Alexco Resource Corp

Thank you for standing by. This is a conference operator. Welcome to the Lexico Resource Corp second quarter 2021 conference call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. 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 operator by pressing star and zero. I would now like to turn the conference over to Rajni Bala, Investor Relations and Communications Lead. Please go ahead.

Thank you very much. Good morning, ladies and gentlemen. Today is Thursday, August 12, 2021. My name is Rajni Bala, and I welcome you all to the Lexo Resource 2021 Second Quarter Results Conference Call. This call is being webcast live and can be accessed through the events and webcast section of our website at an audio archive of the call will be available later today. Our website also contains our most recent news releases and our financial statements for the quarter ended June 30th, 2021. All amounts mentioned today are in Canadian dollars, unless otherwise indicated. 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 Krog, 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 law. Similarly, past performance discussed today does not indicate future results, and our business involves several risks that could cause results to differ from projections. Investors are encouraged to review the disclosures pertaining to risk, which can be found in our most recent regulatory filings available on our website and on CEDAW and ADCOR. I will now leave you with our Chairman and CEO, Clint Nauman.

Thank you, Rajni, and thank you to everybody who's attending this morning. Certainly good to talk to you. A little bit of a change up this quarter. My presentation is going to be relatively brief, and I'm not going to reiterate financial results. You have them available from our filings yesterday. So rather, I'm going to give you a few high-level remarks from site operations and then expand in response to any questions that you might have. I think that should be a pretty productive way to... to execute this discussion. So our ramp up of operations at Keno Hill continued during the second quarter, and we've been making good progress. I would say that, you know, our workforce is settling in. The COVID restrictions, although still rigorous, are not viewed as as threatening at the workforce level, which is important. And so operations are hitting more of a routine, you know, type of a profile. On the revenue side, we continue to mine ore from our Belkino mine. In the last quarter, we mined 6,460-odd tons. The head grade was just over 700 grams per ton in the second quarter, and the year-to-date head grade is a little bit north of 770 grams per ton silver. with pretty strong base metal credits. So this mine continues to overachieve its block model estimates, but we are at the present time moving into the last stope that we would intend to mine there, and then we'll be looking to transition and redeploy resources we have in that mine, the Belkino mine, to either Flamin' Moth or to Birmingham. The one thing that I would say about the Balkino experience is that we have done a significant amount of long hauling. And for those that are familiar with our technical reports, you'll know that both at Birmingham and at Flame and Moth, we have a long hauling component. On balance, it's a subsidiary component. Contrary to that, at Balkina, we've been doing a fair amount of long hauling, and I would have to say that our experience has been very, very good. We've overachieved grades. We haven't taken a lot of dilution. We're using much more, I guess, sophisticated or advanced long hauling methods than we used in the past, and the results have been excellent. So just to make that point, that the volcano experience has been really pretty pleasant in terms of operating practices as well as output. But time to move on. So we remain on track to reach the Birmingham and Flaming Wild Ore in the second half of 2021. I would say that at Flavor Moth, which, of course, you know, is situated right very close to the mill, where we are at the first production level, at the 835 level, and we're about to cross-cut to the ore. It's about 120 meters to the ore, and that's going to open up about 65,000 tons of material. It has a grade of 600 to 700 grams in that type of range. It's the top of the Flavor Moth ore body. And we would anticipate being into that ore body in the last half of the year. Over at Birmingham, in contrast, we are in a drive called the 1150. It's the first production drive. It's a result of the new reserves and resources that we calculated earlier this year. And there's... We're within meters of the first ore blocks at Balkino. The major portion of the Balkino deposit that will occupy the production component in 2022 is about 140 meters in front of us down the ramp. And that will open up when we get there about 60,000 tons of close to 1,700 grams per ton silver. We're within 140 meters of that. Meantime, we're going to be mining at the 1100 level and extracting ore going into the third and fourth quarter. Underground development rates, as we mentioned in our published material, is slower than forecasted, and we would point to crew and experience-related issues there, but they certainly are improving, and we're pretty happy with where we're heading here. At Birmingham, the initial oil production is anticipated, as I mentioned, in the third quarter, and at Flavamoth, initial oil production is anticipated in the fourth quarter of 2021. Don't forget that we updated our mineral reserves in May of this year. They were increased by about 20% to 1.4, 1.5 million tons, so we added about 270,000 tons. Small number for those used to bigger mines, but don't forget that at 400 tons a day, that's almost two years of production there. So the new resource is an average grade of 804 grams per tonne silver, 3.8% zinc, 2.6% lead, there's a little bit of gold, or as some people report, and we would say just over 1,000 grams per tonne silver equivalent based on the normal calculations. So this new reserve has extended our mine plan, and we were anticipating producing more than 35 million ounces of silver over the next eight years. At the mill, we processed nearly 11,000 tons of ore in Q2. It's 18,000, 19,000 tons year-to-date, with a year-to-date hit grade of 817 grams per tonne silver. about 11% lead and 4% zinc. So very high base metals. In the second quarter, that mill averaged 176 tons per operating day for the days it was operating in Q2. And the mill is simply operating in response to the ore that's being extracted and delivered from Balcino. But the Q2 experience was a 65% increase in throughput over the last quarter. And all of the, or the great majority of the construction work, refitting work in terms of cyclones, a new fine ore feeder, construction of a new building, the second ball mill, the regrind mills, et cetera, have all been completed and stand ready for scale-up in Q3 and Q4. The experience in the mill has been excellent, actually. You know, recoveries, are on or ahead of our expectations. It's averaged 93% of recovery of silver in Q2, with 94% of the silver reporting to the lead concentrate. So, you know, payabilities are high, and that's good to see. Here today, you know, recoveries are around 91% with 87% of the silver reporting to the lead concentrate. So you can see the similar trends, you know, emerging at the mill with increasing efficiency and especially payability as we go along here. So additionally in Q2, as I mentioned before, we released an updated technical report. The mineral reserve increased, as I mentioned. And we end up here with a run rate of 4.4 million ounces of silver per year over an initial eight-year mine life. Turning briefly to exploration, we will have a lot more to say about exploration in a couple of weeks here. The Birmingham Northeast Deep Exploration Program is continuing. We have four drill rigs here. continue to operate. They're using directional drilling technology. That is a 20,000 meter underground program. Excuse me. And we're about 60% of the way into that particular program. 11,500 meters have been drilled to date. Ultimately, we should have more than 50 intercepts through the target zone in this northeast deeps area under the Birmingham deposit. And that zone, which as we've talked before, is 400 to 500 meters long, will be drilled off of 10 fences, which are being drilled with large diameter core, off of which we drill daughter holes or directional holes to get a vertical hole spacing of about 20 meters. So we're doing that very deliberately to make sure or to enhance, I guess, the opportunity for us to, when we start calculating the resource for this deeper mineralization, that we're able to go straight to an indicated category. We're working towards releasing initial drill results in late August. I would say that we would hope to have them available, you know, for the second quarter for this week, actually. But we had some duplicates and standard issues, quality issues that we had to retest at the lab. It was delayed just a couple weeks. Nothing to get excited about there. It's pretty routine. This is very high-grade material. to the extent that it is intercepted, so it does give the lab some problems from time to time. Our objective in 2021 is to incorporate this drilling into a new site-wide mineral resource estimate, and of course that will be focused mostly at Birmingham, but it will gather in some other drilling that we did in 2020. So, it's still our target to complete this resource analysis by the fourth quarter of this year, and just to see where we stand at, especially at Birmingham. So, finally, just to conclude, I wanted to, again, express my sincere thanks to our workforce who have continued to deliver results amidst the ever-evolving COVID environment together. We've made steady and significant progress on delivering Keno Hill back to full production, but make no mistake, we still have hard work ahead of us. Maintaining and increasing our forecasted underground development advance rates is key, as is continued successful recruitment of underground miners and maintenance technicians. We also need to be navigating the normal short-term supply chain issues, as are most other people in the business. So for us, it's all about execution, and that comes down to underground advance rates, continuing success in recruiting underground operators, miners and mechanics especially, and being proactive on the supply chain challenges. With that, I think I've said enough here to give you a high-level overview, so I'd like the operator to open the call for questions. Thank you.