Excellon Announces Agreement to Acquire Mallay Mine in Transformative Transaction
Excellon Announces Agreement to Acquire
Mallay Mine in Transformative Transaction
Toronto, Ontario--(Newsfile Corp. - October 31, 2024) -
Excellon Resources Inc. (TSX: EXN)
(OTCQB: EXNRF) (FSE: E4X2)
("
Excellon
" or the "
Company
") is pleased to announce that it has
entered into a share purchase agreement (the "
Agreement
") with Adar Mining Corp. ("
Adar
") to acquire
(the "
Acquisition
"), subject to the satisfaction of certain conditions, all of the issued and outstanding
shares (the "
Minera Shares
") in the capital of Minera CRC S.A.C. ("
Minera CRC
"), which holds a
100% interest in the Mallay Property, including the past producing Mallay Silver Mine and the Tres
Cerros Exploration Property, in Peru. Pursuant to the Agreement, Adar intends to bid for the Minera
Shares pursuant to receivership proceedings under the
Bankruptcy and Insolvency Act
(Canada) (the
"
Realization Proceedings
"). Adar has agreed to sell, subject to the satisfaction of certain conditions,
the Minera Shares to Excellon in exchange for US$1.25 million in upfront cash payments and such
number of common shares of Excellon ("
Common Shares
") that is equal to 12.9% of the issued and
outstanding Common Shares on a basic, non-diluted basis, as further described in the Agreement. The
Acquisition is subject to, among other things, Adar acquiring the Minera Shares in a proposed sale and
investment solicitation process to be conducted in the Realization Proceedings.
Conditional on the completion of the Acquisition, Excellon will enter into agreements (i) with Adar to
provide for consideration in the form of a 1.0% net smelter returns royalty (0.5% of which may be
repurchased for US$1.5 million) (the "
Royalty
") and a 5% to 8% zinc and lead metals stream (the
"
Stream
" and together with the Royalty, the "
Deferred Contingency Payments
"), payable on the
successful restart of the Mallay Mine, and (ii) with Adar and another party to sell up to a 49% interest in
the Tres Cerros Exploration Property (the "
Back In Right
") at a back-in option exercise price of 1.5x
attributable historical exploration expenditures incurred.
Excellon has arranged approximately $3.8 million (US$2.725 million) to fund the upfront cash payments
and for working capital during the Realization Proceedings, as further described below. On completion
of the Acquisition, Excellon will focus on restarting the Mallay Mine, with the goal of returning the
Company to a silver-producer status.
Mallay Silver Mine Highlights
Past producing mine, built and operated by Buenaventura, with US$115 million historical
investment.
1
Fully permitted to restart production, existing infrastructure includes working mill,
operational water treatment plant, adit and ramp access to the mine, significant
underground development and active workforce.
Historical Reserves
2
of 2.67 Moz AgEq @ 626 g/t AgEq and Historical Inferred Resources
2
of 4.57 Moz AgEq @ 564 g/t AgEq.
Excellon to review off-take prepay facilities and other non-equity alternatives for mine
restart.
Current mineralized inventory is believed to be sufficient for the basis of a three-year
mine plan, the expected six-month restart period includes mine rehabilitation and mill
controls upgrade.
Significant opportunities to expand mineralized inventory through extension of
historically mined veins down dip and along strike.
Excellon has an experienced operating team, capable of delivering a mine restart.
Notes:
1)
Source: Compañía de Minas Buenaventura S.A.A.
2)
Historical estimates based on historical audit completed in December 2018 by Geomineria S.A., an independent resource auditor in Peru.
Mineral inventories have been worked on in accordance with the standards, procedures and technical specifications approved by Compañía de
Minas Buenaventura S.A.A. for all its units, which are described in the "V Geology Workshop 2014 - Chap. Mineral Inventory Manual", in the 2016
Sampling Manual, 2016 Quality Control Manuals and 2017 Geological Modeling and Resource Estimation Procedures of Compañía de Minas
Buenaventura S.A.A.; and adapting them to international standards such as the JORC Code or similar. Following closing of the transaction,
Excellon will update the resources to become NI 43-101 compliant.
Tres Cerros Exploration Property Highlights
Bulk tonnage potential. Area of interest is a 3 km x 0.5 km gold-silver mineralized corridor
near, but not related to, the Mallay Mine.
Large-scale, classic high sulphidation target. Coincident IP/resistivity anomalies
indicative of deep (300m) sulphides overlain by oxide zone +100m thick.
Several drill targets identified, access by truck - no helicopters required.
Large exploration package (~110km
2
) in a region which boasts numerous significant
current and historic mines.
Benefits to Excellon Shareholders
Fully permitted, near-term silver producing asset in an established mining-friendly
jurisdiction.
Acquisition of US$115 million in historical infrastructure investment for total purchase
consideration of approximately US$2.5 million in cash
3
and shares
3
plus the Deferred
Contingency Payments.
Minera CRC will be acquired free of existing debt, upon completion of the Realization
Proceedings.
Deferred Contingency Payments are structured to provide a smaller payout stream over a
longer period of time, ensuring maximum financial buffer during the sensitive periods of a
mine startup.
Termination fee of US$2.5 million paid to Excellon if the shares and debt of Minera CRC
are sold to an alternative party.
Notes:
3)
Includes US$1.25 million cash plus shares to be issued as purchase consideration, valued at Excellon share price prior to announcement.
Shawn Howarth, President and CEO of Excellon, commented, "Mallay represents an exciting opportunity
to return Excellon to silver producer status as early as mid-2025. This highly accretive transaction
benefits Excellon shareholders, as the agreement with Adar resolves the existing debt burden on the
asset, paving a clear path for value creation. Excellon's operational expertise sets the foundation for a
highly collaborative and productive partnership. Upon closing the transaction, our immediate focus will
be on mine rehabilitation, finalizing restart plans, conducting near-mine drilling to extend mineralization
and mine life, and demonstrating the robust economics of the mine."
Laurence (Laurie) Curtis, Chairman of Excellon, commented, "Excellon and the team worked hard to
reach a comprehensive agreement aimed at revitalizing the Mallay Mine, after a prolonged period of
downtime. With strong momentum in the metals market, we are confident this project is positioned for
substantial success and renewed operational strength."
Transaction Details
The Agreement provides for Excellon acquiring, subject to the satisfaction of certain conditions, the
Minera Shares and certain indebtedness of Minera CRC (the "
Minera Securities
") from Adar in
exchange for (i) cash payments to Adar in the aggregate amount of US$1,250,000 (the "
Upfront
Payments
") within 30 days to fund expenses incurred by Adar pursuant to the Realization Proceedings
and advances by Adar to Minera CRC; and (ii) such number of Common Shares (the "
Consideration
Shares
") that is equal to 12.9% of the issued and outstanding Common Shares on a basic, non-diluted
basis excluding the completion of the Capital Raise (as defined below). Any portion of such Upfront
Payments that is not spent by Adar prior to closing of the Acquisition will remain with Minera CRC. If
Adar does not acquire the Minera Securities in the Realization Proceedings and instead receives
repayment of indebtedness owed to Adar by the parent company of Minera CRC, Adar will pay Excellon
a termination fee of US$2.5 million. In the event the Acquisition is completed, Excellon is required to
deploy at least US$6.5 million from the Capital Raise and the Debt Raise toward commencing mining
operations at the mining unit and processing plant owned by Minera CRC. The Consideration Shares
will be subject to a contractual 12-month hold period. The completion of the Acquisition is conditional on,
among other things, execution of definitive agreements in respect of the Royalty and the Stream,
execution of the Back In Right Agreement (as defined below), Excellon completing a financing, other than
the concurrent financings described below, of at least US$4,500,000 (the "
Capital Raise
"), Excellon
executing a committed debt facility in an amount no less than US$3,000,000 (the "
Debt Raise
"), Minera
CRC having indebtedness not more than US$1,000,000 at closing, receipt of regulatory and stock
exchange (including Toronto Stock Exchange) approvals (including shareholder approval of the
Acquisition and the Capital Raise as will be required by the requirements of the Toronto Stock
Exchange), and Adar acquiring the Minera Securities in the Realization Proceedings. The proceeds of
the Capital Raise and the Debt Raise will be used for the purpose of commencing mining operations
following completion of the Acquisition and is not part of the consideration for the Acquisition. The
outside date to complete the Acquisition is February 27, 2025, which may be extended by 30 days by
Excellon up to four times by making a cash payment in the amount of US$250,000 to Adar for each such
30 day extension. Each such extension payment will be set-off against deliveries required to be made by
Excellon pursuant to the Stream.
In connection with the completion of the Acquisition, Excellon will enter into agreements to provide for the
Royalty, the Stream and the Back In Right as follows:
The Royalty:
1% net smelter returns royalty payable in respect of products produced from the
Mallay and Tres Cerros properties. Excellon will have the right to purchase one-half of the Royalty
for US$1.5 million within 18 months of commencement of commercial production.
The Stream:
Excellon will have an obligation to deliver 5% of all zinc and lead produced, until a
maximum of 2 million pounds of each of zinc and lead, respectively, has been delivered (the "
Initial
Zinc and Lead Delivery Obligation
"). Thereafter Excellon will have an obligation to deliver 8% of
all zinc lead produced, until a maximum of 10 million pounds of each of zinc and lead, respectively,
has been delivered. All deliveries of zinc and lead will be subject to certain costs incurred by
Excellon. Excellon has the right to purchase the Stream for cancellation for (i) US$18 million up to
the first anniversary of the commencement of commercial production, and (ii) US$15 million after
completion of the Initial Zinc and Lead Delivery Obligation, provided that the Stream buy back right
will expire on the third anniversary of the commencement of commercial production.
The Back In Right:
Pursuant to the Back In Right Agreement, Adar will have an option to acquire a
32% interest in the Tres Cerros Exploration Property and a third party will have an option to
acquire a 17% interest in the Tres Cerros Exploration Property, in each case until the date that is
120 days after Excellon delivers a preliminary economic assessment in respect of the Tres Cerros
Exploration Property based on a minimum of 15,000 metres of exploratory drilling and which
indicates inferred resources in the form of gold equivalent ounces of at least 500,000 ounces. The
Back In Right option exercise price will be 1.5x of attributable historical exploration expenditures
incurred following completion of the Acquisition ("
Qualifying Expenditures
"). During the Back In
Right term, Excellon will be the operator of the Tres Cerros Exploration Property and will have an
obligation to incur an aggregate of US$7.5 million in Qualifying Expenditures as follows: (i) US$ 1
million in year 1, (ii) US$2.5 million in year 2, and (iii) US$4 million in year 3. If either party
exercises their respective Back In Right, the parties will enter into a joint venture agreement, the
form of which will be settled in connection with the Back In Right Agreement.
Concurrent Financings
In connection with the Acquisition, Excellon is also pleased to announce that it has entered into
agreements with respect to a non-brokered private placement offering (the "
Unit
Offering
") of up to
19,500,000 units of the Company ("
Units
") at a price of $0.105 per Unit for aggregate gross proceeds
of up to $2,047,500 (approximately US$1,475,000), and a non-brokered private placement offering (the
"
Note Offering
" and together with the Unit Offering, the "
Offerings
") of US$1,250,000 aggregate
principal amount of unsecured non-convertible promissory notes of the Company ("
Notes
"). The
aggregate offering size is approximately $3.8 million (US$2.725 million).
Each Unit will be comprised of one Common Share and one half of one common share purchase
warrant of the Company (each whole warrant, a "
Warrant
"). Each Warrant will entitle the holder thereof
to acquire one Common Share at a price of $0.15 per Common Share for a period of 24 months from
the closing date of the Unit Offering.
The Notes will mature on the date that is 18 months following the closing date of the Notes Offering (the
"
Maturity Date
"). On the Maturity Date, any outstanding principal amount of the Notes plus any accrued
and unpaid interest thereon shall be repaid by the Company in cash. The Notes will bear interest at a
rate of 10% per annum. Interest on the principal amount outstanding under the Notes will accrue during
the period commencing on the closing date of the Notes Offering until the Maturity Date and will be
payable in cash on the Maturity Date, subject to earlier prepayment or exercise of the Tres Cerros
Prepayment Election (as defined below).
If, following the issuance of the Notes and prior to the Maturity Date, the Acquisition is completed, the
holder of the Notes will be able to elect to direct that the principal amount of the Notes plus any accrued
and unpaid interest thereon be applied as a prepayment against a portion of the purchase price payable
by the holder to exercise its Back In Right pursuant to a back in right agreement (the "
Back In Right
Agreement
") to be entered into in connection with the Acquisition (the "
Tres Cerros Prepayment
Election
").
If, following the issuance of the Notes and prior to the Maturity Date, the Acquisition is not completed on
or before the outside date for completion of the Acquisition, the Company will be required, within 30
calendar days following expiry of such outside date, to prepay in cash any outstanding principal amount
of the Notes plus any accrued and unpaid interest thereon.
The Company may elect, at any time, to prepay in cash any or all of the principal amount of the Notes
plus any accrued and unpaid interest on such principal amount being prepaid.
The Company intends to use the net proceeds of the Offerings to fund acquisition costs, including upfront
cash payments in respect thereof, and for working capital and general corporate purposes.
The Unit Offering is anticipated to close on or about November 8, 2024, and is subject to satisfaction of
certain conditions, including, but not limited to, the receipt of all necessary regulatory and other
approvals, including the approval of the Toronto Stock Exchange ("
TSX
"). The Note Offering is
anticipated to close on or about November 1, 2024, and is subject to satisfaction of certain conditions,
including, but not limited to, the receipt of all necessary regulatory and other approvals.
The securities will be offered: (a) by way of private placement in each of the provinces of Canada
pursuant to applicable exemptions from the prospectus requirements under applicable Canadian
securities laws; (b) in the United States or to, or for the account or benefit of, U.S. persons, by way of
private placement pursuant to the exemptions from the registration requirements provided for under the
United States Securities Act of 1933, as amended (the "
U.S. Securities Act
"); and (c) in jurisdictions
outside of Canada and the United States on a private placement or equivalent basis. The securities to
be issued pursuant to the Offerings will be subject to a four-month hold period in Canada pursuant to
applicable Canadian securities laws.
The securities offered have not been, nor will they be, registered under the U.S. Securities Act, or any
state securities law, and may not be offered or sold in the United States or to, or for the account or
benefit of, U.S. persons absent registration or an exemption from such registration requirements. This
news release shall not constitute an offer to sell or the solicitation of an offer to buy in the United States
nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be
unlawful.
Mallay Property
The Mallay Property, located in Peru, is comprised of the concessions encompassing the past-
producing Mallay Mine and the Tres Cerros Exploration Property.
Mallay Mine
The Mallay Mine was constructed by Compañía de Minas Buenaventura S.A.A. ("
Buenaventura
") at a
cost of US$115 million, commenced production in 2012 and operated consistently until early 2018.
Average annual production by Buenaventura (2013 to 2017) was 1.3 million ounces silver, 9,100 tonnes
zinc and 6,600 tonnes lead (source: Buenaventura company reports). Historical Mineral Reserves and
Mineral Resources (JORC compliant) at the time the mine was placed on care-and-maintenance (Table
1) were calculated at metals prices of US$18.00/oz Ag, US$2,250/t Pb and US$2,600/lb Zn. Following
closing of the Acquisition, Excellon intends to update the resource calculation to become NI 43-101
compliant, taking into account not only updated metals prices, but additional extension drilling Excellon
anticipates to undertake, demonstrating the continued extension of current mineralized zones.
Table 1: Historical Mineral Resource Estimate (As at December 31, 2018; JORC Compliant)
Tonnes
g/t Ag
% Pb
% Zn
g/t
Ag-Eq
000 oz
Ag-Eq
Proven & Probable Reserves
133,000
203
3.68%
6.75%
626
2,677
Resources (Exclusive of Reserves)
6,782
229
2.23%
3.42%
457
99
Inferred Resources
251,805
208
4.02%
4.90%
564
4,566
Metals Prices used: US$18.00/oz Ag, US$1,300/oz Au, US$2,250/t Pb, US$2,600/t Zn
Figure 1: Mallay Mine Processing Facilities and Surface Infrastructure
To view an enhanced version of this graphic, please visit:
https://images.newsfilecorp.com/files/1601/228552_excelloni.jpg
Advisors
Bennett Jones LLP is acting as legal advisor to Excellon. Cassels Brock & Blackwell LLP is acting as
legal advisor to Adar.
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 management team for the benefit of
our employees, communities and shareholders. The Company is advancing a portfolio of gold, silver and
base 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 little
modern exploration.
Additional details on Excellon's properties are available at
www.excellonresources.com
.
For Further Information, Please Contact:
Excellon Resources Inc.
Laurie Curtis, Chairman
Shawn Howarth, President & Chief Executive Officer
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, contained, referenced or incorporated by
reference in this 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: "actively", "advance", "anticipated", "assess",
"believe", "cause", "commence", "completion", "conditions", "consideration", "continues",
"development", "due course", "expectation", "exploration", "extend", "extension", "flexibility",
"focused", "forward", "further", "future", "if", "implement", "liquidity", "looking", "maturity", "may",
"negotiations", "occur", "opportunities", "options", "outcome", "outstanding", "potential", "providing",
"reach", "restructuring", "risk", "subject to", "to be", "update", "vision", "waive", "when", "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, to, will, would (or not) be achieved, occur, provide,
result, complete 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 structure and terms of the Acquisition; the timing and ability of the Company
to complete the Acquisition; the structure and terms of the Offerings; the use of proceeds of the
Offerings; the timing and ability of the Company to complete the Offerings; the timing and ability of the
Company to receive necessary approvals; exploration and drilling programs, including the timing,
completion and results thereof; potential mineralization; and the Company's objectives, goals and
future plans and strategies. 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 inability of the Company to complete the Acquisition on the
terms proposed or at all, the inability of the Company to complete the Offerings on the terms proposed
or at all, the inability of the Company to receive necessary regulatory approvals, termination of the
Agreement, the inability to complete a feasibility study which recommends a production decision, the
"Risk Factors" in the Company's annual information form dated April 1, 2024 (the "
2024 AIF
"), and
the risks, uncertainties, contingencies and other factors identified in the Company's Management's
Discussion and Analysis, and accompanying financial statements, for the year ended December 31,
2023, and the Company's other applicable public disclosure (collectively, "
Company Disclosure
").
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 2024 AIF and the other Company Disclosure. 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 other Company 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.
Not for distribution to United States news wire services or for dissemination in the United
States
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