The share price of Toronto-listed Excellon Resources fell by 9% on Tuesday, on news that its San Pedro subsidiary, in Mexico, had been ordered to pay $23-million for failing to operate the Miguel Auza mine.
The company was taken to court in 2019 by the owner of the La Antigua concession that forms part of the Evolucion property in Zacatecas. La Antiqua was included in Excellon’s acquisition of Silver Eagle Mines, in 2009, which includes a portion of the historic mineral resource at Miguel Auza.
The concession is subject to a 2006 exploration and exploitation agreement with purchase option between San Pero and the owner that provides, among other things, for a minimum payment of $2 500 plus value-added tax per month and the payment of a 3% net smelter return (NSR) royalty.
San Pedro has the right to purchase absolute title to La Antigua including the NSR royalty upon payment of $500 000.
The Miguel Auza mine never reached commercial production and was put on care and maintenance in December 2008, prior to Excellon’s acquisition of Silver Eagle. However, the plaintiff sued San Pedro for noncompliance with the agreement and specifically for not operating the Miguel Auza mine.
The plaintiff was initially awarded damages of about $700 000, but on appeal, the plaintiff obtained an award of $23-million, predominantly in damages for the Miguel Auza mine not being in operation.
“These court decisions are the product of rank corruption and are a black mark on the judicial system of Mexico,” stated Excellon president and CEO Brendan Cahill on Tuesday.
“The value ascribed in the judgment is impossible based on evidence, facts or law. Simply put, the maximum value realisable by the plaintiff from the agreement on La Antigua was $500 000 in the best-case scenario, yet the Miguel Auza mine was shut down in 2008 almost immediately after operations commenced.”
Cahill said that Excellon would continue to pursue avenues through labour, community and government relationships and that it was investigating remedies under international law.
Excellon said the decision would not impact on its other assets, including Platosa, Kilgore, Oakley and Silver City.
The company’s stock traded at a low of C$2.38 a share – 2c above its one-year low of C$2.36 apiece.