Alexco picking up the old Keno Hill mine

Vancouver – Newly-listed Alexco Resource (AXR-T) is acquiring the assets of past Yukon silver producer United Keno Hill Mines, including mineral rights on the project.

The purchase agreement will have an Alexco subsidiary, Elsa Reclamation & Development Company (or ERDC), buying the assets of the mine for $410,000, in addition to staged agreements to take over environmental liability of pre-existing conditions and assuming ongoing care and maintenance of the site.

ERDC will deposit $10 million in trust to fund its proportionate share of preexisting environmental liabilities, and will jointly develop and fund a reclamation plan for the site with the Federal Government. In assuming ongoing environmental care and maintenance, ERDC will be contributing a portion of any asset sale and a 1.5% net smelter royalty (to a maximum of $4 million) from any production to a separate reclamation trust.

Alexco, which has established itself as an environmental remediator and re-evaluator of closed mine sites, intends to launch an extensive exploration program at Keno Hill to determine prospects of reactivating the operation.

The United Keno Hill, or Elsa, project was an underground silver-lead mine located about 350 km north of Whitehorse in the central Yukon. The mine was operated by the Treadwell Yukon Company from 1921-to-1941, producing about 48 million oz. of silver. In 1945, Frobisher Exploration and Conwest Exploration formed Keno Hill Mining that operated the mine almost continually until 1988, producing about 163 million oz. of silver, when it was closed due to low metal prices. United Keno Hill Mines was 44.8% owned by Falconbridge (FAL.LV-T, FAL-N), which divested its interest in 1990.

Through the 1990s, various efforts were made to rejuvenate the project including ownership restructuring, engineering studies, drilling, underground rehabilitation and a feasibility study. United Keno Hill Mines was issued a Class A water license in early-1998, however debt issues prompted the Yukon Supreme Court to seize and order the mine assets and property sold in late-1999, pushing the company into bankruptcy protection. Since then, the Yukon Government has been managing the environmental monitoring and maintenance of the mine site.

Remaining equipment at Keno Hill includes a 500-tonne-per-day concentrator, building and machinery.

As of 1996, historic (non-NI43-101 compliant) geologic reserves of about 850,000 tonnes grading 1,026 grams silver per tonne, 3.9% lead and 4.8% zinc were reviewed. Additional resources of 944,000 tonnes grading 940 grams silver, 4.8% lead and 3.9% zinc were also reviewed. Silver-lead-zinc mineralization in the project area is primarily hosted in high-grade vein structures.

Alexco, which launched its initial public offering in early-2006, is owned 19.3% by NovaGold (NG-T, NG-X) and 9.9% by Quest Capital (QC-T).