The speed of Alexco (December 06, 2010)

Alexco Resource (AXR-T, AXU-N) showed good pace in getting its Bellekeno silver mine in the Yukon up and running and the market has rewarded its efficiency.

After announcing that the mill at the underground mine is working at designed capacity and has produced silver, lead and zinc concentrates, the company’s shares gained 47¢ to close at $7.12 in Toronto on Nov. 19.

“It is notable that from the initiation of Bellekeno’s mine development and mill construction, production has been achieved in less than a year,” Clynton Nauman, Alexco president and CEO, said in a statement

In fact, Alexco has managed to go from discovery at Bellekeno to production in a scant three years.

Part of the reason for such speed was a financing deal with Silver Wheaton (SLW-T, SLW-N) which secured US$50 million in funding from the larger silver company. In exchange for the funds, Silver Wheaton gets 25% of silver production from the Keno Hill district at a cost of US$3.90 per oz.

Bellekeno lies in the southeastern section of the company’s larger Keno Hill land package which formerly hosted some 35 mines and produced more than 217 million oz. silver between 1921 and 1988 with grades averaging 40.5 oz. silver per tonne, 5.6% lead and 3.1% zinc. Those numbers make the district the second-largest historical silver producer in Canada.

Ore for the mill at Bellekeno is being drawn from an indicated resource of 401 million tonnes grading 920 grams silver, 9.4% lead and 6.5% zinc for 11.9 million oz. silver.

The mill has a 400-tonne-per-day capacity and is producing two concentrates, one which combines lead and silver and another that combines zinc and silver. Alexco says it plans to ship between 2 million and 2.8 million oz. silver per year.

In these early days of operation, the company is focusing on optimizing metal recovery and increasing efficiency of the milling equipment and process flow sheet. It says that while it works out any kinks, it will continue to process lower grade ore, and will shift to higher-grade material once the mill becomes a finely-tuned machine.

Alexco has called Bellekeno the first “bead on the string” of future mines. Its next production targets on the property are Onek, Lucky Queen, Silver King and the historic tailings.