Alexco Announces Second Quarter 2022 Results
August 11, 2022 Alexco Resource Corp. (NYSE American/TSX: AXU) (“Alexco” or the “Company”) today reports financial results for the three and six month periods ended June 30, 2022 (“Q1 2022” and “YTD 2022”) compared to the three and six month periods ended June 30, 2021 (“Q2 2021” and “YTD 2021”).
Acquisition by Hecla Mining Company
- On July 4, 2022, the Company entered into a definitive agreement with Hecla Mining Company (“Hecla”), as assigned and amended (the “Arrangement Agreement”), pursuant to which 1080980 B.C. Ltd. (“108”), a subsidiary of Hecla, will acquire all of the outstanding common shares of Alexco that 108 does not already own (the “Arrangement”). Each outstanding common share of Alexco will be exchanged for 0.116 of a share of Hecla common stock. The acquisition is subject to approvals by Alexco securityholders, as well as applicable regulatory approvals and the satisfaction or waiver of customary closing conditions. The board of directors of Alexco and Hecla have both unanimously approved the transaction.
- The Company reported revenues of $3,952,000 for Q2 2022 compared to $7,939,000 for Q2 2021. Mining operations revenue, net of streaming payments related to the Wheaton Precious Metals Corp. (“Wheaton”) silver purchase agreement (“SPA”), in Q2 2022 was $3,528,000 and was derived from concentrate sales from ore sourced from the Bermingham and Flame & Moth mines. In Q2 2022, the Company also recognized reclamation management revenue of $424,000.
- The Company recorded a write-down of mineral properties, plant and equipment of $97,048,000 during Q2 2022. As at June 30, 2022, indicators of impairment were identified, and the carrying value of the Keno Hill cash generating unit (“Keno Hill CGU”) was compared with its recoverable amount. The recoverable amount of the Keno Hill CGU was determined by management based on the fair value less costs of disposal (“FVLCD”) method using the implied value of Alexco based on the agreed transaction value with Hecla. Management assessed that the Keno Hill CGU carrying value exceeded its FVLCD and a write-down of mineral properties, plant and equipment was recognized.
- The Company reported a net loss of $95,062,000 for Q2 2022 which was primarily attributable to a write-down of mineral properties, plant and equipment and a gross loss from mining operations, partially offset by a gain on sale of mineral property rights related to the McQuesten mineral property and a fair value gain on the embedded derivative asset related to the Wheaton SPA. A net loss of $2,748,000 for Q2 2021 was primarily from ramp-up related costs at Keno Hill and general and administrative costs.
- The Company reported an adjusted net loss of $4,269,000 for Q2 2022 compared to $2,548,000 for Q2 2021. The adjusted net loss excludes the amounts recorded with respect to the fair value adjustment on the embedded derivative asset related to the Wheaton SPA and the non-cash write-down of mineral properties, plant and equipment (see “Non-GAAP Measures” in the MD&A for the three and six month periods ended June 30, 2022).
- The Company reported an operating loss of $105,662,000 for Q2 2022 compared to $2,489,000 for Q2 2021. The operating loss for Q2 2022 was related to a write-down of mineral properties, plant and equipment and a gross loss from mining operations.
- The Company’s cash and cash equivalents as at June 30, 2022 totaled $8,901,000 compared to $9,933,000 as at December 31, 2021, while net working capital totaled $(6,368,000) compared to $1,389,000 as at December 31, 2021 (see “Non-GAAP Measures” in the MD&A for the three and six month periods ended June 30, 2022). The Company’s restricted cash and deposits as at June 30, 2022 totaled $2,998,000 compared to $2,990,000 as at December 31, 2021.
Mine Operations and Exploration
- During the quarter, ramp-up of mining activity at Keno Hill continued to progress with underground development performance aided by improved equipment availability (versus Q1 2022) at both the Flame & Moth and Bermingham mines. Similarly, the District Mill saw improved throughput and metallurgical performance in the same period. Underground advance at Bermingham reached the 1120 level, where the upper portion of the high-grade Bear Zone has been cross-cut with two ore faces and predictive block model grades of 1,900 – 2,000 grams per tonne silver appear to be well supported or exceeded in mine based rib and face assays.
- While the underground performance improvements were notable, and the demonstrated supply of 150-250 tonnes per day of ore to the mill has been important, the rate of improvement in the advance of underground development remained insufficient to achieve the necessary number of production headings to sustain 400 tonnes per day feed to the mill before the end of 2022. To rectify this imbalance, in June, the Company elected to temporarily suspend milling operations to focus all efforts on advancing underground development, which saw a combined total of 150 meters of underground development in the Bermingham and Flame & Moth mines in the month of July.
- Surface exploration began with two drills in May with focus in the vicinity of the historic Silver King mine and the Coral Wigwam area, approximately 800 meters along structural trend from the Bermingham Mine. Early indications from shallow geology-defining drill holes in the Coral Wigwam area have identified a structural geology framework potentially similar to that which exists in the area of the Bermingham deposit.
- On April 13, 2022, the Company completed a non-brokered private placement offering with an affiliate of Hecla for 7,473,495 common shares at a price of $1.75 per share, resulting in gross proceeds of $13,078,616.
- On April 28, 2022, the Company received a further prepayment of US$5,000,000 under the unsecured revolving credit facility (the “Facility”) with its offtaker. During Q2 2022, the Company repaid US$2,500,000 plus applicable interest and standby fees. Subsequent to period end, the Company repaid the entire outstanding balance of the Facility.
- On April 29, 2022, the Company sold to Victoria Gold Corp. (“Victoria”) all of its rights, benefits and interests in and to the remaining option consideration payable to Alexco by Banyan Gold Corp. (“Banyan”) under the option agreement with Banyan in exchange for 447,142 shares of Victoria. On May 4, 2022, the Victoria shares were sold for net proceeds of $6,000,000 after selling costs and commissions.
Key Performance Metrics
- Mill throughput (tonnes per operating day) is based on the number of days that the mill was operational during the period. The mill was operational for 31 days and 62 days during Q2 2022 and Q2 2021 and for 55 days and 98 days during YTD 2022 and YTD 2021, respectively.
- See “Non-GAAP Measures” in the MD&A for the three and six month periods ended June 30, 2022.
- Total assets decreased primarily due to a write-down of mineral properties, plant and equipment
- Sum of quarters may not add up to the yearly totals due to rounding.
The disclosure in this news release of scientific and technical information has been reviewed and approved Sebastien D. Tolgyesi, P.Eng., P.Geo., Keno Hill Operations Manager, who is a Qualified Persons as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
Alexco is a Canadian primary silver company that owns and operates the majority of the historic Keno Hill Silver District, in Canada’s Yukon Territory, one of the highest-grade silver mines in the world. Alexco started concentrate production and shipments in 2021 and is currently advancing Keno Hill toward steady state production. Upon reaching commercial production, Keno Hill is expected to produce an average of approximately 4.4 million ounces of silver per year contained in high quality lead/silver and zinc concentrates. Keno Hill retains significant potential to grow and Alexco has a long history of expanding the operation’s mineral resources through successful exploration.
Clynton R. Nauman, Chairman and Chief Executive Officer
Rajni Bala, Investor Relations and Communications Lead
Phone: (778) 945-6577
Email: [email protected]
84 total views, 2 views today