third quarter activities & cashflow report ..., page-18

Here is a copy of a letter despatched to holders on the email list today:

There simply is no other way to describe it! Exco has clearly enjoyed the most productive and successful period in the Company?s history; and it shapes to get better from here!

WHITE DAM - Production and cash flow continue to exceed all expectations;
? JV production for the quarter totalled 25,237 oz (or >100,000 oz on an annualised basis),
? Costs for the quarter were A$388/oz; up from the Dec quarter (A$289/oz), but still well below the projected life of project average (~A$570/oz), and perhaps most importantly,
? Exco enjoyed net cash flows of A$24.4M, resulting in substantial increase in the Company?s cash position to a record A$35.8M.

CLONCURRY COPPER PROJECT (CCP) - Great as the news from White Dam has been, it is probably overshadowed by the announcement that Exco has entered into an agreement with Xstrata Copper for the sale of the CCP for A$175M. The proposed transaction (which remains subject to mainly procedural conditions and the Board?s recommendation for the forthcoming shareholders meeting, which is in place) represents the culmination of a comprehensive review of the Company?s options for the CCP, and I genuinely believe that it represents a tremendous outcome for the Company and our shareholders. The obvious benefits include;
? A risk-free and immediate realisation of value, and a demonstrably higher return on equity than the prospect of a standalone development,
? The ability to make a substantial, tax efficient return to investors (of up to A$100M), many of whom have patiently supported the Company in its pursuit of such an outcome,
? Retention of the Company?s extensive and highly prospective portfolio of projects in NW Queensland, with the cash available to proactively and aggressively seek to replicate our earlier resource development success, and
? An ability to actively seek appropriate asset acquisition opportunities.

From my perspective ?new? Exco will represent an even greater investment opportunity, as the Company seeks to grow further from a very solid position. It has long been clear to us that the value of the ?sum of the parts? exceeds the current ?whole?, and we recognise that it is our job to keep unlocking value from those various parts. I believe we have made a purposeful start and we look forward to the next chapter.

N.B. Shareholders can expect to receive a Notice of Meeting within the coming days, ahead of a shareholder meeting to approve the sale of the CCP in early June. I would like to point out that the Board of Exco has volunteered to seek shareholder approval for the sale, given the strategic importance of the asset / transaction. I would also like to clarify that the sale will only require approval of an ordinary resolution by a simple majority (i.e., more than 50% of those voting); there are no applicable thresholds.

I look forward to your ongoing support, and can be contacted at any stage should you have any queries, or if you require any additional information on the Company and our plans.

Kind regards

Michael Anderson
Managing Director
Tel +61 8 9211 2000