Mr. Brendan Cahill reports
EXCELLON REPORTS THIRD QUARTER 2020 FINANCIAL RESULTS
Excellon Resources Inc. has released its financial results for the three- and nine-month periods ended Sept. 30, 2020. All dollar amounts are expressed in U.S. dollars unless otherwise specified.
Third quarter 2020 financial and operational highlights (compared with Q3 2019):
Revenues increased by 56 per cent to $9.7-million during Q3 2020 ($6.2-million in Q3 2019).
Gross profit improved to $2.5-million (Q3 2019 -- loss of $1.0-million).
- Production increased 23 per cent to 524,312 silver equivalent (AgEq) ounces (Q3 2019 -- 427,131 AgEq oz), while sales increased 31 per cent to 485,841 AgEq oz (Q3 2019 -- 370,376 AgEq oz).
- Total cash cost net of byproducts per silver ounce payable decreased 31 per cent to $12.60 (Q3 2019 -- $18.18).
- AISC (all-in sustaining costs) per silver ounce payable decreased 34 per cent to $18.92 (Q3 2019 -- $28.46).
- Production cost per tonne decreased 33 per cent to $227 per tonne (Q3 2019 -- $339 per tonne).
- Net working capital totalled $10.5-million at Sept. 30, 2020 (Dec. 31, 2019 -- $7.6-million).
- The company had cash and marketable securities of $10.1-million as at Sept. 30, 2020, and improved liquidity following $17.91-million (Canadian) convertible debenture issuance and repayment of Sprott Private Resource Lending $6-million bridge loan.
- Other highlights during the quarter included:
- Listed and commenced trading on the New York Stock Exchange;
- Released updated mineral resource estimate on the Evolucion project in Zacatecas, Mexico, totalling an indicated resource of 35.1 million AgEq oz grading 170 g/t AgEq and an inferred resource of 64.8 million AgEq oz grading 135 g/t AgEq;
Finalized transition to private electricity supplier at Platosa, with substantial operational cost savings expected going forward.
"This quarter was one of our best in years, with record tonnage, excellent metal recoveries and solid cost reductions, all in a rising metal price environment," stated Brendan Cahill, president and chief executive officer. "We are confident that we can improve further by realizing the benefit of the new lower-cost electricity contract that is now in place and through other optimizations under way. Our teams in Mexico deserve great credit for continuing to improve the operation, while ensuring the safe operation of the business during the ongoing COVID pandemic."
Mr. Cahill continued: "On the exploration front, we currently have three rigs operating at Platosa and one at Silver City, and we expect to start drilling at Oakley in the near term. Our focus over the coming quarters is resource growth and discovery, supported by cash flows from our improving Mexican operations."
FINANCIAL RESULTS FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPT. 30, 2020, AND 2019
(in thousands, except amounts per share and per ounce)
Q3 2020 Q3 2019 YTD 2020 YTD 2019
Revenue $9,667 $6,203 $17,173 $20,055
Production (costs) (5,875) (6,050) (13,994) (17,199)
Depletion and amortization (loss) (1,269) (1,140) (3,204) (3,458)
(Cost) of sales (7,144) (7,190) (17,198) (20,917)
Gross profit (loss) 2,523 (987) (25) (862)
Corporate administration (loss) (1,502) (1,151) (5,009) (3,540)
Exploration (loss) (2,001) (858) (2,631) (2,829)
Other (expenses), net (744) (200) (1,435) (439)
Finance (expenses), net (292) (71) (1,829) (459)
Income tax recovery (expense) 1,776 (365) 919 (765)
Net (loss) (240) (2,902) (10,010) (8,894)
(Loss) per share -- basic and diluted (0.01) (0.14) (0.36) (0.44)
Cash flow (used in) operations (166) (1,548) (5,902) (2,298)
Production cost per tonne 227 339 324 304
Cash cost per silver ounce payable
net of byproducts ($/Ag oz) 12.60 18.18 16.80 12.58
All-in sustaining cost (AISC) per
silver ounce payable ($/Ag oz) 18.92 28.46 29.28 22.51
Silver ($US/oz) 24.82 17.65 20.18 15.78
Lead ($US/lb) 0.84 0.94 0.80 0.88
Zinc ($US/lb) 1.10 1.07 0.99 1.15
Revenues increased by 56 per cent to $9.7-million during Q3 2020 ($6.2-million in Q3 2019), driven by a 36-per-cent increase in silver ounces payable and a 41-per-cent increase in the average realized silver price relative to the comparative period.
Direct mining and milling costs included in cost of sales decreased 12 per cent in Q3 2020 compared with Q3 2019, despite increases of 20 per cent in ore mined and 31 per cent in ore milled in Q3 2020, reflecting lower personnel costs and efficiencies realized following the pandemic-driven suspension in Q2 2020. Total cost of sales was flat with the comparative quarter after adjusting for movements in ore and concentrate inventories ($800,000) and no toll milling revenue in the current quarter ($300,000).
Net loss in Q3 2020 reflects a $2.7-million improvement over the prior-year period based on higher revenues (by $3.5-million) and a $1.8-million non-cash recovery of deferred taxes, partly offset by higher exploration expenses (by $1.1-million), unrealized foreign exchange losses of $400,000, and higher interest and other expenses of $800,000.
General and corporate administration expenses increased 30 per cent or $300,000, including an increase of $100,000 related to stock-based compensation and $200,000 in administrative expenses, including certain one-time costs related to corporate development activities, listing on the NYSE and the related share consolidation.
The $1.1-million increase in exploration expenditures over Q3 2019 primarily reflects increased exploration activity at Silver City ($900,000) and work conducted on the Kilgore project ($200,000), partially offset by a delay of exploration activities in Mexico. Work continued on the Oakley project, which is under option to and financed by Centerra Gold Inc.
Cash cost net of byproducts per silver ounce payable (or total cash cost) decreased to $12.60 in Q3 2020 (Q3 2019 -- $18.18) driven by an 82-per-cent or $1.9-million increase in byproduct credits and a 36-per-cent increase in silver ounces payable, partially offset by a 236-per-cent or $1.7-million increase in TC/RCs (treatment charge/refining charge) relative to the comparative quarter. The increased TC/RCs were in line with charges in the global zinc and lead concentrate industry, which saw the marked increase in TC/RCs in 2019 continue into 2020. Q3 2020 TC/RCs were pursuant to a renegotiated offtake agreement in respect of zinc concentrate, which delivered lower charges, but the operation incurred higher penalties for deleterious elements, particularly antimony, during the period. The company plans to mitigate these penalties through increased ore blending in the future.
AISC net of byproducts per silver ounce payable decreased to $18.92 in Q3 2020 due to lower total cash and sustaining costs and the increase in silver ounces payable. Excluding non-cash items, AISC was $17.82 in Q3 2020 (Q3 2019 -- $27.38).
All financial information is prepared in accordance with IFRS (international financial reporting standards). The information in this press release should be read in conjunction with the company's unaudited condensed interim consolidated financial statements for the three- and nine-month periods ended Sept. 30, 2020, and associated management discussion and analysis (MD&A) which are available from the company's website and under the company's profile on SEDAR.
Operating results and outlook
OPERATING PERFORMANCE FOR THE PERIODS INDICATED
Q3 Q3 YTD YTD
2020 2019 2020 2019
Tonnes of ore mined 21,877 18,167 45,046 56,967
Ore processed (t) 22,612 17,235 42,941 53,968
Historical stockpile processed (t) - - - 1,450
Platosa ore processed (t) 22,612 17,235 42,941 55,418
Blended head grade (ore and historical stockpiles)
Silver (g/t) 483 512 510 509
Lead (%) 5.26 4.44 5.34 4.72
Zinc (%) 6.81 5.97 6.80 6.98
Silver (%) 93.0 87.2 91.4 89.2
Lead (%) 85.0 77.7 84.0 78.9
Zinc (%) 80.9 76.5 78.3 78.1
Silver (oz) 326,909 257,497 642,109 794,746
AgEq ounces (oz) 524,312 427,131 1,082,978 1,532,330
Lead (lb) 2,227,511 1,304,538 4,247,172 4,444,278
Zinc (lb) 2,746,328 1,654,175 5,036,098 6,363,203
Silver ounces (oz) 310,295 227,350 605,101 730,322
AgEq ounces (oz) 485,841 370,376 1,001,710 1,414,106
Lead (lb) 2,183,574 1,182,211 4,038,174 4,203,295
Zinc (lb) 2,287,459 1,322,133 4,353,738 5,796,157
San Sebastian ore processed (t) - - 4,785 -
The Mexican operations continued to realize improvements from organizational changes implemented prior to and during the mandated shutdown. During Q3 2020, a record 21,877 tonnes of ore was mined from Platosa (Q3 2019 -- 18,167) driven primarily by improved mine efficiency and increased equipment reliability. At the Miguel Auza mill, significant improvements in metal recoveries reflect modifications and improvements made to the mill flotation circuits early in 2020, and better management of the thickening process and reagent use, resulting in silver production of 326,909 oz (Q3 2019 -- 257,497 oz), the strongest quarter of silver production since Q2 2014.
Continuing business improvements and lower electricity prices from the newly activated power contract at Platosa are expected to continue improving the operation's economics. With recent metal price increases, the company expects to be able to generate positive cash flows for the remainder of 2020.
COVID-19 prevention, hygiene and safety measures, health screening, travel restrictions, contact tracing, testing and quarantine protocols are in place and have so far proven effective in protecting the work force from confirmed COVID-19 cases that originated from community spread.
Other than due to the Q2 2020 suspension mandated by the government of Mexico, to date there has been no material impact to production or shipment of concentrate from any of the company's operations as a result of COVID-19. Additionally, there has been no significant disruption to the supply chain of the company's operations. Excellon continues to monitor and implement business continuity measures to mitigate and minimize to the extent possible any potential impacts of the pandemic that might emerge in the company's operations, procurement and commercial activities.
About Excellon Resources Inc.
Excellon's vision is to create wealth by realizing strategic opportunities through discipline and innovation for the benefit of its 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 gold development 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.
We seek Safe Harbor.
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