Excellon Resources Inc.
TSX VENTURE : EXN

Excellon Resources Inc.

November 21, 2006 10:18 ET

Excellon Reports Record Financial Results for 2006

TORONTO, ONTARIO--(CCNMatthews - Nov. 21, 2006) - Excellon Resources Inc. (TSX VENTURE:EXN) is pleased to report record operating cash flow of $3,985,000 for the year ended July 31, 2006. Excellon's cash flow since then has continued to grow, and the Company now has over $13 million cash on hand. Other results from the year ended July 31, 2006 include:



July 31/ 06 July 31/ 05
---------------------------

Revenue $ 26,595,875 $ 1,166,079
Cost of production (including amortization
of $2,349,026; 2005 - $362,589) 5,686,552 943,577
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20,909,323 222,502
---------------------------

Expenses:
Non-cash items 15,453,433 2,951,594
Exploration 4,581,854 2,386,348
Other 5,752,367 2,509,059
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25,787,654 7,847,001
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Net gain/ (loss) for the period $ (4,878,331) $ (7,624,499)
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---------------------------
Loss per share - basic and diluted $ (0.04) $ (0.07)
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---------------------------

Cash provided by (used in) operating activities $ 3,985,354 $ (6,308,865)
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---------------------------

Cash and short-term investments $ 10,630,650 $ 91,428
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The loss for the year ended July 31, 2006 is primarily due to the valuation loss of $6,900,115 (2005 - $406,065) in connection with the Company's silver debentures and total amortization costs of $7,635,003 (2005 - $1,632,942), both of which are non-cash items. Under generally accepted accounting principles, the Company is required, at the end of each fiscal period, to value the silver debentures at the market value of the silver bullion (1,800,000 ounces) potentially deliverable in connection with the repayment of the debentures. As a consequence, the significant increase in the price of silver during the fiscal year increased the value of the silver potentially deliverable upon repayment of the debentures, thereby significantly increasing the accounting loss. The amortization costs relate to the Company's Platosa/Saltierra mineral properties, which have now been written-down to $5,180,872 at July 31, 2006 from $12,202,471 at July 31, 2005. The operating results for 2005 are not comparable with those for 2006 as, while the test-mining program began in August 2004, actual production only began in May 2005.

As at July 31, 2006, the Company's aggregate cash and short-term investments amounted to $10,630,650 (increased to approximately $13,000,000 as at November 16, 2006). Cash provided by operating activities was $3,985,354 for the year, compared with cash used in operating activities of $6,308,865 in 2005, when the test-mining program had begun, but no production had yet occurred.

The Company has 145,138,657 common shares outstanding (158,188,657 fully diluted). The exercise of outstanding incentive stock options would raise $4,100,300 of additional cash. However, there can be no guarantee that any such options will be exercised. The Company anticipates that the cash provided from its ongoing test-mining program will be sufficient to fund all anticipated operations, including its presently planned exploration programs on the Platosa/Saltierra properties, for at least the next 24 months.

The following are the financial highlights for the three months ended July 31, 2006 and 2005.



July 31/ 06 July 31/ 05
---------------------------

Revenue $ 10,604,940 $ 1,166,079
Cost of production (including amortization
of $161,953; 2005 - $362,589) 1,681,216 943,577
---------------------------
8,923,724 222,502
---------------------------

Expenses:
Non-cash items (107,474) 796,697
Exploration 2,877,345 2,386,348
Other 1,312,124 1,113,171
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$ 4,081,995 $ 4,296,216
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Net gain/ (loss) for the period $ 4,841,729 $ (4,073,714)
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---------------------------
Gain (loss) per share - basic and diluted $ 0.04 $ (0.04)
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Cash provided by (used in) operating activities $ 2,251,847 $ (3,581,413)
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The quarter ended July 31, 2006 includes a valuation gain of $1,808,482 (2005 - $25,392) with respect to the silver debentures and total amortization costs of $596,566 (2005 - $1,196,517). The valuation gain occurs because the price of silver dropped to U.S. $11.440 at July 31, 2006 from U.S. $12.555 at April 30, 2006. Amortization costs dropped significantly because the calculation was updated to reflect the increased resources at the Platosa property identified in the Scott Wilson Roscoe Postle Associates Inc., independent mining and geological consultants of Toronto, Ontario ("Scott Wilson RPA"), NI 43-101 report of September 29, 2006, thereby significantly decreasing the amortization cost per unit of production.

As at November 16, 2006, the Company's aggregate cash and short-term investments amounted to approximately $13,000,000.

Test-Mining Program

Approximately 62,000 tonnes of ore have been shipped to the mill at the Naica Mine Division of Industrias Penoles ("Penoles"), a major integrated mining, milling and smelting company centered in Torreon, Mexico, since Excellon's ore production began in May 2005. In August 2004, the Company began to develop and operate a test-mine on the high grade indicated resource defined by Scott Wilson RPA's original report in September 2002.

The following are the production statistics for the12 months ended July 31, 2006:



Quarter Ended Year Ended
-----------------------------------------------
Oct. 31/ 05 Jan. 31/ 06 Apr. 30/ 06 July 31/ 06 July 31/ 06
-----------------------------------------------------------

Tonnes of ore
shipped 8,363 9,554 13,483 13,013 44,413
-----------------------------------------------------------
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Contained Metal
Silver (ozs.) 371,227 325,903 501,751 512,838 1,711,719
Lead (lbs.) 2,493,414 2,254,345 3,065,521 3,107,782 10,921,062
Zinc (lbs.) 1,558,652 3,655,648 3,941,718 3,620,245 12,776,263

Average grade:
Silver (oz/T) 44.4 34.1 37.2 39.4 38.5
Lead (%) 13.5 10.7 10.3 10.8 11.2
Zinc (%) 8.5 17.4 13.3 12.6 13.1

Payable metal:
Silver - 76.9%
(ozs.) 285,473 250,619 385,847 401,030 1,322,969
Lead - 80.0%
(lbs) 1,994,732 1,803,476 2,452,415 2,499,982 8,750,605
Zinc - 58.0%
(lbs) 904,019 2,120,274 2,286,197 2,051,212 7,361,702

Silver withheld
for repayment
of silver-backed
debentures(i) 140,228 125,310 192,923 200,515 658,976


(i) For shipments up to October 15, 2006, this amount has increased to
932,289 ounces.


The tonnage of ore shipped from Platosa to the Naica Mill currently averages approximately 4,000 tonnes per month, which is less than the targeted shipping rate of 6,000 tonnes per month. The Company is presently in discussions with Penoles, as well as with other mill operators, to formulate potential alternatives that would enable the Company to achieve the targeted shipping rate. In addition, the Company has initiated the preliminary planning required to develop a program to secure the necessary approvals for, and to construct, a milling facility at the Platosa Mine site.

Exploration

During the year ended July 31, 2006, the Company's exploration program focused on locating additional sulphide mineralization in the immediate vicinity of the mineralized zones defined in the original NI 43-101 resource report on which initial planning of the test-mine was based. The objective was to increase the 63,400 tonne resource and extend the projected 14 month test-mine life. The program resulted in the discovery of the two largest mineralized zones found to date at Platosa: the Guadalupe and Guadalupe South Mantos. These new, larger, mineralized zones became the focus for step-out drilling on 15-metre centres. The results from this work, together with data concerning mineralization located as a result of the ongoing underground mine development, were utilized to arrive at the updated NI 43-101 resource as calculated by Scott Wilson RPA in its September 2006 report. This report identifies an indicated resource of 184,500 tonnes grading 1,546 g/t (49.7 oz/t) silver, 10.9% lead and 10.5% zinc. (Estimate is of mineral resources only and, because these do not constitute mineral reserves, they do not have any demonstrated economic viability.) Approximately 80% of the new resource is contained in the two new mantos, with the balance contained in extensions made to the previously identified mantos.

Overall, the exploration program was successful in expanding the near mine resources. At a mining rate of 70,000 tonnes per year the updated resources should allow at least two years of test-mine life. Subsequent drilling has since identified additional mineralization, which the Company believes will further increase the resources at Platosa. Surface exploration drilling has shown that the geological, geophysical and geochemical exploration techniques being applied are effective in finding additional mineralization under cover. These techniques have been applied to the near mine area and numerous targets indicated by this approach remain to be tested.

Development of the test-mine continues to show that the mineralization at Platosa occurs as a continuous series of alternating flat and vertical segments (somewhat resembling a staircase) rather than being broken into isolated segments as originally interpreted. The vertical segments of mineralization were not identified by the surface drilling which defined the resource calculated in the original 2002 NI 43-101 report and have added to the tonnages mined to date. The updated 2006 NI 43-101 report showed these vertical segments added approximately 17% over what had been calculated in the original report. As expected, many of the previously unconnected sulphide bodies were linked by underground mining activity that also discovered offshoots of the drill indicated mineralization. In addition, some limited underground exploration was used to help locate extensions to the mineralization.

Further underground exploration drilling will begin late in 2006 on targets that include lateral projections of the mineralization delineated in the updated resource report as well as other mineralization encountered by surface drilling.

As the Company believes that the test-mine can operate off the expanded resource base at for least two years, during the past fiscal year the Company has also advanced its district scale exploration program. This program is focused on determining how exposed mineralization, alteration, intrusion types and host rocks in the Platosa area may indicate the location(s) of other mineralization.

Drill targets were developed in several areas and drilling commenced in September 2006. These include the Cerros San Gilberto area, 15 kilometres south of the Platosa test-mine, where surface geochemistry revealed strong silver values in old prospect workings. More extensive drilling is underway around the old Zorra Mine, 4 kilometres to the west of Platosa. The Zorra Chimney area was a carrot-shaped body, roughly 30 metres in diameter, which was mined for 85 metres vertically. Alteration in this area is very strong and there are numerous prospect pits that have strong silver-lead-zinc anomalies. Both of these areas are held by the Company under option from Exploraciones del Altiplano S.A. de C.V. Surface drilling at the Crestoncitos area, 1.5 kilometres south of Platosa, and the Canon Colorado area, 5 kilometres to the north, started in October 2006. Both these target areas lie in the portion of the Platosa property that Excellon holds under the joint venture with Apex Silver Mines Corporation.

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 20 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

Year Ended 31-Jul-06 31-Jul-05
(12 months) (12 months)

Revenue $ 26,595,875 $ 1,166,079
Operating Income/(Loss) $ (4,477,119) $ (8,166,778)
Income (Loss) per share $ (0.04) $ (0.07)
Net Income (Loss) $ (4,458,331) $ (7,624,499)
Net Income (Loss) per share $ (0.04) $ (0.07)

Balance Sheet Data 31-Jul-06 31-July-05

Assets
Cash and short-term investments $10,630,650 $ 91,428
Accounts receivable 3,582,513 2,107,939
Inventory 189,140 211,388
Deposits 508,462 455,111
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Total Current Assets 14,910,765 2,865,866
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Silver Bullion 8,501,653 Nil
Mineral properties and deferred
exploration expenditures 5,180,872 12,202,471
Deferred financing costs 324,107 883,937
Fixed Assets 740,221 42,452
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Total Assets $ 29,657,618 $ 15,994,726
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Liabilities & Shareholders Equity
Accounts payable and accrued charges $ 2,966,991 $ 2,571,571
Taxes payable 420,000 Nil
Silver debentures 23,287,493 15,766,300
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Total Liabilities 26,674,484 18,337,871
-------------- -------------
Share capital 27,728,911 18,396,901
Silver debenture warrants Nil 450,000
Contributed Surplus 2,622,600 1,300,000
Deficit (27,368,377) (22,490,046)
-------------- -------------
Total Shareholders' Equity 2,983,134 (2,343,145)
-------------- -------------
Total Liabilities and Shareholder's Equity $ 29,657,618 $ 15,994,726
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-------------- -------------


About Excellon

Excellon Resources Inc., a silver producer, is using proceeds from its test-mining operation to explore its 14,692-hectare Platosa/Saltierra Properties in north eastern Durango State, Mexico. Taking advantage of a unique convergence of infrastructure, high grade ore and a low production cost per ounce of silver, the Company has built a significant treasury and will remain self-financed well into the future as it tracks the carbonate replacement deposit (CRD) believed to be at Platosa.

On behalf of

EXCELLON RESOURCES INC.

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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