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spk06: Thank you for standing by. This is your conference operator. Welcome to the Alexco Resource Corp Full Year 2021 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 and zero. I would now like to turn the conference over to Paul Jones, Senior Vice President, Corporate Development. Please go ahead.
spk04: Good morning, ladies and gentlemen. Today is Monday, March 21st, and I welcome you to the Alexco Resource fourth quarter and full year 2021 results conference call. This call is being webcast, and a recording can be accessed through the events and webcast section of our website at alexcoresource.com later today. Our website also contains our most recent news releases and our financial statements for the quarter-ended December 31st, 2021 results. All amounts referenced 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 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. Investors are encouraged to review the disclosures pertaining to risks that can be found in our most recent regulatory filings available on our website on CDAR and EDGAR. I will now leave you with Clint Nauman.
spk02: Thank you, Paul. Good morning, good afternoon, and thank you to those who are joining our call today. I'm going to keep my comments brief this quarter. Our performance in Q4 and into the early parts of 2022 has been well short of expectations, as you have seen from our news release earlier this morning. However, in my short time today, I want to assure you that we have weathered the most challenging issues and we are cautiously optimistic that we will post improved operating conditions and performance as we move into the balance of 2022. Firstly, from a purely pragmatic viewpoint, while the impact of COVID was significant at site in December and extended into January, we were further impacted by serious supply chain issues with respect to critical shares in February, leading to reduced equipment availability and much slower underground progress. The fact of the matter is that we can and must do better anticipating and overcoming these types of problems. As mentioned at the outset, I'm cautiously optimistic that the challenges we face recently are in the rearview mirror and that we are well positioned to deliver Canada's only primary silver mine to full production. Today at Birmingham and Flamin' Moth, we've completed more than 2,300 meters of lateral development and are now in ore at both deposits. Specifically, we currently have four ore headings on two levels available at our Flamin' Moth deposit, and we continue with long-haul retreat mining at our first large dope in the Birmingham deposit. Our upgrades and investments in the district mill have been completed. And when we've had sufficient ore available, we've had several campaigns at and above our design capacity of 200 tons per day, all the while meeting or exceeding our metallurgical model for silver recoveries. However, we are running approximately three to four months behind our schedule, which originally saw us achieving design capacity in Q1 2022. Clearly, this has put pressure on our balance sheet, And in that regard, we have available to us a $10 million U.S. prepayment revolving credit facility with a thousand trade off-taker from which we have currently drawn $5 million U.S. and can access the remaining $5 million if necessary. Accessing additional working capital is simply a function of our success in being able to deliver the targeted oil volumes to the mill to generate revenue offsets. As we speak today, we do see improved ore availability, improved cycle times underground, and improved delivery of ore to the mill. It is on us to maintain and increase this ore delivery in Q2 2022. Meantime, we are rescheduling our mine plan and anticipate being in a position to provide guidance for 2022 production in May, a couple of months from now. Meantime, we have onboarded and trained our own complete mining force, as well as built out a team of highly motivated and skilled service operators. I do want to commend our team for their dedication and steadfast commitment to the project. As a team, we have overcome a great number of obstacles. Improving results I expect to see over the next few months is directly related to their efforts. Today, we also announced some short-term production guidance for Keno Hill. We now expect to produce between 75 and 100,000 ounces of silver in Q1 2022, and between 450,000 and 550,000 ounces of silver in Q2 2022. Furthermore, as I previously mentioned, we anticipate being able to provide second half 2022 guidance in conjunction with our Q1 financial report on May 12th. I'd be remiss if I didn't take a brief moment to comment on the success that we've had on the exploration front. Specifically, after completing approximately 17,700 meters of drilling focused on the Birmingham deeps, on January 18th, we announced a 43% increase in Birmingham's indicated resource and a 70% increase to its inferred ounces. Birmingham now has over 47,000 million ounces of indicated mineral resources at a grade of 939 grams per tonne silver, with inferred resources of nearly 20 million ounces at a grade of 735 grams per tonne silver. By any measure, this is a stellar result, and in 2022, we'll be conducting an additional 15,000-metre program to identify and test areas exhibiting geological mineralization signatures similar to our Birmingham discovery starting with targets adjacent to the current reserve area. Meantime, as we have previously mentioned, as part of rescheduling 2022 production at Birmingham, we'll be looking at longer-range development alternatives to reach the deeper levels of this deposit and potentially accessing this new deeper discovery zone sooner rather than later. We've made a lot of progress over the last 18 months, and I expect the next few quarters will be critical for Lexco and Keno Hill. Lastly, I wanted to take this opportunity to thank our shareholders also for their patience and support of Glaxo as we delivered Keno Hill back to full production. With that brief statement, I'd like to ask the operator to open the call for questions.
spk06: 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 will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. The first question comes from Jake Sikulski of Alliance Global Partners. Please go ahead.
spk08: Yeah. Hey guys, thanks for taking my questions. So, you know, you've obviously mentioned the ramp up spend delayed a bit due to COVID restrictions. I'm just curious if this has had any impact on your plans to work towards an updated mine plan around mid-year. I mean, I'm just thinking working with consultants and other vendors. Have you seen a delay in that as well?
spk02: Yeah. Hey, Jake. Thanks for the question. I'll let Brad comment on this too, but just firstly, you know, still our intention obviously to, you know, to, you know, turn out a new life and mind plan. Excuse me. And, but in the meantime, as you might appreciate, we're focused on trying to reschedule, not put out new plans, but simply reschedule production for the remainder of 2022. So that'll be the first priority. And from that, we'll roll into a reformatting of the Life to Mind plan.
spk03: Yeah, maybe a little bit more, Jake. I mean, we've actually started a little bit both internally as well as some external consultants just starting that process of an updated plan incorporating the Birmingham Deep. So, yeah, it'll be a ways out still, but we have started some of that work.
spk08: Okay, fair enough. And then on exploration, you know, I saw that you guys outlined the 15,000-meter surface program. Is any of this aimed at targets that you've talked about in the past, or are these all truly new adjacent targets to Birmingham?
spk02: Yeah, you know, the – The plan, Jake, is to start a more, I guess, reconnaissance-type program in part. What we have found is that over the course of time, we've drilled about 150,000 meters in the district. Of that, only about 20% has ever been testing new targets. The rest has gone into infill drilling. Now we have a significant number of ounces in front of us, both from a reserve perspective and also a resource perspective. We have the runway to start looking at these numerous other targets in the district. And that's what that 15,000, well, the majority of that 15,000 meters is dedicated to. So we know that Birmingham X Calumet trend is very productive, so we'll be doing some more work further to the west along that trend. We're going to start work down on the Husky Silver King trend, which is an equally attractive, very high grade, high fluid flow system that we have not really tested at all. We're going to go over to Lucky Queen probably briefly. There's obvious targets over there adjacent to development that's already in place. We'll come back to Inca, which sits on the side of the whole road and has potential for a smaller, by our account, smaller but high-grade deposit that's very accessible, and do those types of things. So it's more of a reconnaissance program, and it's based on the thesis that if we do 12,000 to 15,000 meters of drilling each and every year, over the course of time, we'll find more of these Birmingham or Flaming Moth type discoveries and will have the runway to drill them out, infill drill them, and permit them and get them into the production line. So it's a change of tactic for us, but it's certainly leveraging on the success that we've had in the past. It's bought us these several years of time to figure out where the next large deposit's going to be.
spk08: Okay, that's helpful. And then just lastly, I mean, we've obviously seen a strong increase in base metal prices over the last few quarters. And I'm thinking more towards the end of this year. Has there been any thought into hedging out some of that exposure at these prices once the ramp up is complete? I'm just kind of curious what the house view is there.
spk02: You know, I mean, it's a good point. And we haven't actually, you know, been uh you know focused on that i i will draw your attention to the fact that ironically there are deposits uh you know akino hill which have more base metals but less silver in them um and uh you know sometimes we've kicked around the possibility of taking another look at those but i mean it's a good point um you know something that certainly will uh will take under consideration as we uh you know, as we get back onto the production path here.
spk09: Got it.
spk08: Okay, that's all for me. Thanks again.
spk06: The next question comes from Joseph Rigor of Roth Capital Partners. Please go ahead.
spk07: Hey, Clinton team. Thanks for taking my questions. I guess first thing on the ramp up, yes, I'm pretty confident that in Q2 there's going to be a, you know, pretty sharp uptick in underground mining rates and then ore to the mill. I guess one, is there anything different that you're going to do in Q2 other than just hopefully not having to have more COVID problems? And then two, if you do have any other recurring issues, are there any external options you guys could look at to get that ramp up done?
spk03: Joe, take a shot at that. Um, I guess several things that we're certainly focused on and that we feel, um, you know, put us in a, you know, a much stronger position, certainly equipment availability, you know, um, trying to get ahead of the game and capital spares and, and on the maintenance group. And we, we are now right now, um, for the first time, quite honestly, at a point where we have essentially a fully staffed maintenance, um, group and a fully staffed mine operations, um, the underground miners. So it's taken us a long time to get to this point in terms of recruitment and retention. Um, you know, so that's, you know, that's a big part of it for sure is, is, you know, having the, you know, the qualified miners underground at the face on a day to day basis, as well as the available, you know, specialists on the maintenance side, um, equipment availability. Um, and the other big point obviously is, um, you know, we now, have a foley developed two sub-levels at Flamin' Moth, the 835 and the 815, and those levels will continue to open up and will continue to drive the ramp deeper at both the mines, which, again, will open up more levels. So it's all about opening up more levels, which opens up more ore faces, which gives us more flexibility, so that if we do have issues at a particular face, we have other places to go.
spk07: Okay, and any external options if you need them? Is there any, you know, contract miners that you could hire in the area?
spk03: You know, we have looked at contractors before, and actually last week, you know, we did employ a contract miner for a shorter time period to help us get over a hump. That certainly is an option. We are just finishing. We're about 45 days away from finishing our second major vent raise to surface. using a contractor, but you're right, that is an option. That's always on the table and is available, but we haven't made that decision yet.
spk09: Okay, thanks. I'll turn it over.
spk06: The next question comes from Nicholas Dion of Cormark Securities. Please go ahead.
spk05: Hey, guys. Glad to hear that things are looking up. I'm wondering if you can maybe provide what the developments or the advance rates are in March so we can kind of see how those are improving into Q2.
spk03: Yeah, in terms of both of the mines, again, we are just now resuming the main access ramp. That was intentionally put on pause because we had multiple phases of level accesses at Flamin' Moth as well as a number of infrastructure projects that had to be still completed. Our objective at both Flamin' Moth and Birmingham is to shoot for two and a half meters per day, which we think is a pretty reasonable, achievable target. At Birmingham, the main access ramp is underway. Those are the type of numbers that that we see sustainable as we finish up March and go into Q2. So that would equate to essentially 75 meters per month of primary waste development. Okay, great. Thanks.
spk05: Do you have a – sorry, do you have more to add?
spk03: Yeah, that would be per mine, 75 meters per month per mine.
spk05: Got it. And do you have a target on the number of ore faces you want available at Flamin' Mons in order to achieve your run rate?
spk03: I think we're essentially there at the 815, 835. We are, as Clint mentioned, we are re-engineering that plan for that level. There's some opportunity for an increase in tons in that area based on some previous infill drilling that we did last year. And then once we resume the ramp, we'll be going down to the next sublevel, which is the 795. And then at Birmingham, we're less than 70 meters away from the 1120, which is one of the highest grades of the mine. So I would hope by the end of Q2, we're going to have four or five faces of ore that flame them off, and we'll have the 1120 at Birmingham opened up as well.
spk05: Okay, perfect. And then maybe just one more question on the balance sheet. Is there any additional flexibility in terms of, I don't know, non-core assets you could monetize, or do you have any remaining equity positions that you could monetize?
spk02: Yeah. Hi, Joe. Yeah, we're obviously, you know, looking at all the alternatives that we have at present time, so... Yeah, we have offloaded our investment in Banyan up to this point and still have a significant retained interest there. So, yes, I mean, we're doing all the prudent things to focus our efforts 100% on getting to sustainable throughput here at Keno Hill.
spk09: Okay, great. Thanks. That's it for me.
spk06: Our next question comes from Martin O'Malley of O'Malley Investments. Please go ahead.
spk01: Gentlemen, my question is, your head grades fell dramatically in the fourth quarter of 2021, and I just wondered what was going on there.
spk03: Yeah, that was by design. That's a transition period. As we transitioned away from the Belpino mine and milled out those remaining stockpile tons, and we transitioned to almost predominantly Longville tons at the Birmingham mine. So Longville does have a higher level of dilution associated with it. This is our very first long haul that we've done at Birmingham. There is a learning curve that we're undergoing right now. You know, so we are taking on probably a higher amount of dilution than original design, which was 33%. So it's a combination of transitioning away from Belkino and into our first long haul. You know, I would anticipate seeing that same trend for a bit in Q1, you know, because of the ore drives that we have at Flame and Mohawk. We're coming into the ends of those ore drives at the 835, which means that they're generally lower grade on the ends of these ore drives until we get into the higher grades into the middle of these things. So it's certainly not unexpected.
spk09: Thank you.
spk06: This concludes the question and answer session. I would like to turn the conference back over to Clint Nelman for any closing remarks.
spk02: Thank you, operator. I look forward to keeping you all updated on our progress and look forward to speaking to many of you again soon. Thank you.
spk06: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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