Why Echo Resources Ltd Fell Lower Today

At the time of writing, shares of Echo Resources Ltd [ASX:EAR] are down by 9.09%, to 20 cents per share. Echo Resources is a gold developer, with tenements across Western Australia.

Why did Echo Resources Ltd shares do this?

The company announced its bankable feasibility study (BFS) for the Yandall gold project today. The BFS considered a two-stage open-pit mine across two deposits, producing 746,000 ounces over an 8.5-year life.

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What now for Echo Resources Ltd?

Here are the headline numbers:

 

 

 

 

 

Source: Echo Resources

The numbers look solid.

Assuming an AUD$1,600 gold price, the post-take internal rate of return (IRR) is 147%. Put differently, that’s the return that shareholders can expect for taking on the project. The break-even cost for the first 3.75 years is AU$1,075 per ounce.

It sounds good.

But, how will the company fund the initial capital cost of AU$39.3 million?

It will be a mixture of debt and equity.

That’s putting shareholders off from buying…

The bottom line: I like where the company is going. But it needs to raise capital to put the mine into production. Once that happens, the share price could explode ― especially if the gold price starts to turnaround!

Jason Stevenson,
Resources Analyst, Markets & Money

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Jason Stevenson is Markets & Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options. He originally studied accounting and finance at Curtin University, where he was awarded a first-class honours degree. His professional background stems across high-net-worth, top tier accounting (corporate finance, tax and auditing), and sell-side equities research. Before joining the team at Markets and Money, Jason worked at boutique firms which advised fund managers and high-net-worth clients on where to invest. Whether it’s gold, crude oil, copper or an obscure metal like vanadium, you can rely on an in-depth analysis in Markets and Money. Jason also brings you extensive macro, political and geopolitical analysis from around the world. He leaves no stone unturned when it comes to telling the truth. Jason is also the lead analyst of Gold Stock Trader, a premium service for investors serious about precious metal stocks. Websites and financial e-letters Jason writes for:


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