Axu technical report 43-101 TECHNICAL REPORT ON UPDATED MINERAL RESOURCE AND RESERVE ESTIMATE OF THE KENO HILL SILVER DISTRICT
File: MP-8959 Alexco Technical Report Apr 2021
The Project risks are substantially minimized compared to a greenfields project by a combination of Alexco’s previous operations at Keno Hill, the recently completed underground development and drilling, the existing and well- maintained infrastructure both onsite and offsite (including grid power) and the safe jurisdiction of the Yukon.
The working (pre-positive monthly cash flow) capital cost of $10.0 M comprises the following cost components: $13.0 M of mine development, PP&E (property, plant and equipment), mill upgrades, site-wide infrastructure modifications and contingency costs, plus an additional $19.3 M of capitalized operating costs. The costs incurred during the working capital period are offset by the $22.3 M in revenue generated to produce a net working capital of $10.0 M prior to reaching positive cash flow. This net working capital covers the first five month period of mine development and mill ramp up. The LOM sustaining capital cost, following the working capital expenditure period, is $95.6 M comprising primarily underground development costs.
The direct operating costs for the Project are estimated at a total of $436 M or $310 per milled tonne of ore. This comprises $277 M direct mine costs, $80 M of direct mill costs, and $79 M for site general and administrative (G&A) costs (excluding working capital period operating costs and corporate costs). AISC life-of-mine average $11.59 per ounce of silver, including corporate costs and working capital. The AISC is a non-GAAP (generally accepted accounting principles) financial measure that does not have any standardized meaning. Alexco has adopted the practice of calculating this performance measure as the net cost of producing an ounce of Ag (our primary payable metal) after deducting revenues gained from incidental by-product production.
Revenue derives from selling four metals (Ag as main product and Pb, Zn, and Au as by-products), reporting to two concentrates; a Ag-Pb concentrate and a Zn-Ag concentrate. The Project will produce a total of 62,053 t of Ag-Pb concentrate and 76,398 t of Zn-Ag concentrate over the eight year mine life. Over the LOM , the total payable of these metals in these concentrates totals 33.5 M oz Ag, 69.8 M pounds (“lbs”) Pb, 75.8 M lbs Zn and 5,082 oz Au.
Metal pricing was based on information from external sources. The LOM net revenue (Net Smelter Return) is $831 M and the total pre-tax cash flow is at $263 M. These are based on metal pricing assumptions as follows:
• Ag ranging from US$25.50/oz in 2021, US$24.10/oz in 2022, US$22.60/oz in 2023, US$21.80/oz in 2024 to the long-term price of US$21.00/oz;
• Zn: US$1.17/lb in 2021, US$1.10/lb in 2022 and 2023, US$1.12/lb in 2024 and US$1.09/lb thereafter;
• Pb: US$0.91/lb in 2021, US$0.92/lb in 2022, US$0.93/lb in 2023, US$0.92/lb in 2024 and US$0.93/lb
thereafter; and
• Au: US$1,910/oz in 2021, US$1,870/oz in 2022, US$1,760/oz in 2023, US$1,710/oz in 2024 and US$1,600/oz thereafter.
The Project economics show this to be a robust project with low capital and high returns with a pre-tax net present value at a 5% discount rate (NPV5) of $210.4 M and after-tax NPV5 of $154.3 M. The pre-tax internal rate of return (IRR) is 326% and after-tax IRR is 295%. Considering the Project on a stand-alone basis, the undiscounted after-tax cash flow totals $189.7 M over the mine life, simple payback occurs approximately 15 months from start of production.
Exploration will continue at Keno Hill, with the objective to expand current resources and in the short term is particularly focused on the Bermingham deposit. Alexco plans approximately 25,000 m of surface diamond drilling at Bermingham and other areas in Galena Hill; this exploration drilling is not included in the Project costs summarized in this Technical Report. It is recognized that there remains estimated Mineral Resources in the Indicated category after extraction of the Probable Mineral Reserves co