Known as a fan favorite, the Expert Series brings together well-known investors and Kitco regulars to find out where they will be putting their money in 2018.
This time, we asked investor David Erfle how he would invest $100,000 in the mining sector this year. He also shared some investments he would avoid, including bitcoin.
Experts: David Erfle
Claim to Fame: Invested proceeds of the sale of his home into the junior mining sector in 2005. He tripled his investment by 2007 and quit his full-time job. He is now founder of juniorminerjunky.com.
How would you invest $100k in the mining sector in 2018?
Erfle said his focus will be on “four sub-sectors of the mining space” this year:
$30,000 into 3 growth-oriented gold producers (GOP)
$40,000 into 4 gold mine developer/explorers, which control high-margin deposits in district scale land packages, and located in safe jurisdictions
$25,000 into a mix of 5 early stage copper, zinc, and precious metal explorers
$5,000 into a U.S. based uranium producer with a solid balance sheet and a tight share structure to hold for the long-term.
Erfle’s Top 3 Mining Picks?
McEwen Mining - Top gold producer
Sabina Gold & Silver - Top mine developer
Marathon Gold - Top explorer
“McEwen Mining is cashed up with no debt and the firm is aiming to nearly double production by 2020. CEO Rob McEwen has aligned himself with shareholders by owning 24% of the company,” he explained.
As for Marathon & Sabina, Erfle said both have projects in safe jurisdictions, highlighting that the latter recently struck a C$66 million strategic financing deal with Chinese miner Zhaojin International.
What 3 investments would you avoid in 2018? Why?
“I strongly believe the bitcoin mania will end in tears,” he said.
“I also believe interest rates are set to rise dramatically in 2018…I would avoid investing in both REITs, and Utilities as well.”
But, more on bitcoin…
“I fear the bitcoin speculative bubble will probably end badly very soon, especially for latecomers who are holding the cryptocurrency ‘forever’ as many have stated,” Erfle said.
For Erfle, regulation is coming into the sector, which will hurt the price of most cryptocurrencies.
“Most digital currencies exist in a sort of twilight state just beyond the grasp of federal regulators, but the IRS is starting to get wise to bitcoin,” Erfle explained. “…regulation will remove the anonymity of bitcoin and other cryptocurrencies and the idea that there is an alternative financial universe separate from government.”
His final words: “I fear the bitcoin speculative bubble will probably end badly very soon, especially for latecomers, who are holding the cryptocurrency ‘forever’ as many have stated.”
What will affect gold most in 2018?
"I believe an increased progression of the European banking crisis would have an enormous effect on the gold price,” he said. “…the new banking rules may put enormous pressure on the Eurozone and, therefore, chase safe-haven capital into gold and the US dollar.”
But it’s not only Europe gold investors should keep an eye on in 2018, Erfle said that U.S. politics will continue to affect the metal’s price.
“I also believe the Republican’s tax package will cause the U.S. economy to boom and inflation to rise, so I see the possibility of US equities, interest rates, and gold all rising together with the US dollar at some point next year as well,” he added.
If you could describe 2017 in one word, what would it be?
Frustrating, as the miner sector traded sideways in 2017 with gold up over 8%.