Original Published on Jul 14, 2022 at 17:58
By Lawrie Crawford, Local Journalism Initiative Reporter
Yukon’s Alexco Resources is about to be purchased by America’s largest silver producer, Hecla Mining.
The news came in a July 5 press release.
“There are no changes at Keno Hill in terms of day-to-day operations,” said Brad Thrall, president of Alexco Resources, in an email on July 7. “There are no changes to any of the plans or agreements.”
Both streams of Alexco Resources’s business activities — mine development and operations, along with their reclamation and remediation side through Elsa Reclamation and Development (ERDC) — will be acquired by the Hecla Mining Company.
“Since Hecla Mining is purchasing the outstanding shares of the corporate entity (Alexco) everything remains in place,” explained Thrall.
Alexco has a lot of moving parts. The property spans 17,000 hectares with leaky old mine entrances, also known as adits, historical buildings and many claims, some exhausted and others promising. The company is engaged in a complicated mix of active mining and concurrent remediation on sites that are scattered and sometimes adjacent. Licences for the active sites are different than for the historic sites, but staffing is optimized between the two.
Decisions are expected on ERDC’s application to renew its water licence for the major remediation on the historic United Keno Hill Mine (UKHM) properties, and on Alexco’s remediation and closure plan for its active mining properties.
ERDC’s water licence is set to expire on Aug. 8. Their application for a 20-year renewal for remediation is before the Yukon Water Board. The complex water treatment plan was 15 years in development and cost the federal government $34 million.
The required remediation work and construction is estimated to take 15 years with a price tag of over $100 million to be paid by the federal government. Following that, the water that springs from UKHM’s historic audits will still need to be treated in perpetuity.
Alexco also has its remediation and closure plan before the Yukon Water Board. The public comment period recently closed and the board has sent a letter to Alexco requesting more information and flagged some items for potential lack of adherence to water licence conditions. These are the same type of plans that resulted in financial security increases for Minto and Victoria Gold mines recently.
Alexco has estimated their financial security deposit at $8.5 million, which is less than the $10 million already reserved with the government.
Operations temporarily suspended
On June 22, the company announced a temporary shutdown of its milling operations. The company said in its news release that it could not produce enough ore from its underground sources to adequately sustain the mill operations.
“Mill operations were temporarily suspended for five to six months so the company could focus all efforts on advancing underground development,” reads the release.
The stock price of Alexco Resource Corp. (AXU on the stock market) dropped on this announcement from .81 cents on June 21 to .48 cents the next day, according to Yahoo Finance.
Last year the company also announced a temporary shutdown of the company’s Bellekeno property so they could focus their efforts on other deposits. Mines can be placed in temporary closure for up to five years before needing to formally shut down operations.
A myriad of reasons
In the news release about the sale, Clynton Nauman, chairman and CEO of Alexco said, “There is no doubt that we have fallen well behind the development and production plan at Keno Hill — and our original estimate of achieving commercial production in early 2022.
“There are myriad reasons for those challenges, but fundamentally, they all led to an increasing level of stress across our business, which was having a negative impact on the share price, our finances, our employees and other stakeholders.”
This is why the purchase is viewed in a positive light by the company. And, with nothing bound to change on the ground and the operations manager staying in place, Thrall believes that the relationships that have been established and fostered by the company over the years will endure. It is only the ownership that will change.
“Keno Hill will be in excellent hands to unlock the full potential of the district and maximize benefits to NND [First Nation of Nacho Nyak Dun] and local communities including Keno City,” he told the News.
Hecla Mining said in the release that it had been eyeing the Keno Hill project for many years.
The transaction provides Hecla with “a fully permitted property with infrastructure that includes a 400 tonne per day mill, on-site camp facility, all-season highway access and connection to the hydropower grid.” It also “increases Hecla’s silver exposure by increasing proven and probable silver reserves” and could enable the company to be not just America’s largest silver producer, but Canada’s as well.
But the deal is not done yet. The terms that are proposed include a combination of a US$30 million operating loan and share purchase at 50 cents, and a yet to be determined number of Hecla shares.
The acquisition transaction will need to be implemented by a court-approved plan, and some regulatory approvals are required. A special meeting will be held in late September and the acquisition is expected to close later that month.
“Hecla has the organizational expertise and financial strength to build Keno Hill to the level and capacity required,” said Nauman.
“[They will be] able to continue to invest in exploration across the district, something that we, as Alexco, independently would likely struggle to achieve.”
This item reprinted with permission from Yukon News, Whitehorse, Yukon