I think based on the resources defined so far, the answer to that question is surely that we are a silver stock. However, within 3-6 months, we will have significant production ongoing and the monetary leverage will be to gold. This is not a bad problem to have when gold is valued so much higher than silver and gold producing juniors are probably going to become in demand as more investors start to clue-in to what is going on.

Just for fun, lets run a few numbers...

Lets assume that ECU runs 500tpd through the new mill. I know its capable of higher production volumes but for a round number that will suffice.

I believe there are about 6000 tonnes of gold-pyrite concentrates that have been produced in the smaller conventional floatation cell at Velardena. We could run 100 tpd of this material for 60 days before turning to the many hundreds of thousands of tonnes of tailings that are also enriched with gold. The gold-pyrite cons run 20 gpt gold, and I believe the tailings run 2-3 g/t gold and 100 g/t silver but that is just going from memory.

For the other 400 tonnes of production volume, ECU will be mining oxide material from the upper 400m or so of the mines. The San Juanes Vein may be the best candidate for this, as the oxides extend down to the 18th level of the mine. Average sampling results for part of this vein encountered 14 g/t gold and 1000 g/t silver over narrow vein intervals of 30 cm to one meter. The ore has low lead and zinc values in this part of the deposit so its a perfect candidate for a vat leaching process. Also, since it is relatively close to the surface it can be mined more efficiently than the less developed deeper levels of the project.

The new mill is running a merrill-crowe recovery circuit where cyanide reagents disolve the gold and silver into solution and the metals then precipitate out in holding tanks. This precipitate is then melted down and poured into dore bars of nearly pure gold-silver with some copper and impurities. This process is far more efficient than the conventional floatation cell recovery process. I would imagine 75-95% of the contained silver and gold can be captured once they have the mill tuned and the right concentration of reagent mix and treatment time settled.

The dore bars fetch a value from the refineries that is very close to the net metals value, perhaps 90-95% of the actual gold and silver contained. They are also efficient to ship.

So to put it all together:

100 tpd * 20 g/t gold plus 400 tpd * 14 g/t gold = 7600 grams gold per day

Lets assume 300,000 grams of silver per day since we do not have much info to go on for the silver content...

Then we will assume 80% recovery efficiency from the process and therefore we pour dore bars everyday that contain 196 ounces of gold, and 7500 ounces of silver.

At $1000 gold and $15 silver, that equates to a metal value of $196,000 plus $112,500 for a total of over $300,000 production per day. If we end up with revenues based on 90% of this after refining, then we get around $275,000 per day from operations. I would think this represents the upper band of the projections for now.

We could temper our expectations if we understand that the gold-pyrite cons will run out pretty quickly, even if the current floatation cell remains in operation to keep producing more cons for the merrill-crowe circuit. That means far lower grade tailings will have to be blended and much lower total dore will be produced. Also, with such narrow veins, the oxide material will be diluted by wall rock as it is extracted and therefore the average grade of the throughput will be much lower, perhaps by a factor of 25% or more. The actual grades of the ore may vary greatly as well, and some zones will have far less than 14 gm gold and 1000 gm silver. Next, consider that it will be difficult to maintain production levels of 400 tpd from the mine to keep that mill running at 500 tpd. The operation is currently running around 240 tpd so its a big step up to open enough stopes and keep mucking and shipping ore at nearly double the rate. Also, I have assumed 80% recovery efficiency but it could easily come in below that, especially during the first year of production as the tuning of the mill will come down to trial and error to get the best settings.

So if we add up all of the above limitations that will probably come into play in the real world, I would be very happy if we can achieve a rate of $130,000 per day of production value. Lets assume that the mill can run for 330 days per year. ECU would then be generating more than $40 million per year in revenues.

Whichever numbers you plug into the above, the bottom line is that ECU will be in position to start generating serious production for the first time ever, in a mill that is a good fit for the mix of ore that the company is mining. The cash flow will make a lot of the debt load go away, and it will allow the ongoing exploration work to be underwritten without the need for further placements. Once the market can see a few quarters of strong recurring internally generated cash, then I think the discount in the share price will disappear.

By the end of the year we could have investors getting excited about ECU again, at exactly the same time as gold and silver are breaking out to new highs. And yet ECU is sitting at a multi-year low in share price, despite the exploration successes that have been documented, and despite the potential from operations that can be achieved with the new mill. Looks like value to me, but I am biased all to hell...

cheers!

mike