Excellon starts building Platosa mill

The permits are in for Excellon Resources (EXN-T) to build a new lead/zinc flotation mill at its high-grade Platosa mine in Durango State, Mexico, where silver, lead and zinc have been mined since April 2005.

In that time, crushed ore has been shipped 45 km to the Naica mill in Chihuahua State, owned by Industrias Penoles Group, which buys the ore based on assays.

Construction of the 350-tonne per day plant is supposed to start immediately and the company expects to commission the mill during the first quarter of 2009. Excellon hopes to double production from Platosa with the increased production rate (current production is 200 tonnes per day) and improve recoveries.

Lead and zinc concentrates will be shipped to the world market from the mine site while silver ore will still be sent to the Naica mill. The company says processing lead and zinc on site will help cut operating costs. Excellon expects to recover the $10-million cost of the mill within a year’s time.

In the nine months ended April 30, 2008, the company produced 1.2 million oz. silver, 8.2 million oz. lead and 9.2 million oz. zinc.

The mine has an indicated resource of 417,000 tonnes grading 1,060 grams silver per tonne, 9.3% lead and 9.8% zinc and an inferred resource of 72,700 tonnes grading 758 grams silver, 9.2% lead and 9.7% zinc.

Excellon says Platosa is one of the highest-grade producing silver, lead and zinc deposits in all of Mexico. The company says it has enough ore to continue the test-mine operation for eight years without the new mill and for about four years with the new mill.

The company is working hard to expand resources but has decided to slash its operating costs in the wake of the world credit crisis by getting rid of two of four diamond drills on site.

This will save about $4 million, cutting 2009 exploration costs to $8.4 million. Another $1 million in other expense cuts is also planned.

The deposit is a carbonate replacement deposit (CRD) made up of pods and lenses called mantos of massive and semi-massive to disseminated silver-lead-zinc sulphides.

Since the last estimate, Excellon has found more mineralization. In August, the company reported results from 28 holes, 12 with strong grades.

Drilling returned a 6.41-metre intersection grading 1,192 grams silver per tonne, 13.7% lead and 23.8% zinc in the south-central Guadalupe manto, which is accessible from existing underground development.

Another hole, 15 metres away, returned 5.55 metres grading 856 grams silver 9.8% lead and 14.8% zinc.

In May, Excellon had to stop mining due to a water-inflow problem that happened when a pilot hole from a new ventilation raise was being enlarged. The company was able to seal off the inflow and get the mine up and running again within a month or so.

Excellon shares were down 7 today to 58 apiece on a trading volume of 163,000 shares. The company has 159.2 million shares outstanding, a 52-week high of $1.98 and a low of 45.