Ecometals stock price drop with poor drill results

VANCOUVER — The past nine months have been a bumpy ride for Ecometals (EC-V): its share price has gone from 10¢ up to $1.34 and then down to 35¢.

The company has been working to confirm ownership and exploration permits for its Rio Zarza gold project following Ecuador’s mining review. Located in Ecuador’s Zamora Chinchipe province, Rio Zarza comprises two mineral tenements covering 11.4 sq. km adjacent to Kinross Gold’s (K-T, KGC-N) sizable Fruta del Norte gold-silver deposit.

Ecometals had made steady progress since last June and began drilling in January. The company’s stock price rose as it moved towards exploration.

The stock price then fell from a high of $1.34 in early January to 60¢ by Feb. 19. During that time period, the company announced plans to sell its 90% stake in the Condor Gold project for US$9 million, and then delayed that plan.

The Condor Gold project covers 71.4 sq. km and hosts a National Instrument 43-101 compliant resource of 27.89 million inferred tonnes grading 0.95 gram gold per tonne.

The prospecitve buyer is Alca, a private British Columbia company that is owned by Albrook Gold and Americas Gold Exploration. The acting president and CEO of Albrook Gold is Robin Slaughter, former CEO of Ecometals (when the company was still named Goldmarca). The deal has still yet to close.

The company’s stock price, however, on Feb. 22 jumped by 84% or 52¢ to close at $1.12. On the same day, the company issued a press release stating it had “intercepted a significant intersection of porphyry-epithermal style mineralization,” and “the hole has encountered in excess of a 50-metre intersection of a strong zone of mineralization.” Ecometals also added it would increase its drilling program from 1,200 metres to 2,000 metres at Rio Zarza “based on this very encouraging result.”

Then, on March 26 the company’s stock price fell from 72¢ to close at 39.5¢. On that day, the company issued a press release stating the first two diamond drill holes at Rio Zarza indicated “uneconomic levels of gold,” though added that the results will help in future drilling.

While there is no indication the company broke any regulations with its optimistic press release, it has in the past. The company was forced by the B.C. Securities Commission in mid-2009 to issue a clarification of a release after it had referred to mineralized material at its Serra do Navio property in Brazil as “ore” and said “project design work is well advanced” when it had neither a current mineral resource nor feasibility study.

Before its stock price dipped, the company accelerated the closing date of its outstanding warrants. Ecometals was allowed to do so after its stock price remained above 90¢ for 20 or more consecutive days of trading. It issued 6.4 million shares at 65¢ for proceeds of $4.15 million by the time the warrant period closed on Feb. 26.

Ecometals also has manganese, gold and iron projects in Brazil. The company has 72 million shares outstanding.