Dave Erfle – From 10 Baggers to 2 Baggers, What To Watch For In Junior Mining Stocks

May 28, 2024

We’ve all bought a junior resource stock initially thinking it was going to be a 10 bagger, only to turn into a losing trade. In this discussion with Dave Erfle, Founder and Editor of The Junior Miner Junky we discuss the road to under-performance of these stocks.  


The discussion highlights the impact of dilution, capital management, and market conditions on stock performance. Strategies for analyzing companies, assessing management teams, and understanding market trends are also covered. 



Click here to visit Dave’s site – The Junior Miner Junky

    May 28, 2024 28:01 PM
    NatGas Update : Henry Hub
    Before Contract Expiration

    May 28, 2024 28:34 PM

    CME raises Silver margins but the world ignores it and buys MORE !

    May 28, 2024 28:49 PM
    May 28, 2024 28:48 PM

    IPT topped precisely where it “should” have in April:

    May 28, 2024 28:50 PM
    May 28, 2024 28:54 PM
    May 28, 2024 28:59 PM

    Most stock buyers get burnt because this game has too many difficult variables and unknowns even for the seasoned investor. A case in point is the interview above it makes me think who needs the hassle, no wonder 95% lose money in the mining sector. Just buy physical and sleep at night and only use these stocks as teasers to appease your gambling addiction. LOL! DT

      May 29, 2024 29:43 AM

      Many “investors” in the sector also fail to take appropriate risk mitigation measures in their own portfolios and likely shouldn’t be managing their own money.

      Over the years I’ve talked to so many investors (many that are no longer around sadly), where they had placed concentrated bets on only 2-4 very early-stage drill plays that didn’t find economic mineralization and sold off, sucking down their portfolio values with it and sometimes clearing them out to where they left the sector vowing never to come back. That is an insanely risky approach that most financial advisors would never recommend. While very rarely a speculation like that can pay off and then be life changing gains for those that got lucky, the much much more common outcome is a swift erosion of capital by taking outsized positions on very risky bets. THAT is one of the most pervasive problems with investing in this sector.

      Look, there are much better odds in Las Vegas if people want to take a concentrated bet and throw it all on the craps or roulette tables… with 48% odds on Red or Black, or betting on the point number as a 6 or an 8. But that is wild speculation and not “investing.”

      The odds of a drill target finding an economic deposit is 1 in 3,000, so those are simply terrible odds working against betting on XYZ drillplay making the next big discovery. Betting strictly on those is just flat out speculation and gambling, and not the same thing as methodical investing. Yes, a good management team and good modern exploration science does improve the odds, but nobody ever knows what is under the surface until the drill assays come back in, and the truth is that true discoveries are incredibly rare. Those kinds of setups are binary outcomes, and not a gradual growth story over time through ongoing and consistent value creation. People that are simply gambling on a drill result outcome, or series of drill result outcomes are kidding themselves if they think that is investing.

      People like to discuss the extremely small amount of success stories like the New Found Gold, Snowline Gold, Hercules Silver, etc… that made it big, but I rarely hear people in the sector discuss the nearly 1000+ other exploration companies that fail to hit their mark and thus fail to deliver returns to investors… Most of these companies are lifestyle companies for the management teams and perpetually raise money to keep poking holes in the ground until existing shareholders are diluted down to a fraction of what they started with; all while they travel the world marketing the story to whoever will listen and pulling in solid 6-figure incomes on the back of the capital raised from investors. If the value creation from a company executing on it’s plan does not outpace all the dilution, then the company merely becomes another sinking ship. That is 90% of the sector.

      Sure, there may be brief periods of time where a given early stage explorer jumps up sharply higher on a good drill result or two, or even just on the pre-assay hype; but those moments are typically fleeting and the reality is that most investors are not positioned before those events. It is far more common for pie-in-the-sky anticipation and dreams to be dashed with the reality of assays from the truth-machine, when they come back into the market. The much more common experience for investors is to see the share price crumble after drill results come back in, or after the reality of a series of drill results come back in that don’t match the initial hype around a high-grade headline hole from the past.

      Most investors are simply herd animals that dogpile into the few trending stocks, long after the results are already well-known and way more than priced in. If an investor does actually get positioned early in a discovery story and then see that hoped for big spike higher, then quite often they fail to sell and harvest the gains, due mostly to greed. As a result, they often do a round-trip on what was actually a winning trade, riding the shareprice all the way back down again. So these people then leave jaded and complaining about how you can’t make money in this sector ; (when it was their own poor trading or missing the obvious win in front of them that was the real issue).

      What has always been curious is that the companies that actually produce revenues and cashflows (producers and royalty companies) are often shunned by punters and speculators, as not offering 10-bagger returns, but in contrast to greenfields drill-plays, very few of the established producer and royalty names go to zero. There is obviously the risk with brand new producers of not getting escape velocity after development to become a legit commercial producer; however, once the producer is up and running for a year or so and generating revenues, they are a much less risky way to play for the sector leverage in underlying metals prices (be it gold, silver, copper, uranium, lithium, oil & gas, etc…). Often times the smaller to mid-tier producers also offer all kinds of leverage and opportunities for regular high double-digit or even solid triple-digit returns, for really nice outperformance and leverage.

      Then the royalty companies are even more diversified across projects & operators, jurisdictions, and commodities and almost never go under or to zero, and yet they can still have really nice leveraged moves in relation to the underlying commodities. When I message with investors about their portfolios, very few retail investors are even positioned in them, or maybe have 1 royalty company, which is very much a contrast to smart-money higher net-worth investors, family offices, funds, and institutions. I’m not suggesting being all-in on just royalty companies, because individual mining companies do offer greater potential returns (of course paired with greater execution risks, jurisdictional risks, and operating risks), but they can be great anchor positions within one’s portfolios, and it is surprising that some investors don’t have any anchor positions and are just completely exposed to a basket of super risky drill-plays.

      We bring on guests to the show all the time that unpack what they are doing in their own portfolios, and when we ask them what stages of companies they are in, folks like Dave Erfle, Jordan Roy-Byrne, John Rubino, Jesse Felder, Craig Hemke, Steve Penny, Adrian Day, Nick Hodge, Sean Brodrick, etc… all mention that they are in growth-oriented producers and developers with the lion’s share of their funds and then they may speculate on a few explorers with a tiny portion and small position-sizing in their portfolios. People will listen to those interviews, and message me, and say they loved getting their insights, but then express frustration about their portfolio performance. I’ll ask them what is in their portfolio, and… (you guessed it) they are 100% positioned in risky drill-plays. What part of the message from those pros listed above is not getting through to people? Did they not hear what they said? Those pros are NOT 100% in explorers, but actually positioned in very few explorers, and the guys that stick around in the sector for decades and have value accretion are mostly in producers and developers with good growth prospects and value creation, or more established advanced explorers/developers with defined ounces in the ground with optionality to rising metals prices.

      The final point is that this is not a set-it-and-forget-it blue chip general equities sector. Commodities are very cyclical, and the resource stocks are leverage to that cyclicality on steroids… and so these stocks simply must be traded. Many of the majors are at similar price ranges today that they were 2 decades ago, and yet the stocks have had all kinds of dips that could have been acquired and all kinds of rips that could have been sold into year after year. It has rarely been a winning strategy to just camp out in these stocks for multiple years or decades, especially considering the time-value of capital deployed during long stretches of underperformance. However, there have been repeated sell-offs and rallies with really huge spreads that could have been capitalized on, even during bear market years, and yet many resource investors just sit there like bumps on a log not taking evasive action or aggressive accumulation action when the setups are there right in front of them. Sitting in Newmont or Barrick for 2 decades is not a winning strategy, whereas trading them can be very lucrative… and even more so for the much more volatile mid-tier and junior producers.

      People say silly things all the time like “I’m not a good trader,” but the reality is that EVERYONE IS A TRADER. We all have to buy something and then sell it to complete the trade. Whether that is holding for 20 years or 20 minutes, it is still all a trade. The idea is to capitalize on periods where a sector or stock is unloved and “low” and then sell it when it is loved and dear or “high.” With resource stocks you can get many more cycles of lows and highs than in traditional equities, and savvy investors in this sector make that volatility their friend. In contrast, just plopping money in a gold stock or oil stock or uranium stock, and then sitting in them for perpetuity bobbing up and down with all the waves of opportunities isn’t going to yield gains that match the risks that are being taken by positioning in this sector.

      Opportunities knock all the time in the commodities sector, but investors need to open the door and take appropriate action when the setups present themselves. Positioning in the resource sector is not like buying the S&P 500, and it rarely rewards inaction. Just look at the trends we’ve seen the last few years in lithium stocks, oil & nat gas stocks, copper stocks, uranium stocks, etc…. there were periods to accumulate when they were unloved, and periods to distribute those shares to other momo traders when then they became extremely overbought, and fantastic gains available for investors that took action and just caught the meat of those moves. It is the same thing again, and again, and again…. Rinse and repeat.

      THOSE are some of the main reasons why there are so many speculators that fail in this sector.

        May 29, 2024 29:34 AM

        One such opportunity(??) just popped up in GROY, down 18% yesterday after splurging on some copper asset. I didn’t look into the details.

          May 29, 2024 29:40 AM

          Good observation Terry. I don’t follow Gold Royalty as closely as some of the other royalty companies, because I feel it has been too richly valued compared to other junior and mid-tier peers (especially considering their lower incoming revenues to NAV). I did see that sell-off yesterday on the back of acquiring the copper stream on the Vares Silver Project from Adriatic Metals.

          Maybe the investors didn’t like the jurisdiction risk of Bosnia or feel GROY overpaid for the stream, or some may just not like the diversification away from gold. I’ll need to look into the specifics a bit closer to find out why the market was not too impressed, but was considering mentioning it in passing as topical recent news in an update article I’m writing on the royalty sector.

        May 29, 2024 29:13 AM

        You are right Ex, but the problem is that most people could read your reply and still not understand it, or maybe they can never get over their own biases because of the way their brain is wired. If they get someone else to handle their portfolio they won’t know when to buy or sell based on a recommendation because they believe it shouldn’t require even knowing how to do that and anyway if you buy Allstate Insurance, you are in good hands. Although insurance companies must make a profit off your money or go out of business.

        The human brain is a weird thing, I see many people who have really good dental plans provided by their employer, but they never even get their teeth cleaned, or they don’t go to the Doctor because they believe in faith healing, or they can diagnose themselves by accessing the internet or talking to their neighbor.

        There is a lot of information out there, but it only works for a few who can understand it and assimilate it through personal change and turn those thoughts into a profit. This is not something new this is part of the human condition. So many times, I see members in my own family who continually make mistake after mistake, and you know that if you try to tell them they won’t listen, or they pretend to listen, but the outcome is still the same.

        How many times have we seen the great minds that are running our countries continually counterfeit the currency until it becomes worthless or fight War after War and lose every time while bankrupting the country. The reality is there are no winners in war only losers, but you would think that by now that might change but it never does. Do you see what I’m getting at investing isn’t easy and the human mind is a hard thing to change to make it a profitable reality. Information is the key but only 5% will be able to turn it into reality the other 95% will always lose. DT

          May 31, 2024 31:39 AM

          Yes, good points DT. The key information is all out there readily available, but few assimilate it into an actionable strategy and then actually follow through with action.

          Additionally, with investing, there is the mastering of one’s emotions (greed & fear) and the internal psychology (desire not to be wrong in a decision previously made) that often runs counter to the new information at hand. People fall in love with a stock, or sector, or a paricular investing thesis, and often want so badly to be “right”, that it prevents them from taking the appropriate action to their own financial detriment.

          It’s not easy to make a plan, act on the thesis, and see things unfold much differently than anticipated. It can be even harder to then assess where things actually are (fundamentally, technically, sentiment wise, etc…) and then adjust one’s plan in a logical and dispassionate manner, when one’s own capital and cognitive dissonance are in the mix.

    May 28, 2024 28:53 PM

    Gold prices steady amid rate jitters, Copper flat with China in focus

    Ambar Warrick – – 05/29/2024

    May 29, 2024 29:27 AM

    To be fair to investors, a discussion about investment choices would not be complete without a review of how such performance factors occur like the Magnificent 7 over a 14 year period and the “Save Canadian Mining” initiative and study. Probably it would be a good idea to go back to the introduction of Computers into the exchanges and the “regulations” that existed before and after the use of electronic trading. If the Regulation issue is addressed, then it may be a good idea to go back to the history of various Acts and Laws that went into effect after the Crash of !929 and how Congress and Elected/appointed officials eroded those protections, particularly the period following Nixon closing the Gold window. Add to that the need for a discussion how entities such as The Fed and Exchange Stabilization Fund are “not audited” and the impact of the Supreme Court passing Citizens United which made Corporations “People” and how that altered the Legal System’s prosecution mentality by only “fining” the “Corporate Person” rather than criminally “indicting” the “real people” committing the fraud and thefts leading to the greatest “Transfer of Wealth” in the history of the World. In order to give the last issue its proper coverage, you will need to note how extensive the “revolving door” is between the Wall Street entities and the various Branches of Government in Key Positions to see the massive policy influence on all facets of economic growth, development and regulation. It goes without saying that the discussion should also focus on the “alteration of data and the accounting systems” by respective government agencies and regulatory authorities. It also goes without saying that a comparative analysis of “bribery and ethics” policies of all 3 branches of government should be completed to see if the erosion is consistent with historic levels or if there has been a quantum leap correlating with the advancement of computers and de-regulation in the corruption of Federal Government activities.
    Once those and other studies have been conducted and validated by a group of experts with no ties to special interests, then and only then should we begin to pass judgement on the “individual investment choices” of anyone attempting to invest in the “markets”. What may be traditional fundamental rules for effective historical investing, may be found to have no relevance in markets that are overwhelmed by a a plethora of intervention or manipulative current practices. Judging others without considering the parameters affecting their choices with respect to your own reasons for investing may be somewhat unfair.

    May 29, 2024 29:57 AM

    Corruption in the markets is meaningless, corruption has been going since the beginning of time and it will always be around. There are enough laws on the books to put anyone away for as many years as they want, one lifetime, two lifetimes.

    When The Rico laws came out, they were extremely severe and they were applied against The Mob and certain other criminals, it curtailed The Mob’s operations, but The Mob is still with us and always will be.

    White collar crime is rarely dealt with in a court of law when compared to the amount of it that exists and when it is it mostly results in a lenient sentence.

    When you confront corruption in the markets you either learn to accept it by letting the class action lawyers take it on when there is enough money to be involved or you don’t play the markets if you find it a bother. DT

      May 29, 2024 29:17 AM

      Al Capone quote on The Stock Markets: ” It’s a racket, “Those stock market guys are crooked.”

      It takes one to know one! LOL! DT

    May 29, 2024 29:23 PM

    Here is a good thought to ponder:
    “Why is it that the mining sector, although shortages are surfacing everywhere, prefers a top down system. Top down meaning, share prices go up for Majors first. (Clue: who buys explorers). But think about it and ask yourself if gaps have to be filled and explorer share prices go up last. Once you have answered the above issue, ask yourself who would have to make sure Majors go first so primary money interests are not disappointed.
    Then ask yourself, why are the BRICS so dead-set on forming another economic system. What’s wrong with the one in the West. Just some more thoughts to ponder to consider until the current price suspression of the miners is lifted.

    May 29, 2024 29:41 PM

    Why are the BRICS so dead-set on forming another economic system. That is a stupid question unless you have a brilliant answer. So, let’s hear it! LOL! DT

      May 29, 2024 29:52 PM

      I bet you used to look at other people’s test papers in High School.
      I don’t know DT: do you think it could be the western economic system failed due to corruption and now is being weaponized against the rest of humanity. I know you are fine with corruption, but the message is that most are not happy about being scammed.

        May 29, 2024 29:57 PM

        That is another stupid assumption, based on nothing!

        Lakedweller2 says, and I quote, “I bet you used to look at other people’s test papers in High School.” Lakedweller doesn’t like to be challenged but he comes up with idiotic suppositions based on nothing and he expects others to think he is credible. Personally, I don’t think education did you any good. You haven’t learned how to think. LOL! DT

          May 29, 2024 29:08 PM

          I have learned through experience that some like to communicate in unproductive ways.

            May 29, 2024 29:16 PM

            You don’t like anyone who challenges your thinking because it hurts too much. It reminds me of people who live alone because they don’t want to think about the response they might get from another person. DT.

            May 29, 2024 29:30 PM

            How long have you lived alone ?

            May 29, 2024 29:35 PM

            Never, I have been married for almost half a century. My family lives close and I see them at least once a week. Another stupid assumption. DT