Mr. Brendan Cahill reports
EXCELLON REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS
Excellon Resources Inc. has released financial results for the three- and six-month periods ended June 30, 2016. All currency figures in this release are in U.S. dollars.
Second quarter 2016 financial highlights
-
Revenue of $5.4-million (second quarter 2015 -- $4.0-million);
-
Sales of 334,549 silver-equivalent ounces (AgEq) payable (second quarter 2015 -- 304,984 AgEq ounces payable);
-
Mine operating earnings of $1.3-million (second quarter 2015 -- loss of $800,000);
-
Adjusted net income of $900,000 or one cent per share (second quarter 2015 -- adjusted net loss of $1.8-million or three cents per share);
-
Production cost per tonne reduced by 13 per cent relative to second quarter 2015 and 24 per cent during the first six months of 2016 relative to the first six months of 2015;
-
Adjusted all-in sustaining cost (AISC) per silver ounce payable of $15.27, excluding the one-time sustaining capital expenditures associated with the platosa optimization plan, demonstrating progress toward materially reduced costs per ounce at Platosa under dry mining conditions;
-
Phases II and III of optimization program under way with increasingly dry mining conditions at Platosa and drawdown rates exceeding projections at current pumping rates, primarily from existing infrastructure;
-
Cash, current account receivables and marketable securities totalled $7.5-million at June 30, 2016 (Dec. 31, 2015 -- $4.7-million), not including $15.2-million (Canadian) bought-deal financing completed in July, 2016;
-
Net working capital totalled $7.3-million at June 30, 2016 (Dec. 31, 2015 -- $5.5-million).
"During the second quarter we continued to realize the benefits of operational efficiencies put into place earlier this year," stated Brendan Cahill, president and chief executive officer. "We returned to profitability on an adjusted basis and improved cash flow, as well as realizing material improvements to all-in sustaining costs per ounce before the one-time costs associated with the ongoing Platosa optimization plan. We have reported adjusted net income during the period as, with the company's strong share performance during the second quarter, fair value adjustments to financing costs were required under international financial reporting standards on our outstanding convertible debentures and associated warrants -- a quality problem. We expect our costs and financial performance to further improve as the Platosa optimization program continues moving towards completion. We enter the third quarter with much improved metal prices, a strengthened balance sheet from our recent, oversubscribed bought-deal financing and a comprehensive drill program about to commence at Platosa."
FINANCIAL RESULTS FOR THE THREE- AND SIX-MONTH PERIODS
ENDED JUNE 30, 2016, AND 2015
(In thousands, except amounts per share and per ounce)
Q2 2016 Q2 2015 H1 2016 H1 2015
Revenues (1) $5,370 $4,036 $9,631 $9,091
Production (costs) (3,441) (4,013) (6,710) (8,573)
Depletion and amortization
(loss) (609) (815) (1,214) (1,662)
------ ------ ------ ------
(Cost) of sales (4,050) (4,828) (7,924) (10,235)
------ ------ ------ ------
Gross profit (loss) 1,320 (792) 1,707 (1,144)
Corporate administration (loss) (665) (862) (1,319) (1,654)
Exploration (loss) (171) (188) (308) (414)
Other (incl. royalty income and finance
cost) (loss) 68 (722) (299) (172)
Impairment of mineral rights 156 - 156 -
Net finance (cost) (5,575) (18) (7,555) (44)
Income tax recovery 489 761 614 1,370
------ ------ ------ ------
Net (loss) (4,378) (1,821) (7,004) (2,058)
Adjusted net profit/(loss) (2) 852 (1,821) 116 (2,058)
(Loss) per share -- basic (0.07) (0.03) (0.12) (0.04)
Adjusted profit/(loss) per
share -- basic 0.01 (0.03) 0.02 (0.04)
Cash flow from (used in) operations (3) 482 (1,187) 743 (757)
Cash flow from (used in) operations per
share -- basic 0.01 (0.02) 0.01 (0.01)
Production cost per tonne (4) 238 274 230 301
Cash cost per silver ounce payable ($/Ag
oz) 9.81 16.96 10.27 15.45
All-in sustaining cost per silver ounce
payable ($/Ag oz) 19.27 24.53 18.35 22.40
Adjusted all-in sustaining cost per
silver ounce payable (5) 15.27 24.53 15.90 22.40
Average realized silver price per ounce
sold (6) 17.43 16.29 16.76 16.25
Notes
(1) Revenues are net of treatment and refining charges.
(2) Adjusted net loss for the second quarter of 2016 reflects results before
$5.4-million fair value adjustment loss on embedded derivatives and warrants
related to convertible debentures issued in November, 2015. The fair value
adjustment derives from the strong performance of the company's stock
during the period, with the market price increasing from 61 cents as of
March 31, 2016, to $1.23 as of June 30, 2016, resulting in significant
increases in valuation/cost upon the potential conversion or exercise
of the debentures or warrants, respectively.
(3) Cash flow from operations before changes in working capital.
(4) Production cost per tonne includes mining and milling costs excluding
depletion and amortization.
(5) Adjusted AISC per silver excludes one-time sustaining capital
expenditures associated with the Platosa optimization plan
(associated costs were $200,000 in the first quarter of 2016 and
$800,000 in the second quarter of 2016).
(6) Average realized silver price is calculated on current-period sale
deliveries and does not include prior-period provisional adjustments in
the period.
Operations during the second quarter continued to focus on progressing phases II and III of Platosa's optimization program and development into higher-grade areas of the mine. Production was primarily from the Rodilla, 6A and Guadalupe north and south mantos. The Rodilla manto continued to serve as the primary source of high-grade production with grades averaging 662 g/t Ag, 5.94 per cent lead and 7.75 per cent zinc. Previously this manto was significantly below the water table, but conditions are now almost entirely dry as a result of optimization efforts to existing pump infrastructure, which demonstrated exceptional results during the second quarter. During the third quarter, the company aims to continue production from the Rodilla manto on the 975 level while continuing development and accessing ore from the 970 level, with development preparing the 960 level for the fourth quarter. Additionally, development is focused on further accessing the Guadalupe south manto and driving development into the 623 manto, hosting mineral resources of 83,000 tonnes at 1,231 g/t Ag (1,766 g/t AgEq), both areas which require water management but are expected to improve as drawdown continues.
Silver production of 227,826 ounces reflects the combined effect of 13-per-cent grade and 6-per-cent recovery improvements when compared with the second quarter of 2015. Similarly, lead production of 1.3 million pounds reflects a 16-per-cent grade and 10-per-cent recovery improvements when compared with the second quarter of 2015. Zinc production of 1.6 million pounds was 10 per cent lower, relative to the second quarter of 2015 as a result of lower zinc grades mined, but similar to the previous quarter's production. Over all, the company produced 368,568 silver-equivalent ounces in the second quarter of 2016 compared with 341,975 silver-equivalent ounces in the second quarter of 2015.
During the second quarter of 2016, the company generated higher net revenues of $5.4-million compared with $4.0-million in the second quarter of 2015. Revenues improved from the previous quarter as access to the Rodilla manto improved production to 334,549 silver-equivalent ounces payable in the second quarter of 2016 compared with 329,200 silver-equivalent ounces payable in the first quarter of 2016. As the silver price improved in the second quarter of 2016, revenues were positively impacted by marked-to-market adjustments on provisionally priced sales that had not been settled at the end of the first quarter of 2016, increasing revenues by $400,000 (second quarter 2015 positive adjustment of $200,000).
The company continued to realize significant cost reductions at its mining operations in the second quarter of 2016. Cost of sales decreased by $800,000 or 16 per cent to $4.0-million in the second quarter of 2016 compared with $4.8-million in the second quarter of 2015. Production costs improved by 14 per cent and decreased to $3.4-million during the quarter from $4.0-million in the second quarter of 2015. The significant cost reductions are attributable to continued improved maintenance practices on pumps and mobile equipment. The company expects costs to be further reduced upon completion of the continuing optimization plan.
During the second quarter of 2016, the company recorded a net loss of $4.4-million compared with a net loss of $1.8-million in the second quarter of 2015. The company's adjusted net income of $900,000 in the second quarter of 2016 reflects the currents period's results before recording a $5.4-million fair value adjustment loss on embedded derivative and warrants relating to convertible debentures and warrants issued in November, 2015, in accordance with IFRS and a $200,000 reversal of impairment on the DeSantis property sold during the period. Part of the fair value adjustment derives primarily from the strong performance of the company's stock during the period, with the market price increasing from 31 cents as of Dec. 31, 2015, to $1.23 as of June 30, 2016, resulting in significant increases in valuation/cost upon the potential conversion or exercise of the debentures or warrants. The company recorded a foreign exchange loss of $600,000, which was offset by an unrealized gain on marketable securities of $600,000 on the common shares Osisko Mining Corp. received in respect of the DeSantis property.
Cash corporate administrative expenses of $500,000 in the second quarter of 2016 were slightly lower than the second quarter of 2015, reflecting consistent cost discipline at the corporate head office in Toronto.
Exploration expenses of $200,000 in the second quarter of 2016 were comparable with the second quarter of 2015. Exploration activity continued to be limited during the period in an effort to conserve cash during the implementation of the optimization plan, but exploration is expected to resume at Platosa during August, 2016.
The company invested $800,000 in capital expenditures for the optimization plan and $400,000 for mine development for a total of $1.2-million in the quarter, compared with $400,000 for mine development in the second quarter of 2015.
Cash cost per silver ounce payable of $9.81 per ounce in the second quarter of 2016 improved by 42 per cent compared with $16.96 for the second quarter of 2015. AISC of $19.27 during the second quarter of 2016 improved by 21 per cent compared with $24.53 in the second quarter of 2015. Total sustaining cost of $2.1-million in the second quarter of 2016 was 60 per cent higher than the second quarter of 2015 mainly due to increased sustaining capital expenditure associated with the Platosa optimization plan. Excluding this one-time capital expenditure, adjusted all-in sustaining costs during the period were $15.27, a considerable improvement from previous quarters and demonstrating progress toward materially reduced costs per ounce under dry mining conditions.
Excellon defines AISC per silver ounce as the sum of total cash costs (including treatment charges and net of byproduct credits), capital expenditures that are sustaining in nature, corporate general and administrative costs (including non-cash share-based compensation), capitalized and expensed exploration that is sustaining in nature, and (non-cash) environmental reclamation costs, all divided by the total payable silver ounces sold during the period to arrive at a per-ounce figure.
All financial information is prepared in accordance with IFRS, and all dollar amounts are expressed in U.S. dollars unless otherwise specified. The information in this news release should be read in conjunction with the company's unaudited condensed interim consolidated financial statements for the quarter ended June 30, 2016, and associated management discussion and analysis (MD&A) which are available from the company's website and under the company's profile on SEDAR.
PRODUCTION HIGHLIGHTS
Q2 Q2 H1 H1
2016 (1) 2015 (1) 2016 (1) 2015 (1)
Tonnes of ore produced 13,929 13,709 26,706 27,629
Tonnes of ore processed 14,453 14,629 29,173 28,457
Ore grades
Silver (g/t) 536 475 509 499
Lead (%) 5.09 4.40 4.94 4.87
Zinc (%) 6.31 6.87 6.23 7.82
Recoveries
Silver (%) 90.0 84.7 90.9 88.6
Lead (%) 81.2 73.6 82.5 75.9
Zinc (%) 78.7 80.1 79.0 81.9
Production
Silver (oz) 227,826 182,709 439,382 399,788
Silver-equivalent
ounces (oz) (2) 368,568 341,975 732,120 750,070
Lead (lb) 1,313,197 1,024,813 2,632,113 2,277,608
Zinc (lb) 1,575,231 1,744,678 3,164,009 3,983,991
Payable (3)
Silver ounces (oz) 209,422 163,778 402,936 368,002
Silver-equivalent
ounces (oz) (2) 334,549 304,984 663,750 684,263
Lead (lb) 1,260,672 972,178 2,512,012 2,225,843
Zinc (lb) 1,321,337 1,492,749 2,666,350 3,453,239
Realized
prices (4)
Silver ($US/oz) $17.43 $16.29 $16.76 $16.25
Lead ($US/lb) 0.77 0.84 0.78 0.82
Zinc ($US/lb) 0.91 0.99 0.87 0.96
Notes
(1) Period deliveries remain subject to assay and price adjustments on
final settlement with concentrate purchaser. Data have been adjusted to
reflect final assay and price adjustments for prior-period deliveries
settled during the period.
(2) Silver-equivalent ounces established using average 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 silver price is calculated on current-period sale
deliveries and does not include the impact of prior-period provisional
adjustments in the period.
We seek Safe Harbor.
© 2024 Canjex Publishing Ltd. All rights reserved.