The Golden Truth: An Update On Aquiline/ECU: Aquiline Hits Paydirt, Is ECU Next?

Wednesday, October 14, 2009

An Update On Aquiline/ECU: Aquiline Hits Paydirt, Is ECU Next?

On Sept. 29, I posted analysis that explained why I was confident that Aquiline Resources and ECU Silver are fundamentally "twin" companies and why both stocks are rediculously cheap to fundamental value.

Well, Aquiline just agreed to be acquired by Pan American Silver (PAAS), in a stock and warrant deal that effectively values Aquiline at $626 million (based on the current price of PAAS stock), or roughly 83 cents per ounce of silver Aquiline has indicated on its latest 43-101 resource filing. We will be taking some profits on our Aquiline position and plowing them into even more ECU stock.

Using this deal as a guideline to assess the relative value of ECU, applying 83 cents to ECU's measured, indicated and inferred resouce of 431 million, ECU stock would have a value of $1.25 vs. it's current trading level of $.77. HOWEVER, Micon International, the independent mining engineering firm which prepares ECU's highly regulated 43-101 Resource Estimate Report, has identified additional mineral potential that has been quantified at an additional 570 to 930 million silver equivalent ounces.

If we apply the 83 cents/per ounce in the ground to just the low end of Micon's assessment, that would give ECU 1 billion ounces, and an implied valuation of $830 million, or $2.91/share.

One more point to bear in mind. At one point in May 2006, the market was valuing silver in the ground, on average, at $2/ounce. If we apply THAT metric to ECU, the Company would be worth anywhere from from $860 billion to $2 billion, or $3-$7/share. Please note that back then the spot price of silver was around $13/ounce and had hit a brief peak of $15.35. Right now silver is $17.85/ounce on its way to at least $20. At some point, the market will value in-ground silver much higher than $2/oz. In other words, any way you want to value ECU's reserves, the stock is incredibly cheap.

I can say with complete confidence, and with money backing my statement, that I have rarely, if ever, seen an investment opportunity in the stock market with the low risk/high return potential of ECU. I say this because ECU, as per its latest press release, is now generating monthly cash flow from its milling operations that is much higher than anyone expected (except maybe CEO Michel Roy), it has demonstrated that the mineralization of its ore has a higher amount of gold than previously thought, and it has the certified potential to have at least a 1 billion ounce deposit. I might add that a huge benefit, though not well understood by most investors, from the Company's endeavor to generate revenues from processing its stockpiled ore is that it has demonstrated that is has a solid understanding of the metallurgy of its massive silver deposit. That issue is the golden (or silver) key to unlocking the value in a discovered mineral deposit.

Oh, and let's not forget about the Massive Sulphide Zone, which still needs to be explored. In conversations with people who have visited the mine-site, it is believed that this Zone could contain several hundred million additional ounces of silver. It is thought that this Zone is the ultimate source of ECU's already proved silver deposit. That potential is not factored into the above valuation analysis.

Please do your own due diligence. I have found COO Steve Altmann to be very responsive and user-friendly to any and all investor inquiry.

1 comment:

DennisThursday, 15 October, 2009
Thanks for this. I'm investigating and will probably pick up some shares.
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.