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Toronto Stock Exchange � EXN
No. 18 � 2008
EXCELLON REPORTS THIRD QUARTER LOSS OF $1,660,395
Toronto, Ontario � June 13, 2008 � Excellon Resources Inc. [TSX-EXN] is
pleased to report its results for the three month period ended April 30,
2008. For full details, please see the Company's unaudited Financial
Statements for the three and nine months ended April 30, 2008 and related
Management�s Discussion & Analysis, which were filed on SEDAR on June
13, 2008.
Q3 Highlights
� Completed $10.0 million private placement equity financing subsequent to
quarter end in May 2008
� Produced 473,422 ounces of silver, 2,700,617 pounds of lead, and
2,625,830 pounds of zinc
� Loss of $0.011 per share
� Received a new Mineral Resource estimate, more than doubling the
Indicated Resource from that of May 2006 and intersected additional
sulphide mineralization since the cut-off date of the new estimate
� Approved construction of mill
"Excellon admittedly has faced some challenges of late: the work
stoppage due to a strike at Pe�oles' Naica facility had an impact on the
third quarter, and operations were temporarily suspended in mid May due to
an unexpected underground water inflow," said Peter A. Crossgrove,
Excellon's chairman. "However, the Company has risen to these
challenges, and is surmounting them. Further, these events have made the
completion of a $10 million private placement equity financing in mid May
especially prudent. Excellon will continue to build on its fundamentals in
the coming quarter. It will progress its work on the construction of the
mill at Platosa, and pursue its exploration program."
Financial Highlights
[For table, please see attached file.]
Test-Mining Program
Development and mining of the Platosa deposit during the quarter ended
April 30, 2008 was carried out primarily in the northwest area of the main
Guadalupe Manto. Shipments of crushed ore to the Naica milling facility
["Naica mill"] of Compa��a Maple, S.A. de C.V. [a subsidiary of
Industrias Pe�oles S.A. de C.V. ["Pe�oles"]] were 11,080 tonnes
for the three months ended April 30, 2008 compared with 12,095 tonnes in
the previous year. Shipments in the period averaged 3,693 tonnes per month
[2007 � 4,032 tonnes per month]. Ore shipments, which had been suspended as
at January 16, 2008 due to a labour strike at Naica, resumed in
mid-February.
In the third week of May during the routine development of a third
ventilation raise in the north western section of the Platosa Mine, there
was an unexpected intersection of a water bearing formation at the 140
metre elevation. This resulted in a water inflow that exceeded the pumping
capacity of the mine dewatering pumps and a suspension of mining activity.
The Company has successfully sealed the water inflow, placed a concrete
safety barrier in the access drift to the raise, and has begun to dewater
the mine.
The following are the shipping statistics for the three and nine months
ended April 30, 2008 and 2007:
[For table, please see attached file.]
Exploration
The Company received an updated and significantly increased Mineral
Resource estimate, more than doubling the Indicated Resource and including
an important Inferred Resource, prepared as of February 3, 2008. Diamond
drilling in the immediate Platosa Test-mine area subsequent to February 3,
2008 has encountered additional significant manto-style sulphide
mineralization. Press releases dated February 21, April 23 and June 5, 2008
discussed assays and/or visual results for five, 16 and 16 new
intersections respectively. These intersections ranged from 0.20 metres (m)
to 8..70 m in estimated true thickness. The reader is referred to the press
releases for complete details.
Of particular importance is the discovery of sulphide mineralization in the
NE Rodilla area, 75 to 150 m northeast of the Rodilla Manto. Massive and
semi-massive sulphide intersections, some with short inclusions of weakly mineralized
limestone, ranging from 0.45 to 7.09 m in estimated true thickness have
been cut and in hole LP533, a second 1.00 m zone of massive sulphides was
intersected 35 m below the expected first zone. The significance of this
occurrence remains to be evaluated..
New mineralization has also been intersected immediately off the northwest
corner of the principal Guadalupe Manto, where it is presently accessible
from test-mine workings. Finally, new sulphides have been found in an area,
tentatively named S. Cent. Guadalupe, located northwest of the 6A Manto and
east of the mined-out N-1 Manto. This area is accessible from existing mine
openings and is also the subject of ongoing diamond drilling..
Three drills are active in the test-mine area, two following up new
sulphide intersections and the third testing geophysical, geochemical and
geological targets, which may lead to the discovery of new mineralized
areas. This approach led to the NE Rodilla discovery noted above.
A fourth drill continues to work on the Company's regional exploration
program in the Saltillera area, three to five kilometres west of the
test-mine area.. This program targets the proximal-style, large
tonnage-potential CRD sulphide mineralization the Company believes is
present on the Property. Nine holes have been completed in the Saltillera
area in calendar 2008. Promising geology and alteration continue to be
intersected. Narrow sulphide intersections have also been found.
Qualified Persons
Mr. G.. Ross MacFarlane, P.Eng., Mr. John Sullivan, BSc., PGeo. and Dr.
Peter Megaw, PhD, CPG, have acted as the Qualified Persons, as defined in
NI 43-101, with respect to the disclosure of the scientific and technical
information contained in this news release and have supervised the preparation
of the technical information on which such disclosure is based.
Mr. MacFarlane is a graduate Mining Engineer with over 30 years of wide
ranging experience in the mining industry. His experience includes senior
responsibilities in the operation of mines and mills as well as mine
project developments from feasibility to construction and the start-up of
operations in Canada as well as in South America, Europe and Asia. Mr.
MacFarlane is not independent of Excellon as he is an officer and
shareholder and holds common share purchase options.
Mr. Sullivan is an economic geologist with over 35 years of experience in
the mineral industry. Most recently a senior geologist at a Toronto-based
international geological and mining engineering consulting firm, he has evaluated
properties and prepared NI 43-101 reports on gold and base metal projects
in Canada and internationally. Mr. Sullivan is not independent of Excellon
as he is an officer and holds common share purchase options.
Dr. Megaw has a PhD in geology and more than 25 years of relevant
experience focused on silver and gold mineralization, and exploration and
drilling in Mexico. He is a Certified Professional Geologist [CPG 10227] by
the American Institute of Professional Geologists and an Arizona Registered
Geologist [ARG 21613]. Dr. Megaw is not independent of Excellon as he is a
shareholder.
Results of Operations
Three months ended April 30, 2008 compared to three months ended April 30,
2007
During the quarter ended April 30, 2008, the Company recorded net loss and
comprehensive loss of $1,660,395 compared net loss and comprehensive loss
of $222,352 in 2007. Gross operating income for the quarter was $8,168,743
compared to $8,057,519 in 2007. Net income before income taxes for the
quarter was $669,479, compared to net income before income taxes of
$3,447,911 in 2007. The financial performance of the Company in the quarter
was negatively impacted by a labour strike at the Naica mill. This
prevented the Company from making any ore shipments to the Naica mill in
the first two weeks of the quarter. Resumption of ore shipments to the
Naica mill occurred on February 13, 2008.
Cash used by operating activities for the quarter was $458,655 [2007 �
$2,280,014] and working capital deficiency as at April 30, 2008 was
$283,404 [July 31, 2007 � working capital of $6,340,137]. The lower cash
and working capital deficiency reflects the significant expenditures by the
Company on surface rights acquisitions and lease in the current fiscal year
as well as the lower sales as a result of the strike at Naica mill.
During the quarter, the Company shipped 11,080 tonnes [2007 � 12,095
tonnes] of ore. Sales were $9,661,688 [2007 � $9,134,927] and cost of
production was $1,492,945 [2007 � $1,077,408], resulting in gross operating
income of $8,168,743 [2007 � $8,057,519].The amount of ore shipped during
the quarter was 8% lower than in 2007, however, the average grade of silver
increased to 42.7 oz/t from 33.7 oz/t in 2007. As a consequence of the
higher silver grade, the resulting contained silver in ore shipped in the
quarter increased to 473,422 ounces from 408,029 ounces in 2007. Lead
contained in ore shipped for the quarter was 2,700,617 pounds [2007 �
2,544,365 pounds] and zinc contained in ore shipped for the quarter was 2,625,830
pounds [2007 � 3,606,838 pounds]. The 6% increase in sales in the quarter
versus the prior year is attributed to the increase in silver contained in
ore shipped combined with a higher realized price of silver in the quarter.
This increase was partially offset by the impact of the strengthening of
the Canadian dollar versus the U.S. dollar and lower shipments of zinc
contained in ore in the quarter. The average Canadian dollar/U.S. dollar
exchange rate in the quarter was 1.01 [2007 � 1.16].
Amortization of acquisition and deferred development costs for the quarter
decreased from $218,125 in 2007 to $129,238 in 2008. This decrease resulted
from the effect of the 2008 Resource estimate on the amortization
calculation. As at April 30, 2008, total mineral properties carried on the
balance sheet increased to $10,444,665 from $3,856,856 as at July 31, 2007.
Details of the mineral properties are included in the interim consolidated
financial statements for the period ended April 30, 2008.
Expenses increased in the quarter from $4,693,443 in 2007 to $7,483,098 in
2008. The increase in expenses in the quarter is explained as follows:
i. Salaries increased to $1,431,974 in 2008 from $383,670 in 2007. The
increase was primarily due to the payment made to the Company's former
President and Chief Executive Officer upon his resignation;
ii. Mine administration increased to $664,766 from $232,866 in 2007
primarily due to the Company's MXN 3,000,000 pesos contribution to a
community development fund for the benefit of the ELS who are neighbours to
the Platosa mine in Mexico;
iii. Regulatory fees increased to $227,987 from $29,984 in 2007 due to the
Company's initial listing fee on the Toronto Stock Exchange;
iv. Exploration expenditures increased to $3,191,726 from 2,268,456 in 2007
due to the Company's planned increase in exploration activities in the
current year versus the prior year; and
v. Stock-based compensation increased to $460,175 from $nil in 2007 due to
the recognition of the fair value of incentive stock options issued to
certain directors, officers, employees and consultants of the Company in
January 2008 over their vesting period. No such incentive stock options
were issued in the same quarter in 2007.
During the quarter, the provision for current income taxes was $1,982,781
[2007 � $2,378,438]. The requirements for the payment of taxes reflect the
fact that the Company's Mexican operating subsidiary is, by virtue of its
income-producing operations, a taxable entity in Mexico. During the current
period, the Company re-assessed the valuation of its future income tax
assets and determined that the value of the current portion of future
income tax asset should be reduced to $510,125 [July 31, 2007 -
$2,040,250]. The non-current future income tax asset as at April 30, 2008
was $597,940 [July 31, 2007 - $597,940]. Future income tax liability as at
April 30, 2008 was $1,125,243 [July 31, 2007 � $1,769,792].
As at April 30, 2008, accounts receivable was $4,102,812 [July 31, 2007 �
$7,350,569].
As at April 30, 2008, property, plant and equipment, net of accumulated
amortization, was $3,009,469 [July 31, 2007 � $3,073,563]. During the
quarter, the Company had property, plant and equipment expenditures
totalling $234,699 [2007 � $816,614]. Amortization increased from $152,205
in 2007 to $176,616 in 2008.
Liquidity and Capital Resources
As at April 30, 2008, the Company's cash and cash equivalents, short-term
investments and silver bullion were $2,699,168 [July 31, 2007 �
$7,602,834], working capital deficiency was $283,404 [July 31, 2007 �
working capital of $6,340,137] and the deficit was $20,212,916 [July 31,
2007 � $17,884,514]. During the three month period ended April 30, 2008,
the Company used cash-flow in its operating activities of $458,655 [2007 �
$2,280,014].
On May 14, 2008, subsequent to the end of the quarter, the Company closed a
private placement of 7,700,000 common shares at a price of $1.30 per share
for gross proceeds of $10,010,000 (the "Offering"). Maison
Placements Canada Inc. (the "Agent") led the Offering. The
Company paid the Agent a commission of 5% of the gross proceeds of the
Offering and issued to the Agent compensation options (the
"Compensation Options") equal to 10% of the number of common
shares sold under the Offering. Each Compensation Option is exercisable at
any time for one common share at $1.35 per share until May 14, 2010.
The Company has in place certain agreements with Auramet Trading LLC
[�Auramet�] in order to provide the Company with external sources of
funding, should it be required. These agreements include a silver purchase
agreement, and bridge loan facility.
During the quarter ended April 30, 2008 the Company borrowed U.S. $902,250
under the Revolving Facility equal to 50,000 ounces of silver produced by
the Company but not yet refined into deliverable form. Prior to April 30,
2008, the Company delivered 50,000 ounces of refined silver to Auramet in
repayment of the aforementioned borrowings. The current balance outstanding
on the Revolving Facility is $nil. As at April 30, 2008, the value of the
Company's silver bullion was $125,060 [7,539 oz]. The Company views the
silver bullion as a near-cash item.
With respect to the bridge loan facility, the carrying value of the debt as
at April 30, 2008 was $nil as the Company made its final repayment on the
Bridge Loan to Auramet during the quarter.
On March 26, 2008, the Company entered into a U.S.. $2,500,000 bridge loan
financing loan ["Second Bridge Loan"] with Auramet.. Borrowings
under the Second Bridge Loan are subject to an interest rate of 10% per
annum and are repayable in five equal monthly installments. Repayments commenced in April 2008. The loan
is guaranteed by Minera Excellon and the Company has pledged its ore sales
accounts receivable of Minera Excellon as collateral for the Bridge Loan.
Transaction costs of $59,946 have been incurred with respect to the Bridge
Loan, which have been included in the carrying value of the short-term debt
and are being amortized using the effective interest method. The carrying value
of the debt as at April 30, 2008 is $1,972,252. Subsequent to the end of
the period, on May 16, 2008, the Company made early repayment of the
outstanding principal balance to Auramet.
The Company's cash flow projections indicate that the cash flow from the
test-mining operations and the Offering will be sufficient to allow the
Company to carry out all of its proposed exploration and test-mining
activities, pay for the construction of the Platosa mill, pay for mine
development and other capital expenditures and pay all of its anticipated
general and administrative expenses, over the next eighteen months.
About Excellon
Excellon, a mineral resource company operating in Durango State, Mexico, is
committed to building value through production, expansion and discovery.
The Company is producing silver, lead and zinc from high grade manto
deposits on its Platosa Property, strategically located in the middle of
the Mexican silver belt. In fiscal 2008, Excellon's focus is on increasing
its Mineral Resources through an aggressive $11 million exploration
program, and expanding its operating capacity with the building of a mill
at site. The Platosa Property, not fully explored, has several geological
indicators of a large mineralized system, the tracking of which Excellon
believes will lead to the discovery of a world class deposit.
On behalf of
EXCELLON RESOURCES INC.
"Peter Crossgrove"
Chairman
The Toronto Stock Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of the content of this Press
Release, which has been prepared by management.
This press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 27E of the Exchange Act.
Such statements include, without limitation, statements regarding the
future results of operations, performance and achievements of the Company,
including potential property acquisitions, the timing, content, cost and
results of proposed work programs, the discovery and delineation of mineral
deposits/resources/reserves, geological interpretations, proposed
production rates, potential mineral recovery processes and rates, the
proposed construction of a mill, business and financing plans, business
trends and future operating revenues. Although the Company believes that
such statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Forward-looking statements are
typically identified by words such as: believe, expect, anticipate, intend,
estimate, postulate and similar expressions, or are those, which, by their
nature, refer to future events. The Company cautions investors that any
forward-looking statements by the Company are not guarantees of future
results or performance, and that actual results may differ materially from
those in forward looking statements as a result of various factors,
including, but not limited to, variations in the nature, quality and
quantity of any mineral deposits that may be located, significant downward
variations in the market price of any minerals produced [particularly
silver], the Company's inability to obtain any necessary permits, consents
or authorizations required for its activities, to produce minerals from its
properties successfully or profitably, to continue its projected growth, to
raise the necessary capital or to be fully able to implement its business
strategies.
All of the Company's public disclosure filings may be accessed via www.sedar.com
and readers are urged to review these materials, including the technical
reports filed with respect to the Company's mineral properties, and
particularly the September 29, 2006 and June 1, 2007 43-101 technical
reports prepared by Scott Wilson Roscoe Postle & Associates with respect
to the Platosa property.
This press release is not, and is not to be construed in any way as, an
offer to buy or sell securities in the United States.
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FOR FURTHER INFORMATION PLEASE CONTACT:
Excellon Resources Inc.
Robert Brissenden
Vice President, Corporate Development
Excellon Resources Inc.
(416) 364-1130
Email: info@excellonresources.com
Website: www.excellonresources.com
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