Historic Q2 for Etruscan can’t lift shares

Despite its second quarter representing a historic time for Etruscan Resources, (EET-T) the company failed to gain any market traction as a bearish trend continues to gather momentum in the overall market.

Etruscan’s second quarter saw its Youga gold mine in Burkina Faso swing into production bringing in more cash flows to company coffers.

The company reported net income of $13.9 million or 11 per share compared to $800,000 or a penny a share for the same period last year.

A net loss, however, was incurred for the six months ending May 31 of $22.6 million or 18 per share compared to a loss of $16 million 16 per share for the six months ended May 31, 2007.

A significant chunk of that loss came from a non-cash expenses of $14.9 million related to the unrealized loss on financial derivative instruments and $1.5 million related to stock-based compensation.

Looking ahead, production from Youga should be the key driver to the company’s market cap.

Youga sits roughly 180 km southeast of the capital Ouagadougou and roughly 7,800 oz of gold were recovered in the second quarter with 6,200 oz poured into dor bars.

At capacity the mine will process 83,000 tonnes per month for an average of 6,700 oz of gold.

In all, 4,756 oz. of gold were sold during the quarter for gross sales of $3.35 million.

Commercial production came in early July with the gold recovery plant operating at projected efficiency with an average gold recovery of over 93%.

Current mineable reserves at Youga are 6.6 million tonnes with an average grade of 2.7 grams per tonne containing 580,000 ounces of gold. That resource comes from five separate pits.

Etruscan spent roughly $17 million in development activities related to the Youga Gold Mine during the quarter.

Etruscan is also hopeful that one of the five satellite gold deposits it has found within a three-km radius of the plant can be put into its resources and reserves in the near future.

Beyond those close confines, it is exploring 35 km northeast of the mill at an area known as Bitou. Bitou lies on the northeastern section of the Youga gold belt and the company says it has identified mineralization with a resource potential extending over a strike length of two km.

Highlights from second quarter drilling there included 22 meters grading 2.8 grams gold per tonne,14 meters grading 2.6 grams gold per tonnes and 2 meters grading 41.6 grams gold per tonne.

If it can prove up a resource at Bitou the ore would provide additional mill feed for Youga.

But Etruscan isn’t only about gold. The company’s Blue Gum diamond project in South Africa is also seeing some action as of late.

During the first quarter mining and processing operations re-started at the Tirisano mine located on the Blue Gum property.

The objective is to achieve a monthly throughput of 100,000 cubic meters of gravel per month from two facilities.

The company managed to recover 5,465 carats from 209,231 cubic meters of gravel with an average value of US$613 per carat for an aggregate diamond value of US$3.35 million.

Etruscan invested $4.3 million in developing the project and another $200,000 in exploration there for the quarter.

While the company has more exploration projects in Burkina Faso as well as Mali and Ghana, perhaps its most interesting exploration play is in Cte d’Ivoire.

The Agbaou gold project there is undergoing a feasibility study to determine the economics of developing a one million tonne per annum mine.

That size would be in the company’s operational comfort zone as Youga comes in at roughly 90,000 oz per year.

Despite its recent social and political problems Etruscan says the country is “one of the most prospective countries for new discoveries in West Africa.”

In all, Etruscan put roughly $9.2 million into exploring its African projects so far this year.

In Toronto on July 11, the company’s shares finished down 3 to $1.73 on roughly 47,000 shares traded. Its shares have moved between $1.52 and $3.50 over the last 52 week period and it has roughly 125 million shares outstanding.