update from fos davies

out now:

Event
EXCO Resources Ltd has announced a 175% increase in Indicated Resources at the E1
camp.
Implication
The Indicated Resources at the E1 camp have increased by 175% from 4.162Mt to
11.462Mt. This has been achieved by an infill drilling programme which has confirmed
the geological continuity of the E1 South deposit, but importantly has now also led to
the upgrading of a significant portion of the resource to the Indicated category from
the Inferred category. The Indicated portion of 7.3Mt @ 0.73% Cu and 0.20 g/t Au now
comprises 40% of the total E1 South Resource. The known resources at the E1 Camp
now total 34.1Mt. Total Resources for the Cloncurry Copper Project now exceed 38.8Mt
(of which 13.8Mt is in the Indicated category) containing 347,500 tonnes of copper and
301,600 ounces of gold.
Comment
This outcome is not unexpected, since previously reported drilling has consistently
delivered positive results. The drilling has typically confirmed, and in some cases
increased, the thickness of the mineralised zones, whilst the grades returned have been
at or slightly above the average for the resource. Resource inventories are expected to
increase further in the coming weeks once an update of the E1 North resource model
has been completed.
This infill drilling forms part of the Definitive Feasibility Study which is currently in
progress and due for completion in the first quarter of 2009. The work is aimed at
converting the existing current Inferred Resource into the Indicated category. Previous
work has concentrated on the sulphide resource potential to a depth of 200m. Each of
the three main deposits remains open at depth and the Company firmly believes that
the current and future outlook for metal prices will support open pit mining to much
deeper levels. Current drilling is therefore testing the resource potential, both along
strike, and at depths of up to 300 metres, after which further pit optimisations will be
undertaken.
This is a very positive step, increasing the value of the project for the company.
However, we have not included it in our modelling yet. We have decided to wait until
the forthcoming E1 North update is released before reworking the model. With depths
of 300m now being assessed, there is good potential for the project to be upsized from
2.5Mt pa to 3mt pa which could possibly significantly increase the value of the project.
Recommendation
We maintain our BUY recommendation with an unchanged target price of $1.03 per share