Hi CMK!

I would agree with most of what you have stated except on the commodity price issue. I have been to many projects in the last few years and always enquire from management what their model silver or gold prices are for their projections, and without exception these prices are always significantly lower than the current market price. Always.

Year after year the average metals price has risen, but the baseline estimates by the mining companies lags that rise. For example last week in Mexico I was informed that GPR is using $20 silver as the long term price assumption for their development budget and resource model. Thats pretty good, and a significant increase from the $15 range they were using the year before, but its still about 30% below current market. And I would bet that every other producer is using similar conservative numbers.

As for Oil, can you name a single company that published guidance that suggested they planned around $130 oil? I cannot and I follow that sector closely.

It is not the producers that come up with high commodity price assumptions. It is the investors that see the world in rose colour and get all frothy. The same bozos that think $130 oil was here to stay are the guys that were selling when it fell to $50. The same guys that thought silver would trade above $20 forever last time around were dumping below $10 in 2008.

Good mining companies will stay conservative and make sure they can keep the story going even if the metals drop sharply. If prices continue to rise, life is good!

Now over time, the reason a rising metals price is such a bonus is because new blocks of resources can become profitable to mine. I am sure there are deposit areas at Velardena that were not included in the last resource estimate because they were marginal and low grade when silver was $15. I bet they would be very profitable to run now with silver nearly twice that level. And you do not need a published resource to mine something. ECU can just go in and start producing from these formerly marginal zones if they choose to and if they believe they can earn a profit. So perhaps this is hanppening today, and the known defined resources are therefore not being depleted as quickly, which is also good.

I think ECU is going to track silver in the months ahead. Strong silver prices will translate to higher earnings in time, but on a shorter term basis it will drive new money into the sector, and new buyers to drive ECU higher. Many newbies to resource stocks are like the deer in the headlights. They want to act but are frozen in fear. They hear the clowns on TV talk about bubbles, unsustainable parabolas, deflation, and all kinds of nonsense that keep them out. Sooner or later there will be a mania as these new buyers decide they cannot stand to sit out and watch the sector climb higher everyday. Then perhaps we are due for a nasty correction, once the dumb money is on board.

cheers!

mike

PS: Notice how on a public forum, the 'dumb money' is always the other guy?