I spent probably about 45 minutes in total speaking with Ken and Ron. My impressions are that they are both very professional and conservative guys who, if they have any fault, is that they are probably too honest... So, before I get into more detail about answers to our questions, I can say to you with a very high degree of confidence that in terms of management alone, AUN is an excellent investment.

I have put what I can recall immediately underneath each question. Expect beaucoup typos...

1. Why was production in the most recent quarter only 60% of the forecasted 440 tonnes/week? Your production was 270t X 12 weeks = 3240 tonnes of concentrate, when it should have been 440t X 12 weeks = 5280 tonnes of concentrate. Was this due to reduced grades, lower than expected recovery rates, or reduced (less than 1000tpd) throughput in processing?? Are you actually processing at 1000tpd, and if so, since when?

This was answered in the latest NR - production was lower than expected because they were running lower-grade development material that was mined/removed to prepare for mining higher grade zones, and because they were still fine tuning the mill.

I also asked about the production increase to 2000tpd and what reserve increase did they need to justify this (somebody on our board had asked this question, and I remembered it, but somehow it did not make it onto the list of questions). Basically, they need to double the reserve to 2.4 million tonnes before they will upgrade to 2000tpd, and they seem to be quite confident that this will happen.

They are looking to for a minimum 5 year mine life, and at one point during the discussion the 10-12 year timeframe was also mentioned. I believe that although they cannot officially say it, I think they believe that they have much more economic ore at La Negra than the current published non-43-101 compliant reserves.   

1a. There is widespread confusion concerning the concentrate(s). Please supply your investors with a full breakdown for the quarter including tonnage mined and concentrates produced including the average metal contents for each (please see last page attachment for an example). Has pay been received for all or a part of the concentrates shipped? How much?

They could not do this yet because during the last quater they were not yet considered a "commercial producer". They are prevented from publishing detailed numbers and production figures until they are classified as a commercial producer and not just an explorer. For this current quarter, now that are officially a commercial producer and I have expressed our hope to both Ken and Ron that we will now see more detailed numbers (full disclosure), and they assured me we will.

2. If the lower than projected production of concentrate was only temporary (due possibly such things as processing lower grade material), then why is the forecasted annual cashflow only $20 million ($.21/sh)? You report that your costs are inline with projections, and steps are being taken to lower them further, so based on your forecasted concentrate production of 440 tonnes/week, should your annual cashflow not be closer to double what you are forecasting, i.e., 35-40 million?? The bottom line is that 20 million projected annual cash flow is much lower than expected and is disappointing. Can you provide updated figures for your rock value/tonne and you production cost/tonne?

First, they are using rock values that are lower than the current market values and they said that they would rather be conservative, than project cashflow that proves to be too high - as I mentioned above they are conservative, not promotional types.

Second, with the above in mind, their explanation of the hit they they take on transport of the concentrate and smelter fees, and the actual recovery rates, is probably higher (the hit) than we had estimated. Bear in mind that they have to tranport the concentrate by road to a seaport (more expensive than ocean freight), where the smelting company then stockpiles it with concentrates from other companies (yes they are all mixed together) before the concentrates are shipped by sea to whatever facility they (the smelting company) are using - could be Chile, could be in Europe, it depends on a number of factors inlcuding maket demand. Aurcana has to pay for the sea freight charges of its concentrate. The smelther also uses a historical standard for recovery rates for calculating payouts, so for example, it does not matter what percentage of zinc the smelter actually recovers our the concentrates, the only pay Auracana for their zinc based on 85% recovery, even if they actually recovering 95%. In fact, Aurcana and other companies are now pushing the smelters to up the payout on zinc to 95% because new technology has enabled the smelters to now recover this much zinc from the concentrates, yet they still only pay 85%. Aurcana is also not big enough to negotiate special contracts directly with the smelters as large ming companies can, so they their ability to negotiate better deals is severely limted.

3. What net impact does the rising Canadian dollar have on your bottom line, and how are you planning to take advantage of your resulting increased purchasing power? Will you accelerate plans to acquire other properties?

They are actively looking at other projects and companies for possible acquisition... Stay tuned.

4. Do you have any professional Canadian or American mining engineers on staff, or on the board, and if so why not? You are now a mining company with producing mines, and with all due respect, geologists should not be running mining and processing operations. Do you not think that, at minimum, an audit of your mining, processing, and maintenance methods by a Canadian mining engineer with 20+ years experience with similar types of operation is in order? It is often the case that significant improvements in operations efficiency can be found in these areas by highly experienced 'outside' mine engineers/managers.

They have sent down a Canadian mining engineer for an outside opinion on the projects they buy and to evaluate their mining and processing operations. They are also planning to hire this guy sometime this coming spring, as they recognize that they need a mining engineer on staff at the executive level. They mining guy gave the thumbs-up to the properties and the operations.

5. It is my opinion that there has been serious disregard for maintaining shareholder value through the promotion of the company and its operations to the appropriate investment/analyst community (Bay St. fund managers, etc.). The addition of Jack Barnes to manage investor relations, and your attendance at this conference, are certainly steps in the right direction, but how do your respond to these concerns, and what actions, specifically, do you plan to undertake to correct this serious deficiency/oversight and repair the serious damage that has been done to shareholder value? Furthermore, when will be there analyst coverage of Aurcana, and when will there be an organized analyst tour of operations in Mexico?

They are doing their best while acknowledging previous shortcomings, and now with JB on board, they plan to be much more active. They had organized an analyst tour, but apparently some Yamana thing ended-up being scheduled at the same time forcing cancellation of AUN's tour. Nothing definite has been organized or rescheduled yet... The impression I get is that analysts want to see a litte more from them before they start to get excited about AUN.

Anyway, apparenty Roulston was plugging AUN again at the conference (I did not see him), and they are trying to get some other newsletter guys on board. We have to remember that there is alot going on in the industry right now, so the comptetion for the investment community's attention is fierce.

6. When will be you finalizing an agreement with Agoracom for their services, to supplement and/or compliment the IR operations of Aurcana Management. Agoracom will conduct and post interviews with company executives, spam Blackberry’s, Yahoo Finance and other news media with your news releases, thereby exposing the company to a much broader 'audience' than it currently retains. Agoracom will also manage a monitored investors forum as part of the Aurcana hub that it would create, which be a one-stop location for all company news, interviews, and other company information. I know you have received their proposal and are aware of the services they can provide, so when will you be acting on it?

This is still on the table...

7. Finally, when will the first 43-101 compliant resource/reserve be completed and made public? This is desperately long overdue and Aurcana, in terms of its market capitalization, has been a slowly sinking ship without it.

43-101 early November barring some world calamity... They are very uneasy committing to any timeframe given all of the problems they have experienced getting this done, but with that caveat in mind, they are fully expecting that it will be published in early November.

Regards,

B.