ECU Silver Mining Inc. (TSE:ECU)

[basserdan]

From the ECU Silver board @ SH....

posted by Mike 97 on May 09, 11 05:14PM

Dave from Denver in tonights MIDAS.

ECU Silver May Be Ready To Make A Big Move
Monday, May 9, 2011

ECU CEO Michel Roy released a letter to shareholders with a complete update on operations today. Before I get on my soap-box and highlight the salient operational points, I would like to first re-print this quote from the letter with regard to the inexorable, illegal manipulation and price-capping of this stock that has occurred for several years now:

ECU's stock also appears to have received excessive pressure from trading patterns which appear designed to suppress the stock price. Management considers this to be a serious concern and is in discussions with legal counsel regarding the nature of this activity and potential recourse.

One of the largest shareholders has been meticulously and laboriously keeping track and recording the market-making activity in this stock for about 4 years, at least. Eveyone of us with decades of trading experience have evaluated this data and it is unequivocally illegal manipulation, likely in conjunction with a rogue blogger who operates out of Peru. I even believe Citadel Capital, the Chicago-based hedge fund may be the lead perpetrator. Having said this, the shareholder referenced above has filed several complaints with the regulatory officials in Canada - I have seen some of these complaints - and of course the complaints have been arrogantly and summarily dismissed. It is beyond absurd but not unexpected given the corrupt nature of the regulatory bodies governing both Wall Street and Bay Street in Canada.

Now, having gotten that out of the way, here is the letter: #msg-62906687

For whatever reason, the market seems to overlook many of ECU's key accomplishments to date, the most significant of which is that they are systematically exploring and proving what turn may turn out to be one of the largest silver deposits in the world. One of the big criticisms of ECU has been that the metallurgy of the deposit is not economical. ECU has spent a lot of time and energy disproving this by building a milling operation which has been processing stockpiled ore and converting it into gold/silver/etc concentrate which is used to help substantially fund ECU's continued drilling activities. You tell me if you think this sounds like its deposit is not feasible:

ECU has increased revenue over the past five consecutive quarters, enhanced by the successful negotiation of the sale of a 13,000 tonne stockpile of processed material containing gold pyrite. Revenue in Q4 '10 was over $6.4 million, almost 200% higher than the period five quarters earlier. Altogether in 2010, metal sales increased year over year by 250% for gold, 144% for silver, 568% for lead, and 375% for zinc. Although the sale and delivery of the gold pyrite stockpile has been completed, management expects revenue from production to improve when the company mines in recently-developed stopes containing significantly higher resource grades...An accelerated development program is underway to advance additional veins, and mining levels, to a stage where mineralized material can be extracted from more mining stopes, thereby increasing production.

The entity that purchased the gold pyrite was one of the largest multi-national gold and silver miners in the world. In my view, one of the most significant aspects of this milling operation is that it should expedite the pre-feasibililty/feasibility process once ECU is ready for that stage of mine development.

Currently ECU is in the middle of drilling a Mass Sulphide Zone (MSZ). One of the most compelling features of what ECU has discovered and proved so far is that they have not found the ultimate "source" of the veins it has been uncovering. While ECU's last resource report contained an statement from the engineering and testing firm that prepared it that essentially said that the depost may contain close 1 billion ounces, it is thought by many of us that discovering and defining the MSZ could add another 50% to ECU's resource.

I think the biggest impediment to ECU's stock achieving a more realistic and comparable valuation, besides the smear campaign being waged from seedy corners of the market and illegal trading activities which are allowed to fester unfettered by the regulators, is that fact that ECU's share base has 308 million shares outstanding. Most junior stock investors, for whatever illogical reason, would prefer to invest in companies with less that 100 million shares. Of course, relative value is about understanding and defining relative valuation.

In that regard, let's compare ECU to Great Panther (GPL), one of the silver market darlings. We own GPL as a trading play, by the way. GPL sports a $450 million market cap and reports having 12.8 million "measured and indicated" ounces of silver (including silver equivalent) and a total of 21 million ounces, including inferred. $21/total ounces per share of valuation. Hmmmm....let's look at ECU (and I would like to say that ECU makes it significantly easier to find this information). ECU has a market cap of $237 million on top of a resource of 40 million "measured and indicated" and 430 million including inferred. 55 cents/oz per share. If you're like me, you're scratching your head on that one. Now, granted there's story behind GPL and they are producing silver and that production is on target for some nice increases. But the disparity in valuation is absurd. And in my valuation assessment of ECU, I'm not giving any credit for "potential" resource as outlined by Micon.

In terms of trading, I took profits for myself and some profits for my fund when the stock traded over $1.10 a few months ago. I have a fiduciary responsibility to my investors (which includes me) and we had been riding some positions we put on when the stock was below .60 cents last year. But we always have a large core position in the fund. However, in this latest sell-off in ECU, some of which is obviously sector-related - but MOST of which has been due to excess shorting/naked shorting and end of day trading games each day - I have reloaded my personal position (I have been in this stock since July 2005, so I know it well) and have added substantially to the position in my fund. This is one of the cheapest silver stocks that I'm aware of by any metric you want to use. ECU should soon start releasing the first drilling results from the deep-drilling of the MSZ and will continue to do so over the summer.

Please read all of Michel's letter if you are interested in this situation and please, please, please do your own due diligence, which would include contacting the Company with any questions or informational requests. I do not often pound the table on stock plays, as it only leads to complaints from disappointed people who buy the same stocks I buy. However I am adamant in my view that ECU represents one of the best possible risk/return, fundamental/value/trading plays right now in the mining stock sector.

http://agoracom.com/ir/ECU/forums/discussion/topics/483395-ecu-may-be-ready-to-make-a-big-move/messages/1551976#message