Junior Miner Junky Founder & Editor David Erfle on Gold, Market Apathy and What Comes Next

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today live from the 2022 Beaver Creek Precious Metals Summit, founder and editor of Junior Miner Junky, Mr. David Erfle. Sir.

David Erfle: That's me.

Gerardo Del Real: Shake hands again?

David Erfle: Good to see you buddy.

Gerardo Del Real: It's good to do it. Good to see you in person. How have you been?

David Erfle: Very good. I mean, life is good. Extremely challenging in the resource sector, especially gold and silver sector, but I like challenges so bring it on.

Gerardo Del Real: Let's get into all of that. I want to talk about the different types of companies here and the difference in demeanor and posture. We talked a bit off air on the way here, about how companies with strong treasuries are just beaming with smiles, chest out, walking very upright, and the companies with balance sheets are looking around with their head down, hoping nobody notices them right? And so I want to get into that. But first and foremost, I want you to explain a bit about your background because we have somewhat similar backgrounds in the sense that we're self-taught, dabbled in real estate a little bit. We did it right around the same time period. So I'd love for you to let people know what you do, where they can find you, and how you got started in this crazy space called the junior resource world.

David Erfle: Sure. Well, I got started in 2003, 20 years ago now. I had lost a lot of money in the dot com bust. I really didn't know what I was doing.

Gerardo Del Real: Stocks go down.

David Erfle: Stocks go down. After they go up for so long and get to ridiculous valuations, they come down, and I was looking around for a sector that was going up while everything else was going down. And I came upon precious metals, and I got hooked. Hooked so much that in 2005, the real estate market was starting to peak. I was restoring an old house in Pasadena and I decided to sell the house and put all the proceeds into junior miners. I do not recommend you do this at home, but it worked out really well for me and I did really well. Quit my job, traveled the world, and here I am writing a newsletter and still loving the sector even though it's getting more and more challenging by the year.

Gerardo Del Real: Tell me about the newsletter. I want to give you an opportunity to let people know where they can find your newsletter. I'm a fan of your work. I think your takes on Kitco are very well balanced. I think they're objective. There's a lot of people in our space that only think one way. It could be raining and they can tell you that the sun is out, right? I don't see that in you when I read your pieces and I read your editorials. They're really well balanced and that's always appreciated because it's not always that way in this space. Where can people find you?

David Erfle: Yeah, sure. I have a weekly column in Kitco. It comes out every Friday and JuniorMinerJunky.com is my website, junky with a Y. And I've been writing the newsletter since April of 2017 and that's where you can find me.

Gerardo Del Real: Good stuff. Let's talk about the different types of companies and demeanors that we're seeing here at the Precious Metals Summit. What do you see and what do you notice and what stands out to you?

David Erfle: Well, like you said in the opening monologue here, the companies with cash, they're walking around with their chest out and they're saying, hey, we have fully funded drill programs. We're fully funded to a PEA to a pre-feas or to a feasibility study and we have a high grade project in a top tier jurisdiction. I mean, you see a lot of value in a lot of these companies because, I mean, let's face it, the gold price has basically been trading between $1,700 and $2,000 an ounce for two years while everything else has gone up. The cost to get it out of the ground, the cost to mine it, the cost to build the projects.

Gerardo Del Real: The ability to build the projects.

David Erfle: It's the ability to build the projects. And the companies that have withstood this test are the companies that are helmed by management teams that have been through all this before.

Gerardo Del Real: Right. Funny how that works.

David Erfle: Right, exactly. They raised money when their share price popped 10 times back in 2020 into 2021 or whatever. They raised money at the right time, with limited dilution. They believe in their projects. They have their skin in the game and a lot of times, in a lot of instances, you can pick up shares right now in these companies where these serially successful people have paid more than what the share price is trading at right now. And they're still excited about the project and they're still buying more shares in the open market. So this is a time to focus on these companies that are serially successful. They've done this before and they have these fantastic projects in top tier jurisdictions.

Gerardo Del Real: You have your newsletter obviously. I don't want to want you to give away the ranch, but do you have a name or two that you want to share?

David Erfle: Absolutely. I just had a great meeting with Orezone. They just poured first gold at Bomboré.

Gerardo Del Real: Congrats to them.

David Erfle: Just an amazing accomplishment. They brought this mine on time, under budget, during COVID, during inflation that is rising exponentially in everything and they've got this higher grade pit right next to the mine that they can add more ounces to. And it's actually one of the only stock charts in the sector that it's going up from the lower left to the upper right. A lot of these other stocks and a lot of these other companies, at no fault of their own, even the companies that are doing all the right things, their stocks look like they're taken a lot of fishing lines down.

Gerardo Del Real: The better managed producers have very healthy balance sheets. There's a lot of very good deposits and explorers and development companies that have anorexic balance sheets. And we talked about predator and prey and how a lot of those companies are trying not to be seen. Do you see that dynamic leading to more M&A, hostile M&A, or do you think it's just keep yawning at gold for another six months and see what happens then?

David Erfle: Well, let's face it, these guys are running out of ore. I mean, they need to replace ounces and it's a lot cheaper to do it on Bay Street than it is to try to do it themselves. So absolutely, I see more M&A. I see at least one major deal coming out of these Colorado conferences, after Denver Gold Forum. I see at least one more and that usually feeds upon itself, but consolidation needs to happen.

And let's face it. A lot of these companies need to go away. We said this in late 2015. We were hoping that the one positive thing that would come out of that incredible bear market with that saw the GDX go down 85% in four years, that a lot of these lifestyle companies would go away, but it didn't happen. I mean, the save came in January of 2016 and all of a sudden everybody was getting financing. So I would really like to see that. We've seen a couple of bankruptcies here recently. I see a couple more that are on the edge that'll probably go by the wayside, but let's face it there's just at least 85 to 90% of these juniors are just not worth investing in. It's our job to find the best ones in that 10%.

Gerardo Del Real: Absolutely.

David Erfle: It makes it more difficult.

Gerardo Del Real: Absolutely. Are there other commodities that you dabble in?

David Erfle: I do like copper, but it's mostly gold and silver. That's where I see the opportunity here because they've just been crushed for the reasons I mentioned. When you have a gold price going sideways for two years and everything going up exponentially, it's going to kill these companies and there's just so much opportunity. You can't use margin and you have to have a lot of patience and you have to buy the right companies.

Gerardo Del Real: It's really good advice. I've shared often that initially when I got started in the business, I was borrowing from credit cards and trading options on margin.

David Erfle: Oh, wow.

Gerardo Del Real: It coincided with the rare earth mania, where companies that were 24 cents that I had invested in, turned into $5 companies that were either on the NYSE or the Nasdaq, which I could then go ahead and take a leveraged option on margin. And much like you, initially, I did very well. And you know how that goes. You start thinking that you're a little bit smart.

David Erfle: You feel invincible.

Gerardo Del Real: And so the market has a way of always humbling those that get ahead of themselves and it was a round trip on my end.

David Erfle: My favorite Rick Rule-ism is, "Confuse a bull market with brains." I did the same thing.

Gerardo Del Real: Yes, sir.

David Erfle: When I first got into the sector, I thought I was invincible, but it was just a bull market. It was one of those dart-throwing bull markets. You just throw a dart and hit a junior, you invest in it. And we haven't had one of those in quite a while.

Gerardo Del Real: It's been a bit. Any parting words of advice for maybe new speculators that maybe have some cash to allocate, are considering jumping into the space? Where to get some information? Where to get some resources?

David Erfle: Sure. This is a great time to do due diligence. I mean, you have all the time in the world and so do these companies. They will talk to you. You call them up. They will go out of their way to talk to you. And if they don't...

Gerardo Del Real: Everybody's pretty right now.

David Erfle: Exactly. And if they don't go out of their way to talk to you, forget about them.

Gerardo Del Real: Yeah.

David Erfle: You've got a plethora of choices, but you really have to sharpen your pencil and make sure you do all the proper due diligence. And if you don't know how to do that proper due diligence, that's when you can sign up for a newsletter like mine or yours or others in the sector that do good work.

Gerardo Del Real: There's only a handful of us, by the way, that you should sign up to. Don’t get carried away, David.

David Erfle: Exactly.

Gerardo Del Real: No, I think that's great advice. Give us the website again.

David Erfle: Sure. It's www.juniorminerjunky.com.

Gerardo Del Real: David, absolute pleasure, sir.

David Erfle: Always wonderful to talk to you, Gerardo.