ECU Silver Edges Closer to Senior Production in Mexico

For over a decade now, ECU Silver (TSX.V: ECU) has been exploring and developing the company's mineral rich Velardeña Properties in the State of Durango, Mexico. Major gold and silver discoveries on the properties have seen the Velardeña resource jump from 1.6 million tonnes to a staggering 30 million tonnes in just over 3 years. Already the reigning kings among their peer group of junior silver producers, ECU Silver is well on its way to realizing its dreams of senior silver and gold production within the next few years.

Located in the Velardeña Mining District, a known but under-exploited mineral bearing region in Mexico's silver belt, the Velardeña Properties consist of three projects – the Velardeña Property, the Chicago Property and the San Diego Property.

ECU holds the Velardeña and Chicago Properties through its 100% owned Mexican subsidiary; Minera William S.A. de C.V. (Minera William), while San Diego is joint ventured with Golden Tag.

The History of Velardeña
Considering Mexico's long-standing love affair with mining, it should come as no surprise that the Velardeña District has a past. Although some records date exploration work in the area to as far back as the early 1800s, it was in 1902 that American Smelting and Refining Company (ASARCO) got down to some serious mining.

After closure by ASARCO in 1926 due to low prices and political difficulties, the district drew only the attention of artisanal miners until 1994, when William Resources acquired the concessions via their Mexican affiliate, BLM Minera.

ECU Gold, predecessor company to ECU Silver Mining, acquired 93.48% of BLM Minera along with 100% of Minera William in 1997 and began the work they're continuing today.

"Our area has been a mining area for the past hundred years", comments ECU President Steve Altmann, "Typically the best place to find an underground mine is where there has been mining activity, that's been our thesis, and the thesis for this property; it's really proved itself out. There have been over 100 million ounces of silver mined from this district and when you think about it, that's really only scratching the surface, considering the type of mining that was occurring several decades ago and the developments in mining today."

Back To The Now
To date, 50% of the property area has yet to be fully explored by ECU. Still, with only 50% explored, the company can already confirm a total of 46 mineralized veins with vein resources from 200m to 1200m in depth and high grades of up to 6000 grams per tonne of silver and 229 grams per tonne of gold.

Confirmation of ECU's claims come in the form of an NI 43-101 report administered at the property in November 2008. Conducted by MICON, the estimate reported 40 million ounces of silver equivalent measured and indicated (that's 0.6 million ounces of gold equivalent), and 391 million ounces of silver equivalent inferred (6.0 million ounces of gold equivalent).

Of course, what differentiates ECU from other silver companies is that their resource has a large gold component. About 2/3rds of ECU's mineral resource is gold and silver, with the rest being mostly lead and zinc. Gold actually makes up almost half of ECU's precious metal content and has just recently been the basis of an impressive coup for the company.

Gold Concentrate Deal
On July 13th 2010 the company announced that it had entered into an agreement with one of the world's largest independent commodities trading companies to sell ECU's pyrite/gold concentrates.

The terms of the agreement are for ECU to deliver an initial 10,000 tonnes from its gold/pyrite concentrate, currently stockpiled near the Velardeña Property, at a rate of 1,500 to 2,000 tonnes per month, equivalent to approximately 965 to 1,285 ounces of gold per month.

With plans to immediately commence delivery of the gold/pyrite concentrate, ECU is unsurprisingly delighted with the deal. The terms of the agreement are considered significantly better than any past offers for the company's gold concentrate and the sale will of course immediately add to ECU's cash position.

"The fact that we were able to enter into an agreement with such a big player in the industry shows that we have a marketable gold product that forms a substantial part of our resource." Altmann comments, "And this opens up the door to future possibilities down the road. This is a key relationship that we're establishing."

Powerful Potential
Not only does the company boast impressive resource figures and a lucrative gold concentrate deal; its mineral potential is another asset not to be taken lightly.

MICON released a separate statement noting that their estimates of the Mineral Potential for the Velardeña properties were in a range of 41.7 to 87.2 million tonnes, grading in a range of 2.08 to 2.82 grams per tonne gold and 167 to 207 grams per tonne silver, totaling 569.5 to 930 million ounces of silver equivalent.

This mineral potential estimate was founded on reliable evidence that many of the veins and vein packages at Velardeña have lateral continuity in both directions and at depth. MICON emphasized that these figures are only projections of potential and do not reflect actual resources.

Projections or not, Altmann is proud of this estimate and sees great things for the resource and the company, based on it.

"A lot of companies will say that their resource remains open laterally, and at depth, … We, however, based on certain geological controls in the area, were able to quantify how much more potential there is in this district, and when you do quantify that, there is a potential to double or triple the size of the resource."

What Now?
So what is ECU doing with this potentially massive resource? They're focusing on generating revenue via the company's 2 milling operations and striving towards that ever alluring goal of senior production, of course.

The company owns two operating mills with a combined capacity of 820 tonnes per day. A 320 tonnes per day flotation mill (the sulphide mill) treats mineralized sulphide material to generate a lead/silver concentrate, a zinc concentrate, and a pyrite/gold concentrate. A 500 tonnes per day cyanide leach mill (the oxide mill) treats mineralized oxide material to generate silver/gold doré bars.

"We're operating two milling operations, an oxide and a sulphide mill." Altmann explains, "We're processing a little over 1.3 million ounces of silver equivalent annually and the plan is to increase that production significantly. So we're completing a scoping study for an operation that will yield about 5 or 6 million ounces of silver equivalent per year as a phase 1 operation. Phase 2 will then increase that to about 20 million ounces of silver equivalent and in that particular case, we would clearly rank among the senior producers."

Part Of The Community
With over 10 years of commitment to the Velardeña Property, numerous gold and silver discoveries and plans to increase the resource yet again, ECU has certainly made their mark in the State of Durango. They've done so graciously, however, forming an admirable bond with the locals and lending a very generous hand in developing the community.

"There are 2 villages nearby and we've formed great relationships with them." Altmann says, "A lot of the people from those villages are employed by us and work at our mine sites. We try to, as much as possible, maximize the employment of locals. We're the main employer for those 2 villages, and overall, we employ over 450 people. Also, we've built a clinic with 2 full time doctors that provide medical services for the people in the village, we have educational programs and we help build infrastructure. We're very active with the community and that has resulted in very good relations for us."

ECU Management
Considered one of the company's stronger assets, the ECU management team is a highly experienced band of brothers. CEO and Chairman is Michel Roy, a geologist with over 35 years experience under his belt. President Steve Altmann spoke to Midas Letter and boasts 20 years investment banking and geophysics experience.

The CFO is Dwight Walker, Joaquin R. Lugo is VP Exploration and Ruben Rodriguez holds the position of Mill Manager. All claiming between 20 and 30 years experience in the fields of public securities, geology and of course mining, respectively.

The pivotal role of Mine Manager is held by a recent hire, Jorge Lujan. Responsible for the overall day-to-day operations of the Velardeña mines, Lujan has over 35 years of experience and brings his extensive milling and underground silver-gold vein mining experience from several well-known mining districts in Mexico.

The ever expanding ECU team also includes Ralph Stricklen, VP Operations. A significant hire for the company, Stricklen has over 40 years experience and an extensive background in the mining industry. He previously held positions with Inco Ltd., Hudson Bay Mining and Smelting, and Southern Peru Copper Corp. and with ECU, Stricklen's expertise will focus on managing the company's mining and milling operations as well as the development and expansion of future production facilities.

ECU's POA
Located only a stone's throw away from the world's richest silver mine, Penole's Fresnillo Mine, and one of Mexico's richest gold mines, La Cienega, ECU couldn't be more lucratively located. With an established history of resource growth and significant resource growth potential, serious escalation of the company's gold and silver production figures is actually a reachable goal.

Next on the ECU horizon is a scheduled scoping study and plans to build a new sulphide operation. The company harbors hopes of re-visiting its deep massive sulphide targets, the drilling of which was halted temporarily at a depth of 1,200 meters because of poor market conditions. The last noted results on these sulphides that boast up to 8 times higher grades than ECU's previous resource were 1,100 grams per tonne silver on M-S Vein 1 and 2,180 grams per tonne silver on M-S Vein 2.

Considered a high priority within ECU, the company is eager to resume drilling on these massive sulphides in the near future and, true to company character, eager to increase production significantly.

Follow the company's progress at www.ecu.ca.

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SOURCE: http://www.midasletter.com/news/100726_ECU-silver-edges-closer-to-senior-production-mexico.php