Q4 2019 Earnings Call
Thank you for standing by this is the conference operator, welcome to the Alexco resource Corp. fourth quarter and yard and corridor conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask a question.
To join the questions here you May proceed Star then one on your telephone keypad should you need assistance during the conference call you May signal, one operator by pressing star and zero.
Now I'd like to turn the conference over to Alexcos director of Investor Relations Kettina Cordero. Please go ahead.
Good morning to these Thursday March 12, 20 to 20 and I welcome you to the Alexco resource 2019 yearend conference call.
This call is being webcast live and it can be accessed through our website at Alexco resource Dot com.
An archive off the call will be available later today on our website in the event Webcasts section of our website also contains our most recent news releases and our final state, but actual statement for the year end at December 31009 aim.
So they are chairman and CEO quick now one well discuss our most recent quarterly and I know we felt.
Or precedent, Rob Crowl, and our CFO, Mike Clark will join him for the question and answer Korea.
Before we start I remind everyone that some statements made today may constitute forward looking information within the meaning of up Nicole Securities law.
Pasta foremost discuss today is not indicative of future. We felt in our business involves a number that could cause results to differ from projection.
Testers are encouraged to review the Scotia pertaining to reach that can be found on our most recent regulatory filings available on our website and on SEDAR and Edgar.
I'll now turn the call over it took went down.
[noise] well thank you Jane.
Thank you everybody who is joining us today.
Yes.
I say.
And I know I must say to be having this type of a call. So.
You know forgive me, if I sort of making it up as we go along but.
Before I provide you with an update its already appropriate to.
And on the disruption.
Okay.
The you know the rapid spread out the carbon 19 virus. You know you know has cost us obviously, a severe collapse slowed down of the world's largest economies.
You know the volatility there we're seeing in my view across all of these markets. You know may have been triggered by the cobot 19 virus spot there are more severe.
On the line.
Issues that are exacerbating the the paying them and the volatility.
I'm not for me it it reminds me.
Oh, I see Oh, my God send the way that it seemed to me in the 2008 3009 period.
And there's no doubt that you know, we're gonna be going into my views some period of fiscal stimulus.
But yeah, I do not saying that it's going to be a true we type of a.
A stimulus a this time around it's not going to be the government trying to add reserves for banks and create credits.
Yeah sort of reinvigorate the credit cycle.
Yeah, Yeah, it's gonna be it has to be in my view personally in my view it has to be new money.
It's going to pay for the current expenditures and it's got to be a share based but well see.
You know all the monetary.
Monitory.
Well and it's a it's the old you know Ben Bernanke Keysight helicopter money that said that I think is coming in and for that reason precious metals are a great place to be.
Gold stocks since Overstocks, obviously, I think our trading obviously in line with a broader markets.
Continuing to do that on a short term basis and were not immune from that but I tell you that my view is that at some point, there's got to be a divergence here.
You know liquidity.
Certainly drives a bubble mockups discounted cash flows determines values and in recessions interpretations and you know as the credit continues to unwind.
Golden So it was value in terms of.
You know drums or other commodities will continue to rise and you know Alexco 10, other gold and silver companies in my views should should do well in that side, but that Glenn environment. So at this time around.
You noted that the optimistic view as it is gonna be as good or better than it was before the pricing.
And then there will be printing and direct injection and my view this time into the economy. That's kinda caused both gold and silver to rise in real add in nominal terms and so I'd done obviously, we don't feel.
Comfortable in the existing buckets, it's volatile it's painful.
The answer today, you know I think that we are in you know the right place at the right time, and it's a matter of just the timing of how this all is going to one falls.
So moving back to 2019 and regarding you know that the information that we put out yesterday.
I just like to say that you know we've continued to focused on moving Keno Hill back into production.
You know we've done this in a disciplined manner, largely driven by a permitting timelines and all the while we've achieved several milestones that have bought us to this point, where we're sitting on the cost of production decision.
I should summarize some about cheapened. Some 2019 on the operations from for example in March we announced a positive results from an independent Prefeasibility study for expanded silver production at Keno Hill.
During the year, we completed several surface that capital exploration projects around the bermingham deposit, including the installation of the production related portal construction.
<unk> treatment palms initial construction of of course wars courses or stores bad and upgrading the existing all roads.
In December 2019 received the amended courts mining license, which authorizes development and future oil production from the Bellekeno flame and moth Lucky Queen Birmingham deposits.
Right now in the final steps of amending and renewing the primary water license for mining related activity across the district, and we completed a public hearing in mid February 10, we expect the license to be issued the water license to be issue.
The end of Q1 or shortly into Q2.
And just as it goes to expiration in 2019, we completed more than 8000 meters are drilling and 29 30 holds across the district.
The first phase just over 5000 meters was in the Birmingham.
We are yet, but it's a shallow at north east is our where we were successful and you'll see the resources expand their and also in the Birmingham deep area.
Where we had several high grade.
So we're going to steps up to eight point more than eight meters true weds with composite grades at 45 ounces well. So so that demonstrates that you know that the that that the Birmingham is going to have some kind of a deeper.
Yeah, Jim for what we see an existing mineral reserves and resources and you know could potentially be bigger deposits than what we see at the present time [noise].
Also on the expiration.
Having completed the Birmingham work, we've moved around a number of other targets, mostly driven by geophysics actually Iceland. The prior year that resulted in the discovery of the new anchor bank.
Which is about one half kilometers from the mill and actually sits between the Bermingham deposit and the district mill.
[noise] other financial front end 2019, we reported a net loss of 8.9 million or eight cents per share.
All in cash cost adjustments of approximately 2.3 million.
We finished the year with cash and cash equivalents of 6.8 million a net working capital of 10.1 billion that restricted cash on deposits at December 31st were 2.8 million.
April we completed a private placement for gross proceeds of 3.5 billion on churn we completed a public.
Offering title gross total gross proceeds of 6.5 billion U.S. [noise].
We've had we left the original Undrawn $15 billion sprott or credit facility, that's $15 million U.S. expire.
And now we have in place decorative term sheets for a new $15 million credit facility on similar terms to the original.
We can trigger when we're ready to make a production decision.
Yeah, Hi, middle side about business E. G. We Ah you would see that that that business grew rapidly in 2000 1920, not more than 29 billion in revenues.
And 6.1 billion on gross profit, where the margins of 21%.
On February the 14th we sold a EG to the AG management's consideration of 13.35 billion cash.
Received 12.1 billion of cash on causing what's the remaining 1.25 million due on February the 14th 2021.
Importantly, we're taking full ownership of the also remediation development company E. R. D C as we call it.
And that's the Mexico will execute the clean up with historical mines in the Keno Hills Silver district under the existing contract with the federal government of Canada.
We'll continue to work with a g. dacogen zero to utilize their expertise and technology AG sale was a strategic decision as a g. I clearly outgrowing alexco and has provided us with significant resources to redirect a mining operations and a renewed focus on moving we cannot.
Go back to production.
2020, we expect to transition to once again from export to mine operators.
Despite making your production decision to choose subject to gradually get what license and looking obviously you know at the market conditions.
In the meantime were preparing to launch out 2020 exploration program.
Which will comprise about living off million meters of diamond drilling.
Right, we have possibly burden gap last drilling.
There will be about 3500 meters.
So I've surface diamond drilling and that living off and that live it off thousand meters.
The Birmingham deep area will be a focus obviously yeah were.
You know were looking to expand the existing existing mineral resource and assuming that we have some success there will have to decide whether or not we want to reinvigorate that Birmingham drill program and stop drilling off these deeper extensions.
It also focus on the anchor prospect.
We expect to define an extended mineralized zone discovered last year.
And as we speak you're actually this month or where you're going to complete some additional aerojet physical.
Work to feel on the gaps from that 2018 program, especially on the on the eastern side of the district.
On the development side, we've been making key hires that site.
Ordering long lead time equipment, we're doing this cautiously and prudently and these items burns for the mail and underground operations and putting us in a position to restart.
When we make that decision.
I will start you that from the corporate perspective, we're treating the cobot 19, a crisis here extremely seriously were implemented appropriate protocols to ensure the safety of our employees and contractors in a while we continue to execute a business plan.
With that I think that I would open the call two questions.
Later.
Thank you well now begin the question answer session to join the question to you May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing entities to withdraw your question. Please.
<unk> Star, then too well pause for a moment as colors join the queue.
Our first question comes from James The Koski with Roth Capital Partners. Please go ahead.
Good morning, guys. Thanks for taking my question.
Just want to say quite well set under market overview I really think you hit on a bunch of important points there that that people should keep in mind.
During the volatility, we're saying right now.
Just a few quit a specific questions on my end, they're able to quantify the capex required for phase two development plan or is that something we should expect to see after you guys nickel production decision.
Yes.
Yeah, I think what would be more specific on that Jacob you know once we make in production decision you know suffice to say that you know where we're into this Ah Ah capitalization program construction program in phase one.
You know in the $3 million to $5 million range SAP. So the I'm sorry. So that number is is coming down I mean, we bought specific on that but instead, but you know.
It's a very manageable very manageable number.
Fair enough and then just on the exploration budget that you guys outline I guess people to give us because the ballpark breakdown or a percentage breakdown of what you expect to allocate towards the Birmingham deep target versus Inca and other regional targets and it seems like the vast majority.
It's going to be funneled towards Birmingham <unk>.
Yeah, Yeah. So it's a you know it's more than 50% and I will go into the Bermingham deposit to good Jeremy.
Pause it the but it's it's a fluid situation you know I do think I mean, we're going to drill some holes. There you know clearly it's clearly a blue skies statement, but you know I keep saying that there's 100 million ounce deposit in the so in that Keno Hill Silver District, Birmingham is a good place to be looking.
For.
We do have indications you noted that the deposit is gonna be a lot larger than we see at the present time, we're gonna be you know we're going to put you know half a dozen all said plus or minus that in there and if it really looks like it is gonna be a very significant deposit.
I think they will probably change course, and we'll have we'll have some discussion about whether or not we should launch off on an infill program, but keep in mind that you know based on our initial response. It gets you know you're talking 30, plus thousand meters of drilling to drill something off at that.
So it would be a pretty serious decision.
So I'm not sure that answers your question, where today, we are very focused on Birmingham were not throwing all about dollars at it we do think that we can generate other targets and other potential resources.
Potentially viable resources and we want to continue.
During that trauma grass roots type perspective, and that's why we're going to use this rab Joel I'm, sorry that we can quickly test targets that we used to tech was time Johnson and move along from one target to another as outlined by the geophysics in areas of copper you know where those areas habit geological signature that similar.
True Birmingham and other deposits in the district. So so long winded answer I don't know if that you know.
You know captures what you're asking but that's that's a that's my thought.
So it definitely does so it sounds like you know if you have some of this initial success at Bermingham. It gets you become a little bit more aggressive during the second half a year, yeah, I think they'll be up pretty deliberate discussion you know that's not an insignificant decision given the you know given the amount of after that.
Dan resources, and it's kind of take.
Of course, you know the price will be <unk>.
<unk> you know.
Well warrant that you know well on the investment.
Sure that makes sense, okay. That's all I have my and thanks again.
Thanks Jack.
Our next question comes from Mike Niehaus, there with Scarsdale equities. Please go ahead I hate Glenn.
Just a.
A couple of questions. The the backlog that you have or proceed with E. R. D C to clean up Keno Hill.
Is that in Canadian or U.S. dollars.
Well I mean, it's in Canadian dollars I mean, we report in Canadian dollars. So yeah. That's a that's a Canadian dollar number.
That's a 100 million Canadian.
I'm also following up on the complements for the market comments. There I just know a lot of people that made a lot of money buying alexco on dips like this and it just seems the decision is pretty clear about going into production.
For the volatility and just wondering how you're viewing you know the Canadian dollar is much weaker to the.
The U.S., which probably accounts for the recent decline in the silver price, but lead and zinc is holding in there and overall it seems like outside of what's going on and the rest of the world Yukon pretty stable and you probably have unless there's a global melt down pretty good position and making a.
Positive mind decision in the next 30 days is that is that.
Is that a reasonable on it.
Well I you know I also think it's reasonable to be sort of keeping our eye in the market I mean, as I mentioned that you know I do think that gold and silver going to move with the markets generally I mean.
You know its isn't it.
Yeah, I mean that you're seeing sort of volatility and collapse that.
Is Ah you know is really significant sorry.
You know, we're gonna be we're gonna be cautious I am I'm, absolutely convinced that were in the right place you know at the right time, it's really a question.
When you know when do you see this additional liquidity injected and worked its way through the records way through the market.
And where we're gonna be sitting at that time, sorry, you know, we're gonna be like everybody else. We're gonna said, we're going to watch we're going to move cautiously forward, but certainly not going to divert.
You know in the short term until we see some.
I'm going to order in the <unk> in the market can then can intelligently.
You know sort of understand what a what's happening so we like everybody else I'm not sure that answered your question.
But you know we're moving cautiously forward here, we're watching we're watching the markets you know carefully.
And when I say that you know.
You know if I'm hedging at my answer I am I, saying and I've said over you know totally collapses.
You know along with the markets as a complete catastrophe here. Obviously you know we're going to you know worked out that you know where you got to treat that or where some.
Some seriousness and and then maybe rethink out plan, but in the meantime, you know where in the right place in my view.
Well I just think the it's a great time to buy when stocks are low and when I think about the comments you made about a you know the deliver the drilling deeper at the Birmingham deep and dilution I keep staring at your slide in your presentation on the Inca vein, how close that as the surface and it just seems.
There's a you know if you had to mind your dollars as you wait for a decision and don't want to dilute further even with a with the flow through dollars that looks like an extremely attractive target.
Is that is that the correct.
A perception of that and is that potentially another Birmingham type look alike are a flame and moth type look alike.
Well you know Birmingham is a booming has the big price.
The.
Well it potentially the big price I do think that the anchor discovery is in poor <unk> do I think that it has the type of size.
That we see or size opportunity that we see at Bermingham I'm not I'm not I don't think we have enough information, yet and I'm not as convinced of that is gonna be you know of that type of size. The 10 or average couldn't you know could be really good. It is a shallow target. It is easy to get to it does mean.
You know our criteria in terms of potentially a you know a target that we would follow up with the potential opportunity than it might turn into something that is you know potentially monobore in the future. It would not be on the front you know the front over the line in terms of mining opportunities.
But from an exploration perspective, there might be up there may be at very reasonable.
Resource there that you know that that that's that's easy to get and is you know that it's it's at the right address in terms of accessibility with all the other infrastructure, we're putting in place in the district.
Well, if it's not on the Hector Calumet, Birmingham trend and it's between that and the mill. It's on a unique trend that is genuinely a new opportunity and I think could could add ounces got to the front end, but the back into the mine plan and isn't that what you're looking exactly know hill.
Yeah, exactly that's what I'm, saying, that's what I'm trying to say kiss, Yeah, Oh, you're doing great. Thanks for taking the calls it's a strange day and you did well and I'm looking forward do a april to see the water use license approved and finish thanks, a lot glance.
Thanks, Mike.
Our next question comes from Lake Hurry with Korea Partners. Please go ahead.
Hi.
Good morning, clad just want to see if I get a little bit more of a range feel for you on the range of up [laughter] consideration of when the mill might be reopened you commented on the getting the last permit and also on the market conditions.
You know, we see we started to see silver trading in 14 Tonineteen range over the foreseeable past.
And somewhere in there would obviously be what market conditions are what we would we be correct in thinking that if the price of silver goes to 14 or 13, we would definitely not do it and if it goes back to 19 and 20, we would definitely do it can you say anything along those lines.
Yeah, well you out that yeah. Thanks for the question I mean, I think that is a pretty pretty accurate.
Representation.
You know I will say that the other thing that you'll be looking at of course, a the is a foreign exchange I mean, the Canadian dollar at least it today well last time I look this is pretty weak I mean, it's in that 70 to 73 cents range. So I mean that whatsoever, you know at more than $20.
In the in Canadian dollars and so that's you know that's plenty.
You know in todays you know in todays you know $15 odd markets. So you know that said that's not a bad number for you know for this district you know if it goes to 13 Bucks and you know.
The Canadian dollar strengths and saw the U.S. dollar weakens and that's it's a completely different story I I agree with that.
So yeah. That's you know there there that's the volatility we're dealing with and that's why I say, we're going to be pretty cautious and watching the market carefully as we move forward.
[laughter] also end up in connection with your comments about the coming monetary stimulus or what impact that's going to have.
It's sort of a difficult thing to see has a monetary stimulus really helps the corona virus in the lower oil price and what I'm hearing that.
They are considering down in Washington would be to do something very dramatic on the fiscal side, maybe some sort of huge two trillion dollar fiscal stimulus that would include tax cuts and big infrastructure rebuilding immediate zero percent loans to all companies that are hurt with.
Bankruptcy from the current of hours for lower oil prices, a provision of money to people and companies and local governments for any kind of prevention measures and immediate reimbursement for all medical costs from the actual victims and I suspect that if anything like this word it happened.
We would see the markets and certainly the price of silver go back up sharply anyway. Congratulations on the progress that you've made.
Hi, Thanks, Lee I appreciate the question and I agree I mean, that's what I mean, what you know liquidity is gonna go directly back into that you know into you took to cover expenses essentially not necessarily through are acutely type mechanism, but I mean, that's just just a thought.
Our next question comes from Tom Rosin Burke, a private Investor. Please go ahead.
We're in Glenn can you hear me.
So I can't.
Oh, you getting good yes, one as Tom and I'm simply a small investor for years.
And I've been watching and I know that exploration is a very important part of gross.
But I also want out wanted to ask you.
The point does.
[music].
Your company become.
Profitable company, helping the shareholder a little bit versus more exploration.
Semi fair sort of her comment.
Yes.
Yeah, we are working towards the production decision the prior cooler.
Terry was asking you know when that when that might occur also.
And Ah I guess I didn't quite get to hit to the answer on that but I mean, if if if market just strong and their audley than you know we'd be looking forward to a you know production in the latter part of 2020 this year.
That's the contract that we're on.
You know, but where you never watching that we're watching the markets pretty carefully and exploration front. You know we have spent a fair amount of BAF. It on exploration, where you have a significant number of ounces and this district in all categories. It's more than 100 million ounces of silver now and Ah you know that same.
Just like it seems like a lot of silver.
We already have a portion of that in or a mine plan, but we continue to find and put silver on the books or you know around 50 cents and so it's it's it's I mean, that's it that's a good investment in abuse or I think that in all likelihood.
We'll continue to do exploration, but the focus is certainly going to move from exploration development to development production.
Yeah, that's baucus change will be in 2020.
And answered my question. Thank you very much.
This concludes the question and answer session I would now like to turn the conference back over to Clynt, Nauman, but chief Executive Officer.
Thank you very much time I want to thank everybody for attending today. Its an interesting time to be best do we invested in Alexco. Obviously, you know we have a world class assets here in a tier one jurisdiction, we have significant potential to grow our existing mineral resources.
You know through continued exploration and we of course are heading down the road towards the production decision here. So other than that I think we've covered a lot of topics here today I certainly appreciate your attention.
And I look forward to discussing out progress with your when we report on our first quarter results, which will be in May until then thanks, very much and have as good a day as possible and this in this market sector.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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