VANCOUVER (miningweekly.com) – Mexico’s highest-grade silver miner Excellon Resources has narrowed its loss for the three months ended December 31, while lifting silver-equivalent output 20%.

The Toronto-headquartered company recorded a net loss of $55 000, compared with a net loss of $1.7-million in the comparable period of 2015. The company’s adjusted net loss of $2.5-million reflects the period’s results before recording a $2.4-million fair value adjustment gain on embedded derivative and warrants related to the debentures.

Revenue in the period rose 35% to $3.35-million, boosted by higher output.

Silver output for the period rose 5% to 159 524 oz, mainly owing to increased tonnes, and despite lower grades. Lead output grew 8% to 900 000 lb and zinc output was flat on 2015 at 1.2-million pounds. On a silver-equivalent-ounce basis, the company produced 305 934 silver-equivalent ounces in the fourth quarter, a 20% improvement on the 259 885 silver-equivalent ounces produced in the same period of 2015, mainly owing to increases in lead, zinc and silver prices.

The nonadjusted all-in sustaining costs of $71.17/oz included significant one-time capital and development costs associated with the optimisation plan, relating to the purchase of pumping equipment along with well-drilling costs to dewater the mine’s working faces.

Ore production during the fourth quarter was primarily from the Rodilla Manto and Guadalupe North and South Mantos. In Rodilla, primary working faces are in one of the deepest parts of the mine and ore is below the water table. The company said that, although these areas are effectively dry and water inflows are entirely under control, development and production conditions were “challenging” during the period.

Significant production during the quarter came from the fringes or outside of the block model of the Rodilla Manto, resulting in generally higher dilution and lower grades. Silver grades of 375 g/t fell 8% in the quarter, partially owing to lower grades and dilution on the fringes of the block model.

Excellon said it expected overall mining conditions to “materially improve” in the coming months as the pending increase in the water drawdown rate more rapidly closes the gap between the water table and operating elevations.

During the quarter, development was impacted by water conditions, but it continues to be a priority for the operation as the miner focused on further accessing the Guadalupe South Manto and driving development into higher-grade areas of the mine, including the 623 Manto, which hosts mineral resources of 83 000 t at 1 232 g/t silver, or 1 777 g/t silver equivalent.

The company noted that Platosa had no significant capacity constraints to increasing production beyond current rates, with spare mill, ramp, personnel and equipment capacity of 50% or more, prompting implementation of the optimisation plan, which it believed would increase output rates and lower costs.

It has scaled down the optimisation project to $6-million in capital expenditures, from the $9.9-million estimated in 2015. Well drilling was completed in March, with 12 wells now in the process of being cleaned or prepared, equipped with submersible pumps, or operating. The company expects to complete installation early in the second quarter, with dry mining conditions being achieved thereafter.