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Jarrod Wesson
Published on
November 15, 2017
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Today, we are covering a business profile that has returned very interesting stock returns in 2017.It is EXCELLON RESOURCES (OTCMKTS:EXLLF), which owns Platosa Mine in Durango, Mexico’s highest-grade silver mine since production commenced in 2005.The key feature that we need to highlight before anything else is the IRR of this mine.If the silver price is $17/oz, the lead price is $0.90/lb and the zinc price is $1.00/lb, then the expected IRR could be 118% with a 1.9 year payback.Additionally, the mine has the after-tax net present value equal to $39 million.These figures are quite astonishing and we are sure that they seduced the market participants.Have a look at the following table given in the last annual report: Economic Analysis of EXCELLON RESOURCES OTCMKTS:EXLLIt been less than four years that the company started work on this project. Have a look at how market participants have pushed the share price since it commenced work on this project. From trading close to 0.25 in 2016, the share price went to touch $1.75 in less than a year.Moreover, the amount of shares exchanged has increased quite a bit in 2017. Some days we could see more than 0.6 million shares exchanged. We believe that it clearly shows that the market interest in the stock has increased after the company got into the Platosa Mine.Check the following stock chart: 2 years chart for EXLLFBusinessExcellon Resources Inc. was founded in 1987 and is headquartered in Toronto, Ontario. Its business objective is the acquisition, exploration, development, and mining of mineral properties.As said, its flagship resource has been the Platosa Property in Durango State, Mexico. The company has been exploring and developing the project for the last three years. Excellon is producing silver, lead, and zinc from high-grade manto deposits.EXLLF owns another property in Miguel Auza, Zacatecas, Mexico, but the most significant cash flows come from the sale of lead and zinc concentrates from production at the Platosa Property.Who are the company's clients and how many people work for the company?Trafigura has been purchasing concentrates since 2011, but after a tender process in 2016, MK Metal commenced to buy mineral too. For those who don't know, both are very big players in the mining industryAs of December 31, 2016, 252 individuals, along with 151 outside contractors, have worked for the company. It is not a small business structure.The fact that the company has already measured 28,000 tonnes shows that the mine work is already quite advanced.Furthermore, the 781 g/t of silver will surprise the readers. We need to highlight it again: this mine is the "Mexico’s highest-grade silver mine since production commenced in 2005."Recent DevelopmentsThe following are, we believe, the most significant announcements released in the last two years.On April 11, 2016, the company released that it had sold mining claims comprising part of the DeSantis Property in the Porcupine Mining Division in Ogden Township, Ontario to Oban Mining Corporation. EXLLF received 620,400 common shares and was expected to receive further 229,600 common shares upon completion of the transfer of the mining leases for a total of 850,000 common shares of Oban.We believe that the market participants appreciated the announcement and pushed up the share price in April, 2016. The share price went from $0.25 to $0.75 after this news was out. This usually happens when companies dispose non-core assets and increase their liquidity.The release of La Platosa Mine's production figures on April 18, 2016 also contributed to that share price spike. The most significant was increase in production in comparison with that of Q4 2015. The company was really speeding up the mining development and the market participants knew that revenues would pick up:

  • Silver production of 211,557 ounces (Q1 2015 – 217,079 ounces), up by 39% from Q4 2015.
  • Lead production of 1.3 million lb (Q1 2015 – 1.3 million lb), up by 57% from Q4 2015.
  • Zinc production of 1.6 million lb (Q1 2015 – 2.2 million lb), up by 26% from Q4 2015.

Additionally, Brendan Cahill, President and Chief Executive Officer, commented the following about Rodilla Manto:

“A significant amount of this ‘bonus’ mineralization was ultra high grade, with approximately 1,600 tonnes of ore produced from Rodilla during March grading over 1,000 g/t Ag, 10% Pb and 10% Zn. ” Source

More share price highs were seen on August 2, 2016 when the company released its second quarter 2016 production results from the La Platosa Mine in Durango, Mexico. Following new increases in production were highlighted:

  • Silver production of 227,826 ounces (Q2 2015 – 182,709 ounces), 25% increase
  • Lead production of 1.3 million lb (Q2 2015 – 1.0 million lb), 28% increase
  • Zinc production of 1.6 million lb (Q2 2015 – 1.7 million lb), 10% decrease

We believe that these figures excited the market participants, which pushed up the share price from $1.00 to $1.75. You know how it works; the sooner the reserves are extracted, the larger the project's net present value.In 2017, we believe that the most interesting was released on July 26, 2017. The company delivered results from its ongoing exploration program in the Platosa Mine. The company continued to confirm the high-grade mineralization. Ben Pullinger, Vice-President Geology, was quoted:

"Today’s results confirm the potential to add significant high-grade mineralization to the 623 Manto and demonstrate continuity between the 623 and Guadalupe South mantos." Source

Additionally, we believe that the following words noting that production would increase were appreciated by the market.

“This mineralization is near mine workings and therefore has the potential to increase near term high-grade production." Source

The share price went up from $1.00 to $1.25 in July.Additionally, the share price increased in August, as the market expected the next results to be delivered. On September 6, 2017, results from the ongoing surface and underground exploration program were released. The most interesting was that the company continued measuring reserves and new mineralization was discovered near existing mine workings. Ben Pullinger, Vice-President Geology, was quoted:

“We have delineated a sizeable new zone of mineralization near existing mine workings that connects and expands the high-grade 623 and Guadalupe South mantos and which may be accessed before the end of the year.” Source

In the last press release, on November 9, 2017, we saw that the company had signed a new deal. Cantor Fitzgerald Canada Corporation had helped the company sell 7,393,750 units at a price of $2.00 per unit (warrants and shares). The most significant was the fact that Eric Sprott, the Canadian billionaire businessman, purchased 1,250,000 Units (for total consideration of $2,500,000) and owns 25.3% interest on a partially diluted basis.ConclusionCurrently trading with a market cap of $103 million, EXLLF is an exciting story among mid caps. With $2 million in cash, $47 million in assets and only $26 million in total liabilities, we believe that the financial situation is quite stable. To sum up, there is a lot to like with EXLLF.We will be updating our subscribers as soon as we know more. For the latest updates on EXLLF, sign up below!Image courtesy of mescalero77 via FlickrDisclosure: We have no position in EXLLF and have not been compensated for this article.

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