ECU Silver Mining Inc. (TSE:ECU)

[basserdan]

Cananccord Update of Golden Minerals (AMEX:AUMN; TSX:AUM)

Golden Minerals Company | Nicholas Campbell, 1.604.643.7027

AUM : TSX : C$13.72 | C$428.1M | Speculative Buy , Target C$30.00

Merger with ECU complete; maintain SPECULATIVE BUY with a target price of C$30.00, down from C$36.50

Investment recommendation

We maintain our SPECULATIVE BUY recommendation with a target price of C$30.00, down from C$36.50.

Investment highlights

With the closing of the merger with ECU Silver, the development of the Velardeña project in Mexico is to be prioritized. A preliminary economic assessment (PEA) is expected to be completed in 2012 with the objective of developing a 2,000 tpd underground mining operation capable of producing 5 million ounces of silver-equivalent per year.

The drilling and drifting work at the El Quevar project has demonstrated the potential to develop the mine with bulk tonnage mining, potentially using open pit mining on the eastern and central portions of the Yaxtché deposit and bulk underground mining in the western portion of the Yaxtché deposit. A PEA on the El Quevar project is expected in 2012.

Valuation

With Velardeña in the pipeline, Golden Minerals has one of the most aggressive silver growth profiles in the junior silver space. We estimate that AUM could produce 8.5 million ounces of silver-equivalent by 2015. With two projects to finance and develop, we have increased our discount rate to 10% from 7.5% previously. We continue to value the shares of Golden Minerals based on a 0.80x multiple to our peak silver estimate of NAVPS (10%, US$45/oz Ag) of C$37.74, down from C$45.66 previously.

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