Excellon Resources Inc.

Excellon Resources Inc.

December 18, 2006 16:34 ET

Excellon Reports First Quarter Earnings of $7.6 Million

TORONTO, ONTARIO--(CCNMatthews - Dec. 18, 2006) - Excellon Resources Inc. (TSX VENTURE:EXN) is pleased to report earnings of $7.6 million for the three month period ended October 31, 2006. Excellon generated operating cash flow of $2.2 million in the period and the Company had $12.8 million cash on hand as at October 31, 2006. As at December 14, 2006, the Company has in excess of $14 million cash on hand. Other results from the period ended October 31, 2006 include:

October 31/06 October 31/05
Revenue $ 12,274,681 $ 3,273,783
Cost of production (including
amortization of $300,366;
2005 - $596,136) 1,230,757 1,142,246
11,043,924 2,131,537
Non-cash items 918,259 1,762,143
Exploration 1,152,789 68,638
Other 1,016,039 910,951
Provision for income taxes 328,586 -
3,415,673 2,741,732
Net income/(loss) for the period $ 7,628,251 $ (610,195)
Earnings (loss) per share - basic
and diluted $ 0.05 $ (0.01)
Cash provided by (used in) operating
activities $ 2,248,335 $ (914,088)

During the three months ended October 31, 2006, the Company recorded net income of $7,628,251 compared to a net loss of $610,195 in 2005. Gross operating income for the period was $11,043,924 compared to $2,131,537 in 2005. Operating income for the period was $7,854,189, compared to a loss of $610,195 in 2005. Included in net income is a loss resulting from the valuation of the Company's silver debenture of $572,283 (2005 - $727,958). Excluding this valuation loss, the Company would have reported net income of $8,200,534 (2005 - $117,763).

During the three months ended October 31, 2006, the Company produced 15,988 tonnes (2005 - 9,620) of ore and shipped 11,536 tonnes (2005 - 8,363 tonnes) of ore. Revenues during the period were $12,274,681 (2005 - $3,273,783) and cost of production was $1,230,757 (2005 - $1,142,246), resulting in gross operating income from mining operations of $11,043,924 (2005 - $2,131,537). Although the amount of ore shipped during the three months ended October 31, 2006 was only 38% greater than in 2005, revenues were significantly increased due to the higher grade of the material shipped and substantial increase in metal prices realized.

Operating expenses increased from $2,741,732 in 2005 to $3,189,735 in 2006. This increase was due to increased mine administration costs of $371,802 (2005 - $206,871), travel and business development costs of $292,528 (2005 - $182,376), professional fees of $127,739 (2005 - $85,229) and exploration expenditures of $1,152,789 (2005 - $68,638). Mine administration costs and professional fees were higher than in 2005 due to increased operations at the mine and the resulting activities required to support these operations. In addition, the Company's exploration program has been significantly increased from 2005 as exploration work continues to focus on locating additional mineralization in the vicinity of the existing test mine as well as testing other regional targets. Travel and business development expenses were higher in 2006 due to the Company's increased participation in trade and investor relations conferences.

Operating expenses were offset by the reduced silver debenture valuation loss of $572,283 (2005 - $727,958), stock based compensation costs of $nil (2005 - $77,000), consulting fees of $70,203 (2005 - 180,000), and amortization of acquisition costs of $298,788 (2005 - $550,323) as well as a foreign exchange gain $79,484 (2005 - loss of 259,004). Amortization of acquisition costs was lower due to the impact of the expanded mineral resource.

As at December 14, 2006, the Company's aggregate cash and short-term investments were in excess of $14,000,000.

Test-Mining Program

Through the quarter ending October 31, 2006 the company maintained continuous production from the underground test mining of the high grade resource defined in 2002 and mined since May 2005. Although ore production was 37.8 % higher than the same period in 2005, it continues to be lower than planned. This shortfall is due primarily to difficulties experienced by Industrias Penoles S.A. de C.V. in optimizing the blending of the higher grade Platosa mineralization with their own production to achieve the best mill recoveries at its Naica milling facility.

Despite the shortfall in the tonnage shipped to Penoles, the mining progressed into some of the higher grade mineralization resulting in the total silver shipped exceeding the same period in 2005 by 155%. During the current period a small quantity of very high grade silver and lead was shipped directly to the Penoles lead smelter on a trial basis. This activity will be extended in the next quarter when the right combination of high silver and lead grades in conjunction with low zinc grades can be selectively mined as the value in zinc that is lost under the direct smelting terms must be less than the improved return for the silver and lead.

During the period mineralization at the test-mine continued to be expanded with the combination of underground mine development and exploration drilling from both surface and underground. High grade production during the period was primarily maintained from the resources originally defined in 2002. Underground development progressed toward the new mineralization discovered in December 2005 and expanded since that time. The Company is awaiting assay results on the newly discovered mineralization.

The following are the production statistics for the quarters ended October 31, 2006 and 2005 and the year ended July 31, 2006:

Quarter Ended Year Ended
Oct. 31/06 Oct. 31/05 July 31/06
Tonnes of ore shipped 11,536 8,363 44,413
Contained Metal
Silver (ozs.) 946,834 371,227 1,711,719
Lead (lbs.) 3,285,664 2,493,414 10,921,062
Zinc (lbs.) 1,626,235 1,558,652 12,776,263

Average grade:
Silver (oz/T) 82.1 44.4 38.5
Lead (%) 12.9 13.5 11.2
Zinc (%) 6.4 8.5 13.1

Payable metal:
Silver - 76.9% (ozs.) 729,507 285,473 1,322,969
Lead - 80.0% (lbs) 2,630,767 1,994,732 8,750,605
Zinc - 58.0% (lbs) 932,298 904,019 7,361,702

Silver withheld for repayment
of silver-backed debentures(i) 364,754 140,228 658,976

(i) Including ore shipments to November 15, 2006, the silver withheld for repayment of the debentures totaled 1,066,000 ounces


Drilling continues around the old Zorra Mine, 4 kilometres to the west of the Platosa Test-mine. The Zorra Chimney was a carrot-shaped body, roughly 30 metres in diameter, mined for 85 metres vertically. Alteration in this area is very strong and there are numerous prospect pits that have yielded strong silver-lead-zinc anomalies. Drilling also continues at the Crestoncitos area 1.5 kilometres south of the Platosa Test-mine, and the Canon Colorado area 5 kilometres to the north. The drilling is focusing on intrusion and alteration centers with moderate geochemical signatures.

Qualified Persons

Dr. Peter Megaw, PhD, CPG, and Mr. G. Ross MacFarlane, PEng, have acted as the Qualified Persons, as defined in National Instrument 43-101, for this disclosure and each has supervised the preparation of a portion of the technical information on which this management discussion and analysis is based.

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 and his company are shareholders.

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 the Chief Operating Officer and a shareholder.

Summary Financial Information

Quarter Ended 31-Oct-06 31-Oct-05
(3 months) (3 months)

Revenue $ 12,274,681 $ 3,273,783
Operating Income/(Loss) $ 7,854,189 $ (610,195)
Income (Loss) per share $ 0.05 $ (0.01)
Net Income (Loss) $ 7,628,251 $ (610,195)
Net Income (Loss) per share $ 0.05 $ (0.01)

Balance Sheet Data 31-Oct-06 31-Oct-05

Cash and short-term investments $ 12,826,442 $ 36,863
Accounts receivable 4,900,887 2,607,000
Inventory 560,619 179,118
Deposits 536,642 780,689
Total Current Assets 18,824,590 3,603,670
Silver Bullion 13,884,039 1,227,691
Mineral properties 4,581,718 11,056,012
Deferred financing costs 235,712 739,292
Fixed Assets, net 738,340 44,535
Total Assets $ 38,264,399 $ 16,671,200

Liabilities & Shareholders Equity
Accounts payable and accrued charges $ 2,464,600 $ 2,348,368
Taxes payable 751,425 Nil
Silver debentures 24,411,989 16,494,258
Total Liabilities 27,628,014 18,842,626
Share capital 27,753,911 19,101,815
Silver debenture warrants Nil 450,000
Contributed Surplus 2,622,600 1,377,000
Deficit (19,740,126) (23,100,241)
Total Shareholders' Equity 10,636,385 (2,171,426)
Total Liabilities and
Shareholder's Equity $ 38,264,399 $ 16,671,200

About Excellon

Excellon Resources Inc., an emerging silver producer, is test-mining and exploring its Platosa/Saltierra Properties in Durango State, Mexico. The Company continues to build a significant treasury, and will remain self-financed as it expands production, and explores to extend the definition of Platosa's high grade resources.

On behalf of


Richard W. Brissenden, Chairman 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, 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 ability 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 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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