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*** Ag/Au/Cu/Zn/Pb related post (ECU.TO ~ ECUXF) ***


Notes from the ECU Silver AGM (by Coach247)

Posted: Fri Jun 29, 2007 2:41 am

I was pleased to attend the AGM again this year for ECU Silver, and wanted to report some of my observations. The meeting went through the usual motions and all were passed. Stephen Altmann then went through the powerpoint presentation on the status of the company, and I had the impression that he has made the same performance many times in the last few weeks to analysts and institutions. It was a thorough, professional update on the accomplishments and objectives regarding defining and developing a large resource at Velardena.

I also attended the AGM last year, and there were many contrasts that I observed this time around. The number of shareholders in attendance seemed smaller, and the overall sentiment level was far more restrained. But my impression was that the company was being very carefull to present a conservative bias in the commentary. It seemed that they did not want to take any chances of crossing the line regarding forward statements or guidance, which was a departure for the levity last year when Michel suggested if the company could not outline over 200 million ounces of silver he should be fired. I know with the long-awaited TSX listing only just taking effect that perhaps management decided to play the meeting exactly by the book and to completely avoid any contraversial statements that could be misinterpreted.

Nonetheless, the picture going forward is very bullish. A great deal of emphasis was directed at the Mineralized Corridor of stockwork zones that had been defined during the year since the last AGM, and the data was impressive. A Gemcom software generated image of the corridor was shown, and one can see that the model for the MC extends far below the lower developed workings of the mine, and also a very large tonnage of material was outlined on the other side of the major fault structure that had previously market the limit of the zone.

Altmann made the comment that ECU is not a production story, but an exploration and development story, with success to define major deposits that can support a rapid growth curve later as the company emerges as a significant producer. At this time, it is more important to value the company on the exploration results than the financial results, in other words.

I will not go into great detail about the various facts that were reveiwed, since any knowledgeable shareholder will know that information, but I will just relate some of the notes that I found interesting.

I asked about the status of the gold-pyrite recovery circuit, and I was informed that the circuit is operational but the arseno-pyrite levels were too high in the concentrates that are being produced, which is a no-no for any smelter in Mexico to buy due to the airborne arsenic contamination that would be discharged. However, Michel pointed out that board member Dan Kappes is already working to resolve the metallurgy to remove the arsenic from the concentrates, and to me that is the most important news, since it demonstrates some of the value of having Kappes in the management team. I think if anyone can get that circuit operating effectively, it will be Kappes, and I would also point out that the competition to source qualified technical people for any project is intense, and to have the access to a first class consulting team to help resolve the problems is a big bonus.

There is sufficient funding after the completion of the financing to fund the ongoing exploration and definition drilling, underground development, and a planned PFS for later this year. In particular, the PFS will help to attract more institutional investment into the story so its worth the cost to prepare the study, and I am sure it will also lay the foundation for a 5-year mining plan towards putting the bulk tonnage MC into production.

Michel reported that the drills working at Velardena and San Diego are running efficiently, with Canadian crews, and he commented that they are pulling up drill core faster than the geos can log it and send it for assays.

In response to a question about the lack of news, Michel stated that they are doing definition drilling and that it is necessary to complete that work in order to prove up a compliant resource, but it is not newsworthy to continually issue assay results from this work. He also stated that all the drilling work is directed towards the MC, and no drilling has targeted the skarn zones yet, now is any planned until 2008. One intriguing bit of info though indicated that 12 drill cores have tested up to 400m below the lowest level of the MC and continued to intersect mineralization, so we could have more news to look forward to there. He also pointed out that 3 more 'chimneys' have been intersected in drilling around the San Mateo mine, which is significant because that ore is extremely high grade, and this could become the second operating mine at Velardena.

Penoles is developing a new mine working the lower elevations of similar deposits in the valley near Velardena, and Michel mentioned that ECU is building a relationship of cooperation with Penoles, including sharing of geological data, and consultations about property development. He also mentioned that Penoles has sold a ball mill from an old mill to ECU for about $30,000 and that equipment would probably have a value of more than $1 million. I think the notion of Penoles being friendly to ECU is a good thing, since these kind of favours could pay off in the future with a potential JV deal, but that is entirely my opinion and it was not expressed by management at the meeting.

A question was raised about the value of ECU and whether Altmann thought it was fair at the current share price. Altmann replied that they had done a study based on 15 other junior silver miners in the peer group, with the average market cap per ounce of silver resource coming in at $3.50 US. The current market cap for ECU would suggest 130 million ounces of resources. I note that management was very cautious not to suggest any resource numbers, but I personally believe the company has already defined enough mineralization to generate a compliant resource of between 300 to 500 million ounces of silver, so that would imply a double to triple from the current market cap if my personal estimates are accurate.

I am a long term ECU investor, and I have no relationship with the company, nor are they an advertiser on my website. I remain bullish as hell on the outlook, and I think the company will continue to crank out impressive exploration results long into the future. Sooner or later the market is going to have to take notice that this is one of the most significant discovery plays in North America.

cheers!
Mike

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