Excellon surges to 2-year high after Peruvian acquisition

[Redator]

Excellon Resources’ (TSXV: EXN) shares jumped to their highest level in two years on Friday amid the company’s preparations to restart production next year at the Mallay silver-lead-zinc mine in Peru.

The miner’s $1.56 million acquisition of Mallay and the nearby Tres Cerros gold-silver exploration target from private entity Adar Mining closed June 24. Both projects are located just west of Oyón, about 220 km north of the capital Lima.

“Excellon appears to have captured lightning in a bottle,” Red Cloud Securities analyst Ron Stewart said in a note on Friday. “The potential upside provided by the mine combined with the discovery potential at Tres Cerros outweighs the execution and exploration risks associated with both Mallay and Tres Cerros.”

Excellon first announced the acquisition in November. In May, it confirmed an upsized C$8 million equity financing as well as an off-take agreement, along with C$10 million loan facility with Glencore (LSE: GLEN).

Shares of Toronto-based Excellon gained more than 12% to C$0.38 apiece on Friday afternoon, for a market capitalization of C$66.5 million. Shares rose 39% since the deal closed last month. Its stock has traded in a 12-month range of C$0.08 to C$0.38.

The deal involved the purchase of all Premier Silver’s shares in Peruvian miner Minera CRC, whose Mallay and Tres Cerros operations are located in central Peru’s prolific Miocene metallogenic belt. It also included Excellon issuing C$400,000 in shares to Premier and Excellon gaining a 1 net smelter return royalty and a 5-8% zinc and lead metals stream.

Red Cloud has initiated coverage of Excellon and given its stock a buy rating with a target price of C$0.52, Stewart said.

Multi-million-ounce mine

Mallay is fully permitted and was operated by Compañía de Minas Buenaventura from 2012 to 2018. It produced 6 million oz. silver, 45 million lb. zinc and 35 million lb. lead, Excellon said.

The site includes a 600-tonnes-per-day flotation plant, underground development, tailings facilities and grid power access. Capital investment exceeds $115 million.

Excellon plans to rehabilitate the underground workings, conduct technical studies and do near-mine drilling towards supporting a mine restart decision in the next three to six months.

‘7-year life’

Red Cloud models a seven-year life for Mallay, producing 6.9 million silver oz. and 69,000 tonnes of base metals at an average all-in sustaining cost of $20.81 per oz. silver-equivalent, Stewart said.

Mallay hosts proven and probable resources of 133 million tonnes grading 203 grams silver per tonne, 3.68% lead and 6.75% zinc, according to a JORC-compliant report from 2018. Its measure and indicated resource totals 6.7 million tonnes at 229 grams silver, 2.23% lead and 3.42% zinc and 251.8 million inferred tonnes grading 208 grams silver, 4.02% lead and 4.9% zinc.

The company plans to release an NI 43-101-compliant resource update for Mallay later this year.

Tres Cerros sits on a 20-sq.-km property adjacent to Mallay, comprising a 2.5 km-by-500-metre corridor of high-sulphidation gold-silver mineralization. Sampling has returned results averaging 1.6 grams gold and 196 grams silver, with 86% of the 113 results grading higher than 1 gram gold-equivalent per tonne. Initial drilling at Tres Cerros is targeted for next year’s second quarter.