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ECR Minerals excited about Itogon and SLM projects

Published: 23:54 30 Sep 2014 AEST

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It's a potentially exciting time for investors in ECR Minerals (LON:ECR) as exploration continues apace at the mineral exploration and development firm's two gold projects, while the boss says he's “cautiously optimistic” about the future price of the precious metal.

ECR has come on leaps and bounds following a hefty restructuring last year that saw three of four directors ejected and a revised strategy put in place.

The upshot of it all was a renewed focus on gold exploration, and 2014 has seen encouraging results from the Itogon project in the Philippines and the Sierra de las Minas (SLM) project in Argentina.

The most recent news from SLM centred on eye catching assay results from sampling in the JV-14 zone, one of the property's three main gold prospects. The results suggest that further investigation is warranted.

Indeed, medium to high grades and a modest-sized deposit that is relatively easy to exploit are what ECR is looking for at SLM, explains Clayson.

The plan is to use early production at SLM to provide funding for the advancement of other assets such as the Itogon gold project in the Philippines.

"The two projects (Itogon and SLM) complement each other quite well and we are excited about both of them for different reasons," says Clayson.

Itogon is potentially much larger scale and would consequently take longer to develop. Initial results, including from drilling earlier this year and four phases of channel sampling, have been encouraging.

ECR can earn up to 50% of Itogon and in order to do so has to convert the current exploration permit into a mining licence within a period of five years, which commenced in December 2013.

Clayson also highlights the scope for Itogon to attract a larger company and perhaps even make ECR an acquisition target.

"Itogon looks as though it may have the sort of attributes that could make it interesting at some point to a larger player in the industry and so that could be a nice exit for everyone - most importantly shareholders," he says.

In terms of financing, ECR looks fairly comfortable, having just secured up to US$10mln through a convertible loan facility with YA Global Master - an initial US$1.5mln of which has been drawn down immediately.

This initial draw-down will mainly be used for further work at Itogon and SLM, although the company "continues to look at other potential investments with a very selective eye", says Clayson.

As has been well documented, recent funding pressure on the junior mining sector has thrown up some opportunities for quality acquisitions for those who can afford it, and on reasonable terms.

"The thing is, when the market is hot, opportunities become very difficult to realise at sensible prices. Perhaps now, it is easier to do good value deals," suggests Clayson.

ECR is focused on gold - a precious metal which the chief executive says he's cautiously optimistic will continue to enjoy a period of "relatively sustained interest" as an investment.

"I don't think gold is going to go back to the wilderness years of the 1990s any time soon but then again nor am I banking on a leap to several thousand dollars an ounce.

"My view is that there are opportunities to create value at the current gold price and really we've got to look at projects conservatively on the basis that to be worth doing they have to be of economic interest at the current price and not dependent on a massive leap upwards, and ideally we'd like to build in a bit of leeway such that even if the gold price fell further the project could weather it."

Another marker for investors to look forward to is the release of Mercator Gold Australia from administration. The Australian subsidiary of ECR benefits from tax losses estimated at around A$80mln.

This is a legacy issue for ECR with a complex background that predates ECR’s current management, but in a nutshell means that if Mercator Gold Australia establishes profitable business activities following its release from administration, then up to A$80mln of profits could be shielded from tax using the losses.

As Clayson colourfully puts it, Mercator Gold Australia is a legacy issue which has a "benefit in the tail" rather than a "sting".

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