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Dear Shareholders and Friends,
We are pleased to share an article by the� Northern Miner� discussing Excellon’s adaptability to survive the tough times in the mining cycle.
To view the full article, please see below.
Regards,
Nisha Hasan
Director, Investor Relations
� Adapt and survive, Excellon style
By: Anthony Vaccaro
2013-10-17
A key to surviving the tough times in the mining cycle is adaptability, and if an investor is looking for an example they need not look further than Excellon Resources (TSX: EXN).
The Toronto-based� miner began the year intent on pumping the cash being generated from its� Platosa high-grade silver mine in Mexico's Durango state back into the ground, but with market valuations for explorers drying up, it changed gears.
"The plan at the beginning of year was to explore for the source at Platosa with an $18 million drill budget, and just break even for the year . . . we've since scaled that back a little," Excellon's CEO Brendan Cahill says in an interview. "At the end of March we shifted our focus. We said, let's focus on production, asset recognition and intelligent acquisition."
The decision was based on a realization that rather than build resources that weren't getting value on the market, it made more sense to look at buying other company's assets at attractive prices.
So while Excellon sunk $6.5 million into exploration in the first quarter and just about broke even with a roughly $500,000 loss, it is now squarely focused on making Platosa the most efficient mine it can be, thus bolstering its treasury and bringing more acquisition targets into its range.
The company currently has� $8-10 million in cash available, depending on how its silver delivery contracts are settled. Delivery contracts involve an upfront payment to Excellon for its silver concentrates, and then settlement either two or four months from the delivery date with a price adjustment being made based on the spot price for silver at the settlement date.
In addition to having a healthy balance sheet, Excellon also has a track record of making such "intelligent" acquisitions in the past.
In 2009 Excellon took note of Silver Eagle Mines, a company that had just completed a $15-million mill for its Miguel Auza mine. With silver prices collapsing in the wake of the financial crisis, the company was under pressure to sell and Excellon was able to swoop in and capture the company and its new mill for just $5 million in shares.
Prior to purchasing the mill Excellon was toll milling its ore with Penoles and was getting recoveries of roughly 70%. The newly purchased mill allowed it to� improve that number by 20-25%,with recoveries improving in each of the last three years.� In 2010 it managed 85% recoveries, the following year it was up to 89%, and last year it managed a record 93%.
When high recoveries meet with a very high grade deposit, the kitty will grow, and last quarter Excellon showed it was well on its way towards beefing up its balance sheet even further. The company managed to produce 607,252 silver equivalent ounces, a 50% increase over the previous quarter and did so at an all-in costs of US$10.65 per silver equivalent oz. That was good news on the cost side, as last year all in costs came in at US$15.32 per silver equivalent oz.
What is generating those returns is the Mantos deposit at Platosa. "Mantos" is Spanish for blanket, a word that aptly describes the flat nature of the deposit which has measured and indicated resources of 637,000 tonnes grading 836 grams silver per tonne, 8.95% lead and 10.58% zinc for 17.1 million oz.� silver, 125.7 million lb.� lead, and 148.5 million lb. zinc.
The Mantos is� 3-4 metres in height and occurs at a depth of roughly 135 metres.
But while the depsoit's structure is straightforward, with visible contact points and very little dissemination outside of the Mantos, mining the ore is made� more complicated due to water management issues. Platosa is a wet mine, and that involves not only water pumps but also grouting and cement work.
Cahill's main focus right now is to make that mining process as efficient as it can be.
"Once we are at a consistent 200 tonnes per day then we can go up to 210 tonnes and then 220 tonnes," he says. "Those small incremental gains, small efficiencies of 1% or 2%, will transfer into faster mining and more ounces per year."
To get those gains Excellon is examining every aspect of its mining process.
"Are we using the� right mixture of concrete? Do we have the right miners available? Are we getting the concrete there as quickly as possible? Are we grouting most effectively? It's really just fine tuning it," Cahill says.
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The company currently has high calibre consultants considering ways to best manage the water issue.
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One thing is certain: once more ore starts coming out of the mine, the mill will be ready for it. Ore from Platosa is trucked 200 km to the plant for processing at a mill that can� handle 350 tonnes per day and is currently only running 16 days of the month. Having a fixed cost like a mill running the full month will drive down overall costs.
Platosa is part of Mexico's CRD belt, which is responsible for roughly 40% of all of the country's silver production.
And while the Mantos is supplying plenty of grade, and will do so for the next 10 years, Excellon is in pursuit of the source of all of its mineralization. It believes that its previous drill program was on the verge of discovering just that as its Rincon del Caido discovery hole from last summer shows signs of being on the periphery of a yet-to-be-discovered source.
Drilling at Rincone, which is roughly 1 km from Platosa, returned highlight intercepts of 55.46 metres grading 132 grams silver, 3.13% lead, 1.74% zinc and 0.07 gram gold, and 7.25 metres grading 13.07 grams gold and 21.1 grams silver.
Cahill says the presence of gold in the assays could indicate that Rincon is near the source. That is because the Carbonate Replacement Deposit system that it believes is the source of the Mantos, will likely have higher gold grades and lower silver grades.
And while looking for the source is on the backburner for now, investors can take comfort in the fact that when precious metal prices bounce back, Excellon will be positioned to adapt again and possibly deliver a big-tonnage story.
- See more at: bit.ly/1a2GoT4
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