Alexco Reports First Quarter 2014 Financial Results
May 15, 2014 – Alexco Resource Corp. (NYSE MKT:AXU, TSX:AXR) today reports its financial results for the first quarter of 2014. All figures are expressed in Canadian dollars unless otherwise stated. For the first quarter, Alexco recorded a net loss of $1.4 million, or $0.02 per share, on total revenue of $3.3 million primarily from the Alexco Environmental Group. Cash and cash equivalents remained at essentially the same level as at the end of the previous quarter.
First Quarter Highlights
- Net loss of $1.4 million, or $0.02 per share. Loss before deferred taxes was $1.9 million, including non-cash costs of $723,000 for depreciation and $475,000 for share-based compensation.
- Cash and cash equivalents at March 31, 2014 of $8.5 million and net working capital of $14.8 million compared to $8.6 million and $15.3 million, respectively, at December 31, 2013.
- Cash flows from the Alexco Environmental Group largely offset cash used during the quarter during the interim suspension of mining operations.
- Initiation of the 2014 summer exploration field season at the Keno Hill Silver District, including up to approximately 10,000 meters of drilling.
- Continued optimization of plans for redevelopment of mining operations at Keno Hill and further work on lowering future fixed cost components related to mining operations.
Alexco’s President and Chief Operating Officer Clynt Nauman said, “Our focus during the first quarter and at the present time is on working through the critical factors that will result in a ‘go’ decision on restarting production at our Keno Hill property in the Yukon. We don’t quite have all the components in place yet, but clearly a major factor in lowering our costs will be to develop additional throughput volume for the mill. Our newest discovery — the Flame & Moth deposit — will be key to accomplishing this goal.”
Nauman continued, “As I’ve said consistently over the past few months, our overall goal is to re-establish production at Keno Hill with an underlying cost structure which will allow us to operate through all reasonably predictable price cycles, both up and down. I believe this will be achievable given the optimization and unit cost restructuring we have been working on this winter.”
Summary Financial Results and Information
| (expressed in thousands of dollars, except per share amounts) |
|
Three Months Ended March 31 |
||
|
|
2014 |
|
2013 |
|
| Revenue from environmental services |
|
3,071 |
|
2,207 |
| Gross profit (loss) from environmental services |
|
981 |
|
807 |
|
|
|
|
|
|
| Revenue from mining operations |
|
256 |
|
14,508 |
| Gross profit from mining operations |
|
256 |
|
32 |
|
|
|
|
|
|
| Revenue from all operations |
|
3,327 |
|
16,715 |
| Gross profit from all operations |
|
1,237 |
|
839 |
|
|
|
|
|
|
| Loss before taxes |
|
(1,899) |
|
(3,354) |
| Net loss |
|
(1,419) |
|
(2,332) |
| Total comprehensive loss |
|
(852) |
|
(2,753) |
| Loss per share — basic and diluted |
|
($0.02) |
|
($0.04) |
| Cash flows from operating activities |
|
140 |
|
1,400 |
Alexco Environmental Group (AEG)
AEG recorded revenues of $3.1 million in the first quarter of 2014 for a gross profit of $1.0 million and a gross margin of 31.9%, compared to revenues of $2.2 million in the first quarter of 2013 for a gross profit of $0.8 million and a gross margin of 36.6%. The increase in revenues is attributable primarily to growth in AEG’s client base within the US market. Nauman said, “This is a strategically important business for us, as well a cash contributor to the company in general — AEG certainly complements our mining business in the Yukon and it also helps us as we move forward with our own permitting process for development projects at Keno Hill.”
Mining Operations
Mining segment revenues recognized in the first quarter of 2014 totaled $0.3 million with nil cost of sales, reflecting the effect of final assay determinations between initial revenue recognition and final settlement of concentrate sales. Bellekeno mining and milling operations were suspended in early September 2013 in light of the reduced silver price environment and reduced operating margins. The last concentrate shipments were delivered in October 2013, and the last final settlements of concentrate sales were completed in April 2014.
Keno Hill Exploration
Alexco’s 2014 exploration budget for Keno Hill is approximately $5 million, including surface drilling utilizing up to three drills which commenced in March and remains ongoing. Surface exploration totaling up to 10,000 meters of drilling will be focused on better defining the potential limits of mineralization and adding immediate resources at the Flame & Moth deposit, and further defining the nearby Flame & Moth West discovery. Additional surface exploration work at Bellekeno and Bermingham as well as other areas is also under consideration.
The Flame & Moth deposit occurs in two zones separated by a fault, and while the current potentially mineable portion has a strike length of about 600 meters, results from drilling in 2013 show the mineralization extends for at least 900 meters. The deposit averages 4 to 5 meters in thickness, with some areas up to 11 meters thick. Drilling results released last year included 28 ounces per ton of silver over 5.6 meters true thickness at the southwest extent of the deposit (see news release dated September 18, 2013 entitled “Alexco Extends Flame & Moth to More Than 900 Meters in Strike Length; Silver Grades to 28.8 Ounces per Ton Over 5.6 Meters”). The Flame & Moth deposit remains open, and just as important the general area around the deposit remains open for satellitic discoveries such as Flame West where there have been intercepts of up to 28.7 ounces per ton silver over a true thickness of 0.85 meters.
Of the approximately 10,000 meter surface drilling program planned for this year, more than 7,000 meters is planned to test targets within the general area of the Flame & Moth deposit and associated structures. More than 5,000 meters of the drilling is planned on the southwest extensions to the Flame Vein, where last year it was demonstrated that mineralization extends at least an additional 220 meters to the south of the existing resource. Initial exploration along trend of the Flame & Moth deposit northeast of the mill is in progress, where there is little existing geologic information because of surficial cover, and this will be supplemented with high density ground magnetic surveys.
Financial Position
Alexco’s cash and cash equivalents at March 31, 2014 totaled $8.5 million compared to $8.6 million at December 31, 2013, while net working capital totaled $14.8 million compared to $15.3 million for the same dates respectively. Expenditures during the quarter on exploration and mine site care and maintenance were significantly offset by net cash generated from operating activities.
With its cash resources and net working capital on hand at March 31, 2014, Alexco anticipates it will have sufficient capital resources to carry out all of its currently-anticipated exploration programs and service the working capital requirements of its exploration activity, environmental services business and corporate offices and administration for at least the current 12 month period, although a re-start of mining operations and new mine development is likely to require additional capital investment.
Financial Report and Conference Call for First Quarter 2014
Full details of the financial and operating results for the first quarter of 2014 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 Friday, May 16, 2014. To participate in the live call, please use one of the following methods:
| Dial toll free from Canada or the US: | 1-877-407-0778 |
| Dial from outside Canada or the US: | 1-201-689-8565 |
| 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 June 16, 2014, 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 # 13582013 |
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