Contemporary Issues in Accounting: EAR Share Price Analysis Report

This report provides a comprehensive financial analysis of Echo Resources Limited (EAR), an Australian mining company listed on the Australian Stock Exchange. The analysis focuses on the company's share price performance from August 1, 2017, to August 1, 2019, considering various factors impacting its price movements. These factors include changes in revenue and profitability, debt financing, market sentiments, and the company's business operations, including the Yandal Gold Project. The report examines the impact of positive market sentiments, favorable business opportunities, and the company's competitive advantages, such as its high-tech infrastructure and significant mineral resources. The analysis highlights the effects of declining profitability and increased debt on the share price. The report concludes with recommendations for the company to mitigate financial risks, improve business activities, and forecast macroeconomic conditions. The appendix includes share price data and a graphical representation of the share price trends.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Name of the Student:
Name of the University:
Author’s Note:

1CONTEMPORARY ISSUES IN ACCOUNTING
Executive Summary
The aim of the assignment is to conduct a financial share price analysis on the Echoes Resources
Limited which is listed in the Australian Stock Exchange with its ticker symbol as EAR. The
company is into the Metal and Mining Sector whereby the operations of the company is into the
specified business activities. The share price of the company is analyzed based on the corporate
news and actions that might have affected the overall share price performance. The share price
analysis was done for a two-year of time period where relevant changes in the share price from
1st August 2017 to 1st August 2019 was taken into consideration for the analysis. The share price
of the company can be well affected due to the volatile macro-economic conditions and changing
business conditions that can cause volatility in the share price of the company. There would be
certain recommendations that were given the fact that the company materially forecast the
changing macro-economic condition and the associated factors that are affecting and influencing
the overall operations of the company.

2CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Introduction......................................................................................................................................3
Analysis...........................................................................................................................................3
Drop in Profitability and Business Operations............................................................................3
Positive Market Sentiments and Favorable Business Conditions................................................5
Yandal Gold Project....................................................................................................................6
Competitive Advantage...............................................................................................................7
Conclusion.......................................................................................................................................8
Recommendations............................................................................................................................8
References........................................................................................................................................9
Appendix........................................................................................................................................11
1) Share Price Data..............................................................................................................11
2) Graphical Representation of Share Price........................................................................12

3CONTEMPORARY ISSUES IN ACCOUNTING
Introduction
The Eco Resources an Australian Mining Company which is listed in the Australian
Stock Exchange having a gold business in a large and highly prospective ground position in the
Eastern Goldfields of Western Australia. The share price movement of the company can be well
captured and explained within the context of various news and business factors that have
impacted the price movement in this period (Proactiveinvestors UK 2019). Variance in the
earnings of the revenue of the company and the consistent increase in the debt funding of the
company has been some of the key points by which the overall financial risk of the company has
increased. The share price of the company can be well affected due to the volatile macro-
economic conditions and changing business conditions that can cause volatility in the share price
of the company. There would be certain recommendations that were given the fact that the
company materially forecast the changing macro-economic condition and the associated factors
that are affecting and influencing the overall operations of the company (Hotcopper.com.au
2019).
Analysis
Drop in Profitability and Business Operations
Companies that do not deliver successful returns in the form of increased business
activities and profitability in the due course of operations are definitely penalized by the
shareholders of the company in the form of falling share price. The share price of Eco Resources
has been primarily affected due to the fall in the revenue earned by company where the company
has earned very low amount of revenue in the twelve month of time frame (Proactiveinvestors

4CONTEMPORARY ISSUES IN ACCOUNTING
UK 2019). The growth of the firm is definitely speculative where investors speculate that the
firm may find some valuable resources in the due course of its operations that can help him in
turning out the financial position of the company. However, the same is not going well for the
company whereby the share price of the company has considerably fallen to around 27% during
the last year of time frame.
In order to successfully carry out the business operations of the company it is well
important that the companies have a sufficient amount of working capital that is available for the
purpose of carrying on operations of the company. The company has also indeed increased the
financing source with the help of debt financing that in turn has increased the financial risk of the
company. The graph presented below reflects the change in the debt and cash position of the
company for the trend period analyzed.
Cash and Debt Position of Echo Resources

5CONTEMPORARY ISSUES IN ACCOUNTING
In the same trend period where the share price of the company has declined by about 27%
at the same time the market itself has delivered a strong positive 9% return. While the company
aims at delivering better what it can do, it’s worth recalling that even great long-term
investments sometimes underperform for a year or more. If we compare the overall performance
by leaving the last twelve months, we could see a better picture where the share price has
rebounded by 88%, in the last ninety days (Echo Resources 2019).
Positive Market Sentiments and Favorable Business Conditions
The positive market sentiments and the favorable business opportunity that were
available to the company in the time period of August 2017 to December 2017 has been the key
reason that boosted the share price performance of the company. The volatility in the share price
could be well related to the business operations and the new project operations that the company
has started in the trend period which ultimately boosted the share price to a new heights
(Asx.com.au 2019). The favorable business projects that were available to the company and the
positive macro-economic factors including the debt financing that were available to the company
helped the company in improving the financial performance of the company in terms of better
operational revenue and profitability.

6CONTEMPORARY ISSUES IN ACCOUNTING
Share Price Data
Yandal Gold Project
The Gold Mining Company Eco Resources plans to build on Yandal’s Current four year
mine life via the latest round of drilling that would be done by the company. The Echo Resources
has started a new project whereby it would be going for another round of drilling at the Yandal
gold project in the Western Australia. Under the program, the company Echo will be undertaking
mining of 17,000m of reverse circulation and 8,400m of air core drilling, with Bronzewing
Northeast to be the first target. In late June, Echo revealed an updated resource for Mt Joel of
1.4Mt at 2.1 grams per ton gold for 91,600 ounces of the precious metal. The news was
announced in the first week of the July 2019 that helped the movement of share price of the
company (St 2019).

7CONTEMPORARY ISSUES IN ACCOUNTING
Competitive Advantage
The business of Eco Resources can enhance the revenue of the business at any time due
to the high-tech infrastructure which is possessed by the business. The business also owns most
of the gold production areas which gives the business a competitive advantage. The Bronzewing
Processing Hub is 2 million tons per annum processing plant and the business effectively
generates maximum of the revenue for the business. In addition to this, the business also has
200-person mining camp, an operational airstrip, essential services which forms part of the
infrastructure of the business (Raskmedia.com.au. 2019). The infrastructure also helps the
management to effectively reduce the costs of capital of the business as upfront capital
expenditures and also promotes efficiency in the operations of the business and also reduces the
time for processing of gold and developing the final product for the business. In addition to this,
a recent estimation of the resources which is possessed by Eco Resources reveals that the
company has significant resources which amounts to 1.7-million-ounce mineral resource. This
helps the business to enhance the revenue generation activities of the business. One other
advantage is that the company has around $65 million of carry -forward tax losses which needs
to be set off before any tax liability is applicable to the business (Small Caps 2019). The tax
losses which are carried forward for the business also provides a tax advantage to the business
and can be considered as a competitive advantage of the business. These factors help the
management of the company to gain competitive advantage over its competitors and effectively
allows the business to generate profits. Therefore, it can be said that such competitive advantages
are also noticed by investors who invest in the operations of the business considering the long-
term wealth generation. It is for this reason that there is a slight upward trend in the share price
of the business.

8CONTEMPORARY ISSUES IN ACCOUNTING
Conclusion
The share price analysis of the Eco Resources was done by taking various business
factors and market forces that have impacted the movement of the share price in the trend period
analyzed for the company. Business factors including the changes in the revenue and profitability
were the key factors that have impacted the share price for the company. Business projects that
are undertaken by the company and would be undertaken in the trend period were some of the
crucial data analyzed.
Recommendations
The company should reduce the financial risk of the company by stabilizing the debt
position of the company. The company should also increase the business activity or the
operations in the form of increased revenue for the company that in turn would be promoting
sustainable and better long term growth of the company. The company should also forecast
various macro-economic and business factors that affects the overall business operations.

9CONTEMPORARY ISSUES IN ACCOUNTING
References
Asx.com.au. 2019. [online] Available at:
https://www.asx.com.au/asx/share-price-research/company/EAR [Accessed 15 Aug. 2019].
Echo Resources. 2019. Echo Resources - Australian Gold Company. [online] Available at:
https://echoresources.com.au/ [Accessed 15 Aug. 2019].
Hotcopper.com.au. 2019. ECHO RESOURCES LIMITED EAR(ASX) - ASX Share Price & News
| HotCopper Forum. [online] Available at: https://hotcopper.com.au/asx/ear/ [Accessed 15 Aug.
2019].
Proactiveinvestors UK. 2019. Echo Resources - King of the Yandal Province. [online] Available
at: https://www.proactiveinvestors.co.uk/companies/news/217490/echo-resources---king-of-the-
yandal-province-217490.html [Accessed 15 Aug. 2019].
Proactiveinvestors UK. 2019. Echo Resources’ BFS confirms Yandal Gold Project is
economically robust. [online] Available at:
https://www.proactiveinvestors.co.uk/companies/news/202255/echo-resources-bfs-confirms-
yandal-gold-project-is-economically-robust-202255.html [Accessed 15 Aug. 2019].
Raskmedia.com.au. 2019. Is Echo Resources The Cheapest Gold Share On The ASX? | Rask
Media. [online] Available at: https://www.raskmedia.com.au/2019/02/08/is-echo-resources-the-
cheapest-gold-share-on-the-asx/ [Accessed 15 Aug. 2019].

10CONTEMPORARY ISSUES IN ACCOUNTING
Small Caps. 2019. Echo Resources kicks-off another round of drilling at advanced Yandal gold
project. [online] Available at: https://smallcaps.com.au/echo-resources-kicks-off-drilling-
advanced-yandal-gold-project/ [Accessed 15 Aug. 2019].
St, S. 2019. Imagine Owning Echo Resources (ASX:EAR) And Wondering If The 27% Share
Price Slide Is Justified. [online] Simply Wall St. Available at:
https://simplywall.st/stocks/au/materials/asx-ear/echo-resources-shares/news/imagine-owning-
echo-resources-asxear-and-wondering-if-the-27-share-price-slide-is-justified/ [Accessed 15 Aug.
2019].

11CONTEMPORARY ISSUES IN ACCOUNTING
Appendix
1) Share Price Data
Eco Resources Ltd
Date Price Change (%)
8/1/2017 15.2
9/1/2017
18.8
5 24.01%
10/1/2017
24.0
5 27.59%
11/1/2017 27 12.27%
12/1/2017 28 3.70%
1/1/2018 29.2 4.29%
2/1/2018
26.4
5 -9.42%
3/1/2018 27.6 4.35%
4/1/2018 27.3 -1.09%
5/1/2018 27.8 1.83%
6/1/2018
29.2
5 5.22%
7/1/2018
34.4
5 17.78%
8/1/2018 33.2 -3.63%
9/1/2018
30.9
5 -6.78%
10/1/2018
25.7
1 -16.93%
11/1/2018
25.3
7 -1.32%
12/1/2018
20.3
3 -19.87%
1/1/2019
23.7
6 16.87%
2/1/2019
24.0
2 1.09%
3/1/2019
24.7
8 3.16%
4/1/2019
22.9
4 -7.43%
5/1/2019
19.6
7 -14.25%
6/1/2019 20.8 6.10%

12CONTEMPORARY ISSUES IN ACCOUNTING
7
7/1/2019
21.0
6 0.91%

13CONTEMPORARY ISSUES IN ACCOUNTING
2) Graphical Representation of Share Price
42979
43009
43040
43070
43101
43132
43160
43191
43221
43252
43282
43313
43344
43374
43405
43435
43466
43497
43525
43556
43586
43617
43647
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
0.4
Eco Resources Ltd