Eric David & Sons Interview

With CEO Dr. W. Pierce Carson

Of Azco Mining Inc.

Eric David & Sons: With the mica project, will the goal be to sell the mine or to mine and sell the mica directly?

WPC: Our preference would be to keep the mine, to get it properly financed and to produce and sell the mica and by-product feldspathic sand ourselves. Although that is our preference, we also would be willing to consider a joint venture, in which the incoming partner would contribute the funding required to achieve full production, in return for a partial share in the project. So far we have spent around $16 million on the mica project and are looking for an additional $5 million. The project is expected to produce a significant cash flow. In general we would like to see the company and its shareholders benefit from the cash flow.

EDS: Are there any processes the mica must undergo before it can be sold and if so will it be handled by Azco or another company?

WPC: At the mine, fifty miles north of Phoenix, the ore is crushed and the mica is separated from the rest of the ore. After the mica is taken out, the rest of the ore is sized to produce by-product feldspathic sand, for sale into the Phoenix construction and recreational markets. The mica is trucked down to Glendale on the west side of Phoenix for further processing. We use a wet grinding process to grind the mica into a fine powder and then use air classification to produce a range of mica powders ready for sale, for example into the cosmetics, plastics and paint markets.

We also plan to produce products that will require the mica powder to be further processed through outsourcing. For example, the mica can be incorporated into plastic pellets through a “masterbatch” process. The pellets, commonly consisting of polypropylene or polyethylene resins, can be formulated to carry 10 – 50% mica. The formulations are engineered for specific applications in the plastics industry. Mica imparts reinforcing and other beneficial characteristics to plastic end products. With respect to the sales price, we get a value-added benefit by going the extra step to produce the plastic pellets. In the past, when we have gone that extra step, we have used another company in Texas to do the compounding.

EDS: What cosmetics companies use or are planning to convert to using mica in their cosmetics?

WPC: We have been selling 1-20 micron mica through cosmetic distributors on the East Coast. They sell to a wide range of companies and do not always tell us whom they are selling to. We believe one company that has been using our mica is Revlon. We understand Revlon has introduced several new products containing Azco mica.

EDS: What plastic companies are currently seeking mica for their polypropylene products?

WPC: We have a number of preliminary marketing initiatives with a wide range of companies. One of those companies is Dupont Canada. We have supplied them with our 20-50 micron powder as well as the plastic pellets, which we understand Dupont has further incorporated into end products in the automotive industry. In terms of testing, there are two- or three-dozen companies to which we have supplied small quantities of mica. They include producers of a wide range of plastics for many applications, for example plastic lumber, speaker housings for sound systems, plastic window frames, and plastic furniture. We also have supplied mica to paint companies and to a major aircraft manufacturer, once again in small quantities for testing purposes. Pending additional financing, we have not been in a position to supply large quantities of mica.

EDS: The company announced in September the lease agreement on the Ortiz Mine Grant, New Mexico. How much gold, silver and copper can you expect to mine from this location?

WPC: Well, previous work on the property has identified about two million ounces of contained gold. That work was carried out mainly in the 1970’s and 1980’s by two or three larger companies and cost around $40 million. However there is still excellent exploration potential remaining. We have under lease a very large area with favorable geology, about ninety square miles. Much of that area has not been thoroughly explored, so that two million ounce number could increase with additional exploration. But right now there is a total of about two million ounces that have been identified.

Feasibility work in the late 1980’s focused on two deposits containing about one million ounces, about half of the gold identified. The feasibility work included over 300,000 feet of drilling, open-pit design, metallurgical testing and design, preliminary engineering and economic analysis. The feasibility study shows that at current gold prices, economics are favorable for producing the million ounces of gold. However, before mining could begin, we would first have to update the feasibility study, obtain the necessary permits and arrange the necessary financing. That will be a significant undertaking for a junior mining company such as Azco.

EDS: How much profit do you anticipate from the Ortiz venture once lease payment and royalties are considered?

WPC: The lease payments are nominal. There is a sliding scale production royalty

related to the price of gold, but generally the profit will depend on the operating and

capital costs. A one million ounce deposit at the current price of gold, which is over $400

per ounce, would have contained gold worth over $400 million. That represents in-

ground value. If it costs half of that to mine the ore and extract the gold, you are left with

a number of around $200 million that we could expect in cash flow. Of course out of that

you have to amortize the capital cost. That will give you an idea. Out of the one million

ounce deposit, we can expect over $100 million as a bottom line profit number.

EDS: When will Azco Mining report audited financials and move to another exchange?

WPC: Our audit currently is in process. It has been frustrating over the last year trying to get current with our financial reporting. However we do expect to complete our financial reports in the next few weeks and to become current. We expect then to be able to move from the pink sheets back to the Bulletin Board. We traded on the Bulletin Board previously, but trading was halted in January 2004 because our financials were not current. We anticipate trading to resume on the on the Bulletin Board in early 2005.

EDS: How many shares are outstanding and how many are in the public tradable float?

WPC: Azco has just over 40 million shares outstanding, 60 million on a fully diluted basis. The majority of those are in the public float. There are no large controlling blocks. Insiders hold less than 10% of shares currently outstanding, and 25% on a fully diluted basis.

EDS: What type of financing is currently in place? Will you use stock as collateral?

WPC: Currently we are looking for financing to take our mica and gold projects forward. Over the past year we have completed small private placements that have enabled the company to survive. We do need to raise larger amounts of money to properly fund the mica project into full production, and to carry out work on the gold project. We certainly would be willing to use stock as collateral, and would be open to either equity or debt financing to raise the required money.

EDS: What other minerals would you like to see Azco become involved with in the future? Are there any that will become particularity profitable?

WPC: Azco for some time has been focused on its mica project, which is an attractive industrial mineral project that will produce significant cash flow. However, in the future we will be shifting our strategic focus towards the more traditional mining of gold, silver and possibly copper. These metals have deep world markets and bright demand outlooks. Given the fundamental need of industry for these commodities, we feel that long term, prices should continue to increase. Another advantage is that deposits of these metals can be more readily financed, a big advantage to a junior mining company with an objective of long term growth.

EDS: Is there anything else that you would like to add or discuss?

WPC: I would just like to say that we believe Azco is a company that has a great future. We have a large shareholder base of around 7,000 shareholders. We have highly experienced management capable of taking the company forward. Our focus will continue to be on the acquisition of only high quality projects, ones that can weather the commodity cycles and still make a profit. So from an investment perspective, I believe Azco has the key ingredients of a great investment – quality people, quality assets and a good plan for going forward.

Interview conducted by Kristin Huffner for Eric David & Sons. 9 December 2004 .

Please View the disclaimer on AZMN at here

2004 © Eric, David & Sons, Inc. All Rights Reserved.

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