Alexco Resource Corp

Thank you for standing by. This is the conference operator. Welcome to the Alexco Resource Corp third 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 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 and 0. I would now like to turn the conference over to Katina Cordero, Director of Investor Relations. Please go ahead.

Good morning. Today is Friday, November 13, 2020, and I welcome you to the Alexco Resource third quarter conference call. This call is being webcast live and can be accessed through our website at alexcoresource.com. An archive of the call will be available later today on our website in the events and webcast sections. Our website also contains our most recent news releases and our financial statements for the quarter end of September 30, 2020. All amounts mentioned today are in Canadian dollars, unless otherwise indicated. Today, our Chairman and CEO, Clint Nelman, will discuss our most recent quarterly results. He will be joined by our President, Brad Thrall, and our CFO, Mike Clark, during the question and answer periods. Before we start, I remind everyone that some statements made today may constitute forward-looking information within the meaning of applicable securities laws. Past performance discussed today is not indicative of future results, and our business involves a number of risks that could cause results to differ from projections. Investors are encouraged to review the disclosures pertaining to risks, which can be found in our most recent regulatory filings available on our website and on CDAR and EDGAR. I will now leave you with Clint Nelman.

Thank you, Katina, and welcome to everybody. Thank you for attending this morning. So, a relatively short discussion here, then we'll move on to the question and answer section. So, just to let you know that development activities at Keno Hill Silver District kicked into high gear during the third quarter, and we're progressing for a restart and commissioning of the district mill in the very near term. This morning, I'm going to provide a brief summary of the work we have completed at site since our last call, our financial and corporate performance during the third quarter, our 2020 exploration program, which, as you remember, focused on the Birmingham Deep Target and is now nearing completion. And I'll also discuss our general plans for Keno Hill in 2021 before opening the call for your questions. So let's review the highlights from the third quarter 2020. On the operations front, as I mentioned, we're getting ready to restart the mill. We've completed the installation of new cyclones, the addition of a new tailings filter press, we've modified the final feeder, and we've executed on numerous other ancillary projects throughout the mill complex. The installation of a second ball mill is ongoing, as is the construction of a crusher enclosure and ventilation system. as well as the installation of two concentrate regrind mills. Our team has wet-tested the mill, and we will provide further updates on mill performance in the near term. Other surface construction activities at site, such as the expansion of the camp accommodation complex, including two new bunkhouse units, an upgraded administration complex, and employee dry and wash facilities, are nearing completion. Mine rehabilitation is complete at all three mines, and each are in various stages of development and ore extraction. The majority of our mining fleet has arrived and has been commissioned and is currently in operation. And just going through the mines one by one, the Belkino long-haul extraction from two underground levels has started, and ore is being placed on the course ore pad in anticipation of the restart of the district mill. At Flamin' Moth and Birmingham, primary ramp development is the main activity, and it continues at both mines. At Flamin' Moth, we're approximately 140 meters away from the first level access point on the 835 level at this juncture. And from that access point, there's about another 100 meters that are needed to crosscut to the ore. At Birmingham, we're at the bottom of the ramp that was driven – last year and we are developing a vent access, vent raise access level at the bottom of that ramp and that access and excavated area is going to be ready for occupation by a contract raise crew within the next several weeks. Construction of the new water treatment plant of Birmingham is also nearing completion and it'll be operational in 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, including citizens of the First Nation of Nacho Nayak Dunn. And about 90% of our employees reside in Yukon or British Columbia. And we continue to focus our hiring efforts within this travel bubble. We remain focused on the health and safety of our employees, contractors, and our host communities. Our COVID-19 management plan continues to strictly enforce prevention measures consistent with the guidelines of the Yukon government and health officials. I would like to commend our employees and contractors for their continuing commitment to Keno Hills' culture of excellence and safety. Our safety record now exceeds more than seven and a half years without a lost time accident. On the exploration front, our 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 Birmingham deposit at depth, some 200 meters below the northeast zone, where we reported outstanding intercepts last year. To date, we've completed approximately 7,600 meters of drilling in a panel of rocks which extend 200 to 300 meters either side of this successful drilling in 2019. And from what we can see, it would appear that our geologic and structural models are quite sound. Unfortunately, because of the backlog in the assay labs, we really can't promise results until late 2020 or even into the first quarter of 2021. And just anecdotally, speaking to the labs yesterday, it looks like our assay turnaround is about eight weeks. So consider that we are still drilling so we can see that some of our assays are clearly going to dribble into 2021 unless things improve at the labs. Subject to final results from the drill program, we'll decide how to proceed in 2021, but rest assured, if we think the Birmingham mineralization with its unique grade attributes is likely to extend to depth, I think we'll mount a fairly significant surface drilling program in 2021 to better understand the opportunity, as well as test other targets in the Birmingham and Hector Calumet area. Finally, ERDC has advanced the reclamation project to offset historic liabilities in the Keno Hill District. And in July of 2020, YESAB issued a final decision document on the final evaluation report. ERDC will be submitting a water license application to the Yukon Water Board in 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. On the financial and corporate front, for the third quarter, we reported an operating loss of $5.4 million, an increase of $3.4 million from the third quarter of 2019, which is primarily a result of increased rehabilitation and dewatering of the Balkine mine and mill refurbishments in anticipation of commissioning the mill in this quarter. Following the positive production decision announced 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 our surety bond into the period was $2.9 million. On August 5th, we entered into an amended and restated agreement with Wheaton with respect to the streaming agreement. The new agreement simplifies the calculation of the payment Alexco will receive for 25% of Keno Hills silver production, while at the same time enhancing our downside hedge, while still allowing us to participate in higher silver prices. And also during the quarter, we selected Ocean Partners as the off-taker for Keno Hills high-quality concentrates, and we're in the process of finalizing an agreement with them in the next couple weeks here. As we move to production and in context of much improved commodity prices relative to those that we used in the PFS in March of 2019, we are deploying a fair amount of effort revisiting our mine plans to ensure that we're positioned to realize further improved value from our ore deposits and adjacent mineralized areas. In this context, we're considering updating our PFS in the first half of 2021. and that would reflect a mine plan which is more in tune with the markets we find ourselves delivering into. On a related note, I'd like to take a moment to recognize our exploration team, led by our Vice President of Exploration, Al McHoney. In the background, over the last several years, we have been diligently working in the field, underground, and with all of the enormous amount of historic geology data that's preserved at Keno Hill, And the result of all this work is a new, fairly highly refined geologic map of the historic Keno Hill Mining District. And with the help of the Yukon Geology Survey, we intend to make this information public, and it will be initially displayed and discussed at this year's Yukon Geoscience Virtual Conference later this month. So this is essentially a map being contributed to the public inventory here. It's a significant body of work. and we're proud to make it available to the public and available for the benefit of our industry and specifically for the mineral exploration community in the Yukon. Kudos to Al and his team on this fine achievement. With that, I'd like to ask the operator to open the call for questions. Thank you.