Excellon Resources Gaining Momentum On Strong Cash Flow
Excellon Resources is a mineral resource company operating in Durango and Zacatecas States,Mexico. The Company is producing silver,lead and zinc ore from high-grade manto deposits on its Platosa Property,strategically located in the middle of the Mexican silver belt. It processes this ore at its concentrator in the town of Miguel Auza 220 km south of the mine and produces silver-lead and silver-zinc concentrates,which are sold under the terms of a long-term contract to an international trader. Miguel Auza hosts an indicated and inferred mineral resource and was the site of considerable historic mining for silver,gold,lead and zinc over the centuries. Chris Hopkins,Excellon’s CFO tells us more about where his company is headed.
Resource Intelligence:Can you give us a little history on Excellon’s involvement in Mexico?
Chris Hopkins:Certainly,Excellon became involved in Mexico in the early 1990s. It acquired the Platosa property in 1996 and in 1998 entered into a joint venture on part of the property with Apex Silver Mines Ltd. We began production in 2005. In June of last year,the Company completed the acquisition of all the outstanding common shares of TSX-listed Silver Eagle Mines Inc. for a purchase price of $5,488,722 comprised of $3,370,000 in common shares and $1,200,000 in net cash payments for transaction costs. The purchase included Silver Eagle’s Mexican assets,in particular its Miguel Auza mine and newly expanded 650 tonne per day mill. We began processing Platosa ore at Miguel Auza in March 2009 while acquisition negotiations were underway. The mine has been on care and maintenance since December 2008.
Another important 2009 development was the purchase of the remaining 49% joint venture interest in a large portion of the Platosa Property from Golden Minerals Company,(successor to Apex Silver) for US$2.0 million in cash and a 1% Net Smelter Returns royalty.
On December 10,2009 we reported that the Platosa Indicated Mineral Resource has increased to a total of 579,000 tonnes grading 909 g/t (27 oz/T) Ag,9.09% Pb,and 10.51% Zn (as at October 31 2009),up nicely from 396,000 tonnes grading 986 g/t (29 oz/T) Ag,9.00% lead,and 10.10% zinc (as at February 3,2008). The Inferred Mineral Resource also increased from 72,700 to 160,000 tonnes at a somewhat lower grade than that of 2008.
RI:So what are the details on your Platosa Property?
CH:Platosa is located in the northeast corner of the State of Durango,Mexico approximately 45 km north-northwest of the city of Torreon,Coahuila State,where the largest silver,zinc,lead smelter and refining complex in Mexico is located. The Property consists of 71 contiguous mining concessions covering a total area of 24,065 hectares. It is nominally divided into three areas based on underlying agreements and/or concession ownership:
Excellon 100%/Golden Minerals Royalty Area:This area comprises 46 concessions totalling 10,118 ha. It contains the Platosa mantos,current Mineral Resources,and Platosa Mine plus the surrounding area,which prior to November 2009 had been held in Joint Venture with Apex Silver Mines Limited (Apex). In November 2009,Apex’s successor Golden Mineral Corp. sold to Excellon its interest in the former Joint Venture concessions or US$2,000,000 and a 1% Net Smelter Return royalty.
Altiplano Area:This area comprises 20 concessions owned by Excellon totalling 11,076 ha. These 20 concessions are subject to a 3% NSR payable to Exploraciones de Altiplano,S.A. de C.V.,a private Mexican company.
Others:This area comprises five concessions totalling 2,870 ha. They are owned 100% by Excellon and are not subject to any underlying agreement or royalty.
In addition we own or lease 1,841 ha of surface rights.
RI:And what are you doing there now?
CH:We’re continuing to drill and expand our resources at Platosa. On January 14,2010 we announced assay results for thirteen additional drill holes,most of which intersected high-grade massive sulphides. Hole LP708 cut 3,300 g/t (96 oz/T) Ag,11.8% Pb,0.13% Zn over 1.15 metres (m) and hole EX09-LP692 intersected 1,470 g/t (43 oz/T) Ag,4.9% Pb,7.3% Zn over 1.77 m. Both represented extensions to the 623 Manto,which as reported in the press release dated December 10,2009,has an Indicated Mineral Resource of 62,000 tonnes grading 1,183 g/t (34 oz/T) Ag,10.27% Pb and 8.52% Zn. Our 2010 drilling program has three drills working in the vicinity of the mine exploring for extensions of existing sulphide bodies and for new ones based on targets developed using both geophysical techniques and geological data and modeling developed during our several years of drilling in the area. A fourth drill will probe targets in the Saltillera/Zorra area five kilometres west of the mine where we continue to see the potential for a large-tonnage proximal carbonate replacement deposit (CRD).
RI:The acquisition of the Miguel Auza Property has made an important addition to your holdings and capabilities. Can you focus on that a little?
CH:Certainly. The Miguel Auza Property is a large property with great potential for the discovery and exploitation of additional epithermal silver/gold,lead and zinc veins similar to those that have been worked so profitably for decades in the Fresnillo camp,150 km to the south as well as elsewhere in the Mexican Silver Belt. It also presents evidence of a potential carbonate replacement deposit (CRD) which could be very important. Although mining has taken place in the camp since the 1500s very little systematic modern exploration has actually been carried out and the historic data record is almost non-existent. Silver Eagle focused on developing the Calvario Vein system and only began a concentrated review of the potential of the overall property shortly before ceasing activities. Several additional vein systems are known including those exploited by the Spaniards,and the property remains largely under-explored. We began an initial exploration program on the property in the fall of 2009. Its focus is on determining if portions of the Calvario Vein system can be exploited economically and whether other areas of the large property warrant concentrated exploration efforts.
There was a small flotation mill on the property when Silver Eagle acquired it,which was expanded and used to process oxide material as Silver Eagle developed the King Ramp and the sulphide portion of the Calvario Vein system. Further expansion and modernization took place during 2008 and it processed Calvario sulphide mineralization for three months until mid-December 2008. We began shipping our Platosa ore to the mill in mid-March 2009.
RI:So you are shipping all your Platosa ore to the Miguel Auza mill?
CH:Yes,and since mill capacity is greater than production rate at Platosa the mill operating schedule is set to match shipments and have a throughput rate that maximizes metallurgical results. For the mid-March to December 31,2009 period throughput averaged 280 tonnes per operating day and was as high as 375 tonnes per day. A total of 57,902 tonnes of Platosa ore grading 994 g/t Ag,8.04% Pb,8.81% Zn were processed during that period. Recoveries averaged 80% for Ag reporting to the Pb concentrate,9% for Ag reporting to the Zn concentrate for a total of 89% Ag recovery. Pb recovery averaged 74.0% and Zn recovery 68.0%. Concentrate production totalled 5,733 tonnes of silver-lead and 6,656 tonnes of silver-zinc.
RI:In summary,why should investors consider Excellon for their portfolio?
CH:Excellon is a well-established operator in the high-grade mining business in Mexico. We have assembled very large land positions,which have seen considerable historic production and as well,hold the potential for significant discoveries of much larger resources. We are well funded,expect to generate over $45 in revenues in fiscal 2010 with greater revenues expected as production increases in the future. We have world class exploration upside and exposure to silver,lead and zinc prices through the highly profitable operations at Platosa. This self-funded exploration play provides investors with great potential without the risk of a pure exploration company. Excellon is an established operator.
Milestones:
* Continue exploring the large under-explored,strategically located properties at Platosa with a $12 million budget devoted largely to diamond drilling
* Develop drilling targets at Miguel Auza with a modest budget of close to $1 million.
* Increase the mining capacity at Platosa and continue processing ore at the Miguel Auza mill
* Continue to operate Platosa on a sustained and consistent basis generating strong cash flows.
* Continue multi-tooled,focused exploration to increase Mineral Resources at Platosa
* Confirm indications of large-scale mineralization on both our properties
* Evaluate additional strategic acquisition possibilities
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