Erik Wetterling – The Importance Of Share Structure When Investing In Junior Mining Stocks

Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us to reflect on the importance of share structure when investing in junior gold and silver mining stocks.   He makes the point that has to roll the dice more on assay risk with companies with tight share structures, as they could move up substantially on a good drill results, whereas one can wait until after assays are released on companies with more bloated share structures, where the good news may not move the needle quite so much.  


Erik mentioned that with larger share structure in Gold79 Mines (AUU) (AUSVF) that he was happy positioning after the positive drill results, as the shares didn’t move much and yet the risk/reward set up on the exploration improved substantially.   In contrast, Erik mentioned he is positioned in Irving Resources (IRV) (IRVRF) ahead or more assays being released because not only does he like the prospectivity of hitting, but they have a tighter share structure, and thus could move up more on positive results.*


We wrap up by discussing how he views the importance of the amount of outstanding warrants in a junior mining stock, what their strike price is, and if this factors into where pricing could get stalled out even on good news.  Ultimately he feels like this just frustrates shorter-duration traders, but actually subsidizes  longer-term value investors with more time to accumulate an under-valued fundamental picture unfolding over time.


*In full disclosure, the companies mentioned by Erik in this interview, are positions held in his personal portfolio, and are also site sponsors of The Hedgeless Horseman website.




Click here to visit Erik’s site – The Hedgeless Horseman

    Apr 06, 2023 06:01 PM

    Copium, Hopium and Common Sensium

    Erik Wetterling – The Hedgeless Horseman – April 05, 2023 #VIDEO

    Apr 06, 2023 06:34 PM

    Tomorrow is a holiday for the markets, but The Fed will be releasing its non-farm payroll report. The trouble with statistics is that discrimination and truth are left out. Statistics are manipulated up and down depending on which way the wind blows and the wind hasn’t been blowing in the direction of The U.S. dollar lately but that could change tomorrow, however; Gold will figure it out. DT😉

    Apr 07, 2023 07:52 AM

    Good Friday to ALL…………
    Hoping that you all find the truth and are blessed by it.

    Apr 07, 2023 07:22 AM

    Success in life is made by the amount of hard work put into it. Happy Easter! DT

      Apr 07, 2023 07:53 AM

      “He has achieved success who has lived well, laughed often, and loved much;
      Who has enjoyed the trust of pure women, the respect of intelligent men and the love of little children;
      Who has filled his niche and accomplished his task;
      Who has never lacked appreciation of Earth’s beauty or failed to express it;
      Who has left the world better than he found it,
      Whether an improved poppy, a perfect poem, or a rescued soul;
      Who has always looked for the best in others and given them the best he had;
      Whose life was an inspiration;
      Whose memory a benediction.”

      ― Bessie Anderson Stanley,

    Apr 07, 2023 07:46 AM

    Matthew 7:14
    “Because strait is the gate, and narrow is the way, which leadeth unto life, and few there be that find it.”
    Happy Resurrection Day…. in advance….

    Apr 07, 2023 07:50 AM

    U.S. Job Growth Solid In March; Wage Inflation Cooling

    Lucia Mutikani – Reuters – Apr 07, 2023

    “U.S employers maintained a strong pace of hiring in March, pushing the unemployment rate down back to 3.5%, signs of labor market resilience that keep the Federal Reserve on track to raise interest rates one more time next month.”

    “The Labor Department’s closely watched employment report on Friday showed annual wage gains slowing, but remaining too high to be consistent with the U.S. central bank’s 2% inflation target. As with most recent economic data, it was too early for financial market stress, triggered by the failure of two regional banks in March, to show up in the employment report.”

      Apr 07, 2023 07:05 AM

      Dollar Firms As US jobs Report Backs Fed hike In May

      Gertrude Chavez-Dreyfuss – Reuters – Apr 07, 2023

      “The dollar strengthened on Friday after data showed an increase in jobs in the world’s largest economy last month, suggesting that the Federal Reserve may have to raise interest rates next month.”

      “Prior to the jobs report, the rate futures market had been betting that the Fed would pause at the May policy meeting. The market has now priced in a 70% chance the Fed will raise interest rates by 25 basis points (bps), though multiple rate cuts have also been factored in by the end of the year.”

      “Friday’s data showed U.S. nonfarm payrolls increased 236,000 in March, in line with forecasts of 239,000. Data for February was revised higher to show 326,000 jobs were added instead of 311,000 as previously reported.”

        Apr 07, 2023 07:08 AM

        “Federal Reserve officials are likely to continue delivering their higher-for-longer message in the run-up to the May policy meeting, supporting expectations for a final rate hike and putting a floor under the dollar,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

        “That said, recent data would suggest that the economic risk backdrop is turning more negative – if inflation and retail sales numbers disappoint in coming weeks, all bets are off,” he added.

    Apr 07, 2023 07:01 AM

    Let me offer four principles;
    Fear of a false factor is always bullish.
    Big fear of a little negative is always bullish.
    Hope for a false factor is always bearish.
    And Big expectations of a little goodie is bearish.
    It’s surprise that moves markets.
    -Ken Fisher

    Apr 07, 2023 07:23 AM

    I have been noticing quite a number of precious metal stocks moving up a lot lately, Kuya Silver has probably gotten a little ahead of itself after Friday’s close. Irving Resources has also been running lately. Just to name a few, this is when the easy money is made. I wanted to buy some Kuya but now I will wait for a pullback. These are happy trading days, when you wake up in the morning and look forward to the excitement. DT

      Apr 07, 2023 07:36 AM

      +1 Agreed DT. I was just ranting about some of these juicy outsized moves higher lately on the Calibre Mining thread/blog, and pointing out the easiest money is typically made buying into the F.U.D. (Fear, Uncertainty, and Doubt), especially when the retail herds over-react to the downside.

      Then when things turn up, they get re-rated back higher again sharply and those are the easiest gains, for those with the contrarian mindset to buy when there is blood in the streets. People love to think they are contrarians, but most people are just momentum traders — a point that Erik Wetterling has made in multiple interviews and I agree with that whole-heartedly.

      When I was posting about buying into over 2 dozen PM stocks back last July and September, and deploying my remaining dry powder, there were a few others on here buying into the technically oversold situation and silly valuations we were seeing across the sector,…. but there not many. It always feels lonely buying into weakness and oversold markets…. especially when most are suggesting caution or patience.

      Most people we saw posting here at the KER or or Seeking Alpha, or on Twitter or on YouTube videos or on other resource chat boards I follow, or the guests that we spoke to when bringing them on the show were mostly cowering in cash at exactly the wrong time. (then were even some clowns vocally posting on here repeatedly advising and warning everyone to sell everything at those low points to go into cash… man, what terrible advice that was for anyone that listed to that nonsense).

      I don’t remember a time ever, like late last summer and early fall, when there were more people bragging on the huge amounts of cash they were sitting on, but that was clearly the wrong move…. not just for the precious metals, but even for the general markets, or cryptos, etc…. Almost everything has been on a rip higher since Sept/Oct, because that is when the dollar started rolling over faster in harmony with interest rates starting to pull back.

      People that were beating on their chests about their cash balances, were just proving once again, that they couldn’t spot good fundamental valuations or technically oversold situations. I made it a little trigger for myself, that every time people said they were 40% cash or 60% cash or 80% cash, that I would go buy something with my cash, because normally the herd is wrong… especially when they are scared. Ironically, those same people (most of them really sharp guys) should have been beating their chests about what they were buying with their cash, but alas, there are always only a few buying when the poop hits the fan. This is why most fail at investing… they refuse to buy low.

      I remember it being just as lonely to be buying in Mar/Apr of 2020 during the pandemic crash, and looking for any spare money I could throw at the markets, when most were back to cowering in cash and selling lows, instead of deploying capital to pick up the good bargains. When I mentioned to people I was buying everything I could PM stocks, Lithium stocks, Uranium stocks, Copper stocks, PGM/Nickel stocks, Oil stocks…. Most people were too worried that that world was ending. I must have asked a dozen people…. “Yeah, but what if this is all a huge over-reaction (which it was) and the world doesn’t end (which it didn’t)?”

      Their fear kept them from taking the right logical action. I even used the 2008-2009 Great Financial Crisis as a prior example where people thought the financial world was ending…. but it clearly didn’t… and that was a great time to have been deploying capital. Of course we got the trite mantra back “Yeah… but this time is different.” (nope, it’s never different, just a different excuse to spook the markets, and savvy investors buy most heavily into the most hated markets. Period.

      Even off-mic with some of the folks we interview on the show, when the sentiment was so rough late last summer and early fall, we’d chat for a bit, and when people asked me what I was doing, I mentioned deploying my dry powder, of course, into the crazy valuations we were seeing.

      Several people said things like “just be careful” or “you’re braver than I am” or “Yeah, good luck, but I’m going to wait and see how things play out…” You could hear the hesitation and concern in their voices, because the only outcome they could see was for things to keep heading lower, and the concept of “buying low” was definitely not something on their minds. There were a few exceptions that did buy into the lows, like Dave Erfle, but not many of them.

      We had technicians that warned, “Oh, I wouldn’t be buying here because these stocks are going to retrace down much lower….” or “these things could go all the way back to their 2015 lows…”
      (well lower never came and they missed buying low once again).

      We had fundamental guys in the sector and even many company executives that said “Yeah, for now I’m just sitting in these really underwater stocks and hoping we see the sector improve.” When I’d press them on why they were not buying into it, they were concerned of waterfall declines like 2013 or that there could be years before things improved. WTF?? It was a totally different macro backdrop than then and the PMs were no longer widely held so a big washout for years was never in the cards.

      When we talked to generalists, they mostly snubbed their nose at gold, silver, and the PM stocks and were completely disinterested. Those same people now are more kind to the PMs, now that it is obvious, and they just shrug it off as “Well, I missed that move…” Yeah…. you guys did miss that move and it was easy money. Again there were exceptions like Dana Lyons and Jesse Felder that were accumulating into the weakness the end of last year, but they were exceptions…. because most folks just had zero interest in buying value or buying low and couldn’t see a positive path forward in the PMs.

      However, as we know, and see all the time in the markets, sentiment can swiftly change. By the VRIC, after 4-5 months of the PM sector rallying from Sept into January then some of the companies were getting a bit more chipper and starting to buy their own stocks, and newsletter writers were getting more encouraged, and funds were starting to consider getting in on financings. Heck, even generalists that don’t track this sector that closely were saying nice things about the “pet rock” once again.

      Of course this brief peak in sentiment marketed a short-term top, and February was a harsh corrective month, moving into early March, where most folks flip-flopped once again to throwing the baby out with the bathwater, and assuming it was another false move. I guess a $350 move in Gold, and move from $17.40 to $24.77 in Silver, and 50%+ moves in the PM mining ETFs were just a false rally. (OK??)

      Then we see the PMs rally big again in March and into early April, and those same Doubting Thomas folks were back to… “Hey, gold and silver here are looking pretty good.” (Oh really?) Look folks, the PMs have been looking good for the last half a year for 6 months…. Why did it take a banking crisis for you to wake up that gold is still a safe haven? It’s been one for 5,000 years now, and central banks have been acquiring the “barbarous relic” in record amounts for just that reason.

      Overall, in the more widely followed PM mining stocks, they’ve also been outperforming the moves in the metals, even if some of the tinier juniors haven’t woken up yet… which is how it is at every turn… every time…. the producers, royalty companies, and larger developers move first, then over time the capital works it’s way down the risk curve and the juniors start getting a bid. We’ve seen more junior start moving over the last month or so, which is a good sign, but people could have positioned in the larger companies for a number of months last year, and even if they didn’t catch the exact bottom, they could have still had really nice double-digit gains. If you made 20% 30% 50% in 4-5 months by purchasing producers or advanced developers that were destined to move on higher metals prices, then would you have more money to deploy into junior drill plays now? (of course you would, but few approach this sector logically)

      Just to be clear, most investors and even most well-know pundits are not contrarians or value investors… nor are they equipped emotionally to know how to buy low…. because they repeatedly demonstrate that they can not… be it coming out of late 2015/early 2016, or the fall of 2018, or the spring of 2019, or the pandemic crash of 2020, or the smash down in the 2nd half of 2022. When prices were low, they were fearful, and not value investors.

      Most investors are merely trend followers, and momentum traders, suffering from recency bias. Last year and all the previous low points just referenced, they operate from the vantage point of what just happened, instead of probabilistically what will happen. Nothing goes down or up in a straight line, no trends last forever, and sentiment will always swing on a dime. Most people last year had the playbook that since the trend had been down, they were extrapolating that out to infinity, instead of seizing on the opportunity staring them right in the face. Most “investors” don’t really like buying low or selling high. Instead, as we’ve said on here for years, they like “crying low, and buying high.”

      Some things never change… especially human nature, and people ruled by their emotions, instead of logic.

        Apr 07, 2023 07:00 PM

        Depends on the individual stock. Got taken by IPT. Fred Davidson comes crawling out of his hole just once and look what happens. Is that guy a sheister?

          Apr 07, 2023 07:14 PM

          Of course Terry, there will always be individual stocks one can point to that didn’t participate as much as hoped for, but in general the PM mining ETFs (GDX), (GDXJ), (SILJ), and most of the producers, including Impact Silver, or widely followed developers and advanced explorers have been trending higher since September/October of last year.

          The overall point is that if people have a diversified basket of PM stocks, and weren’t just camped out in a basket of penny-dreadful drill-plays, then they’ve seen large double-digit or triple-digit increases in their PM stocks over the last 6 months.

          Even IPT (which I also hold in my portfolio) bottomed at $0.24 in September and was up 77% at $0.425 in March, from trough to peak, so there was plenty of margin there for folks to get in, buy somewhere near the lows, and ride them up higher, even if they didn’t catch the whole move.

          [and no, Fred is not a sheister. We’ve had him on the show a few times where I’ve talked to him personally, and I’ve been following him in interviews since early 2016. Fred is a humble and straight-forward guy, that knows their limitations and knows their strengths. Impact Silver is debt free, has been producing for a dozen years, and just acquired a new mine which is why he “resurfaced” to explain the acquisition to the marketplace]

          I find it disappointing when investors take out their frustration on their own poor trading skills and poor decisions on the CEOs of a company that have no control over the metals price action and didn’t tell you personally when to buy or sell.

          One of the biggest disappointments that some folks held in the silver producers has been First Majestic, (which I don’t own and haven’t since the 2016 run it made), but it had a host of fundamental challenges and crashed from a valuation that was already pretty rich compared to it’s peers. Since AG was 12% component in SILJ, it also held back that ETFs normal outperformance, and just further illustrates why I’m a fan of #BuildYourOwnETF.

          So yeah, we can finger point to certain stocks that didn’t do as well, as some on here like to do, but there is no denying the reality that the majority of the larger cap and mid-cap players in the PM sector have been on one hell of a good run the last 5-6 months, and if people missed this move, it was easy money and we covered the positive technical setup here the whole way higher for anyone paying attention, from the lows last year up through the whole rally to present.

          From a longer-term standpoint, sure there are much higher moves to come, but if people can’t buy into the weakness we saw last year confidently, and can’t understand the significance of the false breakdown in gold last year below key support at $1675,when it tripled bottomed around $1620 and then screamed higher by over $300 quickly, or the massive short-squeeze we saw in silver once again from $17.40 to to $24.77, then maybe they are not cut out to be in this sector or managing their own money.

            Apr 07, 2023 07:14 PM

            IPT will be stuck near its low as a result.

            Apr 07, 2023 07:29 PM

            IPT will be stuck at it’s low as a result of what? I don’t follow… the logic or thesis?

            As mentioned, IPT surged up 77% off it’s low from Sept to it’s recent peak… how is that getting stuck at its low?

            How is being debt free and fiscally prudent going to cause it get stuck at it’s low?

            How is having a good CEO going to cause it get stuck at its low?

            How is making an acquisition of the Plomosas Zinc mine going to cause it to get stuck at its low?

            How is all the exploration upside on various projects going to cause it to get stuck at it’s low?

            How will an overall improved metals price environment cause it go get stuck it’s low?

            How will potentially higher silver prices in the future, allowing them to bring back into production their lower grade VMS deposit for an additional kicker cause it to get stuck at its low?

            Please enlighten us on how and why it will be stuck at it’s low of $0.24 (or did you mean the low at $0.11 back in 2016) moving forward, and for how long?

            Apr 07, 2023 07:33 PM

            An improved metals price is the only thing that will bail it out.

            Apr 07, 2023 07:45 PM

            Terry: I say “not a chance” regarding IPT being stuck near it’s low. No one likes dilution especially anywhere near an important low but the cash raised as a result along with the cash IPT already has will go a long way to attract speculative interest as it will be used to do plenty of drilling this year. In addition, earnings will rise sharply along with the price of silver.
            There are good reasons for IPT’s impressive leverage during a bull market and investors would do well to understand that those reasons also explain the impressive leverage to the downside during a bear market or a bull market correction.
            It finished Thursday almost 9% off its low so the tens of thousands of shares I added that day finished in the green. I would have bought more if I didn’t already have more than enough.

            Apr 07, 2023 07:00 PM

            Thanks Matthew, thought they could have funded that from their operations. Also thought they sold too cheap and with the warrant. Kinda pegs the share price between .27-.35 in the doldrums

            Apr 07, 2023 07:48 PM

            IPT had about $15M before the financing which believe would have easily covered their plans for the year and I too don’t love the .27 price of the shares but we have to understand that: 1.) the price is based on the average of recent trading and that: 2.) negotiations surely began before IPT took off just a week ago. In addition, Fred and team are known to be conservative/careful/prudent so it makes sense to grab money when there’s interest from the market rather than pretending the future is known and holding out for a better time. Way too many managers raise money at the worst times and when their companies are tapped out because way too many managers miscalculate future events. These days there’s more uncertainty than ever with respect to economics, banking, geopolitics, local politics, etc., etc., so it’s understandable that management would raise the cash now rather than risk having to do so on worse terms later.
            I can’t think of another C$50M silver company that comes close to IPT’s risk-reward profile.

            Food for thought: On March 30th 2016 IPT announced a share offering to raise $2M at .30 with no warrant. Yes, $2M is not $7M but IPT was much smaller back then and had far fewer shares out so it wasn’t quite as far away from $7M today as it might seem. On a relative basis it might’ve been more like $3M or $4M. Anyway, it traded between .38 and .43 at the time of the announcement and fell to .34 two days later. It never reached the .30 offering price before turning around and more than doubling in the next 20 sessions (hitting .80).

            IPT is a successful producer but is still an explorer first and foremost so having enough cash is everything. Therefore, I don’t mind the warrants which will cash up the company as they are exercised and you can bet that they won’t be exercised anytime soon.

            Apr 07, 2023 07:58 PM

            I’m over my IPT frustration thanks to the explanations given here. Just continue to hold, thank you.

            Apr 09, 2023 09:23 AM

            I bought in to the IPT carnage on Thursday too. This looks to be the second right shoulder of an inverse head and shoulder pattern to match the two left shoulders. The price might hang around down here for a few days to collect itself, but I don’t see it hanging around long at these levels.

            Apr 09, 2023 09:55 PM

            Charles – thanks for sharing your trade on accumulating IPT into the weakness. That is the spirit of buying low, (instead of crying low as some like to do).

            I had mentioned last week that I’ve already got a full allocation to Impact Silver or I’d likely have been adding there as well, but I’m saving my remaining capital for accumulating other stocks I’m not done building a position in and potentially to throw at some oil & nat gas stocks if we see any more pullbacks down in those.

            May your trading be prosperous!

        Apr 07, 2023 07:04 PM

        Hey Ex, what can I say but LOL! I have been watching the natural gas markets as they are beaten up and so is biotech. Biotech can make some spectacular moves even when it isn’t oversold, so I suspect this is a good time to get positioned. I was looking at the weather chart here for next week and we will be seeing summer weather, and its only the beginning of April. I don’t own a Farmers Almanac but I believe this summer will be another scorcher. Interesting times ahead! DT

          Apr 07, 2023 07:24 PM

          Thanks DT. Yeah, biotech can be very volatile but also offer up big gains too.

          Yep… this summer is going to be a scorcher….

    Apr 07, 2023 07:26 PM

    New game in town for me. So Cad and US markets closed today. However, I can convert currencies in my IBKR account today … the dollar went up today so I converted some USD to CAD for Monday. Now I need to watch to see if I should have waited until Monday. More games …

      Apr 07, 2023 07:49 PM

      I trade stocks in 5 different currencies and constantly in and out of those five in my IB account. USD cash balance gets high interest rate so lately I’ve been selling options and collecting interest on those premiums as well.

    Apr 07, 2023 07:27 PM

    This is the one chart you need to look at. 50MA X 20EMA has been a pretty reliable indicator.

    Apr 07, 2023 07:30 PM

    One of the oldest and perhaps the noblest of human aspirations has been the abolition of poverty. That is what Herbert Hoover said in 1928, he wanted to be elected. But the first duty of every politician is to get elected. The stock market bulls believed that they were headed for four more years of prosperity. Hoover swept the country, but he couldn’t sweep “The Depression”, which was coming from unrivalled speculation. DT