ECU Silver Mining Inc.

Metals & Minerals
Recommendation: SPEC. BUY
Unchanged
Risk: SPECULATIVE
12-Month Target Price: C$3.50↑
Prior: C$3.00
12-Month Total Return: 70.7%

Velardena Resource Update: Billion Ounce Potential!
Event

ECU Silver Mining Inc. announced the results of the much anticipated
resource estimate for its Velardena project. The estimate was prepared by
MICON Int. Ltd., a reputable mineral industry consultancy, in accordance
with N.I. 43-101. The results include resource estimates (measured, indicated
and inferred) as well as an evaluation of the conceptual additional resource
potential for the Velardena project.

Impact – Significantly Positive

Total resources grew to 161 million ounces silver-equivalent (exclusive of
base metals), which is somewhat below our forecast (see our Initiating Report
of November 26, 2007). We had indicated additional resource potential of 290
million ounces silver-equivalent to bring the overall total to 500 million
ounces upon successful conversion, however, MICON has estimated 430-750
million ounces of additional potential on the same measure. The higher end of
the range provided by MICON suggests that total resources could grow to
nearly a billion ounces. Once again, that is without including the base metals,
which have historically provided a material revenue stream to the company.

Valuation and Justification of Target Price
The bulk of our target price is derived from applying a resource multiple of $3.00 per ounce silver-equivalent,
inline with the average multiple being applied to the company’s peer group of emerging silver producers. We
add to that value for resource potential, which we derive from the product of the incremental 590 million
ounces MICON forecast (the mid-point of the range it provided) and $0.70 per ounce. We have removed the
resource multiple discounts we applied previously due to the greater certainty that now exists with respect to
both the resources and incremental potential. Finally, we make standard corporate adjustments to generate our
total corporate valuation. When divided by our modeled capitalization of 270 million shares, which includes
the exercise of all securities and an assumed 6.7 million share issuance, we arrive at our revised target price of
$3.50 per modeled share (up from $3.00 previously).

Investment Conclusion
ECU offers investors leverage to the emergence of a potential world class silver play in Mexico, a premier
mining jurisdiction. In a favorable silver price environment, ECU should outperform its peer group of
emerging silver producers due to its strong resource growth profile which we feel may ultimately translate into
world class production.