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May 16, 2008

Genco Resources Ltd (Tsxv: Ggc): Follow-Up No. 5
by Peter Zihlmann

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EXPLORATION FOR SILVER AND PRODUCTION IN THE HISTORIC TEMASCALTEPEC MINING DISTRICT, CENTRAL MEXICO

Business Summary

Genco Resources Ltd. is a publicly traded profitable junior silver mining company. Genco's core assets are multiple mining sites including the La Guitarra Mine located in the companies wholly-owned Temascaltepec Mining District of central Mexico.

This district is part of the Sierra Madre silver and gold Metallogenic Province that has historically produced some of the world's most exceptional mines.

La Guitarra Mine produces precious metals from a classic epithermal vein system, part of a mineralized corridor which extends 15 kilometers in length and averages 4 kilometers in width.

The corridor includes exceptionally high "bonanza" grades and multiple bulk tonnage targets.

Genco is committed to both enhancing shareholder value and fully realizing the vast potential of the Temascaltepec Mining District to create one of the premier Silver Mining Companies in the World.

La Guitarra Project

The La Guitarra Mine is located within the mineral rich Temascaltepec Mining District on Highway 134, a two and a half hour drive southwest of the Mexico City Airport.

The La Guitarra mine has been in silver and gold production since at least 1555, when records indicate that the first Spanish miners arrived. Today the mine continues to produce these precious metals from both the La Guitarra and San Rafael veins, which are only two of over one hundred veins within the Temascaltepec Mining District.

Geographically, the District sits within the prolific silver belt of the Sierra Madre Mountains, which hosts some of the largest silver mining districts in the world such as Fresnillo, Taxco, Guanajuato and Agangueo, as well as Mexico's largest historic gold producing district El Oro.

The Temascaltepec Mining District is wholly-owned by Genco Resources and covers 397 square kilometers of land, with over 15 kilometers of strike length.

Genco Resources has completed over 55,000 meters of exploration and infill drilling on its wholly owned Temascaltepec Mining District in Mexico. Upon the completion of this initial drill program the company embarked upon a second phase II drill program of 50,000 meters.

The Initial drilling program increased Reserves 57% and increased Resources 280%, an astonishing accomplishment. Results of the initial programs caused the Board of Directors to initiate a full feasibility study for a Major Mine Expansion. Following conclusion of the study further information will become available.

Current Objectives include:

• Near Mine exploration and Development.
• Continued Drilling to upgrade Resources to Reserves to more accurately determine mining methods and mine planning.
• Acceleration of Underground Mine development to Increase Production - both to fully utilize the current mill capacity but augment and enhance the interim operations.
• Establish new production centres to provide head-end ore.
• Test Underground Bulk Mining Methods to Lower Mining Costs
• Complete Feasibility Study.

Upon the completion of the feasibility study additional information will become available. Through ownership of a vast land package consisting of 397 square kilometers, Genco controls the Temascaltecpec Mining District.

This district is located in the Southeastern end of the Historic and prolific Sierra Madre Occidental Belt in Mexico. The district hosts well known, mineralized polymetalic low-sulphidation epithermal vein systems. The Silver-gold mineralization is hosted in veins which vary in width from less than one meter to over 25 meters. There are in excess of 100 veins identified on the property with four main vein trends: La Guitarra, Mina de Agua, Nazareno/El Colosso, and El Rincon. The main vein trends in addition to numerous vein occurances are distributed over a 15-kilometer-long by 4-kilometer-wide section.

In this section only 5% of the known (100+) veins have been explored using modern methods.

Current Mining Operations

La Guiterra-San Rafael is a trackless underground mining operation, consisting of six main haulage levels developed within the La Guitarra section of the mine. With the discovery of San Rafael a new ramp was driven from the lowest portal level of La Guiterra to San Rafael. Modern operations began in the early 1990's employing a cut and fill operation, with stope access via ramps from the four main haulage levels, spaced =/- 70 meters apart. Scoop trams muck the ore from the cut and fill operations and ore is transported to surface utilizing 14 tonne standard dump trucks. Backfilling of stopes subsequently occurs.

Current Milling Operations

Milling operations combine two stage crushing followed by milling. Milling circuits are comprised of multiple ball malls running in parallel. The crushed and milled ore is then subjected to a three-stage floatation circuit to produce a silver concentrate. Average recoveries for silver is 88% and 86% for gold.

In the third quarter of 2007, Genco appointed Kappes Cassiday and Associates as lead engineering firm for the feasibility study for a combined milling and heap-leach operation with substantially increased combined capacity.

Upon completion of this study results will become immediately available.

Exploration

Genco Resources has completed over 55,000 meters of exploration and infill drilling on its wholly owned Temascaltepec Mining District in Mexico. Upon the completion of this initial drill program the company embarked upon a second phase II drill program of 50,000 meters.

Recent News: Genco Discovers Significant Mineralization through Reconnaissance

Genco Resources Ltd. announced the initial results of its reconnaissance drilling program in the Temascaltepec Silver/Gold Mining District, Mexico State, Mexico. Highlights include GDH-171 which intersected 1.5 metres grading 672 grams per tonne ("g/t") at 315 metres in the Socorro vein system located in the San Simon area in the eastern portion of the District. Drilling on the Jessica vein system in the Coloso area located in the northwest portion of the District returned 1 metre grading 1,030 g/t silver and 2.50 g/t gold in hole GDH-180 and 0.8 metres grading 1,020 g/t silver and 1.05 g/t gold.

The following tabulates the results of this initial reconnaissance drilling program.

True-widths of the veins are unknown at this time as these are the first holes drilled on the targets.

The equivalent silver ("eAg") grades are based on a 50:1 silver to gold ratio ($550/oz gold and $11/oz silver).

The three holes in the Coloso area are spaced a minimum of 100 metres apart along strike on the Jessica vein system. GDH-167 is the only hole to have tested the Magdalena vein system and GDH-171 is the first and only hole to have tested the Socorro system.

Four holes drilled in the Real de Arriba area intersected low grade mineralization in multiple structures. All holes failed to penetrate the Las Animas vein system due to deviation of the core hole.

Genco's President Gregory K. Liller stated "We are extremely pleased that our first reconnaissance drilling program is returning excellent results. To have intersected multiple high grade silver veins in the first holes drilled on these widely spaced targets confirms our belief that the Temascaltepec Silver/Gold Mining District has significant exploration potential outside of the current area of operations, and is one of the largest silver exploration projects currently being explored in Mexico."

Fundamental Considerations

Reserves and resources as of December 31, 2006 were audited in compliance with National Instrument 43-101 Standards of Disclosure for Mineral Properties ("NI 43-101") of the Canadian Securities Administrators.

The report was prepared by Glenn R. Clark, P. Geo., a qualified independent person for NI 43-101 purposes. The results were as follows:

The market capitalization of Genco is presently CAD 81 million or 57 cents per Silver Eq oz. The table below shows the Market Capitalization of various silver companies with properties in Mexico.

Genco would appear to be massively undervalued considering that some of the companies listed below have no production facilities, contrary to Genco.

The following table summarizes the combined production of La Guitarra and San Rafael Mines.

In the twelve months ended December 31, 2007, Genco realized an average silver price of $ 13.39 or 25% less compared to today's silver price.

Not only will Genco likely substantially increase the reserve/resource basis, they will also be able to reduce cost of production significantly.

Furthermore, the intensive drill program of the vast unexplored properties of the historic silver district will also have a positive effect. Modern exploration has tested only about 5% of the known veins in the District and recent exploration work has shown that there are many more veins than initially estimated.

According to some independent analyst, Genco's earnings could reach 13 cents/share in 2008 and 32 cents/share in 2009. At a PE ratio of 6, Genco, we believe, is an outstanding purchase, especially when you compare its valuations with some other producers like Newmont with a PE ratio of 15, Kinross Gold PE ratio of 17, Goldcorp PE ratio of 30 and Agnico Eagle Mines PE of 38.

Technical Considerations

THE TIMELESS PRECIOUS METAL FUND & THE SIERRA MADRE GOLD & SILVER VENTURE FUND are shareholders in the company and will benefit from any increase in the company's share price.

Disclosure: The author has not been paid to write this article, nor has he received any other inducement to do so. The author is a shareholder in the company and will benefit from any increase in the company's share price.

Disclaimer: The author's objective in writing this article is to invoke an interest on the part of potential investors in this stock to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell this stock. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions in the stock.

Peter Zihlmann
P. ZIHLMANN INVESTMENT • MANAGEMENT AG
www.pzim.com
invest@pzim.ch
Tel. +41 44 268 51 10
Mobile +41 79 379 51 57

Your independent Swiss asset manager

THE TIMELESS PRECIOUS METAL FUND
THE SIERRA MADRE GOLD & SILVER VENTURE CAPITAL FUND

Copyright 2007-2008 © Peter Zihlmann

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