Q1 2020 Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the Alexco Resource Corp, first quarter conference call and webcast. 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 questions.
To join the question Q you May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, operator by pressing star and zero I.
I would now like to turn the conference over to Catena Cordero Director of Investor Relations. Please go ahead.
Good morning, todays Thursday May 14, Twentytwenty and I welcome you to the Alexco resource Twentytwenty first quarter conference call.
It's always being webcast life and can be accessed through website at Alexco resource Dot com an archive of the coal will be available later today on our website in the event Webcasts section.
Our website also contains our most recent news releases in our financial statements for the quarter ending March 31st Twentytwenty.
Well amounts mentioned today or in Canadian dollars unless otherwise indicated.
Today, our chairman and CEO Clynt Nauman will discuss our most recent quarterly result.
He will be doing fire precedent right throw and our CFO, Mike Clark during the question and answer period.
Well, we start I remind everyone that some statements made today may constitute forward looking information within the meaning of optical securities laws.
<unk> performance discuss today, it's not indicative of future results and our business in both number of risks that could cause results to differ from protection.
Testers are encouraged to review the socialist pertaining to raise the can be found in our most recent regulatory filings available on our website and you'll see there and Edgar although leave you with Clynt nauman.
Oh, Thank you Katrina and affect your true what everybody who is joining us today I'm not trying to make this sort of abbreviated discussion or review or the first quarter. So that we can move onto that you and I sessions lead plenty of time for that.
So in first quarter, the onset of Congress Ur Cobot, my team and the pet CT with Nike and kind of Dan Mckenzie, resulting implementation that measures to protect the health and safety if they're all the employees.
How about communities.
Where we take on priority and as a result that has slowed out development. The Keno Hill during the first quarter.
As you would expect.
However in this environment, we're still able we're sure I go to achieve several milestones and we remain focused on our overall strategy to move Keno Hill back into production.
On the financial and corporate from we reported net income of $12 million and of course quarter or 10 cents per share.
And Tom comprises an 8 million dollar games on the sale of Alexco Environmental group.
Got a non cash $8.1 billion game on an embedded derivative related to this so the weekend precious metal stream, which was offset by GE and I and and mine site care and maintenance.
We finished the quarter with cash and cash equivalents of Toiletry point Threemillion on net working capital of 23 boys.
Right, sorry, we had cash cash equivalents or 22.3 million net working capital of 23.2 million hefty ended the quarter.
And our restricted cash and deposits ended the period it was 3.1 billion.
With respect to sale of A.J. for $13.3 million cash it's important to there's little extra trained up the also reclamation development company, which will continue to execute the cleanup estrogel mines and less Keno Hill district under its existing contract with the government of Canada.
And we also completed a public offering during the quarter issuing 4.7 billion common shares.
All righty five per share the cash proceeds of 7.8 million.
On the operations from.
We implemented a toll that 90 in response and management plan, we suspended underground <unk>, what's that we were span of do we've suspended their underground development plans that final Matson Birmingham.
We were able to your you Ah we do right time, these mines and other assets across the district in a development well construction ready.
[noise] journalists bird access to Keno Hill has been a continues to be restricted.
On a strict protocol for I'm, calling the incoming stuff from outside the U. Conn includes a 14 day mandatory corn, Jake and helps US asked one prior to entering site.
We have a crew have you gone you gone based group of employees that are continuing to advance key mill refresh refurbishment and surplus capital improvement projects.
Well the engineering a planning work is being completed remotely by quote unquote not a central workers.
Yeah during the spread we've also made several key hires and secure long term lead items, including mine equipment and other capital structure components, a thatll be deployed across the site.
[noise] on exploration fronts in early March we completed the district wide detailed airborne Geophysical program, which was a follow up from the 2018 on an expansion of the 2018 program.
It was which was particularly successful instead the results from this most recent program will be years, what target generation and ranking for longer term exploration planning in the district [noise].
Oh, sorry, 2020 surface exploration program has been revised without a revision to plans here and the commencement of that program is being deferred until mid to late summer.
Hoping in July the new program will cover at least 42, other computers, but drilling and we'll focus that at the Birmingham deep target.
To follow up on the wide to high grade mineralization that we discovered that depth.
Last year.
On the permitting fraud.
It was February the nice teams that we completed the public consultation process for the renewal.
Expansion that DUC, you know hills bought a license in the wake of the no carbon biting crisis. So this isn't your dog have been operating at a reduced capacity.
However, we're confident that you're talking waterboard more deliberate decision later, this quarter, which should play or the way for us to making final production decision.
[noise] and finally as you all know the unprecedented fiscal stimulus deployed by governments around the globe.
Right off the effects of carbon 19, well in our opinion inevitably generate currency devaluation and a flight to hard assets.
In this environment precious metals strict doing well.
We believe that silver as is usually the case during crises will outperform goal in the longer run.
We remain focused on restarting Keno Hill.
Continued and to continue generating value for shareholders.
As always I'd like to thank you for your continued support and confidence and look forward to reporting up program progress as we become Canada's Arnie primary silver mine, so with that I'd like to open the call drew a questions operator.
Thank you you will now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then too.
During the question could you. Please press Star then one now.
Our first question comes from Jake's Gluski of Roth Capital Partners. Please go ahead.
Hey, Clinton team, thanks for taking my questions going out there, but as well.
[noise], where are you won't see.
Some of the mill.
Refurbishment completed during the quarter.
I'm just trying to get it can handle on how far along you are in case, one portion of the two phase ramp up program you've talked about.
[noise], Yeah, that's right, Brad I'll answer that he's up to speed with everything going on outside.
[noise] Yeah Jake.
Maybe just a by way of background you know what do we still do have a about 25 to 30.
Employees that are based out of Keno Hill working they you know their normal to weekend to Eke out rotation again. These are all Yukon based employees, but with respect to the mill. Most of the focus has been on on two of the bigger projects, which is the the filter press I'm again this is that.
An additional a press to increase our filtering capacity and then the second major project. That's that's underway that we're making progress on his arm is our concentrate.
We dry mills.
In addition to that we still have the a the secondary ball mill again that that's on site, but for the most part over the last I guess 68 weeks most of the progress has been on the on the filter press and and the Regrind Mills.
[noise], we did initially see some some delays in some equipment from from China that.
That that again back in early March once this you know the wants to covert 19 risk you know became pretty obvious but those are so it's been lifted.
Minutes seems the supply lines of that you don't have to kind of opened up since then so we're not seen any any delays there on the underground mine equipment, we have secured a couple of or a couple of new loaders underground.
Loaders and again, we have not seen any Ah I guess any delays in the supply chain from those [noise].
Okay. That's been the here and then just lastly, more of a housekeeping item is the decisions that upper exploration more of an internal decision or is exploration restricted by the government right now.
[noise] no Jay again, that's totally internal decision.
We just thought it was the prudent thing to do yeah. It's it's it's a more efficient if we can launch into that program without these restrictions that being said if there's it's container.
We will sequester jokers onsite and I, certainly agile contractors prepared to do that so it's kind of get going here as I said it'll be delayed hoping that some of these restrictions lifted by then but if they're not.
We have a plan in place to add to mitigate that.
Okay. So so based on where we are right now the go ahead.
That's what you right now.
Well I know its its watch essentially authorized at this point so yeah I'll guys or are you know I'm getting the pieces together.
To launch into that program, we say mid to late summer, we're hoping it's gonna be probably didn't do it sometime in July early August.
Okay perfect. That's all my and thanks again.
Our next question comes from Mike Hi, Hazard of Scarsdale equities. Please go ahead.
Oh, Hi, Clint Brad I'm.
Just a follow up on that or with the phase one.
Is that.
I'm trying to get an idea of what that cost remaining cost and time to complete that or is that were about 30 days out from completing that I'm guessing.
[noise] [noise] Ah.
Well take that can handle that.
No I.
I mean did it.
[noise], there's still a couple of keep a key components, Mike that we're waiting on on final a final delivery I'm you know so.
I would say right now the schedule is really driven by.
By the ability of our kind of U. Conn based in you know well crews and employees at site to to make progress on the work. So it'll certainly we could ramp up activities. Once some of these travel restrictions are are lifted you know we will not be able to complete all of our I guess projects in turn.
Really without the use of third party contractors so.
Again, once we I think a make the final decision in some of these travel restrictions are lifted and were able to bring in third party contractors. We can complete you know those remaining projects you know certainly within kind of 60 to 90 day period.
Great well it makes sense, what what would be the remaining cost to complete the phase one.
Well again.
I think it's a little dependent on you know how much of your you're holding cost and sunk cost I mean I'm sure. You appreciate we're not necessarily going about this in the.
You know based on the original schedule in terms of.
Some of the restrictions and delay that we have here you know we are putting together some optimization plans going to reviewing our mine plans I'm looking at some updated capital costs I think the best answer is that you know the cost too.
From from now going forward to begin first concentrate production is still pretty consistent with what with what we published in the in the Prefeasibility study, which isn't that you know $18 million to $19 million range to produce first concentrate but beyond that them and it's a little tougher to give you know a lot of detail between phase one phase.
Two.
Yeah, Okay, well, thanks for that or I guess I'm getting that yeah. Congratulations on how things are going with the public process on the permit.
If we're able to get to a positive outcome by the end of this quarter with current metal prices exchange rates a smelter charges.
And where we are in the status of the phase one to phase two do you think that there's a high degree of.
Likelihood that you're gonna have everything you need to make a decision.
Oh, I think it had where I think.
Yeah pretty <unk>, we're pretty confident that once we get that water license I think that where you know we have.
And after the pieces are or close to all of the pieces, the Alberta to make that decision for sure.
Okay and.
Moving on yes, well with a with what's going on as Cove. It in assuming that it stays the same or trends forward would that.
When you are able to get people decide and contractors and so forth a would you be able to open up the mine and make a positive mine decision with the current guidance you're getting regarding coated.
For operating a mine and Yukon.
Or is it are you being held up do you think buy something that's or something locally or federally that they're going to require.
[noise] Oh.
Well, maybe I can just give you some context, Mike in terms of what's happening in the U. Conn I'm you know that there have been 11 cases reported in the U. Conn of which 100% of those cases of Ah have recovered there hasn't been a hasn't been a single hospitalization.
In the U. Conn, but I think having said that there are the biggest I guess.
Piece that's in place in the U. Conn is is the 14 day self isolation for employees are contractors coming in from outside the U. Conn. So you know we could certainly you know move forward under those conditions, but you know it wouldn't be a it wouldn't be <unk>, you know certainly costly and more challenging I believe.
In terms of recruitment.
And just logistics, so I mean, I think that'll be one of the bigger decisions that will have in front of us whether or not those travel self isolationist restrictions are still in place at the time, though we pushed the goal button.
Yeah, I mean I could.
Yeah, I agree with that Brent So just Mike just in case, you're also thinking that you know maybe there's.
Other protocols in terms of social distance, saying and other.
Precautions that we have to take all reports that we have to make in terms of our operating.
<unk> you know protocols, then I think that you know based on my observation interrupt the present, a I think that it's it's I don't think there's gonna be true much of a restriction their underground operations are <unk> fully mechanized.
And that and certainly particles can be put in place and that processing circuit in the mail to comply with what would you know what could reasonably expect be expected from a <unk> federal mandate or or a.
No or territorial mandate, you're aware of course are there our minds operating at present time into your comps. So I think we're pretty comfortable.
I'd like Brad that it's that travel restriction that's the that's the hurdle Fastbreak engine.
Got it with that with Brad with regards to the yard DC, what kind of timing guidance could you give a regarding.
The ramp up of work there with revenues margins and how large are large again as the backlog.
Yeah.
In terms of you already see Mike I'm, just by you know stepping back a little bit.
No we have successfully completed the environmental assessment a stage.
Of our closure plan so the.
That plan is now in the in the hands of the a of the federal government.
To issue, what we call it the decision document.
We would expect that you know certainly within the next that I would think 30 days and once you have that then you know we still have a water license that has to be a amended.
But in the meantime, you know we are you know we do have approved plans for later this year again, depending on you know some of the conversation. We've just had with with some of these travel restrictions in Kobin requirements. There are some oh I guess early remediation projects that are scheduled later this year, but again most of the heavy.
Shifting starts next year with the construction of the water treatment plants in the in the Valley Tailwinds.
Remediation and again you know that is essentially a 65 to 70 million dollar construction project over the first five years, followed by you know $30 million to $40 million of long term.
Monitoring and operational water treatment plants.
Excellent.
The is the if coal would kind of abates or is under control. Later. This summer Clint do you think you might be able to add another drill or are you prepared and wanting to do that or are you pretty much looking at this current cut back program.
As a what we might expect this year.
No not at all I mean, I think that I certainly feel that you know if we or get some encouragement.
At Bermingham, I think where you know we would seriously consider.
You know putting an additional asset there. So it's a it's a timing issue yeah. Yeah. Yeah. We are successful early.
And by early I mean, you know I assume that August or September type Prime timeframe. Then we've got lots of time true to expand that program. If it if it were further delayed yes comes later then it's less likely we're going to expand that program. So I mean, what we're trying to sort of been part here is that were.
We're going to get the at least this 4000 4200 meters down at that Birmingham.
And that and we're quite prepared to move on from that it's all a matter of timing.
And and success in the early in the early holes.
I I assume that would be a single rig for that program or am I wrong.
No we might run through actually I'm missing something we're still you know we're still I'm talking about.
The trials right side.
Not a big deal very good.
Great just a matter of people and and all the other hassles, you're gonna have and.
Steve be flexible about the last question I was interested that you had a district wide your physical program or the last one I think was limited to Galena Hill, Brad I I, just would like to talk about how you're looking at.
The the scope of the district I mean, that's the first time outside of putting data together over the district. The historic data that you are really looking at a comprehensive look at really a very large land position and I'm just wondering what the cost the type of geophysics you're doing.
What would you consider a range of outcome and what you'd consider success.
Yeah, well the up on I mean, the airborne work is a combination of you know magazines and electrical methods, where it's a detailed very detailed airborne program.
It's not inexpensive you know the initial program right over billionaire will cost us.
Maybe $250000 why we've just completed right around $300000 and it will provide us what information to allow us to see in detail.
The various geological units that are present in the district and more importantly, the detailed offsetting it varies units, which enables us to pinpoint the structures.
That.
That and nobody in the structure, but also the orientation, they're all of them, which is important and the targeting mechanisms that are that we're using sorry, you know the incurred discovery from last year came directly from the Geophysical work. This year's do you have physical work covers a yeah basic.
The flame and moth fan out over Keno Hill, So we're pretty interested and then what's gonna come out of that work. We also did some further work to the to the west by the way you know back towards from.
Back towards so became so I'm pretty interesting to see what's coming out of this work I mean, it's been very it's it's just it's turned out to be quite successful. It certainly makes our exploration a lot more efficient.
And Ah and yeah, we have high hopes that it's got to be a great targeting mechanism.
More importantly, it allows us to look forward in the district and get a ranking of these targets that.
You know that we need looking out beyond you know the first you know 567 years of reserves and resources that recurrent yes.
Well sounds like there'll be no secrets about the district after this so.
Actually be pretty exciting when do you expect a wrap that up.
Oh, that's flying is done by the chip as it goes down there we got a done just before locked down so as it turned out just by coincidence. So now we're just waiting for the data back from the from the adolescence and it'll take us the balance of the summer to.
Stitch together the details that will come to US you know thatll be obvious from that work.
Right. Okay. Thank you very much and good luck on I know you you've got your work cut out for you and you guys can do it good luck.
Thanks, Mike [noise].
This concludes the question and answer session I would like to turn the conference back over to Mr. Nauman for closing remarks.
Okay. Thank you operator before closing I'd like to remind people on the people around the school and shareholders that are annual general meeting.
We'll be held in a virtual arnie format on during the fourth this year at 137.
All proxies must be received before the stream second.
At the same time 130 P.M. So during the second is the its went as prospects have to begin and for instructions are joined the meeting and vote. Your shares you. Please visit the investors pages on our website and Alexco resource Dot Com and if you have further questions. Please email us at info at no Exco resources.
Dot com.
Just causing just in closing.
I'd just reiterate that we we do have a world class asset here, where in a tier one jurisdiction, we have substantial potential to grow our existing mineral resources through continued exploration and we could also which could also lead to expanded operations down the road.
So I don't forges disgusting out progress with you again, when we report second quarter results in August and until then thank you stay safe and have a good day. Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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