Hi Pkwic!

I too bought more shares of ECU earlier this month. In fact I was on the bid earlier today for even more shares at 96 cents but did not get filled. I think there are two factors driving the stock lower. The first is sector related as most of the juniors have been trending lower this month except for a few market leaders. The gap between the stong market leaders and the weaker juniors continues to widen. The fact that so many are calling a top in silver here, plus the market volatility associated with the world events, plus the usual COMEX op-ex window fun and games, have all pulled ECU lower.

I think the more important issue is the pending financial numbers due out this week. If you go through the news a couple of weeks ago, Stephen Altmann provided some commentary on the operations front, indicating that the company was still struggling to achieve optimum recovery efficiency at the mills, plus it was difficult to maintain mine production to keep the mills output steady. Even a slight decrease in throughput can create issues on production costs and reduce overall operating margins.

My personal opinion is that this guidance is a pre-warning that the earnings numbers will be a disappointment. We were getting a boost from the shipment of stockpiled gold-pyrite concentrates and that contributed to a stronger bottom line to compensate for any under performance on the ongoing production. The stockpiles have now been exhausted and the company MUST get the operations up to highest efficiency, to increase total gold and silver production, and reduce the operating costs down. This is not an easy task, but it is achieveable.

ECU has been reporting improvements quarter-over-quarter as they get the mill tuned and resolve some of the metallurgical issues. Altmann specifically mentioned a primary recovery circuit to strip out the copper from the slurry before going on to run the silver and gold cyanide circuit. This will probably not show up in the past quarter but may create gains going forward.

I notice the volume is thinning out and perhaps any downside earnings estimates have been priced in now. I do not think ECU should trade on the basis of marginal earnings, as long as the company can generate positive cash flow and proceed to aggressive exploration. Whatever drilling success they achieve this spring will drive the share price. But having the operations end running smoothly and at least giving us some leverage to the strong metals prices would be nice, since the company always appears to be under the threat of restricted capital. It is hard to run a mine on a shoestring.

This is just my opinion. I am bullish and have doubled my share ownership. I think the downside is mostly priced in here and could easily see a return above $1.40 along with a bounce for the entire sector as people come to realize the top-callers have been caught on the wrong foot. Sure silver may correct sharply, and sure seasonal weakness may become a factor, but my experience is that when so many people are in agreement that a sector MUST go lower, it usually goes higher. I am content to hold and see how it goes.

cheers!

mike

ECU is a paid advertiser on my website.