Excellon Resources Inc.
TSX VENTURE : EXN

Excellon Resources Inc.

April 03, 2007 16:20 ET

Excellon Reports Second Quarter Earnings of $216,396 and Six Month Earnings of $7,844,647

TORONTO, ONTARIO--(CCNMatthews - April 3, 2007) - Excellon Resources Inc. (TSX VENTURE:EXN) reports earnings of $216,396 for the three month period ended January 31, 2007 and $7,844,647 for the six month period ended January 31, 2007. Excellon generated operating cash flow of $1,875,145 in the second quarter, operating cash flow of $4,123,480 in the six month period, and the Company had $13,805,628 cash on hand as at January 31, 2007. Other results from the three and six month periods ended January 31, 2007 include:

To view the following results please click on the following link: http://www.ccnmatthews.com/docs/Excellon-chart1.pdf

Test-Mining Operations

The quarter ended January 31, 2007 was disappointing from a production point of view. Shipments to the Naica milling facility of Industrias Penoles S.A. de C.V. ("Penoles") were 8,546 tonnes during the period compared with 9,554 tonnes in the quarter ended January 31, 2006, 11,536 tonnes in the quarter ended October 31, 2006, and a target of 15,000 tonnes. Although the operations at Platosa could have maintained the targeted production rates, continuing difficulties experienced at the Naica mine restricted the shipments it could receive. Shipments improved during February and the Company reached the rate of 4,200 tonnes per month in March. This rate is forecast to reach 5,000 tonnes by May.

During the period, development of underground access and mine infrastructure to reach the new mineralization discovered in December 2005 was progressed and initial production from the area was started. With the increase to the mineral resource now available to the test-mining infrastructure that is in place, an evaluation of a mill at Platosa is warranted. Construction of a mill at Platosa will allow production of lead and zinc concentrates and sale to the international markets independent of the current long distance transport of the ore and dependence on the Naica mill operation. It will also allow for better utilization of the mining and crushing capacity now established at Platosa as well as provide a higher return on the metal produced. As part of the evaluation, the planning and permitting process was initiated during the quarter.

The following are the production statistics for the three and six month periods January 31, 2007 and 2006 and the year ended July 31, 2006:

To view the following results please click on the following link: http://www.ccnmatthews.com/docs/Excellon-chart2.pdf

The average grade of contained metal in ore shipped in the quarter ended January 31, 2007 was less than that of the quarter ended October 31, 2006 (silver - 82.1 g/t; lead - 12.9%; zinc - 6.4%). The reduced grade resulted from the development of the access ramp to the new mineralized zone to the north that unexpectedly encountered a breccia zone of mineralization. This zone of lower grade was outside the interpreted mineral resource and resulted in lower than planned grades being shipped to Naica.

Results of Operations

Six months ended January 31, 2007 compared to six months ended January 31, 2006

During the six months ended January 31, 2007, the Company recorded net income of $7,844,647 compared to a net loss of $5,187,980 in 2006. Gross operating income for the period was $17,426,642 compared to $5,689,639 in 2006. Operating income for the period was $8,178,385, compared to a loss of $5,187,980 in 2006. Included in net income is a loss resulting from the valuation of the Company's silver debenture of $2,820,460 (2006 - $4,423,870). Excluding this valuation loss, the Company would have reported net income of $10,665,107 (2006 - net loss of $764,110).

During the six months ended January 31, 2007, the Company produced 19,538 tonnes (2006-18,528) of ore and shipped 20,082 tonnes (2006 - 17,917 tonnes) of ore. Revenues during the period were $20,686,888 (2006 - $8,180,186) and cost of production was $3,260,246 (2006 - $2,490,547), resulting in gross operating income from mining operations of $17,426,642 (2006 - $5,689,639). Although the amount of ore shipped during the six months ended January 31, 2007 was only 12% greater than in 2006, revenues were significantly increased due to the substantial increase in metal prices and silver grade. During the six month period ended January 31, 2007, an error in calculating the inventory of ore in the stockpile related to moisture content was discovered and resulted in an increase in the cost of production of $511,292. Existing procedures have been reviewed to ensure a reasonable calculation in the future.

Operating expenses decreased from $10,877,619 in 2006 to $9,248,257 in 2007. The decrease was due to a reduced silver debenture valuation loss of $2,820,460 (2006 - $4,423,870), consulting fees of $159,362 (2006 - $326,320), foreign exchange gain of $402,713 (2006 - loss of $122,859) and amortization of acquisition costs of $363,898 (2006 - $2,489,708). Amortization of acquisition costs was lower due to the impact of the expanded identified Mineral Resource.

The operating expense decrease was partially offset by increased salaries of $494,578 (2006 - $285,799), mine administration costs of $869,471 (2006 - $471,549), travel and business development costs of $507,875 (2006 - $371,395), professional fees of $254,603 (2006 - $140,213), stock-based compensation of $974,000 (2006 - $582,700) and exploration expenditures of $2,562,036 (2006 - $1,087,151). Mine administration costs and professional fees were higher than in 2006 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 2006 as exploration work continues to focus on locating additional mineralization in the vicinity of the existing test mine as well as exploring other regional targets. Travel and business development expenses were higher in 2007 due to the Company's increased participation in trade and investor relations conferences. Salaries and stock-based compensation were higher in 2007 due to an increase in the number of employees and the issuance of incentive stock options to newly appointed senior management and directors.

During the six months ended January 31, 2007, the provision for current Mexican income taxes is $2,665,992 (2006 - $nil). During the current period, the Company has determined that it is more likely than not that $2,128,934 (current portion - $755,346) of previously unrecognized future income tax assets should now be recognized. There is no provision for Canadian income taxes.

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

During the three months ended January 31, 2007, the Company recorded net income of $216,396 compared to a net loss of $4,577,785 in 2006. Gross operating income for the period was $6,382,718 compared to $3,558,102 in 2006. Operating income for the period was $324,196, compared to a loss of $4,577,785 in 2006. Included in net income is a loss resulting from the valuation of the Company's silver debenture of $2,248,177 (2006 - $3,695,912). Excluding this valuation loss, the Company would have reported net income of $2,464,573 (2006 - net loss of $881,873).

During the three months ended January 31, 2007, the Company produced 6,240 tonnes (2006 - 9,262) of ore and shipped 8,546 tonnes (2006 - 9,554 tonnes) of ore. Revenues during the period were $8,412,207 (2006 - $4,906,403) and cost of production was $2,029,489 (2006 - $1,348,301), resulting in gross operating income from mining operations of $6,382,718 (2006 - $3,558,102). Although the amount of ore shipped during the three months ended January 31, 2007 was 11% lower than in 2006, revenues were significantly increased due to the substantial increase in metal prices and an increased silver grade. During the quarter ended January 31, 2007, an error in calculating the inventory of ore in the stockpile related to moisture content was discovered and resulted in an increase in the cost of production of $511,292. Existing procedures have been reviewed to ensure a reasonable calculation in the future.

Operating expenses decreased from $8,135,887 in 2006 to $6,058,522 in 2007. The decrease was due to a reduced silver debenture valuation loss of $2,248,177 (2006 - $3,695,912), consulting fees of $89,159 (2006 - $146,320), foreign exchange gain of $323,229 (2006 - loss of $54,221) and amortization of acquisition costs of $65,110 (2006 - $1,939,385). Amortization of acquisition costs was lower due to the impact of the expanded identified Mineral Resource.

The operating expense decrease was partially offset by increased salaries of $354,993 (2006 - $146,977), mine administration costs of $497,669 (2006 - $264,678), travel and business development costs of $215,347 (2006 - $189,019), professional fees of $126,864 (2006 - $54,984), stock-based compensation of $974,000 (2006 - $505,700) and exploration expenditures of $1,409,247 (2006 - $828,147). Mine administration costs and professional fees were higher than in 2006 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 2006 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 2007 due to the Company's increased participation in trade and investor relations conferences. Salaries and stock-based compensation were higher in 2007 due to an increase in the number of employees and the issuance of incentive stock options to newly appointed senior management and directors.

During the three months ended January 31, 2007, the provision for current Mexican income taxes is $2,337,406 (2006 - $nil). During the current period, the Company has determined that it is more likely than not that $2,128,934 (current portion - $755,346) of previously unrecognized future income tax assets should now be recognized. There is no provision for Canadian income taxes.

Exploration

Since the press release for the first quarter, which discussed exploration activities to December 15, 2006, a large number of positive drill core assays for 2006 holes in the Platosa test-mine area have been received, diamond drilling has continued with three drill rigs and an airborne electromagnetic survey has been completed.

As reported in a press release dated January 22, 2007, complete assays were received for 13 holes containing massive sulphide and sulphide-rich breccia intersections in the test-mine area, 11 related to the Guadalupe Manto. These results were very positive. Silver grades in the 11 holes range between 139 and 1331 g/t; lead grades range between 2 and 21.4%; and zinc grades range between 0.65 and 19.4% over widths ranging from 0.50 to 7.00 metres. Combining these intersections with previously reported holes extends the high-grade massive sulphide mineralization in the Guadalupe Manto at least 150 metres to the northwest past the limits defined in Excellon's National Instrument 43-101("NI 43-101") compliant Mineral Resource Estimate prepared by Scott Wilson Roscoe Postle Associates ("Scott Wilson RPA") of Toronto, Ontario, independent geological and mining consultants, and reported on August 17, 2006. The Guadalupe Manto remains open in several directions. Management believes that, based on these results, additional mineral resources will be added to the Guadalupe Manto and plans to undertake an updated mineral resource estimate later in 2007.

Of the two other holes, LP-325 was drilled in previously untested ground 75 metres northeast of the Guadalupe Manto and cut 5.74 metres of massive sulphides grading 586 g/t silver with 6% lead and 10% zinc. The remaining hole, LP-322, combines with earlier holes to add significant mineralization to a northerly extension of the previously mined N-1 Manto and may link it with the Guadalupe Manto.

Drilling begun in 2006 at the Crestoncitos area 1.5 kilometres south of the Platosa test-mine and the Canon Colorado area 5 km to the north was completed and returned no significant results.

Three drills are operating on the property. One is in the immediate test-mine area on 100% Excellon ground, following up on known mineralization and new soil geochemical targets. The other two are on ground optioned from Exploraciones Altiplano S.A. de C.V. One is operating near the historic Zorra Mine 4 kilometres to the southwest of the test-mine. Alteration in this area is very strong and there are numerous prospect pits that have yielded strong silver-lead-zinc anomalies. The drilling is focusing on intrusion and alteration centres with moderate geochemical signatures. The other is testing areas of alteration and previous modest silver-lead-zinc values in the vicinity of the historic Saltillera Mine, 4 kilometres west of the test-mine and north of Zorra. Encouragement in the form of extensive alteration, structure and modest sulphides has been encountered in several holes and more holes are planned in all three areas. Assays for 2007 drilling are pending.

In mid-February, an Aeroquest Limited AeroTEMII helicopter-borne electromagnetic and magnetic survey was completed over the Platosa property. Very preliminary data processing has been completed and we are confident that the final survey results will be of significant value in geological and structural interpretation and outlining new high potential drill targets.

Qualified Persons

Dr. Peter Megaw, PhD, CPG, Mr. G. Ross MacFarlane, PEng, and Mr. John Sullivan, BSc., PGeo. have acted as the Qualified Persons, as defined in National Instrument 43-101, for this disclosure and supervised the preparation of the technical information on which this press release 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 is a shareholder.

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, 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 National Instrument 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.

Summary Financial Information

To view the following results please click on the following link: http://www.ccnmatthews.com/docs/Excellon-chart3.pdf

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. Excellon has 146,063,657 shares outstanding, and trades on the TSX Venture Exchange under the symbol EXN.

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, 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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