/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES
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Alexco Also Announces Receipt of Draft Water
Use License, $20 Million Equity Financing, and Changes to
Silver Streaming Agreement
(All amounts expressed in Canadian Dollars
unless otherwise indicated)
VANCOUVER, BC, June 24, 2020 /CNW/ - Alexco Resource
Corp. (NYSE American/TSX: AXU) ("Alexco" or the
"Company") is pleased to announce that it has received a
draft amended and renewed water use license (the "WUL") for
the Keno Hill Silver District (the "District" or "Keno
Hill") from the Yukon Water Board. With the draft terms and
conditions of the water license now issued and established (please
see Appendix I hereto for details of certain terms of the draft
WUL), the Company is moving forward with final development of its
mines at Keno Hill, anticipating initial concentrate production and
silver sales in Q4 2020. The Company has also entered into a
non-binding term sheet (the "Term Sheet") to beneficially
amend its silver purchase streaming agreement with Wheaton Precious
Metals Corp. ("Wheaton"). The Company is also announcing a
$20 million equity financing co-led
by Cormark Securities Inc. and Cantor Fitzgerald Canada
Corporation to underwrite capital development costs to move
the District to production.
Keno Hill Capital Development and Operations
During 2020 Alexco has been steadily moving forward with surface
capital projects at Keno Hill, primarily mill related
refurbishments and improvements as well as long lead-time
underground equipment procurement in anticipation of ore
production, mill commissioning, and concentrate sales in Q4 2020.
With the renewed WUL process now nearly complete, the Company has
begun preparations to restart underground development work in the
Flame & Moth and Bermingham declines where a total of
approximately 300 meters ("m") of ramp development needs to
be driven in each mine to reach the first ore access levels. Level
access development, ventilation raises, and initial cut and fill
ore headings are scheduled for completion in late Q4 2020 with
increasing ore production rates anticipated at each deposit in Q1
2021. In the meantime, the Bellekeno mine will be rehabilitated and
approximately 20,000 tonnes of ore extracted during the Q3 and Q4
of 2020 and used for mill commissioning and initial concentrate
production. Final commissioning and initial silver sales are
scheduled in Q4 2020 (please see Appendix II hereto for a summary
of the operational and financial highlights for Keno Hill). With
the anticipated increase in site development activity, the health
and safety of our employees and the communities in which we operate
remains the top priority for the Company. Strict health and safety
protocols remain in place at Keno Hill and we continue to follow
the guidelines of the Yukon Government with respect to travel
restrictions.
Separately, Alexco is also mobilizing personnel and equipment to
begin the Bermingham deep surface exploration drilling program in
July. This 4,000+ m drilling campaign will test for offsets and
extensions of the previously discovered silver mineralization
approximately 200 m vertically below
the NE Zone of the Bermingham deposit, which overall contains an
Indicated Mineral Resource of 32.9 million ounces of silver at an
average grade of 930 grams per tonne ("g/t") silver. The
2020 exploration drilling will be focused at depth, approximately
250 m along strike northeast of the
silver mineralization discovered in 2019, where best results
returned 1,414 g/t silver over an estimated true width of
8.15 m in the Bermingham Footwall
vein structure.
Amendment to Wheaton Streaming Agreement
Alexco and Wheaton have entered into a non-binding Term Sheet to
simplify as well as modify the Wheaton silver purchase agreement,
originally dated October 2, 2008 and
as subsequently amended. The parties will enter into an amended and
restated agreement to address all amendments to date, including the
current proposed amendments. The anticipated effect of the such
amendments is two-fold as follows:
- During the initial two years or eight million ounces of payable
silver production, Wheaton will continue to receive 25% of the
payable silver stream; however, the silver production payment to
Alexco will be adjusted on a curve that reduces downside pricing
risk, and enhances upside opportunity (the "Initial Production
Payment"). By way of example, in the initial two-year production
period and assuming a nominal US$17
per ounce silver pricing market the Wheaton production payment (to
Alexco) will increase by approximately 70% per ounce of silver
relative to the existing agreement; and
- Following the initial two-year period, Wheaton will continue to
receive 25% of the life of mine payable silver from Keno Hill;
however, the production payment will revert to a defined range
governed by upper and lower numeric criteria (90% and 10%) based on
the silver spot price at the time of delivery of metal to
Wheaton.
For clarification, the percentage of the market price which
comprises production payment will be determined as follows:
Until the earlier of:
(i) two years from first shipment of concentrate;
and (ii) delivery of 2 million silver ounces to Wheaton
|
90 – ((Market Price –
15) * 10); and
|
Thereafter:
|
90 – ((Market Price –
13) * 8),
|
subject to a maximum of 90% and a minimum of 10% in both
cases.
And for clarification, using the example set out above, using an
approximate silver spot price of US$17 determination of the
production payment from Wheaton will be derived as follows:
Initial Production
Payment
|
90 – ((17 – 15) *
10) = 70% * $17 spot price = US$11.90/oz
Silver
(Cdn equivalent
$16.22/oz Silver using USD/CAD 1.3633)
|
Subsequent Production
Payment
|
90 – ((17 – 13) *
8) = 58% * $17 spot price = US$9.86/oz Silver
(Cdn equivalent
$13.44/oz Silver using USD/CAD 1.3633)
|
As consideration of the foregoing amendments, Alexco has agreed,
subject to TSX and NYSE American approval, to issue to Wheaton 2
million common share purchase warrants (the "Warrants"),
whereby each Warrant would entitle Wheaton to purchase one common
share of the Company at an exercise price of $3.50 for a period of five (5) years from
the date of issuance.
Clynton Nauman, CEO and Chairman
of Alexco commented, "The receipt of the draft Water Use License
provides us with the proposed terms and conditions of the final WUL
and represents an important regulatory hurdle we had to clear to be
able to make a final production decision at Keno Hill. We worked
for approximately two and a half years to renew and amend our
primary WUL, but also used that time to de-risk the project and add
value through exploration. The majority of the remaining capital
investment in this project is related to underground development in
the first two years of the project. To that end, I want to thank
the Wheaton team for working with us to mitigate pricing risk in
the critical first two years by materially increasing the silver
production payment while also simplifying the streaming agreement
to deliver benefits to both parties over the longer term. As
previously mentioned, we have continued with optimization studies
and moved steadily forward with mill improvements and other capital
projects at site and we are well-positioned for the final push to
production. Lastly but most importantly, on completion of this
financing we will be fully financed through production with a fair
amount of flexibility."
Brad Thrall, President of Alexco
added, "As per our March 2019 PFS,
underground mining will start in the past producing Bellekeno mine,
while we resume underground development at the Bermingham and Flame
& Moth deposits. We have started to deploy resources while
continuing to observe the strict COVID-19 health and safety
protocols that are still in place to protect the well-being of our
employees, contractors, and communities. In this scenario, we are
confident that we can achieve first concentrate production in Q4
2020 ramping up to full capacity production of 400 tonnes per day
in the first half of 2021. I would like to thank our employees, the
First Nation of Na-Cho Nyak Dun, the
Yukon Government, and our long-time shareholders for their
dedication and support during the past couple of years. We look
forward to updating you on our progress as Alexco becomes
Canada's only primary silver
producer."
Equity Financing
Alexco has entered into an agreement with a syndicate of
underwriters co-led by Cormark Securities Inc. and Cantor
Fitzgerald Canada Corporation (collectively the
"Underwriters"), pursuant to which the Underwriters have
agreed to purchase, on a bought deal basis, 7,326,100 common shares
of the Company (the "Offered Shares") at a price of
$2.73 per Offered Share for aggregate
gross proceeds of $20,000,253 (the
"Offering").
The Company has granted the Underwriters an over-allotment
option (the "Over-allotment Option"), exercisable in whole
or in part, on and for a period up to 30 days following the Closing
Date (as defined below), to purchase up to an additional 1,098,915
Offered Shares (the "Underwriter's Option Shares").
The Company shall pay the Underwriters a commission equal to 6%
of the gross proceeds of the Offering, including proceeds received
from the exercise of the Over-Allotment Option, subject to a 1.5%
cash commission being payable on sales to members of the
President's List, such President's List to not exceed $7.5 million. The Company is pleased to
announce that a lead order from Wheaton in the amount of
$5,000,000 was obtained in relation
to the President's List.
Gross proceeds from the sale of the Offered Shares will be used
to fund continuing development at Keno Hill and for general
corporate and working capital purposes.
The closing of the Offering is expected on or about July 7, 2020 (the "Closing Date") and is
subject to customary closing conditions including regulatory
approval from the Toronto Stock Exchange and NYSE American.
This news release does not constitute an offer to sell or a
solicitation of an offer to buy nor shall there be any sale of any
of the securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful, including in the United States. The securities have not
been and will not be registered under the United States Securities
Act of 1933, as amended (the "U.S. Securities Act") or any
securities laws of any state of the
United States and may not be offered or sold within
the United States or to, or for
the account or benefit of, U.S. persons (as defined in Regulation S
under the U.S. Securities Act) unless registered under the U.S.
Securities Act and applicable state securities laws or pursuant to
an exemption from such registration requirements.
Qualified Persons
The disclosure in this news release of scientific and technical
information regarding exploration projects on Alexco's mineral
properties has been reviewed and approved by Alan McOnie, FAusIMM, Vice President,
Exploration, while the information regarding mine development and
operations has been reviewed and approved by Neil Chambers, P.Eng., Chief Mine Engineer, both
of whom are Qualified Persons as defined by National Instrument
43-101 – Standards of Disclosure for Mineral Projects ("NI
43-101").
About Alexco
Alexco is a Canadian primary silver company that owns the
majority of the historic high-grade Keno Hill Silver District in
Canada's Yukon Territory. Alexco has a long history of
expanding Keno Hill's mineral resources through successful
exploration and is currently advancing Keno Hill to production. In
2019, the Company published a positive pre-feasibility study that
estimates production of 1.18 million tonnes of ore at an average
rate of 430 tonnes per day at an average grade of 805 grams per
tonne silver over an 8-year mine life from the Flame & Moth,
Bermingham, Bellekeno and Lucky Queen deposits. Keno Hill has
excellent potential to continue growing through continued
exploration of the known deposits and other highly prospective
areas in the District.
Some statements ("forward-looking statements") in this
news release contain forward-looking information concerning the
Offering and the use of proceeds thereof, the non-binding Term
Sheet with Wheaton, plans related to Alexco's business and other
matters that may occur in the future, made as of the date of this
news release. Forward-looking statements may include, but are not
limited to, statements with respect to the anticipated receipt of
the WUL; the proposed amendments to the silver purchase streaming
agreement with Wheaton; plans with respect to development and
operations at the Keno Hill project; compliance with
health and safety protocols as well as the guidelines of
the Yukon Government with respect to travel restrictions; the
proposed Offering, anticipated closing of the Offering,
potential exercise by the Underwriters of their Over-allotment
Option to acquire Underwriter's Option Shares, and
anticipated use of proceeds. Forward-looking statements are subject
to a variety of known and unknown risks, uncertainties and other
factors which could cause actual events or results to differ from
those expressed or implied by the forward-looking statements. Such
factors include, among others, risks related to regulatory approval
of the Offering; risks and uncertainties relating to the COVID-19
pandemic including but not limited to business closures,
quarantines and a general reduction in consumer
activity; actual results and timing of exploration and
development, mining, environmental services and remediation and
reclamation activities; future prices of silver, gold, lead,
zinc and other commodities; possible variations in mineral
resources, grade or recovery rates; failure of plant, equipment or
processes to operate as anticipated; accidents, labour disputes and
other risks of the mining industry; First Nation rights and title;
continued capitalization and commercial viability; global economic
conditions; competition; and delays in obtaining governmental
approvals or financing or in the completion of development
activities. Forward-looking statements are based on certain
assumptions that management believes are reasonable at the time
they are made. In making the forward-looking statements included in
this news release, Alexco has applied several material assumptions,
including, but not limited to, the assumption that the final WUL
will be issued in a timely manner on substantially the same terms
and conditions as set out in the draft WUL; all conditions
precedent to the entry into an amended and restated agreement with
Wheaton as contemplated in the non-binding Term Sheet will be
satisfied as anticipated and in a timely manner; all regulatory
approvals of the issuance of Warrants to Wheaton will be obtained
in a timely manner; all regulatory approvals of the Offering will
be obtained in a timely manner; all conditions precedent to
completion of the Offering will be fulfilled in a timely manner;
that the circumstances surrounding the COVID-19 pandemic, although
evolving, will stabilize or at least not worsen; that the extent to
which COVID-19 may impact the Company, including without limitation
disruptions to the mobility of Company personnel, costs associated
with implementation of health and safety protocols, increased
labour and transportation costs, and other related impacts, will
not change in a materially adverse
manner; Alexco will be able to raise
additional capital as necessary, that the proposed exploration and
development activities will proceed as planned, and that market
fundamentals will result in sustained silver, gold, lead and zinc
demand and prices. There can be no assurance that forward-looking
statements will prove to be accurate and actual results and future
events could differ materially from those anticipated in such
statements. Alexco expressly disclaims any intention or obligation
to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise, except as
otherwise required by applicable securities legislation.
Appendix I
Comments on Draft Amended and Renewed Water Use
License
The Company has received from the Yukon Water Board a draft of
the renewed and amended Keno Hill WUL. The WUL authorizes Alexco to
source and use water as well as deposit designated waste streams
into approved facilities in and around planned production centers
at the Bellekeno, Flame & Moth and Bermingham mines as well as
the mill facility. The term of the license is 17 years. The Lucky
Queen and Onek deposits, which are
permitted under the Quartz Mining License, are not included in the
renewed WUL. These deposits are not included in the first five
years of the Company's production plan. For complete details on the
terms and conditions of the draft WUL, a copy can be found on the
Yukon Water Board's website at
https://apps.gov.yk.ca/waterline/f?p=127:LOGIN.
Appendix II
Keno Hill Highlights – 2019 Pre-feasibility
Study1
Operational
Highlights
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Mine life
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8 years
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Mine plan
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1.18 million tonnes
at average 805 g/t Ag
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Mining
operation
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Underground mining –
cut and fill/longhole
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Annual Ag
production
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~4 million ounces
Ag/year
|
Processing
rate
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400 tpd; increasing
to 550 tpd in year 3/4
|
All-in Sustaining
Costs2
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~US$11.94/oz Ag (net
of by-product credits)
|
Financial
Highlights
|
Pre-production
Capex
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$17.9 M
|
Working
Capital
|
$5.3 M
|
Average LOM net
smelter return
|
$554/tonne of
ore
|
Direct operating
costs
|
$321/tonne of
ore
|
After tax
NPV
|
$101.3 M
|
After Tax
IRR
|
74%
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1 Refer to news release
dated March 28, 2019 entitled "Alexco Announces Positive
Pre-Feasibility Study for Expanded Silver Production at Keno Hill
Silver District, available
at www.alexcoresource.com
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2 AISC is a non-GAAP
measure calculated on a produced (contained) basis net of
by-products, as defined by the World Gold Council. Calculated using
the following Average Prices: Ag US$ 17.91/oz, Au US$ 1,325/oz, Pb
US$ 1.00/lb, Zn US$ 1.22/lb. and US$/CDN$ FX of
$0.76.
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SOURCE Alexco Resource Corp.