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By Shane Lasley
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Clear path to Keno Hill silver production

PFS details Flame & Moth-centric mine plan sized for Alexco

 

Last updated 4/12/2019 at 5:34am

Mitchell Haynen

An ore car rests outside a historical mine on Alexco Resource's Keno Hill Silver District property in the Yukon.

With a pre-feasibility study that details a small but financially robust mine, Alexco Resource Corp. is ready to ramp up mining at its Keno Hill Silver District project in the Yukon.

"The results of the PFS reflect the exceptional asset we have in Keno Hill and demonstrate a robust high margin primary silver operation that can produce approximately 4 million ounces of silver per year," said Alexco Resource Chairman and CEO Clynt Nauman.

At an average rate of about 430 metric tons per day, the mill is expected to produce a total of 27.2 million oz of silver, 67.2 million pounds of zinc, 65.4 million pounds of lead over an eight-year mine life.

These payable metals will be recovered from 1.18 million metric tons of reserves averaging 804 grams per metric ton silver, 4.13 percent zinc, 2.98 percent lead and 0.34 g/t gold.

Using current metals prices – US$15.46 per ounce silver, US$1,311/oz gold, US$1.30 per pound zinc and US92 cents/lb lead – this mine is expected to produce an after-tax net present value (five percent discount) of C$79.9 million and an after-tax internal rate of return of 57 percent.

Assuming an average silver price of US$17.90/oz, this operation produces an after-tax NPV (5 percent discount) of C$101.3 million and an IRR of 74 percent.

"Here we have a project which is right-sized for Alexco and is economic in today's environment," said Nauman.

Not only is this project right-sized, it is also relatively inexpensive to get going, thanks to the mill facilities established during previous mining, as well as the underground development completed by the company over the past couple of years.

As a result, Alexco only needs to invest C$17.9 million into surface and underground development to get the mill ready for commissioning and another C$5.3 million for two months of net working capital to ramp-up operations to a point it is generating positive cash flow.

"With the results of the PFS now in hand, we are now on a clear path to production at Keno Hill," said Nauman.

New mine plan

Alexco began commercial production at Keno Hill early in 2011 but suspended operations in 2013 due in large part to low silver prices at the time.

Since shutting down production, the Vancouver, B.C.-based company has continued exploration of the high-grade silver across the Keno property, which blankets a district that has been producing silver for more than a century.

As a result, the company has substantially increased the high-grade silver reserves since 2013.

"90 percent of the ore in this plan was discovered in the last five years," said Nauman.

The new mine plan for Keno centers on Flame & Moth and Bermingham, two high-grade silver deposits that were not part of Alexco's previous mining on the property.

"About 90 percent of the mine plan involves mining of the Flame & Moth and Bermingham deposits," said Alexco Resource President Brad Thrall.

Flame & Moth, which hosts 704,211 metric tons of reserves averaging 672 g/t silver, 5.73 percent zinc, 2.71 percent lead and 0.49 g/t gold, is the centerpiece of this plan.

While this represents the lowest grades of the four deposits to be mined, a consistent orebody and portal adjacent to the mill makes Flame & Moth the centerpiece of the initial eight-year plan.

"Flame & Moth is a thick and continuous vein with average thicknesses of five meters and up to seven meters in locations," said Thrall.

At any one time, however, the company plans to have two deposits delivering ore to the mill. As a result, higher grade ore from Bellekeno, Bermingham and Lucky Queen will supplement the ore from Flame & Moth. Not only will this help bolster the silver grades being fed into the mill, having two mines operating at a time will provide more surety to the mine planning.

The initial ore, however, will come from Bellekeno, a previously producing mine that hosts 40,109 metric tons of reserves averaging 843 g/t silver, 11.79 percent lead and 6.31 percent zinc.

At the same time, crews will finish mining to the ore zones at Flame & Moth, where the company completed 402 meters of underground development last year.

Alexco Resource Corp.

With modern mill facilities already in place adjacent to the Flame & Moth portal, it is only expected to cost around C$23.2 million to resume operations at its Keno Hill silver mine.

"We are already about halfway to reaching the first ore stopes at Flame & Moth," said Thrall.

Once mining the reserves at Bellekeno is complete, expected to take about six months, the underground crew there will move over to Bermingham, a deposit with 362,343 metric tons of reserves averaging 972 g/t silver.

Alexco currently has the environmental licenses needed to begin production at Flame & Moth and expects the requisite license for Bermingham sometime after mid-year.

With mill upgrades currently underway and most of the underground development and other infrastructure already in place, Alexco could once again be producing silver in the historic Keno district sometime later this year.

"These are new orebodies, this is a new plan, the project is right-sized for Alexco and the economics are positive in today's market," said Nauman.

 

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