“Next Big Junior Mining Sector Move Is Up. Crash Has Already Happened” says Investor Erik Wetterling

“Next Big Junior Mining Sector Move Is Up. Crash Has Already Happened” says Investor Erik Wetterling

you are listening to Mining stock education where you’ll learn from the top leaders in the natural resource sector and uncover quality mining investment opportunities this sector uh when you think about it is like fascinatingly dumb in a sense and so fascinatingly uh predictable because like pure Leon says it’s the easiest sector in the world because and his simple reasoning is it always crashes and then always RS and then always crashes and always read we’ve had the crash what’s the next step we know what the next step is the question is are we going to be the be there for it the next big move in the junior space is obviously up I know a lot of people are worrying about a crash but like the crash Castle where to happen welcome to Mining stock education my name is Brian Lenny today with me I have Eric wling who is a private investor in the sector and the editor of the hedges Horseman decom today you are going to hear Eric’s thoughts on the market how he deploys money into the sector the lessons he’s learned throughout his investing career and much more Eric it’s great to have you let’s begin with how you deploy money into the market are you interested in a certain metal and that Propel what propels you into the certain companies or are you agnostic and it’s like a company by company basis that you act I I I would say I have my biases I mean I got into the mining space from gold and silver I started off buying secondhand silver coins and stuff uh and then that became kind of boring because like even you know what quote volatile day that’s like you know 3% or something and then I heard about these Junior mining stocks that could go up 20% in a and down of course more common uh in a day so that got mean to golden silver um and gold and silver Junior miners because yes okay I I you know I listen to all the let’s say videos by the like so you know Sprout and and you keep new Meer and stuff like that and the de bubble um and so it was basically leverage on that theme that you know everything is going to collapse I mean most of us gold bugs are kind of Doomsday bug so it’s like you know we’re still waiting uh and and so that was my first way into Miners and of course I mean the learning curve is kind of steep I mean I got in in 2015 which looks very you know you know Lucky in hindsight but it took a few years to actually have a sense of what I actually owned and I would say it’s like I’m still learning I’m trying to learn every day I’m nowhere near uh you know a geologist or a mining engineer or anything like that my focus is typically the or has been the the psych psychological aspect and you know just getting a good investment uh strategy put together that could work hopefully over the you know long term and of course in this case we have a cyclical sector so and it’s always going to stay that way even if uh the the market always forgets that it’s cyclical at every top and every bottom and it’s like a black one event every time it happens uh but I I would say it’s like I’m a bottomup type investor as like lately I’ve been looking at I mean one of my largest solders is uh you know nickel P GM play uh because I I just I don’t have a particular short-term view on on any metal really but in that case it’s just a such a good company so I I’m let’s say I I try to focus in on or I I would say I let the you know the most important thing be the dictator but I don’t have any kind of I would say pure beta place that’s just a bit on the commodity or any commodity uh in the you know short to medium term uh future I used to do that in 2015 I mean then it worked but I didn’t know that I owned a trading surine I you know I saw oh how many ounces in the ground does this company have it’s like whoa that’s going to be worth a lot but 10 15 years later you know it’s probably not going to be built still so I would say yes I’m I’m a stock picker through and through I have my biases towards some medals uh but that also changes almost on a day-to-day basis I mean if I see copper up 3% I get four more I’m thinking the supply shortage is here the green new Utopia is here and I want to you know sell gold and silver buy copper and buy Versa uh but but I simply try to stick to my guns and just you know yeah be a be a stock picker I don’t care too much what commodity it is but it’s like lium for example that’s so hard I would say to wrap my head around I mean it would probably take me months of research just to have an idea uh what I’m what I’m buying into any kind of liim company so I I’ve kind of been on the let’s say uh on the fence in terms of lithium yes I you know made some bets here and there but it’s like I I I don’t have it within my circle of competence so I have no idea if I’m making a mistake from the GetGo buying something that’s never ever going to work okay so let’s let’s take that company approach so you’re there’s I don’t know 3,000 3,000 and something Junior companies listen on the tsxv or on the TSX to what attracts you to it you know if if the metal isn’t what what necessarily attracts you is it the people is it a value proposition um what’s the detail of of what’s your strategy that’s a good question um I I I think it’s hard to say I see I mean to me this investing in Jor space the Jor space thing I mean I I find the hunt to be the most fun thing the the money is is actually a bonus to me like I mean if I go back to my you know time playing poker uh it’s not necessarily the let’s say biggest pots you won but the times the hands when you really out played an opponent those are the most fun hands even if it’s a small amount but it’s like you get the kind of satisfaction from that so it’s like I treat the junior space as a as a game and I would say that I mean what gets me to a uh usually it’s I think if I find some something that I think is important that the market simply doesn’t appreciate and and it can come in a bunch of different uh you know versions it’s like I mean sometimes a team that’s actually serly successful sort of can be underappreciated because the people that are now in the sector forgot about you know their last success or whatever so I mean we because typically yes the better or the most more well-known teams the serly successful ones they tend to trade with a premium but there are cases where a you know really good team doesn’t trade with a premium because it’s uh you know been unknown it’s like nobody that’s left here remembers it I mean just look at uh this is a might be off topic but it’s like I mean think of the you know new found gold for example would that ever have ramped like it did if nobody knew about Foster will of course not I mean it’s just the the reference point there and uh I mean I I guess I’m going off topic as usual but uh no I mean I I would go to say that I used to care less about people and just looked at the ansers and now it’s kind of progressing towards more and more about the people more because in my mind it’s like okay if I’m in this for the long term uh if if what’s the what’s possibly related with a good management team I I mean that’s like uh returns over a longer time period I mean give give a good team a day to create value you won’t see the difference between a really bad team because they wouldn’t have had the time to destroy value but if I’m in it for a long term because I think we have to be right now given where we are in the sector I mean the next big move in the junior space is obviously up a lot of I know a lot of people are worrying about a crash but like the crash has already happened so the next big Delta is going to be to the upside I don’t know when that is could have started already could be a year from now 2 years from now so okay how do I make sure to catch that and make the most of it I would say it’s like okay let’s say it can take anywhere from one day to three years if you have a good management team they probably won’t dilute you to hell or actually and actually create value over that time so in in that case it doesn’t really matter when it starts whereas if you you know stuck with the pure trading sardines with bad management the more time you get them give them the more time you give them to hang themselves and your investment so so I guess nowadays it’s a lot about the people uh and especially like third part validation as well I mean if you see you know BHP or or Newmont or barck or new Chris buy into something at a particular price unless you’re smarter than them that’s a legit Target or a legit project or whatever so it’s like I think it’s in some ways really easy to actually make a really good portfolio but most of us including myself we’re kind of risk counts in the sense that you know oh this junior is trading for 10 million or whatever oh you know it’s I’m too late to the party on that 50 million market cap company or something and and we kind of take risks we don’t need to because I see a lot you know people you know throw their portfolios at me some sometimes it’s like 80 90% of them I wouldn’t touch cuz I I I don’t see the I don’t see the play it’s like if I can’t have a sense of what I think the future is going to look for a company uh and that’s obviously harder if the management team is bad and they don’t really have a plan and you don’t even see a path forward then then I’m not interested because how am I going to have conviction when when volatility hits I’m not even looking forward to something specific from the company itself so I mean I guess that’s a long response I don’t know if I answered your question at all well how about this though because there’s a spectrum of of of risk and types of companies in the sector you’ve got like the the Green Field expiration companies that have nothing or just based on people and at the very far end of the spectrum you have the the producer and royalty companies um I know you and I know what companies are sort of interested in but explain to us like where on that spectrum of risk and and type of company catches your eye because it’s very different you know depending on the type of investor you are you’re going to be attracted to those different companies and you know personally to me you know that Lan curve is so true so depending on where you hold it and what that company’s doing matters so so where do you lay on that Spectrum well I mean I’m going to say that that uh people ask me about royalty and streaming companies and it’s like and I’ve heard you know Pier Lon talk about that the you know the how beautiful that model is that you’re buying free UPS or free optionality Etc so it’s like in theory uh that work works perfectly and it’s probably the best kind of Investments I mean true Investments that’s like I mean a royalty obviously makes money it’s not just on paper it actually makes money and you get that free optionality you diversify the risk and all that so on paper I think probably Prospect generators and there’s examples out there that I think are trading below their Cash Plus their Equity Holdings so I mean just add face value uh it can’t get any cheaper if you’re trading at a you know negative EV almost but I know myself that it’s it’s just too boring cuz I I you know it’s just too boring for me um so I’m much more into Exploration Place I would say and the same thing goes for developers it’s like I know there are some companies that’s like I I’m 18 90% sure I’m going to make money on long term and that’s kind of rare in this business I’m not saying I’m right in that assessment but but that’s my you know internal estimate that is like 8 90% probability of making money over the longer term and that’s obviously great but it’s like I just find it again too boring I I’d rather take some risks and I mean I I recently had a you know big hit in an exploration Play for example and and that’s not you know too fun but it’s like you know you live by the sword you die by the sword uh if you’re playing that game you’re getting exposed to the you know potential uh uh High revaluation Pace in such Juniors and of course you’re going to have typically more losers than winners but like right now for example I think uh I mean beta proven success is just going have have been going through the roof in terms of risk reward because in those cases especially if it’s a you know low low diluter for example it’s like you know the sector is going to turn around there’s a 100% chance that we’re going to have a bull market in the Juniors 100% And then you can just back calculate okay what does a typical bull leg even do for juniors well that’s like you know 500% for the median crap you know shito as we like to call it in a bull market I mean 2000 uh year 2000 to 2011 like I have no idea but we’re talking 11year uptrend so I know we’re going to have a bull market a bull leg most people for some reason forget it or I think most people are actually they’re more interested in the when not the you know that it’s going to happen because everybody wants to time everything if they think the bull market is 6 months from now they think they should get out of the sector if it’s one month from now maybe they’re going to start deploying capital in 29 days um but so I think beta is going through the roof in terms of risk reward because in those cases it’s like we we know what traditionally an ounce in the ground trades for at a bull high or the medium cycle High let alone you know 2011 Peaks and we know how cheap they are now and we know about the supply demand picture which probably has never been more favorable add the fact that we have gold at alltime high so I mean I’ve never seen anything like this but I would say you know the W stories are you know at Peak Merit basically and I think diversification is a peak Merit as well because if you know that the next big sector move is going to be up I mean if you inv invest in the sector you know you’re going to catch that ride whereas at the tops then it’s like okay if I’m super diversifi right now I’m going to get an 80% decline in my portfolio especially if I’m holding C uh so in in those cases I tend to go for Alpha plays and the you know unknown stories unloved stories and there you know few and four between but it’s like right now there is no competition it’s like investing as an Insider you get the SE the news reles if they’re good you don’t even have to pay up so what’s the difference I mean you know what I mean if you knew the information before it came out then you didn’t have to pay out so in essence it’s like being an Insider it’s it’s this sector when you think about it is like uh I I don’t know I mean just uh fascinatingly dumb in a and so fascinatingly predictable because like pureon says it’s the easiest sector in the world because and the simple reasoning is it always crashes and then always reads and then always crashes and always read we’ve had the crash what’s the next step we know what the next step is the question is are we going to be be there for it well let’s talk about price because you’ve talked about value and especially on the expiration end um I’m interested to to know how you assign a value to the certain expiration companies because you know you look at there can be a range between a 5 million and a 30 million and really on paper outside of the people I’m not sure always what the difference is so how do you look at what is what is a good value for expiration oh that is absolutely I was going to say impossible to to answer uh I mean I try to I I guess I got that from poker I mean the the easiest thing I think is to just let’s say you have a junior and they have a major interest in and then you can just look at okay what’s the market cap of the major what do you think would move the needle per major what do they need to see their entire team of geologist whatever that’s done the due diligence what kind of potential do they need to see and then you look at the you know market cap of the Junior and it might be know 20 million so I mean if BHP is interested in something for example you know they wouldn’t give two shits about something that at the end of the day could be worth 500 million I mean that that’s like throw away money for them so you know it’s in the you know multiple billions of territory and then you look at the again the market cap of the Junior and you’re like H it’s you know even if you had dilution y y it’s pricing in oh a 1% chance of a BP size price or two or 3% chance so I mean I’m not nobody knows what the exact chance of success is obviously but I I think right now especially uh in the sect right now I mean there’s valuations out there where it’s like either the larger company has to be brain dead basically or the Mr Market is have to be brain dead because they don’t you know it it just doesn’t fit it’s like okay if it’s pricing in let’s say a 3% chance of success of finding something that’s you know worth a Major’s time I I don’t think they would you know spend the energy doing the paperwork if they thought it was a 3% chance I mean you probably can find a 3% chance on any project any soil anom or something like that so I I I try to my version of a no-brainer is that you don’t need Precision because I have no idea how to exactly value uh especially an expiration plate I just think of especially if you have a major for example it’s like okay we know the price is somewhere in the billions don’t know if it’s 1 2 3 4 and it depends on the uh on the company company size and then I just look at price it’s like okay if no chance in hell is priced in by definition how can that how can I be overpaying and then of course there’s a bunch of other stuff like okay maybe the threshold for success is kind of low that even if they hit 30% of Blue Sky uh you know that might be worthwhile for a smaller company where it might be a company maker in itself whereas like I mean I remember when I wrote up Snow Line then we’re talking like the highest threshold for Success it’s like okay my idea was that they’ve better find 8 million ounces in such a remote location where it’s a nogo I mean compared that that if you had that Target in Nevada for example where it’s like oh 300,000 ounces is uh you know the critical threshold for Success maybe then it’s just a matter of okay they’re definitely going to have 300,000 then it’s just a matter how big the upside is so it was kind of I was going to say risky in that sense and of course I’m just I guess it’s like there there’s no simple answer and and I can’t you know give you a formula or anything I just go by the case by casee basis and my my Approach especially with exploration it’s simply that you know aim for the stars and hit the moon and you might win that’s the kind of stuff I like to see and especially if you’re related to price obviously if I mean I remember G Baldi resources resources in like 201617 going up to 500 million market cap pre assays I mean then you kind of have to have something very very significant like you know voices Bay or something but if the same company with the same project was valued at 30 million you can have you you can afford to lose a lot of those bets because in the in in the ones that actually pay off going from 30 to 3 billion that’s that obviously pays for a tremendous amount of losers compared to your win starts at 500 million and goes to 300 so of course you have to diversify all the away all the company risk so it’s like I’m never will in on an expiration story dude so like that that’s a really good answer um and I totally agree with that that looking big like it makes a lot of sense to stick to the the big uh potential um one question is for big potential especially when you look at jurisdictional risk does going big mean you have to be more comfortable with jurisdictional risk and I can say like you use snowline as an example and you know I to me more and more I see jurisdictional risk personally as ubiquitous like it’s just in different forms you know whether it’s South America or Africa like it’s you can you can see the the problems that they’ve had but then conversely in Canada we’ve had problems too and the Yukon itself you know it’s remote like you said the threshold is probably 8 million 10 million ounces to to get that road built to to to get the the permitting and stuff so does size push you towards taking more risk on the jurisdictional end of things yeah I mean I I think you you know summed it up well I mean there there’s always versions of risk I mean if if and it of course depends on I was going to say the asset type or whatever it’s like I mean if we’re talking if you’re just going to speculate on a drill play you know you’re going to get more for your money in case of success in Canada even if if that might have no short of actually becoming something I mean I I remember again going back to Snow Line some said it’s like okay don’t even B it doesn’t matter what Snow Line grills because it’s like whatever you know permitting might be hard or or it’s so remote so it’s like that you know in a sense that’s true but my way of thinking was that’s not what the market is going to focus on when those if those drill Hits come back with 300 met of two three rounds per C that that’s going to create fullo that’s going to you know I mean it became even better than I thought but still I I think it’s again a case by case basis I mean I have no problem again I’m going back to the price if the if it’s a risky jurisdiction okay if that’s priced in already then it’s fine yes it might be high risk but in case of success in case they don’t steal the product obviously you’re going to just make more money because that’s already discounted in the price but I think it’s interesting today for example it seems to be a real fren for qu tier one jurisdictions like I I would guess B based on a rule of law kind of thing the more civilized places um and more civiliz civilized places but like the Western World and a focus on permitting because we’ve seen many deals in Nevada and that’s like famous for being easy to permit and then we we’re seeing you know a lot of uh very Advanced or actually producing assets getting acquired or or miners buying other Miners and stuff like that so I mean again I I I’m probably giving you bad answers because I don’t have any you know specific way to answer it but I I would say I’m okay to take uh you know jurisdiction risk and of course it depends on what what you’re after I mean would I invest in someone who says we’re going to be an organic uh or a producer with Organic growth in Canada it’s like good luck even if you find something that’s like 20 years your mind that you’re supposed to use to build a second mind it would be out before you even get you know the second project up and running then I would go to Africa but but then also you know as as the you I was going to say the Ros baders and rickr say it’s like the the geology is where the geologist it’s like if you’re going to go for big Targets in in the copper space you kind of have to go to South America where the mcar orc in Australia whatever and and at the end of the day the only thing we can control is is pride so I mean I’m invested in South America I’m inv invested in North America I’m invested in Australia I’m invested in Europe I’m invested in Sweden CU I am no idea what’s going to happen with these jurisdictions and some jurisdictions might be risky because they have a big mining sector so the government might get a bit grabby but some other jurisdictions where it’s like you know the mining sector is small compared to the uh to compared to the GDP I mean mining is probably not even on their radar so even even if you know if they if we have problems like we see you know Canada raising taxes the US raising taxes and some some people worry about Chile whatever it’s like some places like they wouldn’t give two shits about U you know their mining sector because it’s like there’s no money even to grab there really yes you’ll get them maybe you know if they increase the capital gains tax or whatever but it’s like I I don’t know it’s like the future is like always sh in your cat I’m trying I’m just trying to have a bit of everything that’s where I go with every I’m own a bunch of different Commodities I you know I’m mean a bunch of jurisdictions but I would say that I’m focusing more and more on the tier one jurisdictions and that’s mostly because that’s what the majors seems to be focusing on that’s where the money appears to be heading and of course just uh you know if you’re in critical medals it’s like okay the the tensions with China is ramping out well I would like to own what the West needs in the West in that case cuz I you you know that’s a free optionality on something going really bad with the supply chains or you know oh they stop exporting whatever mineral so I mean there’s just a a thousand different angles one could U deploy I would say and I I can understand why a lot of people find you know investing in the Juniors scary because it sounds like there’s a million things to you know take into account but but I think that that’s like for I mean to start off with now I’m going off topic again but I would say for most people it’s like you know best bet on the people that have done it before I mean sounds boring and it’s like you know you hear it everybody listens to recruit but how many of us actually listens to recruit I mean that’s what I would do if if I was going to go away for two years and you know thought I I’m going to or set myself up to most likely make money in this sector where without even needing to check the portfolio I would just buy whatever the lines are into whatever Ros be is into y y go away for 2 years it’s like there’s probably 90% chance you’re going to make money I mean most people should learn how to walk before they you know try to learn how to run so it’s like um yeah I mean there’s a lot of details to unpack uh in this of course but I I don’t know sometimes I feel like I’m almost doing a disservice by you know bringing up a million different things and I think that might get you know people put off with the junior space you know what er no I I don’t think so at all because I think I think it is complex and but I think your comment about keeping things simple to start is is very wise um because you you truly can’t run before you walk and I think that’s the problem with with a lot of newbie investors as they get in here they get attracted to something sexy and they just have no clue and uh and so those are pretty Sage wise words and um I think people listening need to take heed of that and and listen to you how about portfol portfolio allocation um are you taking large bets on single companies or are you spreading this out over 20 30 40 different companies how do you allocate uh that depends on the opportunity set in front of me I mean sometimes I’m quite Diversified uh but sometimes if I find something that’s just so compelling it’s I I I become a real pig in those cases because you know I’ve listened to Warren Buffett and Charlie manger and even you know Stanley Dr and Millers like if you see something I mean you’re you’re kind of cuz the way I see it I I know some people have these fixed rules like you know never chase a stock sell on a double uh never put more than whatever 10% of your uh portfolio in juniors and no Junior to be higher than 5% or something I mean I I don’t buy into any of those rules because you’re just limiting yourself because like honestly if you find something like right now there’s a lot of Juniors out there that I think are cheap I simply think some are hundreds of percent if you can measure that cheaper than others so like why would I cap myself and go with you know a 2% position in something that is like oh this might be the best risk reward case I’ve seen in The Last 5 Years so my my short answer is that totally depends on the opportunity set I’m not afraid to sometimes take very concentrated bets but typically it’s like I don’t talk about that too much because you know it’s like people are going to think oh you know for us for sure that one’s going to work out no if I knew it I would be 100% in that one obviously so it’s like uh and and now for example again I I think this is a matter of when from these levels that we’re going to make money so like diversification has probably never made more sense than now and even in the junior space even across mels yes gold is at 2,350 so I love gold because I think gold un are actually the cheapest ones out there I know get some flag for that from like silver uh silver bugs for example but in my opinion I mean if we’re talking more you know safety it’s like yes silver and copper produce whatever they might have higher torque to a bull run in those mels but the gold unior some of them are just obscenely cheap given where gold is now that’s like a speculative discount I’m never seen that before in this space even in 20 2015 you buying projects and Juniors that even if they found something would be worthless at an $1,100 gold price so you I mean inherently you were speculating on the fact that you were buying stuff that was at face value worthless even if they traded a 5 million market cap but the BET was that I think the gold price is going to turn around and in that case when they go from worthless to actually becoming something or become uh worth something that’s going to be a huge revaluation now the gold space you don’t even have to take that risk it it’s just the most remarkabl thing I’ve ever seen but at the same time I can’t you know shut my eyes to the critical medals theme and honestly I I don’t want to feel like I don’t want to be in a position where I I can be exactly wrong if I go all in on gold and something happens that I have no idea what’s going to happen obviously that’s going to be I I’m going to feel feel pretty shitty if you see copper nickel lithium oil whatever whatever go up so um uh I was going to say now I’m I am though somewhat concentrated but that’s because I can’t help myself uh because some some cases are just I I I just think they’re a bit unique and again I I think I’m doing my portfolio disservice sometimes by trying to limit my pH in in in some cases because I mean some jors are probably better risk reward than three Juniors uh with identical cases and you get you know U 3x diversification from a company perspective but I think some jors are just that much better than others even though all of them might be cheap so it’s like I think we I can make money on a lot of Juniors from these levels uh but I do end up focusing more on the ones I I really like and that’s also to keep it interesting for myself because again it’s like Prospect generators bore me to death might the best portfolio in the world might be to have 50 different Prospect uniion but I I just can’t do it it’s like I’d rather go watch pain cry or something it’s like that’s not for me I’d rather have big losses and stay at least entertained you you know what though I think I guess I personally disagree with you in one aspect because I know when I left my career in steel manufacturing and I was out on my own invest private investor no income coming in um and you know I looked at myself and I said you know what I need a set of rules to keep myself focused and disciplined because and that’s still to this day like I depend on taking money out of the market well I’ve got I’ve got my newsletter and stuff and that’s that’s good income but um I I want to get pull money out and so that really helped me but that was introspective that’s like I looked at myself and I said I need these set of rules I need to set limits um to and I think honestly I think that applies to more people I think more people need structure um rather than open-end but I like in talking to you I Can See For You specifically it works I think your experience and how your brain works um it works to be more not loose but uh to be more fluid in how you deploy money so how does introspection come is how do you use introspection to adjust how you you go into the market because it seems like you’re pretty in tune with how you work I mean uh first of all just to touch on what you have said I mean I I think you’re totally right and it’s like I tell people most people shouldn’t even be in this sector stock picking I mean that that’s just because most don’t have you know have it in them really to suffer through the volatility so I think a lot of those let’s say psychological crutches is like you’re using like kind of guard rails to keep you from doing too much of you know too big of mistakes mistakes so I think that’s actually very sound for like 95% of people and that’s where I was going with it’s like you know when you TOS in a million different factors then it becomes more of an art and and not a science but um uh the what question again oh right right right right yes I I mean uh in in PO for example you had to kind of you ran sort of simulations in your own head how you thought the opponent was thinking it’s like you know why did it take him three seconds to bet that much instead of two seconds and then you kind of try to go through his the way he thought about it if he had the hand he’s trying to portray that he has and if it takes me 3 seconds to come to the conclusion that that’s bet that bet is all right and he bet uh in just two seconds then I’m not buying that he actually has the hand he’s trying to portray so I I think what I’m saying is that I I try to check myself because like there’s a I don’t know if it’s a saying but like everybody thinks that their feelings are unique to them but they’re typically you know Universal it’s like you know the fears and all of that and I I kind of know how I you know react if I see medals run ripping I know I I want to go out there and buy beta the crappiest univers there is but it’s like I also know if I fast forward that tape there’s going to be a correction maybe tomorrow and then I know okay they’re going down and then I’m going to feel like a like a dumbass so I always want to try to let’s say test my investing Theory or case to just you know play the tape forward and and go through a bunch of scenarios like okay if this case is let’s say uh the base for this case is to hold it for two years and then I you know think about a bunch of scenarios that could happen in those two years and that’s might be other medals going higher uh uh volatility hitting uh whatever it’s like a bunch of different scenarios that’s like you know trying to stress test my case like okay if if the idea is that okay if I buy here and hold for two years I’m probably going to make money maybe a lot of money but if I can’t translate that in practice then it’s like just a paper case let’s say volatility hits I bought it at whatever it goes down 20 30% and now all of a sudden it’s like oh okay now I don’t feel like owning this anymore and I mean then you kind of have your proof that’s like yeah on paper it made sense or like in your head for a while it made sense but in reality you you might figure out that’s like I’m not going to be able to hold this and that also translates in terms of what cases I’m I like I always want to think that like two years ahead or something so I always want to feel like the better The Best Is Yet To Come so if if I’m if I keep myself greed and I I actually think this is a good idea it’s like and try to be rational about it but it’s like set the price Target or value Target in a spreadsheet or whatever for each company it’s like what do you think this could be worth in 2 three years and then if you know the number might be 10x what you paid for it today and and and let’s say you have an updating spreadsheet whatever you can see oh it’s 700% from the 2-year Target or something like that I mean I think anything to keep you greedy when you should keep you in the game when you should um I I think is is uh usable but but I do again a big thing is just knowing yourself most people have no idea how they work they say something they might ridicule someone for acting in a way and then they you know let’s say do a tweet about the exact same thing they were ridiculing but now it’s you know how it relates to to their portfolio and it’s like I’m I’m not perfect in any way myself but I I I have I I spend a lot of time just just running through cases in my head and my portfolio and what could happen in the markets because now for example everybody’s afraid though what happens if we have this recession that every everybody’s been talking about and that makes me scared CU then I’m thinking yeah we might have a you know Cascade selling which we’ve seen a bunch of times 2020 2008 uh during the flash crashes so that makes me want to sell immediately just reading someone say oh this gen is crashing Bank Run soon you know that makes me immediately want to go risk off but then I just play you know okay you know do I know it’s going to happen no I don’t know it’s going to happen everybody’s been predicting that for a long time what’s the risky you know what if I sell now and I’m wrong then I sold that maybe the low near the lowest price for the next eight four years or something what if it happens well if I’m looking at what happened the last crashes in 2020 it actually uh rebounded within 3 weeks so I could have you know taken a vacation gone through that and you know didn’t have to worry about anything so that just goes I guess to Game Theory it’s like where we are now in this sector like even even if we are not at the bottom we’re close enough and if I think okay if it goes lower the the only change is that I can be by the Juniors even cheaper it’s like that’s I I cannot lose in that scenario but I can screw it up myself from thinking there’s a way to lose you know by trying to time time the market so I just checked myself and find ways to you know okay if if I know I get emotional about someone’s tweet or someone’s predicting this or that I just go try to go back remind myself that’s why I you know keep doing a lot of YouTube videos just hammering home the same point that’s like I know what to do here and if a week passes and it’s like I you know might forget it a bit it’s like I know what to do we’re past the point of selling and uh yeah again big rent but I would say that a lot of it comes back to like you’re being Your Own Worst Enemy in theory you know what to do in theory you know something’s cheap if that stock hasn’t moved up for two months you’re going to stop believing that you were right and then I think you have to again it’s like find almost I was going to say confirmation by it’s like to keep you in the game because all of us I think have bet on stuff that’s like literally we hold out because oh you know it’s cheap it’s cheap 3 4 months later it’s like I’m giving up on this the next day poof bottm is in and and you know you you couldn’t hold out but if you actually I I don’t know went back and and actually got some confirmation bias by just refreshing your case then then I think you could hold up does technical analysis work into your process for evaluating stocks or um I’m not sure if you trade but does technical analysis have anything to do with how you make decisions not really I mean I I do like to look at charts I mean I’m doing anything I can right now to keep me the game and that’s like post a lot of means looking at shorts that kind of confirms my you know confirms my bullish uh bullish thesis but it’s like yes I I do look at it but I don’t remember the last time I actually bought anything based on ta because the way I see it as a value investor I see a lot of uni where you have that you know clear downtrend resistance and that’s obviously just something for Traders what I mean there’s not nothing magical about drawing a line and see price hit that and not being able to push through I mean one could say that when you have those situation I mean that’s like traders in a low liquidity environment subsidizing longer term value investors I mean that that’s the way I look at it so it’s like oh it didn’t break through the trend lines like if you think it’s worth 2 3x more it didn’t break through it goes down you should just buy more whereas of course as a typical Trader you would wait for the breakout but if we’re talking like now in this sector when it’s that cheap there’s no technical indicators that’s going to say by the way in 2 three years you’re going to be up 600% from this level because it’s going to look like the bottom is falling out out I mean you know especially in this sector I’ve been you know yeah following it for a few years I mean nothing is more common than oh excuse me false breakouts or false breakdowns so I I look at TA I I might use it use it for like longer term let’s say you know oh go I mean that Gold’s breaking out of $2,000 or $2,100 I mean obviously there’s nothing magical about that except it’s highly psychological so I use it for maybe stuff like that but hey I was buying gold when it went down from 2000 to800 and there was no ta saying oh it’s going to go up to 2,400 people were talking about $1,400 gold when that happen so my short answer is I I cannot afford really to do that because I need my buy and sell conditions to match at all times otherwise it’s not a strategy and my buy and sell conditions are just buy if it’s cheap buy more if it’s cheaper sell if it’s not cheap so if I start to do like buy when it’s cheap and then start to get ta involved then it’s like well they don’t even match I mean it’s you know it breaks down but now it’s even cheaper so I mean so so your ta is s saying sell but your value investor approach is saying buy so I think that’s a big mistake a lot of people do that they don’t have a full circle or full cycle in terms of how they’re going to make money because if you if you don’t have something that you follow all the time then you don’t even have a strategy then you’re basically now I feel like doing ta ta now I feel like being a value investor and it just becomes a show and I think that’s what most people actually do in reality in practice so you you’ve been on your own as an investor in the the sector for almost 10 years now can you share with us your the biggest lesson or maybe it’s equated to the biggest mistake you’ve made and how that has sort of changed the way you approach the sector oh that’s a good question I could probably think about this one for an hour I was going to say um I I mean I I would say like or I would point out that I’m very bad at trading I mean I’ve I’ve tried it I’m bad at you know technical analysis let’s say and all that I mean the only thing that always saved my bacon or has save my bacon I would say is that I’m very good at buying cheap and I’m very good at getting greedy when it’s warranted meaning that’s like when stuff goes down and people run for the hills I’m thinking I’m looking you know because for some reason it’s like no one has ever looked at a uh you know long-term chart on Junior miners or miners overall I mean you can go back to the baron Gold Mining in Gold Mining index if you would put a monkey in control your portfolio that said if this sector is down 50% you start buying then you buy more for every 10 additional percentage down that monkey would have a Flawless track record because this sector the sector never goes down forever never goes up forever of course a lot of the companies go away forever most of them but it’s just to keep it really really simple I mean that is I I I know with sounds boring because I mean I see you know people on Twitter whatever they have like a thousand different indicators every you know every other podcast is about what the FED is going to do I mean there’s a million things you can look at that could get will get you to want to do something and you and you can ask people about you know the same thing you get a thousand different response and there’s a thousand things to look at so I I would say it’s like just learning to shut of the noise and it’s like uh and use any tool necessary to actually do that has been a big thing and I would say one additional big thing is that yeah I mean it it really took maybe 5 years for me to really appreciate how important sentiment is I started off thinking because you know coming out of University that oh you know I’ve just read the efficient market h hypothesis the and I hear everyone is saying the market is always right the market is always right it’s like what are we doing here stock picking if we even believe that and of course if the market would be always right the worst thing you could do is pay a fair price I mean that’s a pretty good you know uh I was going to say cushion uh but that’s not how it is I mean again now in this market today I just you know appreciate more than ever that in the short to medium term is like literally 95% is sentiment it it is and and then it becomes you’re starting to I don’t know reflect like what are we even doing here I mean is this a joke I mean this is the most silly thing I’ve ever seen that it it’s just a bunch of feelings being thrown around and every the downtrend gets exaggerated because everybody’s betting that the next day is going to be the same as today meaning down and then you start to like I mean hard to take this sector ser seriously after a while because you see that like nothing makes sense on the short you know in the short term so so I think that’s one big thing actually that people need to stop taking the paper losses the volatility that personal it’s like if if I’m my mindset is the market is always wrong because it’s an a symmetrical tradeoff anyway any stock can go down 100% Max but the upside is obviously unlimited and I want to be able to make a strong bet against the market when I think the upside can be absolutely substantial cuz I the cheaper it is obviously the less right I need to be maybe one in 10 success one in 10 successes might pay for the other nine if you’re buying into a low for example so it’s like it’s might sound very counterintuitive and to what people have heard but I I would say it’s like stop stop thinking in days weeks stop taking every everything so seriously think of the market right now is a I don’t know a 5-year-old child just you know pressing buttons on the buy sell whatever it’s like nothing really makes sense right now from a long-term perspective and that’s okay it’s not going to make sense at the highs either so as I would say is like the D the market is a lot dumber than many people believe in the short to medium term and this sector is what kind of I mean you could make money just on the sentiment alone but I would prefer I mean in in my opinion I think you would be better off going into the better quality companies but they’re still going to go down 50 60% when the markets throw a his a fit even though nothing has changed and you can’t take that personal you got to say this is nothing changed I know nothing changed because there was no news release out saying it changed and this is just the market being having a tantrum which we’re we’re seeing right now in terms of people or maybe even a book is there anybody or a book that comes to mind that’s had a huge impact on you and that you think other people can gain value from uh well well I like Bob Mor’s book nobody knows anything the title alone kind of says it and I he has a very you know straightforward approach like Buy Low sell high and of course I mean what and that’s one of the you know how Theory gets translated to practice it everybody says that phrase Buy Low sell High what happens in the market is buy low because it can always go lower and buy High because it can always go higher and you see that all the time but otherwise in terms of books I mean I’ve read you know Howard mors um War Buffett I like Mish PAB I I love to watch a lot of presentations by the value investors just to basically brainwash myself into thinking that price and value are different and the only thing how what how is an opportunity made is when they differ right it’s it’s like if they differ you don’t know when it’s going to close like waren Buffett says it’s call it magic that the price will eventually sometime in the future cross where the intrinsic values and you kind of have to just believe that and brainwash yourself to like everybody says this is the way to go about it again if you’re a value investor price is different to value price changes every day value I mean in some way changes every day but those would be the on so it’s like rickr for example I I watch a lot of his stuff because like he’s the master of Common Sense and it’s like I mean it took a while but when you I mean for myself understand everything he was talking about especially when it comes to mining investing but it’s like it’s so brilliant and it puts it so you know as matter of factly let’s say but a lot of people don’t and you can tell that he’s kind of amused by you know he amuses himself I I I think when he says something it’s like this is how simple it is but we know that when you know Theory meets practice we go off in all kinds of Direction so so those would be it I mean I think your show is great as well and I just love hearing from other you know investors because there’s for sure investors that are you know better at due diligence than me a lot better at like share structure uh some who have a different view whatever it’s like I’m looking at myself I’m collecting tools for my toolbox like patience is a big tool for example but it’s and then some who might you know have an idea okay this is how the share structure is going to affect something I find the share structure too boring but like I know I got stuff to work it so I would just follow especially people that you know are good because there’s obviously a lot of people that uh let’s say I mean uh you you get the sense that they’re good and what they say you know it sounds like it makes sense but at the same time it’s more like you know just typical sayings or whatever it’s like again you can’t really translate it into anything uh pragmatic I was going to say to be used in the market but like that that’s Especial way like I mean Mining stock education like you take people from different backgrounds and you get to hear different cases scenarios like how they think about this and that and sometimes it’s like oh you know I haven’t thought about that so okay now I’m going to take his strong suit or what I’m lacking I’m going to incorporate that and then I’m going to use that in my toolbox how I look at other compan but it’s like a stair step kind of thing a lot of people want to become the best investors ever today you know swallow the whole you know eat an elephant in one day so I I just uh yeah I I I listen to anything I can but I would say I much more focused I I think investing in Psychology is 90% and Mining engineering and geology might be 10% personally and that’s going to piss off a lot of geologists and Mining Engineers but I don’t think you need to be a mining engineer or a geologist and I know what I think you know are mining engineers and geologist that I wouldn’t give money to invest in this sector even though they’re really great at geology and at mining uh engineering but investing in Miners and Mining are two totally different things in my opinion okay how about two picks what are your best ideas right now uh one I really like is Magnum uh that’s a nickel copper PGM play in Sudbury Canada it’s like the most advanced Junior in North America I’m pretty sure so it’s like I mean when I think about the fact that the US for example has one operating nickel mine for a$3 35 trillion economy I mean I just find that absolutely hilarious and of course we know well you know the Indonesia whatever but that’s obviously not going to be around forever then we have the you know major players even ago Eagle investing in a nickel Jor but in in this case for example it’s pretty much the this being a very der risked asset with most of the permits across two uh projects in a tier one jurisdiction because like that’s the hard part of these tier one jurisdictions that’s being allowed to m in some parts of like let’s say Africa or South America it’s like yeah you’re probably going to be allowed to build it or maybe but are you going to get to keep it will it get located will it get nationalized or whatever so so I think they have a almost unique position and I think the sentiment for nickel PGM Juniors is absolutely crap which is great and I think they have one of the I mean you can’t ask almost yeah you probably couldn’t ask for a better team to try and do what they’re trying to do because they’re a lot of the people are involved are from FNX Mining and that actually goes back to what I said earlier that some teams are really good but uh you don’t even have to really pay a premium for them because so few people remember the success they had and in this case it’s like almost literally the same thing they’re trying to do but that success happened like I don’t know 2008 I think somewhere along those lines uh so this is more a bet on management jurisdiction assd yada y basically for me checks what the boxes except not being gold so so this is one of those where it’s like it’s so in my opinion I like it so much that it’s like you know I I I have to you know be okay with it not being gold and then I would say I mean my my the latest one I’m really excited about this first Nordic medals uh they’re in Sweden so I’m biased in that sense especially uh because I find it so cool that it’s in Sweden I mean they have they merged I actually own two companies Goldline resources and borsa minerals both were like I mean borsa was at you know multie lows had a has a project uh with ago ago haven’t hadn’t done much on it for like since 2019 so everyone was just bored to Absolute death they used to have a market cap like 178 million in 2017 it went down to like 24 million in market cap or something like that and then you had Gold Line which owned the 50 km of strike to the north of the deposit that BSA had and to the South so it’s like you could literally not come up with you know more obvious synergies you have a big Sweden’s largest gold deposit in bcela in the middle and then you have the other company that owns the strike to the north and to the South so I own both and I I wrote them up I like hey you know I I would like these to be in the same company obviously because like you’re sitting there with the morgin of safety you’re sitting there with the exploration potential I mean together that’s great you get everything in that case uh so now they finally merged and they brought tashing in and what I like about that is like the the let’s say one big success of Tash is when he was in Discovery metals and they acquired a Cordo project in Mexico a big silver deposit I remember I owned that in 2015 16 or something for 17 million when it was in a company called Le on resources anyway so that was a forgotten in that case very low grade Mexican silver deposit well they acquired that within a few years Discovery Sil traded up to $750 million so I mean then we’re talking you know a lot kind of Forgotten asset that actually was better than it looked than what the market gave credit for so I I I’m hoping it’s a similar situation here where Kash again is like okay here we have a sleeping asset it’s been forgotten by the market in a forgotten sector and in time I mean I I think it could become like 3 to 5 million ounces at least and that’s not even including gold lines 100 kilometers of of strike but again I own a lot of shares of both companies I’m biased magnet a banner sponsors Banner sponsor on my site so it’s like as always never ever put any money in any single stock if you can’t see the case yourself because what’s going to happen if you don’t is that as soon as it go goes down you won’t have any idea what uh what to do and you’re probably going to sell low and when it starts running you’re going to buy high so that’s just uh you know anyone listening like promise to never ever buy something just because I like it uh because I can be wrong as well right well Eric it’s been a pleasure talking to you I think we covered a lot of ground there and I look forward to us talking again me too and again it’s like apologize for the rants but I hope some made sense oh definitely definitely okay until next time [Music]

“This sector [junior mining] when you think about it is fascinatingly dumb in a sense and so fascinatingly predictable. Because like Pierre Lassonde says it is the easiest sector in the world. His simple reasoning is that it always crashes and then always rallies. We’ve had the crash. What is the next step? We know what the next step is. The question is if we are going to be there for it. The next big move in the junior space is obviously up. I know a lot of people are worrying about the crash. But the crash has already happened,” says private investor Erik Wetterling in this MSE episode. Erik, furthermore, shares his current views on the junior mining sector and how he is managing his portfolio.

0:00 Introduction
1:06 Deploying money into the sector
5:20 Strategy for picking the right company
10:34 Choosing where you are on the spectrum of risk
16:21 Valuing exploration companies
21:25 Big targets = Big jurisdictional risk?
29:06 Portfolio Allocation
35:29 Introspection and how it’s applied to the market
46:45 Biggest lessons learned
57:18 Magna Mining
59:44 First Nordic Metals

Erik’s website: https://www.thehedgelesshorseman.com/

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