Alexco Resources Corp. [AXR-TSX, AXU-NYSE] is raising US$6.5 million via a bought deal equity financing with proceeds earmarked for ongoing development at the Keno Hill silver project in the Canadian Yukon, which the company says is on a clear path to production.
In an announcement that came after the close of trading on June 3, 2019, Alexco said the underwriter (Cantor Fitzgerald Canada Corp.) has agreed to purchase, on a bought deal basis, 6.5 million common shares of Alexco at US$1.00 per share.
The underwriter has been given an over-allotment option to purchase an additional 975,000 shares on identical terms for a period of 30 days following the date of closure.
When trading in the shares resumed on Tuesday, Alexco eased 15.6% or 25 cents to $1.35 on volume of 156,190.
Alexco’s key asset is the 100%-owned United Keno Hill Mine, which ranks as Canada’s second largest producer of silver, behind Cobalt, Ontario.
During an illustrious history, it produced 217 million ounces of the precious metal.
On March 28, 2019, Alexco released the results of an independent pre-feasibility study, which puts the Keno Hill project “on a clear path to production,” Alexco Chairman and CEO Clynton Nauman said in a press release. The study was centred on the Flame & Moth and Bermingham deposits with contributions of 60% and 30% respectively. Supplemental mine production is expected to be sourced from the Bellekeno deposit early in the production period and from the Lucky Queen deposit later in the mine life.
The life of mine (LOM) production schedule includes an annualized average of 430 tonnes per day over eight years.
“With over 1,000 metres 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 five to seven months after making a production decision for Keno Hill,” said Alexco President Brad Thrall.
The pre-feasibility study is based on total probable reserves of 30.4 million ounces of silver, of which roughly half is hosted by Flame & Moth. Bermingham is estimated to host 11.3 million ounces. Of the balance, Lucky Queen has 2.8 million ounces and Bellekeno has approximately one million ounces.
Life of mine average annual mine production is projected to be 154,000 tonnes per year over an approximately eight-year lifespan at an average feed grade of 804 grams per tonne silver, 2.98% lead, 4.13% zinc, and 0.34 g/t gold.
Total payable metals in concentrate are pegged at approximately 27.2 million ounces of silver, 67.2 million pounds of zinc, 65.4 million pounds of lead over the mine life. Average annualized contained silver in concentrate is forecast at 4.0 million ounces annually, based on full production years.
The pre-feasibility study estimates initial capital costs at $23.2 million, consisting of $17.9 million on surface and underground development costs to reach mill commissioning, plus an additional $5.3 million of net working capital for two months of mill operations ramp-up prior to positive cash flow.
Alexco is bound by a silver streaming agreement with one of its key financial backers, Silver Wheaton Corp. [WPM-TSX, WPM-NYSE] that aims to eliminate some of the downside risk associated with the project.