*** Notes from ECU Silver's AGM ***
Coach 247's notes from yesterday's ECU Silver (ECU.V / ECUXF) AGM....
Its about 2am in Toronto, but I have just returned home after spending most of the day downtown, and then having a few drinks with fellow ECU shareholders after. I will just touch on a few of the more significant topics that come to mind tonight, and then elaborate further tomorrow.
My impression of the meeting itself was more like a town hall gathering than an AGM for a company worth half a billion dollars. The scrutineer for the meeting reported that over 41 million shares were represented by those who attended, and that is about $100 million dollars worth of equity in that small room. But it was very much a down to earth affair with Michel presenting an update on the status of the company and the near term objectives. I have heard all of that recently from my visit to the mine, so I was more interested in the question and answer period to address some of the issues that have been discussed on this forum.
As for the updated resource estimate, Michel indicated that we have about 100 million ounces of silver equivalent resources now. That amount does not include base metals values, which currently account for about 35% of the revenues from our production so already that number is conservative. Also, it does not include the stockwork identified to date which may add another 1.5 million tons of ore, or possibly another 40 million ounces of silver equivalent. It does not include the numerous new veins that have been discovered. And it does not include any value for either of the skarn systems that have been reported. So there is substantial upside to that number just on what has already been discovered recently from the drilling program. I think that based on the rhetoric flying around on this forum alone lately by a handful of bozos, having a NI43-101 compliant update for over 100 million ounces should silence a lot of the naysayers. I cannot think of another junior currently in production that can report that size of resource at this time.
As for the political situation, Michel made a comment that whatever party leader is elected president, he will still have to pound any new legislation through congress before it becomes effective, and that is why Vincente Fox did not make any real changes while he was in government. I would personaly add my own comments, that Mexico is a NAFTA partner and that agreement has made some big strides for that country to add wealth and employment from foreign investment into Mexico. I just cannot see the mining sector, which accounts for about 7% of GDP, to be first on the list of radical changes to the current working relationship, and I think the country has more to lose than to gain by screwing around with the status quo at this point.
I asked Michel for some specific numbers to assist with the framework for forward cash flow projections about the skarn deposit. He suggested that total costs per ton for a skarn system would come in around $15 per ton, including general and admin expenses, based on a larger operation processing in the range of 25,000 tons per day. Considering our gross metal value is above $30 per ton, that puts us right in the ideal economic range of a ratio above 2:1 for ore value versus costs. He also stated that mining operations processing skarn in other parts of the world are very profitable with a similar grade to what we have encountered at Velardena so far. And the lab metalurgy results of 95% recoveries are probably close to what we can expect in actual field operations with a high tonnage operation. So whether some here are willing to acknowledge the economics or not, I think we have reasons to be optomistic going forward.
Michel says that water will not be an issue as production is stepped up, because he feels they can drill more wells in the valley to meet their needs. Arsenic levels in the ore are not an issue depending on who they sell the concentrate to, and he says they are paid 95% of the lead values and gold and silver content in the lead cons, but only about 50-60% of the gold and silver credits in the zinc skarn. Once they get the presure oxidized leaching circuit in operation to recover a gold pyrite concentrate, they can count on 95% revenues for the gold, and higher gold recoveries above 90% of the contained metal value.
For forward operating targets, Michel wants to see at least 1000 tpd capacity in the recovery plant. He indicated a $70 million anual postive cash flow could be generated from a 1300 tpd operation, and if you use a multiple of only 15 times cash flow, that would suggest a share price for ECU of about $5 per share.
It was a pleasure to meet quite a few of the regular contributors to this forum today, and I was also happy to meet Bill Murphy in person and a few other 'celebrities' from the gold world.
My guess is that ECU will go to $3 when it resumes trading, but I also suspect that the stock will settle back down to the $2.70 range by early next week. The market is weak right now, and that will keep the shares trading in a range no matter what the news is. But I do think ECU has taken a giant step forward for credibility, and the peanut gallery can do what they will to bash the company, but there is no other junior to be had at any price that compares with the current proven resource for the stock, and matches the potential upside discovery potential going forward.
cheers!
COACH247
stockhouse.com |
