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.

That weak Bolivian economy again

(H/T to reader JR)

On this link you'll find the second quarter results of GCC, the Mexican cement company that has the biggest market share in Bolivia. It also does business in the USA and Mexico. So let's check the scoreboard to find out how GCC has been doing.

NET SALES (millions of dollars)
		2Q 09		2Q 08		2Q 09 vs 2Q 08			6M 09		6M 08		6M 09 vs 6M 08
Consolidated		175.6		217.8		-19.4%			306.9		369.6		-17.0%
United States		102.9		123.0		-16.3%			165.3		199.2		-17.0%
Mexico		46.2		75.0		-38.4%			89.5		133.5		-33.0%
Bolivia		26.5		19.8		33.8%			52.1		36.9		41.2%

Yes, that does say what you think it says. In dollar terms in the second quarter, sales are down 16.3% in dollar terms in the United States of America. Sales are down 38.4% in Mexico. But sales are up 33.8% in Bolivia. And if we use the Mexican peso (the currency that GCC reports) sales were up 76%, due to the fact that the Bolivian currency is strong...and that's due to the fact that the whole freakin' economy is whupping the rest of South America's tush bigtime. Here are the reasons for the sales figures as given by GCC:

FINANCIAL RESULTS

Net Sales in the second quarter of 2009 rose 3.6% with respect to the year ago period, totaling $2,358.6 million pesos. This was the result of a 6.4% increase in the United States and 76.0% in Bolivia.

In the United States, sales in pesos rose 6.4% compared to the second quarter of 2008 as a result of a more favorable pricing environment in concrete and the depreciation of the peso against the dollar. There was a decline in the residential and public infrastructure sectors, and a slight improvement in the commercial sector.

In Mexico, sales totaled $616.0 million pesos in the second quarter of 2009, a lower figure than in the same quarter of last year. Public infrastructure showed some strengthening, while activity in the residential and commercial sectors declined. The pricing environment in cement and concrete was more favorable.

GCC’s proportional sales in Bolivia rose 76.0% during the second quarter of 2009 compared to the year ago period. This strong growth was due to greater demand in the DIY and commercial-industrial sectors, as well as the depreciation of the peso against the Bolivian peso.

So the next time somebody starts on about that bad economy in Bolivia, tell 'em to STFU, yeah?

Brazil makes a smart move

Remember this chart from a Chart of The Day post last week?

It showed that new car sales all over the region were way down in Janaury/February except for in Brazil. And IKN regular comment-leaver Cesar mentioned at the time the reason for Brazil's relisience, namely tax cuts on car sales from the Lula gov't. The good news today is that Brazil, via FinMin Mantega, has announced that the tax breaks will continue for another three months (to June '09) so as to "preserve jobs and maintain output".

To paraphrase Animal Farm and mash with Nixon; We're all Keynesians now but some are more Keynesian than others.