Alexco Reports Second Quarter 2015 Financial Results

by ahnationtalk on August 12, 2015294 Views

August 11, 2015 – Alexco Resource Corp. (NYSE MKT:AXU, TSX:AXR) today reports its financial results for the second quarter of 2015. All figures are expressed in Canadian dollars unless otherwise stated. For the second quarter of the year Alexco reported a net loss of $1.9 million, or $0.03 per share, on revenue of $2.6 million, while increasing its unrestricted cash balance from the end of the first quarter to $7.5 million.

Second Quarter Highlights

  • Net loss of $1.9 million, or $0.03 per share. Loss before deferred taxes was $1.9 million, including non-cash costs of $0.5 million for depreciation and $0.1 million for share-based compensation.
  • Cash and cash equivalents at June 30, 2015 totaled $7.5 million compared to $7.2 million at March 31, 2015, while net working capital totaled $9.6 million compared to $10.9 million for the same dates, respectively.
  • Exploration work is ongoing at Keno Hill, including the completion of 1,355 meters of diamond drilling at the end of the second quarter, with a focus in the vicinity of the historical Bermingham mine workings. The drilling program, which will be largely completed by the end of August, is following up on significant silver intercepts drilled in 2014. Consolidated results from the current drill program should be available in the fourth quarter of 2015.
  • Alexco Environmental Group (“AEG”), recognized revenues of $2.6 million in the second quarter of 2015 for a gross profit of $579,000 and a gross margin of 22.2%.
  • A milestone was achieved by AEG with a finding of No Further Active Remediation from the State of Colorado at the Globeville Smelter Project, clearing the way for AEG to submit documents supporting the release of a portion of the US$3.3 million of restricted cash originally posted by AEG as security for the project.

Alexco President and Chief Executive Officer Clynt Nauman said, “We’re holding our own in terms of our cash position despite the difficult markets, and the fact that we have supported a modest but effective exploration program. We have certainly made good exploration progress at Bermingham this season, and anticipate results from all work to be consolidated in the fourth quarter. AEG is closing in on completion of its extremely successful and publicly lauded project at the Globeville Smelter in Denver, Colorado. Meanwhile, in addition to further business development at AEG, our focus is on conserving cash and moving forward with permitting and engineering on the Flame & Moth deposit, which is proceeding on schedule.”

Summary Financial Results and Information

(expressed in thousands of dollars, except per share amounts) Three Months Ended June 30 Six Months Ended June 30
2015 2014 2015 2014
Revenue from environmental services 2,610 3,064 7,126 6,135
Gross profit from environmental services 579 812 1,771 1,793
Revenue from mining operations 105 361
Gross profit from mining operations 105 361
Revenue from all operations 2,610 3,169 7,126 6,496
Gross profit from all operations 579 917 1,771 2,154
Loss before taxes 1,920 1,769 2,865 3,668
Net loss 1,866 1,661 2,358 3,080
Total comprehensive loss 2,019 2,041 2,664 2,893
Loss per share – basic and diluted $0.03 $0.03 $0.03 $0.05
Cash flows (consumed) from operating activities (183) (1,171) (2,003) (1,031)

Alexco Environmental Group (AEG)

AEG recognized revenues of $2.6 million in the second quarter of 2015 for a gross profit of $579,000 and a gross margin of 22.2% compared to revenues of $3.1 million for a gross profit of $812,000 and a gross margin of 26.5% in the second quarter of 2014. The decrease in gross margin from the prior year period is a result of one of AEG’s major projects, the Globeville Smelter Project, completing active remediation and phasing to monitoring status with lower revenue and profits. In addition, AEG has been outsourcing a significant amount of specialty work to external consultants, incurring lower margins. In response, AEG has ramped up its business development efforts for bringing on more project related work and has added specific professional positions to begin reducing reliance on third party contractors.

Exploration

Alexco’s exploration plans for 2015, originally budgeted at approximately $2 million with 5,000 meters of diamond drilling, has been revised to approximately $1.6 million with 3,000 meters of diamond drilling, which largely meets the geology and exploration objectives of the 5,000 meter plan. The focus of the program is to follow up on the successful 2014 results at Bermingham. As of June 30, 2015, Alexco had drilled a total of 1,355 meters, with 952 meters drilled at Bermingham and 403 meters at Bellekeno North East. Consolidated results from this drill program should be available in the fourth quarter of 2015.

On April 30, 2015 Alexco announced updated mineral resource estimates for the Flame & Moth and Bermingham deposits (see news release dated April 30, 2015, titled “Alexco Announces Indicated Silver Resource Estimate Increases of 17% at Flame & Moth and 37% at Bermingham, Resulting in a 10% Increase Overall for Keno Hill Silver District”). The Flame & Moth indicated mineral resource is estimated at 1,638,000 tonnes grading 506 grams per tonne (“g/t”) silver, 1.89% lead and 5.40% zinc and 0.40 g/t gold, plus another 348,000 tonnes of inferred mineral resource grading 366 g/t silver, 0.47% lead, 4.37% zinc and 0.30 g/t gold. The Bermingham mineral resource is estimated at 377,000 tonnes of indicated mineral resource grading 430 g/t per tonne silver, 1.59% lead and 1.74% zinc, plus another 52,000 tonnes of inferred mineral resource grading 477 g/t silver, 1.22% lead and 1.88% zinc.

The updated mineral resource estimates were prepared by SRK Consulting (Canada) Inc. (“SRK”) and are summarized as follows:

Deposit Class1,2,3 Tonnes Ag
(g/t)
Au
(g/t)
Pb
(%)
Zn
(%)Ag
(Troy ounces)
Flame & Moth4 Indicated 1,638,000 506 0.43 1.89 5.4 26,650,000
Inferred 348,000 366 0.26 0.47 4.37 4,095,000
Bermingham5 Indicated 377,000 430 0.07 1.59 1.74 5,212,000
Inferred 52,000 477 0.12 1.22 1.88 797,000

Notes:

  1. The effective date of these mineral resource estimates is April 28, 2015.
  2. Mineral resources are not mineral reserves and do not have demonstrated economic viability. All numbers have been rounded to reflect the relative accuracy of the estimates.
  3. Reported at a contained metal value cut-off grade of CAD $185.00/t (US$0.85=C$1) using consensus long term metal prices (US$) and recoveries developed for the nearby Bellekeno deposit (Ag US$20.00/oz, recovery 96%; Pb US$0.94/lb, recovery 97%; Zn US$1.00/lb, recovery 88%; Au US$1,300/oz, recovery 72%).
  4. Ag grades capped at 7,500 g/t; Zn capped at 30%; limited influence of high grade intersections during estimation.
  5. Ag grades capped at 1,500 g/t for the Bermingham Vein and the Bermingham Footwall Vein; Pb capped at 9% for both veins; Au grades capped at 1.0 g/t for both veins.

Engineering and Development

During the second quarter, Alexco continued to work on re-engineering and optimizing the mine plan for Flame and Moth, incorporating the current mineral resource from April 30, 2015. Mine plans will be further refined based on recommendations from a more detailed geotechnical review by SRK Consulting (Canada) Inc., with anticipated completion in the third quarter of 2015. The Flame and Moth economic model will then be updated using current consensus pricing and updated estimated costing. Once the results from the work above are completed, a new optimized multiple mine economic model will be developed incorporating Flame and Moth, Lucky Queen and Bellekeno deposits.

The Company continues its progress with the Yukon Water Board on the amendment of a current Water Use Licence for the Flame & Moth deposit. Management expects a Water Licence amendment hearing to occur in the fourth quarter of 2015.

Financial Position

Alexco’s cash and cash equivalents at June 30, 2015 totaled $7.5 million, compared to $7.2 million at March 31, 2015 and $8.6 million at December 31, 2014, while net working capital totaled $9.6 million compared to $10.9 million and $11.3 million for the same dates, respectively. The decrease in cash and cash equivalents compared to the end of 2014 is mainly attributed to the 2015 exploration drill program, care and maintenance costs at Keno Hill and corporate overhead costs, offset by AEG profits. Furthermore, AEG experienced lower profits in the first six months of 2015 with some scheduled work delayed into the second half of 2015, as well as more work being completed by external consultants.

Financial Report and Conference Call for Second Quarter 2015

Full details of the financial and operating results for the second quarter of 2015 are described in Alexco’s interim condensed consolidated financial statements with accompanying notes and related Management’s Discussion and Analysis. These documents and additional information on Alexco are available on the Company’s website at www.alexcoresource.com and on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml.

Alexco is holding an audio webcast conference call to discuss these results at 11:00 a.m. Eastern (8:00 a.m. Pacific) on Wednesday, August 12, 2015. To participate in the live call, please use one of the following methods:

Dial toll free from Canada or the US: 1-877-407-8031
Dial from outside Canada or the US: 1-201-689-8031
Live audio webcast: www.alexcoresource.com

Participants should connect five to ten minutes before the call.

The conference call will be recorded, and an archived audio webcast will be available at www.alexcoresource.com. Through September 12, 2015, a replay of the call will be available by telephone at the following:

Dial toll free from Canada or the US: 1-877-660-6853
Dial from outside Canada or the US: 1-201-612-7415
Replay Passcodes: Conference ID # 13615534

Qualified Persons

The disclosure in this news release of scientific and technical information regarding exploration projects on Alexco’s mineral properties has been reviewed and approved by Alan McOnie, FAusIMM, Vice President, Exploration, while that regarding mine development and operations has been reviewed and approved by Scott Smith, P.Eng., former Bellekeno Mine Manager, both of whom are Qualified Persons as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects.

About Alexco

Alexco Resource Corp. owns substantially all of the historical Keno Hill Silver District located in Canada’s Yukon Territory, including the Bellekeno silver mine, the Flame & Moth, Lucky Queen, Bermingham and Onek deposits, and other historic and surface resources within the district. Bellekeno, which commenced commercial production at the beginning of calendar year 2011, was Canada’s only operating primary silver mine from 2011 to 2013. Alexco is currently undergoing an interim suspension of operations at Keno Hill in order to decrease costs and reposition the district for long-term, sustainable operations. Between 1921 and 1988, the Keno Hill Silver District was a world-class silver producer, with more than 217 million ounces of silver produced at average grades of 40.5 ounces per ton silver, 5.6% lead and 3.1% zinc (Yukon Government’s Minfile database). These historical production grades would rank Keno Hill in the top 3% by grade of today’s global silver producers. Employing a unique business model, Alexco also provides mine-related environmental services, remediation technologies and reclamation and mine closure services to both government and industry clients through the Alexco Environmental Group, its wholly-owned environmental services division.

Contact

Clynton R. Nauman, President and Chief Executive Officer
Vicki Veltkamp, Vice President Investor Relations
Phone: (604) 633-4888
Email: info@alexcoresource.com

NT3

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