Alexco Resource CEO: Keno Hill Becoming a Promising Mining District

CEO Interviews
CEO Interviews

Alexco Resource CEO Clynton Nauman and President Brad Thrall joined INN to discuss their company’s progress in the Keno Hill district.

Alexco Resource (TSX:AXR,NYSEAMERICAN:AXU) has made significant progress in the region, collecting and exploring promising properties in the Keno Hill district. 

According to Alexco CEO Clynton Nauman, the Keno Hill mining district has presented the company with a unique opportunity to renew the region through environmental remediation work. Alexco was able to secure its portfolio of properties in Keno Hill through an auction conducted by the Canadian federal government, which recognized the potential for Alexco to clean up the area.

According to Alexco President Brad Thrall, the historic production at Keno Hill makes the area a very appealing target for exploration. While environmental remediation work was necessary to ensure future mining will follow environmental regulations, the subsequent exploration work conducted in the area has returned 50 percent of historic production back into resources.

Below is a transcript of our interview with Alexco CEO Clynton Nauman and President Brad Thrall. It has been edited for clarity and brevity.

Investing News Network: You have some pretty interesting developments going on up there in the Yukon. Let’s start with the mine at Keno Hill. What’s happening?

CEO Clynton Nauman: Recently we completed a prefeasibility study looking to move the Keno Hill silver district back to production. Keno Hill was originally discovered way back in the early 1900s, and it mined a couple of hundred million ounces of silver between the early 1900s and 1980. The average grade of production was in excess of 1,200 to 1,400 grams per ton of silver. On a global scale, the district is notable at least, and represents a huge opportunity for Canada to enter the silver business in competition with other major silver producers in the world. It’s a standalone district and through all the work we’ve done there, we’re moving it back towards production.

INN: So what happened between 1980 and now? There were some tremendous changes in the mining environment in the Yukon, not just Keno Hill, but throughout. Was that one of the factors that brought production to a standstill? 

CN: The major factor that brought production to a standstill at Keno Hill was the increasing environmental regulations, and properly so. Keno Hill was developed early and did not have the regulatory control that mining companies and mining areas have on them presently. They ended up having to shut down operations in the district because they couldn’t keep up with the environmental controls, the facilities that were necessary and the capital that was necessary to come into compliance with the evolving regulations. That was a big factor in the shutdown of the district. It stayed dormant, in fact, until we came along in 2006. We were able to come to an arrangement with the federal government of Canada to both clean up the district on behalf of the taxpayers and also move the district back to production.

INN: Was it mined out or was it a series of other factors? If it wasn’t mined out, what are we learning now about where we can go forward?

CN: Keno Hill was 30 to 40 mines in production. The district itself is 25 to 30 kilometers long and 15 to 20 kilometers wide. It’s a very large district. It’s not a single mining operation. As a result of that, there was a fair amount of ore, high-grade silver ore that cropped out on the surface. The old timers essentially moved from one area where an orebody cropped out to the next using a “bead on a string” type of approach. None of those mines were mined any deeper than 100 to 200 meters. The deepest mine of the district is 300 meters. In today’s world, that is relatively shallow and no comprehensive geological picture was put together in the district.

INN: Is that because they just didn’t have the technology?

CN: It was primarily because the district was divided up with a lot of different companies with 10, 12, 15 companies working in the district. They didn’t necessarily share information one with the other.

INN: So have you brought all of this together as one single project now?

President Brad Thrall: Yes. I mean the package that we now own was the former United Keno Hill Mines, and it was quite diluted too. It was at that time that all of these different mines and projects all came together under one corporate structure, which was United Keno Hill. When we bought the assets in 2006, it was an auction processed by the government of Canada. We were one of about a dozen companies that bid on the assets and Alexco has a unique business model.

We’re not only mine explorers, developers, operators, but we also have an environmental remediation services business. We’re miners, but we’re also very skilled at environmental remediation. By bringing these two skills together we were able to be successful purchasers of this district. We own the entire district, all the claims, as one asset. We also are moving steadily towards putting the final closure plan together that we’re the sole source contractor on behalf of Canada to implement.

INN: What are you looking at moving forward in 2019?

CN: We have just completed a prefeasibility study as I’d mentioned earlier. That study contemplates the mining of about 30 million ounces of silver from four mines in the district, which takes into account that about 90 percent of that production, which totals about 1.2 million tons over eight plus years, comes from a couple of mines that we have discovered since about 2013. The project is one that will produce 4 million ounces of silver per year plus a significant amount of lead and zinc. We produce two concentrates. The concentrates are shipped through Alaska or go underwater in Alaska. It’s our intention to move forward and put this district back into production.

INN: You’re close to green lighting this project then?

CN: We’re like every other mining company. We required a lot of regulatory authorizations. We are lacking one final authorization that we expect to receive in the third quarter of this year. Once we have that, we will make a production decision. Prior to that, we have enough confidence that we’re moving forward with a lot of the capital work that’s required to move the district back to production.

INN: What is your relationship with indigenous nations in the area? Have you been able to get all that in place?

BT: Relationships with the First Nations community are critical. We operate within the traditional territory of the First Nation of Nacho Nyak Dun (NND), mainly based out of the community of Mayo, which is about 40 kilometers from our project. We’ve had a great relationship since day one. We have in place what we call a cooperation benefits agreement with NND. That outlines a number of opportunities that we can bring, including scholarships and legacy funds. There are contracting opportunities and a lot of the normal things you would see in a modern benefit agreements. There are a lot of opportunities and they’ve been really great partners. On the other hand, they also have the opportunity to comment and look at all of our permits and authorizations and bring their perspective as well. It’s very important.

INN: What infrastructure is there in place to move the product from there to market, ultimately?

BT: This district has been in operation for decades. I mean, it’s an all-weather, year-round road. We’re on the Yukon power grids so we don’t have to generate our own power. Several years ago they added another 10 megawatts of power to the grid called the Mayo B. For a project in the north, I would think we’ve got infrastructure as good as any northern project.

INN: Wow. It’s pretty exciting. That’s Keno Hill. Let’s also talk about the environmental consulting management side of your business. Where are you at? 

CN: Historically, this business is one that Brad and I were running prior to forming Alexco. We were selected as the preferred purchaser of the Keno Hill district, the silver district, because of our background, expertise and demonstrative success in the reclamation business in the north. When we acquired Keno Hill, we were automatically in the reclamation business because that was the commitment to the federal government of Canada. We also recognized that there was a lot of opportunity in the sector, in the mining sector generally, for people with expertise in late-stage mine operations and mine reclamation and closure, up to and including trying to advise people on how to minimize long-term liabilities associated with orphaned or abandoned mine sites.

The business started from there. It has grown up over the last eight or 10 years. Last year our top line revenues were C$20 million. It’ll be more than that in 2019. We’re able to hold on to 20 to 30 percent gross margin. So it has expanded from Canada into the United States. We do a lot of work in North America and some international work also.

INN: How could the global price of silver influence your future progress at Keno Hill?

CN: That’s a really good question. The most recent study that we have completed is one that we have deliberately rightsized for Alexco. We’re not a large company. It’s relatively low capital, high return and is economic in today’s silver environment, which is sub-US$15 per ounce of silver. That’s the reason that we’re excited about this project. It also means that in the future, there are a lot of other silver resources, indicated resources, beyond the reserves that we have on our books. Under a higher silver price environment, which everybody hopes it’s going to be the factor of the future, a lot of resources are going to come into reserve and will eventually be mined. Although we’re starting with an eight year mine life, our intention is to move this district to production and keep it in production for the foreseeable future.

INN: In a historically rich zone, is it a question of when you will start production again?  

CN: Yes. One of the cornerstones of our success has been the fact that we’ve been very successful on the exploration side. We started with virtually no reserves or resources in the district. At present time, we have more than 80 million ounces of indicated resource including the reserves that are in the current mine plan and another 20 plus million ounces of inferred resource, so you’re looking at a district now that has in total, in all categories, more than a hundred million ounces of silver. That is no small achievement in the silver business. It’s every indication that there will be more ore deposits to be found similar to the ones that we have found in the last few years here.

BT: If you look over at the history of this district, I think Keno Hill produced about 200 million ounces of silver over nearly 70 years. In just the span of six to seven years, our exploration group has put about 50 percent of that historic production back into resources. Our group was just recently awarded the Spud Huestis award by NBC. That really is to the testament of the exploration, the brain power of our exploration team.

This interview is sponsored by Alexco Resource (TSX:AXR,NYSEAMERICAN:AXU). This interview provides information which was sourced by the Investing News Network (INN) and approved by Alexco Resource in order to help investors learn more about the company. Alexco Resource is a client of INN. The company’s campaign fees pay for INN to create and update this interview.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Alexco Resource and seek advice from a qualified investment advisor.

This interview may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, receipt of property titles, etc. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The issuer relies upon litigation protection for forward-looking statements. Investing in companies comes with uncertainties as market values can fluctuate.


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