You don't mind if I ask again, do you?

(From last Saturday morning)

ECU Silver (ECU.to): Has anyone else noticed something really strange about these results?

When your humble scribe saw ECU Silver (ECU.to) returning a loss in its 3q10 report yesterday it was a little strange because, after all, in this previous post that looked at the production numbers we'd ended up by anticipating a net profit for the quarter of $2m or so (guesstimated, of course). The culprit of the big difference between IKN's guess and the ECU report was quickly noted, however.

IKN had estimated sales revenues at $8.7m for gold and silver. We'd come to that number by simple multiplication of gold and silver sales as reported by ECU.to with the average spot prices for those metals in 3q10, according to the London Fixes. This is a method that usually works when anticipating sales revenues, but this time it came with a big big miss.

ECU silver (ECU.to) reported sales of $5.29m for the quarter.

That's a big difference and when seeing that low number it was "WTF?" time at IKN nerve centre, so this morning I found myself checking the ECU.to 3q10 MD&A to try and work out how this low figure came about. The answer seems to be in the sales of pyrite concentrate and what follows is based on guesstimates (because ECU.to disclosure is so pisspoor you need to assume here and there) but at least makes sense

First, this from the MDA

"During the quarter, the Company recorded sales of a portion of its gold pyrite material in process inventory. This resulted in a gain from the reversal of previous inventory cost write-offs in the amount of $1,049,111."

Now, according to ECU.to filings the total pyrite concentrate sales were 3999oz, and production of pyrite conc was 1740oz. This implies that ECU sold 2259 oz Au in the pyrite conc for $1.05m...less than $500 an ounce!

This also adds up in the estimates for all products. Check this simple table in which we make conservative estimates for the prices fetched for the other metals sales. We use doré gold U$1,150/oz, silver $18.50 (according to the London Fix, the quarter average was U$18.92) and then Zn and Pb at $1.00/lb. This leaves the gold-in-pyrite concentrate as the unknown variable (presented in blue)

product	sales	est prices	revs
pyrite conc inventory	2259oz	$465?	$1,049,111
pyrite conc prod	1740oz	$465?	$809,100
dore Au	1989oz	$1150	$2,287,350
Ag	72264oz	$18.50	$1,336,884
Pb	141,215lb	$1.00	$141,215
Zn	65,616lb	$1.00	$65,616
		total	$5,689,276
	recorded sales		$5,293,139

For me, the $5.7m rough total is close enough to the $5.29m ECU reported as sales...what with TCRC etc etc. So under the rough guess table, the produced pyrite conc, if given the same average price of the inventory conc revenues (as implied by the MDA, but not explicit), also fits that estimate of $465/oz Au

Is ECU Silver (ECU.to) really selling its ounces of gold-in-pyrite at U$465/oz or thereabouts? I'm not sure but on reverse engineering on the numbers it seems at this point the only logical answer. I know IKN isn't the flavour of the Month over at ECU.to and I'm unlikely to be able to get an answer from management, but those of you long ECU.to would be wise to write, phone, tweet or whatever the top people there and get an answer on this, because this quarter's sales number was weird compared to the ounces sold numbers.

ECU Silver (ECU.to): Has anyone else noticed something really strange about these results?

When your humble scribe saw ECU Silver (ECU.to) returning a loss in its 3q10 report yesterday it was a little strange because, after all, in this previous post that looked at the production numbers we'd ended up by anticipating a net profit for the quarter of $2m or so (guesstimated, of course). The culprit of the big difference between IKN's guess and the ECU report was quickly noted, however.

IKN had estimated sales revenues at $8.7m for gold and silver. We'd come to that number by simple multiplication of gold and silver sales as reported by ECU.to with the average spot prices for those metals in 3q10, according to the London Fixes. This is a method that usually works when anticipating sales revenues, but this time it came with a big big miss.

ECU silver (ECU.to) reported sales of $5.29m for the quarter.

That's a big difference and when seeing that low number it was "WTF?" time at IKN nerve centre, so this morning I found myself checking the ECU.to 3q10 MD&A to try and work out how this low figure came about. The answer seems to be in the sales of pyrite concentrate and what follows is based on guesstimates (because ECU.to disclosure is so pisspoor you need to assume here and there) but at least makes sense

First, this from the MDA

"During the quarter, the Company recorded sales of a portion of its gold pyrite material in process inventory. This resulted in a gain from the reversal of previous inventory cost write-offs in the amount of $1,049,111."

Now, according to ECU.to filings the total pyrite concentrate sales were 3999oz, and production of pyrite conc was 1740oz. This implies that ECU sold 2259 oz Au in the pyrite conc for $1.05m...less than $500 an ounce!

This also adds up in the estimates for all products. Check this simple table in which we make conservative estimates for the prices fetched for the other metals sales. We use doré gold U$1,150/oz, silver $18.50 (according to the London Fix, the quarter average was U$18.92) and then Zn and Pb at $1.00/lb. This leaves the gold-in-pyrite concentrate as the unknown variable (presented in blue)

product	sales	est prices	revs
pyrite conc inventory	2259oz	$465?	$1,049,111
pyrite conc prod	1740oz	$465?	$809,100
dore Au	1989oz	$1150	$2,287,350
Ag	72264oz	$18.50	$1,336,884
Pb	141,215lb	$1.00	$141,215
Zn	65,616lb	$1.00	$65,616
		total	$5,689,276
	recorded sales		$5,293,139

For me, the $5.7m rough total is close enough to the $5.29m ECU reported as sales...what with TCRC etc etc. So under the rough guess table, the produced pyrite conc, if given the same average price of the inventory conc revenues (as implied by the MDA, but not explicit), also fits that estimate of $465/oz Au

Is ECU Silver (ECU.to) really selling its ounces of gold-in-pyrite at U$465/oz or thereabouts? I'm not sure but on reverse engineering on the numbers it seems at this point the only logical answer. I know IKN isn't the flavour of the Month over at ECU.to and I'm unlikely to be able to get an answer from management, but those of you long ECU.to would be wise to write, phone, tweet or whatever the top people there and get an answer on this, because this quarter's sales number was weird compared to the ounces sold numbers.

Venezuela's 2009 budget, oil revenues, deficits and all that jazz

Of all the black box economics available to play around with in South America, perhaps the worst (should that be 'best'?) is the projected revenues that Venezuela expects in any given year from its state-run oil company, PDVSA. Not only are there a mountain of pricing variables, you have the neverending argument about actual production levels in the country, basically revolving around what actually constitutes a barrel of oil. Suffice to say that, if you so wish, you can "prove" that Venezuela is in great shape financially or about to go bankrupt next week just by choosing your own favourite dataset. Thus what is needed by people who don't live in partisanlandia is a fair estimate of how oil revenues are going and, eschewing as much politics as possible, a fair estimate about the state of play in the country's economy as a result.

All that preamble is to introduce this short but very informative report from Banca y Negocios (run by consulting firm Aristimuño Herrera & Asociados) that makes as good an estimate as any I've seen recently about the whole oil revenues caboodle. It's Spanish language, but there are plenty of numbers to help those who aren't so proficient (hey...there's always Google Translate). The whole thing is very much worth reading, but here are three points made:

• Oil revenues estimated at U$19.57Bn less than the original 20o9 budget and are now roughly equivalent to 2005 revenue levels

• However, government spending is up some U$32Bn from 2005 level (The shortfall is to be made up from tapping the Fonden fund, the extra revenue from the 3% rise in sales tax and by looking to Venezuela's private banks as a credit source)
  

• The adjusted budget barrel price of U$40 takes the pressure off PDVSA as the prime mover of revenue collection and will allow the company to get on with its job. It will also allow revenues to flow into FONDEN if the Venezuela basket price rises above $40/bbl.

There are plenty more in the link. The report sets out good ballpark estimates and doesn't try to thrust any ideology down your throat, thus it is recommended. It also gives me yet another reason to suppose that 1) Venezuela is not under any great fiscal pressure this year (this will come as a disappointment to many) and 2) a devaluation will happen in the second half of this year if oil prices don't pick up. As such, inflation will become a headline-grabber.

May you live in interesting times.