Excellon Resources Inc.
TSX VENTURE : EXN

Excellon Resources Inc.

November 28, 2007 17:05 ET

Excellon Reports Annual Net Income of $9,483,863

TORONTO, ONTARIO--(Marketwire - Nov. 28, 2007) - Excellon Resources Inc. (TSX VENTURE:EXN) reports net income of $9,483,863 for the year ended July 31, 2007, and $1,861,568 for the three month period ended July 31, 2007. For full details, please see the Company's Management Discussion & Analysis, which was filed on SEDAR, www.sedar.com, on November 28, 2007.

2007 HIGHLIGHTS:

- Reported earnings of $0.07 per share;

- Produced 2.3 million ounces of silver, 10.2 million pounds of lead, 8.9 million pounds of zinc;

- Paid for and cancelled all silver debentures shortly after fiscal year end;

- More than doubled estimated NI 43-101 resources;


- Sales of $38,093,009, operating income of $13,928,053 and net income of $9,483,863;

- Working capital of $6,340,137;

- Strengthened management and operations team;

- Extended mineral and surface rights holdings at Platosa;

- Began mill evaluation and permitting process; and,

- Restated Interim Financial Results for the quarter ended April 30, 2007. The major item relates to changes in Mexican tax law that affected estimated future tax recoveries, which were reduced by $2,455,437.

To view the Financial Highlights, please visit the following link: http://www.ccnmatthews.com/docs/financial_highlights.pdf

Test-Mining Operations

Shipments of crushed ore to the Naica milling facility ("Naica mill") of Compania Maple, S.A. de C.V. (a subsidiary of Industrias Penoles S.A. de C.V. ("Penoles")) were 45,691 tonnes for the year ended July 31, 2007 compared with 44,413 tonnes in the previous year. For the three months ended July 31, 2007, shipments were 13,514 tonnes compared with 12,095 tonnes in the three months ended April 30, 2007. Shipments are currently averaging approximately 4,800 tonnes per month. The target shipping rate is 6,000 tonnes per month, and the Platosa mine is capable of maintaining this rate of production. Some modifications were completed to the Naica mill in May of 2007 and other improvements are currently being implemented at Naica that should allow that operation to process increased amounts of ore delivered from Platosa. The primary constraints at the Naica mill relate to maintaining optimum recoveries while blending the high-grade Platosa ores with the lower grade Naica Mine ores. Platosa mine management maintains ongoing dialogue with that of the Naica mine to optimize planning and blending of the Platosa ore to maximize the monthly ore deliveries. Platosa currently supplies about 7% of the tonnage being milled at the Naica mill, but more than 30% of the metal produced.

Excellon is presently evaluating the construction of a 350 tonne per day mill on the Platosa Property. The operation has produced high-grade silver, lead and zinc ore, and sold it to the Naica mill since April 2005. The construction of the Platosa flotation mill ("Platosa mill") would allow the production of two concentrates, containing silver, lead and zinc, at the site for sale to world markets and decrease Excellon's current operating costs. Excellon has initiated an environmental impact assessment, process development work, selection of suitable sites for the Platosa mill and tailings dam, and has begun preliminary discussions with equipment suppliers and construction contractors. If the Company proceeds with the construction of the Platosa mill, the environmental permit is anticipated to be received in early calendar 2008, with construction starting in 2008 and start-up in the last quarter of calendar 2008.

The initial contract for the purchase of 60,000 tonnes of Platosa ore by Penoles was completed in October 2006 and discussions were initiated to settle on new purchase terms. Due to the increasing metal prices for lead and zinc, Penoles and the Company agreed to apply interim terms that included a price participation formula that reflected smelter industry standard practices. The interim terms have been applied to all settlements on ore purchases since November 2006 and Penoles has recently proposed final terms that are similar to the interim terms.

Excellon is investigating two other possible options to mill the Platosa ore either as a replacement with more favourable terms than the Penoles ore purchase contract or as a way to increase the production rate at the mine due to the limitations of the Naica mill to accommodate the full Platosa test-mine production capacity.

During the fiscal year, Excellon continued to make capital investments in the test-mining operation to replace the higher cost contracted production equipment. These investments included the purchase of a drill jumbo, two scooptrams and an underground haulage truck. These items comprise the main underground production equipment. In addition to reducing the ongoing operating costs, this equipment has improved underground working conditions and productivity.

Development and mining of the Platosa deposit during the year was progressed in the new and larger Guadalupe Manto discovered in 2005 to the north of the mantos that were the basis of the initial mine development plan. This development and production was carried out at similar mine depths as Manto 5. Mining of the higher grade material in Manto 6 has been deferred until future development of the mine reaches the required depth. In support of the development of the Guadalupe Manto, a new main pumping station and ventilation raise to surface were established.

In the course of the mine development into and within the larger Guadalupe Manto, breccia and massive sulphide mineralization not included in the updated National Instrument 43-101 compliant technical report prepared as at May 9, 2006 by Scott Wilson Roscoe Postle Associates Inc., independent geological and mining consultants of Toronto, Ontario ("2006 Resource") was encountered. Material from these zones was economic but the breccia portions were lower in lead and zinc grade than the grade estimated in the mine plan. As a result, overall fiscal 2007 lead and zinc production grades were slightly lower than both the 2006 Resource grade and the mine plan grade. The fiscal 2007 silver grade was virtually identical to the 2006 Resource grade and far higher than the fiscal 2006 production grade.

During the year, a small tonnage of the high-grade zone mined from Manto 5 was shipped directly to the Penoles lead smelter. Following analysis of the net smelter return from the smelter compared to the return from delivering the ore to the Naica mill, it was concluded that all Platosa ore should be delivered to the Naica mill.

To view the Production Statistics for the years ended July 31, 2007 and 2006, please visit the following link: http://www.ccnmatthews.com/docs/production_stats.pdf

Exploration

Exploration efforts in fiscal 2007 and on into the August-November 2007 period were focused in two geographic areas, the immediate Platosa test-mine area and the Saltillera area three to five kilometres west of the test-mine. In the immediate test-mine area there were two objectives:

- To further define and add to the known distal-style, high-grade CRD Mineral Resources; and

- To carry out a diamond drilling program to test biogeochemical and geophysical targets and follow-up on interesting drill intersections, largely north and adjacent to the test-mine, which had previously been inaccessible due to surface access issues.

In the Saltillera area, the district-scale search for proximal-style CRD sulphide mineralization was continued and accelerated.

Throughout most of fiscal 2007 and into late calendar 2007, three drill rigs were in operation, one in the immediate test-mine area and two at Saltillera. In early August 2007, the Company purchased surface rights to the north of the test-mine and, at the end of August 2007, a drill was moved from Saltillera to this area to begin testing the targets referred to above. A fourth drill was mobilized in early October 2007 and joined the one already at Saltillera.

Several exploration successes were achieved during the year in both the test-mine area and in the district scale exploration program. These were as follows:

- The initial program to expand the 2006 Resource was successfully completed in late calendar 2006, at which time it was put on hold because of the access issues noted above and to put more emphasis on the district-scale program. Management is confident that the results of the initial program will add to the Guadalupe Manto resources when an updated Mineral Resource estimate, scheduled to be completed in early calendar 2008, is delivered.

- Work by the Company showed that the apparent 60-metre wide "gap" between the Guadalupe and Guadalupe South mantos appeared to be at least partially bridged approximately 25 metres above the elevation of these mantos. As part of the ongoing test-mining at Platosa, brecciated sulphide mineralization was traced upwards from the southeast end of the Guadalupe Manto to flat-lying massive silver-galena-sphalerite rich mineralization. Eighty-six metres farther southeast along this trend, Hole LP07-347 intersected 4.55 metres of similar looking massive and brecciated sulphide mineralization grading 2,291 g/t silver, 16.7% lead, 9.1% zinc at the same elevation. Additional drilling was carried out in this area and Hole LP07-350 intersected 2.00 metres of massive sulphide mineralization grading 2,740 g/t silver, 36.8% lead, 1.1% zinc. Hole LP07-355 intersected 6.75 metres of massive sulphide grading 2,200 g/t silver, 11.2% lead, 4.7% zinc at a similar elevation in the central portion of the Guadalupe Manto and subsequent test-mining has indicated that this previously unknown mineralization extends to the west and southwest. Test-mine development continues in this area and management believes that this work will add to the Platosa Mineral Resource.

- Drilling on the southeast portion of the Guadalupe Manto has intersected breccia-style sulphide mineralization. Hole LP07-385 intersected 4.89 metres grading 1,219 g/t silver, 10.8% lead, 3.0% zinc, and assays are pending for several other holes. In addition, holes LP07-391 and 392 intersected massive sulphides in an area immediately north of the Guadalupe South Manto at an elevation similar to that of holes LP07-347, 350 and 355 mentioned above. Hole LP07-391 intersected 2.66 metres grading 797 g/t silver, 10.9% lead, 16.2% zinc and Hole LP07-392 intersected 6.29 metres grading 471 g/t silver, 6.0% lead, 13.5% zinc.

- Most significantly, the Company announced that drilling in the Rodilla Manto area, some 75 metres north of the northeast corner of the Guadalupe Manto, intersected additional massive sulphides. The Rodilla Manto was intersected by a single drill hole in late calendar 2006 and, following the acquisition of surface rights, drilling resumed in late September 2007. Several holes have intersected massive to semi-massive sulphides as follows: LP07-405 - 3.42 metres, 408 - 13.06 metres, 411 - 4.89 metres, 413 - 12.47 metres (intermittent semi-massive sulphides), 417 - 3.95 metres (semi-massive) 419 - 3.10 metres and 424 - 15.25 metres. Assays have been received for 405, which ran 282 g/t silver, 4.7% Pb, 12.1% Zn from 138.36 to 143.15 metres and 408, which ran 632 g/t silver, 9.0% Pb, 10.9% Zn from 154.40 to 168.60 metres. This mineralization is open in several directions, drilling is ongoing and results will be incorporated into the pending updated Mineral Resource estimate.

- The Company's geophysically driven diamond drilling program, designed to locate mineralization associated with intrusive bodies, succeeded in discovering geologically significant proximal-style mineralization and alteration roughly five kilometres west of the test-mine. The discovery lies in a previously undrilled overburden-covered area lying along the strong northwest-trending structural corridor that contains the historic Saltillera and Zorra mines. Hole EX07ST-50 cut 85 metres of variably sulphide-mineralized proximal or near-source hornfels and skarn developed around two swarms of fine-grained felsite dykes representing the terminal stages of multi-phase intrusive activity (often diagnostic of large CRD systems in Mexico and elsewhere). Galena, sphalerite and chalcopyrite are locally visible in the core, with the most strongly mineralized section grading 129 g/t silver, 2.12% lead, and 0.92% zinc over 1.10 metres. The two most continuously mineralized portions of the 85-metre intercept average 19.3 g/t silver, 0.31% lead, 0.32% zinc over 8.01 metres (from 397.47 to 405.48 metres); and 41.2 g/t silver, 0.64% lead. 0.44% zinc over 16.25 metres (from 409.92 to 426.17 metres). This intercept is the first significant mineralization to be found in a series of holes designed to test specific zones around a large and complex magnetic anomaly revealed in the AEM survey flown in early 2007. Previous drill holes in the program have progressively outlined what is emerging as an extensive multi-phase intrusive system with numerous dyke offshoots and this progression led to the siting of Hole EX07ST-50. Overall, the intrusive system shows numerous features similar to those associated with the largest lead-zinc-silver-copper-gold CRDs of Mexico. Drilling seeking larger-scale, more pervasive mineralization in this area continues with two rigs.

Other significant ongoing activities begun during fiscal 2007 have been the building of an in-house exploration team, the enhancement of the Company's Quality Assurance/Quality Control program and the introduction of computer software that will eventually allow it to take better and more timely advantage of diamond drilling and other exploration data by building easy-to-visualize models of results and incorporating them into the drill hole interpretation and planning process. Certain of these activities have been slowed by the industry-wide shortage of qualified professional staff. This shortage extends to commercial laboratories and the Company, like most of its peers, faces delays of many weeks in receiving assay results. While the significance of much of the sulphide mineralization the Company is likely to intersect is apparent visually, delays in the receipt of assay data impact the Company's ability to disclose assays as quickly as it would like to.

Exploration efforts for the remainder of fiscal 2008 will remain focussed on diamond drilling in the immediate test-mine area in search of additional distal high-grade massive sulphide mineralization, particularly at the Rodilla Manto, and to the west at Saltillera in search of a high-tonnage proximal intrusive and skarn-related CRD deposit, which ongoing drilling continues to suggest is located in this area.

Qualified Persons

Mr. G. Ross MacFarlane, PEng, 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 press 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

Year Ended July 31, 2007 Compared to Year Ended July 31, 2006

During the year ended July 31, 2007, the Company recorded net income of $9,483,863 compared to a net loss of $4,878,331 in 2006. Gross operating income for the year was $32,324,287 compared to $20,909,323 in 2006. Income before income taxes for the year was $14,240,261, compared to a loss of $4,458,331 in 2006. Cash used by operating activities for the year was $1,154,622 (2006 - provided by $3,985,354) and working capital as at July 31, 2007 was $6,340,137 (2006 - deficit $3,262,066).

During fiscal 2007, the Company produced 46,723 tonnes (2006 - 44,778 tonnes) of ore and shipped 45,691 tonnes (2006 - 44,413 tonnes) of ore. Revenues were $38,093,009 (2006 - $26,595,875) and cost of production was $5,768,722 (2006 - $5,686,552), resulting in gross operating income of $32,324,287 (2006 - $20,909,323).

Although the amount of ore shipped during the year was only 3% greater than in 2006, silver production increased to 2,338,723 ounces from 1,711,719 ounces in 2006. Lead production for the year was 10,271,603 pounds (2006 - 10,921,062 pounds) and zinc production for the year was 8,943,334 pounds (2006 - 12,776,263 pounds). The significant 43% increase in revenues is as a result of the increased silver production and also the substantial increase in metal prices realized during the year. These increases more than offset the slightly lower lead and zinc grades that were experienced during the year. The cost of production was reduced in 2007 due to lower mineral properties amortization.

Total amortization for the year reduced from $7,021,599 in 2006 to $1,324,016 in 2007. This reduction was due to the increase in the Company's estimated Mineral Resources. Mineral property and deferred exploration expenditures are amortized on a unit of production basis, thus the increase in the amount of the estimated Mineral Resources, as contained in the 2006 Resource, has significantly reduced the amortization for the year. Amortization included in cost of production for 2007 is $472,515 (2006 - $2,349,026). Amortization of acquisition cost reduced from $4,672,573 in 2006 to $851,501 in 2007. As at July 31, 2007, total mineral properties carried on the balance sheet decreased to $3,856,856 from $5,180,872 as at July 31, 2006. Details of the mineral properties are included in the consolidated financial statements for the year ended July 31, 2007.

Expenses decreased from $25,386,442 in 2006 to $18,396,234 in 2007. This decrease was due to reduced silver debenture valuation loss of $1,925,841 (2006 - $6,900,115), reduced stock based compensation expense of $938,000 (2006 - $1,529,200), the 2006 onetime buy-out of the finder's fee of $1,315,740 and the reduced amortization of acquisition costs of $851,501 (2006 - $4,672,573) as noted above. These decreases were partially offset by increased professional fees of $1,410,690 (2006 - $446,797) and exploration expenditures of $6,677,846 (2006 - $4,581,854).

To view the calculation of the loss on silver valuation included in the consolidated statements of operations and deficit for the years ended July 31, 2007 and 2006, please visit the following link: http://www.ccnmatthews.com/docs/consolidated_statements.pdf

As at July 31, 2007, silver bullion carried on the balance sheet is $22,450,301 (2006 - $8,501,653) and the value of the silver debentures is $24,803,102 (2006 - $23,287,493). The Company is required to include in its silver debenture liability a contingent liability representing the full market value of the silver not yet delivered to the custodian. If the silver were delivered to the custodian, the Company would obviously have a corresponding sale and or adjustment to market value. This contingent gain, which would equal the contingent liability, is not recorded in the accounts of the Company. As at July 31, 2007, 1,629,254 ounces (2006 - 658,976 ounces) of silver has been delivered or is in transit to the custodian for the benefit of the debenture holders. The remaining 170,746 ounces (2006 - 1,141,024 ounces) of silver that could be delivered to the custodian is valued at $2,352,795 (2006 - $14,761,993). The remaining principle value of the debenture based on the silver held by, or in transit to, the custodian at year end is $1,000,802 (2006 - 7,097,112). The resulting contingent liability of $1,351,993 (2006 - $7,664,881) is included in the valuation of the silver debenture liability. As noted above the corresponding contingent gain of $1,351,993 (2006 - $7,664,881) is not recorded in the accounts of the Company.

During the year, the Company granted 1,150,000 incentive stock options (2006 - 4,095,000 incentive stock options) to directors and employees. 750,000 incentive stock options are exercisable for a period of five years, expiring on November 23, 2011 and are exercisable at a price of $0.97 per share. The remaining 400,000 incentive stock options are exercisable for a period of five years, expiring on January 25, 2012 and are exercisable at a price of $1.41 per share. The total fair value of the options issued is $938,000 (2006 - $1,529,200).

During the year, the Company engaged a legal consultant to assist the Company in its ongoing negotiations with local land owners. Additional legal and accounting assistance was also required with respect to the silver debentures and tax planning. The Company also implemented a new accounting system effective August 1, 2007. This new system will facilitate improved data management and timely and more accurate reporting between the head office in Toronto and operations in Mexico. The costs of implementing, training and testing this new system are included in professional fees. Lastly, the Company has engaged a consultant to assist in its evaluation of its systems and internal controls as required by Multilateral Instrument 52-109. As a result, professional fees have increased in 2007 to $1,410,690 from $446,797 in 2006.

During the year, exploration expenditures were $6,677,846 (2006 - $4,581,854) as the Company significantly increased its exploration program in 2007. Three drill rigs were in continuous operation during the year. The Company had an AEM survey flown over Platosa and, in addition, the Company has begun to increase and build its own exploration team to complement the expertise provided by senior consultants from IMDEX Inc./Minera Cascabel S.A. de C.V. ("IMDEX/Cascabel").

During fiscal 2007, the provision for current income taxes is $5,624,796 (2006 - $420,000). The requirements for the payment of taxes reflect the fact that the Company has, by virtue of its income-producing operations, now utilized all of its previously available losses available to offset income. During the current period, the Company has determined that it is more likely than not that $2,638,190 (2006 - $nil) of previously unrecognized future income tax assets should now be recognized. Current future income tax liabilities in the amount of $1,769,792 (2006 - $nil) have been recognized in the period and are related temporary taxable differences.

As at July 31, 2007, accounts receivable were $7,350,569 (July 31, 2006: $3,582,513). The increase is due to higher realized metal prices during the year compared to fiscal 2006.

As at July 31, 2007, property, plant and equipment, net of accumulated amortization, was $3,073,563 (2006 - $740,221). During the year, the Company had capital expenditures totalling $2,700,810 (2006 - $751,343), of which the purchase of mining equipment totaled $2,060,007 (2006 - $587,180). Amortization expense as a result of the capital expenditures during the year increased from $53,574 in 2006 to $367,468 in 2007.

Subsequent to the year end, the Company acquired surface rights totaling 622 hectares adjacent to the Platosa test-mine property from a group of local land owners for U.S. $1,030,000 representing the land cost and applicable legal and transfer fees. In a separate transaction, the Company acquired other surface rights, totaling 5 hectares, located in nearby Coahulia State, for U.S. $7,468,889. To fund these purchases the Company entered into a U.S. $4,000,000 bridge financing loan with Auramet Trading, LLC ("Auramet"). The Company borrowed U.S. $2,500,000 of this facility and U.S. $1,666,667 is outstanding as at November 19, 2007. The loan is guaranteed by the Company's Mexican subsidiary Minera Excellon de Mexico, S.A. de C.V. ("Minera Excellon") and the Company has pledged to provide the shares of Minera Excellon as collateral for this loan.

Three months ended July 31, 2007 compared to three months ended July 31, 2006

During the three months ended July 31, 2007, the Company recorded net income of $1,861,568 compared to net income of $4,841,729 in 2006. Gross operating income for the period was $6,840,126 compared to $8,923,724 in 2006. Income before income taxes for the period was $2,410,645, compared to $5,261,729 in 2006. Cash used by operating activities for the period was $2,998,088 (2006 - provided by $2,776,263) and working capital as at July 31, 2007 was $6,340,137 (2006 - deficit $3,262,066)

During the three months ended July 31, 2007, the Company produced 13,797 tonnes (2006 - 11,662 tonnes) of ore and shipped 13,514 tonnes (2006 - 13,013 tonnes) of ore. Revenues were $8,271,194 (2006 - $10,604,940) and cost of production was $1,431,068 (2006 - $1,681,216), resulting in gross operating income of $6,840,126 (2006 - $8,923,724).

Silver production decreased to 445,689 ounces from 512,838 ounces in 2006. Lead production for the three month period was 2,806,561 pounds (2006 - 3,107,782) and zinc production for the three month period was 2,912,801 (2006 - 3,620,245). The Company experienced lower average ore grades in the three month period compared to 2006 (silver: 33.0 oz/T versus 39.4 oz/T in 2006; lead: 9.4% versus 10.8% in 2006; zinc: 9.8% versus 12.6 in 2006).

Total amortization for the three month period reduced from $449,395 in 2006 to $290,651 in 2007. This reduction was due to the increase in the Company's estimated Mineral Resources. Mineral property and deferred exploration expenditures are amortized on a unit of production basis, thus the increase in the amount of the estimated Mineral Resources, as contained in the 2006 Resource, has reduced the amortization for the current period. Amortization included in cost of production for the period is $46,761 (2006 - $161,953). Amortization of acquisition cost reduced from $287,442 in 2006 to $243,890 in 2007. As at July 31, 2007, total mineral properties carried on the balance sheet decreased to $3,856,856 from $4,147,507 as at April 30, 2006. Details of the mineral properties are included in the consolidated financial statements for the year ended July 31, 2007.

Expenses increased from $3,665,660 in 2006 to $4,454,534 in 2007. This increase was due to a reduced silver debenture valuation gain of $500,222 (2006 - $1,808,482) partially off-set by decreased exploration expenditures of $1,847,354 (2006 - $2,877,345).

To view the calculation of the loss on silver valuation included in the consolidated statements of operations and deficit for the three months ended July 31, 2007 and 2006, please visit the following link: http://www.ccnmatthews.com/docs/consolidated_statements_operations.pdf

Silver bullion carried on the balance sheet is $22,450,301 (2006 - $8,501,653) and the value of the silver debentures is $24,803,102 (2006 - $23,287,493) as at July 31, 2007. The Company is required to include in its silver debenture liability a contingent liability representing the full market value of the silver not yet delivered to the custodian. If the silver were delivered to the custodian, the Company would obviously have a corresponding sale and or adjustment to market value. This contingent gain, which would equal the contingent liability, is not recorded in the accounts of the Company. The resulting contingent liability of $1,351,993 (2006 - $7,664,881) is included in the valuation of the silver debenture liability and the corresponding contingent gain of $1,351,993 (2006 - $7,664,881) is not recorded in the accounts of the Company.

During the period, no incentive stock options were granted.

During the period, the Company engaged a legal consultant to assist the Company in its ongoing negotiations with local land owners. Additional legal and accounting assistance was also required with respect to the silver debentures and tax planning. The Company has also implemented a new accounting system effective August 1, 2007. This new system will facilitate improved data management, timely and more accurate reporting between the head office in Toronto and operations in Mexico. The costs of implementing, training and testing this new system are included in professional fees. Lastly, the Company has engaged a consultant to assist in its evaluation of its systems and internal controls as required by the Multilateral Instrument 52-109. As a result, professional fees have increased in the period to $566,843 from $168,896 in 2006.

During the period, exploration expenditures were $1,847,354 (2006 - $2,877,345). Three drill rigs were in continuous operation during the period.

During the three months ended July 31, 2007, the provision for current income taxes is $580,366 (2006 - $420,000). The requirements for the payment of taxes reflect the fact that the Company has, by virtue of its income-producing operations, now utilized all of its previously available losses available to offset income. During the current period, the Company has determined that it is more likely than not that $363,631 (2006 - $nil) of previously unrecognized future income tax assets should now be recognized. Current future income tax liabilities in the amount of $332,342 (2006 - $nil) have been recognized in the period and are related to temporary taxable differences.

As at July 31, 2007, accounts receivable were $7,350,569 (July 31, 2006 - $3,582,513).

As at July 31, 2007, property, plant and equipment, net of accumulated amortization was $3,073,563 (2006 - $740,221). During the period, the Company had capital expenditures totalling $1,172,146 (2006 - $228,396). Amortization expense as a result of the capital expenditures during the period increased from $21,276 in 2006 to $130,820 in 2007.

Liquidity and Capital Resources

As at July 31, 2007, the Company's cash and cash equivalents and short-term investments was $7,602,834 (2006 - $10,630,650), working capital was $6,340,137 (2006 - deficiency $3,262,066) and the deficit was $17,884,514 (July 31, 2006 - $27,368,377).

During the year, the Company used cash of $1,154,622 in its operations (2006 - provided cash of $3,985,354). This decrease was due to significant increases in accounts receivable balances and the silver bullion balance at year end. Net cash was also decreased due to the increased capital expenditures in 2007 of $2,700,810 (2006 - $751,343).

The significant increase in accounts receivable and silver bullion was also the reason that working capital increased by $9,602,203 to $6,340,137 as at July 31, 2007 from a deficiency of $3,262,066 in 2006.

Subsequent to year end, on September 5, 2007, the Company and Auramet entered into a Silver Purchase Agreement. Pursuant to this agreement, the Company may pre-sell to Auramet 50% of the silver refined from ore mined at Platosa for the next two years and Auramet will provide the Company an operating line of credit (up to a maximum of US$4,000,000), whereby Auramet will pay for silver produced by the Company prior to being refined into deliverable form. The silver will be priced at market prices, as agreed between Auramet and the Company at the time of pricing, and will be subject to deduction for financing based upon LIBOR for the applicable financing period. In connection with this agreement, the Company issued 1,350,000 non-transferable share purchase warrants to Auramet. Each warrant is exercisable at a price of $1.38 per share until September 4, 2009. The warrants and any shares issued upon the exercise of the warrants are subject to a hold period until January 5, 2008.

The Company's cash flow projections indicate that the cash flow from the test-mining operations and the Auramet operating line of credit will be sufficient to allow the Company to carry out all of its proposed exploration and test-mining activities and pay all of its anticipated general and administrative expenses over the next eighteen months, and to repay its operating line of credit.

Restatement of Interim Financial Results for three month period ending April 30, 3007

Following an internal review of the annual financial statements and the procedures involved in the preparation of the year ended July 31, 2007, the Company determined that a restatement of the previously filed interim financial statements for the third quarter ended April 30, 2007 was required. The items requiring restatement were as follows:

1. The Company's silver in-transit receivable had been overvalued resulting in an over-statement of sales in the amount of $1,109,208;

2. Exploration expenditures were under accrued by $1,519,420;

3. The amortization of mineral properties as part of cost of production was over-stated by $335,319; and

4. Changes in Mexican tax law that affected the timing of the Company's future tax recoveries had not been reflected in the accounts of the Company. As a result the Company's future tax recoveries were overstated by $2,455,437.

The unaudited interim consolidated financial statements for the third quarter ended April 30, 2007 have been restated to correct these items. The related income tax effect of the restatement is reflected in the restated interim financial statements.

To view the impact of the restatement through and as at April 30, 2007, please visit the following link: http://www.ccnmatthews.com/docs/restatement.pdf

Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as at April 30, 2007, as required by Canadian securities laws. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as at April 30, 2007, a weakness existed in the design of the disclosure controls and procedures caused by a lack of timely review and reconciliation by management of the accounts of Minera Excellon for each interim period. This weakness could result in a failure to ensure the reconciliation to Canadian GAAP of accounts prepared by Minera Excellon under Mexican GAAP and could result in material misstatements to the Company's consolidated financial statements for any such interim period.

In order to address the identified weakness, management has determined to move the majority of the accounting process for each of its material Mexican subsidiaries from Mexico to its head office in Toronto, a move that will be made possible by the implementation of its new accounting system, effective August 1, 2007. In addition, management has concluded that, until such time as the foregoing move can be fully implemented, it needs to implement a specific control monitoring responsibility to the Company's Controller to attend on-site in Mexico and review and reconcile such accounts for each interim period (as opposed to having such review and reconciliation only for each annual period), and this process has been implemented.

The restated interim financial statements and restated interim filings for the three month period ending April 30, 2007 have been filed with SEDAR (www.sedar.com).

To view Summary Financial Information, please visit the following link: http://www.ccnmatthews.com/docs/summary_financial_information.pdf

About Excellon

Excellon Resources Inc. (TSX VENTURE:EXN), a self-sustaining 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, expanding its operation, and studying the feasibility of building 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.

Richard W. Brissenden, President and Chief Executive Officer

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 future anticipated exploration program results, the discovery and delineation of mineral deposits/resources/reserves, the potential construction and economic impact of a mill at Platosa, business and financing plans, business trends and future production rates and 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 inability of the Naica facility to process all the ore available for shipment by the Company, the Company's inability to obtain any necessary permits, consents or authorizations required for its activities, the Company's inability to secure all of the equipment necessary for its planned operations in a timely manner, 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 43-101 resource report 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.

The TSX Venture 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.

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