VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 3, 2008) - Silver Wheaton Corp. ("Silver Wheaton") (TSX:SLW)(NYSE:SLW) is pleased to announce that it has agreed to purchase 25% of the life of mine silver produced by Alexco Resource Corp. ("Alexco") (TSX:AXR)(AMEX:AXU) at its Keno Hill project ("Keno Hill") located in the Yukon Territory, Canada. Keno Hill is historically one of the highest-grade and most prolific silver producing districts in the world.
Silver Wheaton will pay Alexco US$50 million to acquire 25% of all payable silver produced from the Keno Hill project, for the lesser of US$3.90 (subject to a one percent annual adjustment starting in year four after the achievement of specific operating targets) or the prevailing market price per ounce of silver delivered. The upfront payment will be made in several tranches, with a total payment of US$15 million to fund ongoing underground development made upon the satisfaction of certain conditions, and the remaining US$35 million payment to fund mill construction and mine development costs made on a drawdown basis, upon the satisfaction of certain additional requirements, including the receipt of operating permits. Silver Wheaton is not required to contribute to further capital or exploration expenditures and Alexco has provided a completion guarantee with certain minimum production criteria by specific dates. Payment for the transaction will be drawn from Silver Wheaton's existing credit facilities.
Keno Hill, Alexco's flagship project, is located in the Yukon Territory, 330 kilometers north of Whitehorse, and comprises more than 30 historic mines. From 1913 to 1989, the district produced more than 217 million ounces of silver with average grades in excess of 40 ounces per ton silver, 5% lead and 3% zinc (according to the Yukon Government's published Minfile database). These historical production grades would rank Keno Hill in the top 3% by grade of today's global silver producers.
Alexco acquired the 240 square kilometre Keno Hill project in 2006 and has invested over US$26 million on exploration in and around at least seven of the historic mines. As a result of their exploration success, Alexco completed a preliminary economic assessment ("PEA") on the Bellekeno deposit in July 2008, and is advancing Bellekeno towards production. The PEA forecasts a production start in 2010 with average annual mine production of 3.3 million ounces of silver, 30.1 million pounds of lead and 24.5 million pounds of zinc over an initial five year mine life. It is expected that the mine life will be extended significantly through continued exploration success. Currently, underground development is underway to access the deeper portions of the Bellekeno deposit.
Bellekeno is anticipated to be a low cost producer employing primarily cut and fill mining methods to feed a conventional flotation mill that ramps up from 250 tonnes per day in year one increasing to 400 tonnes per day by year three.
