Interview with Brendan Cahill, President & CEO of Excellon Resources (TSX: EXN)

We've seen some great turnaround stories in recent times; RNC Minerals springs to mind. Excellon Resources is something of a more long-winded story, with the share price falling for much of the last 5yrs, albeit in erratic fashion. Well they did chose to be Silver afterall.

Excellon Resources looks to change things around with an aggressive M&A strategy. Cahill talks to us about creating wealth. Fine words. Shareholders are in two minds though about how to respond. On one hand, perhaps Excellon Resources should focus on and fix the assets that have. On the other hand, M&A is usually a sure fire way of changing the status quo. Cahill talks us through the logic and strategic for this change.

Excellon Resources is Mexico's 'highest-grade silver producer' with a small producing mine and multiple exploration opportunities in Mexico. They have also option a Silver Exploration asset in Germany. So country diversification but not commodity diversification.

The commodity diversification comes on recently news, February 24, 2020, of the proposed acquisition of Otis Gold, a gold development project in the United States, to its portfolio. The acquisition is remarked as an 'initial step in Excellon becoming a larger multi-asset precious metals producer.' Cahill comments that we are currently at a gold:silver of 89/90:1, and the historical norm is 55-65:1. There are also some issues surrounding production; the majority of silver companies are producing a concentrate, and the lead and zinc by-products have seen a large increase in treatment charges in recent years.

The management team has a solid track record in terms of mineral exploration and M&A.

To us, the M&A feels like Excellon Resources trying to diversify, and take less of the impetus off silver, given it has let the company down. Diversity brings leverage to multiple commodities and a greater set of options; however, investors will know that focus is extremely important in the world of mining. Excellon Resources may have a "simple plan" on paper, but the reality seems more complex. A management team can only chase value through M&A for so long before they need to generate more substantive growth through profits. Spreading a team thinly across multiple jurisdictions with multiple commodities could be a concern for investors. Cahill states that evolving optimised economics at projects within Excellon Resource's portfolio could be a game changer, but will the market agree? The company has not been generating cash flow for the last few quarters, but Cahill is confident these projects will operate much more efficiently in the future.

Excellon Resources has c. C$5M left to play with because C$4M of Excellon Resources' cash is committed to exploration in Mexico and a further $1M to Germany. What does that mean for the newly-acquired project, Otis Gold? Cahill says that cash flow will help, but this is not expected until the end of 2020. Listing on the NYSE could Excellon Resources gain more investors, but will Cahill be able to communicate this complicated turnaround story effectively to prospective investors? 2020 should be a very interesting year indeed. We will keep our eyes on this story as it develops.

What did you make of Brendan Cahill? What about the business strategy of Excellon Resources? Would you do anything differently? Comment below and we will respond.  

Company page: http://www.excellonresources.com/

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