TORONTO, March 31, 2022 /CNW/ - Excellon Resources
Inc. (TSX: EXN) (NYSE: EXN) and (FRA: E4X2)
("Excellon" or the "Company") is pleased to report financial
results for the three- and twelve-month periods ended December 31, 2021.
Q4 2021 Financial and Operational
Highlights (compared to Q4 2020)
- Revenues of $9.3 million (Q4 2020
– $10.1 million)
- Gross loss of $1.3 million, which
includes a non-cash charge of $1.6
million relating to future mine closure costs (Q4 2020 –
profit of $2.7 million)
- Total cash cost net of byproducts per silver ounce payable
increased to $15.61 (Q4 2020 –
$12.73)
- All-in sustaining cost ("AISC") per silver ounce payable
increased to $24.82 (Q4 2020 –
$21.49)
- Production cost per tonne increased to $314 per tonne (Q4 2020 – $252 per tonne)
2021 Financial and Operational Highlights (compared to
2020)
- Revenues of $38.0 million (2020 –
$26.2 million, impacted by the Q2
2020 suspension mandated by the Government of Mexico in response to the COVID-19 pandemic
(the "Suspension"))
- Gross profit of $4.5 million,
which includes a non-cash charge of $1.6
million relating to future mine closure costs (2020 – profit
of $1.6 million)
- Total cash cost net of byproducts per silver ounce payable
decreased to $13.01 (2020 –
$15.38)
- AISC per silver ounce payable decreased to $24.78 (2020 – $26.80)
- Production cost per tonne decreased to $291 per tonne (2020 – $299 per tonne)
- Record mined and processed tonnage, along with the most silver
ounces produced since 2013
- Silver equivalent ("AgEq") production increased by 23% to
2,017,639 oz (2020 – 1,639,310 AgEq oz)
- Net working capital totaled $0.3
million (excluding provision for litigation) as at
December 31, 2021 (December 31, 2020 – $9.8
million), with cash and marketable securities of
$4.5 million as at December 31, 2021 (December 31, 2020 – $10.7
million)
"During 2021, we realized a number of successes, while certainly
encountering challenges," stated Brendan
Cahill, President and Chief Executive Officer. "Our mining
operation delivered the second highest revenues in the operation's
history, after 2011 when silver prices averaged $34. Our team's operational improvements
delivered another record for tonnage processed and continued to
improve on all health and safety measures. In particularly, we
managed through another year of the pandemic effectively, while
realizing vaccination rates of nearly 100%.
On the exploration front, we delivered a robust program that
included the strong advancement of the Silver City project and the
discovery of a new high-grade zone of readily mineable
mineralization at Platosa. We also successfully advanced the
permitting process at Kilgore to
support this year's upcoming drilling program.
Despite the successes of 2021, as we noted in early January,
during Q1 2022 we have been assessing the longer-term viability of
the Platosa Mine. Based on the results of this analysis,
exploration work in Q4 2021 and Q2 2022 and consideration of
current and expected economic factors, the Company now expects to
wind down operations at Platosa during Q3 2022, subject to results
from ongoing exploration programs. This determination, along with
the previously disclosed judgment in respect of our subsidiary, San
Pedro Resources, has resulted in an impairment and net loss on our
income statement and non-cash impact on our balance sheet.
In the immediate term, we look forward to resolving the labour
action at Platosa, resuming normal operations at Platosa and
advancing the operation towards a responsible wind down in Q3 of
this year. We are also pursuing a number of strategic opportunities
that we believe will unlock significant value for our investors
from each of the jurisdictions in which we are operating."
Financial Results
Financial results for the three- and twelve-month
periods ended December 31, 2021 and
2020 were as follows:
('000s of USD, except
amounts per share
and per ounce)
|
Q4 2021
|
Q4
2020
|
2021
|
2020(8)
|
Revenue
(1)
|
9,306
|
10,097
|
37,955
|
26,202
|
Production
costs(2)
|
(8,673)
|
(5,986)
|
(26,207)
|
(19,981)
|
Depletion and
amortization
|
(1,928)
|
(1,445)
|
(7,300)
|
(4,649)
|
Cost of
sales
|
(10,601)
|
(7,431)
|
(33,507)
|
(24,630)
|
Gross profit
(loss)
|
(1,295)
|
2,666
|
4,448
|
1,572
|
|
|
|
|
|
Corporate
administration
|
(1,255)
|
(1,886)
|
(6,689)
|
(6,896)
|
Exploration
|
(1,783)
|
(1,400)
|
(7,194)
|
(4,032)
|
Other expenses, net
(1)
|
89
|
(6)
|
(758)
|
(373)
|
Provision for
litigation
|
(5)
|
-
|
(22,282)
|
-
|
Impairment
loss
|
(15,788)
|
-
|
(16,540)
|
-
|
Finance income
(expenses), net
|
(1,242)
|
(679)
|
(3,680)
|
(2,508)
|
Income tax recovery
(expense)
|
(167)
|
(4,703)
|
(5,078)
|
(3,783)
|
Net loss
|
(21,446)
|
(6,008)
|
(57,773)
|
(16,020)
|
Adjusted loss
(3)
|
(4,069)
|
(6,008)
|
(14,311)
|
(16,020)
|
Loss per share – basic
and diluted
|
(0.65)
|
(0.19)
|
(1.77)
|
(0.55)
|
Adjusted loss per share
(3)
|
(0.12)
|
(0.19)
|
(0.44)
|
(0.55)
|
Cash flow from (used
in) operations (4)
|
(217)
|
1,931
|
1,652
|
(3,733)
|
|
|
|
|
|
Production cost per
tonne (5)
|
314
|
252
|
291
|
299
|
Cash cost per silver
ounce payable net of byproducts ($/Ag oz)
|
15.61
|
12.73
|
13.01
|
15.38
|
AISC per silver ounce
payable ($/Ag oz)(6)
|
24.82
|
21.49
|
26.78
|
26.80
|
|
|
|
|
|
Realized prices:
(7)
|
|
|
|
|
Silver –
($US/oz)
|
23.30
|
24.46
|
25.12
|
21.59
|
Lead –
($US/lb)
|
1.06
|
0.87
|
1.00
|
0.83
|
Zinc –
($US/lb)
|
1.53
|
1.21
|
1.37
|
1.08
|
|
|
(1)
|
Revenues are net of
treatment and refining charges ("TC/RCs"). Refer to Note 18 of the
Q1 2021 Condensed Consolidated Financial Statements for detail of
the comparative period reclassification of foreign exchange
differences on provisionally priced sales.
|
(2)
|
Q4 2021 production
costs include a non-cash accrual of $1.6 million related to future
mine closure.
|
(3)
|
Q4 2021 adjusted loss
and adjusted loss per share excludes impairment losses of $15.8
million and $1.6 million related to future mine closure accruals
(included in production costs). Q3 2021 adjusted loss and adjusted
loss per share excludes $22.3 million related to the Provision for
litigation, the related $0.8 million impairment loss and $3.1
million deferred-tax asset derecognition expenses (included in
income tax expense).
|
(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)
|
AISC per silver ounce
payable excludes general and administrative and share-based payment
costs attributable to the Company's non-producing projects. The
comparative has been revised to conform with the current
allocation.
|
(7)
|
Average realized price
is calculated on current period sale deliveries and does not
include the impact of prior period provisional adjustments in the
period.
|
(8)
|
2020 results were
significantly impacted by the Suspension.
|
Revenues decreased by $0.8 million
or 8% during Q4 2021 compared to Q4 2020, driven by a 4% decrease
in AgEq ounces payable and a 5% decrease in the realized silver
price, partly offset by 22% and 26% increases in realized lead and
zinc prices, respectively. Revenues for the 12-month period
increased by $11.8 million or 45%,
driven by a 21% increase in AgEq ounces payable and 16%, 20% and
27% increases in realized silver, lead and zinc prices,
respectively, compared to the prior year. Revenues for the
comparative 12-month period were impacted by the Suspension.
Gross profit decreased by $4.0
million in Q4 2021 relative to Q4 2020, primarily driven by
the $0.8 million decrease in revenue,
$0.5 million increase in depletion
and amortization and a $2.7 million
increase in production costs, which included a non-cash accrual of
$1.6 million related to future mine
closure. Gross profit improved by $2.9
million for the 12-month period, driven by higher revenues
of $11.8 million, partly offset by
increased production, depletion and amortization costs (increased
by $6.2 million and $2.7 million, respectively) following the
Suspension in 2020.
General and administrative expense decreased by $0.6 million or 34% in Q4 2021 driven by lower
share-based payment expenses in Q4 2021 ($0.2 million) and the $0.3
million expense relating to the Company's initial listing on
the NYSE American in Q3 2020. Overall, general and administrative
expenses decreased by $0.2 million
for 2021 reflecting decreases in share-based payment expenses
($0.3 million) and corporate
development and legal costs ($0.5
million), partly offset by increases in salaries
($0.1 million) and higher insurance
expense ($0.4 million) due to the
listing on the NYSE American.
Exploration and holding expense increased by $0.4 million in Q4 2021, primarily reflecting
increased drilling expenditures at the Silver City Project.
Exploration programs were limited in 2020 by the initial outbreak
of COVID-19 resulting in lower expenditures. In 2021, the Company
invested exploration and holding costs of $3.2 million on Silver City in Saxony,
Germany (2020 – $1.7 million), $2.4 million on Platosa and Evolución in
Mexico (2020 – $1.6 million) and $1.6
million on Kilgore in
Idaho, USA (2020 – $0.7 million).
Other expenses include realized and unrealized foreign exchange
gains and losses, unrealized gains and losses on marketable
securities and warrants, interest income and other non-routine
income or expenses. Other expenses in Q4 2021 are consistent with
Q4 2020. The 12-month variance of $0.4
million reflects changes in the values of marketable
securities and warrants, which had unrealized gains of $0.6 million in 2020 but unrealized losses of
$0.9 million in 2021, partly offset
by a decrease in foreign exchange losses of $0.7 million between these periods.
As disclosed in Q3 2021, the Company received the formal written
decision regarding the litigation involving the Company's
subsidiary, San Pedro Resources ("San Pedro"), in respect of the La
Antigua mineral concession (the "Judgment"). The Company recorded a
Provision for litigation of $22.2
million in Q3 2021 as required under IFRS's International
Accounting Standard 37 – Provisions, Contingent Liabilities and
Contingent Assets (included in Other Expenses). The uncertainty
related to the Judgment also contributed to the $0.8 million impairment loss and the $3.1 million deferred-tax asset derecognition
(included in income tax expense). The Company continues to pursue
avenues through its labour, community and government relationships
and is investigating remedies under international law. In the
interim, San Pedro continues to
operate in the ordinary course (subject to the labour action noted
below).
As announced on January 5, 2002,
while the Company continued to aggressively drill to expand and
define the mineral resource in recent years and throughout Q4 2021,
current mining is entering an area of the deposit that steepens
significantly, with fewer vertical-tonnes-per-metre than
historically encountered. The Company has been assessing whether
maintaining a consistent production schedule beyond mid-2022 at
achievable dewatering rates and with acceptable capital
expenditures is possible without additional mineralization being
defined. Based on exploration results in Q4 2021 and Q1 2022, the
Company currently expects to wind down operations at Platosa during
Q3 2022, subject to results from ongoing exploration programs. As a
result, the Company performed an impairment test on its Mexican
operations and recorded an impairment loss of approximately
$15.8 million as at December 31, 2021 (Q4 2020 – $Nil). In Q3 2021,
the Company had recorded an impairment loss of $0.8 million on Miguel
Auza reflecting the impact of the Judgment against
San Pedro.
The primary component of net finance expense in Q4 2021 is
$1.1 million of interest expense on
the 5.75% secured convertible debentures (the "Convertible
Debentures") issued in Q3 2020, which are recorded at amortized
cost and accreted to the principal amount over the term of the
Convertible Debentures. This interest expense includes $0.4 million in coupon interest at a 10% rate,
paid in common shares at the Company's election (Q4 2020 –
$0.4 million), and a non-cash
$0.7 million accretion of the face
value of the Convertible Debentures (Q4 2020 – $0.4 million).
Net finance expense of $3.7
million for 2021 is $1.2
million higher than the comparative period. Interest on the
Convertible Debentures, increased by $2.2
million including $0.8 million
relating to coupon interest (paid in shares), and $1.4 million relates to non-cash accretion
interest expense. This increase was partially offset by a
$0.4 million in unrealized loss on
currency hedges in 2020, which have since been settled at a net
realized loss of $40,000 and
$0.7 million interest in 2020 on a
$6 million credit facility that was
repaid in Q3 2020.
Adjusted loss decreased by $1.9
million in Q4 2021 relative to Q4 2020, despite the
$4.0 million decrease in gross profit
discussed above, mainly driven by a $4.5
million decrease in income tax expense and a $0.6 million reduction in general and
administrative expenses, partly offset by a $0.6 million increase in finance expense and a
$0.4 million increase exploration
expense. Adjusted loss decreased by $1.7
million in 2021 relative to 2020, mainly driven by the
$2.9 million improvement in gross
profit in 2021, discussed above, and a $1.8
million decrease in income tax expenses (after adjusting for
the deferred-tax asset derecognition related to the provision for
litigation), partially offset by an increase of $3.2 million in exploration and holding expenses
and a $1.2 million increase in
finance expenses.
Production cost per tonne increased by 25% in Q4 2021 relative
to Q4 2020 due to a 6% decrease in tonnes milled in Q4 2021 and a
17% increase in production costs, as discussed above. Production
cost per tonne decreased by 3% for 2021 as 2020 was impacted by the
Suspension.
Total cash cost per silver ounce payable increased by 23% for Q4
2021 relative to Q4 2020, primarily driven by an 11% decrease in
silver ounces payable and a 9% increase in cash costs net of
by–product credits reflecting higher production costs. Total cash
cost per silver ounce payable decreased by 15% for 2021, primarily
driven by a 23% increase in silver ounces payable in 2021 as 2020
included negligible production in Q2 2020 due to the
Suspension.
AISC per silver ounce payable increased by 15% in Q4 2021
relative to Q4 2020 due to the impacts of lower silver ounces
payable (11%) and higher all-in sustaining costs ($0.2 million or 3%). AISC per silver ounce
payable decreased 8% for 2021 relative to 2020, primarily driven by
a 23% increase in silver ounces payable in 2021 as 2020 was
impacted by the negligible production realized in Q2 2020 due to
the Suspension.
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 press release should
be read in conjunction with the Company's audited condensed
consolidated financial statements for the years ended December 31, 2021 and 2020, 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 and EDGAR at
www.sec.com/edgar.
The discussion of financial results in this press release
includes references to "cash flow from operations before changes in
working capital items", "production cost per tonne", "cash cost per
silver ounce payable", and "AISC per silver ounce payable", 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 years ended December 31,
2021 and 2020, for a reconciliation of these measures to
reported IFRS results.
Operating Results & Outlook
Operating performance
for the periods indicated below was as follows:
|
Q4
|
Q4
|
|
|
|
2021
|
2020
|
2021(1)
|
2020(1)
|
Tonnes
mined:
|
20,954
|
21,455
|
85,530
|
66,501
|
Tonnes
milled:
|
21,309
|
22,626
|
86,021
|
65,567
|
Grades:
|
|
|
|
|
|
Silver (g/t)
|
438
|
536
|
494
|
519
|
|
Lead (%)
|
4.65
|
5.42
|
5.01
|
5.37
|
|
Zinc (%)
|
5.50
|
6.12
|
6.03
|
6.57
|
Recoveries:
|
|
|
|
|
|
|
Silver (%)
|
90.5
|
91.2
|
89.5
|
91.4
|
|
Lead (%)
|
78.5
|
82.9
|
80.0
|
83.7
|
|
Zinc (%)
|
83.7
|
80.1
|
79.0
|
78.9
|
Production(1)
|
|
|
|
|
|
|
Silver –
(oz)
|
271,525
|
355,581
|
1,222,991
|
997,690
|
|
Lead – (lb)
|
1,717,525
|
2,223,465
|
7,612,332
|
6,470,637
|
|
Zinc – (lb)
|
2,167,840
|
2,452,728
|
9,014,028
|
7,488,825
|
|
AgEq ounces
(oz)(2)
|
492,013
|
556,332
|
2,017,639
|
1,639,310
|
Payable:(3)
|
|
|
|
|
|
|
Silver ounces –
(oz)
|
287,953
|
323,139
|
1,141,281
|
928,240
|
|
Lead – (lb)
|
1,762,293
|
2,049,065
|
7,073,488
|
6,087,239
|
|
Zinc – (lb)
|
1,697,098
|
2,088,975
|
7,101,992
|
6,442,712
|
|
AgEq ounces
(oz)(2)
|
479,566
|
499,644
|
1,810,199
|
1,501,354
|
San Sebastián ore
processed (t)
|
-
|
-
|
-
|
4,785
|
|
|
(1)
|
Period deliveries
remain subject to assay and price adjustments on final settlement
with concentrate purchaser. 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 respective period
applied to the recovered metal content of the concentrates to
calculate the revenue contribution of base metal sales during the
period.
|
(3)
|
Payable metal is based
on the metals delivered and sold during the period, net of payable
deductions under the Company's offtake arrangements, and will
therefore differ from produced ounces.
|
The Company's Mexican operations delivered records for mined and
processed tonnage in 2021, along with the most silver ounces
produced since 2013. In Q4 2021, the Company recorded its sixth
consecutive quarter of over 20,000 tonnes mined and milled
following the restart in late Q2 2020 – a first since production
commenced in 2005.
Head grades were lower in Q4 2021 compared to Q4 2020 due to
higher mining dilution and variation in manto mineralization.
Overall, silver, lead and zinc grades decreased 5%, 7% and 8%,
respectively, compared to 2020.
Silver, lead and zinc production decreased by 24%, 23% and 12%,
respectively, relative to Q4 2020 driven by lower feed grades and
recoveries. The Suspension resulted in lower AgEq production for
2020 compared to 2021.
As discussed above, underground and surface drilling continued
throughout Q1 2022, however based on the recent drilling results
and consideration of current and expected economic factors, the
Company expects to wind down operations at Platosa during Q3 2022,
subject to results from ongoing exploration programs.
On March 7, 2022 the Company
reported that the Sindicato Nacional Minero Metalúrgico (the
"Platosa Union") commenced a labour action at the Platosa Mine in
Durango, Mexico. The Company is in
discussions with the Platosa Union and is committed to reaching a
fair settlement and returning to production in the immediate
term.
Management Change
The Company is also pleased to announce the appointment of
Daniel Hall as Chief Financial Officer effective April 1, 2022. Alfred
Colas is stepping down as Chief Financial Officer effective
April 1, 2022 to pursue an
opportunity outside of the mining industry.
Mr. Cahill stated, "Dan Hall has
been Corporate Controller since October
2019 and has driven improved financial reporting and
controls and has demonstrated strong leadership in the finance team
since joining the Company. We are pleased to welcome him into
senior management and look forward to working with him on our
strategic plans going forward."
"On behalf of the Board, we thank Alfred for his efforts as CFO
and wish him well in his next role."
Daniel Hall, CPA, CA joined
Excellon as Corporate Controller in 2019 and has been responsible
for financial reporting, treasury, internal controls, tax, IT
systems and all operational finance functions. Prior to joining
Excellon, Mr. Hall had 12 years of experience with Deloitte LLP in
South Africa, Bermuda, and Canada specializing in public company
reporting and complex accounting matters, with a focus on global
mining companies. Daniel is a Chartered Accountant, a member of the
Institute of Chartered Professional Accountants of Ontario, and holds a Bachelor of Commerce
degree with a post graduate specialization in Accounting and
Finance from Rhodes University in South
Africa.
COVID-19 Update
In 2021, none of the Company's projects were suspended or
restricted. Although the Company believes the risk for business
interruption remains low, unexpected interruptions could still
occur given the uncertainty surrounding the recurring wave of
rising cases in certain regions where the Company operates and
considering the surge in the "Omicron" variant of the virus.
Government vaccination programs for COVID-19 are underway in all of
the regions in which the Company operates. Vaccination programs are
now progressing well in Mexico,
with 99% of the Company's workforce double-vaccinated and 37%
triple-vaccinated.
About Excellon
Excellon's vision is to create wealth by realizing strategic
opportunities through discipline and innovation for the benefit of
our employees, communities, and shareholders. The Company is
advancing a
precious metals growth pipeline that includes: Platosa,
Mexico's highest-grade silver
mine since production
commenced in 2005; Kilgore, a high quality
advanced exploration
gold project in Idaho with strong economics
and significant growth and discovery potential; and an option on
Silver City, a high-grade epithermal silver district in
Saxony, Germany with 750 years of
mining history and no modern exploration. The
Company also aims to continue capitalizing
on current
market conditions by acquiring undervalued projects.
Additional details
on Excellon's 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 impact of the COVID-19 pandemic on the
Company's operations and results, the outcome and impact of the
legal action in Mexico (including
the dismissal of the appeal by the federal courts of Mexico on July 1,
2021) in respect of the La Antigua mineral concession that
is part of the Evolución Property in Zacatecas, mineral resources estimates, 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, the potential of the Company's properties,
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, the ability of the Company to maintain normal
operations during the COVID-19 pandemic, the outcome and impact of
the legal action in Mexico
(including the dismissal of the appeal by the federal courts of
Mexico on July 1, 2021) in respect of the La Antigua
mineral concession that is part of the Evolución Property in
Zacatecas, 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, 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. 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.
Cautionary Note to U.S. Investors: The
terms "mineral resource," "measured mineral resource," "indicated
mineral resource" and "inferred mineral resource," as used on
Excellon's website and in its press releases are Canadian mining
terms that are defined in accordance with National Instrument
43-101 – Standards of Disclosure for Mineral Projects ("NI
43-101"). NI 43-101 is a rule developed by the Canadian Securities
Administrators that establishes standards for all public disclosure
an issuer makes of scientific and technical information concerning
mineral projects. These standards differ from the requirements of
the United States Securities and Exchange Commission (the "SEC")
applicable to United States
domestic and certain foreign reporting companies under Subpart 1300
of Regulation S-K ("S-K 1300"). Accordingly, information included
in this press release that describes the Company's mineral
resources estimates may not be comparable with information made
public by United States and
certain foreign companies subject to the SEC's reporting and
disclosure requirements of S-K 1300.
SOURCE Excellon Resources Inc.