San Simon Project - Bolivia

Accelerate the development of San Simon into a world class Gold mine.



posted on Jan 14, 2009 09:04AM


To Our Shareholders:

I am pleased to bring you an update on our San Simon gold project in northeastern Bolivia.

First of all, we are grateful to those of you who have stayed with us through an extremely challenging market. As a result of your continuing support over the last year, we have been able to confirm our understanding of how gold is distributed throughout the San Simon District. The geological team is extremely pleased with the accuracy of our exploration efforts, which have exceeded expectations.

Since we began using a new 3-D computer model to guide our exploration, over one-third of the new drill holes have returned intercepts of greater than 10 grams/tonne gold (See news releases dated March 3, 2008, April 8, 2008 and April 29, 2008). This is the best performance in Eaglecrest's history.

We also have cash-thanks to a recently completed $3.3 million private placement (at US$0.10). However, as a result of the credit crunch now facing companies worldwide (and junior exploration companies are among the hardest hit), we have adjusted and refocused our exploration priorities. We have instituted a series of cost cutting measures that will also allow us to keep our geological team working efficiently on new gold targets in the San Simon district. To conserve cash, we have temporarily halted drilling. We are also currently discussing a business arrangement to purchase the drill rigs so a) we won't be slowed down when drilling resumes and b) we can lower operating costs.

The Company has retained AMEC International to complete an independent resource calculation on the Trinidad zone in accordance with NI 43-101, but that process has been suspended until market conditions improve. The Company determined that it would be preferable to allocate its financial resources to exploration with a view to enhancing its assets-rather releasing news into a paralyzed marketplace. It is simply more practical to keep our eye on the bigger picture of keeping the team moving forward.

Our team is now focused on surface sampling and district-wide mapping. This is an inexpensive way to demonstrate the potential of the entire property (less than 5% of which has been explored). Any prospective buyer or joint venture partner will want to see this.

With our improved understanding of how gold is distributed on the San Simon plateau, our geologic team has identified multiple new target zones-which they have plotted on a district-wide compilation map. One of these additional zones appears to be a one kilometre extension of gold mineralization that has already been drilled at Trinidad. All these new targets are near surface with good gold grades in outcrop (See news release dated July 9, 2007). When we do resume drilling, it will be expeditiously guided by this thorough mapping of new targets throughout our property.

We have maximized our exploration of the entire district-with minimal cost-in part by using data that was previously collected but underutilized. For example, as part of this district-wide strategy, the team recently began work on the Paititi zone. Eaglecrest management (prior to 2002) had spent $15 million on geologic and engineering studies of this area, but never finished exploration of the zone. Fifty-two holes were drilled from 1996 to 2000. We cleaned up the data from these studies and are putting it into our own three-dimensional computer model-which would equate to over $2 million in exploration costs if we were to drill these holes today.

In 2001, Kilborn Engineering modeled the valid holes for the Paititi zone. Their model showed potential for a near-surface gold resource. At the same time, 197 tonnes of bulk samples were collected from the surface and the average gold grade was 1.64 grams per tonne gold. Once our team completes an in-house preliminary geologic model, the Company believes that only 20 to 30 additional drill holes will be required to calculate a qualified Mineral Resource for this zone, which will become the second zone with a resource in the San Simon district. Additionally, because gold comes right to the surface in this area, the preliminary geologic model demonstrates Paititi's potential to be economic for an open-pit gold mine, like Yamana Gold's nearby Sao Francisco mine in Brazil.

As part of the effort to develop a better geologic model, we are also assaying intervals of drill core acquired previously from the Dona Amelia zone but never analyzed. More than 15 new gold intercepts have been discovered in this process (so far) and we've added them to our geologic model. This re-sampling procedure equates to about four months of drilling and roughly another $2 million in saved expenditures.

While we have made significant progress with an in-house preliminary geologic model of the L463 gold shoot, we have only begun. Results to date have exceeded our expectations and the Company believes there is significant potential for additional shoots in the Dona Amelia zone, as is evident in the 3D model above.

The fundamentals for gold in the world economy appear to be stronger than ever. Despite recent volatility, gold is up 42.6% since January 1, 2007 while the S&P is down 36.9% (source: Casey Research, October 2008). Additionally, the bullion gold shortage, the disconnect between gold's price and availability, and the lack of new gold resource discoveries has added fuel to what is bound to be a raging bull market in the next several years! If we are part of the shortest commodity bull market, which was 16 years, then we are only half way into this one. All these factors will create an excellent market for Eaglecrest to continue its expansion of a gold resource at San Simon.

I know it has been a rough ride for all of us, but I must tell you that Eaglecrest's fundamentals are strong-in fact stronger than ever. Eaglecrest's boards of directors, as well as our technical team on the ground in Bolivia, remain committed to making a world-class gold discovery at San Simon.

Thank you for your support.

On behalf of the Board of Directors,

"Hans Rasmussen"

Hans Rasmussen

President, Eaglecrest Exploration Ltd.

The technical information in this Update Letter has been reviewed and approved by Dr. Odin Christensen, a technical consultant and Eaglecrest board member, who is a Qualified Person in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects.

Contact Information

Paul Zdebiak

Eaglecrest Explorations Ltd.

Phone: 604-687-7272

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