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OMB
APPROVAL |
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OMB
Number: |
3235-0116 |
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Expires: |
November
30, 2023 |
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8.7 |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For
the month of January , 2023.
Commission
File Number 001-39491
EXCELLON
RESOURCES INC.
(Translation
of registrant’s name into English)
10
KING STREET EAST, SUITE 200 TORONTO, ONTARIO, CANADA M5C
1C3
(Address
of principal executive office)
Indicate
by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F. Form 20-F ☒ Form
40-F ☐
Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1): ____
Note:
Regulation S-T Rule 101(b)(1) only permits the submission in paper
of a Form 6-K if submitted solely to provide an attached annual
report to security holders.
Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): ____
Note:
Regulation S-T Rule 101(b)(7) only permits the submission in paper
of a Form 6-K if submitted to furnish a report or other document
that the registrant foreign private issuer must furnish and make
public under the laws of the jurisdiction in which the registrant
is incorporated, domiciled or legally organized (the registrant’s
“home country”), or under the rules of the home country exchange on
which the registrant’s securities are traded, as long as the report
or other document is not a press release, is not required to be and
has not been distributed to the registrant’s security holders, and,
if discussing a material event, has already been the subject of a
Form 6-K submission or other Commission filing on EDGAR.
EXCELLON ANNOUNCES AGREEMENT TO ACQUIRE PAST PRODUCING LA NEGRA
MINE IN MEXICO
ACQUISITION
OF THE LA NEGRA MINE IN ALL SHARE TRANSACTION
COMPANY
PLANS TO RESTRUCTURE CONVERTIBLE DEBENTURES ADDING FINANCIAL
FLEXIBILITY
COMPANY
PLANS SUBSCRIPTION RECEIPT PRIVATE PLACEMENT TO FINANCE PROJECT
DEVELOPMENT
Toronto,
Ontario – January 9, 2023 – Excellon Resources Inc. (TSX:EXN,
NYSE:EXN and FRA:E4X2) (“Excellon” or the “Company”) is
pleased to announce that it has entered into a definitive
acquisition agreement (the “Agreement”) to acquire the
permitted, past-producing La Negra Mine (“La Negra”) located
in Querétaro State, Mexico from Dalu S. à r.l. (the
“Seller”), an entity owned by an investment fund managed by
Orion Resource Partners (“Orion”) for aggregate
consideration of US$50 million paid through upfront payments
totalling US$20m, payable in common shares of the Company, and a
further US$30m of deferred, contingent consideration payable in
common shares of the Company or in cash at the Company’s option,
following the restart of commercial production (the
“Acquisition”).
Concurrent
with the execution of the Agreement, Excellon has entered into a
binding term sheet with holders representing approximately 66 2/3%
of the principal amount of outstanding convertible debentures (the
“Debentures”) to convert 25% of the Debentures into equity
and reprice and extend maturity of remaining principal outstanding
upon closing the Acquisition, providing greater flexibility to the
Company.
La
Negra Highlights:
|
● |
La
Negra, a past producing mine with historical production averaging
+3.0 million silver-equivalent (“AgEq”) ounces (“oz”)
annually1 |
| |
|
|
● |
Brownfields
site with permits to restart production, existing infrastructure
including a 3,000 tonne per day mill, mine development, camp
facilities, all-season highway access and existing
workforce |
| |
|
|
● |
Completed
Preliminary Economic Assessment (“PEA”) with an effective date of
March 31, 2022 supported by an NI 43-101 technical report (the “La
Negra Technical Report”)2 |
| |
|
|
● |
Indicated
Mineral Resources of approximately 15.1 million oz AgEq and
Inferred Mineral Resources of approximately 41.8 million oz
AgEq3 |
| |
|
|
● |
PEA
demonstrates a Post-tax NPV5% of US$132.4
million4 |
| |
|
|
● |
Polymetallic
production mix: 43% Ag, 26% Zn, 23% Cu, 7% Pb by NSR
contribution3,4 |
| |
|
|
● |
Near-term
restart of La Negra: 12-18 month development plan de-risking mine
restart |
| |
|
|
● |
New
labour agreement in place, local workforce and communities strongly
support a restart |
| |
|
|
● |
Local
partner, Grupo Desarrollador Migo, S.A.P.I. de C.V. (“M Grupo”) to
become key shareholder in Excellon |
1
Average annual production from 2013 to 2015 at throughput of
approximately 2,500 tpd.
2
See Cautionary Statements regarding “Preliminary Economic
Assessments” at the end of this news release. Refer also to the La
Negra Technical Report, which will be filed within 45 days of the
date of this news release.
3
Mineral Resource Estimate effective as at March 31, 2022 prepared
in accordance with National Instrument 43-101 – Standards of
Disclosure for Mineral Projects (“NI 43-101”) of the
Canadian Securities Administrators (“CSA”). See also
Cautionary Statements on “Mineral Resources” and to “U.S. Readers”
at the end of this news release. Once filed, refer also to
the La Negra Technial Report which, as noted, the Company expects
to file under its profile at www.sedar.com within 45 days,
and will announce by news release upon such filing.
4
Long-term commodity price estimates used in analysis: US$22.00/oz
Ag, US$1.15/lb Zn, US$3.60/lb Cu, US$0.95/lb Pb
|
● |
Located
in Querétaro, one of the most stable states to operate in
Mexico |
| |
|
|
● |
Opportunities
to expand current Mineral Resource estimates with multiple untested
near-mine exploration target areas |
| |
|
|
● |
Significant
exploration potential along the regional structures controlling
mineralization and below unconstrained skarn bodies |
Shawn
Howarth, President and CEO commented, “Excellon has a long
history of operational excellence in Mexico. The acquisition of La
Negra will be transformational for Excellon, with the goal of
returning the Company to producer status on an accelerated
timeline. La Negra stands out as a permitted, near-term restart
opportunity capable of generating significant value. Our strategy
is to restart the mine following a 12-18 month de-risking process
that we believe will position the Company for operational readiness
by early 2024. We also see significant upside potential in the
currently defined Mineral Resource estimates, which despite La
Negra’s 50-year production history, remains relatively
under-explored, and the system remains open along strike and at
depth. An infill drill program has been budgeted for and is
considered to be a critical component of longer-term
success.”
Mr.
Howarth added “The transaction further highlights the strengths
each party is delivering in an all-share deal. At Excellon, we
believe that we have the management experience and operational
know-how to successfully restart La Negra. We are pleased that M
Grupo, who has the in-country relationships at the community,
labour and government levels to support a seamless transition, will
become a new significant shareholder of the Company and a
continuing local resource for La Negra. We are also excited to be
partnering with Orion as another new, significant shareholder and
expected long-term strategic supporter of the asset and the
Company.”
A
presentation on the Acquistion and La Negra is available on the
Company’s website under
https://excellonresources.com/investors/presentations under a link
entitled La Negra Acquisition. In addition, the Company plans to
file the La Negra Technical Report within 45 days of the date of
this news release and will announce such filing by news
release.
Acquisition
and Debenture Restructuring Highlights
|
● |
All-Share
Acquisition of the La Negra Mine |
|
○ |
Up to
US$50 million aggregate consideration, of which 60% will be paid to
the Seller in respect of the acquisition of all of the outstanding
shares of the holding company of La Negra, and 40% will be paid to
M Grupo in satisfaction of the termination of existing joint
venture arrangements regarding La Negra. |
|
○ |
Orion
previously entered into an agreement with its local joint venture
partner, M Grupo, a privately held, Querétaro-based infrastructure
and construction company with a more than 30 year track record and
long-standing in-state and national relationships, that specified
that 40% of the proceeds from a sale of La Negra would be for the
account of M Grupo. |
|
○ |
Up
front US$20 million payment will be paid 60% to the Seller in
respect of the purchase of the shares and 40% to M Grupo in
satisfaction of the termination of the joint venture
arrangements. |
|
○ |
Deferred
payments of US$30m in the aggregate (payable in two tranches, as
described below), contingent on successfully achieving commercial
production, payable to Orion and M Grupo on the same 60% / 40%
basis. |
|
● |
Restructuring
of the Debentures |
|
○ |
Conversion
of C$4.5 million, or 25%, of the Debentures principal to equity
upon closing the Acquisition at a conversion price of C$0.48 per
Excellon Share |
|
○ |
Adjustment
of conversion price for the remaining principal to C$0.535 per
share |
|
○ |
Extension
of maturity of remaining principal from July 30, 2023 to April 30,
2027 |
|
● |
Private
placement for a minimum of US$10 million (the “Closing Private
Placement”) |
|
○ |
Planned
subscription receipt financing to provide development
capital |
|
○ |
Proceeds
to fund 12-18 month development plan and general corporate
purposes |
Excellon
Restart Strategy for La Negra: 12 to 18-month
Timeline
Excellon
is targeting a restart timeline of 12 to 18 months for La Negra.
While the Company believes there is potential to optimize this
timeline, critical work streams need to be completed prior to
reassessing restart timing.
La
Negra is a prior producer that has historically operated at 2,500+
tpd throughput. A Preliminary Economic Assessment (“PEA”)
was completed for the asset, with an effective date of March 31,
20222. The PEA concluded there was adequate detail and
information to support a positive economic outcome and recommended
restart of La Negra, particularly as this is a brownfields site
with existing infrastructure, equipment, development, operating
permits and labour force.
A
summary of the PEA conceptual life-of-mine (“LOM”)
statistics is provided in the following table (and additional
detail is set out below under the heading “Summary of the PEA for
La Negra”)2:
| La
Negra PEA Summary – LOM Statistics |
|
|
|
| |
|
|
|
| |
|
Unit |
|
Value |
|
| Mine
Life5 |
|
Years |
|
|
7.4 |
|
| LOM Tonnage |
|
kt |
|
|
6,223 |
|
| LOM Average Silver (Ag) Grade |
|
g/t |
|
|
63 |
|
| LOM Average Lead (Pb) Grade |
|
% |
|
|
0.4 |
|
| LOM Average Zinc (Zn) Grade |
|
% |
|
|
1.5 |
|
| LOM Average Copper (Cu) Grade |
|
% |
|
|
0.4 |
|
| LOM Process Rate |
|
tpd |
|
|
2,500 |
|
| |
|
|
|
|
|
|
| Average Annual
Payable Metal |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Silver |
|
000 oz |
|
|
1,227 |
|
| Lead |
|
000 lbs |
|
|
5,521 |
|
| Zinc |
|
000 lbs |
|
|
19,126 |
|
| Copper |
|
000 lbs |
|
|
4,262 |
|
| |
|
|
|
|
|
|
| Economics6 |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Restart
Capital |
|
US$m |
|
$ |
20.9 |
|
| AISC7 |
|
US$/oz AgEq |
|
$ |
12.95 |
|
| Post-Tax
NPV 5% |
|
US$m |
|
$ |
132.4 |
|
| Post-Tax
NPV 7.5% |
|
US$m |
|
$ |
119.0 |
|
The
following key areas need to be assessed to further advance the PEA
and de-risk restart planning:
5
Based on current Mineral Resource Estimate
6
AgEq calculated utilizing the metals price assumptions in the PEA
and provided in the table under Economic Analysis below
7
All-in sustaining cost, or AISC, is a non-GAAP financial measures
with no standardized meaning under IFRS and therefore, may not be
comparable to similar measures presented by other issuers. AISC for
La Negra is a forward-looking non-GAAP financial measure without
historical equivalents given the lack of recent operations at La
Negra.
|
● |
Tailings
management: The PEA contemplates construction of a filtered
tailings facility to replace historical hydraulic tailings
deposition. Approximately 50% of the restart capital is allocated
to filtered tailings and conveyance. |
|
● |
Infill
drilling: The Company plans to undertake an infill drill
program aimed to better define mineralization scheduled for the
initial three years of the current conceptual Life of Mine
production plan. |
|
● |
Mine
plan and equipment review: Explore opportunities for planning
optimization, based on information gathered during infill drilling
and further assessment of mining equipment and infrastructure at
site. |
|
● |
Processing
analysis and metallurgical test work: The historical mill
requires refurbishment to return it to operational status. During
this refurbishment period the Company will also undertake
metallurgical test work to explore opportunities to optimize
metallurgical recoveries. |
La
Negra Mineral Resource Estimate3
The
Mineral Resource estimate presented in the following table is
derived from the La Negra Technical Report and is effective as at
March 31, 2022 and is reported at a base case cut-off grade of
US$28/t net smelter return (“NSR”) accounting for value from
Ag, Pb, Zn and Cu, treatment and refining charges, and penalties
from arsenic (As) and iron (Fe).
A
drill program was completed in 2021 consisting of 35 underground
diamond drill holes totaling 9,800 metres. The global database
contains 47,000 underground and surface drill hole
assays.
The
mineral resources have been estimated using Ordinary Kriging with
assay data collected from diamond drilling, channel sampling, and
long-hole production sampling. Samples have been selected and the
block model has been defined by 35 mineral zone solids constructed
via implicit modelling using a mineral domain spatial cut-off of
US$20/t as a general guide.
|
La
Negra Mineral Resource Estimate3 |
|
|
|
|
|
|
Grade |
|
|
Contained
Metal |
|
|
Classification |
|
Tonnes
(m) |
|
|
Ag
(g/t)
|
|
|
Zn
(%) |
|
|
Cu
(%)
|
|
|
Pb
(%)
|
|
|
Ag
(m
oz)
|
|
|
Zn
(m
lbs)
|
|
|
Cu
(m
lbs)
|
|
|
Pb
(m
lbs)
|
|
|
Indicated |
|
|
2.46 |
|
|
|
64.0 |
|
|
|
1.95 |
% |
|
|
0.50 |
% |
|
|
0.27 |
% |
|
|
5.1 |
|
|
|
105.8 |
|
|
|
27.1 |
|
|
|
14.6 |
|
|
Inferred |
|
|
6.42 |
|
|
|
80.0 |
|
|
|
1.80 |
% |
|
|
0.40 |
% |
|
|
0.65 |
% |
|
|
16.5 |
|
|
|
254.8 |
|
|
|
56.6 |
|
|
|
92.0 |
|
See
Cautionary Statements on “Mineral Resources” at the end of this
news release. Mineral Resources are stated as undiluted. Quantity
and grades are estimates and are rounded to reflect the fact that
the resource estimate is an approximation. NSR includes the
following price assumptions: Ag US$20.0/oz, Pb US$0.90/lb, Zn
US$1.10/lb and Cu US$3.30/lb based on the Q3 2021 Q3 long-term
forecasts provided by Duff & Phelps (D&P). NSR includes
varying recovery with the averages of 80% Ag, 68% Pb, 80% Zn, and
66% Cu
Detailed
Terms of the Acquisition
Excellon
has agreed to acquire all of the issued and outstanding shares of
Minera La Negra, S.A de C.V. (“MLN”), the Mexican company
that holds title to La Negra. Excellon has agreed to pay an
aggregate of up to US$50,000,000 in connection with the purchase of
MLN. Upon closing of the Acquisition, Excellon will issue the
Seller and M Grupo an aggregate of 56,191,666 common shares of
Excellon (“Excellon Shares”) at a price of C$0.48 per
Excellon Share (33,715,000 Excellon Shares to be issued to the
Seller and 22,476,666 to be issued to a subsidiary of M Grupo), for
a deemed value of US$20,000,000 upon closing of the Acquisition
(the “Closing Date Consideration Shares”).
In
addition, Excellon has agreed that it will pay aggregate deferred,
consideration of US$30,000,000 through two payments (the
“Deferred Consideration Payments”) to the Seller and M
Grupo:
|
(a) |
within
three days after the declaration of commercial production at the La
Negra Mine, Excellon will pay an aggregate of US$15,000,000 to the
Seller and M Grupo; and |
|
(b) |
twelve
months after the declaration of commercial production at the La
Negra Mine, Excellon will make a further aggregate payment of
US$15,000,000 to the Seller and M Grupo. |
With
respect to the Deferred Consideration Payments, 60% of such
payments will be made to the Seller and 40% will be made to M
Grupo. The Agreement provides that commercial production at the La
Negra Mine will be achieved upon the restart of the La Negra mine
and the associated plant and the production of saleable concentrate
for three consecutive months at 75% of the nameplate capacity of
the plant.
Excellon
may, at its sole election, satisfy either or both Deferred
Consideration Payments by issuing Excellon Shares at a price equal
to the 20-day volume-weighted average trading price for the
Excellon Shares on the Toronto Stock Exchange (the “TSX”)
ending on the day prior to the issuance of such Excellon Shares, or
in cash.
In
connection with the Acquisition, Excellon, the Seller and M Grupo
have agreed to terminate the Joint Venture Agreement between the
Seller and M Grupo (the “La Negra JV Termination”) upon M
Grupo’s (or a subsidiary thereof) receipt of 40% of the Closing
Date Consideration Shares and as mentioned above, M Grupo will
thereafter be entitled to similarly receive 40% of the Deferred
Consideration Payments. As a result of the Acquisiton, it is
expected that Orion and M Grupo will become significant
shareholders of Excellon. Upon completion of the issuance of the
Closing Date Consideration Shares, it is expected that the Seller
and M Grupo will hold approximately 26% and 17%, respectively, of
Excellon’s then issued and outstanding common shares, depending on
the aggregate number of Excellon Shares issued pursuant to the
Company’s anticipated Closing Private Placement.
In
recognition of their significant anticipated holdings, the Company
has agreed to enter into an investor rights agreement with Orion
and M Grupo upon closing of the Acquisition. The investor rights
agreement will, among other things, provide each of Orion and M
Grupo with the right to nominate one qualifying individual to the
Board of Directors of the Company. The Company currently
anticipates that Victor Flores, a nominee of Orion, and Pablo
Reynoso, a nominee of M Grupo, will be proposed for addition to the
Board of Directors of the Company at the special meeting of
shareholders of Excellon to be called in connection with the
Acquisition (as further discussed below).
In
addition, each of Orion and M Grupo will be provided with customary
registration rights, participation rights and the right to
participate in a technical committee regarding La Negra. The
investor rights agreement will require that Orion and M Grupo vote
in accordance with management proposals to Excellon shareholders
that are approved by the Company’s independent directors, other
than in respect of matters requiring supermajority approval, for a
period of 18 months following closing of the
Acquisition.
The
Excellon Shares issuable to Orion and M Grupo will also be subject
to contractual restrictions on transfer pursuant to the investor
rights agreement. The Closing Date Consideration Shares will be
subject to the following restrictions on resale: (i) 25% will be
restricted for a period of twelve months from closing of the
Acquisition, (ii) an additional 25% will be restricted for a period
of fifteen months from closing of the Acquisition, and (iii) 50%
will be restricted for a period of eighteen months from closing of
the Acquisition. Concurrent with the execution of the Agreement,
the La Negra JV Termination will be completed.
Completion
of the Acquisition is subject to approval of the TSX. As the
Excellon Shares to be issued in connection with the Acquisition
will exceed 25% of the issued and outstanding Excellon Shares and
as the Acquisition will result in Orion holding sufficient shares
to materially affect control of Excellon (within the meaning of
applicable requirements of the TSX), approval by at least 50.1% of
Excellon shareholders is required under the TSX listing rules.
Excellon expects to convene a special meeting of Excellon
shareholders to consider and approve the issuance of Excellon
Shares in connection with the Acquisition and related matters by
April 15, 2023. Completion of the Acquisition is expected to occur
on or before April 30, 2023. Additional information regarding the
Acquisition will be provided in the Company’s management
information circular in connection with the special
meeting.
The
Agreement and the transactions contemplated therein are subject to
customary conditions for transactions of similar size including
receipt of Excellon shareholder approval, conditional listing
approval of the TSX, as well as the La Negra JV Termination,
completion of the Debenture restructuring, and delisting of
Excellon Shares from the NYSE American and deregistration with the
U.S. Securities and Exchange Commission which the Company has
concurrently announced by separate news release.
The
Board of Directors of Excellon has considered and unanimously
approved the entering into the Agreement and the completion of the
transactions contemplated by the Agreement. Cormark Securities Inc.
has provided an independent fairness opinion to the Board of
Directors of Excellon stating that, as of the date of such opinion,
and based upon and subject to the assumptions, limitations and
qualifications stated in such opinion, the consideration to be paid
under the Acquisition is fair, from a financial point of view, to
Excellon.
Debenture
Restructuring
The
Company has entered into a binding term sheet with holders
representing approximately 66 2/3% of the aggregate principal
amount of the Debentures outstanding, to restructure the Debentures
based on the following key terms:
|
● |
Conversion
of C$4.5 million (25%) of the aggregate principal amount of the
Debentures upon closing of the Acquisition at a price of C$0.48 per
Excellon Share |
|
|
|
|
● |
Extension
of the maturity date from July 30, 2023 to April 30,
2027 |
|
|
|
|
● |
Reprice
the conversion price of the remaining principal to C$0.535 per
share |
|
|
|
|
● |
Interest
rate of 6.5% (payable semi-annual in cash to maturity) or 10.0%
payable in Excellon Shares, at the Company’s election |
|
|
|
|
● |
Option
to call the Debentures at the Company’s election after 12 months if
the trading price of the Excellon Shares is above C$1.50 for at
least 20 consecutive trading days |
|
|
|
|
● |
Option
for the Debentureholders to put the Debentures to the Company for
repayment in cash, on or after December 31, 2025 |
|
|
|
|
● |
Issuance
to current Debentureholders of 6.7 million warrants to purchase
Excellon Shares, exercisable at C$0.85 per share within 48
months |
In
consideration for the Debenture amendments, Debentureholders will
also receive one special warrant per Debenture. The special
warrants will, for a period of 60 months, entitle the holders to
22.5% (in the aggregate) of the issued and outstanding common
shares of the Excellon subsidiary holding the Company’s Silver City
project, which will be deemed to be automatically exercised for no
additional consideration, with no further action required by the
holder upon a spin-out of such project by public offering or other
prescribed disposition or dissolution of such subsidiary or the
project. Consent of the holders of the special warrants will be
required prior to any sale, transfer or other disposition of the
company holding the Silver City project or any sale, transfer or
other disposition of all or substantially all of its property or
assets.
Completion
of the Debenture restructuring is subject to approval of the TSX
and approval of at least 66 2/3% of holders of the aggregate
principal amount of Debentures outstanding, which is expected to be
obtained based on such percentage having signed the binding term
sheet.
Planned
Financing
Prior
to closing of the Acquisition, Excellon intends to complete the
Closing Private Placement for gross proceeds of at least US$10
million. The Closing Private Placement is expected to be an
offering of subscription receipts, with proceeds being placed into
escrow pending closing of the Acquisition. Proceeds from the
Closing Private Placement would be expected to be released from the
subscription receipt escrow upon closing of the Acquisition.
Proceeds of the financing will be used to fund development
activities for the planned restart of mining operations at La Negra
and for general corporate purposes. Further details regarding the
financing will be announced in due course once final terms have
been determined.
Summary
of the PEA for La Negra2
The
PEA was completed by an independent consultant with an effective
date of March 31, 2022 and prepared in accordance with NI
43-101.
La
Negra Location and Background:
The
La Negra Mine is located in the State of Querétaro, in Central
Mexico. La Negra was first developed by Industrias Peñoles S.A. de
C.V. in the 1960s and achieved commercial production in 1971.
Mining and processing at La Negra proceeded to operate almost
continuously since then as other deposits have been discovered and
developed.
The
mine was closed in March 2020 due to the COVID-19 shutdown. During
this period of care-and-maintenance, a new labour contract was
negotiated with the union and went into effect in April 2021, a
15-year extension to the land-use agreement was signed in July 2021
and a 9,800 metre drill program was completed that formed the basis
of an updated Mineral Resource Estimate.
La
Negra has all the permits required to restart operations as
contemplated by the PEA. An amendment is required to the
environmental impact statement in order to support filtered
tailings deposition at the primary tailings storage facility. It is
expected the amendment will be completed prior to the restart of
the mine.
Geology
and Mineralization:
The
La Negra property is located in the Sierra Gorda range, belonging
to the Sierra Madre Occidental physiographic province. The main
sedimentary host rocks consist of late Jurassic - Cretaceous
carbonates which were intruded by Eocene granodiorites along
favourable structural corridors leading to the formation of skarn
bodies.
The
principal minerals at La Negra consist of sphalerite (marmatite),
galena, and chalcopyrite, with silver present in association with
galena and as argentite and pyrargyrite.
Conceptual
Mine Plan:
Mining
is expected to be completed by way of long-hole open stoping, using
a top-down approach. Mineralized zones will be mined using existing
mine infrastructure, supplemented by new drift and ramp
development, water handling and ventilation, as needed. Mine
production is based on 2,500 tonnes per operating day, or 842,500
tonnes per annum. All phases of mining, with the exception of
haulage to surface, will be carried out by experienced La Negra
personnel, with haulage to the surface portal anticipated to be
managed by a local contractor.
Recommended
stope geometry is 20 metres long by 20 metres high and 6 metres
wide.
The
mineral resource model3 was adjusted to account for
expected mining dilution as historically achieved.
Overview
of the La Negra Mineralization
Process
Plant:
The
existing process facility at La Negra consists of standard
crushing, grinding, flotation and filtration circuits producing a
lead-silver, copper-silver and zinc concentrates. The concentrator
has a designed (or nameplate) capacity of 3,000 tonnes per
day.
Set
out below is a summary of the life of mine (“LOM”)
production schedule based on the PEA2.
LOM
Production Schedule
| |
|
|
|
LOM |
|
|
Year 1 |
|
|
Year 2 |
|
|
Year 3 |
|
|
Year 4 |
|
|
Year 5 |
|
|
Year 6 |
|
|
Year 7 |
|
|
Year 8 |
|
| Tonnes ore to the
mill |
|
(000’s Tonnes) |
|
|
6,223 |
|
|
|
843 |
|
|
|
843 |
|
|
|
843 |
|
|
|
843 |
|
|
|
843 |
|
|
|
843 |
|
|
|
843 |
|
|
|
326 |
|
| Production and Throughput |
|
(tpd) |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
2,500 |
|
| Ag Grade |
|
(g/t) |
|
|
63 |
|
|
|
47 |
|
|
|
53 |
|
|
|
62 |
|
|
|
63 |
|
|
|
63 |
|
|
|
55 |
|
|
|
81 |
|
|
|
96 |
|
| Pb Grade |
|
(%) |
|
|
0.4 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.5 |
|
|
|
0.5 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
0.7 |
|
|
|
0.8 |
|
| Zn Grade |
|
(%) |
|
|
1.5 |
|
|
|
1.3 |
|
|
|
1.4 |
|
|
|
1.8 |
|
|
|
1.6 |
|
|
|
1.7 |
|
|
|
1.6 |
|
|
|
1.3 |
|
|
|
1.4 |
|
| Cu Grade |
|
(%) |
|
|
0.4 |
|
|
|
0.4 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
0.4 |
|
|
|
0.3 |
|
|
|
0.4 |
|
| Fe Grade |
|
(%) |
|
|
8.6 |
|
|
|
9.8 |
|
|
|
8.9 |
|
|
|
8.6 |
|
|
|
8.2 |
|
|
|
8.2 |
|
|
|
8.7 |
|
|
|
8.7 |
|
|
|
6.3 |
|
| As Grade |
|
(%) |
|
|
0.7 |
|
|
|
0.6 |
|
|
|
0.8 |
|
|
|
0.8 |
|
|
|
0.6 |
|
|
|
0.7 |
|
|
|
0.7 |
|
|
|
0.4 |
|
|
|
0.4 |
|
The
process plant is currently not operational and capital for
refurbishment is required to ensure a successful
restart.
Capital
Cost:
Estimated
restart capital based on the PEA is US$20.9 million. The cost
estimate includes refurbishing the process plant, upgrading the
existing mining fleet, mine development, purchasing additional
equipment and constructing a new tailings facility to support
filtered tailings deposition.
Of
the restart capital, approximately US$13.5 million was estimated
for construction of the tailings filter, tailings conveyor, and
engineering of the tailings storage facility.
LOM
Capital Cost Estimate
|
Description |
|
Restart
Capital
(US$m)
|
|
|
Sustaining
Capital
(US$m)
|
|
|
Closure
(US$m)
|
|
|
LOM
Total
(US$m)
|
|
|
Processing
Plant |
|
|
2.41 |
|
|
|
2.38 |
|
|
|
- |
|
|
|
4.79 |
|
| TSF |
|
|
13.55 |
|
|
|
4.11 |
|
|
|
- |
|
|
|
17.66 |
|
|
Underground
Development |
|
|
0.57 |
|
|
|
18.18 |
|
|
|
- |
|
|
|
18.75 |
|
|
Equipment
Replacement/Refurb |
|
|
0.46 |
|
|
|
12.31 |
|
|
|
- |
|
|
|
12.77 |
|
|
Indirect
Costs |
|
|
2.03 |
|
|
|
- |
|
|
|
- |
|
|
|
2.03 |
|
|
Owner’s
Costs |
|
|
1.63 |
|
|
|
- |
|
|
|
- |
|
|
|
1.63 |
|
|
Capitalized
Exploration |
|
|
0.29 |
|
|
|
4.57 |
|
|
|
- |
|
|
|
4.85 |
|
| Other |
|
|
- |
|
|
|
0.58 |
|
|
|
- |
|
|
|
0.58 |
|
| Closure |
|
|
- |
|
|
|
- |
|
|
|
5.00 |
|
|
|
5.00 |
|
|
Total
Capital |
|
|
20.94 |
|
|
|
42.13 |
|
|
|
5.00 |
|
|
|
68.06 |
|
Operating
Cost:
LOM
operating cost estimates for La Negra average approximately
US$28.00/tonne and include mining, processing, tailings,
geotechnical services and G&A. The cost per tonne milled is
based on an annual processing rate of 842,500 tonnes (2,500 tonnes
per day).
The
LOM operating cost excludes offsite costs such as treatment
charges, refining charges, other concentrate penalties/losses and
concentrate transportation.
The
all-in sustaining cost (“AISC”) is estimated to average
US$12.95 per ounce AgEq, based on commodity price assumptions as
summarized below in the Economic Analysis
section.7
Economic
Analysis2:
The
following table outlines metals prices and foreign exchange
assumptions used in the economic analysis.
Commodity
Price and FX Assumptions
|
Commodity |
|
Unit |
|
Year 1 |
|
|
Year 2 |
|
|
Year 3 |
|
|
Year 4 |
|
|
Year 5 |
|
|
Year 6 |
|
|
Year 7 |
|
|
Year 8 |
|
| Silver |
|
US$/oz |
|
|
22.50 |
|
|
|
22.50 |
|
|
|
22.13 |
|
|
|
22.00 |
|
|
|
22.00 |
|
|
|
22.00 |
|
|
|
22.00 |
|
|
|
22.00 |
|
| Lead |
|
US$/lb |
|
|
0.95 |
|
|
|
0.95 |
|
|
|
0.95 |
|
|
|
0.95 |
|
|
|
0.95 |
|
|
|
0.95 |
|
|
|
0.95 |
|
|
|
0.95 |
|
| Zinc |
|
US$/lb |
|
|
1.18 |
|
|
|
1.16 |
|
|
|
1.15 |
|
|
|
1.15 |
|
|
|
1.15 |
|
|
|
1.15 |
|
|
|
1.15 |
|
|
|
1.15 |
|
| Copper |
|
US$/lb |
|
|
3.95 |
|
|
|
3.76 |
|
|
|
3.78 |
|
|
|
3.65 |
|
|
|
3.60 |
|
|
|
3.60 |
|
|
|
3.60 |
|
|
|
3.60 |
|
| MXN |
|
per US$ |
|
|
21.00 |
|
|
|
21.00 |
|
|
|
21.00 |
|
|
|
21.00 |
|
|
|
21.00 |
|
|
|
21.00 |
|
|
|
21.00 |
|
|
|
21.00 |
|
The
PEA returned an after-tax NPV5% of US$132.4 million at
base case commodity price and FX assumptions. The NPV was
sensitized to metals prices of -20%, -10%, +10% and +20% relative
to the base case, as summarized in the following table.
NPV5%
and Metals Price Sensitivity (Figures in US$m)
The
NSR contribution is primarily silver, zinc, copper and lead. The
distribution by metal is provided in the following
table:
NSR
Distribution by Metal
Advisors
Osler,
Hoskin & Harcourt LLP is acting as legal counsel to Excellon on
the Acquisition. Bennett Jones LLP is acting as legal counsel on
the Debenture restructuring. Canaccord Genuity is acting as
financial advisor to Excellon. Cormark provided an independent
fairness opinion to the Excellon Board of Directors.
None
of the securities to be issued pursuant to the Acquisition have
been or will be registered under the United States Securities
Act of 1933, as amended (the “U.S. Securities Act”), or
any state securities laws, and any securities issuable in the
Acquisition are anticipated to be issued in reliance upon available
exemptions from such registration requirements pursuant to Section
3(a)(10) of the U.S. Securities Act and applicable exemptions under
state securities laws. news press release does not constitute an
offer to sell or the solicitation of an offer to buy any
securities.
About
Excellon
Excellon’s
vision is to realize opportunities through the acquisition of
advanced development or producing assets with further potential to
gain from an experienced operational management team for the
benefit of our employees, communities and shareholders. The Company
is advancing a portfolio of silver, base metals and precious metals
assets including Kilgore, an advanced gold exploration project in
Idaho; and Silver City, a high-grade epithermal silver district in
Saxony, Germany with 750 years of mining history and no modern
exploration. As discussed above, the Company has also entered into
an agreement to acquire La Negra, a past-producing Ag-Zn-Cu-Pb mine
with exploration potential, located in Mexico.
Additional
details on Excellon’s properties are available at
www.excellonresources.com.
About
Orion
Orion
Mine Finance Group is one of the world’s leading mining-focused
private equity businesses. In addition, the Orion team has
experience in the physical metals markets, such as facilitating the
purchase, metal financing, transporting, processing and selling of
a mine’s output to end customers.
About
M Grupo
Grupo
Desarrollador Migo, S.A.P.I. de C.V. (“M Grupo”) is a
Querétaro-based infrastructure company. M Grupo has business
interests in real estate, infrastructure construction and in
mining, through La Negra. M Grupo’s focus is labour relations,
community support and social responsibility.
Technical
Information
Mr.
Paul Keller, P. Eng., Chief Operating Officer of the Company and a
Qualified Person as defined in NI 43-101 (a “QP”), reviewed,
verified and approved the scientific and technical information
in this news release relating to operations and production. Mr.
Jorge Ortega, M.Sc., P.Geo., Vice President Exploration of the
Company and a QP, reviewed, verified and approved any scientific
and technical information relating to geological interpretation and
results contained in this news release.
For
Further Information, Please Contact:
Excellon
Resources Inc.
Shawn
Howarth, President & Chief Executive Officer
Daniel
Hall, Chief Financial Officer
info@excellonresources.com
www.excellonresources.com
CAUTIONARY STATEMENTS ON FORWARD-LOOKING STATEMENTS AND OTHER
MATTERS
Forward-Looking Statements
All
statements, other than statements of historical fact, contained,
referenced or incorporated by reference in news release constitute
“forward-looking statements” and “forward looking information”
(collectively, “forward-looking statements”) within the
meaning of applicable Canadian and United States securities
legislation. Generally, these forward-looking statements can be
identified by the use of forward-looking terminology such as:
“accelerate”, “advance”, “anticipated”, “assessment”, “believe”,
“budgeted”, “capable”, “conceptual”, “consider”, “contemplate”,
“contingencies”, “contingent”, “continuing”, “convert”, “could”,
“create”, “deferred”, “derisking”, “development”, “discovery”,
“estimate”, “expectes”, “exploration”, “exposure”, “flexibility”,
“following”, “further”, “future”, “growth”, “initial”,
“innovation”, “life of mine” or “LOM”, “long-term”, “may”, “model”,
“near-term”, “need”, “new”, “ongoing”, “opportunities”, “optimize”,
“option”, “outlook”, “PEA”, “pipeline”, “plans”, “position”,
“potential”, “preliminary”, “program”, “project”, “provides”,
“restart”, “restructure”, “risk”, “schedule”, “seeking”,
“strategy”, “studies”, “subject to”, “target”, “test”, “timeline”,
“transformational”, “transition”, “trend”, “uncertainties”,
“untested”, “upside”, “viability”, “vision”, “will” and “would”, or
variations of such words, and similar such words, expressions or
statements that certain actions, events or results can, could, may,
should, will (or not) be achieved, occur, provide, result or
support in the future or which, by their nature, refer to future
events. In some cases, forward-looking information may be stated in
the present tense, such as in respect of current matters that may
be continuing, or that may have a future impact or effect.
Forward-looking statements include statements regarding the
Acquisition and the details and merits thereof (including the
exploration potential and the independent fairness opinion), the La
Negra Technical Report (including timing of its filing) and
completion of the Acquisition (including TSX and shareholder
approval and timing); the restart of mining operations at La Negra
(including strategy, plans, critical work streams, development
activities and resulting further analysis, timing, capital
requirements, permitting, achieving commercial production, LOM
production, life of mine or LOM, and tailings management);
exploration potential at La Negra (including infill drilling plans
and necessary capital therefor, and openness of the currently
defined La Negra deposit along strike and at depth); the
restructuring of the Debentures (including terms, implications and
required approvals thereof, and any spin out of Silver City under
the special warrants or otherwise); the Closing Private Placement
(including timing thereof, the closing and use of proceeds
thereof); the PEA including the results thereof (including restart
recommendation, NPV, AISC, capital requirements); mineral resource
estimates (including tonnes, grade, and expansion and conversion of
such estimates; see also below in these Cautionary Statements under
“Mineral Resources”), and the benefits of any of the foregoing to
Excellon shareholders and investors. Although the Company believes
that such statements are reasonable, it can give no assurance that
such expectations will prove to be correct, and any forward-looking
statements by the Company are not guarantees of future actions,
results or performance. Forward-looking statements are based on
assumptions, estimates, expectations and opinions, which are
considered reasonable and represent best judgment based on
available facts, as of the date such statements are made. If such
assumptions, estimates, expectations and opinions prove to be
incorrect, actual and future results may be materially different
than expressed or implied in the forward-looking statements.
Forward-looking statements are inherently subject to known and
unknown risks, uncertainties, contingencies and other factors which
may cause the actual results or performance of the Company to be
materially different from any future results or performance
expressed or implied by the forward-looking statements. Such risks,
uncertainties, contingencies and other factors include, among
others, the “Risk Factors” in the Company’s annual information form
dated March 31, 2022 (“2022 AIF”), and the risks,
uncertainties, contingencies and other factors identified in this
news release, the Management’s Discussion & Analysis of
Financial Results for the three and nine months ended September 30,
2022 (together with the accompanying financial statements for the
same period, the “Q3 2022 Financial Disclosure”), the
Company’s Management’s Discussion and Analysis, and accompanying
financial statements, for the year ended December 31, 2021 and
prior quarters ended in 2022 (collectively, the “FYE 2021 and
Prior 2022 Financial Disclosure”), and the Company’s other
applicable public disclosure (including the La Negra Technical
Report). The foregoing list of risks, uncertainties, contingencies
and other factors is not exhaustive; readers should consult the
more complete discussion of the Company’s business, financial
condition and prospects that is provided in the 2022 AIF and the
other aforementioned documents. The forward-looking statements
referenced or contained in this news release are expressly
qualified by these Cautionary Statements as well as the Cautionary
Statements in the Q3 2022 Financial Disclosure, the FYE 2021 and
Prior 2022 Financial Disclosure, the 2022 AIF, the La Negra
Technical Report and the Company’s other applicable public
disclosure. Forward-looking statements contained herein are made as
of the date of this news release (or as otherwise expressly
specified) and the Company disclaims any obligation to update any
forward-looking statements, whether as a result of new information,
future events or results or otherwise, except as required by
applicable laws.
Mineral Resources
Until
mineral deposits are actually mined and processed, mineral
resources must be considered as estimates only. Mineral resource
estimates that are not classified as mineral reserves do not have
demonstrated economic viability. The estimation of mineral
resources is inherently uncertain, involves subjective judgement
about many relevant factors and may be materially affected by,
among other things, environmental, permitting, legal, title,
taxation, socio-political, marketing, or other relevant risks,
uncertainties, contingencies and other factors described in the
foregoing Cautionary Statements. The quantity and grade of reported
“inferred” mineral resource estimates are uncertain in nature and
there has been insufficient exploration to define “inferred”
mineral resource estimates as an “indicated” or “measured” mineral
resource and it is uncertain if further exploration will result in
upgrading “inferred” mineral resource estimates to an “indicated”
or “measured” mineral resource category. The accuracy of any
mineral resource estimates is a function of the quantity and
quality of available data, and of the assumptions made and
judgments used in engineering and geological interpretation, which
may prove to be unreliable and depend, to a certain extent, upon
the analysis of drilling results and statistical inferences that
may ultimately prove to be inaccurate. The quantity and grade of
“inferred” mineral resource estimates are uncertain in nature and
there has been insufficient exploration to define “inferred”
mineral resource estimates as an “indicated” or “measured” mineral
resource and it is uncertain if further exploration will result in
upgrading “inferred” mineral resource estimates to an “indicated”
or “measured” mineral resource category. Mineral resource estimates
may have to be re-estimated based on, among other things: (i)
fluctuations in mineral prices; (ii) results of drilling and
development; (iii) results of geological and structural modeling
including stope design; (iv) metallurgical testing and other
testing; (v) proposed mining operations including dilution; and
(vi) the possible failure to receive and/or maintain required
permits, licenses and other approvals. It cannot be assumed that
all or any part of a “inferred”, “indicated” or “measured” mineral
resource estimate will ever be upgraded to a higher category
including a mineral reserve.
The
mineral resource estimates referenced in this news release were
estimated, categorized and reported using standards and definitions
using Canadian Institute of Mining, Metallurgy and Petroleum
Definition Standards for Mineral Resources and Mineral Reserves
(the “CIM Standards”) in accordance with NI 43-101 of the
CSA, which governs the public disclosure of scientific and
technical information concerning mineral projects.
Preliminary Economic Assessments
The
PEA summarized in this news release is only a conceptual study of
the potential viability of La Negra’s mineral resource estimates,
and the economic and technical viability of La Negra and its
estimated mineral resources has not been demonstrated. The PEA is
preliminary in nature and provides only an initial, high-level
review of La Negra’s potential and design options; there is no
certainty that the PEA will be realized. The PEA conceptual LOM
plan and economic model include numerous assumptions and mineral
resource estimates including Inferred mineral resource estimates.
Inferred mineral resource estimates are considered to be too
speculative geologically to have any economic considerations
applied to such estimates. Under NI 43-101, estimates of inferred
mineral resources may not form the basis of feasibility studies,
pre-feasibility studies or other economic studies, except in
prescribed cases, such as in a preliminary economic assessment (or
PEA) under certain circumstances. There is no guarantee that
inferred mineral resource estimates will be converted to indicated
or measured mineral resources, or that indicated or measured
resources can be converted to mineral reserves. Mineral resources
that are not mineral reserves do not have demonstrated economic
viability, and as such there is no guarantee La Negra economics
described herein will be achieved. Mineral resource estimates may
be materially affected by environmental, permitting, legal, title,
taxation, socio-political, marketing, or other relevant risks,
uncertainties and other factors, as more particularly described in
the foregoing other Cautionary Statements of this news
release
U.S. Readers
The
terms “mineral resource”, “measured mineral resource”, “indicated
mineral resource” and “inferred mineral resource” as disclosed by
the Company are Canadian mining terms defined in the CIM Standards
(collectively, the “CIM Definitions”) in accordance with NI
43-101. NI 43-101 establishes standards for all public disclosure
that a Canadian issuer makes of scientific and technical
information concerning mineral projects. These Canadian standards
differ from the requirements of the United States Securities and
Exchange Commission (the “SEC”) applicable to United States
domestic and certain foreign reporting companies under Subpart 1300
of Regulation S-K (“S-K 1300”). Accordingly, information
describing mineral resource estimates for La Negra may not be
comparable to similar information publicly reported in accordance
with the applicable requirements of the SEC, and so there can be no
assurance that any mineral resource estimate for the Company’s
projects would be the same had the estimates been prepared per the
SEC’s reporting and disclosure requirements under applicable United
States federal securities laws, and the rules and regulations
thereunder, including but not limited to S-K 1300. Further, there
is no assurance that any mineral resource or mineral reserve
estimate that the Company may report under NI 43-101 would be the
same had the Company prepared such estimates under S-K
1300.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
|
EXCELLON
RESOURCES INC. |
|
(Registrant) |
|
|
|
|
|
Date:
January 9, 2023 |
By: |
/s/
Shawn Howarth |
| |
|
President
and Chief Executive Officer |
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