Take physic, pomp

ECU Silver (ECU.to): You’re joking, right?

I’ve had a couple of mails, both pre and post PDAC, asking for an opinion on ECU Silver (ECU.to). As the company issued a PR today my memory has been jolted, so here’s a quick post summing up the company…it won’t take long.

This PR today proudly proclaimed that ECU Silver (ECU.to) has taken delivery of its new (well, secondhand, but who’s counting) processing facility so that it can start producing some silver (and a bit of gold, too) at its Velardeña project in Mexico. Look, it’s really difficult to put into words how much this company sucks for shareholders and I’m not going to spend a whole bunch of time on it, but here are a few ballpark numbers that will give you the jist.

Consider that this new processing plant will run at 500tpd when fully operational (it’ll take quite a while to get running at that speed, too). With the ore grades it will put through and taking into account byproduct offsets, even if silver cash cost finishes at $3 or so and it makes $10 and ounce or so we’re looking at no more $2m per quarter of gross revenues (and around $1.3m at 300tpd). There’s no way that ECU can make a profit on that kind of piddly little operation (that compares to the 40m M+I ounces or so they say they have at the concession). And even if it can make a profit, the 270m or so shares outstanding means it’s a silly investment even in the long-term.

In a nutshell the company is today trumpeting its purchase of a far-too-small processing facility which will stop the constant cash fracturing but won’t ever make a net profit for ECU.to. If one day they decide to build a plant more suitable for the resource size at Velardeña the financing will dilute shareholders even further. I cannot see how this company will ever make more than a couple of pennies in EPS under any circumstances. How this thing is still trading at a market cap of over $100m is quite beyond me.

Compare ECU.to to a decent small silver like FVI.v and the phrase “totally sucks” is front and centre, and I’m only really scratching the surface with this post. Jim Cramer is not my idea of a role model by any means, but I do hear him when he talks about investing in ‘best of breeds’. This comes to mind when considering ECU.to, as it is an amazingly, incredibly and totally avoidable stock. So avoid it.

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