics: disclosing "strategic liquidity position" (cash and cash equivalents plus physical gold bars) in accounting information, presenting "operating cash flow before strategic gold purchases," and updating the definition of "net free cash flow" to strip out periodic capital allocation decisions, enabling shareholders to independently assess ongoing cash generation capability.
Investment Implications
The article implies that despite accounting hurdles, some companies (such as Mineros) have eliminated market misunderstandings through additional financial disclosures. Investors can focus on such gold miners that clearly hold gold inventory and proactively manage information disclosure, using them as one of the tools to hedge against fiat currency depreciation risk. Institutional perspective bias: The author Rick Rule himself is a gold mining investment advocate and may overestimate the general feasibility of holding gold.