TORONTO, March 22, 2018
/CNW/ - Excellon Resources Inc. (TSX:EXN, EXN.WT, EXN.WT.A;
OTC:EXLLF) ("Excellon" or the "Company") is pleased to report
financial results for the three- and twelve-month periods ended
December 31, 2017.
2017 Financial and Operational Highlights (compared to
2016)
- Completion of Optimization Plan resulting in dry mining
conditions with two consecutive quarters of increased production
and lower costs
- Underground drilling successfully added near-term mineable
mineralization
- Commenced surface exploration program to define new targets
surrounding Platosa; initial drilling program at Miguel Auza to commence in Q2
- Revenue increased 25% to $21.2
million (2016 – $17.0
million)
- Silver equivalent ("AgEq") production increased 14% to 1.5
million ounces (2016 – 1.3 million AgEq ounces)
- AgEq ounces payable increased 18% to 1.3 million ounces (2016 –
1.1 million AgEq ounces payable)
- Gross profit decreased 42% to $0.4
million (2016 – $0.7 million),
but totaled $2.6 million in the
second half of the year following completion of the Optimization
Plan
- Total cash cost per Ag oz payable decreased 23% to $10.38 (2016 – $13.42)
- Adjusted all-in sustaining cost per Ag oz payable ("AISC")
decreased 15% to $21.89 (2016 –
$25.83), excluding the one-time
sustaining capital expenditures associated with the Optimization
Plan, with Adjusted AISC per Ag oz payable of $13.73 in the second half of the year
- Adjusted net loss of $3.7 million
or $0.05/share (2016 – adjusted net
loss of $3.4 million or $0.05/share), excluding non-cash financing loss
associated with convertible debentures ("Debentures") issued in
November 2015 and accelerated to
conversion in December 2017
- Net working capital totaled $13.8
million at December 31, 2017
(December 31, 2016 – $8.6 million), following successful equity
financing to advance exploration
Q4 Financial Highlights (compared to Q4 2016)
- Continued improvement in operations post-Optimization Plan,
revenue increased 112% to $7.1
million (Q4 2016 – $3.4
million)
- Production increased 55% to 475,007 AgEq ounces (Q4 2016 –
305,934 AgEq ounces)
- Sales increased 80% to 435,924 AgEq ounces payable (Q4 2016 –
241,867 AgEq ounces payable)
- Gross profit of $1.1 million (Q4
2016 – loss of $0.9 million)
- Adjusted net income of $0.9
million (Q4 2016 – adjusted loss of $2.5 million)
- Total cash cost per Ag oz payable reduced by 66% to
$6.27 (Q4 2016 – $18.48)
- Adjusted AISC per Ag oz payable reduced by 67% to $15.84 (Q4 2016 – $48.49)
"During 2017, we achieved dry mining conditions for the first
time since the earliest days of Platosa," stated Brendan Cahill, President and Chief Executive
Officer. "The stage is now set to ramp production up to optimal
levels and begin realizing Platosa's full potential. During Q4 2017
and into Q1 2018, we resolved a few of the outstanding challenges
to increased production. Most importantly, we drove the 730 and 725
ramps below Rodilla and 623 mineralization to set up more
productive cut-and-fill mining of those mantos in the coming weeks.
We expect first quarter production to be 410,000 - 440,000 AgEq
ounces, but the work done during the quarter prepares for stronger
production through the remainder of the year. We expect to
publish an updated mineral resource statement and technical report
in April, along with a production outlook for the remainder of
2018."
Financial Results
Financial results for the three- and twelve-month periods ended
December 31, 2017 and 2016 as
follows:
|
|
|
|
|
('000s of USD, except
amounts per share
and per ounce)
|
Q4
2017
|
Q4
2016
|
2017
|
2016
|
Revenue
(1)
|
7,123
|
3,354
|
21,208
|
16,994
|
Production
costs
|
(4,796)
|
(3,620)
|
(16,978)
|
(13,906)
|
Depletion and
amortization
|
(1,277)
|
(696)
|
(3,831)
|
(2,435)
|
Cost of
sales
|
(6,073)
|
(4,316)
|
(20,809)
|
(16,341)
|
Gross profit
(loss)
|
1,050
|
(961)
|
399
|
653
|
|
|
|
|
|
Corporate
administration
|
(1,159)
|
(1,214)
|
(4,228)
|
(3,477)
|
Exploration
|
(345)
|
(809)
|
(1,909)
|
(1,345)
|
Other
|
(415)
|
(1,112)
|
1,840
|
(971)
|
Write-down of
inventories
|
(568)
|
-
|
(568)
|
-
|
Impairment reversal
of mineral rights
|
-
|
-
|
-
|
156
|
Net finance
cost
|
820
|
2,367
|
(2,262)
|
(11,288)
|
Income tax
recovery
|
2,170
|
1,674
|
1,037
|
2,201
|
Net income
(loss)
|
1,553
|
(55)
|
(5,691)
|
(14,071)
|
Adjusted net income
(loss) (2)(3)
|
850
|
(2,489)
|
(3,652)
|
(3,408)
|
Income (loss) per
share – basic
|
0.02
|
(0.00)
|
(0.07)
|
(0.21)
|
Adjusted profit
(loss) per share – basic
|
0.01
|
(0.03)
|
(0.05)
|
(0.05)
|
|
|
|
|
|
Cash flow from (used
in) operations (4)
|
571
|
(3,147)
|
(699)
|
(3,291)
|
Cash flow from (used
in) operations per share – basic
|
0.01
|
(0.04)
|
(0.01)
|
(0.05)
|
|
|
|
|
|
Production cost per
tonne (5)
|
267
|
251
|
266
|
250
|
Cash cost per payable
silver ounce ($/Ag oz)
|
6.27
|
18.48
|
10.38
|
13.42
|
All-in sustaining
cost ("AISC") per silver ounce payable ($/Ag oz)
|
18.42
|
71.17
|
27.97
|
33.04
|
Adjusted AISC per
silver ounce payable(6)
|
15.84
|
48.49
|
21.89
|
25.83
|
|
|
(1)
|
Revenues are net of
treatment and refining charges.
|
(2)
|
Adjusted net income
(loss) reflects results before fair value adjustments on embedded
derivatives and warrants related to the Debentures (2017 – $1.5
million loss; 2016 – $10.8 million loss; Q4 2017 – $1.3 million
gain; Q4 2016 – $2.4 million gain). The fair value adjustment
derives from the performance of the Company's stock during each
period (2017 – C$1.64 to C$1.84; 2016 – C$0.31 to C$1.64; Q4 2017 –
C$2.03 to C$1.84; Q4 2016 – C$1.88 to C$1.64), resulting in
significant variances in valuation/cost upon the potential
conversion or exercise of the Debentures or associated warrants,
respectively. The Debentures were settled via accelerated
conversion in December 2017 and there will be no further fair value
adjustment in the future associated with these
Debentures.
|
(3)
|
Adjusted net loss for
2016 reflects results $0.2 million reversal of impairment on
DeSantis Property sold in the period.
|
(4)
|
Cash flow from
operations before changes in working capital.
|
(5)
|
Production cost per
tonne includes mining and milling costs excluding depletion and
amortization.
|
(6)
|
Adjusted AISC per
payable silver ounce excludes the relatively one-time sustaining
capital expenditures associated with the Optimization Plan Phase 1
completed in early July 2017 and ongoing optimization work,
comprising additional pump stations and production wells
("Optimization Plan Phase 2") in Q4 2017. Associated cash
expenditures for Phase 1 were $3.5 million in 2017; $2.9 million in
Q4 2016; and $4.8 million during 2016, and for Phase 2 were $0.5
million in Q4 2017.
|
Operating conditions during 2017 transitioned from wet to dry
mining following the completion of the Optimization Plan in early
Q3 2017, improving production and facilitating accelerated
development. Stronger production during the second half of the year
resulted in 1,470,650 AgEq ounces mined in 2017, a 14% improvement
over 2016. During Q4 2017, production improved 55% to 475,007 AgEq
(Q4 2016 – 305,934) as multiple operating faces were accessed in
the Rodilla, Guadalupe South, Pierna
and 623 mantos. As the ramp up in production continues, the Company
is strengthening its ground control program of bolting and
screening to support on-going production and development
activities. During the year, the Company continued to process
low-grade historical stockpiles and sump material, with minimal
associated mining costs. This mineralized material is blended with
mined ore to improve recoveries (in the case of high-grade lead
and/or zinc ore) and payability, as well as being cash flow
generative.
In 2017, net revenues increased by 25% to $21.2 million (2016 – $17.0 million) due to a 19% increase in AgEq
payable ounces produced to 1,345,500 oz (2016 – 1,133,789 oz). A
lower realized silver price of $16.73
in 2017 (2016 – $17.38) impacted net
revenues, but was offset by higher base metal prices and improved
treatment and refining charges ("TC/RC") under the 2017 offtake
sales agreements ($1.7 million in
2017 compared to $3.5 million in
2016). Net revenues increased by 112% in Q4 2017 compared to
Q4 2016, primarily due to an 80% increase in AgEq ounces
payable.
Cost of sales, including depletion and amortization, increased
27% in 2017 compared to 2016 and 41% in Q4 2017 compared to Q4
2016. The primary contributor to increased cost of sales, apart
from increased tonnage mined and processed, was the amortization of
capital costs associated with the Optimization Plan. Increased
pumping rates and an increase in electricity prices from
$0.06/kwh to $0.08/kwh in 2017 and $0.07/kwh to $0.08/kwh in Q4 also resulted in nominal
increases in electrical expense, although pumping efficiency
increased by 36%. Due to pumping requirements, electrical
consumption will continue to be a key driver of mining costs at
Platosa. The Company is currently monitoring the nascent
private market for electricity under the recent energy reforms in
Mexico and will become a
"qualified user" when an opportunity for more competitive
electricity prices arises.
The Company recorded a net loss of $5.7
million in 2017 (2016 – net loss of $14.1 million). The Company's adjusted net loss
of $3.7 million in 2017 reflects the
period's results before recording a $1.5
million fair value adjustment loss (2016 – $10.8 million loss) on embedded derivative and
warrants related to the Debentures in accordance with IFRS.
Components of adjusted net loss included:
(i) 57% increase in depletion and amortization as amortization
of capitalized costs of the Optimization Plan commenced in Q3
2017;
(ii) 22% increase in electricity usage and rate charges;
(iii) 22% increase in general and administrative cost due to new
appointments and marginally higher cash board and share-based
compensation;
(iv) 42% increase in exploration costs as drilling continued at
Platosa throughout 2017, though was negligible in H1 2016; and
(v) $1.8 million realized gain on
marketable securities (2016 – $1.0
million unrealized gain).
The Company recorded adjusted net income of $0.9 million in Q4 2017 compared to adjusted net
loss of $2.5 million in Q4 2016.
Components of adjusted net income included:
(i) 112% increase in revenues;
(ii) 83% increase in depletion and amortization over Q4 2016 due to
amortization of capitalized costs of the Optimization Plan;
(iii) 33% increase in cash cost of sales, primarily due to
increased tonnage produced, increased electricity usage and rate
charges required for the increased pumping of the Optimization
Plan; and
(iv) Income tax recovery of $2.2
million.
Increased electricity consumption related to the Optimization
Plan also impacted production cost per tonne with higher costs in
2017 of $266/t (2016 – $250/t), particularly as lower tonnage was
produced in H1 2017, prior to the completion of the Optimization
Plan. The production cost per tonne in Q4 2017 of $267/t (Q4 2016 – $251/t) is expected to continue to improve into
2018 as production rates further increase and electricity unit
costs improve.
Cash costs net of by-products per silver ounce payable (or Total
Cash Costs) were lower in 2017 and considerably lower in the third
and fourth quarters due to an increase in metal sold and a 102%
increase in byproduct credits due to significantly higher lead and
zinc production and prices. In 2017, costs improved to $10.38 (2016 – $13.42) and $6.27
in Q4 2017 (Q4 2016 – $18.48).
The Company's adjusted AISC per silver ounce payable of
$21.89 in 2017 (2016 – adjusted AISC
of $25.83) improved due to lower net
cash costs and sustaining capital expenditures in 2017. AISC per
silver ounce payable of $27.97 in
2017 includes (i) significant one-time capital and development
costs of $3.5 million associated with
the Optimization Plan Phase 1 (completed in July 2017), primarily relating to the purchase of
pumping equipment, along with well-drilling and engineering costs
and (ii) the commencement of Optimization Plan Phase 2 for
$0.5 million. In Q4 2017, adjusted
AISC of $15.84 (Q4 2016 –
$48.49) continued to show improvement
from H1 2017 and 2016, with increased metal produced following the
successful completion of the Optimization Plan, but was higher than
Q3 2017 due to (i) lower AgEq oz produced, (ii) increased total
cash costs and (iii) increased general and administrative cost, as
mentioned above.
Excellon defines AISC per silver ounce as the sum of total cash
costs (including treatment charges and net of by-product credits),
capital expenditures that are sustaining in nature, corporate
general and administrative costs (including non-cash share-based
compensation), capitalized and expensed exploration that is
sustaining in nature, and (non-cash) environmental reclamation
costs, all divided by the total payable silver ounces sold during
the period to arrive at a per ounce figure.
All financial information is prepared in accordance with IFRS,
and all dollar amounts are expressed in U.S. dollars unless
otherwise specified. The information in this news release should be
read in conjunction with the Company's audited consolidated
financial statements for the year ended December 31, 2017 and associated management
discussion and analysis ("MD&A") which are available from the
Company's website at www.excellonresources.com and under the
Company's profile on SEDAR at www.sedar.com.
The discussion of financial results in this press release
includes reference to "cash flows from operations before changes in
working capital items", "cash cost per silver ounce payable", "AISC
per payable AgEq ounce", "adjusted AISC cost per silver ounce
payable" and "adjusted net income (loss)" which are non-IFRS
performance measures. The Company presents these measures to
provide additional information regarding the Company's financial
results and performance. Please refer to the Company's MD&A for
the three and twelve-month periods ended December 31, 2017, for a reconciliation of these
measures to reported IFRS results.
Production Highlights
Mine production for the periods indicated below were as
follows:
|
|
|
|
|
|
Q4
2017
|
Q4
2016
|
|
|
|
2017
|
2016
|
Tonnes of ore
produced
|
16,114
|
15,320
|
57,165
|
53,234
|
Tonnes of ore
processed
|
17,978(5)
|
14,417(5)
|
63,742(5)
|
55,593(5)
|
Ore
grades:
|
|
|
|
|
|
|
Silver
(g/t)
|
424
|
375
|
393
|
456
|
|
Lead (%)
|
3.81
|
3.52
|
3.75
|
4.40
|
|
Zinc (%)
|
5.81
|
4.80
|
5.30
|
5.70
|
Recoveries:
|
|
|
|
|
|
|
Silver (%)
|
90.3
|
90.0
|
89.3
|
90.5
|
|
Lead (%)
|
80.0
|
81.1
|
80.9
|
82.1
|
|
Zinc (%)
|
82.2
|
81.3
|
81.4
|
80.1
|
Production:(1)
|
|
|
|
|
|
|
Silver –
(oz)
|
223,349
|
159,524
|
718,460
|
752,689
|
|
AgEq ounces
(oz)(2)
|
475,007
|
305,934
|
1,470,650
|
1,293,815
|
|
Lead –
(lb)
|
1,198,286
|
903,763
|
4,241,225
|
4,427,300
|
|
Zinc –
(lb)
|
1,897,894
|
1,248,022
|
6,059,922
|
5,581,060
|
Payable:(3)
|
|
|
|
|
|
|
Silver ounces –
(oz)
|
206,400
|
126,773
|
667,370
|
668,181
|
|
AgEq ounces (oz)
(2)
|
435,924
|
241,867
|
1,345,500
|
1,133,789
|
|
Lead –
(lb)
|
1,170,595
|
740,812
|
4,134,184
|
4,092,790
|
|
Zinc –
(lb)
|
1,669,739
|
955,415
|
5,219,258
|
4,602,386
|
Realized
prices:(4)
|
|
|
|
|
|
Silver –
($US/oz)
|
16.32
|
16.70
|
16.73
|
17.38
|
|
Lead –
($US/lb)
|
1.14
|
1.03
|
1.08
|
0.85
|
|
Zinc –
($US/lb)
|
1.45
|
1.22
|
1.37
|
0.98
|
|
|
|
|
|
|
(1)
|
Period deliveries
remain subject to assay and price adjustments on final settlement
with concentrate purchaser(s). Data has been adjusted to reflect
final assay and price adjustments for prior period deliveries
settled during the period.
|
(2)
|
AgEq ounces
established using average realized metal prices during the period
indicated applied to the recovered metal content of the
concentrates.
|
(3)
|
Payable metal is
based on the metals shipped and sold during the period and may
differ from production due to these reasons.
|
(4)
|
Average realized
price is calculated on current period sale deliveries and does not
include the impact of prior period provisional adjustments in the
period.
|
(5)
|
During the periods,
the Company milled low grade stockpile totaling 9,316 tonnes at 340
g/t AgEq in 2017 (2,775 tonnes at 400 g/t AgEq in Q4 2017) and
4,518 tonnes at 255 g/t AgEq in 2016 (nil tonnes at Q4
2016).
|
During Q4 2017, pumping rates were lower than planned because of
on-going maintenance, which impacted overall drawdown. Drawdown was
also impacted by infiltration from certain surface water
facilities, which has now been addressed. The Company continues to
monitor and eliminate other sources of surface water infiltration
that have the potential to impact drawdown rates in the ordinary
course. Partially due to the foregoing, development rates were
lower than in the previous quarter with 151 metres in ore (44%
decrease over Q3 2017 – 269 metres) and 227 metres in waste (22%
decrease over Q3 2017 – 292 metres). Planned development was also
proactively reduced as underground drilling identified a connector
zone of mineralization between the Rodilla and Pierna mantos, which
eliminated the need for a dedicated Pierna ramp (685), as both
mantos will now be accessed via the 730 ramp.
Development is now focused on driving a ramp deeper on Rodilla
and Pierna and a second ramp below 623 to allow for cut-and-fill
mining going forward on all three mantos, which will improve
productivity. As drawdown rates were lower in Q4 2017, development
of these ramps was slower than planned, though improved during Q1
2018. As a result, production during Q1 2018 is expected to be
410,000 - 440,000 AgEq ounces and is expected to increase from
both ramps in Q2 2018. The Company expects to publish an updated
mineral resource estimate and technical report in April, along with
an associated production outlook for the remainder of 2018.
The Company has commenced Optimization Plan Phase 2 as part of
the ordinary course of mining operations going forward. Phase 2
will consist of the periodic development of new well bays and the
drilling of new wells, with existing submersible pumps being moved
to the new wells as those at higher elevation begin to lose pumping
efficiency. During Q4 2017, the Company completed the development
of two new well bays and the drilling of four new production wells.
One of these wells has been commissioned and the other is on
standby pending capacity reorganization of vertical turbine pumps.
The other two will be commissioned early in Q2 2018. Capital
expenditures on Phase 2 are considered sustaining and are expected
to total approximately $2 million
over the course of 2018 and into 2019.
During Q1 2018, the Company announced that it entered into an
agreement with Hecla to toll mill
sulphide ore from the San
Sebastian mine in Durango at Excellon's mill facility in
Miguel Auza. The toll milling
arrangement is expected to commence in 2019 following successful
completion of a 4,000-tonne bulk sample testing program at the
Miguel Auza mill facility in Q3
2018. Preparation for the bulk sample testing program is ongoing in
collaboration with Hecla.
Annual and Special Meeting
The annual and special meeting (the "Meeting") of Excellon
shareholders will be held at 4:00 p.m.
(ET) on May 10, 2018 at the
Albany Club (Presidents' Room) 91 King Street East, Toronto, Ontario M5C 1G3. Shareholders as of
March 23, 2018 will be entitled to
attend and vote their shares at the Meeting. The Management
Information Circular and materials related to the Meeting will be
available on the Company website and SEDAR in the coming days
pursuant to Notice and Access rules.
About Excellon
Excellon's 100%-owned Platosa Mine in Durango has been
Mexico's highest-grade silver mine
since production commenced in 2005. The Company is focused on
optimizing the Platosa Mine's cost and production profile,
discovering further high-grade silver and carbonate replacement
deposit (CRD) mineralization on the Platosa Project and epithermal
silver mineralization on the Miguel Auza Property and capitalizing
on the opportunity in current market conditions to acquire
undervalued projects in the Americas.
Additional details on the La Platosa Mine and the rest of
Excellon's exploration properties are available at
www.excellonresources.com.
Forward-Looking Statements
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. 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,
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 July 9, 2015 NI 43-101-compliant technical report
prepared by Roscoe Postle Associates Inc. 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.
SOURCE Excellon Resources Inc.