26 October 2010 Exco Resources - Buy Recommendation Reiterated with Target Price to A$0.85 Exco Resources (EXS AU) BUY Price: A$0.51 Target Price: A$0.85 Market Cap (M): A$176.7 EV (M): A$266.7 Event Exco has announced its September quarterly production figures.

On an equity interest basis, the White Dam mine processed 576,479 tonnes grading 0.90g/t and produced 13,143oz of gold.

Total cash cost for the quarter was A$683/oz and the average realised gold price was A$1,345/oz. Comment This was a good quarter for Exco, with recoveries at White Dam at 75% exceeding our expectations and we believe far more representative of on going operations.

Also during the quarter, a further 7,348oz of the Barclays loan facility was repaid.

Exco are now well ahead of schedule and expect to have the facility repaid by December 2010, some 6 months ahead of schedule. The figures in the quarterly appear to indicate that costs increased substantially in the September quarter, up to A$686/oz from A$563/oz in the June quarter, This was because some costs were deferred from the June quarter into the September quarter and the project to date column in the release gives a more accurate picture of the real costs.

This gives a total cash cost of A$634/oz for the project to date. The near mine exploration programme around the White Dam operation has completed the drilling of the Vertigo, White Dam South and Ambush prospects.

An indicated resource will be released for Vertigo in the current quarter with an initial reserve to follow shortly afterwards.

The approval programme for the mining of the Vertigo deposit is underway as well as geotechnical and metallurgical testing. There were also some very encouraging high grade intersections released from both the Salebury and Tanbah prospects.

The best intercept at Salebury was 48m grading 2.18% copper and 1.97g/t gold.

There are numerous other good grade intercepts, indicating the potential of this prospect.

A little to the south at the Tanbah prospect equally encouraging intercepts were reported, containing gold, copper and cobalt. Recommendation We retain the Buy recommendation with an unchanged target price of A$0.85/share. Please click here for the full research note: http://www.uploadlibrary.com/foxdavies/ExcoFlashnote26Oct2010.pdf Fox-Davies Capital Contact Details Research: +44 (0)20 7936 5240 Sales: +44 (0)20 7936 5220
For further information, please contact: Michael Anderson Exco Resources Limited Managing Director Tel: +61 (0) 8 9211 2000
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