Additional drilling is also occurring on the jointECU Silver Chairman and CEO, Michel Roy, Provides Letter to Shareholders
ECU Silver Chairman and CEO, Michel Roy, Provides Letter to Shareholders
TORONTO, ONTARIO, May 09, 2011 (MARKETWIRE via COMTEX News Network) --
ECU Silver Mining Inc. (TSX: ECU)
Dear Shareholders,
Gold and silver prices have surged since thebeginning of 2011, despite a sharp correction this past week. However,most of the stocks in the mining sector, including both producers andexplorers, have significantly underperformed the precious metal priceescalation. Many analysts attribute this incongruity to an over-ridinginvestment strategy implemented by many hedge funds in which they"hedge" the sector investment by collectively going long the metal andshort the mining stocks.
Beyond this general sector underperformance,ECU's stock also appears to have received excessive pressure fromtrading patterns which appear designed to suppress the stock price.Management considers this to be a serious concern and is in discussionswith legal counsel regarding the nature of this activity and potentialrecourse.
From an operational standpoint, much has alreadybeen accomplished in 2011 and as the year progresses, managementanticipates numerous achievements which should enhance production andrevenue, as well as the size and quality of the resource. Presumably,these accomplishments will positively impact the value of ECU's commonstock.
Mine Operations
ECU has increased revenue over the past fiveconsecutive quarters, enhanced by the successful negotiation of thesale of a 13,000 tonne stockpile of processed material containing goldpyrite. Revenue in Q4 '10 was over $6.4 million, almost 200% higherthan the period five quarters earlier. Altogether in 2010, metal salesincreased year over year by 250% for gold, 144% for silver, 568% forlead, and 375% for zinc. Although the sale and delivery of the goldpyrite stockpile has been completed, management expects revenue fromproduction to improve when the company mines in recently-developedstopes containing significantly higher resource grades.
Oxide mineralized material continues to beextracted from the Santa Juana mine as three additional mines, SanJuanes, Chicago, and Terneras West have been opened. An accelerateddevelopment program is underway to advance additional veins, and mininglevels, to a stage where mineralized material can be extracted frommore mining stopes, thereby increasing production.
As outlined in previous press releases, newveins and vein extensions have been discovered at Santa Juana. Most ofthese discoveries are sulphide material which contains good toexcellent gold and silver grades higher than nearby areas that wererecorded in the last resource report. Metallurgical testing has allowedus to develop a new procedure to enhance processing of the sulphidematerial. New high grade veins plus enhanced processing techniques willsignificantly increase the quality and quantity of the concentrates.Since sulphides represent over 97% of the mineral resource, this is avery important step towards the future development of the project.
Milling Operations
Both the flotation (sulphide) and the cyanideleach (oxide) mills have been fine-tuned with extra equipment and newcircuits. Modifications were completed at the flotation mill toincrease the precision of reagent additions and PH control. New lab andbulk metallurgical testing will help us refine the flotation process.These modifications will increase recoveries and improve the quality ofthe concentrates produced.
A new circuit to remove copper from thesolutions was added to the oxide mill. Previously, copper interferedwith gold and silver recoveries. So, after several months of testingand modifications, the company completed a copper removing continuouscircuit which is now removing over 95% of the copper from thesolutions. This enables the company to increase gold and silverrecoveries, as well as produce a saleable copper concentrate.
With initiatives that have been in developmentover the past year, ECU expects to see an increase in quantity andquality of concentrates and dore bars over the next few months.
Exploration
An underground high-performance drill iscurrently advancing to define the massive sulphide zone that waspreviously discovered with high grade sulphide intercepts from holeSJ-18-21. The drill will cut various holes at different angles (daughterholes) at depth, in order to intercept further high grademineralization. This will help define the shape, size, and persistenceof the mineralization in the massive sulphide zone. Geological modelingsuggests that this zone could consist of large replacement type bodiesor mantos style deposits.
As the high-performance drill re-entered theoriginal drill hole, drilled nearly three years ago, it was realizedthat sections of the hole had filled in. As such, the drill bit wasreplaced with a smaller one, in order to avoid a deviation from theoriginal hole. This precaution caused a slight delay but this portionof the work is nearly complete and the actual drilling for the firstcut will start very soon.
Additional drilling is also occurring on the joint venture San Diego property.
Results from the two drilling programs will be published as they become available.
Property Expansion
ECU recently entered into contracts to acquirenew properties. One is a newly-acquired mining claim immediatelyadjacent and now integrated into the Chicago property. We are currentlyexploring this area by underground ramping and drifting. Several newveins have been discovered in the Chicago property which extends ontothe new claim.
A second property, the Flechas property, isbeing evaluated through underground exploration and development, along aknown major vein. Results have been encouraging, justifying thecontinuation of our exploration and development work.
On another property, the Nazas property, aninitial 1,700 tonne bulk sample of oxide material was processed whichconfirmed that grades and recoveries were highly suitable for the oxidemill. Additional work will be done in a key zone on this property todefine the size and shape of the mineralization. The zone currentlybeing examined is over 15 meters wide on surface and appears amenableto open pit mining. Other exploration projects on various properties(surface and underground) are also being evaluated.
Scoping Study
Since the changeover to a larger consultingfirm, the work has progressed significantly. The new consultant iscurrently integrating real data from our mining stopes into theirmodel. Since the company is currently extracting mineralized materialfrom operations, several of the model parameters are "actual", therebygiving the scoping study a high level of accurateness and reliability.We will provide updates on the scoping study as we get nearer to itscompletion.
Summary
Management believes that the market value of ECUcan be greatly enhanced by significantly increasing the size andquality of the company's mineral resource. As a result, major drillingcampaigns are underway to define the massive sulphide zone in SantaJuana and further define the resource at San Diego. In addition,ongoing development work at several areas have already identified newveins and vein extensions. This information will be incorporated intoan updated NI 43-101 mineral resource report. We expect the drillingcampaign to be completed at the end of this year with the updatedtechnical report shortly thereafter.