Blockade forces Excellon to shut Platosa mine

Excellon Resources (EXN-T) continues to be plagued by labour and community issues at its Platosa mine in Mexico’s Durango State, with the company recently suspending operations.

On Aug. 8 the company declared force majeure on its concentrate delivery contracts owing to an ongoing blockade at its mine that started on July 8. The company states that the local communal landowners group known as the Ejido de La Sierrita started the blockade, with assistance and funding from the  NGO Project on Economic, Social and Cultural Rights (ProDESC) and the union Sindicato Nacional de Trabajadores Mineros Metalurgicos, Siderurgicos y Similares de la Republica Mexicana, affiliated with the United Steelworkers in Canada.

The blockade relates to a dispute over a land rental contract from April 2008. The local landowners are calling for the company to comply with provisions of the deal that include community contributions, construction of a water treatment plant, granting of concessions, and “fair rental prices” for the land.

The 2008 contract was itself reached after a three-month blockade by the landowners, upset with an initial contract signed in 2004. The landowners say they have been trying to reach a new agreement with Excellon since November 2011, and had a meeting scheduled with the company for July 6. When the meeting was cancelled shortly before the date, the landowners decided to blockade the mine.

A further complication is the existence of multiple unions fighting for control over the workforce at La Platosa. The above Sindicato Nacional de Trabajadores Mineros Metalurgicos, Siderurgicos y Similares looks to have sided with the local landowners on this issue, while the competing Sindicato Nacional Minero, Metalurgico Don Napoleon Gomez Sada union, has allied with the company.

Excellon, which employs no private security in the country, has asked government officials to enforce criminal charges for trespassing laid against those at the blockade, but the government has yet to act. The blockade, initially consisting of some 70 landowners, is reported to remain peaceful at presstime. The mine is on care and maintenance in the meantime.

ProDESC states that Excellon cut short an Aug. 13 meeting between landowners and the company after confirming that the blockade had not yet been lifted. According to the landowners, Excellon COO Robert Moore expressed his disappointment that the protest continued, as he had apparently been told the blockade would be lifted before he started to negotiate. Interim CEO Peter Crossgrove did not respond to a request for comment.

As to operations at La Platosa, for the three months ending June 30 the company reported net income of $478,000 and a total comprehensive loss of $826,000 from production of roughly 374,000 oz. silver and 6.5 million lbs. lead and zinc. Cash operating costs per oz. of silver, net of byproduct credits, came to $4.25, with ore grades of 825 grams per tonne silver, 7.07% lead, and 13.52% zinc.

As of a July 2011 resource estimate the Platosa project hosts 637,000 tonnes grading 836 grams silver, 8.95% lead, and 10.58% zinc, plus inferred resources of 69,000 tonnes carrying 1,011 grams silver, 11.35% lead, and 11.34% zinc.

Just before the blockade news broke, Excellon had reported it had hit “source-style” mineralization in hole 12LP-1019 on the Rincon del Caido area northwest of the Platosa mine. The hole hit a 55.5-metre interval grading 132 grams silver per tonne, 3.13% lead, 1.74% zinc, and 0.075 gram gold per tonne. The company reports this is the first time it has encountered persistently anomalous gold at Platosa, which suggests increasing proximity to the source of the high-grade Platosa mantos. Excellon is trying to connect the new mineralization to Platosa, with three rigs now deployed to the Rincon del Caido area.

On Aug. 10 Excellon appointed Rupy Dhadwar as chief financial officer after the sudden resignation of Steve Poad. Dhadwar has been the company’s corporate controller since 2010.  The appointment comes not long after the company appointed Brendan Cahill to the position of executive vice-president, and two months after Jeremy Wyeth stepped down as CEO of Excellon, after which executive chairman Peter Crossgrove stepped in as interim CEO.

Excellon’s share price has been under pressure since the blockade started, falling from a brief run up to 71¢ on July 9 to as low as 35¢ in recent days. The company has 275.9 million shares outstanding, and as of June 30 had roughly $10 million in cash.