Excellon Resources received official notice from the Mexican federal government that the court upheld a judgment against its subsidiary San Pedro Resources granting the owner (the plaintiff) a $24 million award and said the decision is not subject to further appeal in Mexico. The decisions stems from a lawsuit related to the La Antigua mineral concession and the Miguel Auza mine, which the company acquired in Zacatecas.
“These court decisions are the product of rank corruption and are a black mark on the judicial system of Mexico,” Excellon Resources President and CEO Brendan Cahill said. “The value ascribed in the judgment is impossible based on evidence, facts or law. Simply put, the maximum value realizable by the plaintiff from the agreement on La Antigua was US$500,000 in the best-case scenario, yet the Miguel Auza mine was shut down in 2008 almost immediately after operations commenced.”
Cahill said the company is investigating remedies under international law and he does not expect this decision to impact any of the company’s other assets.
La Antigua was included in Excellon’s acquisition of Silver Eagle Mines Inc. in 2009 and includes a portion of the Evolución mineral resource at Miguel Auza. The concession is subject to an exploration and exploitation agreement with purchase option between San Pedro (now a subsidiary of Excellon) and the plaintiff that provided, among other things, a minimum payment of US$2,500 plus value added tax per month (the advance royalty) and the payment of a 3% net smelter return (NSR) royalty.
Pursuant to the agreement, San Pedro had the right to purchase absolute title to La Antigua, including the NSR royalty upon payment of US$500,000, a right that was never exercised. San Pedro has accrued the advance royalty on an ongoing basis.
Though the Miguel Auza mine never reached commercial production and was put on care-and-maintenance in December 2008 prior to Excellon’s acquisition of Silver Eagle, the plaintiff sued San Pedro for non-compliance with the agreement and specifically for not operating the Miguel Auza mine. The plaintiff was awarded damages of approximately US$700,000 in the court of first instance in Torreón, Coahuila. Both San Pedro and the Plaintiff appealed the decision to the Second District State Court in the Judicial District of Torreón. In December 2019, the court confirmed the initial decision but, subsequently, pursuant to an order obtained by the plaintiff, made the judgment, predominantly in damages for the Miguel Auza mine not being in operation. The book value of San Pedro’s fixed assets is US$4.8 million, according to Cahill.
