Tuesday, February 7, 2017

Good News For Excellon Investors

Today Excellon Resources (EXN.TO) announced a new offtake agreement. Why am I writing about it?

Well, the main products of Excellon, a high - grade silver / gold producer, are two concentrates (silver - zinc and silver - lead). These concentrates have to be smelted and refined at special chemical plants. It is a  necessary and money - consuming process for any concentrate producer.

The table below shows TC/RC costs (treatment and refining costs), paid by Excellon over three quarters of 2016 (the row marked in red):

source: Excellon

Note that TC/RC costs are not reported in the statement of operations. The trick is that the company discloses only net revenue, i.e. $13,640 thousand (this figure is disclosed as "Revenue"). However, in fact the gross revenue was $16,351 thousand (look at the line "Sales before TC/RC).

Now, according to the company's statement,

"The final terms agreed with two purchasers are materially better than terms seen in recent years and represent an approximately 60% reduction in treatment and refining charges relative to 2016 based on budgeted tonnage for 2017 and at current metal prices" 

In my opinion, it is the good news for Excellon's investors. Theoretically, if the company applied these lower TC/RC rates last year, the operating result disclosed by Excellon would be higher by $1,627 thousand (TC/RC costs of $2,711 thousand x 60%). As a result, instead of a loss of $1,185 thousand the company would have shown a profit of $442 thousand.


  1. Tx for this. I'm paying attention to what you post!I do have a small position in Excellon.

    I believe there is a clerical error: add back $1627 (not $2711) and the profit would be $442.

    kind regards.