Q1 2022 Alexco Resource Corp Earnings Call

Thank you for standing by. This is the conference operator. Welcome to the Alexco Resource Corp for a squatter 2022 results 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 questions.

Thank you for standing by this is the conference operator.

Welcome to the electric co resource Corp, first quarter 2022 results 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 questions.

To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0.

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I would now like to turn the conference over to Paul Jones, Senior Vice President, Corporate Development. Please go ahead.

I would now like to trying to conference over to Paul <unk> Senior Vice President Corporate development. Please go ahead.

Good morning ladies and gentlemen. Today is Friday, May 13th, 2022. My name is Paul Jones and I welcome you to the Alexco Resource 2022 First Quarter Results Conference call. This call is being webcast and a recording can be accessed through the events and webcasts section of our website at AlexcoResource.com later today.

Good morning, Ladies and gentlemen, today is Friday may 13th 2022, My name is Paul Jones and I Welcome you to the electrical resource 2022 first quarter results conference call.

This call is being webcast and a recording can be accessed through the events and webcast section of our website at electrical resource Dot Com later today.

Our website also contains our most recent news releases and our financial statements for the quarter ended March 31st, 2022. All amounts mentioned today are in Canadian dollars, unless otherwise indicated.

Our website also contains our most recent news releases and our financial statements for the quarter ended March 31, 2022, all amounts mentioned today are in Canadian dollars unless otherwise indicated today are chairman and CEO Clinton Aman will discuss our most recent results and he will be joined by our President Brad Thrall and our <unk>.

Today, our chairman and CEO , Clint Nauman, will discuss our most recent results, and he will be joined by our president, Brad Thrall, and our CFO Mike Clark during the question and answer period. Please be reminded that some statements made today may constitute forward looking information within the meaning of applicable securities regulation.

Oh, Mike Clark during the question and answer period.

Please be reminded that some statements made today may constitute forward looking information within the meaning of applicable securities regulations.

Past performance discussed today is not indicative of future results and our business involves several risks that could cause results to differ from projections.

Past performance discussed today is not indicative of future results and our business involve several risks that could cause results to differ from projections investors are encouraged to review the disclosures pertaining to risks that can be found in our most recent regulatory filings available on our website and on SEDAR and Edgar I will now.

Investors are encouraged to review the disclosures pertaining to risks that can be found in our most recent regulatory filings available on our website and on CEDAR and EDGAR. I will now leave you with Clinton Almond.

With Clinton Aman.

Thank you Paul Good morning, good afternoon, and thank you to all those joining our call today.

Thank you, Paul. Good morning, good afternoon, and thank you to all those joining our call today.

Given the volatile and changing, challenging environment, I want to thank all our shareholders for their continuing support and for helping shape Alexco's vision of becoming Canada's only primary silver producer.

Given the volatile and changing challenging environment I want to thank all our shareholders for their continuing support and for helping shape Alexia its vision of becoming Canada's only primary silver producer.

It's only been about eight weeks since our last conference call. So I'm going to take this opportunity to be very brief today, but I'm going to be happy to answer questions after this brief discussion.

It's only been about eight weeks since our last conference call. So I'm going to take this opportunity to be very brief today, but I'm gonna be happy to answer questions. After this brief discussion.

Yeah.

As we had noted in late March, reduced workforce availability coupled with supply chain interruptions led to a reduction in underground equipment operating hours in the early parts of the year.

As we have noted in late March reduced workforce availability, coupled with supply chain interruptions led to a reduction in underground equipment operating hours and the early parts of the year.

This was particularly so in January and February as COVID related workforce issues gave way to delay delivery of critical parts and components for underground equipment. Primarily scoop trash.

This was particularly so in January and February as Covid related workforce issues gateway to delay delivery of critical parts and components for underground equipment, primarily scoop trams.

Even though we began to see improvement in workforce availability in March, supply line delays continued as did availability of underground mechanics.

Even though we can't even though we began to see improvement in workforce availability in March supply line delays continued as does it as did availability of underground mechanics.

But we did see operating improvements in March with about 70% of the Q1 silver production being produced in March by 56,000 ounces. And these improvements continued through April , where there's another 15 to 20% step up in silver production.

But we did see operating improvements in March with about 70% of the Q1 silver production being produced in March about 56000 ounces and these improvements continued through April where theres, another 15% to 20% step up in silver production.

In particular, we saw bitter advanced rates in the ramp at Birmingham and an additional production level coming on stream, the 1850-15 level at Flammer Mall.

In particular, we saw a better advance rates and the ramp at Bermingham.

And an additional production level coming on stream. The 18, 50, 815 level at flame and moth.

We've been encouraged by these improvements. They are admittedly short of where we need to be. So we do need to ensure that this trend continues in order for us to be successful over the longer term.

We've been encouraged by these improvements.

Admittedly short of where we need to be so.

So we do need to ensure that this trend continues in order for us to be successful over the longer term.

Notably, our focus currently is for the near future and for the near future, will be on improving underground equipment availability, which will have a direct impact on accelerating our access to additional underground or face.

Notably our focus currently is for the near future and for the near future will be on improving underground equipment availability, which will have a direct impact on accelerating our access to two additional underground ore faces.

More equipment availability means more underground development and that drives access to additional oil phases, which is key for ramping up throughput to the mill.

More equipment availability means more underground development and that drives access to additional ore faces, which is key for ramping up throughput to the mill.

We had previously anticipated providing formal guidance for the balance of 2022 as part of this release, but we are deferring that until we have them work until we have more confidence in our projections.

We had previously anticipated providing formal guidance for the balance of 2022 as part of this release. But we are deferring that until we have a more confidence in our project.

In the meantime, we're evaluating a number of production and operating scenarios which will drive our overall assumptions for underground development rates.

In the meantime, we're evaluating a number of production and operating scenarios, which will drive our overall assumptions for underground development rates.

With more clarity and confidence on how best to advance our development, we will then be in a position to guide when we will achieve our target 400 ton per day mill through.

With more clarity and confidence on how best to advance our development. We will then be in a better position.

To guide when we will achieve our target of 400 ton per day mill throughput.

Although nearly all of our attention is focused on improving our underground productivity, we are launching a relatively small exploration program, later in May, leveraging our success of Birmingham.

Although nearly all of our attention is focused on improving our underground productivity. We are launching a relatively small exploration program later in may leveraging off of our success at Bermingham.

Now that we have a solid understanding of the structural geology architecture in which the larger and higher grade deposits occur at Keanu Hill, we see many areas which require additional attention and testing, not only along strike in both directions from our discovery of Birmingham, but also in a number of other areas in this very large district.

Now that we have a solid understanding of the structural geology architecture in which the larger and high grade deposits occur at Keno Hill, we see many areas, which require additional attempts at additional attention in testing not only along strike in both directions from a discovery at Bermingham, but also in a number of other areas in this very large district.

Finally, I want to thank our shareholders for their patience and support of Alex Gome as we deliver Kino Hill back to full production. And with that very brief statement, I'd like to ask the operator to open the call for questions.

Finally, I want to thank our shareholders for their patience and support of Alaska as we deliver Keno Hill back to full production and with that very brief statement I'd like to ask the operator to open the call for questions.

Thank you. We will now begin the question and answer session. Through joining the question here, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request.

Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad you were here at Cowen acknowledging your request if you're using a speaker phone. Please pick up your handset before.

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We will pause for a moment as color is showing the cube.

We'll pause for a moment its color its trying to cure.

Okay.

The first question is from Joseph Regar with broad capital partners. Please go ahead. Hey, Clinton, Dean. Thanks for taking my question.

The first question is from Joseph Reagor with Roth Capital Partners. Please go ahead.

Hey, Clinton and team thanks for taking my questions.

Hi, Joe.

Okay. So.

Obviously, I've asked about this a little bit before on prior calls, but just want to follow up on it again.

Obviously I've asked about this a little bit before on prior calls, but just want to follow up on again.

What can you guys do to kind of accelerate the underground development? You know, I guess last time you guys said you were looking at, but had made any decisions yet on potentially, you know, bringing in a...

What can you guys do to kind of accelerate the underground development and yeah. Yes last time you guys said you were looking at but haven't made any decisions yet on potentially bringing in a you know a contractor or something to do additional development work you know what the the capital raise you completed.

contractor or something to do additional development work. You know, with the capital raise completed, are you in a position now where you, you know, financially could do that?

Are you in a position now where you you know financially could could do that.

Yeah, Joe, it's a brighter. I think I can take that.

Yeah, Yeah, Joe's bread are all I think I can take that.

It's Clint mentioned, I mean, there's a direct linkage between our equipment availability and our advance rates. And just to give you, I guess, put it into context.

As Cliff mentioned I mean, there is a direct linkage between you know our equipment availability and our advance rates and just to give you I guess you know put it into context, our scoops. The underground loaders have had a non availability in the 35.

Our scoops, the underground loaders, have had an availability in the 35% range over the last couple of months, where they really need to be in the 65 to 70% range.

That range over the last couple of months, where they really need to be in the 65% to 70% range.

So, you know, certainly the supply chain and the shortage of underground mechanics has an impact on that. And to address that, we are currently in the process of leasing additional equipment.

So certainly there's the supply chain and the and the shortage of underground mechanics.

As an impact on that and to address that we are currently in the process of.

Leasing additional equipment underground loaders, specifically they have not arrived at site yet so they are on their way so that will help increase our availability by having more units.

Underground loaders specifically they have not arrived at site yet, so they are on their way, so that will help increase our availability by having more units And then in terms of the

And then in terms of the contractor.

You know, we have used a contractor previously last year to try to supplement our advance rates and quite honestly, I think the contractors are facing many of the very similar challenges that we do in terms of recruitment of

You know we have used a contract or previously last year to try to supplement our advance rates and quite honestly I think the contractors are facing many of the very similar challenges that we do in terms of recruitment of of mechanics, and and miners and specifically the face miners. So those are the <unk>.

of mechanics and and miners and specifically the face miners. Those are the miners that can really do all of the tasks.

Miners that can really do all of the tests underground. So again, it's it's the focus is recruitment on mechanics, and bringing in additional equipment to supplement our availability.

Underground so again that the focus is recruitment on mechanics and bringing in additional equipment to supplement our availability

OK, fair enough, and then you know recovery rates in the mill seem to be, you know, kind of a touch below plan. Not not tragically, but just slightly.

Okay Fair enough and then you know recovery rates in the mills seem to be you know kind of a touch below plan not not tragically, but just slightly.

Any ideas about, you know, will, you know, filling the mill solve that problem? Is it, you know, still a matter of ramping up and getting, you know, everything fine-tuned, you know, to different ore bodies? You know, just any additional color you can give there, you know, as far as expectations going forward.

And any ideas about you know will you know filling the mill solve that problem is it are you know still a matter of ramping up and getting you know everything fine tuned you know two different ore bodies, just any additional color you can give there.

You know as far as expectations going forward.

Yeah, I mean, I guess the two points to make on mill recovery, I'm certainly silver recovery is directly related to head grade in the mill. So as our head grade continues to increase, the recovery is increased. So I think if you...

Yeah, I mean, I guess, the two points to make on mill recovery.

Certainly silver recovery is directly related to head grade in the mill So as our head grade continues to increase.

The recoveries increase so I think if you Oh.

It's just a trend that you can plot and see that directly. The other piece is more consistent run time. So as we have additional ore that feeds the mill, we can operate the mill longer rather than starting and stopping in shorter durations. So.

It's just a trend that you can you can you can plot and see that directly the other piece is as more consistent run time. So as we have additional ore that feeds the mill, we can operate the mill longer.

Rather than starting and stopping and shorter duration. So mills liked to be fed a constant feed and so both of those things together I think are contributing to the current recovery I will say, our certainly our zinc recovery over the last couple of months has been better than it has ever been even.

You know, mills like to be fed a constant feed, and so both of those things together, I think, are contributing to the current recovery. I will say, certainly our zinc recovery over the last couple of months has been better than it has ever been, even back into the original Belkino days. So again, and that's a direct reflection of...

Back into the original Bell Keno days too so again and that's a direct reflection of.

Increased zinc levels that we see from flame and moth

Increased zinc levels that we see from flame and moth.

Okay. Thanks, I'll turn it over.

The next question comes from Chen Lin with Lin Asset Management. Please go ahead. Hi. Thank you for taking my questions. I noticed that...

The next question comes from Chen Lin with Lin asset management. Please go ahead.

Hi, Thank you for taking my questions I note is that our youth so.

Oh, Victoria Dan.

The rights, but banking so with that additional meaning.

What is your like a working capital going forward and then do?

What is your like a working capital going forward and I do see that there is sufficient to reach cash flow positive. Thank you.

Yeah, thanks. Thanks, Jen.

Yeah. Thanks, Thanks Chen.

So yeah with the monetization.

So yeah, with the monetization of the Banyan position, our current cash is right around $23 million.

The banyan position our current cash is right around 23 million Bucks.

And so as I mentioned in my call, we are looking at various operating scenarios moving forward. And certainly if we continue to see you know the type of improvement that we have here over the last couple months.

And and so as I mentioned in my call. We are looking at various operating scenarios.

Moving forward and certainly if we continue to see.

You know the type of improvement that we have here over the last couple of months.

There's going to be a lot less pressure, but we obviously, you know, we're continuing to look at all options. So it's a difficult one to...

There's going to be a lot less pressure.

But obviously you know we're continuing to look at that all options. So.

It did it's a difficult one to.

to forecast, to confidently forecast, Chen, because we need to get more run time under our belt to see continuation of these improvements, to be able to, you know, nail when we see that point of cash self-sufficiency.

To forecast it to confidently forecast the channel because we need to get more run time under our belt to see continuation of these improvements.

To be able to you know.

Now when we see that that point of cash self sufficiency.

Okay, great. Thank you how about the Kobe city originates the completely lifted you can.

Great, thank you. How about the COVID situation? Is it completely lifted?

It's much reduced and it was earlier in the first quarter for sure. The first quarter, quite frankly, was a struggle. And that was initiated with COVID cases that we had, some of which were held over from December , but also a bunch of new ones in January .

It's it's much reduced than it was.

Earlier in the first quarter for sure the first quarter quite frankly he was.

You know it was a struggle and and and and and that was initiated with the COVID-19.

Races that we had some of which were held over from December but also a bunch of new ones in the in January .

Okay. Thank you.

The next question is from Lauren Shurf with Raymond James. Please go ahead.

The next question is from Lauren Scharf with Raymond James. Please go ahead.

Alright Clinton bread.

Hi Clint and Brad. To follow up on the earlier solution of that the leasing equipment is on the way, the second part of that was getting underground mechanics. How tight is that market? What's your likelihood of attracting anyone? And what's the price of doing so in the market today? How much do we have to pay to entice people to come in?

Follow up on the earlier a solution of the leasing equipment is on the way. The second part of that was getting underground mechanics, how tight is that market, what's your likelihood of attracting anyone and what's the price of doing so in the in the market today, how much do we have to pay to entice people to come in.

Yeah, well in terms of mechanics, I'm again, just to put it into context, we probably.

Yeah, well, in terms of mechanics, again, just to put it in the context, we probably are on average, 65% to 70% filled up, if you will, of mechanics more, we really need to be.

On average you know, 65% to 70% filled up if you will of mechanics from where we really need to be.

uh... so in order to supplement that you know where you we we are using a number of contractors on multiple contractors some of them specialized in the equipment that we on such as a bolter

So in order to supplement that you know, where we are using a number of contractors multiple contractors some of them specialized in the equipment that we have.

One such as the bolter.

But yes, it's very tight out there in terms of...

And but yes, its very tight out there in terms of.

particularly on the underground mechanic side. So it's not all about wages. It's certainly camp conditions and those types of things. It's a pretty mobile industry that we're in. So you know.

Particularly on the on the underground mechanic side. So it's a you know it's not all about wages you know its certainly cant conditions and those types of things are you know.

It's a pretty mobile industry that we're in so.

Yeah.

So it's really trying to continue to recruit, retain, and then we're supplementing with contractors where they can help build those gaps.

It's really trying to continue to recruit retain and then we're supplementing with with contractors, where they can help fill those gaps.

So if you're successful with bringing in a couple of contractors and the equipment, it's on the way, so let's say it's coming in this quarter, how soon is the ramp up to where you want to be if both of those things are successful?

So if you're successful with bringing.

Bringing in a couple of contractors in the equipment.

It's on the way so lets say its coming in this quarter.

How soon is the ramp up to where you wanted to be both of those things are successful.

The hilarious is clean. I mean, it's sort of the same answer. You know, we need to see, you know, continuation of the improvement that we've seen here in the last couple months.

Hey, Larry This is Glenn I mean, it's sort of the same answer.

We need to see continue.

Continuation of the improvement that we've seen here in the last couple of months and I'm, a little bit of love to speculate at this point until we get a little more time under our belt to you know to be able to forecast exactly when that's going to be I mean as I mentioned you know we are looking at.

And I'm a little bit of low to speculate at this point until we get a little more time under our belt to be able to forecast exactly when that's gonna be. I mean, as I mentioned, we are looking at various cases, you know, upside and downside, and I can certainly assure you that in the middle and upside cases, then we're gonna reach that point. That's a good point.

<unk> cases.

You know upside and downside and I can certainly assure you that in the middle and upside cases, then you know we're going to reach that point.

Okay. Thanks, very much guys I appreciate it.

Good luck.

Thanks Ryan.

The next question is from Martin O'malley with O'malley investments. Please go ahead.

Yeah, in our last call we talked about the first quarter head grades and how those were affected by the fact that we had some, I guess a little more waste rock in our in our feet than we should have. What are the head grades looking like now? We're about halfway through the second quarter.

Yes in our last call, we talked about the first quarter head grades and how.

Those who are affected by the fact that we had shut in I guess, a little more waste rock in our in our sheet sure. What is the head grades looking like now we're about halfway through the second quarter.

Yeah, just to, again, we haven't released all the numbers, but I mean, certainly our April headgrade is, I would say, you know, 25 to 30% higher than Q1. And we're starting to see that same trend in May now as well, just to give you a flavor. I mean,

Yeah just.

We haven't released all the numbers, but I mean, certainly our April head grade is a I would say you know, 25% to 30% higher than Q1 and.

And we're starting to see that same trend in in May now as well just to give you a flavor I mean.

April head grades coming from the Flamin Moth mine were in excess of 700 grams per ton of silver And over 650 grams per ton from the Birmingham mine. So we're certainly seeing that trend You know, we've learned a lot at Birmingham in terms of our long hole drilling and blasting

April head grades coming from the flame and moth mine were in excess of 700 grams per ton of silver.

And in over 650 grams per tonne from the Bermingham mines. So we're certainly seeing that trend.

We've learned a lot that Birmingham in terms of our long hole drilling and blasting techniques.

And at Flamie Moth, it's really about, we're now, I guess, would be more on the heart of that 815 level, rather than on the perimeter on the outer edges of the 835 that we were in the first quarter.

And at flame and moth, it's really about we're now I guess would be more on the heart of that 815 level.

Rather than around the perimeter on the outer edges of the 835 that we were in the first quarter.

Yes.

In the call last, I guess eight weeks ago, you all talked about the, you're just now getting into a couple of very good stoves. And I can't recall which those are, but I assume that that's continued. And these grades, you sound great for April . That's a big improvement.

In the call last.

I guess eight weeks ago.

You all talked about the you're just you're just now getting into a couple of very good stopes and I cant recall, which those are but I assume that that's continued in these grades yourself the sound great for April that's a big improvement.

Yeah, that means, again, specifically the flame and moth, the first quarter, we were primarily in what we call the 835 level. So that was higher in elevation. And you're on the perimeter. You're on the just on the very edges of that stope. But now that we are lower in the next level down, we are seeing more consistent higher grades from flame and moth.

Oh, Yeah, I mean, again, specifically at flame and moth the first quarter.

We were primarily in what we call. The 835 level. So that was higher in elevation and you cut your on the perimeter youre on the just on the very edges of that stope.

But now that we are lower than in the next level down we are seeing more more consistent higher grades from flame and moth.

Thank you.

Okay.

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

This concludes the question and answer session. I would like to turn the conference back over to Clint Nellman for any closing remarks.

Thank you, operator. And again, I just want to thank our shareholders for their patient's death before, of Alex go, as we bring Kino Hill back into full production. Thank you.

Thank you operator, and again I just want to thank our shareholders for their patient and patients in support of a Lex Goh as we as we bring Keno Hill back into full production.

You very much.

This concludes today's conference call. You may disconnect your lines.

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

Thank you for participating and have a blessed day.

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