ECU Silver has been on a roll ever since they announced a major exploration program in January this year on their Velardeņa project Mexico. We added ECU Silver at that time to our Exploration portfolio at 0.60 CAD$. Almost every single week since then ECU managed to come out with astonishing drill results. Grades of up to 56 g/t gold and 8,822 g/t silver did create a big stir indeed and sure enough the stock took off and appreciated by almost 400% in just four single months. Now what is this discovery all about? Could it really be dubbed as a major discovery by now already? Isn't the current excitement a bit overdone? Is this stock too expensive now? Did it rose too fast? Or is it just the beginning and could this be another Gammon Lake story? What is the potential here? What does management expect themselves? In what time-frame? Well, enough questions here, time to ask management themselves. We're pleased that ECU Silver CEO Michel Roy took the time to go over the issues mentioned above with us and below you'll find a summary of our interview we did with Michel Roy on May 01
Interview with ECU Silver CEO Michel Roy, May 01, 2006
Q: Hello Michel, thank you for being with us today
A: Thanks Eric, always a pleasure talking to you!
Q: Michel, gold and silver are slowly crawling onto the investor's radar screen these days since they are reaching fresh 25 year highs. But unfortunately the average investor out there isn't quite familiar yet with investing in gold/silver mining companies. Could you please explain in a nutshell what ECU silver is all about?
A: ECU is a mining exploration company in Mexico that managed to survive the dry years of the late 1990ies as Gold was hitting 25 year lows of $255/ounce.Since 2001, the company has been very active in planning and implementing our growth strategy through mine and mill development as well as exploring for new resources.
Q: ECU's current drilling program is extremely successful and plenty of good news releases are hitting the press lately. But what investors eventually want to know is what kind of resource estimate the company will come up with and when. Could you please shine a light on which time-frame ECU would like to come out with updated resource estimates?
A: We expect to have an updated 43-101 resources report ready for June of this year. Thereafter, it will be a continuous process with regular updates being released as justified by new results either from the mine developments or the exploration program. Things are going so well with our current exploration program that we are gathering information much faster than can be integrated in the databanks.That is a good problem to have. However, issuing an update on a timely basis based on the information available is a priority for us as it will be the first step in getting our project recognized by more market participants.
Q: History has clearly demonstrated that junior mining companies making significant discoveries are being rewarded tremendously. Arequipa Resources comes to mind which appreciated from half a dollar to 30 CAD$ in just 6 months time before they were taken out by Barrick Gold in 1996. Or more recently Gammon Lake Resources which appreciated from 30 dollar cents (CAD$) in 2001 to CAD$ 20+ recentl Now some market rumors are circulating that ECU Silver could be another Gammon Lake story. In other words, the buzz is that ECU Silver could end up with a silver resource base of several hundred million ounces. That sounds almost too good to be true. Could you please comment on these market talks?
A: Until we have completed the current drilling program and have enough data to integrate the skarns mineralization in a new 43-101 technical report, we can not comment on the quantity of resources we have. However, the geological environment we are encountering certainly has the potential to contain a large deposit. Our current task is to demonstrate that such a deposit is present on our property and we are working as hard as possible on that front to upgrade our 43-101 Inventory resource report.
Q: In an environment of rising demand for precious metals while supply is on the wane senior producers are watching juniors making discoveries like a hawk since they have to find a way in order to replace their own dwindling reserves. How would ECU Silver deal with such potential major interest? In other words, what is the company's strategy in order to maximize shareholder value? Do you want to sell out the company (or maybe a single project like Virginia Gold recently did with their Eleonore project) or would you prefer to stay focused becoming a major producer yourself?
A: We are open to all possibilities and the final decision would be based on what we think is best for our shareholders. There are pros and cons to all scenarios. We have taken the decision to continue as if we are going to be alone and will welcome a deal ONLY if we feel it is in the interest of our shareholders. One thing we are certain off is that there will be a great deal of consolidation in our industry going forward as the Seniors are fast depleting their inventory and many will rectify that problem by buying out juniors companies.
Q: Some critics say, ok it sure looks good what ECU Silver is doing but still they aren't profitable yet. But nevertheless ECU managed to decrease its loss by 64% over the last year and with sales going up dramatically over the next few years accompanied by sky-rocketing silver prices it only seems to be a matter of time before ECU becomes profitable. What is your estimate, when will ECU silver be profitable?
A: Profit is an accounting notion that can be elusive at best. We posted an operating profit for 2005 which is what I was focusing on. We are in an important growth stage and are investing for the future through developments and exploration. This has kept the profits on the back burner, but once the first step of our strategy is completed, it will be immediately reflected in the financial statements. Then we shall focus on step two which will be a major increase in production that will show up in an improved bottom line for the company.
Q: How is ECU going to present this exciting discovery to the investment community?
A: We are still in the process of sizing the potential but will have all we need to present our case and potential in the very near future. Then we shall present it to the mining and investment community through road shows in Canada and Europe as well as having a presence in the major events such as the PDAC, NY, Las Vegas, etc. precious metals shows.
Q: Is there anything left you want to share with our readers?
A: Current success is based on several years of hard work to prepare the current development and drilling programs. Our team has been hard at work preparing for the opportune moment to verify their geological models which they have refined through the years. Right now, ECU' shareholders are reaping the rewards from all this work and careful preparation and we are confident that the best years for the company's potential are still ahead of us not behind us.
Eric Hommelberg
The Gold Drivers Report
E-mail: ehommelberg@golddrivers.com
Web-site: www.golddrivers.com
May 4, 2006