General Precious Metals
RSD at Beaver Creek Interview Series: Junior Miner Junky David Erfle
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. I'm here with a true bear market success story, the Junior Miner Junky, Mr. David Erfle. David, how the heck are you?
David Erfle: Fantastic. Always great to talk to you. I love this conference. It's fantastic.
Gerardo Del Real: It's a gorgeous backdrop. We're here at the 2019 Beaver Creek Precious Metals Summit. I joke that you are a true bear market success story, but we were talking off camera yesterday and congratulations, you just bought a new place with some junior miner money.
David Erfle: Yes, yes. All it takes is a couple in this sector. If you get lucky with a couple and ride them to where they're going to go and get out at the right time, you can do really well.
Gerardo Del Real: Let's talk about your background a little bit. You have a very similar background as myself. Come from a little bit of a real estate background, somewhat self-taught, met some good people, were able to grow your business. Can you tell the people that aren't familiar with you a little bit about yourself?
David Erfle: Sure, yeah. Well, I didn't have a real estate background. But I worked at UCLA and I purchased all the phones and phone equipment for the university and maintained a storage room where all the equipment was kept and had a lot of time on my hands because I came in and kind of revamped the system to where I only had to work a couple hours a day. So I taught myself junior mining investing and sold my house in 2005.
Gerardo Del Real: That's the background.
David Erfle: I don't recommend this at home. Don't recommend this at home.
Gerardo Del Real: I did the same thing, and that's why I said we have a very similar real estate background. That's the connection.
David Erfle: Okay, there it is. So I put all the money from my house sale into juniors – like I said, I don't recommend this at home – and did really well. I've been doing this professionally ever since.
Gerardo Del Real: Right. So my story is very, very similar. It's quite fascinating. Talk to me a little bit about your approach and then let's talk gold and commodities and where you think it's going.
But let's start with a little bit about your approach, your due diligence process. What does that look like? What should the average speculator, maybe that's coming into the sector that's new and that's looking to duplicate the success that you've had, what should they be looking at when they're considering a buy on a company?
David Erfle: Well, as far as an early-stage company, it's definitely management. It's definitely share structure. It's definitely the jurisdiction they're in. You want to make sure they have a big land package. It's got some blue sky, they got good targets, they got access to capital.
That's a big one because if they don't have access to capital, they're going to be wallowing around like a lot of these guys are right now. Right now it's a bull market for some, but it's still a bear market for many.
Gerardo Del Real: Absolutely, I couldn't agree more. Let's talk about that new bull market. Gold just dipped below $1,500. I think both you and I agree it got a little bit ahead of itself.
Do you think this decline continues? And what do you think are the support levels?
David Erfle: I do, I do. I think we chop into the Fed next Thursday above $1,480 and all depending on how the market reacts to what he has to say. Personally, I'd still like to see that $1,455 area tested, because this thing got way overheated and the higher it goes without getting a correction, the stronger the correction is.
We had that GDX on a monthly basis at an RSI, a relative strength index, of 70. The last time it was there it was 2008, which makes sense that it got overheated because it broke out of a huge 6-year base. So there was a lot of power there.
Gerardo Del Real: It was boring for 6 years. It didn't have the energy to break out.
David Erfle: Exactly. Plus, the retail that's in this sector, they're coming into ETFs. They're coming into GLD.
Gerardo Del Real: Absolutely.
David Erfle: We're not seeing the retail dollar coming in here yet. I think once this pullback ends, then you're going to see the juniors start to perform a little better after this correction ends.
Gerardo Del Real: Excellent. So near term we both expect a correction. Let's talk mid to long term. We saw the ECB today, we knew that was coming. We've seen the BOJ, that's going to continue until they can't continue. What does it look like three years from now?
David Erfle: Oh geez, three years from now. My crystal ball's broken, but I could try to hazard a guess here. I see the gold price over $2,000 by then. And I see the silver price, it's going to be at least $35 an ounce, I would expect.
But what's the world going to look like at that time when we have those prices?
Gerardo Del Real: It comes with a consequence. Right?
David Erfle: Exactly. I think the safe-haven plays going forward during the next few years are going to be blue chip stocks paying a healthy dividend, the US Dollar and gold.
Gerardo Del Real: Agreed.
David Erfle: All three going up together being safe havens.
Gerardo Del Real: Great. Let's talk a couple of names you might recommend or names that you like.
David Erfle: Okay. As far as developers are concerned, developer explorers.
Gerardo Del Real: Let's start there.
David Erfle: Okay. I really like Orezone (TSX-V: ORE). I think it's still very undervalued here because of where it's at. They have a project in the finance stage in Burkina Faso.
Gerardo Del Real: Sure.
David Erfle: They've discovered some high-grade areas that they're drilling out right now. They have about $22 million cash. They have a lot of ounces that are economic at $1,300. It looks really good as a possible takeover within the next 12 months.
Gerardo Del Real: Are they economic at $1,200?
David Erfle: No, they're not economic $1,200.
Gerardo Del Real: So you would mitigate that risk by watching that level?
David Erfle: Absolutely. Watching $1,400. As far as I'm concerned, as long as gold holds $1,400, I'm happy. The last thing I want to see is these wild predictions of gold going to $5,000 or $10,000. I'd rather see a steady climb like we saw during the last bull from 2001 to 2011, climbing from that $1,400 base as opposed to resistance.
Gerardo Del Real: Do you think that's the future though? Because I see a future where $200 gold price moves are going to be the norm.
David Erfle: Yeah, you're probably right. But I don't think that future is near term. I think it's longer term.
Gerardo Del Real: Agreed, agreed. Anything else you like out there?
David Erfle: Early stage? I just purchased something recently and I just had a meeting with them today. What peaked my interest was they had a very attractive finance. They're called Radisson Mining (TSX-V: RDS) and they're in the Cadillac Break area of Quebec, which is my favorite jurisdiction. Their project, the O'Brien mine, at one point in the late '50s it was the highest grade gold mine in Quebec. They stopped mining because they mined a little too close to the shaft and it caved and that was that. But they were mining 15 grams per tonne back then.
Gerardo Del Real: That'll get it done today.
David Erfle: Exactly. They've got a small resource on it, about 300,000 ounces at over 7 grams per tonne. They just got a very attractive finance for a micro cap. They raised $3 million in hard dollars with only a half warrant and they got another $3 million in flow-through. They've got a lot of shares out, 172 million. I'm not happy about that. But they're going to be drilling 20,000 meters at only 550 meters deep.
They've got LaRonde right next door, which is a mile. It's mined down to a mile, and they've got the Iamgold mine right on the other side. They're right in the middle of that. So they're in a good district. You can see a gas station from the project. It's only $120 a meter to drill. And if they're using hard dollars to drill they get 33% back in the mail from the government. I really like this project. I like the company and we'll see what happens.
The market cap's about $32 million right now and they have the 20,000-meter drill program. They're going to have drill results coming out in October and steady every three weeks into March. Mining permit in Q1 of 2020. I am a shareholder and I cover it in my subscription-based newsletter so we'll see what happens.
Gerardo Del Real: Excellent. Let's talk about that subscription-based newsletter for people that want to follow your work, David. How can they?
David Erfle: JuniorMinorJunky.com and I also write a weekly column for Kitco. It comes out on Fridays. The subscription-based service is close to being filled. I think I have about 9 or 10 spaces left. I cap it at 250 because I give my subscribers a 24-hour notice before I buy something, I write up a report on it, send it out. So we all kind of try to buy it at the same time.
Gerardo Del Real: Got it, got it. All that with shades on guys. Thanks a lot, David. Appreciate it.
David Erfle: Thank you, buddy.
Gerardo Del Real: All right