Trading Note: Eloro posts MRE, share price drops

Eloro (ELO.T) has just posted its maiden Mineral Resource Estimate with a headline 1.15 billion in situ silver equivalent ounces at its Bolivian project, Iska Iska. The resource is open in all directions.

As I expected, Eloro shares have been selling off on the news. As I write ELO is down $0.24 on a volume of over 400,000 shares. Welcome to the junior exploration sector.

The fact is that this MRE has landed in the upper middle range of expectations. It is excellent but not “over the top” and the speculative end of the market is disappointed with anything less than over the top.

Substantively, the MRE is excellent as to the current size of the resource at Iska Iska, grades a touch lower than expected, the model’s strip ratio is estimated at 1:1 which suggests profitable mining. The silver economics in the release are based on $22.52 silver, silver is trading above $24 and touched $25 earlier today.

The tin side of the Iska Iska story does not feature in the release. “The Blob” and the large domain of low grade tin have not been drilled enough to be included in the MRE.

The real impact of the MRE is not, at the moment, well understood by the market: the MRE is 3rd party confirmation of the drill results ELO has already posted and a conservative model of that resource.

My view is that Iska Iska will be bought by a much larger company. As a matter of due diligence, such a potential buyer will require a 43-101 compliant Mineral Resource Estimate. Now they have it.

The retail end of the market often “sells on news” and there is a bit of a cascading effect then the Share Price drops below $3.00 and the stock is no longer marginable. At a guess, the current below $3.00 price will be transient and offers a significant opportunity to join the Eloro journey.

(Full Disclosure: I picked up shares at $2.67 down $0.41 on the day.)

Disclaimer: This is not investment advice. I am not an investment professional. I am down about 30% at the moment. I will write about companies that I hold. I will disclose any holdings. Do your own due diligence. Do it hard. Call the CEO.

I currently hold shares in ELO.V and while I have no plans to sell anytime soon (actually I am buying), I reserve the right to take profits as they arise.]