TORONTO (miningweekly.com) – Mexico’s highest-grade silver miner Excellon Resources on Thursday reported a fourth-quarter and full-year loss, mainly owing to the volatile silver price impacting on the bottom line.

Toronto-based Excellon, which owns the La Platosa silver mine, reported a net loss of $5-million, or $0.09 a share, for the full-year 2013, and a net loss of $2.4-million, or $0.04 a share, in the three months ended December 31.

The company said it had booked a $2-million negative price adjustment ($900 000 for the fourth quarter), related to decreases in the price of silver between the delivery date and final settlement date, for concentrates, which in some cases took place up to four months. This included $600 000 of unsettled deliveries marked-to-market at the end of the fourth quarter.

Excellon said that it had entered into new concentrate purchase terms, which were expected to reduce the effect of similar revenue adjustments in 2014/15.

"The biggest impact on our profitability was the significant volatility in the silver price, particularly during the second and fourth quarters. We have now taken steps to reduce the effect of these fluctuations and we are confident that these adjustments will improve cash flow and profitability going forward. Additionally, just as we realised cost reductions throughout the year, we will continue to further reduce costs at the mine site level through 2014,” president and CEO Brendan Cahill said.

Fourth-quarter charges also included a deferred tax accounting adjustment of $800 000 recognised in the fourth quarter as a result of the recently enacted Mexican tax reforms.

Revenues during 2013 decreased by 8% year-on-year to $33.3-million, despite a 52% increase in tonnes produced, owing to a 33% decrease in the average realised silver price from $31.03/oz to $20.93/oz.

The lower silver price resulted in lower revenues, as well as significant charges against revenue during 2013, both of which affected income and cash flow. Total revenues for 2013 were also lower than expected, owing to inclement weather at year-end on the west coast of Mexico, which delayed the delivery of $1-million in concentrate until early 2014.

The costs of sales increased 28% during 2013 owing to the significant increase in produced tonnage during the year.

Excellon reported full-year sales of 2.04-million silver-equivalent ounces (545 428 silver-equivalent ounces in the fourth quarter), including 1.4-million ounces of silver, 7.23-million pounds of lead and 9.68-million pounds of zinc.

The company said that it had committed going forward to providing costs per silver-equivalent ounce on a ‘payable’ basis, rather than on a ‘produced’ or ‘sold’ basis, as the payable basis provided a more accurate measure of the cash income received from each silver-equivalent ounce sold by the company. On the payable metric, costs per ounce appeared higher than they may historically have appeared when reported on a produced or sold basis.

Cash cost per payable silver ounce net of by-products increased during 2013 to $10.51, up from $6.80 in 2012. This increase was mainly attributable to lower grades of silver (-15%) and zinc (-32%) in the mantos mined during 2013 relative to 2012, lower recoveries of lead and zinc and related lower by-product credits on silver production, as well as higher costs of certain consumables that were not expected to recur in 2014.

The all-in cost per payable silver-equivalent ounce was slightly higher year-on-year at $17.29, when compared with $16.78.

Excellon is targeting 1.4-million to 1.6-million ounces of silver, 7.5-million to 8.5-million pounds of lead and 9-million to 10-million pounds of zinc, or 2.1-million to 2.3-million silver-equivalent ounces in 2014, based on $24/oz silver, $0.90/lb lead and $0.90/lb zinc.

RESOURCE UPDATE

Excellon on Wednesday reported an updated resource estimate for La Platosa, saying the mine has Canadian National Instrument 43-101-compliant measured and indicated resources totalling 488 000 t grading 777 g/t silver, 8.42% lead, 10.15% zinc or a silver-equivalent grade of 1 277 g/t.

The measured and indicated resources totalled 12.1-million silver ounces, or 20-million silver-equivalent ounces.

The resources were estimated using a conservative $20/oz silver price, with less than 2% variation resulting from a $2/oz change in silver price, the company said.

“La Platosa is one of the world's highest-grade silver deposits with currently identified measured and indicated resources containing 20-million silver-equivalent ounces, sufficient to maintain present rates of production for close to seven years.

“The resource demonstrates exceptional resilience to changes in the silver price, a key attribute during this period of lower prices. Our exploration efforts since the last resource update in 2011 have focused on discovering the large tonnage source of the Platosa mine, but the exploration horizon for new high-grade, near-surface mantos is wide open to the north, east and south-east of our current mining operation,” Cahill said.

Excellon’s TSX-listed stock had gained 16.67% in value from the start of the year, and on Thursday traded up 0.71% at C$1.41 apiece.