first look at exco resouces.

Company information:

� Shares on issue: 350,044,187
� Current share price: 62.5c
� Market cap: $218.77 million
� 12 month share range: 45.5 to 77c
� Cash at bank: $224 million (trading at cash backing).
� Main interests: gold, copper & uranium.
� Main cash generating project: White dam (gold) 75% interest.

In June 2010, Exco Resources sold its Conclurry copper project to Xstrata for $175 million, hence the strong cash position.
Exco Management have informed shareholders that they intend to pay a special dividend (fully franked) of 38c per share, at a cost of $135 million. This will leave Exco with $49 million in the bank and a mixture of income earning assets and exploration assets.
Exco�s main revenue producing asset is the White Dam gold project (75% interest), which is not to be confused with Ramelius Resources (RMS) Wattle Dam project.

Last quarter production at White Dam saw 21,810 ounces of gold produced with year to date production at 87,524 ounces. Total cash cost of mining to date is AUD $450 per ounce (extremely low) and with gold expected to run to USD $2,000 by the end of the year, then the revenue that Exco will continue to receive will continue to grow.

White Dam should produce another 88,000 ounces (see the depleted resource inventory of 188,700 ounces, as 100,342 ounces already being poured in total).

88,000 ounces at a gold price of AUD $1300 minus costs of $450 per ounce equals revenue of $74,800,000. Out of this figure, Exco receive 75%, so Exco share of revenue is $56,100,000. Note that last quarters gold was sold at average price of AUD $1,388 per ounce and with gold going up and up, my number $1,300 figure is conservative.

Exploration results are due in the September quarter to potentially increase the resource, with drilling taking place at White Dam north, White Dam East and ore being processed from Vertigo.

Exco also has a number of other projects, importantly more tenements near Cloncurry which look promising for gold, copper, uranium and zinc.

Once the special dividend is paid, some believe the SP will drop back down to around 40c per share. If this is correct, 40 cps gives a market cap of $140 million, then subtract the remaining cash of $49 million and the market will value Exco�s remaining assets at $90 million. Jeez, White Dam should generate more than $20 million for Exco next year!

I believe the SP will drop back to around 45c-50c, giving EXS a market cap of $158 million (45cps), take out the cash at the assets are at $109 million. The reason for my thoughts on this is the high gold price and extensive exploration news that could flow over the next 2-6 months.

Smart holders did well out of Sigma Pharmaceuticals �SIP� (see SP before special dividend, size of special dividend payment and compared to SP now).

For me, Exco looks a great but at current prices with short term and long term benefits of buying in.

I look forward to buying some shares on Monday.