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ECU Silver: Short - Empty Vessels Make the Most Sound

|Includes: Ecu Silver Mining In (ECUXF)

ECU Silver - Strategy: Short
Everything but the “helicopter”..

  This company is a silver producing company that trumpets its production but doesn’t include said production in its earnings statement
  The company is highly indebted with interest payments per quarter that currently exceed its entire cash holdings
  Recent results showed continuing losses despite “forex gains” which presumably come from revaluing the debt 
  Production, for what its worth, is feeble to say the least and artisanal at best
  Executives at the company are at the trough for options in a massive way for a company with ostensibly no production and little prospect thereof. They are paying themselves as if they were working at a successful major rather than a teetering junior
  The company needs some money fast for debt repayment and servicing so shall need to issue shares in the very near future
+The inferred resource at ECU Silver’s Mexican project is very large…. 
  ….however the company likes to rhapsodize about its massive sulphides, which unfortunately are at 1,200 Meters (nearly 4,000 ft) underground 

This TSX main board listed miner is engaged in gold, silver and base metals exploration and development, and has its mining operations in Mexico. It owns three properties (two wholly and one in a JV) located in the Velardeña mining district. 


Chief amongst ECU’s “prospects” is the Velardeña Property that contains the Santa Juana mine. The property consists of 20 contiguous mineral concessions totaling 233.2 hectares. The company is actively mining on the property and processing the mined material at the oxide mill acquired during in the second quarter of the year. The doré bars that are generated are being sold (but not reported in the earnings statement). In 2004, ECU purchased a flotation mill located in the town of Velardeña and has been processing stockpiles of mineralized material through this flotation mill. 

Infrastructure at the Santa Juana Mine site comprises office buildings, a warehouse, machine shop, electrical substation, compressor, and various mobile underground mining equipment. This plant started treating base metals concentrates in June 2004 and has been expanded since then by adding extra flotation capacity, a new tailings pond and a newly completed laboratory.

The company is currently operating two mills, the Oxide Mill and the Sulphide Mill.


The Chicago property is located approximately 2 km south of the Velardeña property. The property consists of eight contiguous mineral concessions totalling 315.88 hectares. The Chicago Property is located approximately two kilometer south of the Velardeña Property. This property contains the historical Los Muertos-Chicago mine and consists of eight contiguous mineral concessions, totaling 315.88 hectares. The company has full title to the claims. No exploration activity was undertaken in the period.

San Diego 

The San Diego property is located 9 km northeast of ECU's Velardeña property in the municipality of Cuencame, Durango State, Mexico. The property is in a JV with Golden Tag Resources (GOG.v) that has a fully-vested 50% interest in the property interest under the JVA. On November 2, 2005, ECU and Golden Tag entered in a joint venture agreement whereby Golden Tag could a 50% interest in the San Diego property by incurring a total of US $1.5 million in exploration expenses in increments of US $500,000 per year over three years. As of May 31, 2007 at the end of the initial drilling program, Golden Tag had incurred expenses on the property totalling US $1.16 million. As of the end of November, 2007, Golden Tag had incurred total expenses of US $1.679 million and has met the obligations under the joint venture agreement. Subsequent to the earn-in period, Golden Tag and ECU have joint ventured exploration and development of the property and are paying for their proportionate share of expenditures.
Golden Tag had incurred total expenses of US $2.355 million (unaudited) as of November 30, 2008. For its part, ECU who is the operator of the project, had incurred total expenses of US $968,340 (unaudited) over the same period to November 30, 2008. ECU remains the operator of the project.

The property is comprised of four contiguous mineral concessions totaling an area of 91.65 hectares and contains the historic La Cruz-La Rata and El Trovador mines as well as a number of other shallower shafts. In Golden Tag’s opinion the San Diego Property is primarily a base metal deposit, with silver as a co-product. Currently, ECU Silver is not mining or milling any material from the San Diego Property.

The San Diego Property hosts published NI 43-101 compliant resources of: 

vIn the Indicated Resource category - 371,000 tonnes grading 245 Ag g/t, 1.80 % Pb, 1.33 % Zn and 0.339 Au g/t, representing a total of 4.25 Million ounces of silver Equivalent (oz.Ag EQ), or 371,000 Tonnes grading 356 g. Ag EQ/t (11.44 oz. Ag EQ/t).

vIn the Inferred Resource category -21,632,000 tonnes grading 110 Ag g/t, 1.84 % Pb, 2.21 % Zn and 0.134 Au g/t representing a total of 214.3 Million ounces of silver Equivalent (oz.Ag EQ), or 21.6 Million Tonnes grading 308 g. Ag EQ/t (9.91 oz.Ag EQ/t).

Mineral Resource Summary - Velardeña District Properties  

ECU Silver refers to its resource as the Velardeña District Properties (the extent of this resource, prepared by Micon, is shown below). However, some digging into the NI 43-101 shows that it has blended into these numbers those from the San Diego property which is not only 50% owned by Golden Tag Resources but is currently in a state of legal contention, as we shall detail later. While San Diego’s indicated resource is only 4.25mn ozs (of which 50% pertains to ECU) and thus only a lowly one eighteenth (or around 6%) of ECU’s M&I resource, the Inferred resource however of 391mn silver equivalent ozs includes 107mn ozs (25% of the total inferred silver equivalent ozs) pertaining to ECU at San Diego (the asset now in dispute). 

  Gold Silver Silver Equivalent Lead Zinc Silver Equivalent 
  (Au) (Ag) (Au+Ag) (Pb) (Zn) (All metals ) 
 000 oz 000 oz 000 oz 000 lb 000 lb 000 oz 
Measured 203 9,463 23,606 12,780 22,023 25,249 
Indicated 90 6,665 12,880 13,44414,707 14,456 
M&I 293 16,128 36,486 26,22436,730 39,705 
Inferred 1,759135,400 248,109 1,002,3891,214,142 391,024

The key in looking at the ECU resource is to pass over the lead and zinc (after all they scarcely mention it) and instead zero in on the measured and indicated gold and silver resource that is 36.4mn ounces. 

A little perspective

First we might look at Silvermex Resources. Its market cap is around $17 mn at the current time and it has a M&I resource of silver of 10.06mn ozs (with a grade of 101 g/t). Aurcana which owns the Shafter mine has a M&I resource at that mine of 24.6mn ozs grading at 271g/t. Its market capitalization is around $24mn. It does not take a degree in mathematics to work out that investors are paying ways over the odds to be positioned in ECU Silver, and yet, try as we might, its negatives are more glaringly obvious than its positives.

Journey to the center of the Earth

Our alert sensors started to go off when we saw a cross section of the main deposit (shown on the following page) in ECU’s investor presentation. While one looks at cross-sections like this all the time, the devil is in the details. In this case it is the scale. It is a case of that old textile trade adage, “Never mind the quality, feel the width”. In that case it is “feel the depth for the “Massive Sulphide Intersections” shown on the map are at 1,200 metres depth. For the non-metric savvy this is nearly 4,000 feet underground. A giveaway is that the company states there is “1km of vertical continuity” and veins are parallel and steeply dipping”. These veins start at 200mn, which is a depth where many silver miners stop drilling. 

Now while the world has deep mines (the Witwatersrand mines in South Africa have reached a maximum of around 3,500 metres) such deep mines come with enormous problems (heat, water removal, rock pressure and accidents with frequent fatalities due to rock bursts). Moreover these are gold mines. No-one would bother going to depths of 1,200 metres for silver extraction because it is just not worth the effort, when there are masses of undeveloped silver deposits of size much nearer the surface (MAG Silver being an obvious that springs to mind. Certainly one would not bother brining to the surafec the large quantities of zinc and lead that come along with the deal in a mine at this depth. That means that this part of ECU Silver’s inferred resource remains in the realm of Jules Verne-like imagination and deserves mention in a geology textbook rather than in a serious estimation of mine viability. 


To say that ECU Silver is an artisanal miner is almost to exaggerate its output. Production might be higher if they closed the mill and broke out the gold pans and all headed down to the local creek.

It latest report on operations for the month of September showed the Oxide Mill had its highest throughput since start-up and treated 15,545 tonnes of mineralized material at an average rate of 527 tonnes per day. This performance translated into the largest amount of gold to date, being 702 ounces of gold (representing a very anemic 1.44g/t), a 42% production increase over the month of August. Silver increased by 7% over the prior month to 13,744 ounces for September (an uninspiring grade of a mere 28 g/t). 

However, the amount of gold should best be considered as an annualised amount of 8,400 ozs, making it one of the world’s smallest gold mining operations with pretensions to greatness (and a market cap of over $250mn). The silver output is even more derisory. 

We almost had to restrain a chuckle, but it turned into a guffaw when we saw the results from the recently reactivated sulfide mill. The company claims that with the significant increase in lead and zinc prices, its sulphide stockpiles “have become an attractive opportunity to enhance revenues”. In September, the sulphide mill treated 4,124 tonnes of mineralized material to generate 48 tonnes of lead concentrate (grading 9.1 g/t gold, 5,780 g/t silver and 28% lead) and 42 tonnes of zinc concentrate (grading 1,077 g/t silver and 43% zinc) and 315 tonnes of gold/pyrite concentrate grading 18.61 g/t gold and 161 g/t silver. The lead and zinc concentrates will be sold to smelters and most of the 188 ounces of gold (yes, 188 ozs, no zeros missing) contained in the gold/pyrite concentrates will be treated further, resulting in “additional doré bars” after roasting and leaching. This also implies that the output will be less than 188 ozs. Interestingly in relation to this latter “asset” the September results statement makes the following comment “the company has reflected its gold pyrite material-in-process inventory at a net realizable value of zero. As such, it has recorded a write-down of inventory of $664,851”.

To wind back the clock a little we find the company reported its dore bar fabrication for the month of July with the output of a measly 32 dore bars with a total weight of 709 kg. The assays of the dore bars indicated that they contained a total of approximately 541 ounces of gold and 14,875 ounces of silver. To that date, 182 bars had been generated with a total weight of 3,780 kg containing 2,245 ounces of gold and 76,123 ounces of silver. This is embarrassingly small.

Productivity of the oxide operations remains was 14,193 tonnes milled during 28.5 operating days in July giving an average of 498 tpd. Recoveries for gold and silver were 68% and 52%, respectively versus 75% and 40% in June.

The oxide mill handled up to 578 tonnes in one day and had no problem handling a steady feed above 500 tpd;

Grades and recoveries for the mineralized material from the Santa Juana, San Juanes and Chicago mines were very good considering an important portion of the material from the Santa Juana mine was from the Transition Zone which lies between the sulphide and oxide sections of the mine and thus contains sulphides that leach poorly

A portion of the tonnage (47 tonnes) milled came from high-grade roasted pyrite/gold concentrate material. Results show that the recoveries for the roasted pyrite/gold concentrate material were extremely high, most likely above 90%, despite previous laboratory metallurgical tests that indicated potential recoveries between 50% and 75%. Test work on the roasted pyrite/gold concentrate material is continuing. Cynics would call this “high-grading”.

The key thing to note with these “reports” is that no mention is made of production costs. The company is clearly obfuscating here. Such paltry output would be called a test-mine by any other company. In such small quantities the production is clearly taking place at a loss and we well might wonder why. If nothing intellectually is being achieved by the operation (e.g. showing which way to head for an eventual proper mine) and nothing is being achieved financially beyond ongoing losses then one might suppose the production is there to dangle beads and mirrors in front of investors and justify (if one could ever justify) the gargantuan option issuance to a management team that only succeeds (indeed excels) at losing money. 

Funky accounting

The output of the Velardeña property has a touch of the magical about it. 

The audit trail that leads to this interesting situation is verily like breadcrumbs dropped in the forest. The September results rather cryptically say: “Deferred costs for the Velardeña property have been offset by the related revenues. During the nine-month period the total of such revenues was $4,283,994. The cumulative amount of such revenues for the Velardeña property is $15,785,136”.

Hmm.. what does this mean? A look at the income statement shows no revenue whatsoever. But then the company boasts of its production. Meager though this output is it must produce some income, unless it is not sold. However, if it is not sold then it should be in inventories and there are no signs of these. The gold production in September alone would have been worth around US$680,000 at prevailing prices for gold while the silver should have gleaned over US$200,000. Small stuff but annualized it would amount to over $8mn which would provide some comfort to nervous creditors and even more nervous shareholders. However, showing the production would also necessitate showing the production cost and this is where the obtuse language of the results statement (which by the way did not generate a press release from a company that is notoriously fast on the trigger with press releases when it comes to its “production”) needs to be examined. Now $4.2mn worth of revenues in the nine-month period are enough to counter the losses incurred but not if we cannot say what the production costs were. By what piece of magic can revenues and costs not be reported. 

We strongly suspect that ECU Silver’s output is being made at a loss. Moreover how can $15.7mn in accumulated revenues over the year’s be swept under the corporate rug with a glib statement like “Deferred costs for the Velardeña property have been offset by the related revenues’? What is “deferred” about these costs if they are being incurred at the current time in production. And where is that production going if not for sale? Certainly not to inventory. The old saying that “What happens in Vegas, stays in Vegas” seems to have been rewritten by management with Velardeña in mind.

In a final comment we would note that the value of the Velardeña mine ($59.223mn at the end of September) includes $27.161mn worth of “deferred costs”. This is up roughly $4mn since the start of the year, thus roughly corresponding the aforementioned deferred costs related to production. Is the company bumping up its book value by the amount that it is spending mining the metals that are “being sold” but seemingly disappearing into the financial ether? This gives a whole new slant to the term “creative” accounting.

Then there is the shareholder’s capital. This amounts to $131mn in issued share capital, less $100.385 in accumulated losses. To this is then added an amount called “contributed surplus” that represents $24.55mn. Now the intriguing thing about the latter number is that without it the liabilities of the company would almost equal to the shareholder’s funds, and moreover the shareholder’s funds would be a mere 10% of the current market capital representing a price/book of 10 times. That is if you even can believe the asset values in light of the aforementioned “deferred costs” being used to augment the asset values.

In the September accounts the “Changes in contributed surplus” are shown as follows:

Amount $
Balance - December 31, 2008 14,634,913

Stock-based compensation 1,385,643
Warrants issued in prospectus financing 5,600,000
Warrants issued in private placements 861,551
Warrants issued on conversion of convertible debentures 2,351,376
Warrants issued on conversion of notes payable 255,665
Transfer to share capital, exercised options (538,650)

Balance - September 30, 2009 24,550,498 

What does this mean? That unexercised warrants and options, that may never be exercised, are inflating the capital account of the company. What’s more the company seems to be accounting for them at the exercisable value when surely a warrant/option is only as good as its market value (which might be infinitesimally small should the warrant or option be way out of the money). Thus we regard a goodly chunk of the shareholder’s funds element of the balance sheet to be unfounded in good accounting practice. 

We are not bothering to create any estimates going forward for this company for that would be an acquiescence to the current accounting and add the presumption that the numbers looking backwards have some veracity on which to base a view looking forwards. One cannot make bricks without straw. 

Legal problems

We normally do not dwell on minor legal disputes relating to companies we cover. However “minor” is “major” when the party charged has as little financial wherewithal as ECU Silver currently does and if the legal matter is the result of claims of sharp practice then the investing public deserve to know. 

The plaintiff in this case is Golden Tag Resources (GOG.v) a junior exploration company exploring for high grade gold and silver deposits at the San Diego silver project in Durango State, Mexico; the Aquilon Gold Project in James Bay, Quebec; and the McCuaig gold project in Red Lake, Ontario. 

In late June Golden Tag Resources gave a formal notice to ECU Silver Mining demanding arbitration consequent upon having determined that ECU, the operator of the San Diego joint venture had failed to remedy fundamental breaches of the option and joint venture agreement signed on November 2, 2005 in respect of the San Diego property. 

Golden Tag's counsel, in a letter dated March 20, 2009, notified ECU of these breaches and Golden Tag subsequently received assurances that the breaches would be rectified within the requested 30-day period. Despite several follow-ups, the breaches have not been remedied. 

Among the breaches of ECU which Golden Tag claims will be substantiated at arbitration are that ECU :

vAllowed a third-party charge against the Property contrary to the JVA.
vInvoiced Golden Tag for joint-venture expenses but did not remit the funds to pay joint venture suppliers on a timely basis, some suppliers still being unpaid.
vFailed to timely contribute its equivalent pro rata share of funding to the joint venture.
vFailed to follow proper procedures and timely financial reporting.

Due to these significant breaches, Golden Tag plans to seek the right to assume operatorship of the San Diego property, dilution of the interest of ECU and/or compensatory damages and other relief. ECU Silver has received a “cease demand” from Golden Tag Resources, which has stopped it testing the stockpiled ore at the San Diego property. These claims are serious as they put a substantial proportion (25%) of ECU’s inferred resource at risk of sequestration. These also raise issues about the financial probity of ECU in its dealings with Golden Tag and suppliers. 

Debt problems

The company has $23mn in debt at end of June 2009 that it had to restructure in July as it could not make principal payments. Cash on hand was less than $400K. 

In August 2009 the ECU Silver restructured its long-term debt facilities with its principal lender. The amount outstanding at the time of the restructuring was $15,750,000 US Dollars, together with an additional amount of US$868,541 representing interest due. These were consolidated into a new loan of US$16,618,541. No principal repayment is required until November 30, 2010 following which principal will be repayable in equal monthly installments for 12 months. Interest is payable quarterly and is calculated at the greater of 12% and 1-month LIBOR plus 6%. The effective rate of interest on the loans is 12.8%. The loans are secured by a first mortgage covering the current mining properties of the Company's Mexican subsidiaries, except the San Diego property, as well as the current and future facilities constructed thereon.

Legal problems with Golden Tag are not the only ones that have cost the company dearly. On May 11, 2009 the company settled legal actions related to title of four mineral concessions on the Velardeña property. Under the terms of the settlement, ECU Silver agreed to pay a total of USD$6mn in a series of six payments of USD$1mn, commencing May 19, 2009 and running semi-annually thereafter ending November 17, 2011, without interest. The settlement allows for an optional early termination of the payment schedule with a balloon payment of USD$4mn on November 17, 2009. Under the terms of the contracts, a 30% interest in the title to the concessions will transfer to the counterparty should the company fail to make the payments agreed there under. This sounds to us like two different parties may have claims against the properties of ECU (excepting San Diego) should the company default. We find it hard to imagine that the $4mn balloon payment will be made next week in light of the company’s scant cash resources at the current time. 

In any case the payment schedule from now onwards will be rather heavy with $1mn due next week, substantially gutting the company’s cash “pile”. The pace heats up from late 2010, so production had better ramp up before then or the mine goes to the creditors, if they would want such a measly producer. The interest rate on the term loan, meanwhile, is high for current standards and represents a considerable drain on company finances with interest payments of around $2mn per annum. 

Moreover, we might mention that the company had $6mn worth of convertible debentures outstanding in March that were converted into around 10.5mn new shares and warrants. 

Thus total liabilities at the end of September stood at CAD $28.6mn of which CAD$6.225mn was accounts payable (an exceedingly large amount for a supposedly non-operating miner) and there was $1.6mn in the current portion of the long term debt. Current asset were a mere CAD$2.38mn, of which CAD$1.18mn were accounts receivable (for what was not detailed). This gives a quick ratio that would give any auditor sleepless nights and even more concern to investors. Maybe ECU Silver’s directors manage to nod off counting their warrants and options to lull themselves. 

Recent performance

Everyone knows that silver has made a remarkable recovery since its 2008 lows recently passing the $17 per oz level. ECU Silver has been a relatively recent arrival at this party having massively (and deservedly) underperformed the physical silver ETF over the last year as shown in the chart below.

Easy Come, Easy Go

We seldom speak of director’s transactions in a company’s shares but at ECU Silver there is a mismatch between the enthusiasm projected to investors and the reality of what director’s are doing with their own positions. It’s a case of “do as I do, not as I say”. 

In fact the directors of the company do not impress us very much in the size of their core holdings. Options seem to be a “hot potato” that are realized ASAP (for a profit, of course). The information below is sourced from

Stephen Altman started the year with 3.8mn options and was granted 1,000,000 further options in October.

Options (Common Shares)  

v2009-10-22 Grant of options +1,000,000@0.80cts taking his holding to 4,800,000 options  
Michel Roy started the year with 6,220,000 options and exercised 1.5mn in May. He then sold 1.16mn of the ordinaries received from the exercise straight away. He had held 2,080,693 ordinary shares before this conversion so the net increase was 340,000 ordinary shares. Mr Michel was then granted a further 1,000,000 options in late October taking him back to 5.72mn options held. 

Common Shares  

v2009-05-21 Exercise of options +1,500,000@0.3750 to take his option holding to 3,580,693 options  
v2009-05-22 Disposition carried out privately -1,160,000 ord shares taking total held to 2,420,693 ord shares  
Options (Common Shares)  

 2009-05-22 Exercise of options -1,500,000@0.375cts to take his holding to 4,720,000 options  
  2009-10-29 Grant of options +1,000,000 exercisable @0.80cts, new balance 5,720,000 options  

Mason, Michael Thomas was a busy beaver, selling stock like it was going out of fashion. 

Common Shares  

2009-05-26 Disposition in the public market -90,000@0.64cts taking his holding to 460,000 shares  
2009-10-16 Disposition in the public market -75,000@0.77cts taking his holding to 385,000 shares 

2009-10-23 Disposition in the public market -50,000@0.78cts new balance 335,000  

2009-11-05 Disposition in the public market -50,000@0.79cts new balance 285,000  
2009-11-09 Disposition in the public market -25,000@0.88cts new balance 260,000  

2009-10-29 Grant of options +100,000 exercisable @0.80cts to take total to 795,000 options  
Talal Chehab started the year with 495,000 options and was gifted a further 595,000 options in July 2009 taking his balance to 1,090,000 options. Then he was issued a further 50,000 options in October 2009.


2009-07-30 Grant of options +595,000@$1.00 new balance 1,090,000  
2009-10-22 Grant of options +50,000@0.80cts current balance 1,140,000  

Clifford Belanger had a holding of 750,000 options at the start of the year. In late May he exercised 200,000 options and then in a series of transaction sold all his entire holding of ordinary shares into the market. In late October he was issued an extra 50,000 options. Now he holds 600,000 options and no ordinary shares.

Common Shares  

2009-05-21 Exercise of options +200,000@0.375cts new balance 200,000  
2009-06-23 Sale in the public market -13,500 @0.61cts new balance 186,500  
2009-06-23 Disposition in the public market -10,000@0.60cts new balance 176,500  
2009-06-24 Disposition in the public market -14,000@0.62cts new balance 162,500  

2009-07-03 Disposition in the public market -30,000@0.57cts new balance 132,500  
2009-07-09 Disposition in the public market -32,500@0.52cts new balance 100,000  
2009-09-11 Disposition in the public market -10,000@0.65cts new balance 90,000  
2009-09-15 Disposition in the public market -10,000@0.60cts new balance 80,000  
2009-10-13 Disposition in the public market -20,000@0.67cts new balance 60,000  

2009-05-21 Exercise of options -200,000@0.375cts new balance 550,000  

2009-10-29 Grant of options +50,000@0.80cts new balance 600,000  
What does this all mean? Well, they want the public to buy their shares, but even when the executives and directors are given shares on the cheap via option compensation they can’t wait to get rid of them. Dare we mention that the option issuance is truly massive at this company in light of the fact that it is heavily losing money and has added nothing to its resources through exploration or reserve expansion by other means in recent times. 


Most investors in the silver space keep their eye on the silver price and then compare it to how their stock is doing. Hardcore ECU silver fans have been able to restart the habit in recent times for ECU Silver has risen from its deathbed and hobbles along with the silver price again. However over the longer term they might as well have checked the daily moves in the price of Pez Dispensers (that hotly sought after collector’s item) as compare ECU to the silver price.

ECU Silver is a non-starter in the precious metals production field. Its output is so small as to rank as artisanal (in fact in our recent meeting with Magellan Minerals they spoke of one garimpiero near their project that was producing three kilos per day – far more than ECU).

It is hard for us to fathom a company with such:

va large market capitalization

vsuch a feeble silver-equivalent Measured and Indicated resource

vsuch infinitesimally small production

vdiabolically poor grades for both silver and gold currently “produced”

vNo identifiable cashflow and large visible outflows

vwhile having such a high debt burden compared to liquids

va quick ratio of which nightmares are made

vunique accounting practices

vand yet such gushingly generous executive remuneration in light of the above

The Canadian mining market produces one such story each decade. Maybe ECU Silver is the one this time around. 

When summed ECU Silver is a meager producer at best and a black hole for money at worst. This stock’s dubious qualities are well-known amongst thinking investors in the mining community hence its flatlining through 2009 (until the last few weeks) despite the rally in precious metals. ECU Silver is a Short in our Model Mining Portfolio with a twelve-month target price of CAD 45 cts.

Important disclosures

I, Christopher Ecclestone, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report.  
Hallgarten’s Equity Research rating system consists of LONG, SHORT and NEUTRAL recommendations. LONG suggests capital appreciation to our target price during the next twelve months, while SHORT suggests capital depreciation to our target price during the next twelve months. NEUTRAL denotes a stock that is not likely to provide outstanding performance in either direction during the next twelve months, or it is a stock that we do not wish to place a rating on at the present time. Information contained herein is based on sources that we believe to be reliable, but we do not guarantee their accuracy. Prices and opinions concerning the composition of market sectors included in this report reflect the judgments of this date and are subject to change without notice. This report is for information puposes only and is not intended as an offer to sell or as a solicitation to buy securities. 
Hallgarten & Company or persons associated do not own securities of the securities described herein and may not make purchases or sales within one month, before or after, the publication of this report. Hallgarten policy does not permit any analyst to own shares in any company that he/she covers. Additional information is available upon request. 
© 2009 Hallgarten & Company, LLC. All rights reserved. 
Reprints of Hallgarten reports are prohibited without permission. 

Disclosure: No positions