The disappointing year for the shares of ECU Silver Mining (TSE:ECU), (PINK:ECUXF) continues. Since the beginning of 2011, ECU has fallen by 46%. During the last days, the decline continues on large volumes and on no negative company announcements.
Yesterday, the stock drowned to a six-month low of $0.72 on a large for the company turnover of 1.73M shares, exceeding the 30-day average trading volume. The decrease in the stock price has been significant over the last four weeks – ECU has lost a third of its value (33.3%) since early April.
The current market cap of $223M is almost four times larger than the $60M net worth of business. It is very hard for a mining company in the development stage to hold such an overvalued price for long. Before the recent shares’ downfall, the market cap and respectfully the overestimation were even larger.
The analysis suggests that the decline of the stock might continue in the future. Of course, we cannot be 100% certain this will happen. In case ECU Silver comes out with some huge news, some really very positive development, everything could turn around quickly and the shares might start moving up.
For now, however, this is in the sphere of guesses and suggestions. The reality is far more discouraging. As we pointed out in an earlier article, ECU Silver is not in a flourishing financial condition. The company had a long-term debt of more than $13M and ended 2010 with a working capital deficiency of $11.75M.
From a technical point of view, ECU has gone oversold, though it is hard to predict for how long the shares will remain in this position.
