Oreninc Podcast Series with David Erfle #1

Oreninc Podcast Series with David Erfle, the Junior Miner Junky

Recorded on February 15th, 2018

Participants: David Erfle (Junior Miner Junky), Kai Hoffmann (CEO Oreninc)

Topics: 

• David Erfle introduces himself and the Junior Miner Junky
• Financing environment
• Participation in financings as a US citizen
• ...

Find the transcription below the video. 

 

 

Kai: Hello, everybody, and welcome to a new Oreninc podcast series. I'm joined today by David Erfle, the JuniorMinerJunky. And David, I'm very pleased that you're on the show here and that we're starting a new series here. Welcome and, yeah, welcome to the show.
 
David: Great to be here, Kai. Thanks a lot for having me.
 
Kai: Oh, a pleasure, a pleasure. We've discussed this briefly before starting or putting...pressing the record button here, you're fairly new to the public junior mining scene, although you've been involved in...or you've been involved as an investor for years and years longer than I have. So, why don't you give our readers...oh, readers, subscribers, listeners, a bit of a background? Where do you come from? Where do you hail from?
 
David: Sure. I live in a little town called Sierra Madre, California. It's about 20 miles north of downtown Los Angeles and I've been in the sector for... I've been trading in the sector for a little over 15 years and been doing it professionally for about 10. I started writing a column for Kitco in March of 2016 and it brought me some notoriety. And a lot of readers started sending me emails telling me I should start a subscription-based service and I really didn't wanna do that. I figured it would take away from my research and it would take away from all the work I have to do in the market to figure out what I'm gonna speculate in and...because I just...I basically...I strictly invest in the junior resource market. So, it's a lot of work and it takes a lot of time. But in April of last year, I kinda went into it kicking and screaming, and said, "Okay. I'll do it."
 
Kai: If you're frustrated. Yes' I'll do it.
 
David: Exactly, yes. But I said to myself and I just said, "If I'm gonna do this, I'm gonna do it right." I know the newsletter business very well. I know a few newsletter writers. I subscribed to a few of them when I first started out and I gained a lot of knowledge from a few of them and I got rather upset from a few others. So, I tried to take the best attributes of my favorite newsletters and apply them to my own with a little twist. And my little twist is, I give my subscribers a 24-hour notice before I buy or sell anything and in order to do that, I have limited it to only 200 subscribers.
 
Kai: Okay. That's creating a certain scarcity, that definitely helps.
 
David: Right. And it's created kind of a family atmosphere with the service and it's worked really, really well. We kinda all get in at the same time and we all kinda get out at the same time to simply trading juniors, which as you know can be very difficult to get in at times especially for large purchases. And my purchases are usually in the order between $12,000 and $18,000 per position.
 
Kai: Okay. You're touching on something that we want to talk about in a little more detail, just getting a decent position, so financing in general. And you're based in America...in the States not in Canada, as most other listeners here. So, participating in a private placement is for you more of a hassle than anything else.
 
David: Very much so. Yes.
 
Kai: Tell us a little bit about the process and what makes it worthwhile.
 
David: Well, I was very fortunate... For me to make it worthwhile, I was very fortunate to be able to get into the last Novo Resources private placement and I did very, very well with that. But still the process is taking so long for U.S. citizen was detrimental for me being able to sell a portion of that position at the optimum time because it went up so far so fast. If you're a Canadian citizen, you're able to sell a portion of your position after four months and a day when the restrictions come up. But as a U.S. citizen, I have to wait for the legend removal process to end, which can take an additional four to six weeks.
 
Kai: Okay. That's definitely a disadvantage to some trading theories here...or trading ideas here. Yeah, for sure, especially when you know that the stock has been heavily promoted or being heavily promoted.
 
David: Exactly.
 
Kai: Yeah. What are you looking for when you're participating in the financing?
 
David: Well, I'm looking for a solid management team. You know, I know a lot of people in the industry and I have a lot of ears that I can bend and ask people about if I'm not very familiar with management. And I also look for jurisdiction and how large that land package is in that jurisdiction. Their targets for drilling, I look at that, but land package is essential. I don't wanna invest in anything small.
 
Kai: Okay. So, size does matter.
 
David: It does. Absolutely, it matters. I mean, you just go big or you go home in this sector because basically, what I'm trying to do is I always try to think like a major. I try to be in the shoes of a Goldcorp, or an Agnico, or a Barrick. Like, what would I be looking for if I wanted to acquire this...to acquire a company? And you have to have big...you have to have a large land package with blue sky potential. That's a must.
 
Kai: Yeah. No, district potential is like the buzzword these days.
 
David: Right. Right.
 
Kai: How are you seeing the financing activity in general? Like, our numbers say it's fairly subdued still. We've only seen a few bad deals, but overall, financing activity is pretty much down for the first six weeks.
 
David: Right. Yeah. It has been. It has been, but, you know, the big number that sticks out to me is last year you had nearly half a billion dollars in financings come from strategic private placements for majors, which is huge. That is very good for us.
 
Kai: No doubt. That's very healthy actually and you pointed out in one of your recent newsletters, Mawson Resources, that's seen an investment by Goldcorp. So, there is a lot of activity in that space, but do you see that continuing because Goldcorp already mentioned. And I was kinda surprised then to see the Mawson one as well, maybe it was on the list for a long time, but their CEO said they're done with strategic investments for now. Do you see a general slowdown there or is that just that an empty phrase?
 
David: Yes. I seriously believe that's a empty phrase. I mean, these majors, they have to replace their high-grade ounces, you know. They've got a ton of low-grade ounces on the books that they've had to write down and they need to replace high-grade ounces. So, these strategic financings are gonna continue. And like I said, it's a very healthy for the sector.
 
Kai: Do you see a trigger coming up that might trigger another rally in financings? Because right now, as I said, it's very subdued. It needs a trigger, I think, and I hate bringing it up, but it really seems like blockchain...the pot space and also Bitcoin or just the general cryptocurrencies are taking, obviously, a lot of the limelight here. We have to talk about it. I don't really want to because it's very hyped and it's just...it's tough to talk about it.
 
David: I hear you.
 
Kai: I'm not sure it's jealousy or not, but it's just very frustrating to see what's happening in that space while good money projects are having a hard time, you know, raising a couple million dollars.
 
David: Yeah. I know and these companies have something tangible to back their companies when these blockchain companies don't. I mean, they're just ones and zeros but, anyway, yeah. I mean, it is something we have to talk about because, yeah, it has taken a lot away from the space. But you asked me what a catalyst would be and with these majors, they usually chase price. So, I think a catalyst will be the gold price having a monthly close above $1375 because when that...once that happens, we're technically in a bull market because we're still not technically in a bull market in gold yet. 
 
Kai: That's true. That's very true, actually, and the activity we've seen yesterday. So, we're recording this interview on the 15th of February, but the activity we've seen yesterday on the 14th in the markets. I saw like almost all the watchlist...all the share or companies I have on my watchlist were pretty much dark green yesterday. A lot of them...that the development companies or even the major producers close to 10%.
 
David: Right. Yeah. On a day that focuses mostly on red, which is Valentine's Day, it was nice to see a lot of green, wasn't it?
 
Kai: It was refreshing to be honest. I'm out here in Vancouver, it's just depressing when you're out here by yourself.
 
David: Oh, yeah. I can imagine. All that rain and all that red. 
 
Kai: Exactly. No, that was beautiful. It's freezing cold out here but it's beautiful. But to come back to that is like the trigger, obviously, was inflation numbers from what I've been reading out of the United States there. But, again, today is like, you know, the excitement is gone again. Like, I'm not sure it was just profit taking because usually like you'd expect, okay, inflation is coming up. It should be, you know, maybe a bit of a rally at least till Friday. 
 
David: Well, you think...you figure that a lot of that yesterday was short covering, but the thing to concentrate on which is very encouraging was the volume on the GDX, was nearly 100 million shares traded again. And the volume spike on Friday was really interesting on the GDX because most of it happened in the last five minutes of trade.
 
Kai: And it seemed like from what I've been reading a lot of let's say technical analysts got this right, actually. And I was surprised because for me, that's like reading left overs in a coffee cup like technical analysis especially in the junior mining space. But it was like they saw that hammer on Friday. They said, "Okay. This is gonna be the breakout here." And I have to give a lot of like, respect to those guys because it really seemed like it, "Okay. We're bouncing massively off of that low on Friday."
 
David: Yeah. And it was off critical support which is at 21 level on the GDX. That was huge, especially like I said, when you see a volume spike like that. But the really encouraging thing now, the takeaway from the inflation figures that were released yesterday was the market, it seems to be focusing now on the effect of the interest rates. Meaning, the Fed continues to lag inflation as opposed to concentrating on the rate hikes themselves, which is what they've been doing because if you notice, you know, usually when you have a Fed meeting coming up the sector usually sells into it.
 
Kai: Yeah, usually in the gold space.
 
David: Yeah. Yeah. And then afterward, it goes right back up, but the most interesting thing is, is historically, gold rises with interest rates due to that lag, the fact that the Fed lags inflation on these interest rates. And when did this... When did the gold market bottom? It bottomed a month after the Fed raised rates for the first time in eight years.
 
Kai: No, that's very true and I think that's where we're gonna have a very interesting 2018, especially they're planning still like three interest rate hikes this year. So we should see a very active gold market. David, we've been talking for a while now. I think it was a great introduction to yourself, what you're doing, and I really appreciate you taking the time. We're gonna be talking every...or we're trying to talk every two weeks now. And I'm gonna ask you what's your weather like or what's your weather forecast for the next two weeks for the gold space?
 
David: Oh, for the gold space. I was gonna say if you were gonna ask me about...
 
Kai: Vancouver changes every 10 minutes, but...
 
David: If you're gonna ask about Sierra Madre, I think, you don't wanna here it because it's been the warmest winter on record. I've yet to use my heater.
 
Kai: That's phenomenal.
 
David: But as far as the gold space is concerned, well, you know, in China, it's gold week right now. So, we're not gonna get any help from them for the next week because it's closed until...I think until next Wednesday or Thursday. But you also have option expiration on the 22nd here in February. So, I think you really gotta watch closely that $1350 price. It's holding here today and I think if it holds today, you're gonna see...I think you're probably gonna see some more strength in the gold market here. But I'd really like to see a monthly close of February above $1375. If you look at the gold chart now, it's got a beautiful company and a line. So, that's a very bullish chart pattern during consolidation. But we just...we still have to have the miners start to lead. I mean, they're starting to catch...they started to catch up a little bit yesterday, but like I said, a lot of that was probably short covering. But the miners have been lagging here for over a year. I mean, when we started off in 2017, the gold price was a little less than $1175 and the GDX was trading at the same price that it is now.
 
Kai: No. You're absolutely right and I think that's a great topic we should focus on it a little more in our next podcast edition here. 
 
David: That'd be great. Sure.
 
Kai: And David, how can people get a hold of you? How do they find you?
 
David: Okay. I have a weekly column that comes on on Kitco every Friday and I have a website. Website is www.juniorminerjunky.com and that's junky with a Y.
 
Kai: Perfect. Thank you so much, David. I much appreciate it and I'm looking forward to our regular podcast series here with you.
 
David: Me too, Kai. It was fun. Thanks a lot.