The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Enters into all-shares deal to buy full ownership of Alexco North of 60 Mining News - July 5, 2022
An aerial view of the mill facilities at Alexco Resource's Keno Hill Silver District mining operation in Canada's Yukon.
Hecla is loaning Alexco $30 million to continue underground development and exploration until the purchase is finalized.
Already the largest silver producer in the United States, Hecla Mining Company is poised to become the largest silver producer in Canada with the purchase of Alexco Resource Corp., owner of the Keno Hill Silver District project, Yukon.
Alexco's 242-square-kilometer (93 square miles) Keno Hill property covers one of the highest-grade silver districts in the world. Between 1913 and 1989, more than 200 million ounces of silver from ore averaging 44 oz per ton, making this Yukon mining district the second-largest historical silver producer in Canada.
According to the most recent calculation, Alexco's Keno Hill property hosts 1.44 million metric tons of probable reserves averaging 804 grams per metric ton (37.19 million ounces) silver, 3.84% (122 million pounds) zinc, and 2.64% (84 million lb) lead in four deposits – Bellekeno, Lucky Queen, Flame & Moth, and Bermingham.
"At Hecla, we have followed the Keno Hill project closely for a number of years, as it is one of the very few deposits that fit seamlessly into Hecla's strategy of owning and operating high-grade properties in tier one jurisdictions," said Hecla Mining President and CEO Phillips Baker Jr.
At the end of 2020, Alexco began to ramp up to commercial production at Keno Hill, but COVID-related staffing issues slowed the restart of operations in the historic district and in June of this year the company announced that it is shutting down the mill in order to focus on underground development and to ensure the availability of ore.
"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," said Alexco Resource Chairman and CEO Clynton Nauman. "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."
Hecla, which produces more than 9 million oz of silver per year at its Greens Creek Mine in Southeast Alaska and operates other precious metals mines in the U.S. and Canada, has the financial wherewithal and underground mining expertise to alleviate this stress by achieving commercial production at Keno Hill.
"By partnering with Hecla, an industry leader in high-grade narrow vein silver mining, we further position Keno Hill to achieve its full potential," Nauman added. "As a much larger business, Hecla has the organizational expertise and financial strength to build Keno Hill to the level and capacity required, while being able to continue to invest in exploration across the district, something that we, as Alexco, independently would likely struggle to achieve."
To acquire full ownership of Alexco and Keno Hill, Hecla will exchange 0.116 of its shares for every Alexco share it does not already own. This is equivalent to roughly US47 cents per share, which is roughly a 23% premium based on a five-day volume weighted average price of the shares of the two companies.
The board of directors for both companies have approved this transaction, and the Alexco board recommends that shareholders vote in favor of the Hecla acquisition.
It is expected that a special meeting on the acquisition will be held in September and, pending shareholder approval, the deal is expected to be finalized later that month.
To ensure that Alexco has the funding to continue advancing underground development and carrying out exploration at Keno, Hecla is providing the Yukon silver miner with a US$30 million secured loan facility and is purchasing 8.98 million Alexco Shares at C$50 cents each, which will provide Alexco with C$4.5 million (US$3.4 million) and result in Hecla or its affiliates owning 9.9% of Alexco shares.
Hecla has also entered into an agreement to issue Wheaton Precious Metals Corp. US$135 million in Hecla shares to terminate its silver streaming interest at Keno Hill property upon the completion of Hecla's acquisition of Alexco.
As a result, Hecla will gain full ownership of a permitted and established silver mine in the Yukon that increases its proven and probable silver reserves by 19% to 237 million oz, measured and indicated resources by 24% to 257 million oz, and inferred resources by 7% to 523.7 million oz.
"As the United States' largest silver producer, producing over 40% of silver mined in the U.S., it is natural that Hecla acquires Keno Hill which could also make Hecla Canada's largest silver producer," said Baker. "Silver is a critical element to decarbonize the economy and the need for domestic supply is growing. Acquiring Keno Hill allows Hecla to further meet this need with a secure high-grade silver development and exploration project that has a small environmental footprint."
CORRECTION: This article has been corrected to state that the Keno Hill property hosts 1.44 million metric tons of probable reserves and the Greens Creek Mine produces more than 9 million oz of silver per year.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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