Alexco halts mill to focus on underground development at Keno Hill

While Alexco Resource (TSX: AXU) continues to make progress with ramp-up mining activities at its wholly owned Keno Hill silver mine in […]
The Keno Hill mill has been idled for the remainder of the year. Credit: Alexco Resource

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While Alexco Resource (TSX: AXU) continues to make progress with ramp-up mining activities at its wholly owned Keno Hill silver mine in Yukon, but the rate of underground performance improvements may still leave the company short of mill feed this year. The company has decided to suspend milling for the remainder of the year.

Ore extraction and milling operations will restart in January 2023, and with its anticipated production, cash self-sufficiency should be achieved within the first quarter of 2023, Alexco said. The company estimates that more than 4.0 million oz. of silver will be delivered in feed to the mill next year.

During the month of May, sustained underground development performance was supported by improved equipment availability at both the Flame and Moth and Bermingham mines. Underground advance at Bermingham reached the 1120 level, where the upper portion of the high-grade Bear zone has been cross-cut with two ore faces and predictive block model grades of 1,900 to 2,000 g/t silver, appearing to be well supported or exceeded in mine based rib and face assays.

Similarly, the district mill saw improved throughput and metallurgical performance. In May, the milled approximately 5,750 tonnes of ore, representing an approximate 19% increase over the previous month. The mill operated for 16 days, nine of which operating at throughput above the nameplate capacity of 400 t/d. The metallurgical performance continued to be robust, with over 93% total silver recoveries to concentrate and in excess of 16,300 g/t silver in the lead concentrate.

Still, while the underground performance improvements are notable, and the demonstrated supply of 150 to 250 t/d of ore to the mill has been important, Alexco notes that results to date suggest the rate of improvement in the advance of underground development remains insufficient to achieve the necessary number of production headings to sustain 400 t/d feed to the mill before the end of 2022.

To rectify this imbalance, the company has decided to temporarily suspend milling operations for five or six months and to focus all efforts on advancing underground development. After this development period is complete, it anticipates accessing, cross-cutting, and having available a total of approximately 120,000 tonnes of ore inventory grading 1,050 g/t silver at the Bermingham and Flame and Moth mines by the end of 2022.

"This refocusing of operations is the right decision and it is unquestionably in the best interest of the mine and the company as a whole," Alexco chairman and CEO Clynton Nauman said. "The alternative of continuing to operate under the status quo with slowly improving ore deliveries to the mill for the balance of 2022, only serves to diminish the benefit of extremely high-grade ore,"

While the mill is idle, additional financing will be required. As June 22, 2022, the cash position of Alexco is approximately $14 million with negative working capital of approximately $4.5 million. In April, the company announced a $13.1 million financing to support the ramp-up of mining operations at Keno Hill.

The final scope, cost and timing of the interim development-only plan, and the subsequent transition back to full mill operations with concentrate shipments in January 2023 remains under review. Additionally, the company will continue to evaluate all financing and strategic options available to enhance the value of Keno Hill.

Located 350 km north of Whitehorse, Keno Hill is considered one of the largest silver districts in the world, comprising numerous mineral deposits and more than 35 historical past-producing mine sites. Between 1913 and 1989, the district produced over 200 million oz. of silver with average grades of 1,368.55 g/t, making it the second-largest historical silver producer in Canada.

Alexco made the decision to restart development and production at Keno Hill in 2020, beginning with ore extraction from the Bellekeno mine and recommissioning of the district mill it previously built. Concentrate production and shipments have already begun.

More information is posted on www.AlexcoResource.com.

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