Alexco Approaching Production Decision for Keno Hill Silver District

- August 22nd, 2018

Alexco Resource, once Canada’s only primary silver producer, will soon make a decision on whether to start producing again at the Yukon-based Keno Hill Silver District.

Alexco Resource (TSX:AXR,NYSEAMERICAN:AXU) was once Canada’s only primary silver producer, churning the metal out at its Bellekeno mine in the Keno Hill Silver District.

But times changed. The company shut Yukon-based Bellekeno down at the end of 2013 after nearly three years of production, citing a variety of factors, including low silver prices.

Five years later, times are changing again. Alexco has been working on its assets in the Keno Hill area since Bellekeno’s closure, and the company believes it could be time to restart production in the area.

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“We’ve been pretty active since [Bellekeno shut down], building up resources,” said Brad Thrall, president of Alexco, during a recent media tour of the company’s property. “We’ve got Flame & Moth, and now we’ve got Bermingham.” The site also includes the past-producing Lucky Queen deposit.

A preliminary economic assessment (PEA) released in March 2017 pegs Keno Hill’s life-of-mine output at 1,021,000 tonnes grading 843 g/t silver, 3.3 percent lead and 4.6 percent zinc. Bermingham has the highest grade at 220,000 tonnes grading 1,276 g/t silver, while Flame & Moth has the highest tonnage at 683,000 tonnes grading 666 g/t silver.

Bellekeno and Lucky Queen are smaller at 37,000 tonnes grading 747 g/t silver and 81,000 tonnes grading 1,206 g/t silver, respectively.

Making a stop while touring Alexco’s property. 

Adding Flame & Moth, Bermingham and Lucky Queen to the production profile for Keno Hill addresses one of the issues that led to the closure of Bellekeno back in 2013. As Thrall explained, the mine shut down in part because it didn’t produce enough material to feed the company’s mill.

Now, he said, Alexco is much better equipped to do that. Under the mine plan outlined in last year’s PEA, the company will run 400 tonnes a day through the mill, drawing first from “low-hanging fruit” at Bellekeno and then moving on to the other deposits. Flame & Moth will produce the most, accounting for 67 percent of total life-of-mine mill feed.

“We [weren’t] just sitting here on a resource,” Alan McOnie, Alexco’s vice president, exploration, emphasized. “We are looking and actively searching for more.”

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Work continues at Keno Hill, with a number of projects underway. Among other things, Alexco is finishing the decline at Flame & Moth. Standing in front of the tunnel’s entrance, Thrall said the company can move forward at a rate of about 3 to 3.5 meters a day; as of mid-August 301 meters were complete.

He anticipates that the decline will reach its full length of 550 meters in Q4 of this year. It will be the second decline at the property, with the first being a 580-meter decline at Bermingham.

The company is also in the midst of a 5,000-meter drill program at Bermingham, which Lisa May, director of investor relations, said is geared at “tighten[ing] up spacing.” Initial results have already been released, with highlights including 12 meters (true width) of 1,019 grams per tonne silver.

Standing outside the entrance to the Flame & Moth decline.

Those projects and other ongoing work at Keno Hill are all leading up to the publication of a prefeasibility study (PFS). Due for release at the end of Q3 or early Q4 of this year, the PFS will guide Alexco toward a production decision.

“It’s a really busy time for us, we have a lot going on,” said May. “[The PFS] will really be the document that sets the tone for us to make a production decision.”

The PFS will update the current resource and reserve estimates for Keno Hill, and will incorporate other work completed since the publication of last year’s PEA. Alexco’s decision on whether to start production will depend on permitting as well — while Bellekeno, Flame & Moth and Lucky Queen are fully permitted, the company is still waiting on an okay for Bermingham. 

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“We are in the final permitting stage for Bermingham, and this is an amendment to permits that we already have,” said May. “We’re well into that process, [and it] is going well … we expect that in Q1 2019.”

May said that Alexco will also take silver prices into account when deciding on whether to bring Keno Hill into production once again.

“One of the important factors that people may tend to forget to take into consideration is currency,” she added. “That’s a big thing for us because we are a Canadian company and we produce in Canadian dollars, but then we sell in US dollars. That’s significant when it comes to looking at our economics.”

Alexco’s McOnie stands at one of the company’s water treatment plants.

Even with that important milestone coming up, Alexco also continues to move forward in other areas. During the site visit, all members of the Alexco team pointed to the company’s environmental division, Alexco Environmental Group (AEG), which is making strides of its own.

As May explained, the Alexco story actually starts with AEG. “It’s not a typical mining story,” she said. “The former owner of the district was United Keno Hill, and they … went into receivership. The property was then taken over by the government of Canada.”

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No reclamation work had been done on any of the many mine sites on the property, and the Canadian government made the decision to auction off the package of land to a company willing to remediate the area. With a proposal to work on both mining and reclamation, Alexco emerged as the winner.

AEG is responsible for cleanup efforts at Keno Hill, but now the company also operates at other sites as well — in fact, in June AEG acquired Contango Strategies. “It’s a good business that generates $12 to $13 million in revenue a year … it’s a great business, and we’re growing it,” said Thrall.

Making another stop while touring Alexco’s property. 

With Alexco’s production decision approaching quickly, those watching the company will have plenty to look forward to. And those interested in the Yukon may want to keep an eye on its neighbors as well — in true Yukon fashion, Alexco has collaborative relationships with Banyan Gold (TSXV:BYN) and Metallic Minerals (TSXV:MMG), both of which have assets close to the Alexco site.

“I think the Yukon is the most inclusive mining community that I’ve ever been involved with,” said May. “People understand mining culture here, they welcome it, they want to be a part of it. And likewise we want to be part of the community.”

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Editorial Disclosure: Alexco Resource is a client of the Investing News Network. This article is not paid-for content.

The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence. 

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