VANCOUVER, March 28, 2019 /CNW/ - Alexco Resource
Corp. (NYSE American: AXU, TSX: AXR) ("Alexco" or the
"Corporation") is pleased to announce the results of an independent
pre-feasibility study ("PFS") on its 100% owned Keno Hill Silver
project ("Keno Hill" or the "Project") in Yukon, Canada.
Highlights of the PFS:
Note that all dollar amounts referenced herein are in Canadian
dollars ("CAD") unless indicated otherwise.
- Project pre-tax and after-tax net present value ("NPV") is
$136.4 million ("M") and $101.3 M (5% discount rate), respectively, and
pre-tax and after-tax internal rate of return ("IRR") is 84% and
74%, respectively, at an assumed average life of mine ("LOM")
silver ("Ag") price of US$17.90 per
ounce ("oz").
- At current spot metal prices 1 and USD/CAD foreign
exchange rate, the project has a pre-tax and after-tax NPV of
$101.7 M and $79.9 M (5% discount rate), respectively, and a
pre-tax and after-tax IRR of 63% and 57%, respectively.
- LOM average annualized mine production is projected to be
154,000 tonnes ("t") per year over an approximately eight (8) year
project life at an average feed grade of 804 grams per tonne
("g/t") Ag, 2.98% lead ("Pb"), 4.13% zinc ("Zn") and 0.34 g/t gold
("Au").
- Total payable metals in concentrate are approximately
27.2 M oz of Ag, 67.2 M pounds ("lbs") of Zn, 65.4 M lbs of Pb over an eight (8) year mine
life. Average annualized contained silver in concentrate is
4.0 M oz per year, based on full
production years.
- Initial capital costs are estimated to be $23.2 M comprised of $17.9
M of surface and underground development costs to reach mill
commissioning plus an additional $5.3
M of net working capital for two (2) months of mill
operations ramp-up prior to positive cash flow.
- Total sustaining capital (including underground development and
property, plant and equipment ("PP&E")) is estimated to be
$76.5 M, which excludes the initial
capital of $23.2 M. Direct operating
costs of $321/t of ore are estimated
over the LOM.
- Upon achieving commercial production, Alexco has calculated
all-in sustaining costs ("AISC") (contained Ag, by-product basis)
over the LOM to be US$11.98/oz of Ag.
At current spot prices1 over the LOM, the calculated
AISC is US$10.86/oz of Ag.
|
Footnote:
|
1.
|
Current spot
prices are calculated as of March 22, 2019 using the following
assumptions: Ag US$15.46/oz, Au US$1311.30/oz, Pb US$0.9187/lb, Zn
US$ 1.2961/lb and USD/CAD exchange rate of $0.75.
|
Alexco Chairman and CEO, Clynton
Nauman, commented, "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
four million ounces of silver per year. The operational and
economic metrics of the PFS show an improvement over the previous
preliminary economic assessment ("PEA") in nearly all categories
including a higher NPV, increased annual silver production, reduced
capital requirements, improved operating costs and productivities,
increased mine tonnage and throughput, lower LOM AISC and an
impressive IRR. With the results of the PFS now in hand, we are now
on a clear path to production at Keno Hill."
Pre-Feasibility Study
The PFS includes existing mineral resource estimates for the
Flame & Moth, Bellekeno, Lucky Queen and Onek deposits, and an updated resource estimate
for the Bermingham deposit. In addition, mineral reserve
estimates are provided for assessment of underground mining
operations for all of the deposits with the exception of the
Onek deposit. The PFS was compiled by
Mining Plus Canada Consulting Ltd. ("Mining Plus") with
contributions from a team of qualified persons and firms. The PFS
assesses underground mining operations in all four (4) deposits,
with two deposits in concurrent production at all times, feeding an
existing conventional flotation mill to produce mineral
concentrates containing silver, lead, zinc and gold.
* See "Cautionary Note to Investors regarding Mineral Reserve
and Resource Estimates" below.
Key PFS metrics (and assumptions) are as follows:
Production
Profile
|
Total Tonnes
Mined/Milled
|
1,177,379
t
|
LOM Diluted Mill Feed
Grades
|
804 g/t Ag, 2.98% Pb,
4.13% Zn
|
Total Payable Silver
in Concentrate
|
27.2 M oz
|
Current Project
Life
|
8 years
|
Metallurgical
Recoveries
|
95.6% Ag, 88.6% Pb,
73.6% Zn
|
LOM Average Mill
Throughput
|
430 tonnes per day
("tpd")
|
Annualized Silver in
Concentrate 1
|
4.0 M
oz/yr
|
LOM Net Smelter
Return ("NSR")
|
$554/t
|
LOM AISC
|
US$11.98
|
Capital
Requirements
|
Pre-Production/Development Capital Cost
|
$17.9 M
|
Working Capital
Ramp-Up
|
$5.3M
|
LOM Sustaining
Capital 2
|
$76.5 M
|
Operating
Costs
|
Underground Mining
Direct
|
$201/t
|
Milling
|
$61/t
|
G&A
|
$59/t
|
Total Direct
Operating Cost
|
$321/t
|
LOM Sustaining
Capital 2
|
$68/t
|
Economics
|
|
Pre-Tax
|
After-Tax
|
Cash Flow
|
$174.1M
|
$129.4M
|
NPV (5%)
|
$136.4M
|
$101.3M
|
IRR
|
83.7%
|
74.2%
|
Payback Period
2
|
26 months
|
27 months
|
Notes:
|
1.
|
Based only on full
production years
|
2.
|
Calculated after
initial capital costs are incurred
|
The economic parameters are based on a metal price forecast with
the following assumptions: US$15.75/oz Ag in Year 1, increasing to
US$18.25/oz in Year 4 and long-term;
US$0.96/lb lead in Year 1, increasing
to US$1.00/lb long-term; US$1.25/lb zinc in Year 1, decreasing to
US$1.22/lb long-term; and USD/CAD
foreign exchange of US$0.75 in Year
1, increasing to US$0.77
long-term.
Alexco President, Brad Thrall,
commented, "The results reflected in this PFS include an optimized
mine plan for Flame & Moth with increased tonnes and reduced
development relative to the previous PEA. Similarly, at Bermingham
we have a 65% or 142,000 tonne increase to the mine plan primarily
as a result of 2018 exploration success at this deposit.
Furthermore, the silver production from the Bermingham mineral
reserve incorporates only one-third of the current Bermingham
silver indicated mineral resource and is therefore a reflection of
the potential upside at Bermingham, which will be a focus of
ongoing mine optimization and expansion studies. With over 1,000
meters ("m") of development completed at Flame & Moth and
Bermingham at the end of 2018, we are in a position to initiate
mill operations and achieve concentrate production within 5-7
months after making a production decision for Keno Hill. Finally,
with over 75% of projected revenue from Ag and a LOM Ag equivalent
("AgEq") grade of 1,136 g/t 1, Keno Hill represents an
exceptional silver development project with relatively low capital
intensity and is now on a path to become Canada's only primary silver producer."
Mining and Mineral Reserves
The PFS mine plan is centered on the Flame & Moth and
Bermingham deposits with LOM production contributions of 60% and
30%, respectively. Supplemental mine production is sourced from the
Bellekeno deposit early in the production period and from the Lucky
Queen deposit later in the mine life. The LOM production schedule
includes an annualized average of 430 tpd over an approximate eight
(8) year period. Nominal production rates are an initial 250 tpd
from the Bellekeno deposit, a variable 250 - 300 tpd from each of
the Flame & Moth and Bermingham deposits throughout the entire
mine life and 100 tpd from the Lucky Queen deposit in the final two
(2) years of the mine plan. Mining methods are predominantly
mechanized cut and fill with a trend toward long hole and drift and
fill mining methods in areas of increased deposit thickness. A
summary of the mineral reserve estimates from each of the deposits
included in the PFS is set out below:
|
Classification
|
Tonnes
|
Ag
(g/t)
|
Pb
(%)
|
Zn
(%)
|
Au
(g/t)
|
Contained
Ag
|
Bellekeno
|
Proven
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Probable
|
40,109
|
843
|
11.79
|
6.31
|
-
|
1,087,000
|
Lucky
Queen
|
Proven
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Probable
|
70,717
|
1,244
|
2.63
|
1.38
|
0.12
|
2,829,000
|
Flame &
Moth
|
Proven
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Probable
|
704,211
|
672
|
2.71
|
5.73
|
0.49
|
15,214,000
|
Bermingham
|
Proven
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Probable
|
362,343
|
972
|
2.59
|
1.32
|
0.13
|
11,324,000
|
Total
|
Proven
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Probable
|
1,177,379
|
804
|
2.98
|
4.13
|
0.34
|
30,454,000
|
Notes:
|
1.
|
Sum of all amounts
may not add up to totals due to rounding.
|
2.
|
The mineral reserves
above are included in the mineral resource estimate table in
Appendix 1.
|
* See "Cautionary Note to Investors regarding Mineral Reserve
and Resource Estimates" below.
|
Footnote:
|
1.
|
AgEq equivalent
was calculated using PFS average LOM metal prices and mill
recoveries: Ag US$17.90/oz, recovery 96%; Pb US$1.00/lb, recovery
89%; Zn US$1.22/lb, recovery 73%; Au US$1,321/oz, recovery
49%.
|
Processing and Infrastructure
The Keno District mill facility has a nameplate capacity of 408
tpd and employs conventional crushing, grinding, differential
flotation and dewatering processes to produce a Pb-Ag concentrate,
a Zn concentrate and a filtered tailings product for storage in an
established dry stacked tailings facility or to be used underground
as backfill. Ag and Pb minerals are recovered together in a Pb-Ag
concentrate and Zn minerals in a separate Zn concentrate. The mill
was previously commissioned in 2011 and operated for three (3)
years and has been under enhanced care and maintenance since 2014.
Silver recoveries are estimated to be 94% with 91% reporting to the
Pb concentrate, thereby enhancing Ag payability. The average LOM
throughput in the mill is 430 tpd over the eight (8) year schedule,
with a peak throughput to 550 tpd in the third year of the PFS
schedule. This would require an amendment to the current quartz
mining license ("QML") prior to the increase in mill
throughput.
Prior to resumption of mill operations, an additional
1.8 m x 3
m, 150-kilowatt ("kW") ball mill (purchased and on site)
would be installed to provide expanded grinding capacity ahead of
the flotation circuit. Additional tailings filtering capacity and
concentrate regrind mills will also be installed prior to mill
commissioning. Updated metallurgical recovery performance in the
PFS is based on five (5) additional locked cycle flotation tests on
representative sample composites from Flame and Moth, Bermingham
and Lucky Queen, as well as previous open cycle tests. Once in
commercial production, the Pb-Ag concentrate would have an expected
commercial grade of 54% Pb and 17,300 g/t Ag. The projected
metallurgical performance in the PFS is as follows:
Mill Recoveries
(Payable) – LOM
|
|
Into Pb-Ag
Concentrate
|
Into Zn
Concentrate
|
Ag %
|
91.0
|
4.6
|
Pb %
|
88.6
|
-
|
Zn %
|
-
|
73.6
|
Au %
|
49.0
|
-
|
Concentrate
Production (at full production)
|
|
Pb-Ag
Concentrate
|
Zn
Concentrate
|
Ag g/t
|
17,316
|
704
|
Dry Tonnes
|
52,772
|
65,436
|
Pb %
|
54.0
|
-
|
Zn %
|
-
|
53.0
|
Additional pre-production site infrastructure improvements
included in the PFS comprise a camp expansion, additional dry
facilities, expanded administration offices, an additional
maintenance facility, electrical power grid substation at
Bermingham and a water treatment plant at Bermingham.
Capital Costs
The Keno Hill Silver Project is a low capital intensity project
due to its existing mine and mill infrastructure. The initial
capital costs of $23.2 M comprises
$17.9 M of surface and underground
development costs to reach mill commissioning plus an additional
$5.3M of working capital to reach
positive cash flow. PP&E expenditures in the amount of
$2.8 M are being allocated to mill
upgrades to increase the grinding and filtering capacity and to
complete other improvement modifications prior to reaching
commercial production.
Initial Capital
Costs (CAD$ Millions)
|
Mine
Development/PP&E
|
11.8
|
Mill
Refurbishment
|
2.8
|
Site
Infrastructure/PP&E
|
1.4
|
Owners Costs,
Contingency
|
1.9
|
Total
Pre-Production Capital
|
17.9
|
|
|
Working
Capital
|
5.3
|
Total
|
23.2
|
Other
All of the regulatory approvals required for mining and
processing activities associated with the Bellekeno, Lucky Queen
and Flame & Moth deposits are currently in place. An amendment
to the QML and Water Use Licence ("WUL") are required for mining
and processing activities associated with the Bermingham deposit.
Both of these license amendments are underway. The amendment to the
QML is anticipated in Q2 2019 while the amendment to the WUL is
anticipated to be received in Q3 2019.
The PFS was compiled by Mining Plus with contributions from a
team of Qualified Persons as defined by National Instrument 43-101
– Standards of Disclosure for Mineral Projects ("NI 43-101")
as follows:
- Zach Allwright, P.Eng. of Mining
Plus
- Hassan Ghaffari, P.Eng of Tetra
Tech
- Gilles Arseneau, Ph.D., P.Geo.
of SRK Canada Inc.
- Cliff Revering, P.Eng., of SRK
Canada Inc.
- Paul Hughes, Ph.D., P.Eng. of
Mining Plus
- Adrian Churcher, P.Eng. of
Mining Plus
All mineral resources are classified following the CIM
Definition Standards for Mineral Resources and Mineral Reserves
(May 2014), in accordance with the
CIM Estimation of Mineral Resources and Mineral Reserves Best
Practice Guidelines and NI 43-101.
See "Cautionary Note to Investors regarding Mineral Reserve
and Resource Estimates" below.
The disclosure in this news release of scientific and technical
information regarding exploration has been reviewed and approved by
Alan McOnie, FAusIMM, Alexco's Vice
President, Exploration, while that regarding mine development and
operations has been reviewed and approved by Neil Chambers, P.Eng., Mine Superintendent, each
of whom is a Qualified Person and has approved the disclosure
herein. The technical information in this news release was reviewed
by Zach Allwright, P.Eng. and
Adrian Churcher, P.Eng. both of
Mining Plus, Gilles Arseneau, Ph.D.,
P.Geo. and Cliff Revering, P.Eng,
both of SRK Canada Inc. and Hassan
Ghaffari, P.Eng. of Tetra Tech, each of whom is a Qualified
Person and has approved the disclosure herein.
Conference Call Details
Alexco will hold a conference call and webcast tomorrow,
March 29, 2019 at 9:00 a.m. Eastern (6:00
a.m. Pacific). To participate in the live call, please
use one of the following methods:
Dial toll free from
Canada or the US:
|
1-800-319-4610
|
|
|
Dial from outside
Canada or the US:
|
1-604-638-5340
|
|
|
Dial from
Germany:
|
0800-180-1954
|
|
|
Dial from
Switzerland:
|
0800-802-457
|
|
|
Dial from the
UK
|
0800-101-2791
|
|
|
Confirmation
Code#:
|
Ask to join the
Alexco conference call
|
|
|
Live audio
webcast:
|
www.alexcoresource.com
|
Participants should connect five to ten minutes before the
call.
The conference call will be recorded and an archived audio
webcast will be available at www.alexcoresource.com.
About Alexco
Alexco owns the majority of the historic high-grade Keno Hill
Silver District in Canada's
Yukon Territory.
Alexco also operates a wholly-owned subsidiary business, Alexco
Environmental Group, that provides mine-related environmental
services, remediation technologies and reclamation and mine closure
services to both government and industry clients in North America and elsewhere.
Please visit the Alexco website at www.alexcoresource.com
Some statements ("forward-looking statements") in this news
release contain forward-looking information concerning the results
of the PFS, anticipated results and developments in Alexco's
operations in future periods, planned exploration and development
of its properties, plans related to its business and other matters
that may occur in the future, made as of the date of this news
release. Forward looking statements may include, but are not
limited to, statements with respect to results of the PFS; future
mineral exploration including the estimation of mineral reserves
and mineral resources and the realization of mineral reserve and
mineral resource estimates; future mine construction and
development activities; future mine operation and production; the
timing of activities and reports; the amount of estimated
development and operational expenses; projected operational and
economic metrics; the success of exploration and development
activities; the potential upside and growth in respect of certain
deposits comprising the Keno Hill Silver Project; anticipated
permitting time lines; requirements for additional permits (or
amendments to existing permits); anticipated installation of
certain infrastructure; projected equipment and production
capacity; and potential capital, revenue and sources and uses of
funds. Forward-looking statements are subject to a variety of known
and unknown risks, uncertainties and other factors which could
cause actual events or results to differ from those expressed or
implied by the forward-looking statements. Such factors include,
among others, risks related to actual results and timing of
exploration and development activities; actual results and timing
of mining activities; actual results and timing of environmental
services activities; actual results and timing of remediation and
reclamation activities; conclusions of economic evaluations;
changes in project parameters as plans continue to be refined;
future prices of silver, gold, lead, zinc and other commodities;
possible variations in mineable resources, grade or recovery rates;
failure of plant, equipment or processes to operate as anticipated;
accidents, labour disputes and other risks of the mining industry;
First Nation rights and title; continued capitalization and
commercial viability; global economic conditions; competition; and
delays in obtaining governmental approvals or financing or in the
completion of development activities. Forward-looking statements
are based on certain assumptions that management believes are
reasonable at the time they are made. In making the forward-looking
statements included in this news release, Alexco has applied
several material assumptions, including, but not limited to, the
assumption that Alexco will be able to raise additional capital as
necessary, that the assumptions, projections and estimates in the
PFS will proceed as planned, and that market fundamentals will
result in sustained silver, gold, lead and zinc demand and prices.
There can be no assurance that forward-looking statements will
prove to be accurate and actual results and future events could
differ materially from those anticipated in such statements. Alexco
expressly disclaims any intention or obligation to update or revise
any forward-looking statements whether as a result of new
information, future events or otherwise, except as otherwise
required by applicable securities legislation.
Cautionary Note to Investors regarding Mineral Reserve and
Resource Estimates
This press release has been prepared in accordance with the
requirements of the securities laws in effect in Canada, which differ from the requirements of
United States securities
laws. The terms "mineral reserve", "proven mineral reserve"
and "probable mineral reserve" are Canadian mining terms as defined
in accordance with NI 43-101 and the Canadian Institute of Mining,
Metallurgy and Petroleum (the "CIM") - CIM Definition Standards on
Mineral Resources and Mineral Reserves, adopted by the CIM Council,
as amended. These definitions differ materially from the
definitions in SEC Industry Guide 7 ("SEC Industry Guide
7") under the United States Securities Act of
1933, as amended. Under SEC Industry Guide 7 standards, a
"final" or "bankable" feasibility study is required to report
reserves, the three-year historical average price is used in any
reserve or cash flow analysis to designate reserves, and the
primary environmental analysis or report must be filed with the
appropriate governmental authority.
In addition, the terms "mineral resource", "measured mineral
resource", "indicated mineral resource" and "inferred mineral
resource" are defined in and required to be disclosed by NI 43-101;
however, these terms are not defined terms under SEC Industry Guide
7 and are normally not permitted to be used in reports and
registration statements filed with the SEC. Investors are cautioned
not to assume that all or any part of a mineral deposit in these
categories will ever be converted into SEC Industry Guide 7
reserves. "Inferred mineral resources" have a great amount of
uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all
or any part of an inferred mineral resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or
pre-feasibility studies, except in rare cases. Investors are
cautioned not to assume that all or any part of an inferred mineral
resource exists or is economically or legally mineable. It is
reasonably expected that the majority of inferred mineral resources
could be upgraded to indicated mineral resources with continued
exploration. Disclosure of "contained ounces" in a resource is
permitted disclosure under Canadian regulations; however, the SEC
normally only permits issuers to report mineralization that does
not constitute "reserves" by SEC Industry Guide 7 standards as in
place tonnage and grade without reference to unit measures.
Accordingly, information contained in this press release
regarding descriptions of the Corporation's mineral deposits may
not be comparable to similar information made public by U.S.
companies subject to the reporting and disclosure requirements
under the United States federal
securities laws and the rules and regulations thereunder, including
SEC Industry Guide 7.
APPENDIX 1 - MINERAL RESERVES AND MINERAL
RESOURCES
The table below represents the current Keno Hill mineral
resource estimate inclusive of mineral reserves in the indicated
mineral resource category. Mineral resource estimates for the
Bellekeno, Flame & Moth, Onek and
Lucky Queen deposits are unchanged from the Company's prior public
disclosure. The Bermingham mineral resource estimate has been
updated as disclosed in the footnote below.
|
Classification
|
Tonnes
|
Ag
(g/t)
|
Pb
(%)
|
Zn
(%)
|
Au
(g/t)
|
Contained Ag
(Oz)
|
Bellekeno
|
Indicated
|
262,000
|
585
|
3.5
|
5.3
|
n/a
|
4,927,000
|
|
Inferred
|
243,000
|
428
|
4.1
|
5.1
|
n/a
|
3,344,000
|
Lucky
Queen
|
Indicated
|
132,300
|
1,167
|
2.43
|
1.63
|
0.16
|
4,964,000
|
|
Inferred
|
257,900
|
473
|
1.04
|
0.8
|
0.13
|
3,922,000
|
Flame &
Moth
|
Indicated
|
1,679,000
|
498
|
1.85
|
5.33
|
0.42
|
26,883,000
|
|
Inferred
|
365,200
|
356
|
0.47
|
4.25
|
0.26
|
4,180,000
|
Onek
|
Indicated
|
700,200
|
191
|
1.24
|
11.85
|
0.6
|
4,300,000
|
|
Inferred
|
285,100
|
118
|
1.15
|
8.26
|
0.42
|
1,082,000
|
Bermingham1
|
Indicated
|
1,102,300
|
930
|
2.4
|
1.7
|
0.14
|
33,004,000
|
|
Inferred
|
509,400
|
717
|
1.7
|
1.5
|
0.15
|
11,746,000
|
Total
|
Indicated
|
3,875,800
|
594
|
2.0
|
5.3
|
0.34
|
74,078,000
|
|
Inferred
|
1,660,600
|
455
|
1.6
|
3.7
|
0.20
|
24,274,000
|
Notes:
|
1.
|
The effective date of
this mineral resource table is September 26, 2018, and is based on
a revised narrow-vein interpretation prepared by Alexco on
September 13, 2018. An initial vein model was prepared by Alexco on
August 28, 2018, which was predicated on a wider vein
interpretation that incorporated a significant volume of low-grade
material (i.e. <100 g/t silver). Although an initial mineral
resource estimate was completed using the wider vein model, a
subsequent update has been completed using the narrow-vein model to
remove this low-grade tonnage for use in the 2018 PFS study. The
narrow-vein geological model was interpreted using a 100 g/t silver
cut-off grade to define the mineralized veins but otherwise
estimated using the same parameters.
|
2.
|
Mineral resources for
Bermingham are reported at a value per tonne cut-off of CAD$185/t
using the following metal prices and recoveries; Ag US$20.80/oz,
recovery 96%; Pb US$1.05/lb, recovery 97%; Zn US$1.20/lb, recovery
88%; Au US$1,450/oz, recovery 72%. Foreign exchange rate of $0.80
USD/CAD. All numbers have been rounded to reflect the relative
accuracy of the estimates. Mineral resources are not mineral
reserves and do not have demonstrated economic
viability.
|
* See "Cautionary Note to Investors regarding Mineral Reserve
and Resource Estimates" above.
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SOURCE Alexco Resource Corp.