ECR Minerals (LON: ECR) shares have dropped 20% in London today as they make a press release. Which contains that dreaded phrasing “not been as encouraging as we would have hoped.” We have noted before around here that there's an art to reading corporate announcements, there's a special language used. The correct translation of this phrase is closer to “Ooops, we lost your money, sorry” than it is to anything else. Not that a corporate press release ever does quite put it that way but it would be refreshing if someone did occasionally.
As to what ECR does it's an exploration stage junior gold mining company with research programmes in Australia. By junior here we mean not producing anything as yet. Well, someone has to go out and find out what actually is in those hills over there and that's what junior exploration miners do. The problem is that sometimes there's nothing of any great interest found - that's the point of doing the exploring after all. But the costs of going looking have still been incurred even if nothing has been found.
This matters, for all the costs of a junior miner are going to be met from shareholder capital. Until a mineral reserve has been proven there is no asset that can be borrowed against - it's by necessity all funded from risk capital. But what that means is that if nothing has been found then that shareholder capital has still been spent with nothing to show for it.
ECR Minerals share price from London Stock Exchange
As we can assume from that share price chart not much of interest has been found in ECR's research programmes. This could change of course, it might be that the next hill is that proverbial gold mine.
In detail we get told: “have and will continue to be used to rank prospects prior to drilling.” and to translate that out of corporate speak their admission is that they weren't really - not really - checking where they were drilling before they spent the money on the drilling. But they really do promise to do that properly in the future. And maybe they will at that - nothing so good as losing money to make you change your ways.
And this is almost Biblical in its glory: “In contrast to the Company's historical projects in Victoria, we believe the prospects identified for drilling and further mapping and sampling in Queensland are of superior width and consistency” We can hear the echoes of “Next year in Jerusalem” there.
The basic ECR Minerals problem here is that they didn't find very much of interest when they spent the money to go exploring. Ah, well, that happens. But when it does it really does mean that the money's simply gone.