Excellon assessing whether to continue mining in Mexico amid cost increases

6th January 2022 By: Tasneem Bulbulia - Creamer Media Reporter

Dual-listed Excellon Resources is assessing the economic viability of continuing to mine at its Platosa silver mine, in Mexico, beyond the middle of this year, president and CEO Brendan Cahill said on January 5.

In an update to shareholders, he said the company had made great progress at Platosa over the past 16 years, professionalising the mining operation, improving health and safety to industry standards, growing mineral resources and overcoming Platosa’s particular dewatering challenges.

“We have continued to aggressively drill to expand and define the mineral resource in recent years, but we are entering an area of the deposit that steepens significantly, with fewer vertical tonnes per metre than historically encountered.

“The last two years have seen an increase in the challenges we face in Mexico, particularly the impact on dewatering rates of the suspension of industries in the second quarter of 2020 and the polar vortex in February 2021, along with increased consumable prices and certain legislative changes,” he pointed out.

During 2021, the Platosa mine and Miguel Auza mill delivered four quarters of stable production at record rates. Yearly and fourth-quarter production results for 2021 are expected to be released in the coming weeks.

Excellon conducted extensive underground drilling over the past six quarters, including 320 holes totalling 20 462 m during 2021. Much of this drilling successfully improved definition of mineralised  bodies in advance of mining operations and incrementally added tonnage to the mineralised body.

A key goal of this drilling was to define tonnage in an area of deposit, the “Gap Zone”. Drilling in the Gap Zone has not sufficiently infilled this area of the deposit.

Over the course of 2021, cost increases impacted on the operation in various areas, particularly energy and labour, the two largest cost centres.

Additionally, legislative changes in Mexico further materially increased labour costs.

Excellon is assessing whether maintaining a consistent production schedule beyond mid-2022 at achievable dewatering rates and with acceptable capital expenditures is possible without additional mineralisation being defined in the Gap Zone or elsewhere.

Underground drilling continues and results are forthcoming on various areas of the deposit, including follow-up results from the vertically-oriented 817 Zone.

Ongoing underground exploration is testing for other potential vertical zones of mineralisation.

The company is also launching an up to 2 000 m surface drilling programme in the coming weeks to test anomalous mineralisation about 90 m southeast of Manto 623.

This drilling will be important to define mine planning for 2022 and is expected to provide insights by late first quarter 2022, the company said.

EXPLORATION

At Platosa, beyond the programmes outlined above, the company has a 2 700 m drill programme at PDN planned for half two 2022.

The company is conducting an O18 isotope study on the Jaboncillo target, about 11 km northwest of the Platosa mine.

At the Evolución project, the company has planned about 4 600 m of drilling for the second half of this year at the Ilusión and Los Lobos targets, which may lie on the structure regionally controlling Hecla Mining’s San Sebastián mine, northwest of the project.

Excellon expects to start a drilling programme of about 15 000 m on the Kilgore project in mid-2022 pursuant to the terms of the drilling operations plan permitted by the US Forest Service.

The company currently expects to resume drilling on the Silver City project in late January to close out the 2021 programme, dependent on pending results from the Grauer Wolf target.

Drilling may be conducted until March 31 and resumed on about July 1 based on crop planting and bird nesting cycles.

Also, Excellon said it was considering various corporate development opportunities and strategic alternatives that may include acquisitions, divestitures, mergers or spin-offs of the company’s or third parties’ assets, as applicable.