Excellon Resources Inc. T.EXN

This needs to be resolved !!

[Marine2]

Provision for litigation

Management’s Discussion & Analysis of Financial Results For the three and six-month periods ended June 30, 2022

The Company recorded a $22.2 million provision in Q3 2021 as required under IFRS’s International Accounting Standard 37 – Provisions, Contingent Liabilities and Contingent Assets, since receiving the formal written decision regarding the litigation involving the Company’s subsidiary, San Pedro Resources (“San Pedro”), in respect of the La Antigua mineral concession (“La Antigua”) as announced on August 10, 2021 (the “Judgment”). The Company believes the decision is without merit and not supported by the evidence, facts or law. The Judgment is solely against San Pedro,,, and the Company believes that the plaintiff has no recourse against the Company’s other assets in Mexico (including Platosa), Idaho, Saxony or Canada. San Pedro is a wholly owned, indirect subsidiary of the Company that holds the Miguel Auza processing facility and the original Miguel Auza mineral concessions, including the Evolucion mineral resource disclosed in September 2020. The book value of San Pedro’s assets included in the consolidated balance sheet after impairment is $1.5 million, including plant, property and equipment ($0.2 million), VAT recoverable ($1.1 million) and materials, supplies and other ($0.2 million).

The Company continues to pursue avenues through its labour, community and government relationships and is investigating remedies under international law. In the interim, San Pedro continues to operate in the ordinary course. San Pedro generates minimal cash flows from milling fees charged to the Platosa Mine for ore processing and holds minimal working capital. The Platosa Mine is owned and operated by an entirely separate subsidiary.