Alexco Reports Third Quarter 2019 Results

CORPORATE

• Overall, Alexco reported a net loss of $2,308,000, or $(0.02) per share for Q3 2019 and a loss before tax expense of $2,240,000 including net non-cash cost adjustments of $906,000. In the same period for 2018 the Company incurred a loss before taxes of $1,548,000, including non-cash income adjustments of $714,000. The operating loss for both periods was similar, with offsetting differences to the net loss related to non-cash adjustments resulting from the treatment of the embedded derivative on the Wheaton Precious Metals stream and deferred income tax expense.

• The Company’s cash and cash equivalents at September 30, 2019 totaled $10,551,000 compared to $8,576,000 at December 31, 2018, while net working capital totaled $13,853,000 compared to $10,188,000 at December 31, 2018. The Company’s restricted cash and deposits at September 30, 2019 totaled $2,774,000 compared to $2,725,000 at December 31, 2018.

EXPLORATION

• During Q3 2019 the Company completed an 8,333 meter (“m”), 29-hole surface exploration diamond drilling program:
  • The program commenced in June 2019 with two drills sited in the vicinity of the Bermingham deposit, where 5,140 m were drilled in 10 holes targeting extensions of the shallower Northeast Zone reserve and resource, as well as testing the continuity and tenor of the high grade Bermingham mineralization at depth;
  • The remaining 19 holes and 3,193 m of drilling were assisted by results from the 2018 geophysical survey flown over the Galena Hill area and targeted signatures exhibiting a similar structural and stratigraphic framework to the Bermingham deposit;
  • On September 10, 2019 the Company announced initial results from the 2019 Bermingham “deep target” drilling program (see news release dated September 10, 2019, entitled “Alexco Intersects 8.1 Meters (True Width) at Composite Grade of 1,414 Grams per Tonne (45.5 oz/t) Silver at ‘Bermingham Deep’ Target”) indicating this target is completely open and will require follow-up; and
  • The drilling program was completed in mid-October; assay results are pending for the balance of the 2019 surface drilling campaign and are expected to be available in December 2019.

MINE OPERATIONS, DEVELOPMENT AND PERMITTING

• The Company completed the planned surface capital construction activities at the Bermingham deposit consistent with work outlined in the recently published pre-feasibility study, including installation of the underground production-related portal, construction of a lined treatment pond, initial construction of a coarse ore storage pad, and upgrading of existing haul roads.

• Alexco has the requisite permits and authorizations for development and future ore production from the Bellekeno, Flame & Moth, Lucky Queen, and Onek deposits. Amendment of the Company’s Quartz Mining Licence is expected to be complete in the fourth quarter of 2019, which will allow Alexco to resume and complete the remaining underground development at Bermingham and begin ore production.

• The Company is in the final steps of renewing the Water Use Licence (“WUL”) with a Technical Pre-Hearing Conference scheduled for early December 2019. Following this process step, the final issuance of the WUL renewal will be subject to consideration by the Yukon Water Board and will likely extend into Q1 2020.

ALEXCO ENVIRONMENTAL GROUP

• AEG recognized revenues of $7,200,000 in Q3 2019 for a gross profit of $1,420,000 achieving a gross margin of 20% compared to revenues of $4,669,000 for a gross profit of $1,702,000 and a gross margin of 36% in the third quarter of 2018. The decrease in gross profit margin during the 2019 period was primarily related to use of third party contractors to complete construction of a larger water treatment system complex in Ontario as well as two new longer-term projects coming online that incurred higher up-front costs.

• During the quarter, under the contract with Canada for the remediation of legacy environmental conditions at Keno Hill, the Company completed the Evaluation Process for the ESM Reclamation Plan and a final Evaluation Report by the Yukon Environmental and Socio-economic Assessment Board is expected to be issued in December 2019. In addition, the Company continued with detailed engineering related to the final closure plan.

• During the quarter, the Company entered into an agreement with the Yukon Government to provide water treatment services at the Wolverine mine site located in the Yukon, Canada.

• From a strategic perspective, Alexco continues to evaluate options to unlock value from AEG for the benefit of Alexco shareholders.