Excellon to buy Silver Eagle Mines

Excellon Resources (EXN-T) is putting plans to build a mill at its Platosa silver-lead-zinc mine in Durango state, Mexico, on hold now that it has offered to buy Silver Eagle Mines (SEG-T).

Instead the company will be able to process Platosa ore at Silver Eagle’s Miguel Auza mill 220 km away in Zacatecas state.

Excellon chairman and acting CEO, Peter Crossgrove, says the deal is very positive for the company.

“It will give us immediate access to a recently expanded, modern mill and will allow us to start processing our own ore immediately,” Crossgrove said in a statement.

Silver Eagle was forced to shut down the Miguel Auza last December due to low silver, lead and zinc prices, which resulted in financial hardship for the company.

Silver Eagle shareholders will receive 0.2704 Excellon shares in exchange for each Silver Eagle share held. Once the deal is complete Excellon will have 176 million shares outstanding.

As a part of the transaction, Excellon will lend Silver Eagle $500,000 to pay for the closing of the transaction. Excellon has already lent Silver Eagle half of that amount. The rest will be advanced once the definitive agreement is signed. If the deal doesn’t go through, Silver Eagle has agreed to provide Excellon with use of the Miguel Auza mill for a period of one year on reasonable commercial terms.

By shipping ore from the Platosa mine to Miguel Auza mill, Excellon will be able to increase near-term production by 150 tonnes per day, eventually ramping up to 250 tonnes per day or more in 2010 (the mill’s capacity is 300 tonnes per day).

Excellon currently ships ore to the Naica mill 45 km away, selling it based on assays, but will soon stop. The Naica mill is owned Minera Maple, a subsidiary of Industrias Penoles.

The Platosa project has an indicated resource of 396,000 tonnes grading 986 grams silver per tonne, 9% silver, and 10.1% zinc. Inferred resources stand at 72,700 tonnes grading 742 grams silver per tonne 9.1% lead and 9.7% zinc.

Excellon announced it was starting construction of a 350-tonne per day plant at Platosa in October 2008. The company planned to process lead and zinc on-site to help cut operating costs while still sending silver ore to the Naica mill. Excellon said it expected to recover the $10-million capital cost of the mill in about one year.

Excellon shares rose 1¢ today to 23.5¢ apiece on a trading volume of 546,000 shares. The company has 159.2 million shares outstanding.

Silver Eagle shares fell 8¢ to 2.5¢ each on a trading volume of 424,000 shares. The company has 55.5 million shares outstanding.