Hi Lawnbowler!

A lot of the equipment necessary to process ore is the same for both an oxide or a sulphide circuit. The crushing and grinding circuits would be using the same equipment for example, although they may tune the circuits differently to achieve a finer particle size for a floatation cell processing of sulphides. There is plenty of capacity to expand the original Velardena mill and add additional ball mills and cone crushers to handle more through put. From there the fines can be transported to existing floatation cells, or a new bank of leaching tanks could be installed to build up an oxide processing circuit.

I have not been to the new oxide mill, but I have toured so many mills over the last few years and you see one, you have seen 'em all. In general the equipment is pretty simple to install and operate, and it comes down to metallurgy and tuning to get things running properly. Most mills operate using gravity feed, so they are located on a hill or decline, and raw ore is dumped into a hopper at the top of a hill, and then fed through each circuit using gravity and converyor belts. Velardena has very little on either side of it to prevent expansion. They would have to pour new foundations and probably install another transformer to step down industrial hydro-electric power, but otherwise its no big deal if they have permitting to go forward.

My personal opinion is that it makes sense to add incremental production only on the basis of generating additional cash flow to define resources. Greater production means it will also build costs all down the line, to hire people, buy more equipment and rolling stock, open more stopes to maintain the mills at capacity, etc. Since Velardena makes the most sense as a bulk tonnage op running 5,000 - 10,000 tpd it is hardly worth moving up to 1,000 tpd if one is only interested in generating earnings.

There is no free lunch in the mining biz and people need to understand that. You can either:

1) operate a small high-grade mine and make money

-or-

2) operate a large low-grade bulk tonnage mine and make money

I do not think you can fool yourself into trying to surgically extract large tonnages of high grade ore from narrow veins and make it work. Either ECU is going to be defined as a huge resource of bulk tonnage ore, and just try to generate cash flow to fund that along the development curve, OR, they will stay small, produce up to 500 tpd of just high grade ore, and settle into a niche as a profitable small producer. Right now they in the middle and they will probably go for the bulk tonnage scenario.

I still see critical comments on blogs from pinheads that dont get it. To make money on low grade ore, you do not expand to 1000 tpd. You expand to 5000 or 10,000 tpd and then you have a shot. But you need a capex of hundreds of millions of dollars to get to that production level and processing capability. There is a curve to navigate to grow and the first phase is proving up and defining the ore feed to sustain a large capital operation. The people that cry about the relatively low cash flow generated today are complete idiots with no concept of the mining biz.

ECU is doing just fine and remains one of the best development stories in Mexico, in my most humble opinion. Unfortunately the long term plan is just that: long term. We wont get there in a couple of quarters.

End of rant...

cheers!

mike