The companies said this week toll milling could start next year subject to successful processing of a 4,000 tonne bulk sample from San Sebastian, 42km north-west of the mill, in the third quarter in 2018 and the parties being happy with due diligence assessment.

Excellon processes ore from its flagship La Platosa silver-lead-zinc mine, near Bermejillo in Durango State, at Miguel Auza.

La Platosa produced 718,460oz of silver, 4.2 million pounds of lead, and 6.1Mlb of zinc in calendar 2017.

Hecla has an estimated 3.4Moz silver, 12,500oz gold, 18,900t zinc, 14,538t of lead and 8,817t of copper in 488,030t of indicated resources in the Hugh Zone at San Sebastian, and 1.2Mt inferred containing about 6.4Moz silver, 6,000oz gold, 31,900t zinc, 22,433t lead and 18,790t copper.

Excellon said about 12,000t/month of San Sebastian ore would be batch processed at Miguel Auza under the proposed longer term formal milling arrangement, yielding copper, lead and zinc concentrates after installation of a dedicated copper flotation circuit.

"This arrangement provides opportunities for additional operating cash flow to the company and lower milling cost per tonne and all-in sustaining cost from Platosa," Excellon president and CEO Brendan Cahill said.

"Our milling facility's exceptional scalability has made this opportunity possible, with ample capacity remaining to process increased Platosa production and potential new discoveries at either Platosa or Miguel Auza."

Hecla's president and CEO Phillips S Baker Jr said the deal could be a key step in extending the life of the San Sebastian mine.

"San Sebastian sulphides have the potential for five years of mine life and considerable upside with our recent exploration discoveries," he said.

"Excellon's Miguel Auza facility is well-located for our purposes and expected to be well suited to process our sulphide ore going forward."

Miguel Auza has a 650tpd ball mill in operation and a second, 150tpd ball mill on standby. Crushing capacity is said to be more than 1,000tpd, none of which is required for Platosa ore, which is crushed on site at Platosa. The plant is expected to have enough initial flotation capacity to handle the San Sebastian copper con.

Excellon said planning was already underway with Hecla on the proposed copper circuit upgrade.

The latter will have an option to extend the initial five-year toll milling agreement by two years.