The speed of Alexco (November 19, 2010)

Alexco Resource (AXR-T, AXU-N) showed good pace in getting its Bellekeno 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 4% to move up to $6.92 midday 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, of Alexco’s President and Chief Executive Officer 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 miner. 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. of silver between 1921 and 1988 with grades averaging 40.5 oz. per tonne silver, 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. of 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 and 2.8 million oz. of 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 only shift to higher grade material once the mill becomes a more 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.