How Excellon Turned an Abandoned Silver Mine Into a Production Thesis

Buenaventura sank roughly US$115 million into building and running the Mallay silver-lead-zinc mine in central Peru, operated it from 2012 to 2018, then walked away. Excellon Resources (TSXV: EXN) acquired that fully permitted infrastructure in mid-2025 and had concentrate in Glencore’s hands within roughly 13 months. The distance between what was spent and what was paid is the whole story.

That gap matters more now than it would in a normal silver market. Commodity research houses and the Silver Institute have pointed to a structural tendency toward market deficits, driven by rising industrial demand from solar and electronics against constrained primary mine supply. In that environment, a fully permitted past-producing asset is a genuinely rare entry point, because the hardest parts of the project are already behind it.

Commodity research houses and the Silver Institute have pointed to a structural tendency toward silver market deficits, driven by rising industrial demand from solar and electronics against constrained primary mine supply, a backdrop that elevates the scarcity value of any fully permitted restart asset.

This analysis of Excellon Resources and the Mallay silver mine sets out the milestones worth tracking to judge whether the thesis converts from a promising restart into a self-funding production asset, and the specific points where it can break down instead.

Why a US$115 million abandoned mine became Excellon’s foundation

Buenaventura built the Mallay mine and its 600 tonne-per-day (tpd) flotation mill from 2012, ran the operation as a narrow-vein, high-grade underground mine, and ceased operations in 2018. The concrete, the hoisting, the tailings infrastructure, and the mill are all still standing. That is what Excellon actually bought.

The acquisition logic reads as a sequence of risk-reduction decisions rather than a single bet. The deal was agreed in late 2024 and formally closed on 24 June 2025. Pre-commissioning began on 2 July 2026, and first concentrate followed in early August 2026, sold to Glencore.

The management team, which joined around 2022 and exited legacy Mexican silver operations through 2022-2023, deliberately targeted a permitted restart rather than a development-stage project. Peru was chosen because management viewed its permitting conditions as comparatively stable, particularly for an asset that already carried its permits.

That preference makes sense when you count what the restart model removes from the risk equation:

1. A shorter timeline to production, because the underground development, mill, and tailings infrastructure already exist.
2. Lower permitting risk, because the mine and plant have operated under permits in the same jurisdiction before.
3. Prior operator data, because Buenaventura’s drilling and operating records inform resource modelling and mine planning.
4. Historical capital already sunk, embodied in the infrastructure Excellon now owns.

The infrastructure moat Buenaventura’s roughly US$115 million in prior capital investment is not a historical curiosity. It is embodied in the mill, the workings, and the permits Excellon acquired, effectively collapsing the capital and timeline a comparable greenfield project would face.

For an investor, that asymmetry is the point. The competitive advantage here is not geological discovery; it is timeline and capital compression. What you are buying is a route to silver-price exposure that skips the most capital-hungry, most permission-dependent years of a mine’s life. Hold that framing, because the resource and production figures only make sense against it.

What the resource base actually says, and what it does not yet say

Start with what is compliant and confirmed. The most recent NI 43-101 Mineral Resource Estimate (MRE) for Mallay carries an effective date of 18 February 2026, was announced on 23 February 2026, and is supported by an independent technical report filed on SEDAR+ on 8 April 2026. An NI 43-101 estimate is a resource statement prepared to Canadian regulatory standards and signed off by an independent qualified person, in this case Allan Armitage, Ph.D., P.Geo. of SGS Canada.

The categories matter. Indicated means a higher confidence level; Inferred means a lower one, based on more limited data. Both use a cut-off grade of 120 g/t silver equivalent (AgEq).

That is the credible floor. Now the pivot: management views this estimate as materially understating the geological potential, and its reasoning is specific rather than promotional. The current inventory is largely built on historic drilling and development from the prior operator.

The upside argument rests on depth and width. Historic mining worked narrow cut-and-fill zones of around 1.5 metres, whereas deeper targets are being drilled at widths of 3 to 5 metres, better suited to mechanised mining. Two drill bays have been established off the 4090 Level to test both near-mine and step-out targets, with an updated resource estimate and mine scheduling targeted for year-end 2026 or Q1 2027.

For a commercial-minded reader, that gap between the compliant number and management’s confidence is not reassurance. It is a milestone trigger. The updated resource estimate is the single most important near-term data point to watch if you are deciding whether to hold, add, or wait, because it is where the exploration thesis either gains hard numbers or does not.

Tres Cerros and the district-scale optionality play

Tres Cerros sits apart from the Mallay resource entirely. It is a district-scale gold-silver exploration target adjacent to the mine, being drilled concurrently with the restart, and it carries no defined resource.

Management identified Tres Cerros as one of the primary reasons the Mallay acquisition looked attractive, precisely because it adds exploration upside beyond the restart. For an investor, that means the Mallay resource is the thesis you can underwrite today, while Tres Cerros is optionality you are not paying much for yet.

For investors wanting to interrogate the NI 43-101 estimate and the Tres Cerros exploration programme with the same rigour as a technical analyst, our dedicated guide to mining exploration due diligence covers the specific assessment frameworks used to evaluate resource quality, geological confidence, and exploration upside at early-stage and restart assets.

From first concentrate to 600 tpd: what the ramp-up mechanics look like

The operational story reads cleanly on paper. Pre-commissioning began on 2 July 2026, the mill ran at a controlled rate of roughly 400 tpd, and around 12,000 tonnes were processed. First concentrate followed in early August 2026, and it has already been sold.

The pre-commissioning campaign yielded, in contained metal (not payable):

• Approximately 29,200 oz of silver
• Approximately 319,000 lbs of lead
• Approximately 456,000 lbs of zinc

Contained metal is the total metal in the concentrate before smelter treatment charges, penalties, and payment terms reduce it to what the operator actually gets paid for. So treat those numbers as evidence the plant works, not as a revenue figure.

The forward constraint is where attention belongs. Current mining is focused on remnant material in narrower, shallower zones, while the physical route to the deeper, wider ground is still being opened. That route is the 400 Ramp, and its rehabilitation is targeted for completion by year-end 2026.

The sequence to nameplate capacity runs like this:

1. Mine remnant narrow zones now, using the material available today.
2. Complete the 400 Ramp rehabilitation below the 4090 Level by year-end 2026.
3. Transition to mechanised stope mining of the wider 3-5 metre zones at depth.
4. Reach the full 600 tpd nameplate throughput.

The ramp rehabilitation is not routine maintenance. It is the physical gate between current throughput and the mechanised method that determines whether the deeper, wider zones can be mined at the scale the economics require. Treat its completion timeline as a production-thesis checkpoint, not a housekeeping update.

The commercial side is further advanced. A competitive offtake process was run before Glencore was selected, with zinc concentrate grades running at approximately 49%, and an undrawn credit facility available.

The selection of Glencore as offtake partner reflects both its existing relationship with the asset and Glencore’s role in past-producing restarts more broadly, where the trader’s willingness to provide credit facilities alongside offtake agreements has become a meaningful de-risking signal for junior operators navigating the gap between commissioning and sustained cash flow.

A relationship that already existed Glencore previously served as offtake partner for Mallay under Buenaventura, meaning the commercial relationship is familiar to both sides rather than something Excellon had to build from a standing start.

For an investor tracking the ramp, the message is to watch specific milestones rather than trust generic confidence. The ramp rehabilitation and the mining-method transition are the operative variables between today’s sub-nameplate throughput and the production profile management is targeting.

How the portfolio restructuring changes the capital allocation story

Zoom out from Mallay and the corporate picture looks deliberately narrowed rather than scattered. Excellon holds three assets, and the structure tells you where management wants the market to look:

• Mallay: the operational focus and the entire near-term thesis.
• Kilgore (Idaho): a development-stage gold asset, not the operational focus.
• Silver City (Germany): a silver exploration subsidiary being spun out.

The Silver City spinout, targeted for Q4 2026, is a simplification move. The German silver exploration is being separated into an independent entity, having raised approximately US$2.125 million at a pre-money valuation of US$20.8 million in May 2026.

Kilgore is a staged asset kept in the background. It holds roughly 825,000 oz of gold indicated at 0.58 g/t and about 136,000 oz inferred at 0.45 g/t, and a 2019 preliminary assessment outlined a five-year plan targeting around 100,000-112,000 oz of gold annually. It functions as a free option, not a current priority.

Read together, the spinout and Kilgore’s peripheral status signal that management understands the market will not pay a premium for complexity mid-restart. The portfolio simplification is a direct acknowledgement that a re-rating depends on Mallay delivering, not on optionality spread across three assets.

Balance sheet runway and the production cash-flow inflection

The financial position needs stating plainly. As of year-end 2025, the company had no operating cash flows and a working-capital deficit at 31 December 2025, with current liabilities exceeding current assets.

Funding has come from equity: a CAD 5.1 million private placement in May 2025 and roughly CAD 8.0 million in September 2025. The Glencore credit facility remains an undrawn backstop, useful to note but not something to lean on as a safety net.

For context, the shares traded around CAD 0.34 in late September 2026, for a market capitalisation of roughly CAD 151-170 million, within a 52-week range of CAD 0.24-0.71. That framing matters because Mallay reaching cash-flow positivity is not merely aspirational; it is the primary de-risking event for the balance sheet.

Assessing the thesis before the next resource update

The bull case is coherent. Excellon owns permitted, past-producing infrastructure with a Glencore-validated offtake, district-scale exploration optionality at Tres Cerros, a supportive silver-market backdrop of structural deficits, and management’s stated ambition for Mallay to become a multi-year, multi-million-ounce silver producer.

The bear case deserves equal weight. Pre-commissioning output was contained metal, not payable, and sustained ramp-up figures are not yet public. The resource base is largely historical with the updated estimate still pending. The balance sheet needs production cash flow to become self-sustaining. And because Mallay is polymetallic, with 65 Mlbs of lead and 95 Mlbs of zinc in the Indicated category, the economics lean on zinc and lead prices alongside silver, exposing the operation to multiple commodity cycles.

Because Mallay is polymetallic, with 65 Mlbs of lead and 95 Mlbs of zinc in the Indicated category, the economics lean on zinc and lead prices alongside silver; polymetallic project risk introduces simultaneous exposure to multiple commodity cycles, a factor that changes how investors should size positions relative to a pure-play silver asset.

The way to hold both cases at once is to track four milestones. These are your checklist, not management’s talking points:

1. Completion of the 400 Ramp rehabilitation and the start of mechanised mining, targeted for year-end 2026.
2. The updated NI 43-101 resource estimate and mine scheduling, targeted for year-end 2026 or Q1 2027.
3. Completion of the Silver City spinout, targeted for Q4 2026.
4. The first sustained throughput figures approaching the 600 tpd nameplate capacity.

The long-term vision Management has stated an ambition for Mallay to evolve into a multi-year, multi-million-ounce silver production asset, the upside scenario that the four milestones above will either validate or quietly undercut.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions. Past performance does not guarantee future results, and financial projections and forward-looking targets are subject to market conditions and various risk factors.