Q2 2020 Alexco Resource Corp Earnings Call

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Thank you for standing by this is the conference operator, welcome to the Alexco Resource Corp, second quarter 2020 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 a question.

To join the question Q you May proceed Star then one on your telephone keypad.

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I would now like to turn the conference over to Kettina Cordero Director of Investor Relations. Please go ahead.

Good morning surveys Thursday August 13, and I welcome you to the Alexco resource Twentytwenty second quarter Conference call.

This call is being webcast live and can be accessed through a website at alexco resource Dot com.

An archive of the coal will be available later today on our website in the event Webcasts section.

Or what played also contains our most recent it's really says that our financial statements for the quarter ended June Thirtyth Twentytwenty.

Well amounts mentioned way, our Canadian dollar unless otherwise indicated.

Today, our chairman and CEO Clynt nauman, well the scope her most recent quarterly results.

He will be joined by a precedent brought fro at our CFO, Mike Clark during the question it out for a period.

Before we start I remind everyone that some statements made to eight may constitute forward looking information within the meaning of applicable securities laws.

Cost performance discuss today is not indicative of future Russell.

Our business involves a number of free but could cause results to differ from rejection.

Investors are encouraged to review the scorched earth pertaining to respond can be found in our most recent regulatory filings available on our website and all SEDAR and Edgar Although I'll leave you with Clynt Nauman.

[laughter].

Your casino.

The second quarter 2000, <unk> block a turning point for let's go.

Finally, we see all departments and authorizations required to place our minds Bakken production.

I got to keep this report relatively great. That's worked toward me in that period, where we're starting to spool up activities inside the operations and achievements are pretty fluid.

And it's our intention is to have more regular updates coming out over the next <unk> over the next few months as we move through capital construction process.

And at the end of the day I think your times better spent with me answering your questions.

Well that's it.

The following some of the highlights from two true.

As I mentioned, we received a drops and subsequently final renewed and expanded water use license for Keno Hill, which cleared the way for us to make a positive construction decision and take a final steps and now de risking program as well secured the necessary funding to what do you find that finance us through development and preparation for silver production and.

Sales in the fourth quarter 2020.

We're actually well down that tracks and generally on schedule and on budget.

Well, George just me or not having made that decision and then finding ourselves in the middle of and appreciating silver market is a pretty interesting place to be.

But make no mistake I focus remains on the disciplined execution about plan.

Cost, we can control prices, we do not control and let's face. It rice is really the return opportunity for all stakeholders, but only if we execute as promised.

Talking about rising.

2020 has been a year of extreme volatility in the silver markets as you know our precious metal prices quickly stabilized following stop <unk> shop decline in March in parallel with general market down drought related to the onset of because I hope it might be in pandemic pandemic.

During Q2, we saw a global move towards unprecedented fiscal stimulus an effort to offset the economic damage caused by this protracted crisis.

Precious metals have been extremely volatile over the last five months fluctuating for multiyear lows.

Gold and silver the all time highs for gold and a strong recovery for silver in August.

During this week, we were just shop price correction, both ways both metal, but this doesn't change our approach and I believe that massive worldwide fiscal stimulus will ultimately generate a long term devaluation of current season, a flight to hard assets, which bodes well for precious metals.

And that scenario sober always a laggard should outperform gold and alexco being one of the fear primary silver producer as.

<unk> shares or what are the highest betas to silver.

Well position to generate significant value for our stakeholders going forward.

With that I'll spend a few minutes to high that highlight progress since our last conference call in May of last year.

With respect to curb at night game.

As we intensified ER and create a recruitment efforts and increase that workforce Peracchi continues to be the welcome safety of the communities in which we operate and our employees and contractors. We continue enforcing the strict prevention measures of our carbon 19 management plan, which is consistent with the guideline.

And so the Yukon government and the health officials.

We will continue closely.

Monitoring Oh.

Situation with respect to the pandemic ammo adjust out plans accordingly.

On the financial on corporate from a highlight some Q2 inquiry to follow.

We reported a net loss of 12.2 million or 10 cents a share. The net loss is primarily a result.

Cash fair value loss on the embedded derivatives, we deal with associated with Sweden streaming agreement.

We finished Q2 with cash and cash equivalent to 17.8 million net working capital of 24.4 million and our restricted cash deposits at the end of the period were 2.9 million.

Subsequent to quarter end on July 7th we completed an equity financing and issued 10.9 million common shares at a price at $2.73 per share a gross proceeds of $30 million.

With this transaction, we secured the funds necessary to complete a capital development program to bring our minds online.

Our cash position as of today, there's approximately 45 and.

And we find ourselves with about another 20 million of development expenditures, including working capital to be deployed before metal sales begin to update our cash outflow.

Also subsequent to quarter end, we entered into an agreement with freedom to abandon restate the streaming agreement whereby we will continue to receive 25% Keno Hill silver production, but the production payment made by weight and will be based on a new simpler formula that's linked to the silver price alone and this abandoned.

Concepts other great price linkage with a wait and production payment.

Overall this is a good deal for Alexco as it enhances our downside hedge while also allowing us to put tourists to participate in higher silver prices.

On the operations front, we're making steady progress towards our goal of concentrate production in Q4 2020.

Our focus is to continue to advance with recruitment and Onboarding of Keno Hill operations Keno Hill operations workforce.

Senior management team at Keno Hill is in place and keys Supervisors operators miners and certified maintenance trades continued to be recruited where the current count up nearly 100 employees and contractors onboard at Keno Hill.

The majority of the contractors and service providers have partnership or joint venture arrangements to arrangements in place, where the first nation of not to like Dom and today over 90% of Keno Hill employees from either the U. Conn or British Columbia.

I knew underground mining fleet started arriving on site and delivery of the Romania equipment is on track to meet our planned production schedule.

Underground activities are currently focused on the rehabilitation of the primary ramp in services installation at the Bellekeno mine and in fact, we're drawing the first longhole stope blocks up at that mine as we speak here on the 600 level.

Every year off from Bellekeno through the mill is on track for a true for.

And as you underground development.

Possible or re commands in the coming days and is scheduled to reach the initial production levels in Q4, and finally underground development Birmingham is set to be good in September reaching initial production levels in early Q1 2021.

The district mill upgrades advancing its plan a second tailings filter press, a second ball mill to new concentrate Regrind mills for lead and zinc concentrate and improved by ore feed system and a crusher ventilation system that includes a newbuilding enclosure around the existing primary crusher being.

Still installed.

This work is on track, but they'll commissioning and initial causing tray production and sales in Q4.

Other surface construction projects such as the expansion of the flat create camp.

And the updated administration complex and other maintenance and support facilities are currently underway with completion expected prior to melt commissioning and ramp up of mining operations during Q4.

[noise] on the expiration from 2020 surface exploration program, which focuses exclusively on the Birmingham deep target commenced in July with one drill at approximately 930 meters are being completed to date as they can drill is expected to be working in the next month or so and we expect to come.

Played at least 4200 meters of drilling this year and a follow up on the wide and this drilling you know aimed at following up the white high grade mineralization at depth that we intercepted last year.

[noise] cars I'll reiterate that we're on track to restock you never know in Q4, our economics are sound, we have great ore deposits, we have hurdles of exploration upside and a whole district at our disposal.

Talking around book of course in my opinion is that we're winning value proposition and the prime you still got space in a rising supermarket.

Once again I'd like to thank all of our loyal shareholders for their patients and continued support and with that I'd like to ask the operator to open the call for questions.

Thank you.

We will now begin the question and answer session to join the question Q. You mean press Star then one on your telephone keypad, you will share a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset for pressing any keys.

To withdraw your question. Please press Star then too well pause for a moment as collars join the queue.

[noise] [noise] [noise] once again, if you have a question. Please press Star then one.

The first question comes from.

Lee Curry with creep partners. Please go ahead.

Thank you very much.

Good afternoon plant I, just wanted to get a field from you we haven't talked for a while.

Give us a little review on not only how you've indicated some of the things about how covert impart Ami covert impacted the operations what was the impact in what continues to be the impact on the first nations on there.

All the people there and how has that impacted their attitude.

And morale.

Yeah. Good afternoon Lee good to hear from you I I'm going to actually turn that over to Brad Thrall. He has been much closer contact with the first nations groups and their workforce into more recent past then that tonight or what Brad do you want to do to answer that Felipe.

Yeah sure Yeah. Thanks, Lee maybe I'll start with just the general I guess status of coal, but in the U. Conn in general there you know there have been a really relatively few cases, that's I think at about 15 to be exact I'm since you know since March.

You know of those cases, there hasn't been a single hospitalization.

And everyone is fully recovered so I'm going to take the Yukon has done a pretty good job in general in terms of kind of initially locking down it.

You can always in what we call phase three or what the with the regulators are calling phase three which has opened up some of the travel restrictions. So in terms of travel there's there's a there's a bubble jurisdictional. It includes the Yukon British Columbia.

End of your T. in Nunavut, So it'll employees in residence and within that bubble can travel freely in and out of the Yukon now with without a nice relation requirements. So that's certainly had a positive impact in terms of the community. You know again, we certainly stay in close contact with a with.

With mail both of them that the mayor and counsel level, but as importantly, the first nation I'm not sure Mike Dunn, Chief and counsel.

And I think really you know with respect to the community. It's it's about do you know trying to keep our employees you know out of the community.

You know our camp is about a 50 kilometers away. So it'll certainly on a rotation days. We you know we try to limit any interaction, we'd obviously doing a lot of online communication.

These days.

You know we've changed the number of our I guess lined up and and the way we do business at site to two to keep some some separation. So yeah I mean, a lot of the I think the normal things that a that you hear it you're about it at most operation. So it's all in all again I think you consider it's doing well but.

We certainly are not going to let our guard down and ER and again like you know your question about about the communities is.

That is obviously front and center to how we know we manage our operations.

[noise]. Thank you, it's very good I'm glad to hear I wasn't fully aware that the.

Travel in and out without a corn teen was in place for.

For employees of local companies, that's a big plus for you all.

And and following up on that.

How how difficult. It is is it for you all to higher labor right now.

Is this relatively a good job what are the what are the ideas and what [laughter], who do a week competing with for a for labor up there.

Yeah, I can take that as well no absolutely I mean, I think we've had we've had a real good success.

To date in our recruiting efforts I'm you know certainly the Yukon you know again, it's a small jurisdiction.

Less than 35000.

People living in the Yukon, So clearly I mean, it's it's you know we can't supply our entire workforce just from the U. Conn. There are two other active mining operations underway as well.

You know so our recruitment efforts have really been focused on on the U. Conn in British Columbia, mainly again because of the you know the the lifting of the travel restrictions were BC residence.

Do not have to have to corn team.

We've been very successful over 90% of our of our hires at Keno Hill or from those two jurisdictions. We you know so I do I think run we're on good track and in terms of I mean, you know.

You know recruiting efforts.

No, we're putting a lot of focus in and some capital into into expanding our camp I'm, bringing you know.

Some new facilities, you know that took a good place to to sleep and a good places to eat or are very important in terms of it'll be in competitive in the north.

With kind of a flight and flight fly out a workforce.

Thank you very much and I also want to take this opportunity to.

Congratulate Clint for his.

Planning prowess and ability that he was able to finalize all the permits all the preparatory work has been working on for the past several years to get all that done a pretty just when the price of silver has taken up taken off gotten above $25. So.

Congratulations on your good planning and we didn't realize you were that good of four Castro several prices can.

[laughter], yeah facts, so [laughter] I don't quite know.

Otherwise it was that it was fortuitous and but yes. So you know the runway here looks particularly good but yeah like I say weekend I need with us at all about execution, we can control because we can do nothing you know about prices and as I mentioned.

The prices for the benefit of the stakeholder I'm. So yeah, we're pretty excited and I'm a bit and moving forward as as planned anyway, well. Thanks for your comment I.

I think the shareholders or card side at all so congratulations.

Thank you.

The next question comes from Alan Mendell that Alan and trading company. Please go ahead.

Oh, Hi, this is Alan Mandela, a at one M. trading company in New York and I wanted to Echo the comments and commendation from our previous caller.

Could there be or is it has there been given the volatility in the foreign exchange markets is there any material impacts on the Canadian U.S., the or any material impact on earnings or could there be due to plan for that.

Yeah, that's a that as a very good question.

Yes. The answer is yes, you know we are certainly you know one of that one of the greatest sensitivities in the financial side.

In the operations that we anticipate here is the exchange rate.

We are actively investigating and planning to offset that volatility.

The actual method by which we do that has not been decided yet.

I will sort of point out, though I mean here we are sitting.

In an environment with very strong precious metal prices, but the Canadian dollar is still relatively weak.

And <unk> and I'm not sure you know how to interpret the fact that you know you've seen oil prices. You know go from you know well in fact zero.

40, bucks or or or <unk>, and you know there has not been what I would.

This debate to be a very significant change in the exchange rate. So there's something different going on in the exchange rates, but the answer is yes were mindful of exchange rates It does impact our business.

You noted that the general the general wisdom is that afras precious metal prices and base metal prices. Appreciate you know the Canadian dollar well also appreciate but margins will be preserve that does not seem to be the case at the present time.

That could be an anomaly and we are like I say, you know actively looking and how to preserve margins in a in a in a in a volatile exchange rate environment.

Yes, I'm sure it's challenging okay. Thank you for the uptake.

Thank you.

This concludes the question answer session I would like to turn the conference back over to Clynt Nauman for any closing remarks.

Thank you operator, and Keno Hill, we have a world class primary silver Historic district in a tier one jurisdiction where significant potential to grow that's coming online in a strong precious metals environment. We're fully funded production and we're on track to stock concentrate production and sales in Q.

For.

Look forward to reporting on a mill commissioning and mining operations in November when we discuss that Q4 results and as we become Canada's only primary silver mine until then thank you and have a good day and I turn this back to catena to close out the cool. Thank you.

Thank you. Please this concludes our call.

You may disconnect now.

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