How to Build a Successful Junior Resource Portfolio | David Erfle

At the 2018 Vancouver Resource Investment Conference, professional mining stock investor and Junior Miner Junky newsletter writer David Erfle shared how he would recommend investing $100,000 in the mining sector in 2018.  Below is the summary of David’s presentation.  David spelled out three categories of potential mining stock investments, his recommended financial allotment amount to each category and company and what to look for in each company within each category.

GROWTH-ORIENTED PRODUCER (Low-risk) $30,000

Allocate $10,000 each into 3 growth-oriented gold producers (GOP) for a total of $30,000. The ideal profile of a quality GOP are as follows:

• A proven management team who is aligned with shareholders.
• A solid balance sheet with a substantial cash position and manageable or no debt
• 100% control of low cast mines and projects with blue sky potential
• Preferably no royalties or streaming agreements should be attached to projects
• Operates in safe jurisdictions
• Solid ownership in the stock with preferably a global miner owning at least 9.9% of the company

DEVELOPER/EXPLORER (Medium-risk) $40,000

Allocate $10,000 each into 4 gold mine developers/explorers which control high-margin deposits, contained in district-scale land packages, and located in safe jurisdictions for a total of $40,000.  The ideal profile of a quality developer/explorer is as follows:

• A proven management team who has been successful in the past and has a track record of under-promising and over delivering
• The project(s) should be contained in a district-scale land package with plenty of blue sky potential.
• If the project has a PEA, it should have an after-tax IRR of no less than 20% at $1,250/ounce gold
• Strategic investment by a global miner and a low retail float
• Preferably less than 250 million shares fully diluted
• Enough cash to fund its entire 2018 budget and no debt
• Management should be aligned with shareholders by owning stock outright (not just granted options) and preferably buying more recently.

EARLY-STAGE EXPLORATION COMPANY (High-risk)

Allocate $5,000 each, into a mix of 6 early-stage copper, zinc and precious metal explorers who possess similar to the above property size and location fundamentals with enough cash to fund their respective 2018 budgets for a total of $30,000.  The ideal profile of a quality early-stage exploration company is as follows:

• A proven management team who has been successful in the past
• A 100% controlled district-scale land package which is located in a safe jurisdiction
• Project(s) should preferably be located near past or current production of large discoveries.
• Has a tight share structure with solid ownership.  Make sure there is not a large overhang of near-term in-the-money warrants which can cap the stock price and dilute the share structure when exercised.
• Has enough cash to fund its entire 2018 budget and no debt
• Management should be aligned with shareholders by owning stock outright (not just granted options) and preferably buying more recently.

JUNIOR MINER JUNKY MINING STOCK INVESTING GUIDING PRINCIPLES

• Risk management is vital to the success of the junior speculation portfolio.  Sell the position if you have a 20% loss.
• Have a basic understanding of technical analysis.
• Monitor insider buying via CanadianInsider.com
• July and December are usually a good time to buy juniors.
• The best time to buy a junior is when you feel terrible doing so.
• Always have a selling strategy for each position and the sector.
• Selling strategies can vary depending on where you live (tax implications).
• The 3 keys to success in this sector are 1) research; 2) timing; and 3) patience.