Our 2010 financial MD&A gave last years average mill grades as follows:

Gold = 2.54 g/t

Silver = 92 g/t

Lead = 0.80%

Zinc = 0.84%

Using current metal prices, the value of precious metal fed to the mill was $228.60 per tonne and was $270.66 if the base metals are included. Since the oxide mill does not produce lead or zinc, the average feed value at today's prices was about $240/tonne. If we reduce by 30% to reflect average 2010 metal prices, we get a feed value of $168/tonne. If we assume a 50% average mill recovery for 2010, the produced value was $84/tonne. Although we get a good price for the oxide mill dore, we probably get a 10% haircut on the lead and zinc concentrates and 30 or 40% haircut on the gold pyrite from the sulphide mill. So after all is said and done, we received approximately $75/tonne last year.

All of our ore last year came from either the Velardena or the Chicago mines. Total operating and development costs at these two mines was $15.16 million for the year. The total tonnage mined was 184,450 tonnes and the amount milled was 231,056 tonnes. Since the mining represents about 2/3 of the costs, our operation last year was about 200,000 tonnes. The operating and development cost was thus about $75.80/tonne last year. This is higher than the $45/tonne estimated in our NI43-101 report and is probably due to inflation, development of access shafts which will open up greater production in the future, and last some room for improvement as this is a relatively new operation.

I am calculating these numbers as I write, and to my surprise, my approximate sales and costs per tonne are almost the exact same at $75/tonne. At this point, there are at least 3 areas of improvement at this time vs 2010. One is the higher metal prices. Two is the pretreatment of the oxides to remove the copper which ECU has said will improve recoveries 10%. Three is improving head grades which are about at the M&I for the gold, but are about 30% low for the silver. Just the current metal prices and the improved recoveries will increase our sales from the 2010 average of $75/tonne to about $120/tonne now. A 30% increase in the silver grade will add at least another $15/tonne.

An improvement of $45/tonne in sales times 200,000 tonnes in 2011 will help our bottom line by $9 million. Regards.