For those of you who don't have a Cafe membership you might want to wait for a much lower price next year.. Although we will certainly prefer if that would not be the case..

He’s back… Mexico Mike…

Hi Bill!
It has been a while since I have commented on the status of ECU Silver. I have owned a core position in this one for more than 5 years but I was buying again this week. The company recently announced another major financing and that has also provided the opportunity for heavy shorting against the newly issued paper and warrants, bringing the stock down to a multiyear low. However, people may have overlooked the transition in the evolution of this company.

For the last few years ECU was an exploration story and they were remarkably successful to outline new deposit areas with hundreds of millions of ounces of silver resources. This latest financing was issued to underwrite the purchase of larger mill and recovery plant and therein lies the reason for my optimism.

While the silver resources controlled by ECU are impressive, investors may have overlooked that the company also has encountered some extremely high grade gold zones in the mines, ranging up to 14 grams per tonne in some veins. The gold bearing ore did not behave well in the existing processing plant with the floatation circuit that was running to produce lead-silver and zinc concentrates. So the company was unable to realize the value of this higher grade gold on its bottom line from operations. Until now...

When this new mill is operational the performance of the company should make a quantum leap forward. The new circuit will produce a gold-silver dore product, which is much more efficient and will contribute higher net profits from the smelter than shipping base metals rich concentrates. The company will be able to mine the higher grade oxide deposit areas of their mines, where the base metals content is lower. The additional value of the gold in the dore will probably double the value of the production and contribute to positive cash flow that is directly leveraged to the rising gold price. With this new mill acquisition, ECU will effectively transition from an exploration story that is burning cash, to become a significant gold and silver producer that is generating cash.

Despite this improved operating strength, the stock has sold off steadily and now the shares represent a greater bargain that at any other time in the history of the company. Never before has there been so much value in terms of resources and infrastructure to back up each dollar of market value. And the ability of the company to continue funding its operations and exploration is now much stronger once this new mill is commissioned and the dore is being poured. I like the combination of increased value and lower risk, in the context of what is still a vibrant and healthy secular bull market for precious metals. I wish I had more money to step up and buy the hell out of this stock but I am happy to just add a few cheap shares here and will be looking forward to the future.
cheers!
MexicoMike

ECU Silver has become my worst nightmare. I own 1.75 million shares. It is the ONLY mine I have ever been to. Michel Roy, ECU’s main man, was the general manager when I first went there and took over the deal when the nut case former CEO blew the deal up.

The stock went to 2 cents, then was not allowed to trade for 6 months. It then went to $3.50 cdn and now is at a crummy 50 cents. What Michel has done is incredible and NOBODY is paying attention.

If this stock is not at $3 US, or CDN, by the end of the year, I will cut the Café’s subscription price in half for 2010, or $100 versus the now $199 … which means I will lose hundreds of thousands of dollars if this dog does not hunt … am putting my money and my mouth where my money is.

So be it … either way.