Excellon Resources Inc.

Excellon Resources Inc.

March 10, 2008 08:51 ET

Excellon Reports Second Quarter Loss of $1,594,687

TORONTO, ONTARIO--(Marketwire - March 10, 2008) - Excellon Resources Inc. (TSX:EXN) is pleased to report on the results for the three month period ended January 31, 2008. For full details, please see the Company's unaudited Financial Statements for the three and six months ended January 31, 2008 and related Management Discussion & Analysis, which were filed on SEDAR on March 06, 2008.

Highlights since Q2

- Received an updated Mineral Resource estimate that more than doubled its indicated resource to 417,000 tonnes (an increase of 126%) at 1,060 g/t silver, 9.31% lead and 9.79% zinc

- Significantly expanded Rodilla Manto and identified new expansion of NE-1 Manto

- Common shares listed on Toronto Stock Exchange

Q2 Highlights

- Produced 323,472 ounces of silver, 2,395,023 pounds of lead, and 2,584,489 pounds of zinc

- Sales of $5,828,649, operating loss of $443,642, and net loss of $1,594,687

- Loss of $0.012 per share

- Working capital of $818,886

- Cash, short-term investments and silver bullion of $5,370,903 as at January 31, 2008

"Although a work stoppage due to a strike at Penoles' Naica facility and a protest at our Platosa Property resulted in a net loss, the Company remains on track for meeting its corporate goals for fiscal 2008," said Richard W. Brissenden, Excellon's president and CEO. "In the coming quarter, Excellon intends to finalize its mill decision, and build on its investment in exploration that is already yielding tremendous dividends. We will continue to add value for our shareholders."

Financial Highlights

Three months ended Six months ended
31-Jan-08 31-Jan-07 31-Jan-08 31-Jan-07
------------ ------------ ------------ -------------

Sales $ 5,828,649 $ 8,412,207 $ 14,206,040 $ 20,686,888

Cost of
for 3 month
period of
(2007 -
6 month
period of
$1,896,163 1,856,380 2,029,489 4,123,973 3,260,246
------------ ------------ ------------ -------------
(2007 -
$451,342)) 3,972,269 6,382,718 10,082,067 17,426,642
------------ ------------ ------------ -------------

Non-cash items 1,452,078 3,098,619 1,792,832 4,016,878
Exploration 1,313,616 1,409,247 2,980,303 2,562,036
Other 1,646,200 1,449,984 3,811,004 2,466,023
for income
taxes - current 407,447 2,337,406 1,514,322 2,665,992
for income
taxes - future 747,615 (2,128,934) 538,483 (2,128,934)
------------ ------------ ------------ -------------
5,566,956 6,166,322 10,636,944 9,581,995
------------ ------------ ------------ -------------

Net gain/(loss)
for the period $ (1,594,687) $ 216,396 $ (554,877) $ 7,844,647
------------ ------------ ------------ -------------
per share
- basic $ (0.012) $ 0.001 $ (0.004) $ 0.054
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
- diluted $ (0.012) $ 0.001 $ (0.004) $ 0.049
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------

Cash provided
by (used in)
activities $ 1,829,307 $ 1,875,145 $ 2,539,932 $ 4,123,480
------------ ------------ ------------ -------------

and silver
bullion $ 5,370,903 $ 13,805,628 $ 5,370,903 $ 13,805,628
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------

Test-Mining Program

During the quarter, the development and mining of the Platosa deposit was carried out in the north-west area of the Guadalupe Manto. 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 10,802 tonnes for the three months ended January 31, 2008 compared with 8,546 tonnes in the previous year. Shipments in the period averaged approximately 3,600 tonnes per month. Shipments for the quarter were reduced by a suspension in deliveries to Naica primarily due to a work stoppage at the Naica mill during wage rate negotiations with Penoles. During the suspension of deliveries to Naica mill the local agricultural co-operative (ejido) at the Platosa Mine protested and blockaded at the site for 12 days in support of ongoing negotiations for the extension of surface rights near the mine site. The illegal blockade was removed before settlement of the Penoles wage contract dispute (which was settled on February 9, 2008) and did not impact ore deliveries to Naica mill.

The following are the production statistics for the three and six months ended January 31, 2008 and 2007:

Three months ended Six months ended Year Ended
31-Jan-08 31-Jan-07 31-Jan-08 31-Jan-07 31-Jul-07
---------- --------- --------- --------- ----------

Tonnes of ore
shipped 10,802 8,546 25,153 20,082 45,691
---------- --------- --------- --------- ----------
---------- --------- --------- --------- ----------

Contained metal
Silver (ozs.) 323,472 538,173 728,220 1,485,007 2,338,723
Lead (lbs.) 2,395,023 1,635,014 5,468,874 4,920,678 10,271,603
Zinc (lbs.) 2,584,489 897,459 6,570,805 2,523,695 8,943,334

Average grade:
Silver (oz/t)(1) 29.9 63.0 29.0 73.9 51.2
Silver (g/t) 931.9 1,960.0 901.0 2,299.0 1,593.3
Silver (oz/T) 27.2 57.2 26.3 67.1 46.5
Lead (%) 10.1 8.7 9.9 11.1 10.2
Zinc (%) 10.9 4.8 11.8 5.7 8.9

Payable metal:
Silver - (ozs.) 249,720 416,220 562,186 1,145,728 1,808,234
Lead - (lbs.) 1,820,216 1,309,070 4,156,344 3,939,837 7,951,749
Zinc - (lbs.) 1,705,762 503,793 4,336,731 1,436,091 5,681,659

(1) Oz/t is not a generally accepted unit measure as it combines imperial
and metric units. However, it is the unit of measure upon which the
Company's settlements with Penoles are based. The generally accepted units
of measure are g/t and oz/T.


During the quarter, the Company had four drills operating on the Platosa property, except during the Christmas break and during the blockade by the Ejido. Three were drilling in the immediate vicinity of the test-mine, while one was engaged in the district-scale exploration at Saltillera. The results received to date for this drilling were announced in Press Release No. 5 - 2008 (February 21, 2008).

The Company also continued testing geological, biogeochemical and geophysical targets north and northwest of the Guadalupe Manto during the quarter. Of significance was the intersection of felsic intrusive in a hole located 290 m northwest of Guadalupe. This is the first time intrusive material has been intersected near the test-mine and raises the possibility that proximal, large-tonnage CRD mineralization may be found close to the test-mine where the Company is presently exploiting high-grade distal-style CRD sulphide mineralization.

In the Saltillera area, three to five kilometres west on the test-mine area, the district-scale search for proximal-style, large tonnage-potential CRD sulphide mineralization was continued with one drill, making a total of four drills operating on the Platosa property. The Company continues to intersect geologically significant mineralization and alteration lying in a previously undrilled overburden-covered area lying along the strong northwest-trending structural corridor that contains the historic Saltillera and Zorra mines. Favourable geology, in the form of an extensive multi-phase intrusive system with numerous dyke offshoots, has been intersected in several of these holes. Overall, the intrusive system shows numerous features similar to those associated with the largest lead-zinc-silver-copper-gold CRDs of Mexico.

Year-to-date exploration expenditures are running under budget due to lower than expected drilling productivity, the unplanned two-week hiatus in late-January and slightly conservative estimated line-item budgeting. The Company anticipates that the exploration spending rate will increase in the third quarter.

Subsequent to the end of the quarter, an updated National Instrument 43-101 ("NI 43-101") compliant Mineral Resource estimate prepared by Scott Wilson Roscoe Postle Associates Inc., independent geological and mining consultants of Toronto, Ontario was received in March 2008. The resource estimate was prepared as at February 3, 2008 in accordance with the guidelines set forth in NI 43-101.

Qualified Persons

Mr. G. Ross MacFarlane, P.Eng., 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 news 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

Three months ended January 31, 2008 compared to three months ended January 31, 2007

During the three months ended January 31, 2008, the Company recorded net loss and comprehensive loss of $1,594,687 compared to net income and comprehensive income of $216,396 in 2007. Gross operating income for the quarter was $3,972,269 compared to $6,382,718 in 2007. Net loss before income taxes for the quarter was $439,625, compared to net income before income taxes of $424,868 in 2007. The financial performance of the Company in the period was negatively impacted by a labour strike at the Naica Mill. This prevented the Company from making any ore shipments to the Naica Mill in the last three weeks of the period. Ore shipments to the Naica Mill resumed on February 13, 2008, subsequent to the end of the quarter. Cash provided by operating activities for the period was $1,829,307 (2007 - $1,875,145) and working capital as at January 31, 2008 was $818,886 (July 31, 2007 - $6,340,137). The lower cash and working capital reflects the significant expenditures by the Company on surface rights acquisitions in September, 2007 as well as the lower sales as a result of the strike at the Naica Mill.

During the quarter, the Company shipped 10,802 tonnes (2007 - 8,546 tonnes) of ore. Sales were $5,828,649 (2007 - $8,412,207) and cost of production was $1,856,380 (2007 - $2,029,489), resulting in gross operating income of $3,972,269 (2007 - $6,382,718). The amount of ore shipped during the quarter was 26% greater than in 2007, however, the average grade of silver decreased to 29.9 oz/t from 63.0 oz/t in 2007. As a consequence of the lower grade, the resulting silver production in the quarter decreased to 323,472 ounces from 538,173 ounces in 2007. Lead production for the quarter was 2,395,023 pounds (2007 - 1,635,014 pounds) and zinc production for the quarter was 2,584,489 pounds (2007 - 897,459 pounds). The 31% decrease in sales in the quarter versus the prior year is attributed to the decrease in silver production in the quarter and the impact of the strengthening of the Canadian dollar versus the U.S. dollar. The average Canadian dollar/U.S. dollar exchange rate in the quarter was 0.99 (2007 - 1.16). This was partially offset by an increase in the realized metals prices.

Amortization of acquisition and deferred development costs for the quarter increased from $216,086 in 2007 to $1,007,192 in 2008. The Company's acquisition of surface rights in September 2007 resulted in an increase in mineral properties at the beginning of the quarter compared with the same quarter in 2007, and this increase resulted in the higher amortization of acquisition and deferred development costs in the quarter. Amortization included in cost of production for the quarter was $763,134 (2007 - $150,976) and amortization of acquisition costs for the quarter was $244,058 (2007 - $65,110). As at January 31, 2008, total mineral properties carried on the balance sheet increased to $10,372,455 from $3,856,856 as at July 31, 2007. Details of the mineral properties are included in the interim consolidated financial statements for the period ended January 31, 2008.

Expenses for the quarter decreased to $4,415,911 from $6,058,522 in 2007. The decrease was primarily due to the absence of silver debenture loss in the current year (2007 - $2,248,177) as the silver debenture liability was settled in the quarter ended October 31, 2007.

During the quarter the Company issued 2,655,000 incentive stock options and recorded the fair value of the options that vested upon issuance (January 4, 2008) of $690,300 in contributed surplus and stock-based compensation.

During the quarter, the provision for current income taxes was $407,447 (2007 - $2,337,406). 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 quarter, the Company re-assessed the valuation of its future income tax assets and determined that the value of the current portion of future income tax asset should be reduced to $1,020,125 (July 31, 2007 - $2,040,250). The non-current future income tax asset as at January 31, 2008 was $597,940 (July 31, 2007 - $597,940). Future income tax liability as at January 31, 2008 was $1,288,150 (July 31, 2007 - $1,769,792).

As at January 31, 2008, accounts receivable were $2,790,540 (July 31, 2007 - $7,350,569).

As at January 31, 2008, property, plant and equipment, net of accumulated amortization, was $2,951,386 (July 31, 2007 - $3,073,563). During the quarter, the Company had capital expenditures totalling $50,863 (2007 -$675,654). Amortization expense as a result of the capital expenditures during the period increased from $46,166 in 2007 to $187,856 in 2008.

Liquidity and Capital Resources

As at January 31, 2008, the Company's cash and cash equivalents, short-term investments and silver bullion were $5,370,903 (July 31, 2007 - $7,602,834), working capital was $818,886 (July 31, 2007 - $6,340,137) and the deficit was $18,552,521 (July 31, 2007 - $17,884,514). During the three month period ended January 31, 2008, the Company generated cash of $1,829,307 from its operations (2007 - $1,875,145).

The Company has in place certain agreements with Auramet Trading LLC ("Auramet") in order to provide the Company with external sources of funding, should it be required. These agreements include a silver purchase agreement, and bridge loan facility.

During the quarter ended January 31, 2008 the Company did not borrow any funds under the Revolving Facility. Subsequent to the quarter end, the Company borrowed U.S. $902,250 under the Revolving Facility equal to 50,000 ounces of silver produced by the Company but not yet refined into deliverable form. During the quarter, 50% of the payment to the Company for the payable silver contained in the ore sold by the Company was made to the Company in the form of silver bullion. This silver bullion is either held in trust by Auramet on behalf of the Company or is currently in transit to Auramet. Under the terms of the Agreement, Auramet, as sales agent for the Company, will sell this silver bullion upon receipt at market terms on behalf of the Company for cash proceeds. If the Company has borrowed funds under the Revolving Facility, this silver bullion shipped to Auramet will be used to repay these borrowings. As at January 31, 2008, the value of the Company's silver bullion was $3,176,509 (189,037 oz). The Company views the silver bullion as a near-cash item.

With respect to the bridge loan facility, the carrying value of the debt as at January 31, 2008 was $828,368. Total effective interest for the six month period is $285,124, which is included in bank charges and interest. Subsequent to the end of the quarter, on March 3, 2008 the Company made its final repayment on the Bridge Loan to Auramet.

The Company's cash flow projections indicate that the cash flow from the test-mining operations and the Revolving Facility will be sufficient to allow the Company to carry out all of its proposed exploration and test-mining activities, make the initial payment on the proposed land acquisition with ELS, pay for the proposed construction of the Platosa mill, and pay all of its anticipated general and administrative expenses, over the next eighteen months, as well as to fully retire all advances drawn under the Bridge Loan and the Revolving Facility.

About Excellon

Excellon, 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


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 the future results of operations, performance and achievements of the Company, including potential property acquisitions, the timing, content, cost and results of proposed work programs, the discovery and delineation of mineral deposits/resources/reserves, geological interpretations, proposed production rates, potential mineral recovery processes and rates, the proposed construction of a mill, 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 inability 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 and June 1, 2007 43-101 technical reports 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 Toronto Stock 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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