Interview conducted by:
Lynn Fosse, Senior Editor,
Published Ė October 15, 2010
CEOCFO: Mr. Roy, what first attracted you
to ECU Silver Mining?
Roy: What first attracted me to ECU Silver Mining was the enormous
potential of the mineralized system. I am a geologist, so normally what
attracts me most is the geological part of a project. In this case, I am
used to Canada where we are mining veins, but I have never seen such
continuity in the vein in Canada as I saw here in Mexico at that project,
that is what attracted me.
CEOCFO: What is happening on the ground today?
Roy: We went through a phase of reorganizing the company from an
exploration company to a production company, and this took quite a bit more
work than we thought originally for technical reasons mostly. We went from
operating one mine to now operating four different mining units. In
addition, we are getting close to our initial targets of production and this
is all happening. The last changes started last June and we will be where we
want to go in the month of October.
CEOCFO: What is coming out of the mines today?
Roy: What is coming out of our mines is we are producing gold sulphide
and oxide, ore mineral, which are treated at one of our two mills. We have a
mill to treat by flotation with sulphide ore to produce lead and zinc
concentrates, as well as a pyrite gold concentrate. The other mill is a
cyanide mill from which we produce dorť bars.
These as well as the concentrates are commercialized and sold, generating
sufficient revenues to cover all of our costs. Now we are thinking about
what to do with the extra money, where we are going to go to reinitiate some
exploration, which will also produce some growth.
CEOCFO: Would that be in the same area?
Roy: So far, we are concentrating all in the same area, but we are
looking at several other projects, which are still in the same area, but we
are talking about 30 to 100 kilometers from our actual installation. Right
now we are focusing right on site, but in the near future you could hear
news about new projects.
CEOCFO: Do you find that there are more projects available in the
current economic times, or do you find any difference?
Roy: Right now because of the recent increase in the price of gold and
silver and the general feeling about finding a market, I do not see more
projects being available because more players want projects. But on the
other hand, we are considered to be a Mexican company basically because
there are only two non-Mexicans working in Mexico. So we have been
approached by smaller miners with good properties, which seem to have gotten
more confidence that we will treat them well.
CEOCFO: Would you tell us about some of the new vein discoveries?
Roy: In our latest press releases we are opening areas either that were
not included in our resource estimates and the official report, or were
included but in the inferred category with relatively low grade. What we
have been finding is that the veins are more continuous and have better
grades than indicated by the drilling, and I have been focusing on that. I
want to demonstrate that most of our resources are very high quality
resources, and that when we go there actually to mine, so far we have more
than thirty examples, we have always found more gold by mining it than the
CEOCFO: What is your mineral focus?
Roy: We are gold and silver precious metals, with lead/zinc being
secondary. We have areas that are going to be more silver and some that are
going to be more gold and we can adjust say for example if the price of
silver was crazy tomorrow morning, we could shift our focus a little bit
toward that side. If the price of gold was to fly and the price of silver
remained stable, we could mine more from the gold-rich area.
CEOCFO: What is the most important thing you learned from getting this
into production that you could translate to newer projects?
Roy: The biggest thing now for us because of the production is that we
are financially independent, in the sense that now I donít have to rely on
outside funding to pay for the cost to do new things, explore new areas, do
some acquisitions. All that right now I can consider; whereas before I would
have to do some financing; right now we are not planning to do any
CEOCFO: Is the investment community paying attention?
Roy: The investment community has not realized yet exactly how far we
have progressed in the last few months. Quite a few people are waiting for
the results of the 3rd Quarter to see the evolution. I think our
shareholders are going to be pleasantly surprised. Some of the bigger
investors will probably wait a little bit more to see the 3rd and
the 4th Quarter. On our side we decided to keep everybody
informed and you can see that we have been publishing quite a bit of press
releases so that people know that we are doing things, and I think that
lacked a little bit in the early months of this year.
CEOCFO: What is your resource base?
Roy: The actual resource base is about in silver equivalent about 50
million in the measure indicated and 380 million in the inferred. This is
one thing that we plan to change in the short term. We plan to upgrade a
significant portion of our inferred to the indicated category resources and
I have been working on that now for a while. This is going to be one of the
main undertakings in the future because the problem with our inferred is
that at the time we didnít have enough information to classify them as
indicated. However, now there is a significant portion of new information,
so we can move to indicate it and this is going to change our position a
CEOCFO: Tell us a little about the area of Mexico that you are in; it
seems to be miner-friendly.
Roy: Mexico is mining friendly in most of the country, but especially
the old mining areas like we are in Durango, and the area of VelardeŮa was a
very active mining community in the late 1800ís. Mining dates back 500 years
in that area. Most of my miners are from the immediate area around the
mines; there are quite a few more available. The miners we have are very
qualified, and the productivity level is what you can compare with other
areas like Canada and the United States. Therefore, we have good
productivity and the miners are available, which helps us a lot in keeping
costs down. We have excellent mining and operating costs and we are
maintaining them because of that. Also, if we talk more about the fact that
there is a lot of publicity about Mexico, Canada and the United States right
now about insecurity, but that has not affected us.
CEOCFO: What is your two-minute take on the whole commodity cycle and
where we are as far as gold and silver today?
Roy: I am not an economist so I canít talk about the role of gold and
silver and what it should be and what it is, but basically if you look at it
as a commodity, there is a very strong shortage or a very important shortage
in both silver and gold. The demand has been very strong now for years and
the production is much less. For example, with gold the actual production
would be 2500 tonnes per year and the consumption has been 4000 tonnes for
quite a while with the 1,500 missing coming out from different sources.
There are lots of publications on that. But right now, those sources are
drying out, so you see the impact on both gold and silver prices. In
addition, with all the insecurity about the economy on a world wide basis
more and more people are turning to gold and silver as kind of refuge
against potential collapse of currencies or whatever, so there is more
demand now than there has been for a long time.
CEOCFO: In closing, why should potential investors consider ECU Silver
Roy: There are quite a few reasons investors should consider. First we
are certainly one of the lowest cost producers in Mexico. Number two, we
have a huge resource among the small companies. For our size company, we are
the largest resource base. The resource we have has the potential to grow
tremendously very simply because we have not reached the limit of our main
mineralized systems. We have not reached the limit of depth or laterally, so
there is still a large potential for growth there. Finally, I think that
because of the past dealings that we have had with local miners there are
smaller miners that have lots of confidence in us and have been approaching
us with projects that are of interest to us. Therefore, we have first shot
at a lot of things that the big ones donít have or the others wonít have
because they donít have the contacts. All of that put together means that
the company will continue to grow tremendously in the future.
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