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spk08: Thank you for standing by. This is the conference operator. Welcome to the Elexco Resource Corp third quarter 2021 conference call. As a reminder, all participants are in 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 call over to Rajni Bala, Investor Relations and Communications Lead. Please go ahead.
spk02: Thank you, operator. Good morning, ladies and gentlemen. Today is Wednesday, November 10, 2021. My name is Rajni Bala, and I welcome you to the Lexco Resource 2021 Third Quarter Resource Conference Call. This call is being webcast live and can be accessed through the Events and Webcast section of our website at alexicoresource.com. 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 September 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 Krall, 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 laws. Past performance discussed today is not indicative of future results. Our business involves several risks that could cause the results to differ from the projections. Investors are encouraged to review the disclosures pertaining to risks that can be found in our most recent regulatory filings. These are available on our website and on CEDAW and ADGAR. I will now leave you with Clint Nauman.
spk03: Clint Nauman Thank you, Rajni, and welcome and thank you to people that are on the phone this morning or this afternoon. And I just wanted to sort of lead off by indicating that our third quarter results really, you know, are a turning point, you know, in our mission to return Keno Hill or the district, the Silver District, to full production. And as you know, since last December, we've been processing what I would call salvage oil from the Belkino mine while we continued underground development of our two new mines, which, of course, from the bulk of the forward mine plan, and that is the Birmingham deposit and the Flamin' Moth deposit. I'm pleased to report that mining and milling of the Balkino salvage ore was completed in October, and we are now focused entirely on our new ore bodies, Birmingham and Flamin' Moth. Just anecdotally, at the end of the day, we mined about 24,500 tons from Balkino, that averaged 740 grams per tonne silver and about 14% combined lead zinc. Silver recovery was about 92% with better than 90% of the silver going into the lead concentrate and through that within excess of 500,000 ounces of silver contained in that concentrate. In the third quarter, in total, we mined more than 11,000 tons of ore, with the majority, about three-quarters of it, coming from Balkino. And our head grade in Q3 was on plan at 778 grams per tonne silver, along with nearly 18% combined lead zinc. Our performance in the district mill was also on plan in Q3. We saw 7,275 tons of ore milled, or about 162 tons per operating day. Recoveries across all three metals continue to be very strong, with our team continuing to improve silver recoveries in particular. Now, I must stress that while our total tons milled were down from the second quarter, this is largely due to the fact that we made the decision to not blend the new high-grade Birmingham ore with the Balkina ore. Instead, we chose to stockpile nearly 2,500 tons of Birmingham ore and allow the mill to complete its run of Balkina ore. We also used this time to work on tying in the new bore mill and the two regrind mills, which we'll bring online to optimize concentrate quality and production from the new deposits. The high-grade stockpile that we currently have, it's over 950 grams per tonne silver, is now being milled, and this will allow us to test the mill at its eventual target rate of 400 tonnes per day this quarter. Silver production in the third quarter came in at over 173,000 ounces, bringing our year-to-date production from development ore and salvage ore to around 500,000 ounces. Looking ahead, we're now milling and mining ore from Birmingham, and from all indications, that work is proceeding well. At Flamin' Moth, we continue to make good progress on the main decline. We've reached the first ore access level and are cross-cutting to the ore at Flame and Moth now, and we'll take our first rounds in ore at Flame and Moth this quarter. The last remaining critical path item at Flame and Moth is the completion of the Alamak race, which once completed in early 2022, will allow us to sustainably deliver ore to the mill, which when combined with activities at Birmingham, will see us achieve our targeted mill throughput level of 400 tons per day. Before I turn away from current operations, I wanted to briefly discuss a topic that we get asked about a lot, and for good reason, that being our working capital position, and if Alexco has sufficient cash to see ourselves to free cash flow generation early next year. This quarter saw a larger than normal drawdown in cash as we substantially finished all our PP&E spending. We were investing and finalized our exploration program, and we were operating in three mines. Additionally, as I noted earlier, we purposely delayed milling of the Birmingham ore while we milled out the Belkino ore. This really had the impact of delaying the revenue we would have otherwise realized this quarter, but we will now generate. For the better part of the last year, internally, we've been evaluating, forecasting, and monitoring our cash position. And as we sit here today in November, I can tell you that we're almost exactly where our internal plan had us at this time. That's not to say we don't still have some work ahead of us, but assuming we continue to deliver on our plan like we have in the last few months, I fully expect to see the cash balance start to grow in early 2022. Additionally, we also have access to our new revolving credit facility, which is undrawn. Finally, I want to talk briefly about the work that's ongoing on the exploration front. We have finished our drilling at the Birmingham Northeast Deep Zone. where we completed nearly 18,000 meters of drilling, which resulted in about 51 intercepts in the target zone. We announced in September our interim results, which were very good, as you likely know, with intercepts up to 1,600, 1,700 grams over more than 20 meters, actually. And we defined, as a result of all that and all those intercepts, we've defined an approximate 500-meter long subhorizontal mineralized zone with at least 100-meter vertical extent that's proximal to our existing Birmingham Reserve. We're now doing the work needed to turn those results into a robust mineral resource, which will be completed by the end of the year. And with that, I'd ask the operator to open the call for questions.
spk08: 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 will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Jake Sikielski from Alliance Global Partners. Please go ahead.
spk04: Hey, guys. Thanks for taking my questions. Just a quick question on the stockpiled bellocino ore during the quarter. Do you expect to blend that in over time or over the longer term, or is that something you think you'll process more near term?
spk01: Yeah. Hi, Jake. It's Brad here. Yeah, the stockpile ore was from Birmingham. And again, that was an intentional decision. I mean, the metallurgical characteristics are are slightly different at Birmingham. So, again, Belkino ore is fully processed now, and we are now milling Birmingham ore exclusively, and we would expect by the end of this year to draw down that stockpile to much lower levels by the end of this quarter.
spk04: Got it. Okay, so that will probably come into Q4, that sounds like. That's right. Okay. Um, and then secondly, on, uh, exploration, I mean, I think that's a big part of the story right now and the resource update, uh, targeted for the end of this year, um, significant catalyst, um, assuming it's positive. I mean, you guys still think we're looking at a, uh, a mine plan update in the first half of next year on, on the back of that. Um, and if so, you know, any color on timing of that?
spk03: Um, yeah, uh, Jake, um, Right now, we've only got back about 48% of the assays in this zone, but we are pretty confident that we're going to have everything back by the end of November, and we're going to do our best to, at least internally, put together a new resource or calculate the resource for that zone and for Birmingham in general in December. Once we have that resource and assuming it's appropriate based on, you know, the tenor of that resource, we will, you know, proceed to look at the, you know, economic factors and whether or not it can be worked into a mine plan. So we absolutely, assuming we have the, you know, decent results from the drilling and the resource calculation, we'll move forward and produce a new mine plan. As quickly as we can in 2022.
spk04: Looking forward to that. That's all on my end. Thanks again.
spk03: Thanks, Jake.
spk08: Once again, if you have a question, please press star then 1. The next question comes from Mike Nehuza from Roth Capital Partners. Please go ahead.
spk06: Hi, Clint. Stepping in for Joe Rieger, who is unavailable. um congratulations on passing the turning point um just some closing comments on belkino it looks like you had some really nice grades over uh the commissioning process and i'm just curious though you're totally focused on birmingham and flamin moth uh you know milling out and you've milled out the final tons and you're done with that um is there any further opportunity down the line for exploration at uh at belkino or is it just simply good night for that deposit
spk03: No, I mean, you know, internally, we're talking about that deposit, and we will still carry it, you know, as to, you know, how we're going to carry it on our resource statement. But I can, you know, I, you know, I'm the blue sky guy, right? But so I think that there's, you know, there's material at Balcino that we didn't go get that's above you know, where we've been mining. We've mostly been, you know, long hauling in Belkino, as you know, relatively easy to get and cheap tons. There are a number of tons, you know, what we would call above the main haulage level there that we didn't go get. So, yeah, at some point in the future, you know, I would see us, you know, circling around and maybe going back to Belkino. But, you know, I don't see doing that in the next, you know, five to eight years. I think it's going to be out there always.
spk06: So are you actually going to then decommission the mine and have to re-permit it? And I guess also, is there any decommissioning issues like mine water that has to be dealt with, or is it pretty clean?
spk01: Yeah. Hi, Mike. Brad here. The one common permitting, no, that mine remains fully permitted. So it's in what we would call temporary closure, but the permit is still in good standing even when you go into this phase. And we'll maintain the access to the mine. We've removed some of the assets that we can redeploy at the other two mines. And then in terms of water, we will let the mine flood, if you will. And then next year, depending on the water quality, we may continue to have to treat. But we'll see what the water quality looks like. But the water treatment plant remains available and and we can turn it back on next year.
spk06: Okay. Thank you. Also, you know, we've got some really good metal prices. I know that silver is kind of flat at a very good level, but also lead and zinc are up. And I'm just curious with, you know, maybe with the levels of throughput through the mill, do you think you might be able to make it without having to draw on that line of credit, the new line of credit that was put on?
spk03: Yeah, so that's what I was trying to address, you know, initially, Mike, is that, you know, to date, we have been operating and comparing ourselves to, you know, a plan that we put together, I think, back in May or June, and we're running right on target with that plan. You know, we're not quite there yet. We still have, like I say, work to do. But that plan would see us, you know, starting to accumulate cash in early 2022. So, you know, that's where we find ourselves at the present time. And for sure, we thought it was prudent to, you know, put that revolver in place. And it does provide, you know, does provide a cushion.
spk06: Okay. Also, it looks like over the last three quarters, you've accelerated the progress of underground development. I know it's been a tough year with COVID, but is there any secret sauce there that you have for doing that, or is it just the release of an availability of resources?
spk03: Well, I think Brad's probably in a better position to answer that, but let me just get my two cents in here first. I mean, you know, we brought on a whole new underground. We're self-mining, for most of you people are familiar with that. So we are... working and training, you know, our own underground employees. We have dealt with, you know, a COVID pandemic. You know, now we have additional restrictions in Canada in terms of who can and can't go to work relative to the vaccination state. You've got to be vaccinated to travel on a commercial aircraft in Canada. So, I mean, all of those things sort of play into you know, what's happening underground. But with that, I'd turn it over to Brad for more of the, you know, the skills and the improving performance there.
spk01: Yeah, Mike, I think probably two main factors that, you know, we've been steadily improving on, and that's retention and recruitment of underground miners. Really over the last probably two to three months, we're doing much better there in terms of, you know, again, recruitment, and equipment availability. Even though this is a fairly new mining fleet, again, one of the challenges on recruitment has been underground mechanics. Again, this is an industry-wide challenge that I think most miners are facing. And again, we've made improvements there, so that directly translates into improved mechanical availability. So it's really continuing to focus on recruiting, training and retention of our underground personnel.
spk06: Great. Well, I guess one last question on the exploration. I mean, it's stunning to have a 1,700-gram per ton silver intercept over 20 meters. And I know that the earlier releases on the high-grade at the Northeast Deep were also pretty amazing. So there is some variability as things pinch and swell, I imagine. But are you starting to develop an idea of the characteristics of the tenor of that potential new deposit as to whether there are challenges or is it going to be pretty straightforward for long-haul stoping? Can you comment about kind of how that looks? Obviously, it's large and it's going to be significant, but how is it kind of shaping up?
spk03: I think the best way to answer that is that we've got more than 50 intercepts in this thing. And I would say that for 90% of those, they were able to intercept that zone almost exactly where they predicted it to be. So what that tells you is that it's a very consistent zone. It does vary a little in terms of strike and dip as you work your way along it, but it's still a relatively steep zone. It's about 100 meters from the top to the bottom of it, if you like, and it's an elongated zone. Looking at the core, I think it's fair to say it has the same sort of characteristics as the majority of the, you know, of the Birmingham ore. And as we've explained before, you know, it's high in silver and as we have, you know, in the results that we've announced and relatively low in base metals. And so, yeah, they're sort of the characteristics. Everything else, I think, needs to wait until we get all of these assays back in.
spk06: I know you've really... drilled it tightly with the directional drilling and number of rigs is it could we might expect it's at an indicated level the resource or maybe some measured or how do you see that coming out
spk03: I think it's going to be indicated. I mean, we designed on the basis of indicator, and that's why we did the directional drilling, so we could get those holes exactly where we wanted them, working with our independent engineer and QPs. So, yeah, I'm hoping for, you know, it's going to be mostly an indicator category. Okay. Thank you very much.
spk08: The next question comes from Nicholas Dion from Hallmark Securities. Please go ahead.
spk05: Hi, guys. Congrats on the progress you're making. Sorry, I missed the call a bit late, so sorry if I'm being repetitive, but I just wanted to ask if you could, I guess, add any commentary on how Birmingham is going now that you're both mining and processing or from there. And then secondly, I was wondering if You know, what, if any, specific impacts the recent new COVID restrictions in the Yukon have on your operation? Thanks.
spk01: Yeah, Ryder, I can take that one. Birmingham first. I mean, we've got really two main activities happening at Birmingham. We have the main ramp decline that's progressing. And then we are mining ore on what we call the 1150 level. And that is our first, you know, sill drive on the cut and fill. And that's nearly complete. We have about 20 meters left. And then when that is complete, we'll start pulling long holes and retreat back out of that drive. That's about 150-meter-long drive. So that'll be our primary ore source really for the next couple of months until we reach the really high-grade material at Birmingham, which is at the 1120 level. And we've got about 125 meters remaining in that ramp to reach that 1120 level access. In terms of COVID, it's a great question on the travel. I think everybody understands the new rules, the mandate in Canada in terms of vaccination requirements. We have seen a minor impact, I would term it, in the last couple of weeks now that this has come in place. You know, at site, I mean, our employees at site were just over 90% vaccination rate at Keno Hill, which is, I think, very good. So it's going to have, I think, a small impact on, you know, some employees that are unable to travel. But certainly in, I think, the shorter, you know, more medium term, we don't see a significant impact. But again, you know, we are seeing some increased cases in the Yukon. Um, and we continue to just be, you know, very diligent on our, you know, health and safety protocols at site.
spk00: Okay. Thanks for that. That's it for me.
spk08: The next question comes from Kent Bissell, private investor. Please go ahead.
spk07: Thank you. Um, good morning gentlemen. I'm in, uh, BC. Um, my question, um, is more related to the overall picture of the company and is forward-looking in terms of the size of the land package and the exploration. I want to compliment you all on how fast you're bringing this mine to fruition with the mines of Birmingham and Flamin' Moth. But what your plans are for future exploration and development of the overall package of the property?
spk03: Yeah, I mean, that's a great question. You know, as a small company, we've sort of fallen in the trap of, you know, it's a good news story, obviously. I mean, we found a couple of deposits here, blind discoveries, and put, you know, 70, 75 million ounces on the books, and those ounces are now going into production. But for the last five or six years, and we've focused, you know, 95% of our attention on those two deposits. The district itself is 30-odd kilometers long and 15, 20 kilometers wide. And mineralization, silver mineralization, occurs over the entire district. So we really have only looked at a very small portion of the district. The flip side, though, is that we have done enough detailed work in and around these new deposits that we have a much better understanding technical understanding of the geological architecture that's required to produce these larger and higher grade deposits. So in 2022, you know, we don't have any plans finalized yet, but we will undertake, you know, more of a reconnaissance type of an exploration program, seeing if we can, one, Find, you know, proxies or, you know, similar geological settings to the ones that host the Flame of Moth and the Birmingham deposit. And secondly, just see what the, you know, if we can get a better understanding of the metal distribution in the district. I mean, it's quite noticeable that, you know, some of these deposits, like the Balcino deposit, for example, have a lot of lead and zinc associated with them. and the silver occurs with the lead in the actual lead minerals. Other deposits, like the ones that we've found here more recently, are very high-grade silver with lower base metals associated, and we don't understand exactly why that is. But you can be sure that there's going to be a series of deposits. This is a blue-sky statement, of course, that's going to fit within that spectrum. And, you know, and we're only just getting started on that work. So, yeah, we're pretty excited looking forward here. It's a big district. There's lots of targets. And we're going to start sort of, you know, seeing if we can start ranking those in effect with some kind of a reconnaissance program in 2022.
spk07: Thank you. That's all I have.
spk08: This concludes the question and answer session. I'd like to turn the conference back over to Clint Nelman, Chairman and CEO, for any closing remarks.
spk03: Thank you, Operator. I look forward to keeping you updated on our progress as we get closer to commercial production in 2022. And I thank our shareholders for the continued support and their confidence in our team. Thank you.
spk08: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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