As silver prices rise Excellon shares fall

Increased silver production from Excellon Resources (EXN-V) hasnt been enough to curry favour with the market at a time of rising silver prices.

Despite reporting on Sept. 17 that silver production at its Platosa project was up 4% from last year Excellons fiscal year ends on July 31 the companys share price began a steady decline.

A decline made all the more noticeable by its coming at a time of rising silver prices.

Over the week following its production announcement the price of silver climbed to US$13.62 from US$12.59, an 8% gain; over the same period Excellons share price fell to $1.34 from $1.46 — a 9% decrease.

The decrease points to factors lying beneath the numbers on silver production.

Most notable is the companys inability to reach its planned rate of production due to problems at the mill it sends ore to.

Excellon ships and sells crushed ore to Compania Fresnillos Naica mill where Fresnillo blends Excellon’s higher grade ore into its own lower grade ore.

Excellon says improved ore handling at Naica and better blending of high grade ore meant production was trending upward in the latter part of the year.

Also buffering news that silver production had moved up to 2.3 million oz. from l.7 million the year before, was word of a reduction in lead and zinc production.

Excellon reported that 10.3 million lbs. of lead and 8.9 million lbs. of zinc were turned out for the year compared with the 10.9 million lbs. pounds and 12.8 million lbs respectively for the year previous.

The company blames the decrease in base metal production on its increased silver production.

To get better silver production Excellon is favouring a more uniform blend of high grade ores. The blend results in lead and zinc being mined at grades closer to the average grade of the resource.

Excellon is looking to remedy some of the obstacles it faced in the year by seizing greater control of its operations.

To do so it is looking at erecting its own flotation plant at site to make lead and zinc concentrates.

The mill would be built to handle 350 tonnes of ore per day and, according to Excellon, would decrease its current operating costs.

Towards that end, an environmental impact assessment, process development work and preliminary discussions with suppliers and contractors are all underway.

If it goes ahead the mill would be slated to start up in the last quarter of 2008.

Richard Brissenden, Excellon’s president and chief executive says in a statement that he expects a decision to be made on the mill before the end of calendar 2007.

Platosa has an indicated resource of 184,000 tonnes of ore grading 1,546 grams sliver, 10.86% lead and 10.5% zinc. It has an additional 8,400 tonnes grading 777 grams silver, 5.47% lead and 11.31% zinc in the inferred category.

The property is not yet fully explored and Excellon is putting $11.4 into exploration for the year. It says there are several geological indicators of a large mineralized system at the site.