Excellon Resources has signed a five-year toll milling agreement to process sulphide ore from US-based silver producer Hecla Mining Company’s San Sebastian mine at its Miguel Auza flotation mill facility in Zacatecas, Mexico.

Ore from the mine will be transported 26 miles to the processing facility.

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Under the deal, Hecla is expected to have access to 440t a day of milling capacity. The mill is said to be eventually upgraded to include a copper flotation circuit.

Hecla Mining Company president and CEO Phillips Baker said: “This is a significant step towards extending the life of the San Sebastian mine, and is in keeping with our strategy of maximising the cash-flow and minimising capital investment by using third-party facilities.

“We will take a bulk sample in the third quarter and if it is positive could begin mining sulphide ore next year.”

“This is a significant step towards extending the life of San Sebastian mine.”

According to the company, San Sebastian sulphides have the potential for five years of mine-life and the recent exploration discoveries offer significant upside.

Baker further added: “We hope to mine oxides and sulphides concurrently since this agreement does not impact the current arrangement where oxide ore from shallower depths of the mine is being processed at the third-party owned Velardeña mill.”

The milling agreement is conditional upon due diligence and a successful testing programme that comprises processing of a 4,400t bulk sample of sulphide ore from the polymetallic Hugh Zone this year.

In addition, the parties need to secure any regulatory approvals and third-party consents to complete the deal.

The agreement is expected to enable Hecla to scale-up metal production and extend the mine-life.

There is an additional provision in the deal that offers Hecla an option to extend the agreement for another two years.