Alexco Resource Corp

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.

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.

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.