Alexco Hitting High-Grade In Keno Hill Silver District

VANCOUVER — Alexco Resource’s (AXR-T, AXU-X) drills continue to prove that much silver remains in the Yukon’s historic Keno Hill district.

Between 1913 and 1989, the Keno Hill silver district produced more than 217 million oz. silver from ore carrying average grades of 1,389 grams silver per tonne, 5.6% lead and 3.1% zinc. When metal prices fell and environmental standards climbed in the 1980s, the operator at the time — United Keno Hill Mines — was forced into receivership, in part because of its environmental liabilities.

The district sat empty for almost 20 years until Alexco was selected as the preferred buyer of United Keno Hill’s assets in late 2007. Since then, the company has been hard at work testing the remaining resource within its 234-sq.-km land package, which is home to 35 past-producing mines.

The exploration to date has focused on Bellekeno, Onek and Lucky Queen. And the latest high-grade silver results have come from that last mine, which supposedly tapped into the highest-grade silver deposit in the district.

A historic mine last in production in 1932, Lucky Queen had not seen any modern exploration until Alexco arrived on scene. In 2008, the company punched 19 holes into the ground at Lucky Queen and turned up many thin intervals grading as high as 35,618 grams silver.

This summer, Alexco continued to probe below and southwest of the historic workings with 12 new holes and assay results from the first five holes indicate the resource continues. Hole 204 cut 1.4 metres grading 6,935 grams silver, 1.3 grams gold per tonne, 30.4% lead and 11.4% zinc from 227 metres depth. Nearby, hole 203 returned 2.9 metres averaging 1,659 grams silver, 0.18 gram gold, 4.9% lead and 0.3% zinc from 206 metres down-hole.

Hole 212 hit 1.5 metres of 1,082 grams silver, 0.6 gram gold, 0.2% lead and 3.3% zinc from 227 metres depth. And hole 205 returned 5.1 metres averaging 441 grams silver, 0.07 gram gold, 1.5% lead and 0.7% zinc from 213 metres.

All of Alexco’s 2009 holes at Lucky Queen were drilled in an area 160 metres long by 140 metres wide, centred on two holes from 2008 that returned good intercepts. Hole 161 cut 2.5 metres grading 2,249 grams silver and hole 114 returned 1.1 metres of 17,380 grams silver.

Mineralization at Lucky Queen consists of native silver seams, silver wire and wads, and disseminated silver sulphosalts, with local galena and sphalerite hosted in quartzite.

Alexco’s drill did not arrive at Lucky Queen until August because in the first half of the summer, the company concentrated on the Bellekeno area. At Bellekeno, Alexco is working to increase the confidence and size of an initial inferred resource, spread over three zones, that totals 537,000 tonnes grading 1.016 grams silver, 0.4 gram gold, 13.5% lead and 10.7% zinc.

The company is now incorporating the results from the latest drilling, which totalled 133 holes between January and July, into a new resource model and estimate. Alexco is simultaneously developing a detailed mine plan for Bellekeno and plans to complete an economic assessment of the project before the end of the year.

Once it has an economic assessment in hand, Alexco can make its production decision, safe in the knowledge that the Yukon government has already approved the Bellekeno mine project. In mid- July, the government issued a positive decision document, which agreed with the recommendation of the Yukon Environmental and Socioeconomic Assessment Board that the mine should be allowed to proceed. The decision document completes the Bellekeno environmental and socioeconomic assessment; now the Yukon government will draft the terms of the mining licence.

Alexco’s moves at Bellekeno are also backed by a significant purchase agreement with Silver Wheaton (SLW-T, SLW-N). Once a production decision is made, Silver Wheaton will provide Alexco with US$35 million, on a monthly drawdown basis. The major has already provided Alexco with US$15 million. In return, Silver Wheaton will buy 25% of future Bellekeno silver production at US$3.90 per oz.

The latest drill results from Lucky Queen added 3¢ to Alexco’s share price, bringing it to $2.99. The company has a 52-week trading range of 52¢-$3.15 and 43 million shares outstanding.