Don’t Buy a Junior Gold Mining Stock without 3x-10x Upside says Pro Gold Stock Investor David Erfle

Don’t Buy a Junior Gold Mining Stock without 3x-10x Upside says Pro Gold Stock Investor David Erfle

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 you really have to do your due diligence on these companies and the before you get into them because you know we want to get into stocks that have three three to 10 times upside that’s that’s my criteria before I get into something and if I don’t see that 3 to 10 times upside uh then then I’m not going to take the risk thanks for tuning in to msse I’m your host Bill Powers speaking today with David fley from Junior minor junky withth y.com our monthly check-in with Dave Dave welcome back on to the program you’re a fan favorite and as we always do let’s start with your gold price commentary what do you see happening in the gold price currently yeah thanks uh for having me on Bill always uh look forward to our chats here yeah it’s interesting uh what’s happening with with the gold market here you know we had that $450 runup from just under $2,000 to just under 2500 and um now we’re consolidating that move between it’s at a $150 consolidation between basically between 2,300 and uh 2450 um but it but what you what you’re starting to see now is the silver price and the miners are still are showing relative strength to the gold price and they’re leading um so you have a gold price that’s still you know $100 or so below that all-time high at 2450 yet you had um all four of the Gold stock ETFs GDX gdxj s SJ um have uh 52 week high closes last week and the silver price now is knocking on that $30 door again uh $30 has been really stiff resistance for for the past four years and what happened with the with the silver prices it finally broke out above $26 which had been stiff resistance for a couple years and then it ran to 30 too far too fast so then it came down to to back down to test that breakout at $26 and now it’s formed a little handle on a four-year cupet handle uh pattern on the silver price and as you know I’ve been talked about for a long time that the gold price broke out of a 13-year cup and handle pattern similar to the to the cup and handle pattern at 500 so when you know when gold broke out above 500 it doubled in a couple years I expect that to happen with the gold price again here after it broke out above above 2000 well the silver price now uh knocking on that $30 door has a c and handle as well and if we get a breakout above there we could we could see short cover it could take it to $34 quickly and then $40 is is a cup and handle Target for that on that breakout so really interesting What’s Happening Here uh in in in the precious metal sector that’s for sure are you adding to any positions right now um what I had happened to me recently was um I had a take under situation happen with uh one of my uh developer uh ex explorers that I had got into a little bit too early and that was marathon gold it was taken over by uh calbra mining which is uh be has now become a a mid-tier miner so basically what I did was I held on to the stock even though it was it was taken over under my accumulation price well for the second time I accumulated earlier and did really well with the stock with Marathon I I got in and out of it a couple times and it did really well with it well but the third time was not a charm for me I I got into it for me myself and my subscribers a bit too early and then khib BR basically came in and saw an opportunity and bought it out really cheap it was it was essentially a take under for myself and my subscribers but I held on to the stock even though I didn’t want to hold calbre for that long because I don’t like the nicar jurisdictional risk and also the stock now has has far too many shares outstanding it’s got nearly 900 million shares out and a 1.2 billion market cap so in order for it to Triple uh it would be it have to become like a 4 billion market cap and uh would it would have to have to run up to around uh four or five dollars a share I’m not saying that’s not possible but I don’t like the Nicaragua risk there and also it’s a mid-tier now and I I I see more more upside Junior so what I did was it came up to my it it ran up to my uh entry price on the inherited uh uh shares that I got when when when they took over uh Marathon so I sold it and I bought half positions in two development stage uh companies that have been uh outperforming the sector recently and they’ve also had really uh positive uh financing news on on on both on uh in in both of the stocks so um what I like right now is I like these uh late stage developers that have access to Capital and if if they’ve had a strategic partner or Partners come in that’s also positive we’re starting to see companies like this bifurcate from the sector um in other words we’re starting to see these stocks go higher even when the gold price has been consolidating and and going lower um because basically you know not all these juniors are the same all the are created equal you know you could you could you could be a late stage Junior and have multi-millions of ounces in the ground uh in a in a in a top tier jurisdiction but if you don’t have that access to Capital and you don’t have a strategic partner that shows that access to Capital and if if if it looks like your your your mind even though it’s drisk to uh a late stage like a feasibility stage or even at a finance stage but you’re not going to get your permits for for another couple years um your stock has been stagnating and and the market is is not interested in accumulating stocks like this right now until they see that access to Capital especially that that uh that um credible timeline to being fully permitted because that that’s a big one that’s something we didn’t really have to worry about in the last bull market uh nobody talked a lot about permitting uh in that run up in into uh 2011 uh companies were uh you know Majors were just buying uh low t uh you know uh lowgrade bulk tonnage deposits to just to add to their add basically add to their um add add to their ounces their their inventory ounces and uh nobody and nobody was really concentrating much on pting well this is a this is a different market now you know capital is is a lot more expensive and now we uh you know investors want to see Banks want to see that timeline to to uh to to being fully permit and investors want to see that access to Capital and get that mind built so you’re not afraid of taking on the Mind build risk because we have seen a lot of mine failures in the last three years you’re comfortable to take on the mine risk uh build now I am you know it depends on who’s building the mine is is the team that’s building that mine are they serly successful have they managed the capital markets up to this stage properly because a lot of these companies you know they’ve drisk these projects to a certain stage but they’ve had to over dilute their stock to do so so a lot of that upside now is is gone um you know some of these companies a few years ago they were they were drisking projects and they they’d reached the pre-feasibility stage M you know uh or and or or the paa stage or the pref feasibility stage and they had a tight share structure but we had the bare Market continue um in the Juniors sh prices continue to go lower and if if they weren’t good stewards of raising Capital at the right time when their share prices were still pretty attractive then they they were forced to go to market at lower prices and that that raises the delution factor and also some were forced to give two threeyear full warrants which which produces an overhang on the stock also when those warrants uh are become in the money and um that’s what you you really have to do your due diligence on these companies and the before you get into them because you know we want to get into stocks that have three three to 10 times upside that’s that’s my criteria before I get into something and if I don’t see that three to 10 times upside uh then then I’m not going to take the risk well some of these stocks that had that three to 10 times upside a couple years ago don’t have it anymore because of the delution factor that’s what they’re that’s what all these juniors are fighting is is delution you know as as these Capital markets have remained tight for quite a long time I mean um really attractive projects high margin projects um they’re they are getting financed and you know the the good management teams are taking the financings at the right times but um you really got to be careful with which ones you get into Dave I want to put this out particularly for newer mining investors we often say that the bigger companies the royalty companies the royalty companies The Producers move then the mid- tiers then the developers then the Explorers it trickles down in that fashion but when you’re looking to deploy money here you didn’t say to yourself which Junior hasn’t moved yet that I expect to move because of a rising gold price you actually looked for outperformers and then deployed your money into those could you maybe develop that thought process a little more for listeners well I I I assume you’re talking about the ones that I recently got into correct cuz you said they were outperforming the sector so you saw them outperforming the sector and rather than saying I’m going to put money in a dog that just going to rise because the gold price is rising you’re like I’m gonna I’ll just say you’re gonna chase the ones that are already moving right I don’t know like what do you think not chasing that you didn’t have a point you had a point at which you wouldn’t buy it anymore of course but right exactly you bought one that was moving right right so basically here’s what we have we have a bu for k for deated sector you know we’ve got let say you’ve got if you’re looking in the develop developer Explorer sector right you’ve got different you’ve got You’ got different types of stocks in this sector you’ve got so you’ve got a say you’ve you’ve identified a basket of these things that they’re at their late stage um they’ve got multi-million ounces they’ve got blue sky potential but a major hasn’t recognized this and they haven’t taken a strategic position you got to ask yourself why is that so then you take a look at a company that just got that recognition from from from a major they they got that um strategic placement from a major or maybe another company another uh a mid- tier or or what have you and their stock starts to move because the street and the market sees that hey this is a a legitimate takeover Target now because they have that access to Capital they’ve done a good job in in in attracting that major or mid- tier and their share structure is still pretty is still pretty good so I’m going to start getting into this one and the reason why I I got into companies that were like that as opposed to the ones that are still languishing on on the bottom that that are maybe on my watch list and I do expect them to move at some point point because let’s say I looked at another one and it was at the same Finance stage but they’re in a jurisdiction where they’re not going to get that environmental permit for another two or three years even though their project has reached basically the finance stage or the feasibility stage so you know they’re are single asset company even if they’re a multi-asset company the market is going to avoid those so but I’m going to keep them on my watch list because if I get a company that if I have a company that’s taken out you know and I have and I do really well with it um I’m gonna I’m not gonna I’m not going to keep the shares of the mid tier or the major that bought it I’m G to sell it and I’m G to distribute the proceeds into companies on my watch list that hey maybe they’re closer to getting that environmental permit or maybe you know they’ve signed a lot of Casa recently and they’ve some Majors sniffing around and I think a major is going to get into it because if I was a major what they’re doing what they’ve done recently um I I I want a piece of this because they’re getting close to being to being shovel ready and what what they’ve been proving up there at their project is really attractive this is going to be a high margin project it’s got blue sky potential I really like this I’m going to get into it so you really I mean it’s a totally different Market than it was during the last ball Market there’s there’s different things you have to look at a big reason is is that capital is no longer cheap um these Banks aren just financing everything which is which which in actuality is a good thing you know we’ve talked about this before a lot of these Juniors need to go away um a lot of these companies are are de are are attempting to drisk projects that’ll never be a mine and there’s just so many checks that these Banks can write and now they’re they’re better stent Steward of their Capital because capital is not cheap anymore so and when that fin when that Finance window opens it’s it’s opening in in stages now it’s not just opening wide like we saw in 2016 right in the beginning of 2016 all of a sudden the sum or the summer of 2020 I mean all right right where same thing right in in summer of 2020 in in January of 2016 the Capital Market window just opened wide and everything was being financed and you had to have your your watch list ready to get into certain things you didn’t have time to accumulate you had to you had to buy really quickly because that window opened and all of a sudden we saw mean reversion happen in in these stocks quickly well the mean reversion is happening now in the sector again but it’s selective mean reversion which is which is a good thing if you’re you know if if you’re a patient Speculator because you want to this is still giving you the time to accumulate the right stocks you can’t you know this isn’t a move where you could just you know this is isn’t a dart thrower move right where you could just throw a dart at a board of Juniors and it’s they’re all going to go up that’s not happening and it might not happen for until the gold price gets over gets over $2,500 um and even when it does get over $2500 it might not happen to to the extent that it happened in 2016 and 2022 so I just bought a Explorer for the first time in 3 years but if I’m hearing you correctly you’re not going to buy one until it’s over $2,500 gold is that when you start looking at Gold explorers again yeah I’m not gonna buy an early stage Explorer until I see this Capital Market window open wider and start to fund because because most of these early stage explorers are being are are having finances 2 million 3 million these are this is keep the lights on money you know and I if I’m going to get into an early stage Explorer I want to see them cashed up for for an aggressive drill program they found something that’s worth aggressively Drilling and and somebody’s come along and and recognize that and finance them recently we had that happen to a company called Hercules Silber baric did a Strategic investment without even visiting the project we need to see more of that happen you know that’s just a one-off I want to see more strategic placements I want to see more aggressive strategic placements in earlier stage companies before I’m going to take a chance on an early stage company right this is a very highrisk sector as it is and there’s no there’s no need right now to take higher risk in these early stage companies that have yet to find anything or they’re just following up on on a on a couple of hits you when you can go out and get something where they’ve already got the the multi-millions of ounces in the ground they’re proven up the Blue Sky potential they got the they’ve got the the the the strong management team they got the access Capital you just have to just accumulate it and wait so the flip if I could play the other side of that argument then is if you get into an explorer that is let’s say decently capitalized at such a low valuation including 95% lower than it its highs of two years ago and you like the project your upside Dave you know could be 20x or 30 AB vers three or 5x so would you agree with me like the and this is what went into my recent investment the it’s it’s all relative right it’s a risk reward I take more risk but I’m also potentially going to be rewarded more yes the upside is could be huge on something like that if it flies absolutely especially if it’s got a us uh big board listing and there are a couple around like that that Get Ridiculous valuations yeah yeah they’ve got these us Big Board listings they’ve got these fantastic projects yet they’re stuck in this permitting process right that doesn’t look like they’re going to be it’s it’s going to be shovel ready for quite a while but there’s so few us Big Board gold stocks to buy right so there the money the money goes into it no matter what there’s not that many yeah and then that’s that’s why I I you look at it you look at these West African countries right as soon as you say West Africa and you say mining people just go oh that’s just too risky for me right there’s just too much risk in these in these West West African companies countries there’s coups there’s all these things you have to deal with right but in these in a lot of these West African jurisdictions like kotay DUIs or um Bina Faso or uh Namibia you get permits like that at times you have to give away 10% of the project to the government but you’re going to get your permit I mean there’s some of these companies like Asino you know that that that you and I did well in my subscribers and your subscribers did well in they went from Discovery to being shovel ready in like four or five years that’s unheard of anywhere else in North America it’s a tradeoff right and there’s there’s a company like that that that I’m invested in that’s in my top 10 it’s in Cotate Deo they’re called called Montage gold they just got their environmental permit so they’ve they’ve reached uh the finance stage they’ve got major backers they’ve got four strategic Partners they that have access to Capital they got the lundine group backing them they’ve only they’ve got less than 300 million shares out because they were able to get to the state stage so quickly so they didn’t have to over dilute to get there and they’ve they’ve already they they already at the finance stage they’re at the final pering stage and the stock is just continues to go higher it’s been extreme overbought for months and this is this is this is a rarity in this sector where you could get a company that could go from from so quickly from Discovery to shuel ready and not having to overd dilute and you know and and they attract this these these part ners these strategic partners with this access to Capital so you look for companies like this right now they’re out there you just have to you know sharpen your pencil and and do your due diligence or if you don’t have the time you know you subscribe to a newsletter like mine and we do the due diligence for you and um start accumulating shares and wait so what you brought up like on Montage timing is so critical and I’ve talked to a CEO recently of a a junior Explorer and he’s like it’s not just making the discovery it’s the timing of the discovery means everything and yeah we have to factor that in don’t we Dave right yeah and there’s a company that that one of these companies that I recently got into everything timing worked out perfectly for them they put out a feasibility study that was that was a very that that was a a very good feasibility study it it’s it’s it’s it’s a silver junor at that as the as the silver price was breaking above $26 for the first time in two years and at the same time they attracted a two strategic Partners so all that timing has this stock going from a maybe to I got to get into this I got to start accumulating shares what about the gold producers what are you noticing happening in the margins and also is there money flowing into the gold producer stocks absolutely that’s I headed my I talked about this in my article a few weeks ago when Newmont came out with their they Newmont kicked off the q1 earning season right so you basically had the general the big boy kicking off q1 earning season and it was a blowout quarter the stock went up 12 and a half% on the announcement right their margins were were a bit lower or maybe they might have been a bit higher but this was the this was the first this was the the the first report the first uh quarterly report they put out after the new Crest deal had been absorbed so their margins were fantastic right and the stock like I said the stock went up 12 and a half percent that day and numont is also a lot of people don’t know this it’s the only Gold stock on the S&P 500 so this was a day that the S&P 500 was getting shellacked and numont was the standout winner on that day and like I said new’s the general right so so if Newmont is not trending higher then you know your generalist your fund managers you know your big money Players they’re not going to even mess with Juniors until the general starts leading well that quarterly report also forced newmont’s stock above its downtrend line because Newmont the stock had reached $80 in early 22 when gold was trying to break out above 2,000 well it went all the way down to 30 it’s covid low right and then that that report broke broke it out above its downtrend well it came down and tested that downtrend on lower volume and now it’s bouncing from there again so numont needs to get get back above 4546 and start trending higher once they see that fund met and also and newmont’s blow blowout quarter was followed uh the day after by a nio EO who was now the number two gold uh producer they had a blowout quarter as well and they’re they’re all in all in sustaining costs are like $1,150 you know that’s they’re they’re by far the best minor out there so we had the number one and number two gold miners show blowout quarters right if this happens again in Q2 which I expected too be because you know they’re they’re selling they sold their gold in q1 at an average cost of around between 2070 and 2090 right well the gold price right now is is hanging around 2300 and above if it closes gold if if gold closes above that level in Q2 that’s another $200 right in margins that these miners are going to be making while they’re while their their costs have basically remained the same so all ins sustaining costs are averaging around 4 175 right now right but what’s happening is these margins are the the miners are making higher margins and so so they’re so they’re no longer chasing margin compression anymore there’s margin comp there’s there’s no more margin compression in the market right they’re they’re making they’re making gobs of money as as as the gold price is now outpacing inflation so if fund managers we see blowout Q2 blowout q2’s we we will if the gold price is going to remain above $2,300 all of Q2 like I said that’s another $200 higher an average cost higher they can no longer ignore this sector they’re gonna have to get into it and as you could tell that they haven’t got into it just looking at the volume of look at the volumes of GDX gdxj since covid right ever since covid the volumes have been half of what they were preco that tells you that generalists are nowhere near this sector yet despite the fact that the gold price has ran up to nearly $2,500 an ounce and it’s breaking out in all major currencies and all it’s doing right now is consolidating for its next move higher Dave uh when Numan is divesting of some of its smaller or not prioritize gold mines do you keep your eye on some of those projects just to see whose hands they might end up in because you know when a good management team gets a hold of a decent project Rebrand it Market it go out there you know sometimes that’s a good in opportunity absolutely it happened with um with uh K92 right they took that baric mind that baric didn’t want they’re making gobs of money they’re doing really well with that with that mind in Papa New Guinea so yeah you want you want to see who who takes it over and I like what numont strategy is here you know they they took over another company to become not only the largest to remain the largest gold miner but to to to grow being twice as the size of the number two minor which is now igno which overtook overtook baric so that’s what I like to see I like to see what they’re doing now is they’re they’re divesting mines that are that um are smaller and are less profitable and they’re concentrating on higher margins you know they they’ve got loads of C they got over three billion in cash um and uh they pay a decent dividend so they’re doing all the right things and that’s what you want to see you want to see these because well we saw at the at the top of the last gold bu Market you know these minor balance sheets weren’t anywhere near as healthy as they are now and yet investors still aren’t drawn towards them because they’re they’re doing so well on the stock market so even though the gold price has done so well generalists still aren’t drawn to to gold stocks yet so you’re getting positioned ahead of the curve that’s the idea here right I’ve been positioned ahead of the curve for quite a while to where you say one is too soon wrong right sometimes you feel that way exactly yes well Dave remind listeners what they can find at your website and with your subscription service please yeah sure um website is Junior minor junkie witha y.com and basically um I’m going to teach you how to make how how to accumulate the right stocks in this sector it’s kind of an over over the shoulder service where um I’m completely transparent you not only know um what’s in my account what I buy what I sell how much I made how much I lost but I also share my retirement account which is chalk full of miners now um that that’s doing much better than the junior portfolio right now but I don’t expect that to to continue for very much longer as the Juniors have a lot of catching up to do um so basically um I show you what I do um what I invest in what I’ve made money what I’ve lost money in uh that uh I’m invested in about 20 Junior stocks right now and I have a watch list of 20 more and the letter is gives you a Mac macro overview um I also have commentary on on the sector each week and the top stories in the sector all the all the uh press releases of the companies I’m invested in I also link the the press releases of the companies on my watch list it’s quite a lot of information um and it comes out every week and like I said um you know it’s it’s an over the-shoulder service and also I don’t take any money I don’t uh take any money from companies um my My Credo is basically you know I’m not going to invest in any Junior where the management team is not invested in the company along with the shareholders so I you know why would I expect investors to sign up for my service if I’m not doing the same thing so I invest all my all my own money into the companies that I recommend and I do a detailed report before I buy something and let investors know that hey I’m going to be buying this next week and then we all pretty much get into it together at the same time excellent all right Dave we’ll talk to you on the show in about 30 days thanks for coming on today looking forward to it Bill thanks a lot [Music]

Pro gold stock investor David Erfle explains why you should not buy a junior gold mining stock unless it has 3x-10x upside. David also provides commentary on the gold price and shares the rationale behind selling one of his gold stocks in order to purchase two different outperforming junior mining precious metals stocks.

David Erfle is a self-taught mining sector investor. He stumbled upon the mining space in 2003 as he was looking to invest into a growing sector of the market. After researching the gains made from the 2001 bottom in the tiny gold and silver complex, he became fascinated with this niche market. So much so that in 2005 he decided to sell his home and invest the entire proceeds from the sale into junior mining companies. When his account had tripled by September, 2007, he decided to quit his job as the Telecommunications Equipment Buyer at UCLA and make investing in this sector his full-time job. David founded the Junior Miner Junky subscription-based newsletter in April, 2017 and writes a weekly column for precious metals news service Kitco.com, whose website attracts nearly a million visits every day.

0:00 Introduction
0:46 Gold price commentary
2:58 Selling one junior mining stock to buy two others
7:03 Buying a mine build junior mining stock
9:21 Deploying money into an outperforming mining stock
13:54 Why you need your watchlist prepared
15:28 Time to buy gold explorers?
18:11 West African gold mining stocks
20:18 Importance of timing in junior mining speculation
21:14 Gold producers
25:40 Keeping an eye of gold mines Newmont is divesting

David’s website: https://juniorminerjunky.com/

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