Dave Erfle – The Present Divergence Between Senior And Junior Precious Metals Mining Stocks
Dave Erfle, Founder of The Junior Miner Junky, joins us to review the continued divergence in the performance of the larger senior precious metals miners from the junior mining stocks, and how he is navigating these markets. We note how the mining stocks have positively diverged somewhat from the metals over the last few weeks, and that compared to the rough Q1 that most general US equities markets had that gold being up 6% in the first quarter, and GDX and GDXJ making new 52 weeks highs were still constructive for the longer term trend in motion.
GDX and GDXJ appear to be bullishly consolidating in symmetrical triangle patterns working off overbought conditions, and that this recent corrective move is healthy for the longer term for the PM sector. However, the point was raised that the junior mining stocks have still vastly underperformed the moves in the underlying metals and when compared to the senior producers, and this has many investors frustrated at their lagging performance. We review that generalist capital flows usually hit the producers and royalty companies first, before eventually working down the risk curve into the junior developers and explorers, but debate whether the trends in passive ETF investing and many US platforms that can’t access OTC tickers may keep more funds into those companies held by ETFs or with big board US exchange listings.
Dave is still very constructive on the whole sector, including the junior mining stocks, and notes that we had the double whammy last year of sideways to down consolidating metals prices, with rising input costs due to inflation, keeping a lid on the producing companies, and that this affected the interest from generalist investors in the sector. He feels that now with margins expanding again, and when we see another uptick in mergers and acquisitions that these may be data points that get more generalists rotating over to the gold and silver stocks once again. We wrap up the importance of being a stock picker in these current conditions, and Dave shares the kinds of resource-stage companies that have his interest.