Dave Erfle – Gold Stocks, Silver and Silver Stocks Nearing Key Support Levels… Will They Hold?

June 28, 2022

There’s no denying sectors across the board continue to experience a lot of selling pressure with many breaking down. While the gold price is hanging in very well the underlying stocks are following the rest of the market.


In this segment Dave Erfle, Founder of the Junior Miner Junky joins us discuss what he is seeing in the stocks. Dave did a great job of building up cash but still is sitting on the sidelines waiting for a better opportunity. He outlines some catalysts that could lead to higher prices.




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    Jun 28, 2022 28:37 PM

    What is Alexco(AXU) up to? Are they using a Chinese style strategy of locking down cities, reducing production, starving the world of its products and hoping for increased future prices.

      Jun 28, 2022 28:49 PM

      There is something going on with Alexco. Check the site or Ex. Having some trouble with getting the mine going. But might be over-trashed as are others. Good resource. Ex probably knows. Just can’t remember what it is an don’t own it.

        Jun 28, 2022 28:35 PM

        Yeah, Alexco has been a disappointment for well over a year now. I’ve still got a position, and had a good trade earlier in the year buying in February and then trimming some back in March on the rally…. but not nearly enough. I personally added more AXU back to the position in May and June (most recently at $0.39). It closed today at $0.37 so I’m underwater on the trade now for 2022 and got spanked on that position.

        The issue with AXU is that they are waaaay behind schedule on getting their mine ramped up to their projected commercial production (which they were supposed to have achieved over a year ago now…. with many stalls, ramp up issues, issues with not enough stopes feeding the mill, costs coming in higher, and not enough throughput). As a result, they’ve burned through too much capital and haven’t offset it with solid revenues, and then did a capital raise at much lower levels, which just pissed off many of their longer-term supporters. At this point they’ve created a bit of a mess with investor perception and sentiment, and have not executed well at all as a new producer.

        To make matters worse they’ve suspended milling for the rest of the year as they work to get more stopes opened up and achieve their 400 tonnes per day metric when they start production back up again the beginning of next year.

        They did fantastic as an explorer, and then did great as a developer, when they were drilling out repetitive bonanza grade zingers, and expanding a larger and larger high-grade resource, and putting out very attractive economic studies. The issue they had, like so many companies do, is when they moved into graduating as a profitable producer. The issue most companies have is getting the projected revenues coming in fast enough to offset the project debt and cash burn to get into a profitable position. Sadly, most run into challenges, are under-funded, and then can’t get off the mat fast enough to get escape velocity and get into profitable steady-state production.

        We’ve seen this same pattern play out with so many new PM producers…. Harte Gold, Red Eagle, Sage Gold, Northern Vertex [now Elevation Gold], Pure Gold, Gold Mountain, Aurcana, Americas Gold and Silver (with their Relief Canyon mine), and McEwen Mining (on almost every mine they’ve tried to get into production), etc…. In fact, the only companies I remember really executing well as new producers were Atlantic Gold (taken out), Roxgold (taken out), K92, and West African Resources. Then more recently Mako Mining, Minera Alamos, and Thor Explorations have actually done a good job of pushing out of the gate with minimal issues.

        For most new mines going into production, especially new producers with single asset mines, it is a real challenge, and fledgling producers usually struggle for their first year or two, and often are punished by investors that were in them for the pre-production stories. There are eventually points (usually a few years in) where they get their ships turned around and may outperform their peers or larger producers, or become wounded animals that are picked off by the larger producers in a takeover (like Richmond, Klondex, Primero, Crocodile, Guyana Goldfields, Fiore, TMAC, etc…).

        Those can be interesting points to get into position and with Alexco it’s hard to know exactly where they are in the process at present. They seem to be gradually getting things into position for better quarters ahead, with more stopes opened up and supplying ore from both Flame & Moth and Bermingham, but I’m personally concerned that they’ve burned through so much capital once again, that they are going to need to raise again. This makes them ripe for a takeover from a larger and more competent producer that may want to diversify into Canada for silver production, but also could keep them under pressure and in the hurt longer for a few more quarters. I can’t imagine Q2 was very good, but we’ll see those numbers in about a month or so, and it doesn’t sound like they’ll be producing anything in Q3 or Q4 as they work to get more underground stopes opened up (something they should have done BEFORE going into production). If silver does fall down to $18.50-$19 as some are worried about, then it may just kick their legs out from underneath them, so that is a legit concern.

        At this point Alexco is really oversold and has been severely punished by the market, so I’m waiting to see if AXU is going to get their ship turned around while milling is down the 2nd half of this year. It’s possible I may have to take it as a tax loss for 2022 though, because it’s been my worst performing Silver stock out of the 20 I hold in that sector. So far it’s been a big disappointment, and I won’t be adding any more to the position with so many other better choices and positions I hold that I’d feel better adding to instead.

        In a way, I’d like to see a white knight ride in from a larger company to put them out of their misery in a takeover, and then just exit the position on the takeover premium for hopefully a wash. AXU may be a good contrarian play at this point, for someone that isn’t already in position, or possibly waiting until they announce going back into production again at year-end or the beginning of next year. Personally I just can’t see allocating much more of my capital to it, as I’ve got plenty of other silver positions that are performing much better on a relative basis, that don’t have nearly as much capital risk or operational risk at present. Again, the big concern I’ve got is that they are going to pull a Pure Gold and need to finance yet again at even lower prices to get back out of development mode and into production again, and that would really vex current investors and tank the share price even further. Fugly…. really fugly….

          Jun 28, 2022 28:54 PM

          Wow … great bunch of answers. You know…. I am more and more thinking it is intervention ….

            Jun 29, 2022 29:39 AM

            There could definitely be some larger net-worth investors or institutional funds throwing their weight around and/or exiting positions, as there has been a lot of selling pressure. However, in this case, I believe the poor execution of actually going into production over the last year by Alexco (after teasing for years that they’d be going back into production when the time was right) was something that they brought upon themselves.

            Back in 2021 they clearly had not done enough underground development on the front end, did not have enough ore stockpiled to run the mill at the correct throughput, had not opened up enough stopes to keep accessing higher grade ore, and were not properly capitalized to get properly into production. It sounds like if they spend the 2nd half of 2022 getting things sorted, that they’ll be in a better position heading into January of 2023 to launch things correctly this time. Why it’s taken them 2 years to get to this point is as puzzling as it is disappointing. This is an example of where a good project and fantastic reserves can be messed up by a team that didn’t execute well.

    Jun 28, 2022 28:42 PM

    Alexco is not able to develop the mine to produce enough gold to meet minimum daily ore processing requirements. Consequently, the company is bleeding cash. See their NR’s. Not unlike PGM, but not as bad.

      Jun 28, 2022 28:31 PM

      AXU doesn’t want to sell their product near the bottom of its price range. They’re going to stockpile that ore and process it next year when the metal price will be much higher.

        Jun 28, 2022 28:56 PM

        As noted in their recent market update from last week, waiting for higher metals prices isn’t the main reason for stockpiling ore. Their primary issue has been the inability to meet the 400 tpd nameplate throughput needed to operate profitably. Sure, maybe the silver price will bounce higher by the end of the year or beginning of next year and that will definitely help out as well, but the issue is they faceplanted going into production last year and for the first half of this year. Their operations team should have had way more stopes opened up and far more ore stockpiled long before starting up the milling, so they didn’t have enough underground capacity and ore to feed the beast. Now the present issue and going concern is their cash burn without the associated revenues, so the risk of another dilutive financing looms large.

          Jun 28, 2022 28:00 PM

          I went and found that key passage from the recent presser on June 22nd that sums up the pickle AXU is in:


          “While the underground performance improvements are notable, and the demonstrated supply of 150-250 tpd of ore to the mill has been important, it is also apparent from results to date that the rate of improvement in the advance of underground development remains insufficient to achieve the necessary number of production headings to sustain 400 tpd feed to the mill before the end of 2022. To rectify this imbalance, the Company has elected to temporarily suspend milling operations for five to six months and to focus all efforts on advancing underground development. After this development period is complete, the Company anticipates accessing, cross-cutting, and having available a total of approximately 120,000 tonnes of ore inventory grading 1,050 g/t Ag at the Bermingham and Flame & Moth mines by year end 2022. Ore extraction and milling operations will be restarted in January 2023, and with our anticipated production, cash self-sufficiency should be achieved within the first quarter of 2023. The Company estimates that more than four million ounces of silver will be delivered as ore feed to the district mill in 2023.”

            Jun 28, 2022 28:04 PM

            In a nutshell, by January of 2023, Alexco will finally be in the position operationally that they should have been in by the 2nd half of 2021. If they had just done more underground development and stockpiling of ore first, before going into production, then they’d have had a much different launch into production. Now they are a “day late and a dollar short” as the saying goes…

    Jun 28, 2022 28:01 PM

    Maybe silver is just way underpriced and they are starting to dance the First Majestic song. …. Go find the real thing somewhere else until you can’t … float some paper to that.

      Jun 28, 2022 28:08 PM

      Well, First Majestic is a large enough multi-mine producer, with big enough stockpiles, reserves, and production capacity to be able to occasionally hold off selling into lower metals prices and wait for better prices. Unfortunately, as a newer fledgling single asset producer, Alexco does not have that luxury, and they are halting milling for 5-6 months to get things developed to the point they should have been before ever pulling the trigger on the milling. So AXUs stockpiling of ore is less strategic to capture better prices, and more a survival move for a company on financial life support at present that wasn’t able to produce enough throughput thus far to keep their head above water.

        Jun 28, 2022 28:04 PM

        Still sounds like silver isn’t priced right….

          Jun 29, 2022 29:51 AM

          The price of silver at $20, or the range of $22-$28 it was in for about a year, was still much higher historically than it had been for many years stuck in the teens. However, yes it is surprising that with gold breaking out to a new all time high in nominal terms, and with so many other base metals breaking out to new all-time highs (copper, nickel, zinc, iron, palladium, etc…) that silver was unable to get up above it’s all-time high of $49.

          In that sense, silver and platinum have been the disappointing metals that have seemed unable to break out to new highs, and have lagged the rest of the metals sector. Most people following the silver space for some time would have expected it to have at least made a run into the $30’s or $40s, when gold got up above $2000 three different times now, or even to have tested new highs above $50+. For silver to have been capped at $30, and to still be hovering now around $20-$21 is a bit of a bummer all things considered.

            Jun 29, 2022 29:39 AM

            Silver is very disappointing……….. not going to go into my RANT, …… manipulation at it’s best.
            Someday, when nobody is looking silver will catch up……. and blow past $49……..

            Jun 29, 2022 29:11 PM

            OOTB – Agreed that one day Silver will break up through $49. I thought it could be possible later in 2022 or 2023, but at the rate things are going, this seems like a taller order now than it seemed in later 2020 or early 2021.

    Jun 29, 2022 29:25 AM

    Bitcoin pierced below $20K again in the early hours of Wednesday morning down to $19,875.

    When we saw Bitcoin get down to $17,567 on June 18th, it was a short-lived plunge that day and I was considering jumping on for a trade, but it was on a Saturday and I would have been forced to buy actual Bitcoin versus using the trading vehicle GBTC (which is how I’ve traded Bitcoin in the past). I hesitated on opening an account on Coinbase, and then it immediately sprung back up above $20k again up to about $22k to kick off the trading week, so we never saw that weekend carnage reflected in GBTC.

    Now that the crypto king is faltering a bit again, I’m watching to see if we get another slide back to $18K-$19k or lower, during normal trading sessions, and then I may have a go at a speculative position for a trade.

    It’s currently back up to $20,084, but has looked weak for weeks.

      Jun 29, 2022 29:40 AM

      Had the same thought and discussed it with a fellow investor friend. We both agreed when it hit $18,000 that a bounce was coming but we both felt the drop wasn’t over and on the risk/reward ratio wasn’t worth trying to catch the proverbial knife. Found Matthews recent chart and call for below $10,000 interesting if it were to breakdown more. My friend and I felt $10,000 was where the next drop was taking us. Weekends are where some of the bigger moves and especially rally’s happen with it btw…

        Jun 29, 2022 29:57 AM

        Yeah, good thoughts Wolfster, and it would not surprise me if that $19K area falls again, to see even more damage inflicted. $19k was that top from 2017 (when everyone and their grandmothers got involved over Thanksgiving) and then it nosedived down to $3k in just a mere number of months. There is a lot of pricing memory around that level, and it was interesting when it dove down below it briefly to $17.6K on June 18th (over the weekend) and then shot right back up above $20k again.

        Good point about the weekends being quite volatile for Bitcoin and really all cryptos . We saw some of the big moves in Ethereum, Polkadot, Cardano, Solana, Dogecoin, Shiba Inu, etc… over different weekend moves in the past. I guess since they trade 24/7 that many investors are more tuned in over the weekends to cryptos, when other markets are closed, and many of the other trading vehicles for cryptos in the general markets are not available.

        I’d love to see Bitcoin fall under $19k again, and maybe dive below that recent low of $17,567 from 2 weeks back. There is a rumor that Michael Saylor would have a margin call on all his Bitcoin held in Microstrategies at around $16k, so if that triggered, a move down closer to $10k would not be a surprise. That would be something good to pounce on for a speculative trade.

        To be clear, I’m no HODLer, just a swing-trader, but I’ve made money in the crypto space trading GBTC and trading a half-dozen of the crypto miners, and have been waiting for a good capitulation low to give it another go.

        >> Man, have you been watching the all-out carnage in the crypto miners? Truly epic.

        Check out the 1 year charts for Riot, Hut 8, Hive, Argo Blockchain, Bitfarms, etc…. These things are down 70%-90% and investors have been absolutely decimated (even worse than the PM juniors). It has my contrarian alarm going off to look for bottom fishing opportunities, but it would be great to see them thrashed just a little bit further first. The higher energy prices can’t be doing these companies any favors, and it is nice to see reality and gravity setting in as those companies were priced up in the stratosphere for so long in looney-tunes land.

    Jun 29, 2022 29:27 AM

    Trend Strength:
    Market Retracement Likely Complete.
    Oil Breaking North. NatGas?
    SNAFU: PMs Painful.
    Copper Fake?

      Jun 29, 2022 29:38 AM

      Powell Speech – 09:00

    Jun 29, 2022 29:07 AM

    Looks like gold, silver, and the base metals are springing up to start off the day.

      Jun 29, 2022 29:39 AM

      Well, that didn’t last long and things have reversed back down again in the PMs.

        Jun 29, 2022 29:03 AM

        Ongoing capping action. I would like to hear the “official government” explanation. I guess we will hear it from The Bar at Jackson Hole.

    Jun 29, 2022 29:52 AM

    day /Gc…that double red horizontal line represents 2 price levels of previous TD9 breakouts…If thos breakouts up in price fail that is a bad omen…those 2 are 1792 and 1780…This is serious support…It looks to be coming in for a test…glta…….my link button for sharing chart is not working..sorry

      Jun 29, 2022 29:07 AM

      yes Larry, bloom is again off the rose for not just gold sector but most commodities. Gdx at new annual lows and most dregs have already got there yet gold itself remains sticky just above 1800. Hopefully not a hook for past several weeks to keep all gold bugs hanging on till it breaks your support level and then some. Who knows. Just sitting tight.

    Jun 29, 2022 29:07 AM

    In theory if you believe people sometimes paint charts, then it’s possible a bounce should start tomorrow or next week after the 6 month close. I imagine fund managers will be interested in gold shortly and their preferred method of playing that is through stocks.

    Jun 29, 2022 29:37 PM

    Looks like silver will finally test its 200 week MA and probably on the last day of the quarter. SLV came within 2 cents of touching it today…