Q3 2020 Alexco Resource Corp Earnings Call

Thank you for standing by and just the conference operator, welcome to the Alexco resource Corp. third quarter Tray 20 conference call and that cash.

As a reminder, all participants and listen only mode and the conference is being recorded and your presentation. There will be an opportunity to ask a question to join the question queue. You May Press Star then one on your telephone keypad should you need assistance. During the conference call you may signal, an operator by pressing star and Darryl and I would like to turn the call.

Friends over it took a t. now Cordero director of Investor Relations. Please go ahead.

Good morning today is Friday November 13, 26, I'm cool and I welcome you to the Alexco resource third quarter Conference call.

Call is being webcast live and can be accessed from our website and alexco resource dotcom and.

An archive of the call will be available later today, and our website and the and I said about capex.

Our website also contains and most recently, it's really says and our financial statements for the quarter and the September 30 twice the price Oh.

Oh no question today are in Canadian dollars, unless otherwise noted.

Today, our chairman and CEO, Please now and I will discuss our most recent quarterly results he.

He will be joined by our President, Rob Brown, and our CFO and Mike Sorry, Your question and answer period.

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

<unk> performance discuss today is not indicative of Detroit and our business and also a number of risks that could cause results to differ from rejection.

Investors are encouraged to reviews and filters pertains true, which can be found and our most recent regulatory filings available and I would say and on SEDAR and Edgar.

I will now leave you with clay smelter.

Thank you Katrina and a welcome to everybody. Thank you for attending this morning.

<unk> Roe to be a short a discussion here and then we'll move on to the question onto a sense a section.

So just to let you know that a development activities that Keno Hill Silver district kicked into high gear during the third quarter and were progressing for a restart and commissioning of the district melt and the very near term.

This morning, and got to provide a brief summary of the work we have completed and sites since our last call.

Financial and corporate performance during the third quarter.

2020 exploration program, which as you remember focused on the Birmingham deep target and is now nearing completion and.

Also discuss general plans for Keno Hill, and 2021 before opening the call.

For your questions.

So let's review the highlights from the third quarter 2028, and on the operations front and as I mentioned, we're getting ready to restart the mill. We've completed the installation of new cyclonic. The addition of a new tailings filter press were modified to final feeder and and we've executed on numerous other and so we project.

About the mill complex.

The installation of a sick and ball mill is ongoing as is the construction of a crusher and closure and ventilation system as well as the installation of two concentrate Regrind mills.

Our team has went test at the mill and we will provide further updates on no performance in the in the near term.

The surface construction activities and sites such as the expansion of the cab accommodation complex, including two new bunkhouse units and upgraded administration complex and employee dry and wash facilities and their and completion.

My and rehabilitation. This gets complete at all three mines and <unk>, each other and various stages of development and ore extraction and.

Majority of our mining fleet and has arrived and is being commissioned and that's currently in operations.

And just going through the minds, a one by one the bellekeno long haul extraction from two underground levels have started and orders being placed and of course, all pad in anticipation of the restart of the district mill.

And flame and moth and Bermingham primary ramp development is the primary is that is the main activity and it continues at both mines at flame and moth were approximately 140 meters away from the first level access point on the 835 level at this at this juncture and from that access point, there's about another 100 meters that are needed to cross cut to the ore.

And.

At Bermingham and we're at the bottom of the the ramp that was driven Oh last year and we are developing a van access.

And raise access level at the bottom of that ramp and that's that a access and ER and ex credit area is going to be a ready for occupation by a contract raise crew within the next several weeks.

Construction of the water net new water treatment plant at Bermingham is also nearing completion and it'll be operational and the next couple of weeks.

We continue to make steady progress on recruitment and onboarding of new employees across all departments. We currently have approximately 125 employees at Keno Hill and cleaning citizens of the first nation of non Tonight done.

And about 90 per cent of our employees reside and Yukon walk British Columbia, and we continue to focus our hiring efforts within this travel bubble.

We remain focused on the health and safety around employees contractors and our host communities. A COVID-19 management plan continues to strictly enforce prevention measures consistent with the guidelines of Yukon government and health officials.

And I'd like to command and employees and contractors for their continuing commitment to Keno Hills culture of excellence and safety.

Safety record and now exceeds more than seven and a half years without a lost time accident.

On the exploration from surface exploration program will be completed later this month in fact, we're being chased out by weather and this year, we're focused on the offsets and extensions of the Bermingham deposit at depth. Some 200 meters below the northeast <unk> and where we reported outstanding intercepts last year.

Today, we have completed approximately 7600 meters of drilling and a panel of rocks, which extend 200 to 300 meters either side of this successful drilling in 2019 and.

From what we can see what appear that our geologic and structural models quite sound.

Unfortunately, because of the backlog and the I'd say labs, we really cant promise results until late 2020 or even into the first quarter 2021, and just anecdotally speaking to the labs yesterday. It looks like your Ass day turnaround is about eight weeks. So consider that we're still drilling. So we can see that Oh, sorry, Ross. These are clearly going to dribble into two.

2021, and last things improve at the at the labs.

Subject to final results from the drill program and will decide how to proceed and 2021, but rest assured if we think the bermingham mineralization with US unique great attributes is likely to extend to death I think we will Mount a fairly significant surface drilling program in 2021 to better understand the opportunity as well.

This test other targets in the Birmingham and Hector Calumet area.

Finally, he RDC has advanced the reclamation project to offset historic liabilities and the Keno Hill District and in July of 2020, Yes, and issued a final decision document and the final evaluation and the board yeah.

Yeah do you see will be submitting a water license application to the Yukon water board and the near term and this license will be necessary to authorize some but not all of the activities to affect the closure of the site or closure of the historic liabilities.

And the financial and corporate fronts for the third quarter, we reported an operating loss of 5.4 million and an increase of 3.4 million from the third quarter of 2019, which is primarily a result of increased rehabilitation and de watering the Bellekeno mine and mill Refurbishments and anticipation of commissioning the mill and.

This quarter.

Following the positive production decision announced on June 20 force.

On June 24th on July 7th we completed an equity financing for aggregate gross proceeds of $30 million.

We finished Q3 with cash and cash equivalents of 39.8 million and net working capital of 38 million.

And our restricted cash and deposits related to two hours surety bond ended the period was 2.9 million.

On August 1st we entered into an amended and restated agreement with wheat and with respect to the streaming agreement the new agreement simplifies the calculation of the payment Alexco will receive from 25% of Keno Hill silver production, while at the same time, enhancing and downside hedge while still allowing us to participate in higher silver prices.

And also during the quarter to quarter, we selected Ocean partners as the Offtaker Africa, Keno Hills, a high quality concentrates and we're in the process of finalizing and agreement with them and that and that in the next couple of weeks here.

As we move to production and context of and must improved a much improved commodity prices relative to those that we used and the PFS and much of 2000 2019, we're deploying a fair amount of AFE at revisiting our mine plans to ensure that we are positioned to realize further improve value from our ore deposits and adjacent mint.

Realized areas.

And this context, where considering updating a PFS and the first half of 2021 and that would reflect the mine plan, which is more in tune with the markets, we find ourselves delivering and too.

On a related and <unk> I'd like to take a moment to recognize our exploration teams led by a vice president of exploration L. Mccarney.

And the background and over the last several years [noise].

Good day, and we have been and diligently working and the field underground and with all of the enormous amount of and start geology data. This preserved at Keno Hill and the result of all this work is that is a new fairly highly refined geologic map of the you know with the historic Keno Hill mining district and.

With the help of the Yukon George You survey, we intend to make this information public and it'll be initially displayed and discussed at this year's Yukon Geoscience Virtual conference later this month so.

And this is essentially a map being.

Being contributed to the to the public inventory here, it's a significant body of work and we are proud to make it a payable available to the public and available for the benefit of our industry and specifically from minutes per the mineral exploration community and the Yukon kudos to al and his team on this fine achieve and with that I'd like to ask the operator to open up.

Call for questions Thank and.

Thank you.

We will now begin the question and answer session Guy and the question queue. You May Press Star then one on your telephone keypad, you will hear it so and acknowledging your request if you're using a speakerphone. Please pick up your handset before pressing any key to the dry or a question. Please press star then to be.

We will pause for a moment as callers chain to Q.

The first question comes from Mike Niehuser from Scarsdale Equities. Please go ahead.

Hi, Clynt happy Friday, the 13th.

I knew you were going to mention that Mike go ahead, [laughter] well now it's now it's out and it looks like from to this mornings or last nights release that expenses were a little higher in the third quarter for de watering and modifications, but overall it looks like you will are adhering to euroscan.

Sales and timelines for surface and underground work are you pretty satisfied with that and how things are coming along to be able to start processing ore through the mill.

Well I mean, that's just Brad is in a much better position to to to answer that let me and not and I'm going to hand, it off to him. Let me just say that or do you know the the Bellekeno mine and the mill are being kept on care and maintenance.

And I rather than capitalize those costs, Mike we have just been expensing them as we have in the past and separating them from the capital construction.

Activity.

In terms of the schedule.

You know, we're we're we're taking a pretty close look at a and how were proceeding here. We are putting the pieces together as you know we're operating and three mines currently the important a and you know the important pieces for us to extract the ore that's required from.

Alki, no mine and to to actually shot that operation down and move of it too.

You know flame and moth and Bermingham. So we have this Ah you know this process going on where we're transitioning out of Monmouth line transitioning into two others, both of which require a ventilation raises to be driven so where we're walking down that line.

And you know at the present time, we're pretty comfortable with progress and but that will be updating you know without that and we'll update the plan as we move along geared towards that towards the end of the year.

And Brett and do a would you like to add to that.

No it did but I think they're pretty much covered it well yeah, Mike and again that the plan has always been you know to commission the mill on on just the Bellekeno or which is.

Essentially a salvaged.

Kind of project, if you will with with remnant tons and nor plan has always been to tenet and slowly ramp up in Q1, and then into Q2 and by the time each others start to reach full capacity. So.

Yeah, I mean it.

It's important for us to finish up Bellekeno. So that we can continue to focus and all of our resources on and on flame and moth and Bermingham.

I, probably got another question probably for Brad you since you're there.

With regards to you know pretty much familiar with the project with the crusher and the ball mill and the lead and zinc circuits and the filters for concentrate and tailings, but could you elaborate on some of the modifications and optimizations that you've done to the mill and how they are improving expected to improve performance.

Oh, yes, good question, Mike and again, we'll start the mill on just the Bellekeno or which you know were obviously very familiar with the metallurgy and and performance of both that or.

You know it was you know with respect to you know certain and.

Improvements, we've moved away from Oh, Derik screen, and the mill and gone to cycles, which we think will have a have a real benefit on on throughput and and classification. You know we've made some modifications to our primary grinding mill and and put it and overflow trouble and on that on that mill.

And within the flotation circuit, we've we've made a number of changes within the circuit, there and based on kind of historic performance and again remember that mill operating you know pretty steady at 320 tons per day or so when we did suspend operations back in 2013.

So this additional second ball mill, and <unk> and the and the and the concentrate regrow line Mills, we really don't need those and immediately and for this restart so.

Yeah, just a lot of just of the little projects here and there so but yeah that you know and certainly the mill is isn't isn't really good condition and shape here for commissioning.

Okay, and when do you anticipate you'll be able to start drilling from underground for exploration or infill drilling.

Yeah, I mean, that's a good point to Mike and that goes with the whole optimization. If it were looking at I mean, I I think that.

For production or preproduction purposes will probably be drilling underground and the first quarter always day would that be pretty confident we will be drilling underground and the first quarter.

In terms of a underground exploration I mean, I think we want to get these operations up and stabilized.

You know and before we consider you know driving exploration platforms or doing anything other.

And diverting our focus away from production. So I mean, I think underground exploration is that is a is a question for further down the road and 2020.

And it's the and the reason I mentioned you know a day.

No work at Bermingham, I think we will well in 2021 and if we do anything were most likely to do that from the surface not from underground.

And lastly could you comment on timing for the water use license for the yard D.C.

It's just a huge a bit and upside to the company that just is not recognized and out for any other permitting that you're going to have to complete a in the near term.

Thank you very much.

And Brad you want to day then.

Yeah, sure Mike and related.

We're we're schedule internally as to hopefully have that license and when it's essentially put together and ready to go there are some and then a final consultation that that's underway. So I would expect to have that.

Submitted to the Waterboard and you know prior to the and the end of this year and.

You know you are certainly familiar with the with the process and the Yukon I would hope that it.

It would be relatively straightforward I mean again this is a <unk>.

This is a positive for sure in terms of cleaning up the the district the historic liabilities, but you know I would still probably anticipated to a 12 month process and.

To go through that to the Waterboard application.

Well. Thank you I'm looking forward to your drills on EPS from 2020, and even more from your free or program per 2021, Thanks a lot.

Thanks, Mike.

Thank you.

Once again, if you have a question. Please press Star then one on your telephone Keypad. Please press Star then one now.

There are no other questions at this time.

I would now like to turn the conference back over to Clint Nauman for any closing remarks.

Thank you operator at Keno Hill, we have a world class primary silver and historic district, and the tier one jurisdiction with significant potential to grow that's coming online and the strong precious metals environment.

And I were fully funded to production we're on track to start concentrate production and sales in Q4 or and the very near future.

I look forward to reporting on and middle commissioning and mining operations as we become candidates only primary silver producer until wind and until then thank you and stay safe. Thank you.

Thank you.

This concludes today's conference call you may disconnect. Your line. Thank you for participating and have a pleasant day.

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