Velardeña Property

The Velardeña Property is approximately centred at 25° 4' 30" North and 103° 41' 46" West. This property contains the Santa Juana mine, which has been the focus of ECU Silver’s mining efforts since 1995, as well as the historical Terneras, San Juanes and San Mateo mines. The property consists of 20 contiguous mineral concessions totalling 233.2 hectares.

The Company owns a 500 tonne-per-day gold and silver cyanide leach plant located adjacent to its properties near the town of Velardeña. It also owns a 320 tonne-per-day flotation plant located near the town of Velardeña. During the first quarter of 2011, the Company’s continued to focus on the operation of its plants and development of its mines in the oxide resource. It also initiated a new exploration drilling program geared to increasing mineral resources and to converting a material portion of “inferred” resources into “measured and indicated” resources by drilling into its high grade massive sulphide discovery, and by drilling additional known targets.

During the quarter, the Company incurred cash operating and development costs on the Velardeña property totalling $3,831,890. It decreased its related supplies and spare parts inventory by $57,676. These costs were offset by revenues of $5,996,092.

This resulted in net positive cash flows of $2,221,878. Non-cash development costs included depreciation of plant and equipment in the amount of $462,369 and translation adjustment of $623,847.

Mining and milling activities are presented later in this report under the caption “Mining and Milling Results”.

The Company has not completed an economic study related to the processing of its oxide resource through the Plant and therefore cannot provide assurances that its operation will be economic.