Filed Pursuant to General Instruction
II.L of Form F-10
File No. 333-227024
PROSPECTUS SUPPLEMENT
(To Base Shelf Prospectus dated September
21, 2018)
ALEXCO RESOURCE CORP.
US$6,500,000
6,500,000 Common Shares at a price of
US$1.00 per Common Share
This prospectus supplement of Alexco Resource
Corp. (“
Alexco
” or the “
Company
”) hereby qualifies the distribution (the “
Offering
”)
of 6,500,000 common shares of the Company (the “
Offered Shares
”) at a price of US$1.00 per Offered Share (the
“
Offering Price
”). The terms of the Offering were determined by negotiation between the Company and Cantor Fitzgerald
Canada Corporation (the “
Underwriter
”). The Offering is being made pursuant to an underwriting agreement (the
“
Underwriting Agreement
”) dated June 3, 2019 between the Company and the Underwriter. See “Plan of Distribution”.
The outstanding common shares of the Company
(the “
Common Shares
”) are listed on the Toronto Stock Exchange (the “
TSX
”) under the symbol
“AXR” and the NYSE American (the “
NYSE American
”) under the symbol “AXU”. On June 3,
2019, the closing price of the Common Shares on the TSX and the NYSE American was CDN$1.60 and US$1.18 per Common Share, respectively.
The Company has applied to list the Offered Shares on the TSX and the NYSE American. Listing will be subject to the Company fulfilling
all of the listing requirements of the TSX and the NYSE American.
This Offering is made by a Canadian
issuer that is permitted under a multi-jurisdictional disclosure system adopted by the United States and Canada to prepare this
prospectus supplement and the accompanying prospectus in accordance with Canadian disclosure requirements. Prospective investors
should be aware that such requirements are different from those applicable to issuers in the United States. Financial statements
incorporated herein by reference have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”), and may not be comparable to financial statements
of United States companies.
Prospective investors should be aware
that the acquisition, holding or disposition of the Offered Shares may have tax consequences. This prospectus supplement does not
address the Canadian tax consequences in respect of an investment in Offered Shares, and Canadian resident and non-resident prospective
investors should consult their own tax advisors in this regard. The United States tax consequences for investors who are resident
in, or citizens of, the United States may also not be described fully herein. Prospective investors that are resident in, or citizens
of, the United States should read the tax discussion contained in this prospectus supplement under the heading “Certain U.S.
Federal Income Tax Considerations” and should consult their own tax advisor with respect to their own particular circumstances.
The enforcement by investors of civil
liabilities under the U.S. federal securities laws may be affected adversely by the fact that the Company is existing under
and governed by the laws of the province of British Columbia and the federal laws of Canada, that some or all of the Company's
officers and directors are residents of Canada, and that a substantial portion of the Company's assets and the assets of the officers
and directors of the Company are located outside the United States.
NEITHER THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION (THE “SEC”) NOR ANY STATE SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED OF THE SECURITIES
OFFERED HEREBY OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENCE.
Investing in the Offered Shares involves
significant risks. You should carefully read the “Risk Factors” in this prospectus supplement and the “Risk Factors”
section beginning on page 12 of the accompanying prospectus and in the documents incorporated by reference herein for a discussion
of certain risks that you should consider in connection with an investment in the Offered Shares.
|
|
Public Offering
Price
|
|
Underwriting
Commission
(1)(2)
|
|
Proceeds to the Company
(2)
|
Per Offered Share
|
|
US$1.00
|
|
US$0.07
|
|
US$0.93
|
Total
|
|
US$1.00
|
|
US$455,000
|
|
US$6,045,000
|
Notes:
(1)
|
Pursuant to the Underwriting Agreement, the Company has agreed to pay the
Underwriter a cash fee (the “
Underwriter’s Fee
”) equal to 7.0% of the aggregate gross proceeds of the
Offering. See “Plan of Distribution”. The Company has also agreed to issue to the Underwriter common share purchase
warrants of the Company (“
Underwriter’s Warrants
”) entitling the Underwriter to purchase such number of
Common Shares as is equal to 4.0% of the number of Offered Shares sold in the Offering (“
Underwriter’s Warrant Shares
”)
for a price of US$1.00 per Underwriter’s Warrant Share at any time before 4:30 p.m. (Vancouver time) on the date which is
12 months after the Closing Date (as hereinafter defined). This prospectus supplement and the accompanying prospectus also qualify
the distribution of the Underwriter’s Warrants. See “Plan of Distribution”.
|
(2)
|
After deducting the Underwriter’s Fee, but before deducting expenses of the Offering estimated to
be an aggregate of US$245,000, which will be paid from the proceeds of the Offering.
|
(3)
|
If the Over-Allotment Option (as defined herein) is exercised in full, the
gross proceeds of the Offering, Underwriter’s Fee and net proceeds to the Company (before deducting expenses of the Offering)
will be US$7,475,000, US$523,250 and US$6,951,750, respectively. This prospectus supplement and accompanying prospectus also qualify
for distribution the Over-Allotment Option and the Common Shares issued pursuant to the exercise of the Over-Allotment Option.
See “Plan of Distribution”.
|
The Company has also granted to the Underwriter an option (the “
Over-Allotment Option
”) exercisable, in whole
or in part and from time to time, at the sole discretion of the Underwriter, at any time up to 30 days following the closing of
the Offering, to purchase up to an additional 975,000 Common Shares at the Offering Price to cover over-allotments, if any. A purchaser
who acquires Common Shares forming part of the Underwriter’s over-allocation position acquires those Common Shares under
this prospectus supplement, regardless of whether the over-allocation position is ultimately filled through the exercise of the
Over-Allotment Option or secondary market purchases.
The following table sets out the number
of securities issuable under the Over-Allotment Option and pursuant to the Underwriter’s Warrants:
Underwriter’s Position
|
Maximum size or number of securities available
|
Exercise period
|
Exercise price
|
Over-Allotment Option
|
975,000 Common Shares
|
30 days following closing of the Offering
|
US$1.00 per Common Share
|
Underwriter’s Warrants
|
299,000 Underwriter’s Warrant Shares
(1)
|
12 months following closing of the Offering
|
US$1.00 per Underwriter’s Warrant Share
|
Note:
(1) Assuming the exercise in full of the Over-Allotment Option.
The Underwriter, as principal, conditionally
offers the Common Shares offered hereby, subject to prior sale, if, as and when issued by the Company and accepted by the Underwriter
in accordance with the conditions contained in the Underwriting Agreement and subject to the passing upon of certain legal matters
relating to the Offering on behalf of the Company by Miller Thomson LLP with respect to Canadian legal matters and by Dorsey &
Whitney LLP with respect to United States legal matters, and on behalf of the Underwriter by Stikeman Elliott LLP with respect
to certain Canadian legal matters, and by Cooley LLP with respect to certain United States legal matters.
The Underwriter proposes to offer the Offered
Shares to the public initially at the price specified on the cover page of this prospectus supplement. If all of the Offered Shares
are not sold at the price specified in this prospectus supplement, the Underwriter may decrease the offering price and change the
other selling terms. The compensation realized by the Underwriter will decrease by the amount that the aggregate price paid by
the purchasers for the Offered Shares is less than the gross proceeds paid by the Underwriter to the Company. The decrease in the
offering price will not decrease the amount of net proceeds of the Offering to the Company. See ''Plan of Distribution''.
Subscriptions will be received subject
to rejection or allotment in whole or in part and the right is reserved to close the subscription books at any time without notice.
Closing is expected to occur on or about June 7, 2019, or such other date as may be agreed upon by the Company and the Underwriter
(the “
Closing Date
”).
It is expected that the Company will arrange
for the electronic deposit of the Offered Shares distributed under the Offering under the book-based system of registration, to
be registered in the name of CDS Clearing and Depository Services Inc. (“
CDS
”) or its nominee and will be deposited
with CDS on the Closing Date. No certificates evidencing the Offered Shares will be issued to purchasers of the Offered Shares.
Purchasers of Offered Shares will receive only a customer confirmation from the Underwriter or other registered dealer from whom
the Offered Shares are purchased.
The Underwriter may, in connection with
the Offering, effect transactions which stabilize or maintain the market price of the Common Shares at levels other than those
which might otherwise prevail in the open market in accordance with applicable market stabilization rules. Such transactions, if
commenced, may discontinue at any time. See “Plan of Distribution”.
The Company's head office is at Suite 1225,
Two Bentall Centre, 555 Burrard Street, Vancouver, British Columbia, V7X 1M9 and its registered office is at 10th Floor, 595 Howe
Street, Vancouver, British Columbia, Canada, V6C 2T5.
Investors should rely only on current information
contained in or incorporated by reference into this prospectus supplement and the accompanying prospectus as such information is
accurate only as of the date of the applicable document. The Company has not authorized anyone to provide investors with different
information. Information contained on the Company's website shall not be deemed to be a part of this prospectus supplement or incorporated
by reference and should not be relied upon by prospective investors for the purpose of determining whether to invest in the securities.
The Company will not make an offer of these securities in any jurisdiction where the offer or sale is not permitted. Investors
should not assume that the information contained in this prospectus supplement is accurate as of any date other than the date on
the face page of this prospectus supplement or the date of any documents incorporated by reference herein. The Company will not
make an offer of the Offered Shares in any jurisdiction where the offer or sale is not permitted.
TABLE OF CONTENTS
Prospectus Supplement
Prospectus dated September 21, 2018
GENERAL MATTERS
This document is in two parts. The first
part is this prospectus supplement, which describes the specific terms of the Offering and also adds to and updates certain information
contained in the accompanying prospectus and the documents incorporated by reference therein. The second part is the accompanying
prospectus, which gives more general information, some of which may not apply to the Offering. This prospectus supplement is deemed
to be incorporated by reference into the accompanying prospectus solely for the purposes of the Offering. If the description of
the Offered Shares varies between this prospectus supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement. Before investing, you should carefully read both this prospectus supplement and the accompanying
prospectus together with the additional information about the Company to which we refer you in the sections of this prospectus
supplement entitled “Documents Incorporated by Reference”.
You should rely only on the information
contained or incorporated by reference in this prospectus supplement or in the accompanying prospectus. The Company has not, and
the Underwriter has not, authorized any other person to provide you with different, additional or inconsistent information. If
anyone provides you with different, additional or inconsistent information, you should not rely on it. The Company and the Underwriter
are not making an offer of the Offered Shares in any jurisdiction where the offer is not permitted. You should assume that the
information appearing in this prospectus supplement and the accompanying prospectus is accurate only as of the date on the front
of those documents and that information contained in any document incorporated by reference in this prospectus supplement and the
accompanying prospectus is accurate only as of the date of that document. The Company's business, financial condition, results
of operations and prospects may have changed since those dates.
Unless the context otherwise requires,
references in this prospectus supplement and the accompanying prospectus to “
Alexco
” or the “
Company
”
include Alexco Resource Corp. and each of its subsidiaries. All capitalized terms used but not otherwise defined herein have the
meanings provided in the accompanying prospectus.
CAUTIONARY NOTE TO UNITED STATES INVESTORS
CONCERNING
MINERAL RESERVE AND RESOURCE ESTIMATES
This prospectus supplement and the accompanying
prospectus and the documents incorporated by reference herein and therein have been prepared in accordance with the requirements
of Canadian provincial securities laws, which differ from the requirements of U.S. securities laws. Unless otherwise indicated,
all reserve and resource estimates included or incorporated by reference in this prospectus supplement and the accompanying prospectus
have been prepared in accordance with Canadian National Instrument 43-101—Standards of Disclosure for Mineral Projects (“
NI 43-101
”)
and the Canadian Institute of Mining, Metallurgy and Petroleum (the “
CIM
”) – CIM Definition Standards
on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. NI 43-101 is an instrument developed by
the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical
information concerning mineral projects. The terms “mineral reserve”, “proven mineral reserve” and “probable
mineral reserve” are Canadian mining terms as defined in accordance with NI 43-101and CIM standards. These definitions
differ from the definitions in the SEC's Industry Guide 7 under the United States Securities Act of 1933, as amended (the
“
U.S. Securities Act
”).
Under United States standards, mineralization
may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically
and legally produced or extracted at the time the reserve determination is made. Under SEC Industry Guide 7 standards, a “final”
or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in
any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the
appropriate governmental authority.
In addition, the terms “mineral resource”,
“measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are
defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7
and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not
to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. “Inferred mineral
resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies,
except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically
or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations;
however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC
Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.
Accordingly, information contained in this
prospectus supplement and the accompanying prospectus and the documents incorporated by reference herein and therein contain descriptions
of the Company's mineral deposits that may not be comparable to similar information made public by United States companies subject
to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.
NOTICE REGARDING PRESENTATION OF FINANCIAL
INFORMATION
The consolidated financial statements as
at December 31, 2018 and 2017 and for the years then ended, incorporated by reference in this prospectus supplement and the accompanying
prospectus have been prepared in accordance with IFRS. The unaudited interim condensed consolidated financial statements as at
March 31, 2019 for the three month periods ended March 31, 2019 and 2018 have been prepared in accordance with IAS 34, Interim
Financial Reporting. The selected consolidated financial data included herein has been derived therefrom. IFRS differs in some
material respects from United States Generally Accepted Accounting Principles (“
U.S. GAAP
”) and so these financial
statements may not be comparable to the financial statements of U.S. companies that report in accordance with U.S. GAAP. As a result,
financial information included or incorporated in this prospectus supplement and the accompanying prospectus may not be comparable
to financial information prepared by companies in the United States.
CURRENCY PRESENTATION AND EXCHANGE RATE
INFORMATION
The financial statements incorporated by
reference in this prospectus supplement and the accompanying prospectus, and the selected consolidated financial data derived therefrom
included herein and in the accompanying prospectus, are presented in Canadian dollars. In this prospectus supplement and the accompanying
prospectus, references to “CDN$” or “$” are to Canadian dollars and references to “US$” are
to United States dollars. On June 3, 2019, the daily rate as reported by the Bank of Canada for the conversion of one Canadian
dollar into United States dollars was CDN$1.00 equals US$0.7424.
The following table sets out, for each
period indicated, the high and low exchange rates for one Canadian dollar expressed in United States dollars, the average of such
exchange rates during such period, and the exchange rate at the end of such period based on the daily rate as reported by the Bank
of Canada:
|
|
Period from January 1, 2019
to March 31 , 2019
|
|
|
Year Ended
December 31
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Highest rate during period
|
|
US$
|
0.7353
|
|
|
US$
|
0.7330
|
|
|
US$
|
0.7276
|
|
Lowest rate during period
|
|
US$
|
0.7637
|
|
|
US$
|
0.8138
|
|
|
US$
|
0.8245
|
|
Average rate during period
|
|
US$
|
0.7522
|
|
|
US$
|
0.7721
|
|
|
US$
|
0.7701
|
|
Rate at the end of period
|
|
US$
|
0.7483
|
|
|
US$
|
0.7330
|
|
|
US$
|
0.7971
|
|
The average exchange rate is calculated
using the average of the daily rate on the last business day of each month during the applicable fiscal year or interim period.
The Canadian dollar/U.S. dollar exchange rate has varied significantly over the last several years and investors are cautioned
not to assume that the exchange rates presented here are necessarily indicative of future exchange rates.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus supplement, the accompanying
prospectus and the documents incorporated by reference in this prospectus supplement and in the accompanying prospectus contain
“forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995
and “forward-looking information” within the meaning of applicable Canadian securities laws (together, “
forward-looking
statements
”) concerning the Company's business plans, including, but not limited to, anticipated results and developments
in Alexco's operations in future periods, planned exploration and development of its mineral properties, plans related to its business
and other matters that may occur in the future.
Forward-looking statements may include,
but are not limited to, statements with respect to additional capital requirements to fund further exploration and development
work on the Company's properties, future remediation and reclamation activities, future mineral exploration, the estimation of
mineral reserves and mineral resources, the realization of mineral reserve and mineral resource estimates, future mine construction
and development activities, future mine operation and production, the timing of activities, the amount of estimated revenues and
expenses, the success of exploration activities and permitting time lines. Any statements that express or involve discussions with
respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often,
but not always, using words or phrases such as “expects”, “anticipates”, “plans”, “estimates”,
“intends”, “strategy”, “goals”, “objectives” or stating that certain actions, events
or results “may”, “could”, “would”, “might” or “will” be taken, occur
or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be
“forward-looking statements”.
Forward-looking statements relate to analyses
and other information that are based on forecasts of future results, estimates of amounts not yet determinable and certain assumptions
that management believes are reasonable at the time they are made. In making the forward-looking statements in this prospectus
supplement, the accompanying prospectus and the documents incorporated by reference, the Company has applied several material assumptions,
including, but not limited to, the assumption that: (1) additional financing needed to fund certain contingent payment obligations
to Wheaton Precious Metals Corp. (“
Wheaton
”); (2) additional financing needed for the capacity related refund
under the silver purchase agreement, as amended, with Wheaton will be available on reasonable terms; (3) additional financing needed
for further exploration and development work on the Company's properties will be available on reasonable terms; (4) the proposed
development of its mineral projects will be viable operationally and economically and proceed as planned; (5) market fundamentals
will result in sustained silver, gold, lead and zinc demand and prices, and such prices will not be materially lower than those
estimated by management in preparing the annual financial statements for the year ended December 31, 2018; (6) market fundamentals
will result in sustained silver, gold, lead and zinc demand and prices, and such prices will be materially consistent with or more
favourable than those anticipated in the PFS (as defined under the heading “Summary – Mining Business” below);
(7) the actual nature, size and grade of its mineral resources are materially consistent with the mineral resource estimates reported
in the supporting technical reports; (8) labor and other industry services will be available to the Company at prices consistent
with internal estimates; (9) the continuances of existing and, in certain circumstances, proposed tax and royalty regimes; and
(10) that other parties will continue to meet and satisfy their contractual obligations to the Company. Statements concerning mineral
reserve and resource estimates may also be deemed to constitute forward-looking information to the extent that they involve estimates
of the mineralization that will be encountered if the property is developed.
Financial outlook information about potential
future cash flows contained in this prospectus supplement, the accompanying prospectus or in a document incorporated by reference
is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's
assessment of the relevant information currently available. Readers are cautioned that any such financial outlook information should
not be used for purposes other than for which it is disclosed.
Forward-looking statements are subject
to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from
those expressed or implied by the forward-looking statements, including, without limitation:
|
•
|
commodity price fluctuations including future prices of silver, gold, lead and zinc;
|
|
•
|
risks related to the Company's ability to finance the development of its mineral properties;
|
|
•
|
risks related to the Company's ability to commence production and generate material revenues or
obtain adequate financing for its planned exploration and development activities;
|
|
•
|
the risk that permits and governmental approvals necessary to develop and operate mines on the
Company's properties will not be available on a timely basis or at all;
|
|
•
|
uncertainty of capital costs, operating costs, production and economic returns;
|
|
•
|
the Company's need to attract and retain qualified management and technical personnel;
|
|
•
|
uncertainty of production at the Company's mineral exploration properties;
|
|
•
|
risks and uncertainties relating to the interpretation of drill results, the geology, grade and
continuity of the Company's mineral deposits;
|
|
•
|
mining and development risks, including risks related to accidents, equipment breakdowns, labour
disputes or other unanticipated difficulties with or interruptions in development, construction or production;
|
|
•
|
risks related to governmental regulation, including environmental regulation;
|
|
•
|
risks related to reclamation activities on the Company's properties;
|
|
•
|
uncertainty related to title to the Company's mineral properties;
|
|
•
|
uncertainty related to unsettled aboriginal rights and title in the Yukon Territory;
|
|
•
|
the Company's history of losses and expectation of future losses;
|
|
•
|
uncertainty as to the Company's ability to acquire additional commercially mineable mineral rights;
|
|
•
|
variations in interest rates and foreign exchange rates; and
|
|
•
|
increased competition in the mining industry.
|
This list is not exhaustive of the factors
that may affect any of the Company's forward-looking statements. Forward-looking statements are statements about the future and
are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from
those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without
limitation, those referred to in this prospectus supplement and the Company's annual information form dated March 13, 2019 for
the year ended December 31, 2018 (the “
2018 AIF
”) and the Company's Annual MD&A (as defined herein), each
under the heading “Risk Factors”, the “Risk Factors” section beginning on page 12 of the accompanying prospectus
and elsewhere in the accompanying prospectus and in the documents incorporated by reference herein. In addition, although the Company
has attempted to identify important factors that could cause actual achievements, events or conditions to differ materially from
those identified in the forward-looking statements, there may be other factors that cause achievements, events or conditions not
to be as anticipated, estimated or intended. Many of the foregoing factors are beyond the Company's ability to control or predict.
These forward-looking statements are based
on the beliefs, expectations and opinions of management on the date the statements are made, and such beliefs, expectations and
opinions are subject to change after such date. The Company does not assume any obligation to update forward-looking statements,
except as required by applicable securities laws, if circumstances or management's beliefs, expectations or opinions should change.
For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
SUMMARY
The following summary contains basic
information about the Company and the Offering and is not intended to be complete. This description does not contain all of the
information about the Company and its properties and business that you should consider before investing in the Offered Shares.
You should carefully read the entire prospectus supplement, the accompanying prospectus and the documents incorporated by reference
in this prospectus supplement and in the accompanying prospectus before making an investment decision. See “Documents Incorporated
by Reference” and “Additional Information”. You should also carefully consider the matters discussed under “Risk
Factors” in this prospectus supplement, the “Risk Factors” section beginning on page 12 of the accompanying prospectus,
the “Risk Factors” section beginning on page 15 of the 2018 AIF and the “Risk Factors” section beginning
on page 24 of the Annual MD&A.
The Company
The Company operates two principal businesses:
a mining business, comprised of mineral exploration and mine development and operation in Canada, primarily in Yukon Territory;
and an environmental services business, providing consulting, remediation solutions and project management services in respect
of environmental permitting and compliance and site remediation, in Canada, the United States and elsewhere.
Mining Business
The Company's principal mining business
activities are currently being carried out within the Keno Hill District (the “
District
”) in the Yukon Territory.
The District is a silver mining region in Canada, encompassing over 35 former mines that produced variously from approximately
1918 through 1988.
The Company's mineral property holdings
within the District cover certain geological areas which host silver mineralization, including historic producing former mines
and most of the other mineral occurrences. In addition to the deposits described below that are within the District as detailed
in the independent technical report dated May 8, 2019 with an effective date of March 28, 2019 prepared by Mining Plus
Canada Consulting Ltd. entitled “NI 43-101 Technical Report, Prefeasibility Study of the Keno Hill Silver District Project,
Yukon Territory, Canada” (the “
PFS
”) was filed and is available on SEDAR under the Company's profile at
www.sedar.com.
The Company holds several other less advanced
property interests within the District, including but not limited to the Silver King, Elsa, Husky, Sadie Ladue and McQuesten properties,
which potentially could become material properties depending on the results of exploration programs the Company may carry out on
them in the future, as well as the separate Elsa Tailings Property. Other non-material mineral property interests of the Company
include Harlan properties in the Yukon, and certain net smelter return royalties in respect of the Brewery Creek, Ida-Oro (formerly
Klondike) and Sprogge properties in the Yukon and the Telegraph Creek, Iskut River, Kiniskan Lake and Manson Creek properties in
British Columbia.
The documents incorporated by reference
herein, including the 2018 AIF and the PFS, contain further details regarding the business of Alexco. See “Documents Incorporated
by Reference.”
Environmental Services
The Company's environmental services division,
AEG, is in the business of managing risk and unlocking value at mature, closed or abandoned sites through integration and implementation
of the Company's core competencies, which include management of environmental services, implementation of innovative treatment
technologies, execution of site reclamation and closure operations, and, if appropriate, rejuvenation of exploration and development
activity. The Company's principal markets for these services are in Canada, the United States and the Americas, with the Canadian
market serviced primarily through the Company's wholly-owned subsidiaries, Alexco Environmental Group Inc. (“
AEG Canada
”),
Contango Strategies Ltd. (“
Contango
”) and Elsa Reclamation & Development Company Ltd. (“
ERDC
”),
the U.S. market through Alexco Water and Environment Inc. (“
AWE
”), and the balance of the Americas through either
AEG Canada or AWE. The Company provides its services to a range of industrial sectors, but with a particular focus on current and
former mine sites.
The Company offers its clients a combination
of environmental remediation expertise in the area of site reclamation and closure, an ability to manage complex permitting and
regulatory programs on a turnkey basis, and strong operations management. In addition, the Company seeks to strategically leverage
off its environmental services group, accessing opportunities to enhance asset value through effective liability risk management
and efficient site operations. This is accomplished through unlocking potential exploration and development opportunities at contaminated
or abandoned sites through cost effective and responsible environmental remediation and liability transfer.
The Company executes its environmental
services business plan by using and applying the intellectual property assets, including the Patents, and the specialized skill
sets and knowledge it maintains in-house. While there are a significant number of firms providing environmental services in North
America, these assets, skill sets and knowledge provide Alexco with a competitive advantage. Consolidated revenue from environmental
services for the year ended December 31, 2018 totaled $19,880,000, compared to $10,732,000 in 2017, all of which was derived from
sales to external unrelated parties. During the year ended December 31, 2018, the Company recorded revenues from three customers
representing 10% or more of total environmental services revenue, in the amounts of $4,780,000, $4,020,000 and $3,780,000. During
2017, AEG had three customers representing 10% or more of total revenue, in the amounts of $3,419,000, $1,702,000 and $1,473,000.
The documents incorporated by reference
herein, including the 2018 AIF, contain further details regarding the business of Alexco. See “Documents Incorporated by
Reference.”
Recent Developments
Results of PFS
On March 28, 2019, the Company announced
the results of an independent pre-feasibility study on its 100% owned Keno Hill Silver project and subsequently filed the PFS on
May 8, 2019.
Attached as Schedule “A” to
this prospectus supplement is the summary contained in the PFS. As stated under the heading “Documents Incorporated by Reference”,
the entire PFS is incorporated by reference herein.
April 2019 Private Placement
On April 23, 2019, the Company completed
an underwritten private placement of 1,842,200 “flow-through” Common Shares at a price of $1.90 per share for gross
proceeds of $3,500,180 (the “
April 2019 Private Placement
”). The underwriter received a cash commission
of $210,010 representing 6% of the gross proceeds, as well as 55,266 underwriter’s warrants, with each underwriter’s warrant
entitling the holder to purchase one common share at a price of $1.70 until April 23, 2020.
The Offering
The following is a summary of the principal
features of the Offering and is subject to, and should be read together with the more detailed information, financial data and
statements contained elsewhere in, and incorporated by reference into, this prospectus supplement and the accompanying prospectus.
Common Shares offered
|
|
6,500,000 Common Shares
|
Option to purchase additional Common Shares
|
|
The Company has granted to the Underwriter an option to purchase up to an additional 975,000 Common Shares at the Offering Price on the same terms and conditions as the Offering, exercisable in whole or in part and from time to time, for a period of up to 30 days following closing of the Offering to cover over-allotments, if any.
|
Plan of Distribution
|
|
The Offering is made pursuant to the Underwriting Agreement dated June 3, 2019 between the Company and the Underwriter. See “Plan of Distribution” for details regarding the Underwriter's Fee and Underwriter's Warrants.
|
Use of Proceeds
|
|
The Company anticipates that the net proceeds from this Offering will be approximately US$5,800,000, after deducting the Underwriter’s Fee and other expenses related to the Offering. The Company intends to use the net proceeds of the Offering for development expenditures at the Keno Hill Silver Project and for general working capital. Pending such uses, the Company intends to invest the net proceeds from the Offering in guaranteed investments offered by a Schedule I chartered bank under the
Bank Act
(Canada). See “
Use
of Proceeds
”.
|
Risk Factors
|
|
Investing in the Offered Shares is speculative and involves a
high degree of risk.
Each prospective in™vestor should carefully consider the risks described under the sections titled “
Risk Factors
” in this prospectus supplement and in the accompanying prospectus, and under similar headings in the documents incorporated by reference herein and therein before investing in the Offered Shares.
|
Listing
|
|
The Company will apply to list the Offered Shares qualified for distribution by this prospectus supplement on the TSX and NYSE American. Listing will be subject to the Company fulfilling all of the listing requirements of the TSX and NYSE American.
|
Closing
|
|
Closing on a T+3 basis, on or about June 7, 2019 or such other date as the Company and the Underwriter mutually agree (the “
Closing Date
”).
|
Trading symbols
|
|
NYSE American: AXU
|
|
|
TSX: AXR
|
RISK FACTORS
Investing in the Offered Shares is speculative
and involves a high degree of risk due to the nature of the Company's business and the present stage of exploration and development
of its mineral properties. The following risk factors, as well as risks currently unknown to the Company, could materially adversely
affect Alexco's future business, operations and financial condition and could cause them to differ materially from the estimates
described in forward-looking information relating to the Company, or its business, property or financial results, each of which
could cause purchasers of the Offered Shares to lose part or all of their investment. In addition to the other information contained
in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein, prospective
investors should carefully consider the factors set out under the “Risk Factors” section beginning on page 12 in the
accompanying prospectus, the factors set out under the “Risk Factors” section beginning on page 15 in the 2018
AIF, the factors set out under the “Risk Factors” section beginning on page 24 of the Annual MD&A and the factors
set out below in evaluating the Company and its business before making an investment in the Offered Shares.
Risks Relating to the Offered Shares
and the Offering
Loss of entire investment.
An investment in the Offered Shares is
speculative and may result in the loss of an investor's entire investment. Only potential investors who are experienced in high
risk investments and who can afford to lose their entire investment should consider an investment in the Company.
The trading price for the Company's
securities is volatile
.
The market prices for the securities of mining companies, including the Company, have historically been
highly volatile. The market has from time to time experienced significant price and volume fluctuations that are unrelated to the
operating performance of any particular company. In addition, because of the nature of Alexco's business, certain factors such
as the Company's announcements and the public's reaction, operating performance and the performance of competitors and other similar
companies, fluctuations in the market prices of the Company's resources, government regulations, changes in earnings estimates
or recommendations by research analysts who track Alexco's securities or securities of other companies in the resource sector,
general market conditions, announcements relating to litigation, the arrival or departure of key personnel and the factors listed
under the heading “Cautionary Note Regarding Forward-Looking Statements” can have an adverse impact on the market price
of the Common Shares.
For example, since January 1, 2019,
the closing price of the Common Shares on the TSX has ranged from a low of CDN$1.18 to a high of CDN$1.82 and on the NYSE American
has ranged from a low of US$0.90 to a high of US$1.41.
Any negative change in the public's perception
of the Company's prospects could cause the price of the Company's securities, including the price of the Common Shares, to decrease
dramatically. Furthermore, any negative change in the public's perception of the prospects of mining companies in general could
depress the price of Alexco's securities, including the price of the Common Shares, regardless of the Company's results. Following
declines in the market price of a company\'s securities, securities class-action litigation is often instituted. Litigation of this
type, if instituted, could result in substantial costs and a diversion of Alexco's management's attention and resources.
Sales of a significant number of
Common Shares in the public markets, or the perception of such sales, could depress the market price of the Common Shares.
Sales of a substantial number of Common
Shares or other equity-related securities in the public markets by the Company or its significant shareholders could depress the
market price of the Common Shares and impair Alexco's ability to raise capital through the sale of additional equity securities.
Alexco cannot predict the effect that future sales of the Common Shares or other equity-related securities would have on the market
price of the Common Shares. The price of the Common Shares could be affected by possible sales of the Common Shares by hedging
or arbitrage trading activity which the Company expects to occur involving the Common Shares.
The Company has discretion concerning
the use of cash resources, including the proceeds of the Offering, as well as the timing of expenditures.
The Company has discretion concerning the
application of its cash resources and the timing of expenditures and shareholders may not agree with the manner in which the Company
elects to allocate and spend cash resources. The results and the effectiveness of the application of cash resources are uncertain.
The failure by the Company to apply cash resources effectively could have a material adverse effect on the business of the Company.
Management of the Company will have discretion with respect to the use of the proceeds from the Offering and investors will be
relying on the judgment of management regarding the application of these proceeds. Management of the Company could spend most of
the proceeds from the Offering in ways that the Company's security holders may not consider optimal or that do not yield a favourable
return. Prospective investors will not have the opportunity, as part of their investment in the Offered Shares, to influence the
manner in which the proceeds of the Offering are used. At the date of this prospectus supplement, the Company intends to use the
proceeds from the Offering as indicated in the discussion under “Use of Proceeds”. However, the Company's needs may
change as the business of the Company evolves and the Company may have to allocate the proceeds differently than as indicated in
the discussion under “Use of Proceeds”. As a result, the proceeds that the Company receives in the Offering may be
used in a manner significantly different from the Company's current expectations.
The Company does not intend to pay
dividends in the foreseeable future.
The Company has never declared or paid
any dividends on its Common Shares. The Company intends, for the foreseeable future, to retain its future earnings, if any, to
finance its exploration activities and further development and the expansion of the business. The payment of future dividends,
if any, will be reviewed periodically by the Board of Directors of the Company and will depend upon, among other things, conditions
then existing including our earnings, financial condition, cash on hand, financial requirements to fund our exploration activities,
development and growth, and other factors that the Board of Directors of the Company may consider appropriate in the circumstances.
DESCRIPTION OF SECURITIES BEING DISTRIBUTED
Common Shares
The authorized capital of the Company consists
of an unlimited number of Common Shares, without par value. As at the close of business on June 3, 2019, 110,494,570 Common Shares
of the Company were issued and outstanding.
The holders of the Common Shares are entitled
to vote at all meetings of holders of Common Shares, to receive dividends if, as and when declared by the directors and to participate
rateably in any distribution of property or assets upon the liquidation, winding-up or other dissolution of the Company. The Common
Shares carry no pre-emptive rights, conversion or exchange rights, or redemption, retraction, repurchase, sinking fund or purchase
fund provisions. There are no provisions requiring a holder of Common Shares to contribute additional capital and no restrictions
on the issuance of additional securities by the Company. There are no restrictions on the repurchase or redemption of Common Shares
by the Company except to the extent that any such repurchase or redemption would render the Company insolvent.
USE OF PROCEEDS
The Company estimates that the net proceeds
from the Offering will be approximately US$5,800,000 after deducting the Underwriter’s Fee of US$455,000 and expenses in
the aggregate amount of approximately US$245,000. See “Plan of Distribution”. If the Over-Allotment Option is exercised
in full, the net proceeds from the Offering are estimated to be approximately US$6,700,000 after deducting the Underwriter’s
Fee and the estimated expenses relating to the Offering of approximately US$768,000. See “Plan of Distribution”.
The Company intends to use the net proceeds
from the Offering for development expenditures at the Keno Hill Silver Project and for general working capital. Pending such uses,
the Company intends to invest the net proceeds from the Offering in guaranteed investments offered by a Schedule I chartered bank
under the
Bank Act
(Canada).
The net proceeds of the Offering are intended
to be used as follows (assuming the Over-Allotment Option is not exercised):
Principal Purpose
|
|
|
Estimated
Amount to be
Expended
(US$)
|
|
Development and site expenditures at Keno Hill Silver Project
|
|
|
US$3,300,000
|
|
General corporate and working capital purposes
(1)
|
|
|
US$2,500,000
|
|
Total
|
|
|
US$5,800,000
|
|
Note:
|
(1)
|
Funds included in general corporate purposes may be
allocated to corporate expenses, business development and potential future acquisitions.
|
The key business objective the Company
intends to meet with the proceeds from the sale of the Offered Shares is to increase Company's cash position and to allow the Company
to continue development at the Keno Hill Silver Project.
If the Underwriter’s Over-Allotment Option
is exercised in whole or in part, the Company will use the additional net proceeds from such exercise for general corporate purposes
and working capital. While the Company intends to spend the net proceeds of the Offering as stated above, there may be circumstances
where, for sound business reasons, a re-allocation of funds may be necessary or advisable.
The actual amount that the Company spends
in connection with each of the intended uses of proceeds may vary significantly from the amounts specified above, and will depend
on a number of factors, including those listed under the heading “Risk Factors” in or incorporated by reference in
this prospectus supplement and the accompanying prospectus.
The Company has not yet achieved positive
operating cash flow, and there are no assurances that the Company will not experience negative cash flow from operations in the
future.
CONSOLIDATED CAPITALIZATION
The following table sets forth the Company's
consolidated capitalization as of the dates indicated, adjusted to give effect to the material changes in the share capital of
the Company since March 31, 2019, the date of the Company's financial statements most recently filed in accordance with
National Instrument 51-102 –
Continuous Disclosure Obligations
. The table should be read in conjunction with the unaudited
interim condensed consolidated financial statements of the Company as at and for the three months ended March 31, 2019,
including the notes thereto and management's discussion and analysis thereof.
|
|
As at March 31, 2019
$
|
|
|
As at March 31, 2019 After Giving Effect
on a Pro Forma Basis to the Offering and
Other Issuances
(1)
$
|
|
Common Shares
|
|
|
$213,828,000
(108,647,037
shares)
|
|
|
|
$224,277,000
(4)
(116,994,570 shares)
|
|
Warrants
|
|
$
|
2,494,000
|
|
|
$
|
2,598,000
|
(4)
|
Share Options and RSU's
|
|
$
|
5,974,000
|
|
|
$
|
5,964,000
|
|
Contributed Surplus
|
|
$
|
19,348,000
|
|
|
$
|
19,348,000
|
|
Accumulated Deficit
|
|
($
|
120,591,000
|
)
|
|
($
|
120,591,000
|
)
|
Accumulated Other Comprehensive Loss
|
|
($
|
1,858,000
|
)
|
|
($
|
1,858,000
|
)
|
Shareholders' Equity
|
|
$
|
119,195,000
|
(2)
|
|
|
$129,738,000
(2)
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
$
|
7,136,000
|
|
|
$
|
7,189,000
|
(3)
|
Non-Current Liabilities
|
|
$
|
10,588,000
|
|
|
|
$10,904,000
(3)
|
|
Total Liabilities
|
|
$
|
17,724,000
|
|
|
$
|
18,093,000
|
|
|
(1)
|
Subsequent to March 31, 2019, an additional 1,847,533 Common Shares were issued pursuant to
(a) the completion of an offering of 1,842,200 “flow-through” Common Shares for net proceeds of $2,686,000 after deducting
$19,000 related to the fair value of the 55,266 underwriter’s warrants on the placement; and (b) the vesting of 5,333 restricted
share units resulting in a $10,000 transfer from Share Option and RSU’s to Common Shares. See “Prior Sales”.
|
|
(2)
|
Shareholders' Equity is determined by combining Common Shares, warrants, share options and restricted
share units, contributed surplus, accumulated deficit and accumulated other comprehensive income or loss.
|
|
(3)
|
Current liabilities and non-current liabilities include adjustments of $53,000 and $316,000, respectively,
to “flow-through” Common Share premium liability, which is calculated by the implied premium per share (subscription
price of $1.90 less market price of $1.70, being the closing price of the Common Shares on the TSX on April 1, 2019 (the last business
day prior to announcement of the Offering)) multiplied by the number of shares issued.
|
|
(4)
|
The net proceeds of the Offering after the Underwriter Commission is US$6,045,000 (C$8,169,000)
and the net proceeds after deducting the estimated costs of the Offering are US$5,800,000 (C$7,838,000). Warrants include an adjustment
for the estimated fair value of Underwriter Warrants from the Offering, which is estimated using the Black-Scholes option pricing
model. The fair value was estimated by assuming a risk free interest rate of 2.2% per annum, an expected life of warrant of 1 year,
an expected volatility of 48% and no expected dividends. The $85,000 fair value of the Warrants is a further deduction from Common
Shares as a share issuance cost.
|
PRIOR
SALES
The following table sets forth for the
12 month period prior to the date of this prospectus supplement details of the price at which securities have been issued or are
to be issued by the Company, the number of securities issued at that price and the date on which the securities were issued:
Date of Issue
|
|
Type of
Securities
|
|
No. of Securities
|
|
|
Issue or Exercise
Price per
Security
|
|
|
Reason for Issue
|
June 14, 2018
|
|
“Flow Through” Common Shares
|
|
|
966,500
|
|
|
$
|
2.05
|
|
|
Underwritten Prospectus Offering
|
June 14, 2018
|
|
“Flow Through” Common Shares
|
|
|
1,736,500
|
|
|
$
|
2.05
|
|
|
Underwritten Prospectus Offering
|
June 14, 2018
|
|
“Flow Through” Common Shares
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
|
Underwritten Prospectus Offering
|
June 20, 2018
|
|
Common Shares
|
|
|
237,999
|
|
|
$
|
1.7495
|
|
|
Acquisition of Contango
(1)
|
Date of Issue
|
|
Type of
Securities
|
|
No. of Securities
|
|
|
Issue or Exercise
Price per
Security
|
|
|
Reason for Issue
|
July 30, 2018
|
|
Common Shares
|
|
|
10,000
|
|
|
$
|
1.35
|
|
|
Mineral property option agreement
|
January 4, 2019
|
|
Stock Options
|
|
|
2,029,000
|
|
|
$
|
1.27
|
|
|
Grant of Stock Options
|
January 4, 2019
|
|
Restricted Share Units
|
|
|
166,662
|
|
|
$
|
1.27
|
|
|
Vesting of Restricted Share Units
|
February 1, 2019
|
|
Restricted Share Units
|
|
|
43,335
|
|
|
$
|
1.48
|
|
|
Vesting of Restricted Share Units
|
February 6, 2019
|
|
Restricted Share Units
|
|
|
78,328
|
|
|
$
|
1.48
|
|
|
Vesting of Restricted Share Units
|
February 6, 2019
|
|
Stock Options
|
|
|
15,000
|
|
|
$
|
0.60
|
|
|
Exercise of Stock Options
|
February 14, 2019
|
|
Common Shares
|
|
|
171,480
|
|
|
$
|
1.23
|
|
|
Credit Facility
(2)
|
February 15, 2019
|
|
Restricted Share Units
|
|
|
98,330
|
|
|
$
|
1.65
|
|
|
Vesting of Restricted Share Units
|
February 21, 2019
|
|
Stock Options
|
|
|
55,000
|
|
|
$
|
0.60
|
|
|
Exercise of Stock Options
|
February 21, 2019
|
|
Stock Options
|
|
|
20,000
|
|
|
$
|
0.84
|
|
|
Exercise of Stock Options
|
March 28, 2019
|
|
Stock Options
|
|
|
50,000
|
|
|
$
|
1.76
|
|
|
Grant of Stock Options
|
April 23, 2019
|
|
“Flow-Through” Common Shares
|
|
|
1,842,200
|
|
|
$
|
1.90
|
|
|
Underwritten Private Placement
|
April 23, 2019
|
|
Underwriter’s Warrants
|
|
|
55,266
|
|
|
$
|
1.70
|
|
|
Underwritten Private Placement
|
May 10, 2019
|
|
Restricted Share Units
|
|
|
5,333
|
|
|
$
|
1.42
|
|
|
Vesting of Restricted Share Units
|
Notes:
|
(1)
|
The total purchase price was $1,388,000, of which $971,600 was paid in cash and $416,400 was paid
through the issuance of 237,999 Common Shares.
|
|
(2)
|
Issued to Sprott Private Resource Lending (Collector), LP in consideration
for extending availability draw-down period by six months for credit facility.
|
PRICE RANGE AND TRADING VOLUME
The outstanding Common Shares are listed
on the TSX under the symbol “AXR” and on NYSE American under the symbol “AXU”. The following table sets
forth, for the 12-month period prior to the date of this prospectus supplement, details of the trading prices and volume (rounded
up or down to the nearest one hundredth) on a monthly basis of the Common Shares on the TSX and the NYSE American, respectively.
|
|
TSX
|
|
|
NYSE American
|
|
Period
|
|
High
(CDN$)
|
|
|
Low
(CDN$)
|
|
|
Volume
|
|
|
High
(US$)
|
|
|
Low
(US$)
|
|
|
Volume
|
|
2019
|
June 1 - 3
|
|
|
1.62
|
|
|
|
1.46
|
|
|
|
192,200
|
|
|
|
1.21
|
|
|
|
1.09
|
|
|
|
753,100
|
|
May
|
|
|
1.47
|
|
|
|
1.31
|
|
|
|
904,600
|
|
|
|
1.09
|
|
|
|
0.95
|
|
|
|
4,145,800
|
|
April
|
|
|
1.48
|
|
|
|
1.26
|
|
|
|
2,023,000
|
|
|
|
1.22
|
|
|
|
0.93
|
|
|
|
7,848,500
|
|
March
|
|
|
1.86
|
|
|
|
1.53
|
|
|
|
1,389,100
|
|
|
|
1.41
|
|
|
|
1.15
|
|
|
|
6,574,600
|
|
February
|
|
|
1.87
|
|
|
|
1.45
|
|
|
|
2,419,800
|
|
|
|
1.42
|
|
|
|
1.11
|
|
|
|
7,724,600
|
|
January
|
|
|
1.44
|
|
|
|
1.14
|
|
|
|
1,335,300
|
|
|
|
1.07
|
|
|
|
0.86
|
|
|
|
5,309,900
|
|
2018
|
December
|
|
|
1.34
|
|
|
|
0.99
|
|
|
|
1,291,000
|
|
|
|
0.97
|
|
|
|
0.75
|
|
|
|
3,601,700
|
|
November
|
|
|
1.33
|
|
|
|
0.92
|
|
|
|
1,623,400
|
|
|
|
1.02
|
|
|
|
0.68
|
|
|
|
3,966,200
|
|
October
|
|
|
1.49
|
|
|
|
1.30
|
|
|
|
1,480,600
|
|
|
|
1.15
|
|
|
|
0.90
|
|
|
|
4,490,100
|
|
September
|
|
|
1.49
|
|
|
|
1.31
|
|
|
|
1,046,000
|
|
|
|
1.15
|
|
|
|
1.00
|
|
|
|
3,284,500
|
|
August
|
|
|
1.62
|
|
|
|
1.36
|
|
|
|
1,179,700
|
|
|
|
1.25
|
|
|
|
1.00
|
|
|
|
4,551,900
|
|
July
|
|
|
1.94
|
|
|
|
1.52
|
|
|
|
906,500
|
|
|
|
1.48
|
|
|
|
1.16
|
|
|
|
4,943,900
|
|
June
|
|
|
1.84
|
|
|
|
1.67
|
|
|
|
1,285,300
|
|
|
|
1.42
|
|
|
|
1.25
|
|
|
|
6,175,000
|
|
On June 3, 2019 the closing price of the
Common Shares on the TSX and the NYSE American was CDN$1.60 and US$1.18 per Common Share, respectively.
PLAN OF DISTRIBUTION
The Offered Shares will be offered in the
provinces of British Columbia, Alberta, Ontario, Saskatchewan and Manitoba, and in the United States pursuant to the MJDS and,
subject to applicable law and the Underwriting Agreement, certain jurisdictions outside of Canada and the United States. Pursuant
to the Underwriting Agreement, the Company has agreed to issue and sell and the Underwriter has agreed to purchase, as principal,
subject to compliance with all necessary legal requirements and the terms and conditions contained in the Underwriting Agreement,
a total of Offered Shares at the Offering Price of US$1.00 per Offered Share, payable in cash to the Company against delivery of
such Offered Shares, on the Closing Date. In consideration for its services in connection with the Offering, the Underwriter will
be paid the Underwriter’s Fee equal to 7.0% of the gross proceeds of the Offering (US$0.07 per Offered Share, for an aggregate
fee payable by the Company of US$455,000, exclusive of the Over-Allotment Shares). The Offering Price was determined by negotiation
between the Company and the Underwriter. Subject to the terms and conditions of the Underwriting Agreement, the Company has agreed
to sell to the Underwriter, and the Underwriter has agreed to purchase, at the Offering Price less the Underwriting Fee set forth
on the cover page of this prospectus supplement, the Offered Shares.
Pursuant to the Underwriting Agreement,
the Company has granted to the Underwriter the Over-Allotment Option, exercisable in whole or in part at any time up to 30 days
after the Closing Date, to purchase up to an additional 975,000 Offered Shares at the Offering Price to cover over-allocations,
if any, and for market stabilization purposes, on the same terms and conditions as apply to the purchase of Offered Shares thereunder.
This prospectus supplement qualifies for distribution the Offered Shares as well as the grant of the Over-Allotment Option and
the issuance of the Over-Allotment Shares pursuant to the exercise of the Over-Allotment Option.
The Company has also agreed to issue Underwriter’s
Warrants entitling the Underwriter to purchase such number of Underwriter’s Warrant Shares as is equal to 4.0% of the number
of Offered Shares sold in the Offering for a price of US$1.00 per Underwriter’s Warrant Share at any time before 4:30 p.m.
(Vancouver time) on the date which is 12 months after the Closing Date of the Offering. This prospectus supplement and the accompanying
prospectus also qualify the distribution of the Underwriter’s Warrants and Common Shares underlying the Underwriter’s
Warrants.
A purchaser who acquires Over-Allotment
Shares forming part of the Underwriter’s over-allocation position acquires those Over-Allotment Shares under this prospectus
supplement, regardless of whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment
Option or secondary market purchases.
The Underwriter may sell Offered
Shares in the United States through its U.S. affiliate, Cantor Fitzgerald & Co., which is not registered as an investment
dealer in any Canadian jurisdiction and, accordingly, will only sell Offered Shares into the United States and will not,
directly or indirectly, solicit offers to purchase or sell the Offered Shares in Canada. Subject to applicable law, the
Underwriter may offer to sell the Offered Shares outside of Canada and the United States.
Pursuant to policies of certain Canadian
securities regulatory authorities, the Underwriter may not, throughout the period of distribution under the Offering, bid for
or purchase Common Shares for their own accounts or for accounts over which they exercise control or direction. The foregoing restriction
is subject to certain exceptions, on the condition that the bid or purchase not be engaged in for the purpose of creating actual
or apparent active trading in or raising the price of the Common Shares. These exceptions include a bid or purchase permitted under
Universal Market Integrity Rules for Canadian marketplaces administered by the Investment Industry Regulatory Organization of Canada
relating to market stabilization and passive market making activities, and a bid or purchase made for or on behalf of a customer
where the order was not solicited during the period of distribution. Subject to the foregoing, the Underwriter may effect transactions
which stabilize or maintain the market price of the Common Shares at levels other than those which otherwise might prevail on the
open market. These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of preventing
or mitigating a decline in the market price of the Common Shares, and may cause the price of the Offered Shares to be higher than
would otherwise exist in the open market absent such stabilizing activities. As a result, the price of the Offered Shares may be
higher than the price that might otherwise exist in the open market. Such transactions, if commenced, may be discontinued at any
time.
The Underwriter proposes to offer the
Offered Shares initially at the Offering Price. After a reasonable effort has been made to sell all of the Offered Shares at the
Offering Price, the Underwriter may subsequently reduce the selling price to investors from time to time in order to sell any
of the Offered Shares remaining unsold. Any such reduction will not affect the proceeds received by the Company.
The obligations of the Underwriter
under the Underwriting Agreement may be terminated at its discretion upon the occurrence of
certain events specified in the Underwriting Agreement including standard “litigation out”, “financial
out”, “disaster out” “regulatory out” and “material adverse change out” rights of
termination.
The Underwriter is obligated to take up
and pay for all the Offered Shares offered by this prospectus supplement (not including the Over-Allotment Shares issuable upon
exercise of the Over-Allotment Option) if any are purchased under the Underwriting Agreement, subject to certain exceptions. The
Company has agreed in the Underwriting Agreement to reimburse the Underwriter for its legal fees and certain other expenses in
connection with the Offering, in an amount not to exceed US$130,000 (exclusive of taxes and disbursements).
The Company has agreed, pursuant to the
Underwriting Agreement, to indemnify the Underwriter and its affiliates and its directors, officers,
employees, shareholders and agents and each other person, if any, controlling the Underwriter or its affiliates and against
certain liabilities, including liabilities under Canadian and U.S. securities legislation in certain circumstances or to contribute
to payments the Underwriter may have to make because of such liabilities.
The Company has agreed in the Underwriting
Agreement that it shall not issue, negotiate or enter into any agreement to sell or issue, or announce the issue of, any equity
securities of the Company for a period of 90 days from the Closing Date, without the prior written consent of the Underwriter, such consent to not be unreasonably withheld or delayed, other than: (i) the issuance of the Offered Shares;
(ii) pursuant to the grant of options or other equity-based awards (including RSUs and DSUs) pursuant to any equity compensation
plan in effect as of the date of the Underwriting Agreement and which is disclosed in this Prospectus or the accompanying prospectus;
(iii) the issuance of Common Shares upon the exercise or conversion of any convertible securities outstanding as of the date of
the Underwriting Agreement or in order to extend the availability period of the Company’s existing credit facility.
The Company has agreed to use its reasonable
efforts to cause each director and officer of the Company to enter into lock-up agreements in favour of the Underwriter evidencing
their agreement not to, for a period of 90 days following the Closing Date, directly or indirectly offer, sell or enter into any
other agreement to transfer the economic consequences of, or otherwise dispose of or deal with, or publicly announce any intention
to do any of the foregoing, any Common Shares or other securities of the Company held by them, directly or indirectly or under
their control or direction, other than as permitted under the terms of the lock-up agreements.
This prospectus supplement and
accompanying prospectus in electronic format may be made available on the website maintained by the Underwriter or its
U.S. affiliate participating in the Offering. The Underwriter and its U.S. affiliate may agree to allocate a number of
Offered Shares for sale to their online brokerage account holders. Internet distributions will be allocated by the
representative to the Underwriter and its U.S. affiliate that may make Internet distributions on the same basis as other
allocations. Other than the accompanying prospectus and prospectus supplement in electronic format, the information on these
websites is not part of this prospectus supplement or the registration statement of which this prospectus supplement forms a
part, has not been approved or endorsed by the Company or the Underwriter in its capacity as underwriter, and should not be
relied upon by investors.
The Underwriter and its
affiliates have provided in the past to the Company and its affiliates, and may provide from time to time in the future,
certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the
ordinary course of their business, for which they have received and may continue to receive customary fees and commissions.
In addition, from time to time, the Underwriter and its affiliates may effect transactions for their own account or the
account of customers, and hold on behalf of themselves or their customers, long or short positions in the Company’s
debt or equity securities or loans, and may do so in the future.
Subscriptions will be received subject
to rejection or allotment in whole or in part and the right is reserved to close the subscription books at any time without notice.
The closing of the Offering is expected to occur on or about June 7, 2019, which will be the third business day following
the pricing of the Offering. Since trades in the stock market generally settle in two business days, purchasers who wish to trade
Common Shares prior to the delivery of the Offered Shares hereunder will be required, by virtue of the fact that the Offering will
settle three business days following pricing of the Offering, to specify alternative settlement arrangements at the time of any
such trade to prevent a failed settlement. Purchasers of the Offered Shares who wish to trade the Offered Shares prior to their
date of delivery hereunder should consult their advisors.
Notice to Investors
European Economic Area
In relation to each Member State of the
European Economic Area , no offer of any securities which are the subject of the offering contemplated by this prospectus has been
or will be made to the public in that Member State other than any offer where a prospectus has been or will be published in relation
to such securities that has been approved by the competent authority in that Member State or, where appropriate, approved in another
Member State and notified to the relevant competent authority in that Member State in accordance with the Prospectus Directive,
except that an offer of such securities may be made to the public in that Member State:
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to any legal entity which is a “qualified investor” as defined
in the Prospectus Directive;
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to fewer than 150, natural or legal persons (other than qualified investors
as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of
the representatives of the Underwriter for any such offer; or
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in any other circumstances falling within Article 3(2) of the Prospectus
Directive,
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provided that no such offer of securities
shall require the Company or any of the Underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive
or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. For the purposes of this provision, the expression
an “offer to the public” in relation to any securities in any Member State means the communication in any form and
by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to
decide to purchase or subscribe the securities, as the same may be varied in that Member State by any measure implementing the
Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and
amendments thereto, including the 2010 PD Amending Directive), and includes any relevant implementing measure in the Member State
and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
United Kingdom
This prospectus is only being distributed
to, and is only directed at, persons in the United Kingdom that are qualified investors (as defined in the Prospectus Directive)
that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended, referred to herein as the “Order”, and/or (ii) high net worth entities falling within
Article 49(2)(a) to (d) of the Order and other persons to whom it may lawfully be communicated or caused to be communicated. Each
such person is referred to herein as a “Relevant Person”.
This prospectus and its contents are confidential
and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in
the United Kingdom. Any person in the United Kingdom that is not a Relevant Person should not act or rely on this document or any
of its contents.
Any invitation or inducement to engage
in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “
FSMA
”))
may only be communicated or caused to be communicated in connection with the issue or sale of the securities in circumstances in
which Section 21(1) of the FSMA does not apply. All applicable provisions of the FSMA must be complied with in respect of anything
done by any person in relation to the securities in, from or otherwise involving the United Kingdom.
LEGAL MATTERS
Certain legal matters related to the Common
Shares offered pursuant to this prospectus supplement will be passed upon on behalf of the Company by Miller Thomson LLP with respect
to Canadian legal matters and by Dorsey & Whitney LLP with respect to United States legal matters, and on behalf of the Underwriter
by Stikeman Elliott LLP with respect to Canadian legal matters and Cooley LLP with respect to United States legal matters. At the
date of this prospectus supplement, the partners and associates of Miller Thomson LLP as a group beneficially own less than 1%
of the Company's outstanding securities. At the date of this prospectus supplement, the partners and associates of Stikeman Elliott
LLP as a group beneficially own less than 1% of the Company's outstanding securities.
DOCUMENTS INCORPORATED BY REFERENCE
This prospectus supplement is deemed
to be incorporated by reference into the accompanying prospectus solely for the purposes of the Offering. Other documents are also
incorporated, or are deemed to be incorporated by reference, into the accompanying prospectus and reference should be made to the
accompanying prospectus for full particulars thereof.
Information has been incorporated
by reference in this prospectus supplement from documents filed with the securities commissions or similar regulatory authorities
in each of the provinces British Columbia, Alberta, Ontario, Manitoba and Saskatchewan.
Copies of the documents incorporated
herein by reference may be obtained on request without charge from the Corporate Secretary of Alexco at Suite 1225, Two Bentall
Centre, 555 Burrard Street, Box 216, Vancouver, British Columbia, V7X 1M9, Telephone (604) 633-4888. These documents are also available
on SEDAR, which can be accessed online at www.sedar.com. Information contained or featured on the Company’s website shall
not be deemed to be part of this prospectus supplement or the accompanying prospectus.
This prospectus supplement is deemed, as
of the date hereof, to be incorporated by reference into the accompanying prospectus solely for the purposes of the Offering.
The following documents, which have been
filed by the Company with the securities commissions or similar authorities in British Columbia, Alberta, Ontario, Manitoba and
Saskatchewan (the “
Commissions
”) and filed with or furnished to the SEC, are specifically incorporated by reference
into, and form an integral part of, the accompanying prospectus, as supplemented by this prospectus supplement:
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(a)
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the 2018 AIF, filed on SEDAR on March 13, 2019, except for the technical report dated March 29,
2017 with an effective date of January 3, 2017 as amended on September 14, 2018 prepared by Roscoe Postle Associates Inc. entitled
“Preliminary Economic Assessment of the Keno Hill Silver District Project, Yukon, Canada”;
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(b)
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the independent technical report dated May 8, 2019 with an effective date of March 28,
2019 prepared by Mining Plus Canada Consulting Ltd. entitled “NI 43-101 Technical Report, Prefeasibility Study of the Keno
Hill Silver District Project, Yukon Territory, Canada”, together with the accompanying certificates and consents of qualified
persons, all of which were filed on SEDAR on May 8, 2019 (the “
PFS
”);
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(c)
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the management information circular of Alexco dated April 26, 2019 prepared in connection with
Alexco's annual general meeting of shareholders to be held on June 6, 2019 (the “
Information Circular
”), filed
on SEDAR on May 2, 2019;
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(d)
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the unaudited interim condensed consolidated financial statements of Alexco for the three month
period ended March 31, 2019, together with the notes thereto (the “
Interim Financial Statements
”) and related
management's discussion and analysis (the “
Interim MD&A
”), filed on SEDAR on May 8, 2019;
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(e)
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the audited consolidated financial statements of Alexco for the year ended December 31, 2018, together
with the notes thereto and the auditors' report thereon and related management's discussion and analysis (the “
Annual
MD&A
”), filed on SEDAR on March 13, 2019;
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(f)
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the material change report dated April 2, 2019 in respect of the announcement of the April 2019
Private Placement, filed on SEDAR on April 2, 2019; and
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(g)
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the term sheet dated June 3, 2019 in connection with the Offering (the “
Term Sheet
”).
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Any document of the type referred to
in section 11.1 of Form 44-101F1 of National Instrument 44-101 – Short Form Prospectus Distributions and required to be filed
by the Company with the securities commissions or similar regulatory authorities in Canada after the date of this prospectus supplement
shall be deemed to be incorporated by reference in this prospectus supplement for the purposes of the Offering.
In addition, to the extent that any document
or information incorporated by reference into this prospectus supplement is included in any report that is filed with or furnished
to the SEC after the date of this prospectus supplement and prior to the date that all Offered Shares offered hereunder are sold
or the Offering is otherwise terminated, such document or information shall be deemed to be incorporated by reference as an exhibit
to the registration statement of which this prospectus supplement forms a part (in the case of documents or information deemed
furnished on Form 6-K, only to the extent specifically stated therein).
Any statement contained in this prospectus
supplement, the accompanying prospectus or in a document incorporated or deemed to be incorporated by reference in the accompanying
prospectus shall be deemed to be modified or superseded for purposes of the Offering to the extent that a statement contained in
this prospectus supplement or in any other subsequently filed document which also is or is deemed to be incorporated by reference
in the accompanying prospectus modifies or supersedes such statement. The modifying or superseding statement need not state that
it has modified or superseded a prior statement or include any other information set forth in the document it modifies or supersedes.
The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded
statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material
fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which
it was made. Any statement so modified or superseded shall not constitute a part of this prospectus supplement or the accompanying
prospectus, except as so modified or superseded.
References to the Company's website in
any documents that are incorporated by reference into this prospectus supplement and the accompanying prospectus do not incorporate
by reference the information on such website into this prospectus supplement or the accompanying prospectus, and the Company disclaims
any such incorporation by reference.
DOCUMENTS FILED AS PART OF THE REGISTRATION
STATEMENT
In addition to the documents specified
in this prospectus supplement and in the accompanying prospectus under “Documents Incorporated by Reference”, the Underwriting
Agreement described in this prospectus supplement and the consents of legal counsel, PricewaterhouseCoopers LLP and the experts
referred to and listed under “Experts” in this prospectus supplement have been or will be filed with the SEC and do
or will form part of the registration statement of which this prospectus supplement forms a part.
MARKETING MATERIALS
In connection with the Offering, the Underwriter
used the Term Sheet as “marketing materials” (as such terms are defined under applicable Canadian securities laws).
The Marketing Materials do not form part of this prospectus supplement and the accompanying prospectus to the extent that the contents
of the Marketing Materials have been modified or superseded by a statement contained in this prospectus supplement. Any template
version of any marketing materials that has been, or will be, filed on SEDAR (www.sedar.com) or with the SEC (www.sec.gov) before
the termination of the distribution under the Offering (including any amendments to, or an amended version of, any template version
of any marketing materials) is deemed to be incorporated by reference into this prospectus supplement and the accompanying prospectus
solely for the purposes of the Offering.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain
material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to
the acquisition, ownership, and disposition of Offered Shares acquired pursuant to this Offering.
This summary is for general information
purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations
that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of Offered Shares. In
addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may
affect the U.S. federal income tax consequences to such U.S. Holder, including, without limitation, specific tax consequences to
a U.S. Holder under an applicable income tax treaty. Accordingly, this summary is not intended to be, and should not be construed
as, legal or U.S. federal income tax advice with respect to any U.S. Holder. This summary does not address the U.S. federal net
investment income, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, or non-U.S. tax consequences
to U.S. Holders of the acquisition, ownership, and disposition of Offered Shares. In addition, except as specifically set forth
below, this summary does not discuss applicable tax reporting requirements. Each prospective U.S. Holder should consult its own
tax advisor regarding the U.S. federal income, U.S. federal net investment income, U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership, and disposition of
Offered Shares.
No ruling from the Internal Revenue Service
(the “
IRS
”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the
acquisition, ownership, and disposition of Offered Shares. This summary is not binding on the IRS, and the IRS is not precluded
from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities
on which this summary are based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or
more of the conclusions described in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue
Code of 1986, as amended (the “
Code
”), Treasury Regulations (whether final, temporary, or proposed), published
rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America
with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “
Canada-U.S. Tax Convention
”),
and U.S. court decisions that are applicable, and, in each case, as in effect and available, as of the date of this document. Any
of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change
could be applied retroactively. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed
legislation.
U.S. Holders
For purposes of this summary, the term
“
U.S. Holder
” means a beneficial owner of Offered Shares acquired pursuant to this Offering that is for U.S.
federal income tax purposes:
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an
individual who is a citizen or resident of the United States;
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a
corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized under the laws of the United
States, any state thereof or the District of Columbia;
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an
estate whose income is subject to U.S. federal income taxation regardless of its source; or
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a
trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons
for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S.
person.
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U.S. Holders Subject to Special U.S.
Federal Income Tax Rules Not Addressed
This summary does not address the U.S.
federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including,
but not limited to, U.S. Holders that: (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts,
or other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate investment trusts,
or regulated investment companies; (c) are broker-dealers, dealers, or traders in securities or currencies that elect to apply
a mark-to-market accounting method; (d) have a “functional currency” other than the U.S. dollar; (e) own Offered Shares
as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other integrated transaction; (f) acquire
Offered Shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) hold Offered
Shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes);
(h) are required to accelerate the recognition of any item of gross income with respect to Offered Shares as a result of such income
being recognized on an applicable financial statement; or (i) own, have owned or will own (directly, indirectly, or by attribution)
10% or more of the total combined voting power or value of the outstanding shares of the Company. This summary also does not address
the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents
of the United States; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes
of the Income Tax Act (Canada) (the “
Tax Act
”); (c) persons that use or hold, will use or hold, or that are
or will be deemed to use or hold Offered Shares in connection with carrying on a business in Canada; (d) persons whose Offered
Shares constitute “taxable Canadian property” under the Tax Act; or (e) persons that have a permanent establishment
in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code,
including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisor regarding the U.S.
federal income, U.S. federal net investment income, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state
and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Offered Shares.
If an entity or arrangement that is classified
as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds Offered Shares, the U.S.
federal income tax consequences to such entity and the partners (or other owners) of such entity generally will depend on the activities
of the entity and the status of such partners (or owners). This summary does not address the tax consequences to any such partner
(or owner). Partners (or other owners) of entities or arrangements that are classified as partnerships or as “pass-through”
entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences
arising from and relating to the acquisition, ownership, and disposition of Offered Shares.
Ownership and Disposition of Offered
Shares
The following discussion is subject in
its entirety to the rules described below under the heading “Passive Foreign Investment Company Rules“.
Taxation of Distributions
A U.S. Holder that receives a distribution,
including a constructive distribution, with respect to an Offered Share will be required to include the amount of such distribution
in gross income as a dividend (without reduction for any foreign income tax withheld from such distribution) to the extent of the
current or accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. To
the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution
will be treated first as a tax-free return of capital to the extent of a U.S. Holder's tax basis in the Offered Shares and thereafter
as gain from the sale or exchange of the Offered Shares (see “
Sale or Other Taxable Disposition of Offered Shares
”
below). However, the Company may not maintain the calculations of its earnings and profits in accordance with U.S. federal income
tax principles, and each U.S. Holder may have to assume that any distribution by the Company with respect to the Offered Shares
will constitute dividend income. Dividends received on Offered Shares by corporate U.S. Holders generally will not be eligible
for the “dividends received deduction”. Subject to applicable limitations and provided the Company is eligible for
the benefits of the Canada-U.S. Tax Convention or the Offered Shares are readily tradable on a United States securities market,
dividends paid by the Company to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential
tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied,
including that the Company not be classified as a PFIC (as defined below) in the tax year of distribution or in the preceding tax
year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such
rules.
Sale or Other Taxable Disposition
of Offered Shares
A U.S. Holder generally will recognize
gain or loss on the sale or other taxable disposition of Offered Shares in an amount equal to the difference, if any, between (a)
the amount of cash plus the fair market value of any property received and (b) such U.S. Holder's tax basis in the Offered Shares
sold or otherwise disposed of. Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain
or loss if, at the time of the sale or other disposition, such Offered Shares are held for more than one year.
Preferential tax rates apply to long-term
capital gains of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term
capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under
the Code.
Passive Foreign Investment Company Rules
If the Company were to constitute a “passive
foreign investment company” (“
PFIC
”) for any year during a U.S. Holder's holding period, then certain
potentially adverse rules would affect the U.S. federal income tax consequences to a U.S. Holder resulting from the acquisition,
ownership and disposition of Offered Shares. The Company believes that it was not a PFIC for the prior tax year, and based on current
business plans and financial expectations, the Company expects that it will not be a PFIC for the current tax year and expects
that it will not be a PFIC for the foreseeable future. No opinion of legal counsel or ruling from the IRS concerning the status
of the Company as a PFIC has been obtained or is currently planned to be requested. However, PFIC classification is fundamentally
factual in nature, generally cannot be determined until the close of the tax year in question, and is determined annually. In addition,
the analysis depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations.
Consequently, there can be no assurance that the Company has never been and will not become a PFIC for any tax year during which
U.S. Holders hold Offered Shares.
The Company generally will be a PFIC if,
after the application of certain “look-through” rules with respect to subsidiaries in which the Company holds at least
25% of the value of such subsidiary, for a tax year, (a) 75% or more of the gross income of the Company for such tax year is passive
income (the “income test”) or (b) 50% or more of the value of the Company's assets either produce passive income or
are held for the production of passive income (the “asset test”), based on the quarterly average of the fair market
value of such assets. “Gross income” generally includes all sales revenues less the cost of goods sold, plus income
from investments and from incidental or outside operations or sources, and “passive income” generally includes, for
example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains
from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income
if substantially all of a foreign corporation's commodities are stock in trade or inventory, depreciable property used in a trade
or business or supplies regularly used or consumed in the ordinary course of its trade or business, and certain other requirements
are satisfied.
In any year in which the Company is classified
as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations
and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may result in
an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding
the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621 annually.
If the Company were a PFIC in any tax year
during which a U.S. Holder held Offered Shares, such holder generally would be subject to special rules with respect to “excess
distributions” made by the Company on the Offered Shares and with respect to gain from the disposition of Offered Shares.
An “excess distribution” generally is defined as the excess of distributions with respect to the Offered Shares received
by a U.S Holder in any tax year over 125% of the average annual distributions such U.S. Holder has received from the Company during
the shorter of the three preceding tax years, or such U.S. Holder's holding period for the Offered Shares. Generally, a U.S. Holder
would be required to allocate any excess distribution or gain from the disposition of the Offered Shares ratably over its holding
period for the Offered Shares. Such amounts allocated to the year of the disposition or excess distribution would be taxed as ordinary
income, and amounts allocated to prior tax years would be taxed as ordinary income at the highest tax rate in effect for each such
year and an interest charge at a rate applicable to underpayments of tax would apply.
While there are U.S. federal income tax
elections that sometimes can be made to mitigate these adverse tax consequences (including the “QEF Election” under
Section 1295 of the Code and the “Mark-to-Market Election” under Section 1296 of the Code), such elections are available
in limited circumstances and must be made in a timely manner.
U.S. Holders should be aware that, for
each tax year, if any, that the Company is a PFIC, the Company can provide no assurances that it will satisfy the record keeping
requirements or make available to U.S. Holders the information such U.S. Holders require to make a QEF Election with respect to
the Company or any subsidiary that also is classified as a PFIC.
Certain additional adverse rules may apply
with respect to ta U.S. Holder if the Company is a PFIC, regardless of whether the U.S. Holder makes a QEF election. These rules
include special rules that apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC.
Subject to these special rules, foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally
eligible for the foreign tax credit. U.S. Holders should consult their own tax advisors regarding the potential application of
the PFIC rules to the ownership and disposition of Offered Shares, and the availability of certain U.S. tax elections under the
PFIC rules.
Additional Considerations
Receipt of Foreign Currency
The amount of any distribution paid to
a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of Offered Shares, generally will be equal
to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether
such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency equal
to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after
the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally
will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method
of tax accounting. Each U.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences
of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above,
a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the Offered
Shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian
income tax. Generally, a credit will reduce a U.S. Holder's U.S. federal income tax liability on a dollar-for-dollar basis, whereas
a deduction will reduce a U.S. Holder's income that is subject to U.S. federal income tax. This election is made on a year-by-year
basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.
The foreign tax credit rules are complex
and involve the application of rules that depend on a U.S. Holder’s particular circumstances. Accordingly, each U.S. Holder
should consult its own U.S. tax advisor regarding the foreign tax credit rules.
Backup Withholding and Information
Reporting
Under U.S. federal income tax law and Treasury
Regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement
in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals
who are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition
of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also,
unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial
instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign
entity. U. S. Holders may be subject to these reporting requirements unless their Offered Shares are held in an account at certain
financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should
consult their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS
Form 8938.
Payments made within the U.S. or by a U.S.
payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, Offered Shares will
generally be subject to information reporting and backup withholding tax, at the rate of 24%, if a U.S. Holder (a) fails to furnish
such U.S. Holder's correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer
identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject
to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer
identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However,
certain exempt persons, such as corporations, generally are excluded from these information reporting and backup withholding rules.
Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules generally will
be allowed as a credit against a U.S. Holder's U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder
furnishes required information to the IRS in a timely manner.
THE ABOVE SUMMARY IS NOT INTENDED TO
CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP,
AND DISPOSITION OF OFFERED SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO
THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The Company's auditors are PricewaterhouseCoopers
LLP, Chartered Professional Accountants, of Suite 1400, 250 Howe Street, Vancouver, British Columbia, V6C 3S7. PricewaterhouseCoopers
LLP, Chartered Professional Accountants, as auditors of the Company, report that they are independent with respect to the Company
within the meaning of the Chartered Professional Accountants of British Columbia Code of Professional Conduct and within the meaning
of Public Company Accounting Oversight Board Rule 3520, Auditor Independence.
The registrar and transfer agent for the
Common Shares is Computershare Investor Services Inc. at its principal offices in Vancouver, British Columbia and Toronto, Ontario.
EXPERTS
The following are the named persons responsible
for the preparation of the PFS, and at the date of that report were “qualified persons”, and all were independent,
as then defined in NI 43-101:
Adrian Churcher, P.Eng. of Mining
Plus Canada Consulting Ltd.
Zach Allwright P.Eng. of Mining
Plus Canada Consulting Ltd.
Paul Hughes, Ph.D., P.Eng. of Mining
Plus Canada Consulting Ltd.
Gilles Arseneau, Ph.D., P.Geo.
of SRK Consulting (Canada) Inc.
Cliff Revering, PEng, CPAG, BE
of SRK Consulting (Canada) Inc.
Hassan Ghaffari, M.A. Sc., P.Eng.
of Tetra Tech Canada Inc.
Ting Lu, M. Sc., P.Eng. of Tetra
Tech Canada Inc.
David Farrow, Pr.Sci.Nat, P.Geo.
of Geostrat Consulting Inc.
Except where specifically indicated otherwise,
during its most recently completed financial year and through the date hereof, disclosures by the Company of scientific and technical
information regarding exploration projects on Alexco's mineral properties have been approved by Alan McOnie, FAusIMM, Vice President,
Exploration of Alexco, while those regarding mine development and operations have been approved by Neil Chambers, P. Eng., an employee
of Alexco.
Based on information provided by the other
experts named above, other than with respect to Alan McOnie and Neil Chambers as described below, none of the experts above, when
or after they prepared the statement, report or valuation, has received any registered or beneficial interests, direct or indirect,
in any securities or other property of the Company or of one of the Company's associates or affiliates (based on information provided
to the Company by the experts) or is or is expected to be elected, appointed or employed as a director, officer or employee of
the Company or of any associate or affiliate of the Company.
Both Alan McOnie and Neil Chambers have
been granted stock options of the Company through the course of their respective employments; however, the individual interests
held by each of them throughout their respective employment terms at all times represented less than one percent of the issued
and outstanding Common Shares.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The Company has filed with the SEC a registration
statement on Form F-10 relating to certain of its securities, including the Common Shares. This prospectus supplement and
the accompanying prospectus, which constitute a part of the registration statement, do not contain all of the information contained
in the registration statement, certain items of which are contained in the exhibits to the registration statement as permitted
by the rules and regulations of the SEC. Statements included or incorporated by reference in this prospectus supplement and the
accompanying prospectus about the contents of any contract, agreement or other documents referred to are not necessarily complete,
and in each instance you should refer to the exhibits for a more complete description of the matter involved. Each such statement
is qualified in its entirety by such reference.
The Company is subject to the information
requirements of the U.S. Exchange Act and applicable Canadian securities legislation and, in accordance therewith, files reports
and other information with the SEC and with the securities regulators in Canada. Under the MJDS adopted by the United States and
Canada, documents and other information that the Company files with the SEC may be prepared in accordance with the disclosure requirements
of Canada, which are different from those of the United States. As a foreign private issuer within the meaning of rules under the
U.S. Exchange Act, the Company is exempt from the rules under the U.S. Exchange Act prescribing the furnishing and content
of proxy statements, and the Company's officers, directors and principal shareholders are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of the U.S. Exchange Act. In addition, the Company is not required
to publish financial statements as promptly as United States companies.
You may read and download any document
that the Company has filed with the SEC on the SEC's EDGAR system at www.sec.gov. You may read and download any public document
that the Company has filed with the Canadian securities regulatory authorities under the Company's profile on the SEDAR website
at www.sedar.com.
Schedule
“A” - Summary from PFS
Mining Plus Canada Consulting Ltd. (Mining
Plus) was retained by Alexco Resource Corp. (“Alexco”) to prepare a Preliminary Feasibility Study (“PFS”
or the “Study”) and Independent Technical Report (the “Technical Report”) on the Keno Hill Silver Project
(the “Project”), located in the Yukon Territory, Canada. The purpose of this report is to disclose the results of the
PFS. This Technical Report conforms to National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”).
Alexco is a public company with its headquarters
in Vancouver, B.C. Alexco, through wholly owned subsidiaries, owns the mineral rights for the Keno Hill Silver District (“KHSD”
or the “District”) following its successful bid for the assets of United Keno Hill Mines Ltd in 2006. Alexco acquired
the properties with all pre-existing liabilities subject to indemnification from the Federal Government of Canada.
The Project contemplates the conventional
mining and milling of silver-lead-zinc ore from four deposits in the District. There is an existing mill which will process a high
grade silver-lead-zinc ore from four deposits across the District. Over the eight year mine life contemplated in this PFS, the
mines will produce 1.18 million (“M”) tonnes of ore at an average 805 grams per tonne (“g/t”) silver (“Ag”),
2.98% lead (“Pb”), 4.13% zinc (“Zn”) and 0.34 g/t gold (“Au”). Following commissioning, the
mill will produce two concentrates; a high grade lead-silver concentrate averaging 15,890 g/t Ag, 54% Pb, and 3.7 g/t Au, and a
zinc-silver concentrate averaging 649 g/t Ag and 53% Zn. The annualized silver product in concentrate is 4.0 M ounces (“oz”).
The KHSD is a historic mining district,
with the first production recorded in 1913. Since that time, an estimated 200 million ounces of silver has been produced from over
30 small mines across the district. Due to the high grade, steeply dipping veins which host the mineralization, the historic mines
were typically small underground operations “chasing the vein”, followed by open pit operations beginning in the 1970's
to recover the crown pillars.
In the late 1980's, the then-owner United
Keno Hill Mining Company (“UKHM”) declared bankruptcy and the site was eventually declared abandoned in 2001, reverting
to the Government of Canada. Alexco was the successful bidder in a commercial sale and purchase process and in 2006 became the
100% owner of the assets. Through this transaction, Alexco has the right to mine the deposits and the obligation to develop, permit
and implement a reclamation and closure plan for the legacy liabilities across the District. Alexco is fully indemnified for the
historic liabilities.
Alexco has been actively developing the
Keno Hill Silver District since 2006. Alexco built a new mill complex in 2010 which operated for three years, processing ore from
the Bellekeno Mine. Since suspending mining operations in 2013, Alexco has maintained the District on a care and maintenance status
and focused on additional exploration leading to increases in the estimated Mineral Resources for the Bermingham and Flame &
Moth deposits. In 2018, Alexco completed over 1,000 meters (“m”) of underground development work including an advanced
exploration decline at the Bermingham deposit and a new portal and ramp at the Flame & Moth deposit.
The estimated Mineral Resource includes
the Bellekeno, Lucky Queen, Flame & Moth, Onek, and Bermingham. The total estimated Mineral Resource inclusive of estimated
Mineral Reserve is shown in Table 1-1.
Table 1-1 Keno Hill Mineral Resources (SRK,
2019)(Effective Date March 28, 2019)
Category
|
|
Tonnes
|
|
|
Ag (g/t)
|
|
|
Au (g/t)
|
|
|
Pb (%)
|
|
|
Zn (%)
|
|
|
Contained Ag
(Oz)
|
|
Indicated
|
|
|
3,875,800
|
|
|
|
594
|
|
|
|
0.34
|
|
|
|
2.0
|
|
|
|
5.3
|
|
|
|
74,034,000
|
|
Inferred
|
|
|
1,660,600
|
|
|
|
455
|
|
|
|
0.20
|
|
|
|
1.6
|
|
|
|
3.7
|
|
|
|
24,271,000
|
|
Notes:
|
1.
|
All Mineral Resources are classified following the CIM Definition Standards for Mineral Resources and Mineral Reserves (May 2014) of NI 43-101.
|
|
|
|
|
2.
|
Indicated mineralization is inclusive of Mineral Reserves estimates.
|
|
|
|
|
3.
|
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.
|
|
|
|
|
4.
|
The mineral resource estimates comprising Bellekeno, Lucky Queen and Flame
& Moth, Onek and Bermingham are supported by disclosure in the news release dated March 28, 2019 entitled “Alexco Announces
Positive Pre-Feasibility Study for Expanded Silver Production at Keno Hill Silver District” and this Technical Report filed
on SEDAR dated May 8, 2019 with an effective date of March 28, 2019. The mineral resource estimate for Bermingham has been updated
by disclosure in note 7 below.
|
|
|
|
|
5.
|
The mineral resource estimate for the Bellekeno deposit is based on a geologic resource estimate having an effective date of September 30, 2012. The Bellekeno indicated Mineral Resources are as at September 30, 2013, and reflect the geologic resource less estimated subsequent depletion from mine production.
|
|
|
|
|
6.
|
The mineral resource estimate for the Lucky Queen, Flame & Moth and Onek
deposits have an effective date of January 3, 2017.
|
|
|
|
|
7.
|
The resource estimate for the Bermingham deposit has an effective date of
March 28, 2019 and is supported by disclosure in the news release entitled “Alexco Announces Positive Pre-Feasibility Study
for Expanded Silver Production at Keno Hill Silver District”.
|
The mine plan for this Project comprises mining from four deposits (also referred to as “mines”); Bermingham, Flame
& Moth, Bellekeno, and Lucky Queen. The majority of the ore will come from Bermingham and Flame & Moth (over 90%). Two
mines will be operating at any given time, with the exception of the initial three month ramp up period of ore from Bellekeno only.
The mine plan is based on conventional
mining methods. Based on the orientation, width of the veins, review of historic mining in the District, and geotechnical information,
a combination of mechanized overhand cut and fill, and longhole stoping with cemented rock fill have been selected as the appropriate
mining methods for all four deposits. The deposits require the use of mining methods that can adequately support the vein and that
are flexible and selective while minimizing the direct mining costs. The backfill is planned to be a mixture of waste rock fill
and tailings from the dry stack tailings facility (“DSTF”) with cement added as required.
The estimated Mineral Reserves calculated
by Mining Plus for this Project are 1.18 M tonnes grading 805 g/t Ag, 2.98% Pb, 4.13% Zn and 0.34 g/t gold for an overall silver
equivalent (“AgEq”) grade of 1,136 g/t AgEq as of March 28, 2019.
The District mill will be recommissioned
at the currently permitted average throughput of 400 tonnes per day (“tpd”) (157,000 tonne per year (“tpy”))
with a planned increase in throughput in Year 3, for an overall life-of-mine (“LOM”) average throughput of 430 tpd.
The mill is a conventional flotation mill producing two concentrates. Tailings are thickened, filtered, and placed in a conventional
DSTF, which will be progressively reclaimed.
The Bellekeno, Flame & Moth and Lucky
Queen mines have all permits and authorizations in place to commence full scale mine production. Although licences are also in
place for Onek, there are currently no plans for production from this deposit. The Bermingham deposit requires a final licence
amendment, expected in the third quarter of 2019, to commence ore production. The mill and tailings facilities are fully permitted.
The Project risks are substantially minimized
compared to a greenfields project by a combination of Alexco's previous operations at Keno Hill, the recently completed underground
development and drilling, the existing and well maintained infrastructure both onsite and offsite (including grid power) and the
safe jurisdiction of the Yukon.
The initial capital cost is $23.2 M. This
initial capital (pre-production prior to achieving positive cash flow) comprises $17.9 M of mine development and PP&E and $5.3
M of net working capital for the initial construction and ramp up period of five months. The LOM sustaining capital is estimated
at $76.5 M, primarily for ongoing mine development.
The direct operating costs for the Project
are estimated at a total of $362 M or $312 per tonne of ore. These comprise $226 M direct mine costs, $70 M of direct mill costs,
and $67 M for site general and administrative (“G&A”) costs (excluding corporate). However corporate costs are
included in calculation of all-in sustaining costs (“AISC”).
Revenue derives from selling four metals
(silver as main product and lead, zinc and gold as by-products), reporting to two concentrates; a lead-silver concentrate and a
zinc-silver concentrate. The Project will produce a total of 58,200 tonnes of lead-silver concentrate and 67,800 tonnes of zinc-silver
concentrate over the eight year mine life. Over the LOM, the payable metals produced in these concentrates total 27.2 M oz Ag,
65.4 M pounds (“lbs”) Pb, 67.2 M lbs Zn and 4,707 oz Au.
Metal pricing was based on information
from external sources. The LOM net revenue (“Net Smelter Return”) is $652 M and the total cash flow is at $174 M. These
are based on metal pricing assumptions as follows:
|
·
|
Silver ranging from US$15.75/oz in 2019
to the long-term price of US$18.25/oz;
|
|
·
|
Zinc: US$1.25/lb in 2019 and 2020, and
US$1.22/lb thereafter;
|
|
·
|
Lead: US$0.96/lb in 2019, and US$1.00/lb
thereafter; and
|
|
·
|
Gold: US$1,275/oz in 2019, US$1,315/oz
in 2020 and US$1,325/oz thereafter.
|
The project economics show this to be a
robust project with low capital and high returns with a pre-tax net present value at a 5% discount rate (“NPV
5
”)
of $136.2 M and after-tax NPV
5
of $101.2 M. The pre-tax internal rate of return (“IRR”) is 84% and after-tax
IRR is 74%. Considering the Project on a stand-alone basis, the undiscounted after-tax cash flow totals $129.3 million over the
mine life. Simple payback occurs approximately two years from start of production, approximately 26 months after the end of the
initial capital period).
The brownfields nature of the Project means
a relatively rapid timeline to full production of six months total. The pre-production period is expected to require up to three
months, during which the mill modifications and construction of the additional surface infrastructure (expansion of camp, offices)
will be completed. Once the permitting process is completed, underground development will continue and the mill will be re-commissioned.
The ramp up to full production in the mill is expected to take three months.
Exploration will continue at Keno Hill,
to expand the current resources and in the short term is particularly focused on the Bermingham deposit. Alexco plans approximately
7,500 m of surface diamond drilling at Bermingham and other areas in Galena Hill in 2019; this is not included in the Project costs
summarized in this Technical Report. It is recognized that there remains considerable estimated Mineral Resources in the indicated
category after extraction of the Mineral Reserves considered herein.
|
1.2.1
|
Property Description and Ownership
|
The Keno Hill Silver Project is located
on Alexco's Keno Hill Silver District (KHSD) in the central Yukon. The site is located approximately 350 km north of Whitehorse,
Yukon, Canada in central Yukon and is in the traditional territory of First Nation of Na-Cho Nyäk Dun (FNNND). Access to the
property is via the Alaska, Klondike and Silver Trail highways from Whitehorse to Mayo (407 km) and an all-weather gravel road
northeast from Mayo to Elsa (45 km); a total distance of 452 km.
Alexco Keno Hill Mining Corp. (AKHM) is
a wholly-owned subsidiary of Alexco and has been incorporated for operation of mineral extraction and development in the KHSD.
Elsa Reclamation and Development Company Ltd. (ERDC), a wholly owned subsidiary of Alexco, continues to advance the development
and eventual implementation of the District Wide Closure Plan (ESM Reclamation Plan) which addresses the historic environmental
liabilities of the district from past mining activities. The potential liabilities associated with the historic operations in the
KHSD are indemnified by the Government of Canada under the terms and conditions of the commercial agreement subject to the requirement
for ERDC to develop, permit and implement the site Reclamation Plan. The Reclamation Plan for the historic liabilities is currently
being reviewed by the Yukon Environmental and Socio-economic Assessment Board (YESAB).
Alexco has been actively developing the
KHSD since 2006 under this unique contractual arrangement with the Government of Canada whereby it can enter into production at
historic and newly discovered deposits within the district while it undertakes reclamation activities to remediate historic environmental
impacts.
The KHSD quartz mining claims and quartz
mining leases are held by one of two wholly-owned subsidiaries of Alexco: ERDC or AKHM. The current property ownership, access
and licences cover the areas included in the geological model, Mineral Resources and Mineral Reserves in this study.
Alexco has exploration, maintenance, and
camp facilities near the location of the historic mining town of Elsa, which is located just off the Silver Trail Highway, and
administration, mill and mine facilities at the mill complex located near Keno City, as shown in Figure 1-1. The KHSD is well connected
by a network of public and private gravel roads. A large number of roads constructed for past mining operations are still serviceable.
The KHSD is supplied with electrical power by Yukon Energy Corporation from two hydroelectric plants near Mayo. The area is covered
by NTS map sheets 105M/13 and 105M/14.
The central Yukon is characterized by a
subarctic continental climate with cold winters and warm summers. Exploration and mining work can be carried out year-round. Annual
precipitation averages 28 cm. Half of this amount falls as snow, which starts to accumulate in October and remains into May or
June. The landscape surrounding the KHSD is characterized by rolling hills and mountains with a relief of up to 1,600 m. The highest
elevation is Keno Hill at 1,975 m. Slopes are gentle except the north slopes of Keno Hill and Sourdough Hill.
Source: 2018 photo from Alexco files
Figure 1-1 View of the Existing District
Mill Showing the Dry Stack Tailings Facility and Christal Lake
The Keno Hill mining camp area has a rich
history of exploration and mining dating back to the beginning of the 1900s. Notable periods of interest in the historic evolution
of the Keno Hill mining camp included: :
|
·
|
Early gold prospecting near Mayo, particularly
after the Klondike gold rush of 1898;
|
|
·
|
The first silver was found in 1903 and
small-scale mining commenced in 1913 at the Silver King mine;
|
|
·
|
The end of the First World War and high
silver prices led to renewed exploration and production activity by the Yukon Gold Company and later Keno Hill Limited;
|
|
·
|
In the early 1920s, the Treadwell Yukon
Company Limited (TYC) started mining.
|
|
·
|
The 1950s proved to be the most successful
period, starting in the early 1960s, new discoveries, and additions to mineral inventory were less than production.
|
|
·
|
After the Second World War there was a
sharp decline in activity in the Keno Hill camp until a new company, Keno Hill Mining Company Ltd., later United Keno Hill Mines
Ltd. (UKHM), purchased all TYC properties, started production and sparked increased exploration activity. Production was primarily
from underground mining, following the silver veins;
|
|
·
|
The peak activity occurred in the 1950s
and early 1960s, with new discoveries across the district adding to mineral inventory and production from the larger underground
complexes such as the Hector Calumet camp;
|
|
·
|
Open pit mining began in the late 1970's,
mainly to recover crown pillars; from 1982 to 1985 Sadie-Ladue and Shamrock were mined on a small scale basis, and from 1989 to
1990 Shamrock, Silver King, Hector-Calumet, Lucky Queen, and Keno were mined;
|
|
·
|
UKHM stopped production from the Keno
Hill District permanently in early 1989; and
|
|
·
|
The mine was declared abandoned in 2001
by the Government of Canada and the assets reverted to the Crown.
|
Alexco acquired the KHSD in 2006 and produced
from Bellekeno mine from 2011 to 2013. Exploration has resulted in development and identification of the Lucky Queen, Flame &
Moth, Onek, and Bermingham deposits.
The Keno Hill mining camp is located in
the northwestern part of the Selwyn Basin in an area characterized by the Robert Service and Tombstone Thrust Sheets that are overlapping
and trend northwest. The area is underlain by Upper Proterozoic to Mississippian rocks that were deposited in a shelf environment
during the formation of the northern Cordilleran continental margin. The KHSD geology is dominated by the Mississippian Keno Hill
Quartzite comprising the Basal Quartzite Member and conformably overlying Sourdough Hill Member. The unit is overthrust in the
south by the Upper Proterozoic Hyland Group Yusezyu Formation and is conformably underlain in the north by the Devonian Earn Group
(McOnie and Read, 2009).
Mineralization is of the polymetallic silver-lead-zinc
vein type that typically exhibits a succession of hydrothermally precipitated minerals from the vein wall towards the vein centre.
However, in the KHSD, multiple pulses of hydrothermal fluids or fluid boiling, probably related to repeated reactivation and breccia
formation along the host fault structures, have formed a series of vein stages with differing mineral assemblages and textures.
Supergene alteration may have further changed the nature of the mineralogy in the veins. Much of the supergene zone may have been
removed due to glacial erosion.
In general, common gangue minerals include
(manganiferous) siderite and, to a lesser extent, quartz and calcite. Silver predominantly occurs in argentiferous galena and argentiferous
tetrahedrite (freibergite). In some assemblages, silver is also found as native silver, in polybasite, stephanite, and pyrargyrite.
Lead occurs in galena and zinc in sphalerite, which at the KHSD can be either an iron-rich or iron-poor variety. Other sulphides
include pyrite, pyrrhotite, arsenopyrite, and chalcopyrite.
The Keno Hill mining camp has long been
recognized as a polymetallic silver-lead-zinc vein district with characteristics possibly similar to other well-known mining districts
in the world. Examples of this type of mineralization include the Kokanee Range (Slocan), British Columbia; Coeur d'Alene, Idaho;
Freiberg and the Harz Mountains, Germany; and Príbram, Czech Republic.
In the KHSD, the largest accumulation of
minerals of economic interest occur in areas of increased hydrothermal fluid flow in structurally prepared competent rocks such
as the Basal Quartzite Member and Triassic Greenstone. Incompetent rocks like phyllites tend to produce fewer and smaller (if any)
open spaces, limiting fluid flow and resulting mineral precipitation.
|
1.2.4
|
Exploration and Drilling
|
The exploration conducted by Alexco since
2005 is the first comprehensive exploration effort in the KHSD since 1997. The work has included a program of geologic data compilation,
aerial geophysical surveying, and surface core drilling. Alexco converted the historic maps and documents from nearly 70 years
of mining in the district to digital form. The digital data has been used to construct district scale maps and three-dimensional
(3D) mine models.
Since acquiring the Keno Hill property,
Alexco has completed a total of 737 surface diamond drill holes for a total of 189,529 m. In addition, a total of 431 underground
holes for 29,673 m has also been completed, mainly at Bellekeno, but also includes 24 holes for 4,213 m HQ drilled in 2018 from
the Bermingham exploration decline.
Exploration drilling by Alexco has primarily
been conducted to test targets immediately adjacent to historic resource areas and, to a lesser extent, to evaluate targets based
on interpretation of exploration data. The objective has been to locate structurally controlled vein mineralization.
Standard logging and sampling conventions
are used to capture information from the drill core. Since 2010 all core logging data has been directly digitally entered to the
geology database with data including comments captured in separate tables including lithology, structure, mineralization type,
intensity of oxidation, phases and abundance of veining, alteration, stratigraphy, and geotechnical.
|
1.2.5
|
Mineral Resource Estimate
|
Definitions for resource categories used
in this report are consistent with the CIM definitions incorporated by reference into NI 43-101. The resource evaluations reported
herein are a reasonable representation of the global polymetallic Mineral Resources in the Bellekeno, Lucky Queen, Flame &
Moth, Onek, and Bermingham deposits given the current level of sampling.
The Mineral Resources have been estimated
in conformity with the generally accepted CIM
Estimation of Mineral Resources and Mineral Reserves Best Practices Guidelines
(CIM, 2003) and are reported in accordance with NI 43-101. Mineral resources are not Mineral Reserves and have not demonstrated
economic viability. There is no certainty that all or any part of the mineral resource will be converted into mineral reserve.
In the opinion of SRK Consulting (Canada)
Inc. (SRK), the resource evaluations reported herein are a reasonable representation of the global polymetallic Mineral Resources
in the Bellekeno, Lucky Queen, Flame & Moth, Onek, and Bermingham deposits given the current level of sampling. The databases
used to update the Bellekeno mine and Flame & Moth mineral resource estimates were audited by the Qualified Persons (QPs).
The QPs are of the opinion that the current drilling information is sufficiently reliable to interpret with confidence the boundaries
for the polymetallic mineralization and that the assay data are sufficiently reliable to support mineral resource estimation.
Mintec's MineSight software was used to
construct the geological solids for all five deposits. The Lucky Queen and Onek, geological models and database were imported into
GEMS format Access databases for geostatistical analysis, block model construction, metal grades estimates, and the tabulation
of the Mineral Resources. Maptek's Vulcan software was used for geostatistical analysis and block model estimation for the Bermingham
mineral resource estimate. Isatis was used for geostatistical analysis and variography, block model construction, estimating metal
grades, and mineral resource tabulation for Bellekeno. The Lucky Queen, Flame & Moth, and Onek block models were estimated
using GEMS.
Methodology for the five deposits employed
the following procedures:
|
·
|
Database compilation and verification;
|
|
·
|
Construction of wireframe models for the
boundaries of the polymetallic mineralization;
|
|
·
|
Definition of resource domains;
|
|
·
|
Estimation of bulk density;
|
|
·
|
Data conditioning (compositing and capping)
for geostatistical analysis and variography;
|
|
·
|
Block modelling and grade interpolation;
|
|
·
|
Resource classification and validation;
|
|
·
|
Assessment of “reasonable prospects
for economic extraction” and selection of appropriate cutoff grades; and
|
|
·
|
Preparation of the Mineral Resource Statement.
|
A summary of the mineral resource estimate
for the Project is shown in Table 1-2.
Table 1-2 Summary of Mineral Resource Estimates
as at March 28, 2019
Category
1,2,3
|
|
Deposit
|
|
Tonnes
|
|
|
Ag
(g/t)
|
|
|
Au
(g/t)
|
|
|
Pb
(%)
|
|
|
Zn
(%)
|
|
|
Contained
Ag (oz)
|
|
Indicated
|
|
Bellekeno
2,4&5
|
|
|
262,000
|
|
|
|
585
|
|
|
|
n/a
|
|
|
|
3.5
|
%
|
|
|
5.3
|
%
|
|
|
4,928,000
|
|
|
|
Lucky Queen
2,4&6
|
|
|
132,300
|
|
|
|
1,167
|
|
|
|
0.2
|
|
|
|
2.4
|
%
|
|
|
1.6
|
%
|
|
|
4,964,000
|
|
|
|
Flame & Moth
2,4&6
|
|
|
1,679,000
|
|
|
|
498
|
|
|
|
0.4
|
|
|
|
1.9
|
%
|
|
|
5.3
|
%
|
|
|
26,883,000
|
|
|
|
Onek
4&6
|
|
|
700,200
|
|
|
|
191
|
|
|
|
0.6
|
|
|
|
1.2
|
%
|
|
|
11.9
|
%
|
|
|
4,300,000
|
|
|
|
Bermingham
2,4&7
|
|
|
1,102,300
|
|
|
|
930
|
|
|
|
0.1
|
|
|
|
2.4
|
%
|
|
|
1.7
|
%
|
|
|
32,959,000
|
|
Total Indicated
|
|
|
|
|
3,875,800
|
|
|
|
594
|
|
|
|
0.34
|
|
|
|
2.0
|
%
|
|
|
5.3
|
%
|
|
|
74,034,000
|
|
Inferred
|
|
Bellekeno
4&5
|
|
|
243,000
|
|
|
|
428
|
|
|
|
n/a
|
|
|
|
4.1
|
%
|
|
|
5.1
|
%
|
|
|
3,344,000
|
|
|
|
Lucky Queen
4&6
|
|
|
257,900
|
|
|
|
473
|
|
|
|
0.1
|
|
|
|
1.0
|
%
|
|
|
0.8
|
%
|
|
|
3,922,000
|
|
|
|
Flame & Moth
4&6
|
|
|
365,200
|
|
|
|
356
|
|
|
|
0.3
|
|
|
|
0.5
|
%
|
|
|
4.3
|
%
|
|
|
4,180,000
|
|
|
|
Onek
4&6
|
|
|
285,100
|
|
|
|
118
|
|
|
|
0.4
|
|
|
|
1.2
|
%
|
|
|
8.3
|
%
|
|
|
1,082,000
|
|
|
|
Bermingham
4&7
|
|
|
509,400
|
|
|
|
717
|
|
|
|
0.2
|
|
|
|
1.7
|
%
|
|
|
1.5
|
%
|
|
|
11,743,000
|
|
Total Inferred
|
|
|
|
|
1,660,600
|
|
|
|
455
|
|
|
|
0.2
|
|
|
|
1.6
|
%
|
|
|
3.7
|
%
|
|
|
24,271,000
|
|
Notes:
|
1.
|
All mineral resources are classified following the CIM Definition Standards for Mineral Resources
and Mineral Reserves (May 2014) of NI 43-101.
|
|
2.
|
Indicated mineralization is inclusive of mineral reserves estimates.
|
|
3.
|
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.
|
|
4.
|
The mineral resource estimates comprising Bellekeno, Lucky Queen and Flame & Moth, Onek and
Bermingham are supported by disclosure in the news release dated March 29, 2017 entitled “Alexco and Silver Wheaton Amend
Silver Purchase Agreement and Alexco Announces Positive Preliminary Economic Assessment for Expanded Silver Production at Keno
Hill” and the technical report filed on SEDAR dated March 29, 2017 with an effective date of January 3, 2017. The mineral
resource estimate for Bermingham has been updated by disclosure in note 7 below.
|
|
5.
|
The mineral resource estimate for the Bellekeno deposit is based on a geologic resource estimate
having an effective date of September 30, 2012. The Bellekeno indicated mineral resources are as at September 30, 2013 and reflect
the geologic resource less estimated subsequent depletion from mine production.
|
|
6.
|
The mineral resource estimate for the Lucky Queen, Flame & Moth and Onek deposits have an effective
date of January 3, 2017.
|
|
7.
|
The resource estimate for the Bermingham deposit has an effective date of March 28, 2019 and is
supported by disclosure in the news release entitled “Alexco Announces Positive Prefeasibility Study for Expanded Silver
Production at Keno Hill Silver District”.
|
|
1.2.6
|
Mineral Reserve Estimate
|
The Mineable Shape Optimizer (MSO) tool
was used to create mineable shapes using the NSR values coded into the block models. The results generated from the MSO process
were used as guidance to generate detailed development layouts and crosscut designs. The economic viability of all stope blocks
and levels were tested to ensure that all ore is economically viable.
The Mineral Reserves (Table 1-3) reflect
the total Mineral Reserves for the Keno Hill Silver District. External dilution and mineable recovery has been applied to the Mineral
Reserves. Please note that rounding of tonnes, average grades, and contained metal may result in apparent discrepancies with totals
rounded.
Table 1-3 Mineral Reserves, Alexco Resource
Corp. – Keno Hill Silver District Project
Deposit
3
|
|
Category
|
|
Tonnes
|
|
|
Ag (g/t)
|
|
|
Pb
(%)
|
|
|
Zn
(%)
|
|
|
Au
(g/t)
|
|
|
Contained
Metal
(000 oz
Ag)
|
|
|
Contained
Metal
(000 oz
Au)
|
|
|
Contained
Metal
(M Ibs
Pb)
|
|
|
Contained
Metal
(M Ibs
Zn)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bellekeno
|
|
Proven
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probable
|
|
|
40,109
|
|
|
|
843.1
|
|
|
|
11.79
|
|
|
|
6.31
|
|
|
|
-
|
|
|
|
1,087
|
|
|
|
-
|
|
|
|
10
|
|
|
|
6
|
|
Lucky Queen
|
|
Proven
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Probable
|
|
|
70,717
|
|
|
|
1,244.39
|
|
|
|
2.63
|
|
|
|
1.38
|
|
|
|
0.12
|
|
|
|
2,829
|
|
|
|
-
|
|
|
|
4
|
|
|
|
2
|
|
Flame and Moth
|
|
Proven
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Probable
|
|
|
704,211
|
|
|
|
671.95
|
|
|
|
2.71
|
|
|
|
5.73
|
|
|
|
0.49
|
|
|
|
15,214
|
|
|
|
11
|
|
|
|
42
|
|
|
|
89
|
|
Bermingham
|
|
Proven
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Probable
|
|
|
362,343
|
|
|
|
972.02
|
|
|
|
2.59
|
|
|
|
1.32
|
|
|
|
0.13
|
|
|
|
11,324
|
|
|
|
2
|
|
|
|
21
|
|
|
|
11
|
|
Total
|
|
Proven
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Probable
|
|
|
1,177,380
|
|
|
|
804.51
|
|
|
|
2.98
|
|
|
|
4.13
|
|
|
|
0.34
|
|
|
|
30,454
|
|
|
|
13
|
|
|
|
77
|
|
|
|
107
|
|
Notes:
|
1.
|
Mineral reserves are reported herein based on an NSR cutoff value using estimated metallurgical recoveries,
assumed metal prices and smelter terms, which include payable factors, treatment charges, penalties, and refining charges
|
|
2.
|
Tonnage and grade measurements are in metric units. Contained gold and silver ounces are reported
as troy ounces
|
|
3.
|
The Bellekeno, Lucky Queen, Flame & Moth and Bermingham deposits are incorporated into the current
mine plan supported by disclosure in the news release dated March 28, 2019 entitled “Alexco Announces Positive Pre-Feasibility
Study for Expanded Silver Production at Keno Hill Silver District”.
|
|
4.
|
Rounding as required by reporting guidelines may result in apparent summation differences between
tonnes, grade and contained metal content.
|
The Mineral Reserves identified comply
with CIM definitions and standards for a NI 43-101 technical report. Detailed information on mining, processing and other relevant
factors are contained in the following sections and combined demonstrate that the KHSD Project is an economically viable project.
The
project contains four separate deposits: Bellekeno, Bermingham, Flame & Moth, and Lucky Queen. All are characterized by high-grades
and narrow vein widths. A photo of the existing Bellekeno portal is shown in Figure 1-2, and similarly of the current Bermingham
portal in Figure 1-3.
Source: 2018 photo from Alexco files
Figure
1-2 View of the Current Bellekeno Portal
Source: 2-18 photo from Alexco files
Figure 1-3 View of the Current Bermingham
Portal
The KHSD is historically known for locally
challenging ground conditions encountered that limit the applicable mining methods to fully supported methods with limited spans,
such as cut and fill or very small scale longhole. For most of its historic mining life, the most successful method was square
set stoping with timber.
Historical mining methods used in the KHSD
have included cut and fill, small scale longhole stoping, shrinkage stoping, and square set stoping. The veins typically have dips
around 70 to 80 degrees but vary between deposits from approximately 50 degrees at Lucky Queen to 80 degrees at Flame & Moth.
Numerous geotechnical studies have been
carried out on the KHSD most recently by Jacobs Engineering (Jacobs, 2019). Geotechnical data for this study was only available
for the Flame & Moth and Bermingham deposits which comprise approximately 90% of the PFS mill feed. Operational experience
gained during previous production mining at the Lucky Queen and Bellekeno deposits has been used to guide (but not directly influence)
the development of geotechnical mine design parameters for the PFS. At a feasibility level the geotechnical conditions of the Lucky
Queen and Bellekeno would need to be verified.
To understand the ground conditions at
the KHSD Project, geotechnical domains were created for the BM and FM deposits. Preliminary geotechnical parameters were assessed
using major lithology types as identified by Alexco geology personnel. The geotechnical domains are outlined below on which ground
support designs have been based:
|
·
|
Domain 1: Quartzite (waste development);
|
|
·
|
Domain 2 Schist (waste development);
|
|
·
|
Domain 3: Faults (waste and production
development); and
|
|
·
|
Domain 4: Mineralization (production development).
|
Based on the estimated rock mass classification
Q values, ground support classes were developed for standard lateral development and production drifts for the Flame & Moth
and Bermingham deposits. Mining of the Lucky Queen and Bellekeno deposits will exploit existing underground development. For this
study, previously used ground support standards or the standards outlined for the Flame & Moth and Bermingham deposits (whichever
provides greater capacity) will be used in the limited additional development that is planned. The ground support uses conventional
technology; a combination of shotcrete, rock bolts and mesh.
In general, the infrastructure and development
excavations are open for the long-term, and support has been designed accordingly. The infrastructure has been designed to avoid
areas with potential poor ground conditions; in some situations, this is unavoidable, and support will be increased to provide
long term stability.
The mine design strategy for the Project
was to design as many areas as practical using small scale longhole mining methods while planning mechanized overhand cut and fill
for areas where ground conditions were poor, or where the combination of vein dip and true width was not compatible with longhole
stoping methods. A 3D design of the development and stope shapes was completed for all four deposits using Deswik Software.
Based on the orientation, width of the
veins, review of historic mining in the district, and geotechnical information, a combination of mechanized overhand cut and fill,
and longhole stoping with cemented rock fill has been selected as the appropriate mining methods for all four deposits. The deposits
require the use of mining methods that can adequately support the vein and that are flexible and selective while minimizing the
direct mining costs. The backfill is planned to be a mixture of waste rock fill and tailings from the DSTF with cement added as
required.
For the majority of the mine life two deposits
will be providing mill feed at all times. The only exceptions are early in the mine life when only the Bellekeno mine will be producing
ore and late in the mine life. There will be a 10-month development period at Flame & Moth and Bermingham with steady state
production being reached in Year 2 of the 8-year mine life. Steady state production over the 8-year mine life will average about
160,000 tonnes per annum.
Revenue comes from selling four metals
(silver as main product and lead, zinc and gold as by-products), reporting to two concentrates; a lead-silver concentrate and a
zinc-silver concentrate. Stope shapes and mining areas were created and manually validated based upon an NSR value per tonne cutoff
of $339. This NSR cutoff value was calculated by using the initial operating cost estimate. Mining recovery was applied at 95%
for Bellekeno, Flame & Moth, Bermingham and Lucky Queen which is in line with Alexco's historic operational experience. All
stope shapes and mining areas were reviewed to remove any unprofitable areas.
To maximize project value a higher cutoff
value was selected on a mine-by-mine basis. This accelerates payback and eliminates the scheduling of marginal or near marginal
tonnes. Based on the directive of Alexco management to target minimum 650 g/t Ag average LOM head grade for each deposit. The cut
off values selected to meet this mandate are in Table 1-4 below.
Table 1-4 Mine Design Criteria –
Cutoff Values
Mine
|
|
Cutoff Value ($/t)
|
|
Bellekeno
|
|
|
420
|
|
Lucky Queen
|
|
|
460
|
|
Bermingham
|
|
|
350
|
|
Flame & Moth
|
|
|
350
|
|
Stope dilution is calculated in the block
model for each block, based on the specific block width, and is also reported to give an average dilution for the entire stope.
To factor in unplanned dilution outside the stopes shapes boundaries, a dilution skin of 0.5 m was applied to both the hanging
wall (HW) and footwall (FW) during the stope optimizer process. This dilution was considered when evaluating whether or not shapes
are economic to ensure only diluted economic stope shapes are included in the mine plan.
Internal dilution (Planned Dilution) is
primarily a function of the width of the orebody and minimum mining width. Minimum mining width for cut and fill method in both
Bermingham and Flame & Moth deposits is 3.5 m wide and for the Lucky Queen deposit is 2.5 m wide which is determined from the
size of the equipment selected and consistent with the geotechnical design parameters. For longhole stoping, the minimum mining
width is planned at 1.8m. Dilution for the four deposits is; Flame & Moth 15%, Bermingham 37%, Lucky Queen 39%, and Bellekeno
21%.
The underground mine design for all four
deposits results in reserves of 1,177,380 tonnes (diluted) with an average grade of 805 g/t Ag, 2.98% Pb, and 4.13% Zn. The overall
NSR value for the reserve is $554/tonne.
A monthly production schedule was generated
using excel for each task associated with mine development and production. This schedule was created using Deswik Scheduling software
and targeted approximately 16,000 tonnes ore/month coming from two deposits at any given time. The total annual mill feed and waste
production from the four mines are summarized in Table 1-5 below.
Table 1-5 Mine Production Summary
|
|
TOTAL
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
ORE
TONNES
|
|
|
1,177,380
|
|
|
|
58,384
|
|
|
|
136,174
|
|
|
|
163,200
|
|
|
|
199,800
|
|
|
|
198,800
|
|
|
|
142,324
|
|
|
|
164,655
|
|
|
|
105,468
|
|
|
|
8,575
|
|
WASTE
TONNES
|
|
|
755,123
|
|
|
|
102,696
|
|
|
|
235,874
|
|
|
|
147,658
|
|
|
|
122,717
|
|
|
|
45,717
|
|
|
|
51,897
|
|
|
|
28,920
|
|
|
|
19,644
|
|
|
|
-
|
|
TOTAL
TONNES
|
|
|
1,932,502
|
|
|
|
161,080
|
|
|
|
372,048
|
|
|
|
310,858
|
|
|
|
322,517
|
|
|
|
244,516
|
|
|
|
194,222
|
|
|
|
193,575
|
|
|
|
125,111
|
|
|
|
8,575
|
|
Calculated
Average Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ag(g/t)
|
|
|
805
|
|
|
|
881
|
|
|
|
875
|
|
|
|
903
|
|
|
|
784
|
|
|
|
796
|
|
|
|
775
|
|
|
|
822
|
|
|
|
595
|
|
|
|
672
|
|
Au(g/t)
|
|
|
0.34
|
|
|
|
0.1
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
0.5
|
|
|
|
0.9
|
|
Pb(%)
|
|
|
2.98
|
%
|
|
|
9.1
|
%
|
|
|
2.5
|
%
|
|
|
3.3
|
%
|
|
|
2.9
|
%
|
|
|
2.6
|
%
|
|
|
3.3
|
%
|
|
|
2.0
|
%
|
|
|
2.0
|
%
|
|
|
2.2
|
%
|
Zn(%)
|
|
|
4.13
|
%
|
|
|
5.5
|
%
|
|
|
3.7
|
%
|
|
|
3.3
|
%
|
|
|
4.3
|
%
|
|
|
3.6
|
%
|
|
|
4.3
|
%
|
|
|
3.4
|
%
|
|
|
6.6
|
%
|
|
|
8.7
|
%
|
Calculated
Contained Metal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ag(Oz)
|
|
|
30,453,593
|
|
|
|
1,653,067
|
|
|
|
3,832,080
|
|
|
|
4,740,188
|
|
|
|
5,034,181
|
|
|
|
5,088,284
|
|
|
|
3,548,358
|
|
|
|
4,353,560
|
|
|
|
2,018,645
|
|
|
|
185,230
|
|
Au(Oz)
|
|
|
12,992
|
|
|
|
119
|
|
|
|
1,191
|
|
|
|
1,572
|
|
|
|
1,844
|
|
|
|
1,862
|
|
|
|
2,029
|
|
|
|
2,380
|
|
|
|
1,752
|
|
|
|
243
|
|
Pb(lbs)
|
|
|
77,289,572
|
|
|
|
11,712,803
|
|
|
|
7,367,704
|
|
|
|
11,981,444
|
|
|
|
12,644,948
|
|
|
|
11,156,854
|
|
|
|
10,219,624
|
|
|
|
7,128,997
|
|
|
|
4,656,048
|
|
|
|
421,150
|
|
Zn(lbs)
|
|
|
107,195,512
|
|
|
|
7,119,086
|
|
|
|
11,101,079
|
|
|
|
11,734,556
|
|
|
|
19,030,982
|
|
|
|
15,630,812
|
|
|
|
13,436,290
|
|
|
|
12,247,614
|
|
|
|
15,258,571
|
|
|
|
1,636,522
|
|
Key equipment requirements during the pre-production
and production period will include jumbos, load-haul-dumps (LHDs), haulage trucks, bolters, shotcrete sprayers and a longhole drill.
Raise development will be carried out using alimaks. Alexco currently owns much of the mining equipment required; the additional
major equipment required is assumed to be leased for the Project.
Manpower will consist of technical staff,
mining crews, mechanics, electricians and other support staff. Manpower reaches 222 personnel at full production with up to 122
personnel on site at any given time.
The ventilation system for each deposit
is designed to meet Yukon regulations. Permanent fans will be located on surface at the raise collars. All intake air entering
the mine workings will be heated above freezing point during the winter months.
|
1.2.8
|
Metallurgical Testing and Mineral Processing
|
Metallurgical testwork has been conducted
independently on each of the four deposits included in the production plan independently. Testwork performed from 1996 through
2009 was the basis for the design and construction of the mill facility in 2010. The Bellekeno mine and mill complex achieved commercial
production in January 2011, processing an average of 253 tpd in 2012. Since 2011, samples from Lucky Queen, Flame & Moth, and
Bermingham deposits were tested to assess flotation performance.
The KHSD Property (the Property) is of
a polymetallic silver-lead-zinc vein type mineralization. According to this PFS production plan, additional deposits of Flame &
Moth, Bermingham, and Lucky Queen, as well as the remnant Bellekeno deposit will feed the mill complex at 400 tpd for the first
two years before reaching the peak capacity 550 tpd at year three. Bellekeno mineralization at the Property was processed in the
Keno Hill District Mill at 250 tpd from 2011 and 2013. The existing Keno Hill District Mill will be upgraded to allow processing
of material from additional deposits at the increased feed capacity.
Based on metallurgical testwork described
in Section 13.0 and previous operation experience, a conventional sequential flotation process with regrinding stages on both lead
and zinc rougher concentrates has been selected for this Project to produce silver-lead concentrate and zinc concentrate. The target
primary grind size P80 was designed to be 100 to 120 µm to recover liberated lead and zinc minerals in rougher flotation
circuits. A regrind mill in each of the lead and zinc cleaner flotation circuits will be included for further liberation and upgrading.
Based on the mill capacity/modification
reviews, modifications to the existing Keno Hill District Mill will be required in three areas including grinding circuit, flotation
circuit, and tailings dewatering circuit and have been included in this PFS. Specifically, one additional grinding ball mill, two
regrinding ball mills, and one larger plate frame filter for tailings dewatering will be installed. To reach the higher rate 550
tpd, campaigns will be run to identify additional modifications in the initial operation. An allowance of $1 million has been included
in this Project for this purpose.
Ore will be crushed and then processed
in a conventional flotation mill producing two concentrates. Concentrates will be thickened, filtered, and trucked off site for
sale. Tailings will be also thickened, filtered, and stored in a dry stack tailing facility adjacent to the mill. Process water
will be stored in the mill pond adjacent to the mill complex and recycled to the plant for varied applications. A simplified process
flowsheet is included in Section 17.0 (Figure 17-1). The primary makeup water source is from the Flame & Moth underground mine
which will be treated within the already constructed water treatment plant.
The expected metallurgical recoveries are
shown in Table 1-6 for the life of mine (including ramp up and commissioning) and for the period after the ramp up and commissioning
in Year 1. The total concentrate production over the life of mine is shown in Table 1-7. Also shown in this table, for comparison,
is the concentrate production starting after the ramp up and commissioning period through to the end of the mine life.
While the overall recoveries are similar
for both time periods, the concentrate characteristics differ. This is due to the different head grades and metallurgical performance
of the Bellekeno ore which is used for the start up and commissioning.
Table 1-6 Expected Metallurgical Performance
1
– Recovery to Concentrates
|
|
Average LOM
|
|
|
Average LOM Following
Commissioning
2
|
|
% into Pb-Ag Concentrate
|
|
|
|
|
|
|
|
|
Ag
|
|
|
90.9
|
|
|
|
90.9
|
|
Pb
|
|
|
88.6
|
|
|
|
88.3
|
|
Au
|
|
|
49.0
|
|
|
|
49.0
|
|
% into Zn Concentrate
|
|
|
|
|
|
|
|
|
Ag
|
|
|
4.6
|
|
|
|
4.7
|
|
Zn
|
|
|
73.6
|
|
|
|
73.5
|
|
Notes:
|
1.
|
Based on the mineral reserves presented in Section 15 and mine plan presented in Section 16, metallurgical
testing presented in Section 13.
|
|
2.
|
“following commissioning” refers to Year 2 through to end of mine.
|
Table 1-7 Expected Metallurgical Performance
1
– Concentrates
|
|
LOM
(including year 1)
|
|
|
Average
LOM Following Commissioning
2
|
|
Pb-Ag Concentrate
|
|
|
|
|
|
|
|
|
Dry tonnes
|
|
|
58,151
|
|
|
|
52,772
|
|
Ag g/t
3
|
|
|
14,822
|
|
|
|
15,890
|
|
Pb %
3
|
|
|
54.0
|
|
|
|
54.0
|
|
Au g/t
3
|
|
|
3.4
|
|
|
|
3.7
|
|
Zn Concentrate
|
|
|
|
|
|
|
|
|
Dry tonnes
|
|
|
67,768
|
|
|
|
65,436
|
|
Ag g/t
3
|
|
|
642
|
|
|
|
649
|
|
Zn %
3
|
|
|
53.0
|
|
|
|
53.0
|
|
Notes:
|
1.
|
Based on the mineral reserves presented in Section 15 and mine plan (Section 16).
|
|
2.
|
“following commissioning” refers to Year 2 through to end of mine.
|
|
3.
|
Grades are calculated weighted averages
|
|
1.2.9
|
Project Infrastructure
|
There is considerable infrastructure on
site since the mine was in production from 2011 to 2013. This infrastructure has remained either in use (by the site activities
for Care and Maintenance) or has been regularly maintained.
In Elsa, there are administrative, engineering
and exploration offices, as well as maintenance and warehouse facilities. The nearby Flat Creek camp facilities include bunkhouses,
a kitchen facility and drillers dry, as well as houses at the old Flat Creek town site (part of Elsa).
At the mill, to the east of Elsa and adjacent
to the Flame & Moth portal, there are mine and mill offices and dry, an assay lab, and the mill and DSTF complex as shown in
Figure 1-1 above. Power, water, roads and communications are in place and maintained throughout the site. There is a network of
access roads and haul roads throughout the district. Haul roads have been upgraded between Bermingham and the mill, and a bypass
constructed around Keno City to reduce traffic and noise for the residents.
There is minimal additional infrastructure
required for this Project; minor additional office/dry expansion, and mill modifications to reliably achieve the throughput. The
capital projects required for mine development, such as ventilation raises, are included in the mine planning and costing.
Offsite infrastructure includes highway
access to between Whitehorse and the Keno Hill site as well as to Skagway (for concentrate shipping). Alexco has an administrative
office in Whitehorse. No additional offsite infrastructure is required for this Project.
|
1.2.10
|
Market Studies and Contracts
|
The principal commodities at KHSD are freely
traded, at prices that are widely known, so that prospects for sale of any production are virtually assured. Future production
will continue to be sold in concentrate form and revenue will be based on terms provided by traders or smelters to which the concentrate
is sold. For the economic analysis herein, concentrate sales terms were developed from discussions with various traders or smelters,
and compared with other current projects.
Alexco has entered into contracts with
the following companies to support the operations of the Project:
|
·
|
Canadian Lynden Transport is contracted
by Alexco to transport lead and zinc concentrates to a smelter in North America and to back haul supplies to the site;
|
|
·
|
Yukon Energy Corporation provides power
under contract to various substations; and
|
|
·
|
Superior Propane provides propane with
the largest consumption for mine air heating in the winter.
|
|
1.2.11
|
Environmental Studies, Permitting, and Social or Community Impact
|
Alexco and its subsidiary, ERDC, have a
unique commercial agreement with the Government of Canada in which Alexco is responsible for the care, maintenance, and closure
of the historical mines, with government and company funding provided to address the historical liabilities. Under the agreement,
Alexco is indemnified from the historic environmental liabilities. The company, along with territorial, federal, and First Nation
governments, is responsible for developing a district-wide closure plan that addresses these historic environmental liabilities
arising from past mining activities. The UKHM Reclamation Plan is currently within the Yukon environmental assessment process under
the Yukon Environment and Socio-economic Assessment Act (YESAA). That work is not part of this PFS.
|
1.2.11.1
|
Environment and Water Quality
|
The KHSD has an extensive database of environmental
monitoring and environmental impacts assessments, going back twenty years in some areas. This is in large part due to the historic
operations and the reclamation planning requirements. The additional environmental requirements for both operations and closure
have been clearly defined through the permitting processes.
Geochemical and water quality studies consistently
show that the site is not a source of acid rock drainage. However, oxidation of sulphides and metal leaching under circumneutral
conditions does occur, with local zones of acidity in areas of higher sulphide material, particularly proximal to the mineralized
veins. The tailings are neither net acid generating nor a source of metal leaching. Tailings are deposited in a lined dry stack
tailings facility which is progressively reclaimed during operations. There are comprehensive waste management, water management
and monitoring programs defined by permits and in effect on site.
|
1.2.11.2
|
Environmental Assessment and Permitting
|
The Bellekeno, Flame & Moth, and Lucky
Queen mines have all permits and authorizations in place to commence full scale mine production. Although licences are also in
place for Onek, there are currently no plans to bring this deposit into production.
The Bermingham deposit has in place a Class
4 Mining Land Use Approval which authorizes the underground development and advanced exploration drilling completed to date. Before
milling and further mining of material from the Bermingham deposit, an amendment to the Water Use Licence and Quartz Mining Licence
are required. The water licence renewal process is well advanced. The public hearing process is expected in Q2 2019 followed by
issuance of the water licence amendment in Q3 2019.
The existing approvals and amendments submitted
are for the mill throughput of 400 tonnes per day (tpd) (based upon a 12-month average) and would require a minor amendment to
increase mine throughput to 550 tpd.
|
1.2.11.3
|
Community and First Nations
|
The KHSD is situated in the traditional
territory of the FNNND. Alexco has met regularly with stakeholders and First Nations regarding their ongoing operations as well
as the new plans, presenting detailed information about the Project and seeking expression of concerns.
Alexco has signed a Comprehensive Cooperation
and Benefits Agreement (CCBA) with the FNNND that recognizes the rights, obligations, and opportunities of the two parties. The
Agreement includes detailed discussion about respecting and protecting the environment, including enhanced opportunities for FNNND
to be involved in environmental management of all operations, from mining through to closure and reclamation. The CCBA was reviewed
and amended in May 2016 and there are no material changes to the CCBA.
|
1.2.11.4
|
Mine Reclamation and Closure
|
An updated Reclamation and Closure Plan
was approved by the Government of Yukon in 2018 that encompasses all of the active mining and processing activities in the KHSD
(Alexco, 2018). Alexco will have a site presence for many years while reclamation of the historical liabilities occurs. Therefore,
monitoring of the Bellekeno, Lucky Queen, Flame & Moth, and Bermingham mine areas can be integrated with KHSD monitoring programs
over the long term. This is expected to improve the efficiency of these ongoing water treatment and monitoring activities.
The YG requires financial security in the
form of a letter of credit to cover potential liabilities associated with the cost of reclamation and closure. Alexco has posted
a total of $6.5M of security. The estimated cost for the additional reclamation is recently estimated at $6.6M. Any additional
security that may be required following amendment of the quartz and water use licence would be posted as change to the value of
the current surety.
|
1.2.12
|
Capital and Operating Costs
|
Capital costs were developed by Alexco,
Mining Plus and Tetra Tech (process plant only). Mining Plus and Tetra Tech reviewed the costs in detail and modified as required
to be consistent with a PFS study and the Project. All costs are in Canadian dollars unless otherwise noted. Mining Plus considers
the accuracy of capital cost estimate components to be at a prefeasibility level of +/- 25%. A 12.5% contingency has been included
in the capital cost estimate based upon a review of the capital details.
The capital cost estimates are based primarily
on quotations by vendors on equipment, mill modifications, materials, and supplies. The remaining estimates were developed from
first principles and previous site experience. Escalation has not been included in the estimate. The capital cost estimates were
generated by Alexco and were reviewed and modified based upon detailed review by Mining Plus.
The capital costs include the restart of
the Bellekeno mine, completion of development of the Flame & Moth deposit, completion of development of the Bermingham deposit
and the reopening of the Lucky Queen plus the necessary modifications to process plant and infrastructure for the restart of operations.
The capital cost estimate for the Project
includes the initial and sustaining capital costs. The initial (pre-production) capital cost of $23.2 million comprises two components:
$17.9 million of mine development, PP&E (property, plant and equipment), mill upgrades and site wide infrastructure modifications
costs prior to mill recommissioning, plus an additional $5.3 million of net working capital for two months of ramp up prior to
achieving positive cash flow.
Total sustaining capital (including underground
development and property, plant and equipment (PP&E)) is estimated to be $76.5M which excludes the initial capital of $23.2M.
The sustaining capital is mainly the major mine development in the deposits to be mined.
The LOM direct operating costs total $362
million comprising $226 million of direct mine costs (primarily mine development), $70 million of direct processing costs, and
$67 million for site general and administrative (“G&A”) costs (excluding corporate) as shown in Talbe 1-8. This
corresponds to a LOM unit cost of $312 per tonne of ore. These costs were developed by Alexco and reviewed by Tetra Tech and Mining
Plus. Operating costs do not include contingency. Operating costs are in Canadian dollars. Operating costs are based on vendor
quotations or build up from first principles.
Table 1-8 Life of Mine Direct Operating
Cost Summary
1
Area
|
|
LOM Opex
($ M)
|
|
|
Unit Cost
($/tonne ore)
|
|
Mine
|
|
|
225.9
|
|
|
|
194
|
|
Mill
|
|
|
69.5
|
|
|
|
60
|
|
G&A
|
|
|
66.9
|
|
|
|
58
|
|
LOM Total Site
|
|
|
362.3
|
|
|
|
312
|
|
1
Summary excludes the capitalized
operating cost from Jul 2019 to Nov 2019
The Project presented herein will process
1.18 million tonnes of ore and produce two concentrates; 52,772 tonnes of lead silver concentrate and 65,436 tonnes of zinc concentrate.
The LOM total payable silver in concentrate is 27.2 million ounces, or an annualized silver production of 4 million ounces per
year. At the design processing throughput averaging 430 tpd over the mine life, following ramp up, the current project life totals
8 years. The Project economics are based on assumptions for marketing of concentrate directly to a smelter. This financial analysis
does not include any sunk costs for exploration and project advancement prior to the completion of this study.
The project value is determined on a pre-tax
and after-tax basis at 5% discount rate with the following additional economic criteria:
|
·
|
Metal prices as shown in Figure 1-4;
|
|
·
|
25% of silver is sold to Wheaton Precious
Metals under a streaming agreement at a price ranging from US$5.59/oz to US$11.79/oz silver;
|
|
·
|
NSR includes shipping, treatment, and
refining costs;
|
|
·
|
There is a 1.5% NSR (to a maximum of $4
million) to the Government of Canada.;
|
|
·
|
Revenue is recognized at the time of production;
and
|
|
·
|
Pre-production period: 3 months, following
mill start up a further 2 months of production will be required until the operation is cash-flow positive.
|
Source: Mining Plus 2019
Figure 1-4 Metal Price Projection
An exchange rate of $0.75 US$/CDN$ in first
six months and increasing to $0.77 US$/CDN$ long-term were used was assumed to convert US$ market price projections and particular
components of the initial capital cost estimates into CDN$. No provision was made for the effects of inflation. Current Canadian
tax regulations were applied within the financial model by Alexco Management with support from Alexco's tax advisors.
|
1.2.14
|
Cash Flow Analysis
|
Considering the Project on a stand-alone
basis, the undiscounted after-tax cash flow totals $129.3 million over the mine life. Simple payback occurs approximately two years
from start of production, approximately 26 months after the end of the initial capital period.
An estimate of all-in sustaining cost (“AISC”)
per contained silver ounce on a by-product basis was calculated and is summarized below. Corporate G&A after mine closure is
not considered in the project economic evaluation. All costs below are calculated in United States Dollars (US$). Metal price and
foreign exchange assumptions are presented in Section 22.1. The AISC is US$12.36/contained oz Ag. For comparison, the AISC at current
(March 22, 2019) metal prices and foreign exchange rates was calculated at US$11.30/contained oz Ag. Pricing assumptions are detailed
in Section 21.3.
The after-tax Net Present Value (NPV) at
a 5% discount rate is $101.2 million, and the after-tax Internal Rate of Return (IRR) is 74%. The pre-tax NPV at a 5% discount
rate is $136.2 million, and the after-tax IRR is 84%.
|
1.2.15
|
Sensitivity Analysis
|
Project risks can be identified in both
economic and non-economic terms. Key economic risks were examined by running cash flow sensitivities:
After-tax NPV and IRR sensitivity over
the base case has been calculated for a range of variations. The after-tax sensitivities are shown in Table 1-9, Figure 1-5, and
Figure 1-6.
Table 1-9 Results of Sensitivity Analysis
Project Variables
|
|
Factors (%)
|
|
|
5% NPV
5
($ M)
|
|
|
IRR (%)
|
|
Silver Price
|
|
|
-30
|
%
|
|
$
|
26
|
|
|
|
19
|
%
|
(US$/oz)
|
|
|
-20
|
%
|
|
$
|
57
|
|
|
|
38
|
%
|
|
|
|
-10
|
%
|
|
$
|
81
|
|
|
|
56
|
%
|
|
|
|
0
|
%
|
|
$
|
101
|
|
|
|
74
|
%
|
|
|
|
10
|
%
|
|
$
|
119
|
|
|
|
94
|
%
|
|
|
|
20
|
%
|
|
$
|
135
|
|
|
|
114
|
%
|
|
|
|
30
|
%
|
|
$
|
148
|
|
|
|
136
|
%
|
Silver Recovery
|
|
|
-30
|
%
|
|
$
|
1
|
|
|
|
6
|
%
|
(%)
|
|
|
-20
|
%
|
|
$
|
42
|
|
|
|
29
|
%
|
|
|
|
-10
|
%
|
|
$
|
72
|
|
|
|
50
|
%
|
|
|
|
0
|
%
|
|
$
|
101
|
|
|
|
74
|
%
|
|
|
|
10
|
%
|
|
$
|
130
|
|
|
|
103
|
%
|
|
|
|
20
|
%
|
|
$
|
158
|
|
|
|
138
|
%
|
|
|
|
30
|
%
|
|
$
|
186
|
|
|
|
179
|
%
|
Silver Head Grade
|
|
|
-30
|
%
|
|
$
|
16
|
|
|
|
15
|
%
|
(g/t)
|
|
|
-20
|
%
|
|
$
|
51
|
|
|
|
35
|
%
|
|
|
|
-10
|
%
|
|
$
|
77
|
|
|
|
54
|
%
|
|
|
|
0
|
%
|
|
$
|
101
|
|
|
|
74
|
%
|
|
|
|
10
|
%
|
|
$
|
124
|
|
|
|
96
|
%
|
|
|
|
20
|
%
|
|
$
|
145
|
|
|
|
119
|
%
|
|
|
|
30
|
%
|
|
$
|
165
|
|
|
|
143
|
%
|
Operating Cost
|
|
|
-30
|
%
|
|
$
|
165
|
|
|
|
174
|
%
|
($)
|
|
|
-20
|
%
|
|
$
|
144
|
|
|
|
131
|
%
|
|
|
|
-10
|
%
|
|
$
|
123
|
|
|
|
99
|
%
|
|
|
|
0
|
%
|
|
$
|
101
|
|
|
|
74
|
%
|
|
|
|
10
|
%
|
|
$
|
80
|
|
|
|
54
|
%
|
|
|
|
20
|
%
|
|
$
|
58
|
|
|
|
38
|
%
|
|
|
|
30
|
%
|
|
$
|
33
|
|
|
|
23
|
%
|
Capital Cost
|
|
|
-30
|
%
|
|
$
|
120
|
|
|
|
129
|
%
|
($)
|
|
|
-20
|
%
|
|
$
|
114
|
|
|
|
106
|
%
|
|
|
|
-10
|
%
|
|
$
|
108
|
|
|
|
88
|
%
|
|
|
|
0
|
%
|
|
$
|
101
|
|
|
|
74
|
%
|
|
|
|
10
|
%
|
|
$
|
95
|
|
|
|
63
|
%
|
|
|
|
20
|
%
|
|
$
|
89
|
|
|
|
54
|
%
|
|
|
|
30
|
%
|
|
$
|
82
|
|
|
|
47
|
%
|
From both NPV and IRR analysis, project
value is most sensitive to silver recovery. For ±10% variance in silver recovery, project NPV and IRR can vary by 30% and
28% respectively. With the historical data from Alexco on mill performance, there is sufficient confidence in the recovery estimation.
It is recognized that the various ore sources considered in this evaluation (from different properties) represent slight variances
in mineral composition, however this does not constitute major risk in terms of silver recovery of project cashflows.
Project value is also sensitive to silver
head grade; during the analysis process, change in silver head grade also results in a change to the silver recovery. Taking account
of the downstream effect on silver recovery, a ±10% variance in silver head grade resulted in a 23% variance in NPV and
21% variance in IRR.
Source: Mining Plus 2019
Figure 1-5 After-Tax 5% NPV Sensitivity
Source: Mining Plus 2019
Figure 1-6 After-Tax IRR Sensitivity
Amongst the selected parameters, project
value is least sensitive to capital cost. The result is reflective of the low project capital requirements, leveraging the existing
development and infrastructure.
Mining Plus provides the following recommendations,
the majority of which are opportunities to improve the level of detail for the next stage of project study:
|
·
|
Mining Plus and SRK considers that there
is an opportunity to extend the mine life by additional drilling and sampling, considering the in situ remaining resources, net
of the reserves considered in this Project.
|
|
·
|
Tetra Tech considers that more detailed
metallurgical predictions of production could be achieved with additional variability locked cycle testing of different blends
(that is, of ore from different mines) according to the LOM production plan. There may be an opportunity to improve concentrate
grades with further testing.
|
|
·
|
During the first year of operation, it
is recommended that the Company conduct campaigns of higher plant throughout above the 400 tpd to identify potential bottlenecks
and requirements for mill modifications to achieve 550 tpd throughput.
|
|
·
|
Additional work on the geomechanics is
recommended at a feasibility level including verification of the geotechnical conditions of the LQ and BK, and 3D inelastic modeling
to confirm stope geometry stability and extraction sequence. It is recommended that geotechnical mapping and estimation of Q values,
along with collection of excavation performance should commence once development begins.
|
|
·
|
Mining Plus recommends that due to the
multiple orebodies to be mined, along with their varying grade a comprehensive global optimization process should occur. This should
consider timing of Lucky Queen orebody development as well as the timing of increasing the mill capacity.”
|
SHORT FORM PROSPECTUS
New Issue
|
|
September 21, 2018
|
ALEXCO RESOURCE CORP.
Suite 1225, Two Bentall Centre, 555 Burrard Street,
Vancouver, British Columbia, V7X 1M9
CDN$50,000,000
COMMON SHARES
WARRANTS
SUBSCRIPTION RECEIPTS
UNITS
Alexco Resource Corp. (the "
Company
"
or "
Alexco
") may offer and issue from time to time, the securities listed above or any combination thereof with
the aggregate initial offering price not to exceed Cdn$50,000,000 during the 25 month period that this short form base shelf prospectus
(this "
Prospectus
"), including any amendments thereto, remains effective. The Company's securities may be offered
separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of sale and
set forth in an accompanying shelf prospectus supplement ("
Prospectus Supplement
").
The specific terms of the securities offered
in a particular offering will be set out in the applicable Prospectus Supplement and may include, where applicable (i) in the case
of common shares, the number of common shares offered, the offering price and any other specific terms; (ii) in the case of warrants,
the designation, number and terms of the securities issuable upon exercise of the warrants, any procedures that will result in
the adjustment of these numbers, the exercise price, dates and periods of exercise, the currency in which the warrants are issued
and any other specific terms; (iii) in the case of subscription receipts, the designation, number and terms of the securities issuable
upon satisfaction of certain release conditions, any procedures that will result in the adjustment of these numbers, any additional
payments to be made to holders of subscription receipts upon satisfaction of the release conditions, the terms of the release conditions,
the terms governing the escrow of all or a portion of the gross proceeds from the sale of the subscription receipts, terms for
the refund of all or a portion of the purchase price for the subscription receipts in the event that the release conditions are
not met or any other specific terms; and (iv) in the case of units, the designation, number and terms of the common shares, warrants
or subscription receipts comprising the units. A Prospectus Supplement may include specific variable terms pertaining to the above-described
securities that are not within the alternatives or parameters set forth in this Prospectus.
All shelf information permitted under applicable
securities laws to be omitted from this Prospectus will be contained in one or more Prospectus Supplements that will be delivered
to purchasers together with this Prospectus to the extent required by applicable securities laws. Each Prospectus Supplement will
be incorporated by reference into this Prospectus for the purposes of securities legislation as of the date of the Prospectus Supplement
and only for the purposes of the distribution of the securities to which the Prospectus Supplement pertains.
This offering is made by a Canadian
issuer that is permitted under a multijurisdictional disclosure system adopted by the United States and Canada ("MJDS")
to prepare this Prospectus in accordance with Canadian disclosure requirements. Prospective investors in the United States should
be aware that such requirements are different from those of the United States. Financial statements included or incorporated by
reference herein have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued
by the International Accounting Standards Board ("IASB") and may not be comparable to financial statements of United
States companies. Such financial statements are subject to the standards of the Public Company Accounting Oversight Board (United
States) and the United States Securities and Exchange Commission ("SEC") independence standards.
Prospective investors should be aware
that the acquisition and disposition of the securities described herein may have tax consequences both in the United States and
in Canada. Such consequences for investors who are resident in, or citizens of, the United States may not be described fully herein.
Prospective Investors should read the tax discussion contained in any applicable Prospectus Supplement with respect to a particular
offering of the securities. See "Certain Income Tax Considerations" in this Prospectus.
The enforcement of civil liabilities
under the United States federal securities laws may be affected adversely by the fact that the Company is existing under the laws
of British Columbia, Canada, most of its officers and directors are residents of Canada, that some or all of the experts named
in this Prospectus are residents of Canada, and most of the assets of the Company and the assets of said persons are located outside
the United States. See "Enforcement of Civil Liabilities" in this Prospectus.
NEITHER THE SEC, NOR ANY STATE SECURITIES
REGULATOR, HAS APPROVED OR DISAPPROVED THE SECURITIES OFFERED HEREBY OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
An investment in our securities involves
a high degree of risk. You should carefully read the "Risk Factors" section detailed in this Prospectus.
This Prospectus constitutes a public offering
of the securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted
to sell such securities. Alexco may offer and sell securities to, or through, underwriters or dealers and also may offer and sell
certain securities directly to other purchasers or through agents pursuant to exemptions from registration or qualification under
applicable securities laws. The Prospectus Supplement relating to each issue of securities offered thereby will set forth the names
of any underwriters, dealers, or agents involved in the offering and sale of such securities and will set forth the terms of the
offering of such securities, the method of distribution of such securities, including, to the extent applicable, the proceeds to
the Company and any fees, discounts or any other compensation payable to underwriters, dealers or agents, and any other material
terms of the plan of distribution. No underwriter has been involved in the preparation of, or has performed a review of, the contents
of this Prospectus.
Securities may be sold from time to time
in one or more transactions at a fixed price or prices or at non-fixed prices. If offered on a non-fixed price basis, securities
may be offered at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at prices
to be negotiated with purchasers at the time of sale, which prices may vary as between purchasers and during the period of distribution
of the securities.
In connection with any offering of securities
(unless otherwise specified in a Prospectus Supplement), other than an "at-the-market distribution", the underwriters
may over-allot or effect transactions which stabilize or maintain the market price of the securities offered at a level above that
which might otherwise prevail in the open market. Such transactions, if commenced, may be discontinued at any time. See "Plan
of Distribution".
The Company's common shares are listed
on the Toronto Stock Exchange (the "
TSX
") under the symbol "AXR" and the NYSE American Stock Exchange
(the "
NYSE American
") under the symbol "AXU".
Unless otherwise specified in a Prospectus Supplement,
there is no market through which the Company's warrants or subscription receipts may be sold and you may not be able to resell
any of such securities, purchased under this Prospectus or any Prospectus Supplement. This may affect the pricing of such securities
on the secondary market, the transparency and availability of trading prices, the liquidity of the securities, and the extent of
issuer regulation. See "Risk Factors".
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
You should rely only on the information
contained in or incorporated by reference into this Prospectus. Alexco has not authorized anyone to provide you with different
information. Alexco is not making an offer of these securities in any jurisdiction where the offer is not permitted. You should
bear in mind that although the information contained in this Prospectus and any Prospectus Supplement is accurate as of any date
on the front of such documents, such information may also be amended, supplemented or updated by the subsequent filing of additional
documents deemed by law to be or otherwise incorporated by reference into this Prospectus and by any subsequently filed prospectus
amendments.
This Prospectus provides a general description
of the securities that the Company may offer. Each time the Company sells securities under this Prospectus, it will provide you
with a Prospectus Supplement that will contain specific information about the terms of that offering. The Prospectus Supplement
may also add, update or change information contained in this Prospectus. Before investing in any securities, you should read both
this Prospectus and any applicable Prospectus Supplement together with additional information described below under "Documents
Incorporated by Reference" and "Available Information".
Unless stated otherwise or the context
otherwise requires, all references to dollar amounts in this Prospectus and any Prospectus Supplement are references to Canadian
dollars. References to "$" or "Cdn$" are to Canadian dollars and references to "US$" are to U.S.
dollars. See "Currency Presentation and Exchange Rate Information". The Company's financial statements that are incorporated
by reference into this Prospectus and any Prospectus Supplement have been prepared in accordance with IFRS.
Unless
the context otherwise requires, references in this Prospectus and any Prospectus Supplement to "Alexco", the "Company",
"we", "us" or "our" includes Alexco Resource Corp. and each of its material subsidiaries.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This Prospectus and the documents incorporated
by reference into this Prospectus contain "forward-looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian
securities laws (together, "
forward-looking statements
") concerning the Company's business plans, including, but
not limited to, anticipated results and developments in Alexco's operations in future periods, planned exploration and development
of its mineral properties, plans related to its business and other matters that may occur in the future.
Forward-looking statements may include,
but are not limited to, statements with respect to additional capital requirements to fund further exploration and development
work on the Company's properties, future remediation and reclamation activities, future mineral exploration, the estimation of
mineral reserves and mineral resources, the realization of mineral reserve and mineral resource estimates, future mine construction
and development activities, future mine operation and production, the timing of activities, the amount of estimated revenues and
expenses, the success of exploration activities and permitting time lines. Any statements that express or involve discussions with
respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often,
but not always, using words or phrases such as "expects", "anticipates", "plans", "estimates",
"intends", "strategy", "goals", "objectives" or stating that certain actions, events or
results "may", "could", "would", "might" or "will" be taken, occur or be achieved,
or the negative of any of these terms and similar expressions) are not statements of historical fact and may be "forward-looking
statements".
Forward-looking statements relate to analyses
and other information that are based on forecasts of future results, estimates of amounts not yet determinable and certain assumptions
that management believes are reasonable at the time they are made. In making the forward-looking statements in this Prospectus,
the Company has applied several material assumptions, including, but not limited to, the assumption that: (1) additional financing
needed for further exploration and development work on the Company's properties will be available on reasonable terms; (2) the
proposed development of its mineral projects will be viable operationally and economically and proceed as planned; (3) market fundamentals
will result in sustained silver, gold, lead and zinc demand and prices, and such prices will be materially consistent with or more
favorable than those anticipated in the PEA (as defined under "Summary Description of Business – Mining Business");
(4) the actual nature, size and grade of its mineral resources are materially consistent with the resource estimates reported in
the supporting technical reports; (5) labor and other industry services will be available to the Company at prices consistent with
internal estimates; (6) the continuances of existing and, in certain circumstances, proposed tax and royalty regimes; and (7) that
other parties will continue to meet and satisfy their contractual obligations to the Company. Statements concerning mineral reserve
and resource estimates may also be deemed to constitute forward-looking information to the extent that they involve estimates of
the mineralization that will be encountered if the property is developed.
Financial outlook information about potential
future cash flows contained in this Prospectus or in a document incorporated by reference is based on assumptions about future
events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information
currently available. Readers are cautioned that any such financial outlook information should not be used for purposes other than
for which it is disclosed.
Forward-looking statements are subject
to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from
those expressed or implied by the forward-looking statements, including, without limitation:
|
·
|
commodity price fluctuations including future prices of silver, gold, lead and zinc;
|
|
·
|
risks related to the Company's ability to finance the development of its mineral properties;
|
|
·
|
risks related to the Company's ability to commence production and generate material revenues or
obtain adequate financing for its planned exploration and development activities;
|
|
·
|
the risk that permits and governmental approvals necessary to develop and operate mines on the
Company's properties will not be available on a timely basis or at all;
|
|
·
|
uncertainty of capital costs, operating costs, production and economic returns;
|
|
·
|
the Company's need to attract and retain qualified management and technical personnel;
|
|
·
|
uncertainty of production at the Company's mineral exploration properties;
|
|
·
|
risks and uncertainties relating to the interpretation of drill results, the geology, grade and
continuity of the Company's mineral deposits;
|
|
·
|
mining and development risks, including risks related to accidents,
equipment breakdowns, labour disputes or other unanticipated difficulties with or interruptions in development, construction or
production;
|
|
·
|
risks related to governmental regulation, including environmental regulation;
|
|
·
|
risks related to reclamation activities on the Company's properties;
|
|
·
|
uncertainty related to title to the Company's mineral properties;
|
|
·
|
uncertainty related to unsettled aboriginal rights and title in the Yukon Territory;
|
|
·
|
the Company's history of losses and expectation of future losses;
|
|
·
|
uncertainty as to the Company's ability to acquire additional commercially mineable mineral rights;
|
|
·
|
variations in interest rates and foreign exchange rates; and
|
|
·
|
increased competition in the mining industry.
|
This list is not exhaustive of the factors
that may affect any of the Company's forward-looking statements and new risk factors may emerge from time to time. Forward-looking
statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future
events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties
and other factors, including, without limitation, those referred to in this Prospectus under the heading "Risk Factors"
and elsewhere in this Prospectus. Readers should also carefully consider the matters discussed in the documents incorporated by
reference into this Prospectus, including the Annual Information Form, Annual MD&A and Interim MD&A, as defined below.
In addition, although the Company has attempted to identify important factors that could cause actual achievements, events or conditions
to differ materially from those identified in the forward-looking statements, there may be other factors that cause achievements,
events or conditions not to be as anticipated, estimated or intended. Many of the foregoing factors are beyond the Company's ability
to control or predict.
These forward-looking statements are based
on the beliefs, expectations and opinions of management on the date the statements are made, and such beliefs, expectations and
opinions are subject to change after such date. The Company does not assume any obligation to update forward-looking statements,
except as required by applicable securities laws, if circumstances or management's beliefs, expectations or opinions should change.
For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
CAUTIONARY NOTE TO UNITED STATES INVESTORS
CONCERNING MINERAL RESERVE AND RESOURCE ESTIMATES
This Prospectus and the documents incorporated
by reference herein have been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ
from the requirements of United States securities laws. As used herein, the terms "mineral reserve", "proven mineral
reserve" and "probable mineral reserve" are Canadian mining terms as defined in accordance with Canadian National
Instrument 43-101 –
Standards of Disclosure for Mineral Projects
("
NI 43-101
") and the Canadian
Institute of Mining, Metallurgy and Petroleum (the "
CIM
") –
CIM Definition Standards on Mineral Resources
and Mineral Reserves
, adopted by the CIM Council, as amended. These definitions differ from the definitions in the United
States Securities and Exchange Commission's Industry Guide 7 ("
SEC Industry Guide 7
") under the United States
Securities Act of 1933, as amended. Under SEC Industry Guide 7 standards, mineralization cannot be classified as a "reserve"
unless the determination has been made that the mineralization could be economically and legally extracted at the time the reserve
determination is made. As applied under SEC Industry Guide 7, a "final" or "bankable" feasibility study is
required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate
reserves, and the primary environmental analysis or report must be filed with the appropriate governmental authority.
In addition, the terms "mineral
resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource"
are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide
7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned
not to assume that all or any part of a mineral deposit in these categories will ever be converted into reserves. "Inferred
mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and
legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility
studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists
or is economically or legally mineable. It is reasonably expected that the majority of inferred mineral resources could be upgraded
to indicated mineral resources with continued exploration. Disclosure of "contained ounces" in a resource is permitted
disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute
"reserves" by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.
Accordingly, information concerning mineral
deposits contained in this Prospectus and the documents incorporated by reference herein may not be comparable to similar information
made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws
and the rules and regulations thereunder.
CURRENCY PRESENTATION AND EXCHANGE
RATE INFORMATION
All dollar amounts set forth in this Prospectus
are expressed in Canadian dollars, except where otherwise indicated. References to Canadian dollars, CDN$ or $ are to the currency
of Canada. References to US dollars or US$ are to the currency of the United States.
The following table sets out, for each
period indicated, the high and low exchange rates for one Canadian dollar expressed in US dollars, the average of such exchange
rates during such period, and the exchange rate at the end of such period based on the daily rate as reported by the Bank of Canada:
|
|
Period from January 1, 2018 to
June 30, 2018
|
|
|
Year Ended
December 31
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Highest rate during period
|
|
US$
|
0.7513
|
|
|
US$
|
0.7276
|
|
|
US$
|
0.6854
|
|
Lowest rate during period
|
|
US$
|
0.8138
|
|
|
US$
|
0.8245
|
|
|
US$
|
0.7972
|
|
Average rate during period
|
|
US$
|
0.7827
|
|
|
US$
|
0.7701
|
|
|
US$
|
0.7548
|
|
Rate at the end of period
|
|
US$
|
0.7594
|
|
|
US$
|
0.7971
|
|
|
US$
|
0.7448
|
|
The average exchange rate is calculated
using the average of the daily rate on the last business day of each month during the applicable fiscal year or interim period.
The Canadian dollar/U.S. dollar exchange rate has varied significantly over the last several years and investors are cautioned
not to assume that the exchange rates presented here are necessarily indicative of future exchange rates.
DOCUMENTS INCORPORATED BY REFERENCE
Information has been incorporated by reference
in this Prospectus from documents filed with securities commissions or similar authorities in British Columbia, Alberta, Ontario,
Saskatchewan and Manitoba (the "
Commissions
"). Copies of the documents incorporated herein by reference may be
obtained on request without charge from the Corporate Secretary of Alexco at Suite 1225, Two Bentall Centre, 555 Burrard Street,
Box 216, Vancouver, British Columbia, V7X 1M9, Canada, Telephone: (604) 633-4888 and are also available electronically on SEDAR
which can be accessed electronically at
www.sedar.com.
The following documents of the Company,
which have been filed with the Commissions, are specifically incorporated by reference into, and form an integral part of, this
Prospectus:
|
a.
|
the management information circular of Alexco dated April 25, 2018 prepared in connection with
Alexco's annual general meeting of shareholders held on June 7, 2018 (the "
Information Circular
"), filed on SEDAR
on April 30, 2018;
|
|
b.
|
the unaudited interim condensed consolidated financial statements of Alexco for the six months
ended June 30, 2018 and 2017 (the "
Interim Financial Statements
"), together with the notes thereto and related
management's discussion and analysis (the "
Interim MD&A
"), filed on SEDAR on August 13, 2018;
|
|
c.
|
the amended and restated annual
information form of Alexco (the "
Annual Information Form
") for the year
ended December 31, 2017, filed on SEDAR on September 21, 2018;
|
|
d.
|
the audited consolidated financial statements of Alexco for the year ended December 31, 2017, together
with the notes thereto and the auditors' report thereon and related management's discussion and analysis (the "
Annual MD&A
"),
filed on SEDAR on March 14, 2018;
|
|
e.
|
material change report dated March 5, 2018 in respect of the Company entering into a definitive
credit agreement with Sprott Private Resource Lending (Collector), LP to provide a US$15 million credit facility, filed on SEDAR
on March 5, 2018 (the "
March 5, 2018 Material Change Report
");
|
|
f.
|
material change report dated June 14, 2018 in respect of the bought deal offering of 4,703,000
flow-through common shares of the Company (the "
June 2018 Offering
") announced on June 4, 2018 and completed on
June 13, 2018, filed on SEDAR on June 14, 2018 (the "
June 14, 2018 Material Change Report
"); and
|
|
g.
|
material change report dated June 20, 2018 in respect of the acquisition of Contango Strategies
Ltd. ("
Contango
") by a wholly-owned subsidiary of the Company, filed on SEDAR on June 20, 2018 (the
"
June 20, 2018 Material Change Report
").
|
Any annual information form, material change reports (excluding
confidential material change reports), any interim and annual consolidated financial statements and related management discussion
and analysis, information circulars (excluding those portions that, pursuant to National Instrument 44-101 of the Canadian Securities
Administrators, are not required to be incorporated by reference herein), any business acquisition reports, any news releases or
public communications containing financial information about the Company for a financial period more recent than the periods for
which financial statements are incorporated herein by reference, and any other disclosure documents required to be filed pursuant
to an undertaking to a provincial or territorial securities regulatory authority that are filed by the Company with various securities
commissions or similar authorities in Canada after the date of this Prospectus and prior to the termination of this offering under
any Prospectus Supplement, shall be deemed to be incorporated by reference in this Prospectus.
In addition, to the extent that any
document or information incorporated by reference into this Prospectus is included in any report filed with or furnished to the
SEC pursuant to the United States Securities Exchange Act of 1934, as amended (the "U.S. Exchange Act"), after the date
of this Prospectus, such document or information shall be deemed to be incorporated by reference as an exhibit to the registration
statement of which this Prospectus forms a part (in the case of documents or information deemed furnished on Form 6-K or Form 8-K,
only to the extent specifically stated therein)
Any statement contained in this Prospectus
or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also
is or is deemed to be incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement
need not state that it has modified or superseded a prior statement or include any other information set forth in the document
it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes
that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or
an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light
of the circumstances in which it was made. Any statement so modified or superseded shall not constitute a part of this Prospectus,
except as so modified or superseded.
A Prospectus Supplement containing the
specific terms of an offering of securities, updated disclosure of earnings coverage ratios, if applicable, and other information
relating to the securities, will be delivered to prospective purchasers of such securities together with this Prospectus and the
applicable Prospectus Supplement and will be deemed to be incorporated into this Prospectus as of the date of such Prospectus Supplement
only for the purpose of the offering of the securities covered by that Prospectus Supplement.
Upon a new annual information form and
the related annual financial statements being filed by the Company with, and, where required, accepted by, the applicable securities
commissions or similar regulatory authorities during the currency of this Prospectus, the previous annual information form, the
previous annual financial statements and all quarterly financial statements, material change reports and information circulars
filed prior to the commencement of the Company's financial year in which the new annual information form is filed shall be deemed
no longer to be incorporated into this Prospectus for purposes of further offers and sales of securities hereunder.
SUMMARY DESCRIPTION OF BUSINESS
As used in this Prospectus, the terms
"we", "us", "our", "Alexco" and "the Company" refer to Alexco Resource Corp.
and its subsidiaries unless the context otherwise requires.
The Company was incorporated under the
Business Corporations Act
(Yukon) on December 3, 2004 under the name "Alexco Resource Corp.", and on December
28, 2007, the Company was continued into British Columbia under the
Business Corporations Act
(British Columbia).
The Company's head office is located at
Suite 1225, Two Bentall Centre, 555 Burrard Street, Box 216, Vancouver, British Columbia, V7X 1M9, and its registered and records
office is located at 10th Floor, 595 Howe Street, Vancouver, British Columbia, V6C 2T5. The Company's common shares are listed
for trading on the TSX under the symbol "AXR" and the NYSE American under the symbol "AXU".
The following chart depicts the Company's
corporate structure together with the jurisdiction of incorporation of each of the Company's subsidiaries. All ownership of each
subsidiary is 100%.
General
The Company operates
two principal businesses: a mining business, comprised of mineral exploration and mine development and operation in Canada, primarily
in the Yukon Territory; and an environmental services business, providing consulting, remediation solutions and project management
services in respect of environmental permitting and compliance and site remediation, in Canada, the United States and elsewhere.
Mining Business
The Company's principal mining business
activities are currently being carried out within the Keno Hill District in the Yukon Territory. The Keno Hill District (the "
Distric
t")
is a silver mining region in Canada, encompassing over 35 former mines that produced variously from approximately 1918 through
1988.
The Company's mineral property holdings
within the District cover certain geological areas which host silver mineralization, including historic producing former mines
and most of the other mineral occurrences. In addition to the deposits described below that are within the District as detailed
in the independent technical report dated March 29, 2017 with an effective date of January 3, 2017, as amended September 14, 2018,
prepared by Roscoe Postle Associates Inc. entitled "Technical Report, Preliminary Economic Assessment of the Keno Hill Silver
District Project, Yukon Territory, Canada" (the "
PEA
") was filed and is available on SEDAR under the Company's
profile at www.sedar.com, the Company holds several other less advanced property interests within the District, including but
not limited to the Silver King, Elsa, Husky, Sadie Ladue and McQuesten properties, as well as the separate Elsa Tailings Property,
which potentially could become material properties depending on the results of exploration programs the Company may carry out
on them in the future. Other non-material mineral property interests of the Company include Harlan properties in the Yukon, and
certain net smelter return royalties in respect of the Brewery Creek, Ida-Oro (formerly Klondike) and Sprogge properties in the
Yukon and the Telegraph Creek, Iskut River, Kiniskan Lake and Manson Creek properties in British Columbia.
The documents incorporated by reference
herein, including the Annual Information Form, contain further details regarding the business of Alexco. See "Documents Incorporated
by Reference".
Environmental Services
The Company's environmental services division,
Alexco Environmental Group ("
AEG
"), is in the business of managing risk and unlocking value at mature, closed
or abandoned sites through integration and implementation of the Company's core competencies, which include management of environmental
services, implementation of innovative treatment technologies, execution of site reclamation and closure operations, and, if appropriate,
rejuvenation of exploration and development activity. The Company's principal markets for these services are in Canada, the United
States and the Americas, with the Canadian market serviced primarily through the Company's wholly-owned subsidiaries, Alexco Environmental
Group Inc. ("
AEG Canada
"), Elsa Reclamation & Development Company Ltd. ("
ERDC
") and Contango,
the U.S. market through Alexco Water and Environment Inc. ("
AWE
"), and the balance of the Americas through either
AEG Canada, AWE or Contango. The Company provides its services to a range of industrial sectors, but with a particular focus on
current and former mine sites.
The Company offers its clients a combination
of environmental remediation expertise in the area of site reclamation and closure, an ability to manage complex permitting and
regulatory programs on a turnkey basis, and strong operations management. In addition, the Company seeks to strategically leverage
off its environmental services group, accessing opportunities to enhance asset value through effective liability risk management
and efficient site operations. This is accomplished through unlocking potential exploration and development opportunities at contaminated
or abandoned sites through cost effective and responsible environmental remediation and liability transfer.
The Company executes its environmental
services business plan by using and applying the intellectual property assets, including its patents, and the specialized skill
sets and knowledge it maintains in-house. While there are a significant number of firms providing environmental services in North
America, these assets, skill sets and knowledge provide Alexco with a competitive advantage. Consolidated revenue from environmental
services for the year ended December 31, 2017 totaled $10,732,000, compared to $11,361,000 in 2016, all of which was derived from
services provided to external unrelated parties. During the year ended December 31, 2017, the Company recorded revenues from three
customers representing 10% or more of total environmental services revenue, in the amounts of $3,419,000, $1,702,000 and $1,473,000.
During 2016, AEG had three customers representing 10% or more of total revenue, in the amounts of $3,220,000, $3,044,000 and $1,746,000.
AEG's largest single customer is the Government of Canada, with a substantial component of Government revenues earned from the
Government of Canada's Indian and Northern Affairs Canada. Consolidated revenue from environmental services for the six month period
ended June 30, 2018 totaled $6,309,000 which was derived from sales to external unrelated parties. During the six month period
ended June 30, 2018, the Company recorded revenues from two customers representing 10% or more of total environmental services
revenue, in the combined amount of $3,724,000.
The documents incorporated
by reference herein, including the Annual Information Form, contain further details regarding the business of Alexco. See "Documents
Incorporated by Reference."
Recent Developments
Appointment of
New Director
Subsequent to the filing
of the Annual Information Form, Alexco appointed Karen McMaster as an additional director of the Company. Information regarding
Ms. McMaster's occupation and security holdings as at the date of this Prospectus are set out below:
Name and
Jurisdiction of
Residence
|
|
Office or
Position
Held
|
|
Principal Occupation During the Past Five
Years
|
|
Previous Service as
a Director
|
|
Securities
Beneficially Owned,
Controlled or
Directed, Directly or
Indirectly
|
Karen McMaster
British Columbia, Canada
|
|
Director
|
|
Since 2003, Ms. McMaster,
BA, LLB, MBA has worked as an independent consultant focusing on strategic and economic development of organizations including
risk assessment, contract management, environmental, health and safety excellence, governance and capacity building at the community
level.
Ms. McMaster's positions
have included in-house legal counsel and investor relations advisor for Caledonia Mining Corporation, in-house legal counsel for
Rio Algom Limited, senior internal auditor for BHP Billiton PLC and operations leader for the Alaska Highway Aboriginal Pipeline
Coalition in the Yukon.
|
|
Since April 11, 2018
|
|
2,308 common shares
|
Change in accounting
policies January 1, 2018
The Company has adopted
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers as at January 1, 2018. In light of the changes to
the revenue standard to IFRS 15, management has changed their accounting policy under IFRS 6 Exploration for and Evaluation of
Mineral Properties for the partial distribution of a mineral interest. For the impact of the retrospective application of these
changes in accounting policies see note 4 of the Interim Financial Statements (as defined above under the heading "Documents
Incorporated by Reference").
Offering of Flow-Through
common shares
On June 14, 2018, the
Company completed an offering, on a bought deal basis, of 4,703,000 flow-through common shares at a blended price of approximately
$1.92 per share for gross proceeds of $9,041,150. The securities issued under the offering were comprised of (i) 966,500 flow-through
shares with respect to "Canadian exploration expenses" issued at $2.05 per share; (ii) 1,736,500 flow-through shares
with respect to "Canadian exploration expenses" that also qualify as "flow-through mining expenditures" issued
at $2.05 per share; and (iii) 2,000,000 flow-through shares with respect to "Canadian development expenses" issued at
$1.75 per share, as described in the June 14, 2018 Material Change Report (see "Documents Incorporated by Reference").
Acquisition of Contango Strategies Ltd.
On June 15, 2018 the Company's wholly owned
subsidiary, Alexco Environmental Group Holdings Inc. ("
AEG Holdings
"), completed the acquisition of Contango,
a private company based in Saskatoon, Saskatchewan. AEG Holdings acquired 100% of the outstanding common shares of Contango in
exchange for consideration of $1,388,000 comprising $971,600 in cash and 237,999 common shares of Alexco at a value of $416,400.
The common shares were valued at $1.75 per share using the market price on the date of issuance. Settlement of the consideration
is in two tranches with $1,018,000 (comprising $601,600 in cash and $416,400 in Alexco common shares) paid on closing with the
remaining $370,000 cash payment to be made on the first anniversary of the closing of the transaction.
Updated Mineral Resource Estimate
for the Bermingham Deposit
On September 20, 2018, the Company
announced an updated mineral resource estimate for the Bermingham deposit, located within the District. A detailed mineral resource
estimate by vein and zone was prepared by SRK Consulting (Canada) Inc. ("
SRK
") and is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Volume
|
|
|
|
|
|
Total Ag
|
|
|
Total
Au
|
|
|
Total
Pb
|
|
|
Total
Zn
|
|
|
Grade
Ag
|
|
|
Grade
Au
|
|
|
Grade
Pb
|
|
|
Grade
Zn
|
|
Mineral
Resource Category
|
|
(m3)
|
|
|
Tonnes
|
|
|
(oz)
|
|
|
(oz)
|
|
|
(lbs)
|
|
|
(lbs)
|
|
|
(g/t)
|
|
|
(g/t)
|
|
|
(%)
|
|
|
(%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INDICATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bear
|
|
|
19,000
|
|
|
|
54,750
|
|
|
|
592,400
|
|
|
|
100
|
|
|
|
800,500
|
|
|
|
559,700
|
|
|
|
336
|
|
|
|
0.05
|
|
|
|
0.7
|
|
|
|
0.5
|
|
Arctic
|
|
Bermingham Main
|
|
|
142,600
|
|
|
|
428,400
|
|
|
|
7,656,300
|
|
|
|
1,500
|
|
|
|
9,484,400
|
|
|
|
13,045,700
|
|
|
|
556
|
|
|
|
0.11
|
|
|
|
1
|
|
|
|
1.4
|
|
|
|
Footwall
|
|
|
87,500
|
|
|
|
277,700
|
|
|
|
6,046,100
|
|
|
|
1,200
|
|
|
|
11,543,900
|
|
|
|
7,210,600
|
|
|
|
677
|
|
|
|
0.14
|
|
|
|
1.9
|
|
|
|
1.2
|
|
|
|
West Dipper
|
|
|
8,000
|
|
|
|
24,600
|
|
|
|
666,600
|
|
|
|
90
|
|
|
|
769,800
|
|
|
|
653,800
|
|
|
|
843
|
|
|
|
0.11
|
|
|
|
1.4
|
|
|
|
1.2
|
|
|
|
Bear
|
|
|
59,100
|
|
|
|
189,450
|
|
|
|
8,442,200
|
|
|
|
1,130
|
|
|
|
15,665,400
|
|
|
|
5,352,350
|
|
|
|
1,386
|
|
|
|
0.18
|
|
|
|
3.8
|
|
|
|
1.3
|
|
Bear
|
|
Bermingham Main
|
|
|
22,500
|
|
|
|
70,200
|
|
|
|
1,186,500
|
|
|
|
280
|
|
|
|
1,206,400
|
|
|
|
1,888,400
|
|
|
|
525
|
|
|
|
0.12
|
|
|
|
0.8
|
|
|
|
1.2
|
|
|
|
Footwall
|
|
|
71,700
|
|
|
|
217,400
|
|
|
|
3,835,800
|
|
|
|
900
|
|
|
|
6,136,300
|
|
|
|
5,884,300
|
|
|
|
549
|
|
|
|
0.13
|
|
|
|
1.3
|
|
|
|
1.2
|
|
Etta
|
|
Bermingham Main
|
|
|
43,000
|
|
|
|
133,600
|
|
|
|
2,065,800
|
|
|
|
300
|
|
|
|
6,054,700
|
|
|
|
5,143,000
|
|
|
|
481
|
|
|
|
0.07
|
|
|
|
2.1
|
|
|
|
1.7
|
|
|
|
Footwall
|
|
|
57,100
|
|
|
|
168,600
|
|
|
|
1,713,700
|
|
|
|
350
|
|
|
|
4,508,800
|
|
|
|
6,588,300
|
|
|
|
316
|
|
|
|
0.06
|
|
|
|
1.2
|
|
|
|
1.8
|
|
North East
|
|
Bear
|
|
|
9,900
|
|
|
|
29,700
|
|
|
|
601,000
|
|
|
|
120
|
|
|
|
947,550
|
|
|
|
1,666,750
|
|
|
|
629
|
|
|
|
0.12
|
|
|
|
1.4
|
|
|
|
2.5
|
|
|
|
Bermingham Main
|
|
|
19,850
|
|
|
|
57,100
|
|
|
|
543,900
|
|
|
|
150
|
|
|
|
773,650
|
|
|
|
697,300
|
|
|
|
297
|
|
|
|
0.08
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
INDICATED
|
|
|
540,250
|
|
|
|
1,651,500
|
|
|
|
33,350,300
|
|
|
|
6,120
|
|
|
|
57,891,400
|
|
|
|
48,690,200
|
|
|
|
628
|
|
|
|
0.12
|
|
|
|
1.6
|
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INFERRED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bear
|
|
|
19,800
|
|
|
|
59,000
|
|
|
|
676,450
|
|
|
|
130
|
|
|
|
1,413,750
|
|
|
|
805,900
|
|
|
|
357
|
|
|
|
0.07
|
|
|
|
1.1
|
|
|
|
0.6
|
|
Arctic
|
|
Bermingham Main
|
|
|
20,360
|
|
|
|
62,000
|
|
|
|
1,117,200
|
|
|
|
300
|
|
|
|
1,012,900
|
|
|
|
2,267,800
|
|
|
|
560
|
|
|
|
0.15
|
|
|
|
0.7
|
|
|
|
1.7
|
|
|
|
Footwall
|
|
|
60,400
|
|
|
|
190,900
|
|
|
|
2,827,400
|
|
|
|
800
|
|
|
|
4,240,300
|
|
|
|
1,324,200
|
|
|
|
461
|
|
|
|
0.13
|
|
|
|
1
|
|
|
|
0.3
|
|
|
|
West Dipper
|
|
|
800
|
|
|
|
2,350
|
|
|
|
33,250
|
|
|
|
5
|
|
|
|
26,900
|
|
|
|
22,800
|
|
|
|
441
|
|
|
|
0.07
|
|
|
|
0.5
|
|
|
|
0.4
|
|
|
|
Bear
|
|
|
38,050
|
|
|
|
120,900
|
|
|
|
3,167,000
|
|
|
|
500
|
|
|
|
4,179,950
|
|
|
|
1,582,200
|
|
|
|
815
|
|
|
|
0.13
|
|
|
|
1.6
|
|
|
|
0.6
|
|
Bear
|
|
Bermingham Main
|
|
|
950
|
|
|
|
3,000
|
|
|
|
19,100
|
|
|
|
5
|
|
|
|
15,600
|
|
|
|
107,600
|
|
|
|
197
|
|
|
|
0.06
|
|
|
|
0.2
|
|
|
|
1.6
|
|
|
|
Footwall
|
|
|
7,100
|
|
|
|
22,100
|
|
|
|
195,850
|
|
|
|
75
|
|
|
|
484,850
|
|
|
|
254,550
|
|
|
|
276
|
|
|
|
0.11
|
|
|
|
1
|
|
|
|
0.5
|
|
Etta
|
|
Bermingham Main
|
|
|
290
|
|
|
|
850
|
|
|
|
6,100
|
|
|
|
0
|
|
|
|
7,400
|
|
|
|
15,700
|
|
|
|
221
|
|
|
|
0.05
|
|
|
|
0.4
|
|
|
|
0.8
|
|
|
|
Footwall
|
|
|
27,100
|
|
|
|
78,000
|
|
|
|
686,900
|
|
|
|
175
|
|
|
|
792,850
|
|
|
|
2,741,100
|
|
|
|
274
|
|
|
|
0.07
|
|
|
|
0.5
|
|
|
|
1.6
|
|
North East
|
|
Bear
|
|
|
23,750
|
|
|
|
72,350
|
|
|
|
1,673,750
|
|
|
|
300
|
|
|
|
2,178,350
|
|
|
|
2,428,200
|
|
|
|
720
|
|
|
|
0.13
|
|
|
|
1.4
|
|
|
|
1.5
|
|
|
|
Bermingham Main
|
|
|
1,800
|
|
|
|
5,100
|
|
|
|
35,700
|
|
|
|
10
|
|
|
|
61,050
|
|
|
|
67,950
|
|
|
|
217
|
|
|
|
0.07
|
|
|
|
0.5
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
INFERRED
|
|
200,400
|
|
|
|
616,550
|
|
|
|
10,438,700
|
|
|
|
2,300
|
|
|
|
14,413,900
|
|
|
|
11,618,000
|
|
|
|
526
|
|
|
|
0.12
|
|
|
|
1.1
|
|
|
|
0.9
|
|
Notes:
|
1.
|
The effective date of this
mineral resource estimate is September 17, 2018.
|
|
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$0.80=C$1) using consensus long term metal prices
(US$) and recoveries (Ag US$20.80/oz, recovery 96%; Pb US$1.10/lb, recovery 97%;
Zn US$1.20/lb, recovery 88%; Au US$1,450/oz, recovery 72%).
|
|
4.
|
Ag grades capped at 4,200 g/t;
Zn capped at 6.5%; Pb capped at 6.0% for the Bermingham vein.
|
|
5.
|
Ag grades capped at 13,000
g/t, Zn capped at 12% and Pb capped at 33% for the Bear vein.
|
|
6.
|
Ag grades capped at 3,500 g/t,
Zn capped at 8.5% and Pb capped at 13% for the Bermingham Footwall vein.
|
|
7.
|
Ag grades capped at 3,600 g/t,
Zn capped at 5.0% and Pb capped at 7.5% for the West Dipper vein.
|
|
8.
|
Table numbers
may not add up due to rounding.
|
As a result of exploration work conducted
in 2017 and 2018, the Bermingham indicated mineral resources have expanded from 17.3 million ("
M
") ounces to
33.3 M ounces of contained silver at an average silver grade of 628 grams per tonne ("
g/t
"), while inferred mineral
resources have increased from 5.5 M ounces to 10.4 M ounces of contained silver at an average silver grade of 526 g/t. The updated
mineral resource estimate was prepared by SRK and a comparison to the prior mineral resource estimate is outlined below:
|
|
Resource Estimates
|
|
Category
|
|
|
|
September 17, 2018
|
|
|
January 3, 2017
|
|
INDICATED
|
|
|
|
|
|
|
|
|
|
|
Tonnes
|
|
(t)
|
|
|
1,651,500
|
|
|
|
858,000
|
|
Silver Grade
|
|
(g/t)
|
|
|
628 g/t
|
|
|
|
628 g/t
|
|
Total Silver
|
|
(ounces)
|
|
|
33,350,300
|
|
|
|
17,324,000
|
|
Lead
|
|
(%)
|
|
|
1.6
|
%
|
|
|
2.4
|
%
|
Zinc
|
|
(%)
|
|
|
1.3
|
%
|
|
|
1.7
|
%
|
Gold
|
|
g/t
|
|
|
0.12 g/t
|
|
|
|
0.10 g/t
|
|
INFERRED
|
|
|
|
|
|
|
|
|
|
|
Tonnes
|
|
(t)
|
|
|
616,550
|
|
|
|
220,000
|
|
Silver Grade
|
|
(g/t)
|
|
|
526 g/t
|
|
|
|
770 g/t
|
|
Total Silver
|
|
(ounces)
|
|
|
10,438,700 ounces
|
|
|
|
5,446,000 ounces
|
|
Lead
|
|
(%)
|
|
|
1.1
|
%
|
|
|
2.1
|
%
|
Zinc
|
|
(%)
|
|
|
0.9
|
%
|
|
|
2.2
|
%
|
Gold
|
|
g/t
|
|
|
0.12 g/t
|
|
|
|
0.20 g/t
|
|
With the addition to the silver mineral
resource at Bermingham, Alexco's District-wide indicated mineral resources at Keno Hill increased by approximately 24% from 67.9
M ounces to 84.0 M ounces of contained silver. Similarly, district-wide inferred mineral resources increased by 28% to 23.0 M
ounces of contained silver. Although the Company has determined that the updated mineral resource above is not a material change,
the Company has included this mineral resource update to ensure that this Prospectus is current and complete.
RISK FACTORS
An investment in any securities of the
Company is speculative and involves a high degree of risk due to the nature of Alexco's business and the present stage of development
of its mineral properties. The following risk factors, as well as risks not currently known to the Company, could materially adversely
affect the Company's future business, financial condition, results of operations and prospects and could cause them to differ materially
from the forward-looking statements relating to the Company. Before deciding to invest in any securities, investors should consider
carefully the risk factors set tout below, those contained in the section entitled "Cautionary Note Regarding Forward-Looking
Statements" above, those contained in the documents incorporated by reference in this Prospectus and those described in any
Prospectus Supplement, including those described in the Company's historical consolidated financial statements, the related notes
thereto and the Company's Annual Information Form.
The following risk factors, as well
as risks not currently known to the Company or that the Company currently deems to be immaterial, could materially adversely affect
the Company's future business, financial condition, results of operations earnings and prospects and could cause them to differ
materially from the forward-looking statements relating to the Company. While the significant risk factors which the Company believes
it faces are discussed below, they do not comprise a definitive list of all risk factors related to the Company's business and
operations.
Loss of Investment
An investment in the offered securities
is suitable only for those investors who are willing to risk a loss of some or all of their investment and who can afford to lose
some or all of their investment.
Negative Cash Flow From Operating
Activities
The Company has not yet consistently achieved
positive operating cash flow, and there are no assurances that the Company will not experience negative cash flow from operations
in the future. The Company has incurred net losses in the past and may incur losses in the future and will continue to incur losses
until and unless it can derive sufficient revenues from its mineral projects. Such future losses could have an adverse effect on
the market price of the Company's common shares, which could cause investors to lose part or all of their investment.
Forward-Looking Statements May Prove
Inaccurate
Investors are cautioned not to place undue
reliance on forward-looking statements. By their nature, forward-looking statements involve numerous assumptions, known and unknown
risks and uncertainties, of both a general and specific nature, that could cause actual results to differ materially from those
suggested by the forward-looking statements or contribute to the possibility that predictions, assumptions and uncertainties are
found in the Prospectus under the heading "Cautionary Note Regarding Forward-Looking Statements".
Dilution
The Company expects to require additional
funds to finance its growth and development strategy. If the Company elects to raise additional funds by issuing additional equity
securities, such financing may substantially dilute the interests of the Company's shareholders. The Company may also issue additional
common shares in the future pursuant to existing and new agreements in respect of its projects or other acquisitions and pursuant
to existing securities of the Company.
Exploration, Evaluation and Development
Mineral exploration, evaluation and development
involves a high degree of risk and few properties which are explored are ultimately developed into producing mines. With respect
to Alexco's properties, should any ore reserves exist, substantial expenditures will be required to confirm ore reserves which
are sufficient to commercially mine, and to obtain the required environmental approvals and permitting required to commence commercial
operations. Should any mineral resource be defined on such properties there can be no assurance that the mineral resource on such
properties can be commercially mined or that the metallurgical processing will produce economically viable and saleable products.
The decision as to whether a property contains a commercial mineral deposit and should be brought into production will depend upon
the results of exploration programs and/or technical studies, and the recommendations of duly qualified engineers and/or geologists,
all of which involves significant expense. This decision will involve consideration and evaluation of several significant factors,
including but not limited to: (1) costs of bringing a property into production, including exploration and development work, preparation
of appropriate technical studies and construction of production facilities; (2) availability and costs of financing; (3) ongoing
costs of production; (4) market prices for the minerals to be produced; (5) environmental compliance regulations and restraints
(including potential environmental liabilities associated with historical exploration activities); and (6) political climate and/or
governmental regulation and control.
The ability of Alexco to sell, and profit
from the sale of any eventual production from any of Alexco's properties will be subject to the prevailing conditions in the marketplace
at the time of sale. Many of these factors are beyond the control of Alexco and therefore represent a market risk which could impact
the long term viability of Alexco and its operations.
Figures for Alexco's Resources are
Estimates Based on Interpretation and Assumptions and May Yield Less Mineral Production Under Actual Conditions than is Currently
Estimated
In making determinations about whether
to advance any of its projects to development, Alexco must rely upon estimated calculations as to the mineral resources and grades
of mineralization on its properties. Until ore is actually mined and processed, mineral resources and grades of mineralization
must be considered as estimates only. Mineral resource estimates are imprecise and depend upon geological interpretation and statistical
inferences drawn from drilling and sampling which may prove to be unreliable. Alexco cannot be certain that:
|
•
|
reserve, resource or other mineralization estimates will be accurate; or
|
|
•
|
mineralization can be mined or processed profitably.
|
Any material changes in mineral resource
estimates and grades of mineralization will affect the economic viability of placing a property into production and a property's
return on capital. Alexco's resource estimates have been determined and valued based on assumed future prices, cut-off grades and
operating costs that may prove to be inaccurate. Extended declines in market prices for silver, gold, lead, zinc and other commodities
may render portions of Alexco's mineralization uneconomic and result in reduced reported mineral resources.
Amendments to Silver Purchase Agreement
with Wheaton
The March 29, 2017 amendments to the Silver
Purchase Agreement (the "
Amended SPA
") with Wheaton Precious Metals Corp. ("
Wheaton
") require
that, to satisfy the completion test under the Amended SPA, the Company will need to recommence operations on the KHSD Property
and operate the mine and mill at 400 tonnes per day on or before December 31, 2019. If the completion test is not satisfied by
December 31, 2019, the outcome could materially adversely affect the Company as it would be required to pay a capacity
related refund to Wheaton in the maximum amount of US$8.8 million. The Company would need to raise additional capital to finance
the capacity related refund and there is no guarantee that the Company will be able to raise such additional capital. In the event
that the Company cannot raise such additional capital, the Company will default under the terms of the Amended SPA.
Keno Hill District
While Alexco has conducted exploration
activities in the Keno Hill District, further review of historical records and additional exploration and geological testing will
be required to determine whether any of the mineral deposits it contains are economically recoverable. There is no assurance that
such exploration and testing will result in favourable results. The history of the Keno Hill District has been one of fluctuating
fortunes, with new technologies and concepts reviving the District numerous times from probable closure until 1989, when it did
ultimately close down for a variety of economic and technical reasons. Many or all of these economic and technical issues will
need to be addressed prior to the commencement of any future production on the Keno Hill properties.
Mining Operations
Decisions by Alexco to proceed with the
construction and development of mines are based on development plans which include estimates for metal production and capital and
operating costs. Until completely mined and processed, no assurance can be given that such estimates will be achieved. Failure
to achieve such production and capital and operating cost estimates or material increases in costs could have an adverse impact
on Alexco's future cash flows, profitability, results of operations and financial condition. Alexco's actual production and capital
and operating costs may vary from estimates for a variety of reasons, including: actual resources mined varying from estimates
of grade, tonnage, dilution and metallurgical and other characteristics; short-term operating factors relating to the mineable
resources, such as the need for sequential development of resource bodies and the processing of new or different resource grades;
revisions to mine plans; risks and hazards associated with mining; natural phenomena, such as inclement weather conditions, water
availability, floods and earthquakes; and unexpected labour shortages or strikes. Costs of production may also be affected by a
variety of factors, including changing waste ratios, metallurgical recoveries, labour costs, commodity costs, general inflationary
pressures and currency rates. In addition, the risks arising from these factors are further increased while any such mine is progressing
through the ramp-up phase of its operations and has not yet established a consistent production track record.
Furthermore, mining operations at the Bellekeno
mine project were suspended as of early September 2013 as a result of sharp and significant declines in precious metals prices
during the second quarter of 2013. Re-start of mining operations is dependent on a number of factors, including sufficient improvement
in silver markets and the effectiveness of cost structure reduction measures, and the uncertainties around the achievement of these
factors are significant.
Employee Recruitment and Retention
Recruitment and retention of skilled and
experienced employees is a challenge facing the mining sector as a whole. During the late 1990s and early 2000s, with unprecedented
growth in the technology sector and an extended cyclical downturn in the mining sector, the number of new workers entering the
mining sector was depressed and a significant number of existing workers departed, leading to a so-called "generational gap"
within the industry. Since the mid-2000s, this factor was exacerbated by competitive pressures as the mining sector experienced
an extended cyclical upturn. Additional exacerbating factors specific to Alexco include competitive pressures in labour force demand
from the oil sands sector in northern Alberta and the mining and oil & gas sectors in British Columbia, and the fact that Alexco's
Keno Hill District is a fly-in/fly-out operation. Alexco has experienced employee recruitment and retention challenges, particularly
with respect to mill operators in 2011 and through the first three quarters of 2012. There can be no assurance that such challenges
won't continue or resurface, not only with respect to the mill but in other District operational areas as well including mining
and exploration. Furthermore, any restart of mining operations will necessitate the re-hiring of mine and mill personnel.
Permitting and Environmental Risks
and Other Regulatory Requirements
The current or future operations of Alexco,
including development activities, commencement of production on its properties and activities associated with Alexco's mine reclamation
and remediation business, require permits or licenses from various federal, territorial and other governmental authorities, and
such operations are and will be governed by laws, regulations and agreements governing prospecting, development, mining, production,
taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety
and other matters. Companies engaged in the development and operation of mines and related facilities and in mine reclamation and
remediation activities generally experience increased costs and delays as a result of the need to comply with the applicable laws,
regulations and permits. There can be no assurance that all permits and permit modifications which Alexco may require for the conduct
of its operations will be obtainable on reasonable terms or that such laws and regulations would not have an adverse effect on
any project which Alexco might undertake.
Any failure to comply with applicable laws,
regulations and permitting requirements may result in enforcement actions including orders issued by regulatory or judicial authorities
causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of
additional equipment or remedial actions against the Company. The Company may be required to compensate those suffering loss or
damage by reason of the Company's mining operations or mine reclamation and remediation activities and may have civil or criminal
fines or penalties imposed upon it for violation of applicable laws or regulations.
Amendments to current laws, regulations
and permits governing operations and activities of mining companies and mine reclamation and remediation activities could have
a material adverse impact on Alexco. As well, policy changes and political pressures within and on federal, territorial and First
Nation governments having jurisdiction over or dealings with Alexco could change the implementation and interpretation of such
laws, regulations and permits, also having a material adverse impact on Alexco. Such impacts could result in one or more of increases
in capital expenditures or production costs, reductions in levels of production at producing properties or abandonment or delays
in the development of new mining properties.
Environmental Services
A material decline in the level of activity
or reduction in industry willingness to spend capital on mine reclamation, remediation or environmental services could adversely
affect demand for AEG's environmental services. Likewise, a material change in mining product commodity prices, the ability of
mining companies to raise capital or changes in domestic or international political, regulatory and economic conditions could adversely
affect demand for AEG's services.
One of AEG's customers accounted for 32%
of environmental services revenues in the 2017 fiscal year. The loss of, or a significant reduction in, the volume of business
conducted with this customer could have a significant detrimental effect on AEG's environmental services business and the Company.
The patents which Alexco owns or has access
to or other proprietary technology may not prevent AEG's competitors from developing substantially similar technology, which may
reduce AEG's competitive advantage. Similarly, the loss of access to any of such patents or other proprietary technology or claims
from third parties that such patents or other proprietary technology infringe upon proprietary rights which they may claim or hold
would be detrimental to AEG's reclamation and remediation business and have a material adverse impact on the Company.
AEG may not be able to keep pace with continual
and rapid technological developments that characterize the market for AEG's environmental services, and AEG's failure to do so
may result in a loss of its market share. Similarly, changes in existing regulations relating to mine reclamation and remediation
activities could require AEG to change the way it conducts its business.
AEG is dependent on the professional skill
sets of its employees, some of whom would be difficult to replace. The loss of any such employees could significantly affect AEG's
ability to service existing clients, its profitability and its ability to grow its business.
Potential Profitability Of Mineral
Properties Depends Upon Factors Beyond the Control of Alexco
The potential profitability of mineral
properties is dependent upon many factors beyond Alexco's control. For instance, world prices of and markets for gold, silver,
lead and zinc are unpredictable, highly volatile, potentially subject to governmental fixing, pegging and/or controls and respond
to changes in domestic, international, political, social and economic environments. Another factor is that rates of recovery may
vary from the rate experienced in tests and a reduction in the recovery rate will adversely affect profitability and, possibly,
the economic viability of a property. Profitability also depends on the costs of operations, including costs of labour, materials,
equipment, electricity, environmental compliance or other production inputs. Such costs will fluctuate in ways Alexco cannot predict
and are beyond Alexco's control, and such fluctuations will impact on profitability and may eliminate profitability altogether.
Additionally, due to worldwide economic uncertainty, the availability and cost of funds for development and other costs have become
increasingly difficult, if not impossible, to project. These changes and events may materially affect the financial performance
of Alexco.
First Nation Rights and Title
The nature and extent of First Nation rights
and title remains the subject of active debate, claims and litigation in Canada, including in the Yukon and including with respect
to intergovernmental relations between First Nation authorities and federal, provincial and territorial authorities. There can
be no guarantee that such claims will not cause permitting delays, unexpected interruptions or additional costs for Alexco's projects.
These risks may have increased after the Supreme Court of Canada decision of June 26, 2014 in
Tsilhqot'in Nation
v.
British
Columbia
.
Title to Mineral Properties
The acquisition of title to mineral properties
is a complicated and uncertain process. The properties may be subject to prior unregistered agreements of transfer or land claims,
and title may be affected by undetected defects. Although Alexco has made efforts to ensure that legal title to its properties
is properly recorded in the name of Alexco, there can be no assurance that such title will ultimately be secured. As a result,
Alexco may be constrained in its ability to operate its mineral properties or unable to enforce its rights with respect to its
mineral properties. An impairment to or defect in Alexco's title to its mineral properties would adversely affect Alexco's business
and financial condition.
Capitalization and Commercial Viability
Alexco will require additional funds to
further explore, develop and mine its properties. Alexco has limited financial resources, and there is no assurance that additional
funding will be available to Alexco to carry out the completion of all proposed activities, for additional exploration or for the
substantial capital that is typically required in order to place a property into commercial production. Although Alexco has been
successful in the past in obtaining financing through the sale of equity securities, there can be no assurance that Alexco will
be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such
additional financing could result in the delay or indefinite postponement of further exploration and development of its properties.
General Economic Conditions May Adversely
Affect Alexco's Growth and Profitability
The unprecedented events in global financial
markets since 2008 have had a profound impact on the global economy and led to increased levels of volatility. Many industries,
including the mining industry, are impacted by these market conditions. Some of the impacts of the current financial market turmoil
include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity,
commodity, foreign currency exchange and precious metal markets, and a lack of market liquidity. If the current turmoil and volatility
levels continue they may adversely affect Alexco's growth and profitability. Specifically:
|
•
|
a global credit/liquidity or foreign currency exchange crisis could impact the cost and availability
of financing and Alexco's overall liquidity;
|
|
•
|
the volatility of silver and other commodity prices would impact Alexco's revenues, profits, losses
and cash flow;
|
|
•
|
volatile energy prices, commodity and consumables prices and currency exchange rates would impact
Alexco's operating costs; and
|
|
•
|
the devaluation and volatility of global stock markets could impact the valuation of Alexco's equity
and other securities.
|
These factors could have a material adverse
effect on Alexco's financial condition and results of operations.
Securities of Alexco and Dilution
To further the activities of Alexco to
acquire additional properties, Alexco will require additional funds and it is likely that, to obtain the necessary funds, Alexco
will have to sell additional securities including, but not limited to, its common stock and/or warrants or other form of convertible
securities, the effect of which would result in a substantial dilution of the present equity interests of Alexco's shareholders.
Operating Hazards and Risks
In the course of exploration, development
and production of mineral properties, certain risks, including but not limited to unexpected or unusual geological operating conditions
including rock bursts, cave-ins, fires, flooding and earthquakes, may occur. It is not always possible to fully insure against
such risks and Alexco may decide not to insure against such risks as a result of high premiums or other reasons. Should such liabilities
arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline in the value of the
securities of Alexco.
Adverse weather conditions could also disrupt
Alexco's environmental services business and/or reduce demand for Alexco's services.
Competition
Significant and increasing competition
exists for mining opportunities internationally. There are a number of large established mining companies with substantial capabilities
and far greater financial and technical resources than Alexco. Alexco may be unable to acquire additional attractive mining properties
on terms it considers acceptable and there can be no assurance that Alexco's exploration and acquisition programs will yield any
reserves or result in any commercial mining operation.
Certain of Alexco's Directors and
Officers are Involved with Other Natural Resource Companies, Which May Create Conflicts of Interest from Time to Time
Some of Alexco's directors and officers
are directors or officers of other natural resource or mining-related companies. These associations may give rise to conflicts
of interest from time to time. As a result of these conflicts of interest, Alexco may miss the opportunity to participate in certain
transactions.
Alexco May Fail to Maintain Adequate
Internal Control Over Financial Reporting Pursuant to the Requirements of the Sarbanes-Oxley Act.
Section 404 of the Sarbanes-Oxley Act ("
SOX
")
requires an annual assessment by management of the effectiveness of Alexco's internal control over financial reporting. Alexco
may fail to maintain the adequacy of its internal control over financial reporting as such standards are modified, supplemented
or amended from time to time, and Alexco may not be able to ensure that it can conclude, on an ongoing basis, that it has effective
internal control over financial reporting in accordance with Section 404 of SOX. Alexco's failure to satisfy the requirements of
Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial
statements, which in turn could harm Alexco's business and negatively impact the trading price or the market value of its securities.
In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could
harm Alexco's operating results or cause it to fail to meet its reporting obligations. Future acquisitions of companies, if any,
may provide Alexco with challenges in implementing the required processes, procedures and controls in its acquired operations.
No evaluation can provide complete assurance that Alexco's internal control over financial reporting will detect or uncover all
failures of persons within Alexco to disclose material information otherwise required to be reported. The effectiveness of Alexco's
processes, procedures and controls could also be limited by simple errors or faulty judgments. Although Alexco intends to expend
substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, there is no certainty that it will be
successful in complying with Section 404 of SOX.
As a "foreign private issuer",
the Company is exempt from Section 14 proxy rules and Section 16 of the Securities Exchange Act of 1934
Alexco is a "foreign private issuer"
as defined in Rule 3b-4 under the United States Securities Exchange Act of 1934, as amended (the "
U.S. Exchange Act
").
Equity securities of Alexco are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the U.S. Exchange Act pursuant
to Rule 3a12-3 of the U.S. Exchange Act. Therefore, Alexco is not required to file a Schedule 14A proxy statement in relation to
the annual meeting of shareholders. The submission of proxy and annual meeting of shareholder information on Form 6-K may result
in shareholders having less complete and timely information in connection with shareholder actions. The exemption from Section
16 rules regarding reports of beneficial ownership and purchases and sales of common shares by insiders and restrictions on insider
trading in our securities may result in shareholders having less data and there being fewer restrictions on insiders' activities
in our securities.
It may be difficult to enforce judgements
or bring actions outside the United States against the Company and certain of its directors
Alexco is a Canadian corporation and certain
of its directors, officers and experts are neither citizens nor residents of the United States. A substantial part of the assets
of Alexco and of certain of these persons are located outside the United States. As a result, it may be difficult or impossible
for an investor:
|
·
|
to enforce in courts outside the United States judgements obtained in United States courts based
upon the civil liability provisions of United States federal securities laws against these persons and Alexco; or
|
|
·
|
to bring in courts outside the United States an original action to enforce liabilities based upon
United States federal securities laws against these persons and Alexco.
|
USE OF PROCEEDS
Unless otherwise specified in a Prospectus
Supplement, the net proceeds of any offering of securities under a Prospectus Supplement will be used for general corporate purposes,
including funding potential future acquisitions and capital expenditures. More detailed information regarding the use of proceeds
from a sale of securities will be included in the applicable Prospectus Supplement.
All expenses relating to an offering of
securities and any compensation paid to underwriters, dealers or agents, as the case may be, will be paid out of the Company's
general funds, unless otherwise stated in the applicable Prospectus Supplement.
The Company has incurred negative cash
flow from operating activities for its financial year ended December 31, 2017 and the six months ended June 30, 2018. Accordingly,
the majority or all of the net proceeds of any offering of securities under a Prospectus Supplement will be used to fund the proposed
expenditures set out above or in the applicable Prospectus Supplement as well as other general working capital and administrative
expenses which may cause the Company to continue to experience negative cash flow from its operating activities. See also "Risk
Factors – Negative Cash Flow from Operating Activities".
PRIOR SALES
The following table sets forth for the
12 month period prior to the date of this Prospectus details of the price at which securities have been issued or are to be issued
by the Company, the number of securities issued at that price and the date on which the securities were issued:
Date of Issue
|
|
Type of
Securities
|
|
No. of
Common
Shares
|
|
|
Issue or
Exercise Price
per Security
|
|
|
Reason for Issue
|
August 16, 2017
|
|
Stock Options
|
|
|
42,000
|
|
|
$
|
1.75
|
|
|
Grant of Stock Options
|
September 22, 2017
|
|
Stock Options
|
|
|
10,000
|
|
|
$
|
0.60
|
|
|
Exercise of Stock Options
|
October 9, 2017
|
|
Restricted Share Units
|
|
|
53,332
|
|
|
$
|
1.89
|
|
|
Vesting of Restricted Share Units
|
November 10, 2017
|
|
Restricted Share Units
|
|
|
14,620
|
|
|
$
|
1.61
|
|
|
Vesting of Restricted Share Units
|
November 23, 2017
|
|
Stock Options
|
|
|
333
|
|
|
$
|
0.60
|
|
|
Exercise of Stock Options
|
December 8, 2017
|
|
Common Shares
|
|
|
36,810
|
|
|
$
|
0.53
|
|
|
Exercise of Warrants
|
January 8, 2018
|
|
Common Shares
|
|
|
10,000
|
|
|
$
|
1.75
|
|
|
Exercise of Warrants
|
January 24, 2018
|
|
Common Shares
|
|
|
4,200
|
|
|
$
|
1.75
|
|
|
Exercise of Warrants
|
January 26, 2018
|
|
Stock Options
|
|
|
2,464,000
|
|
|
$
|
2.07
|
|
|
Grant of Stock Options
|
January 29, 2018
|
|
Restricted Share Units
|
|
|
177,700
|
|
|
$
|
2.07
|
|
|
Grant of Restricted Share Units
|
January 29, 2018
|
|
Restricted Share Units
|
|
|
91,035
|
|
|
$
|
1.90
|
|
|
Vesting of Restricted Share Units
|
February 1, 2018
|
|
Restricted Share Units
|
|
|
78,336
|
|
|
$
|
1.85
|
|
|
Vesting of Restricted Share Units
|
February 11, 2018
|
|
Restricted Share Units
|
|
|
44,998
|
|
|
$
|
1.68
|
|
|
Vesting of Restricted Share Units
|
February 12, 2018
|
|
Restricted Share Units
|
|
|
98,333
|
|
|
$
|
1.68
|
|
|
Vesting of Restricted Share Units
|
February 13, 2018
|
|
Stock Options
|
|
|
10,000
|
|
|
$
|
0.84
|
|
|
Exercise of Stock Options
|
February 23, 2018
|
|
Warrants
|
|
|
1,000,000
|
|
|
$
|
2.25
|
|
|
Credit Facility
(1)
|
February 23, 2018
|
|
Stock Options
|
|
|
25,000
|
|
|
$
|
0.84
|
|
|
Exercise of Stock Options
|
April 1 to 30, 2018
|
|
Common Shares
|
|
|
112,650
|
|
|
$
|
1.75
|
|
|
Exercise of Warrants
|
Date of Issue
|
|
Type of
Securities
|
|
No. of
Common
Shares
|
|
|
Issue or
Exercise Price
per Security
|
|
|
Reason for Issue
|
April 16, 2018
|
|
Stock Options
|
|
|
30,000
|
|
|
$
|
0.60
|
|
|
Exercise of Stock Options
|
April 20, 2018
|
|
Stock Options
|
|
|
50,000
|
|
|
$
|
0.60
|
|
|
Exercise of Stock Options
|
April 20, 2018
|
|
Stock Options
|
|
|
166,666
|
|
|
$
|
0.84
|
|
|
Exercise of Stock Options
|
May 1 to 31, 2018
|
|
Common Shares
|
|
|
979,601
|
|
|
$
|
1.75
|
|
|
Exercise of Warrants
|
May 7, 2018
|
|
Common Shares
|
|
|
60,900
|
|
|
$
|
1.49
|
|
|
Exercise of Warrants
|
May 10, 2018
|
|
Restricted Share Units
|
|
|
16,000
|
|
|
$
|
1.93
|
|
|
Grant of Restricted Share Units
|
May 10, 2018
|
|
Restricted Share Units
|
|
|
5,334
|
|
|
$
|
1.93
|
|
|
Vesting of Restricted Share Units
|
May 10, 2018
|
|
Stock Options
|
|
|
60,000
|
|
|
$
|
1.93
|
|
|
Grant of Stock Options
|
June 14, 2018
|
|
Common Shares
|
|
|
966,500
|
|
|
$
|
2.05
|
|
|
Offering of Flow-Through Shares
|
June 14, 2018
|
|
Common Shares
|
|
|
1,736,500
|
|
|
$
|
2.05
|
|
|
Offering of Flow-Through Shares
|
June 14, 2018
|
|
Common Shares
|
|
|
2,000,000
|
|
|
$
|
1.75
|
|
|
Offering of Flow-Through Shares
|
June 20, 2018
|
|
Common Shares
|
|
|
237,999
|
|
|
$
|
1.7495
|
|
|
Acquisition of Contango
(2)
|
July 30, 2018
|
|
Common Shares
|
|
|
10,000
|
|
|
$
|
1.35
|
|
|
Mineral property option agreement
|
Notes:
|
(1)
|
Issued to Sprott Private Resource Lending (Collector), LP in consideration for providing a US$15
million credit facility (see the March 5, 2018 Material Change Report (as defined above under the heading "Documents Incorporated
by Reference").
|
|
(2)
|
The total purchase price was $1,388,000, of which $971,600 was paid in cash and $416,400 was paid
through the issuance of 237,999 common shares of Alexco.
|
TRADING PRICE AND VOLUME
The common shares of Alexco are listed
and posted for trading on the TSX under the symbol "AXR", and on the NYSE American under the symbol "AXU".
The following tables set forth the market price range and trading volumes of Alexco's common shares on each of the TSX and NYSE
American for the 12 month period prior to the date of this Prospectus:
|
|
TSX
|
|
|
NYSE
American
|
|
Period
|
|
High
(Cdn$)
|
|
|
Low
(Cdn$)
|
|
|
Volume
|
|
|
High
(US$)
|
|
|
Low
(US$)
|
|
|
Volume
|
|
2018
|
September 1 - 20
|
|
|
1.49
|
|
|
|
1.34
|
|
|
|
791,923
|
|
|
|
1.15
|
|
|
|
1.02
|
|
|
|
2,349,099
|
|
August
|
|
|
1.65
|
|
|
|
1.37
|
|
|
|
1,179,700
|
|
|
|
1.24
|
|
|
|
1.03
|
|
|
|
4,551,900
|
|
July
|
|
|
1.94
|
|
|
|
1.52
|
|
|
|
906,500
|
|
|
|
1.46
|
|
|
|
1.19
|
|
|
|
4,943,900
|
|
June
|
|
|
1.81
|
|
|
|
1.69
|
|
|
|
1,285,300
|
|
|
|
1.39
|
|
|
|
1.28
|
|
|
|
6,175,000
|
|
May
|
|
|
2.00
|
|
|
|
1.71
|
|
|
|
1,656,100
|
|
|
|
1.59
|
|
|
|
1.31
|
|
|
|
4,663,000
|
|
April
|
|
|
2.14
|
|
|
|
1.68
|
|
|
|
1,695,600
|
|
|
|
1.70
|
|
|
|
1.32
|
|
|
|
5,894,400
|
|
March
|
|
|
1.90
|
|
|
|
1.63
|
|
|
|
1,327,300
|
|
|
|
1.48
|
|
|
|
1.27
|
|
|
|
5,464,400
|
|
February
|
|
|
1.89
|
|
|
|
1.56
|
|
|
|
1,307,000
|
|
|
|
1.53
|
|
|
|
1.24
|
|
|
|
5,669,000
|
|
January
|
|
|
2.18
|
|
|
|
1.78
|
|
|
|
2,359,800
|
|
|
|
1.79
|
|
|
|
1.43
|
|
|
|
7,604,900
|
|
2017
|
December
|
|
|
2.08
|
|
|
|
1.59
|
|
|
|
1,360,300
|
|
|
|
1.64
|
|
|
|
1.25
|
|
|
|
5,264,000
|
|
November
|
|
|
1.86
|
|
|
|
1.52
|
|
|
|
2,056,400
|
|
|
|
1.48
|
|
|
|
1.17
|
|
|
|
6,283,800
|
|
October
|
|
|
1.95
|
|
|
|
1.41
|
|
|
|
1,921,000
|
|
|
|
1.57
|
|
|
|
1.10
|
|
|
|
5,726,500
|
|
September
|
|
|
2.28
|
|
|
|
1.81
|
|
|
|
1,580,900
|
|
|
|
1.85
|
|
|
|
1.45
|
|
|
|
6,701,000
|
|
August
|
|
|
2.19
|
|
|
|
1.66
|
|
|
|
1,139,500
|
|
|
|
1.75
|
|
|
|
1.30
|
|
|
|
5,691,200
|
|
DIVIDEND POLICY
Alexco has not declared or paid any dividends
on its common shares since the date of formation. Any decision to pay dividends on common shares in the future will be made by
the board of directors on the basis of the earnings, financial requirements and other conditions existing at such time.
CONSOLIDATED CAPITALIZATION
The following table sets forth the Company's
consolidated capitalization as of the dates indicated, adjusted to give effect to the material changes in the share capital of
the Company since June 30, 2018, the date of the Company's financial statements most recently filed in accordance with NI
51-102. The table should be read in conjunction with the unaudited interim condensed consolidated financial statements of the Company
as at and for the three and six month periods ended June 30, 2018, including the notes thereto and management's discussion
and analysis thereof.
|
|
As at June 30, 2018
$
|
|
|
As
at June 30, 2018 After Giving Effect
on a Pro Forma Basis to the Other
Issuances
(1)
$
|
|
Common Shares
|
|
$
|
213,128,000
(107,988,902 shares)
|
|
|
$
|
213,141,500
(107,998,902 shares)
|
|
Warrants
|
|
$
|
2,360,000
|
|
|
$
|
2,360,000
|
|
Share Options and RSU's
|
|
$
|
5,038,000
|
|
|
$
|
5,038,000
|
|
Contributed Surplus
|
|
$
|
18,807,000
|
|
|
$
|
18,807,000
|
|
Accumulated Deficit
|
|
$
|
(118,454,000
|
)
|
|
$
|
(118,454,000
|
)
|
Accumulated Other Comprehensive
Loss
|
|
$
|
(1,482,000
|
)
|
|
$
|
(1,482,000
|
)
|
Shareholders' Equity
|
|
$
|
119,397,000
|
(2)
|
|
$
|
119,410,500
|
(2)
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
$
|
8,362,000
|
|
|
$
|
8,362,000
|
|
Non-Current Liabilities
|
|
$
|
5,769,000
|
|
|
$
|
5,769,000
|
|
Total Liabilities
|
|
$
|
14,131,000
|
|
|
$
|
14,131,000
|
|
Notes:
|
(1)
|
Subsequent to June 30, 2018, an additional 10,000 common shares were issued pursuant to a mineral
property option agreement. See "Prior Sales".
|
|
(2)
|
Shareholders' Equity is determined by combining common shares, warrants, share options and restricted
share units, contributed surplus, accumulated deficit and accumulated other comprehensive income or loss.
|
DESCRIPTION OF SHARE CAPITAL
Authorized Capital
The Company's authorized capital consists
of an unlimited number of common shares without par value.
Common Shares
All of the Company's common shares have
equal voting rights, and none of the common shares are subject to any further call or assessment. There are no special rights or
restrictions of any nature attaching to any of the common shares and they all rank pari passu each with the other as to all benefits
which might accrue to the holders of the common shares. The common shares are not convertible into shares of any other class and
are not redeemable or retractable. As at the date of this Prospectus, 107,998,902 common shares were issued and outstanding.
Options
As of the date of this Prospectus, there
were options outstanding to purchase 7,850,500 common shares of the Company at exercise prices ranging from $0.60 to $2.32 with
expiry dates ranging from February 12, 2019 to May 10, 2023.
Warrants
As of the date of this Prospectus, there
were warrants outstanding to purchase 1,126,174 common shares of the Company at exercise prices ranging from $2.15 to $2.25 with
expiry dates ranging from May 30, 2019 to February 23, 2023.
Restricted Share Units
As of the
date of this Prospectus, there were restricted share units issued and outstanding in respect of which up to
273,989
common
shares of the Company may be issued in settlement thereof.
DESCRIPTION OF SECURITIES OFFERED UNDER
THIS PROSPECTUS
The Company may offer common shares, warrants,
subscription receipts or units with a total value of up to Cdn$50,000,000 from time to time under this Prospectus, together with
any applicable Prospectus Supplement, at prices and on terms to be determined by market conditions at the time of offering. This
Prospectus provides you with a general description of the securities the Company may offer. Each time the Company offers securities,
it will provide a Prospectus Supplement that will describe the specific amounts, prices and other important terms of the securities,
including, to the extent applicable:
|
·
|
designation or classification;
|
|
·
|
aggregate offering price;
|
|
·
|
original issue discount, if any;
|
|
·
|
rates and times of payment of dividends, if any;
|
|
·
|
redemption, conversion or exchange terms, if any;
|
|
·
|
conversion or exchange prices, if any, and, if applicable, any provisions for changes to or adjustments
in the conversion or exchange prices and in the securities or other property receivable upon conversion or exchange;
|
|
·
|
restrictive covenants, if any;
|
|
·
|
voting or other rights, if any; and
|
|
·
|
important United States and Canadian federal income tax considerations.
|
A Prospectus Supplement may also add, update
or change information contained in this Prospectus or in documents the Company has incorporated by reference. However, no Prospectus
Supplement will offer a security that is not described in this Prospectus.
Description of Common Shares
The Company may offer common shares, which
the Company may issue independently or together with warrants or subscription receipts, and the common shares may be separate from
or attached to such securities. All of the Company's common shares have equal voting rights, and none of the common shares are
subject to any further call or assessment. There are no special rights or restrictions of any nature attaching to any of the common
shares and they all rank pari passu each with the other as to all benefits which might accrue to the holders of the common shares.
The common shares are not convertible into shares of any other class and are not redeemable or retractable.
Description of Warrants
Warrants may be offered separately or together
with other securities, as the case may be. Each series of warrants will be issued under a separate warrant indenture to be entered
into between the Company and one or more banks or trust companies acting as warrant agent. The applicable Prospectus Supplement
will include details of the terms and conditions of the warrants being offered. The warrant agent will act solely as the Company's
agent and will not assume a relationship of agency with any holders of warrant certificates or beneficial owners of warrants. The
following sets forth certain general terms and provisions of the warrants offered under this Prospectus. The specific terms of
the warrants, and the extent to which the general terms described in this section apply to those warrants, will be set forth in
the applicable Prospectus Supplement. If applicable, the Company will file with the SEC as exhibits to the registration statement
of which this Prospectus is a part, or will incorporate by reference from a Report of Foreign Private Issuer on Form 6-K that the
Company files with the SEC, any warrant indenture or form of warrant describing the terms and conditions of such Warrants that
the Company is offering before the issuance of such Warrants.
The particular terms of each issue of warrants
will be described in the related Prospectus Supplement. This description will include, where applicable:
|
·
|
the designation and aggregate number of warrants;
|
|
·
|
the price at which the warrants will be offered;
|
|
·
|
the currency or currencies in which the warrants will be offered;
|
|
·
|
the designation and terms of the common shares purchasable upon exercise of the warrants;
|
|
·
|
the date on which the right to exercise the warrants will commence and the date on which the right
will expire;
|
|
·
|
the number of common shares that may be purchased upon exercise of each warrant and the price at
which and currency or currencies in which the common shares may be purchased upon exercise of each warrant;
|
|
·
|
the designation and terms of any securities with which the warrants will be offered, if any, and
the number of the warrants that will be offered with each security;
|
|
·
|
the date or dates, if any, on or after which the warrants and the related securities will be transferable
separately;
|
|
·
|
whether the warrants will be subject to redemption or call and, if so, the terms of such redemption
or call provisions;
|
|
·
|
material United States and Canadian tax consequences of owning the warrants; and
|
|
·
|
any other material terms or conditions of the warrants.
|
Prior to the exercise of their warrants,
holders of warrants will not have any of the rights of holders of common shares issuable upon exercise of the warrants.
The Company reserves the right to set forth
in a Prospectus Supplement specific terms of the warrants that are not within the options and parameters set forth in this Prospectus.
In addition, to the extent that any particular terms of the warrants described in a Prospectus Supplement differ from any of the
terms described in this Prospectus, the description of such terms set forth in this Prospectus shall be deemed to have been superseded
by the description of such differing terms set forth in such Prospectus Supplement with respect to such warrants.
Description of Subscription Receipts
The Company may issue subscription receipts,
which will entitle holders to receive upon satisfaction of certain release conditions and for no additional consideration, common
shares, warrants or a combination thereof. Subscription receipts will be issued pursuant to one or more subscription receipt agreements
(each, a "
Subscription Receipt Agreement
"), each to be entered into between the Company and an escrow agent (the
"
Escrow Agent
"), which will establish the terms and conditions of the subscription receipts. Each Escrow Agent
will be a financial institution organized under the laws of Canada or a province thereof and authorized to carry on business as
a trustee. In the United States, the Company will file as exhibits to the registration statement of which this Prospectus is a
part, or will incorporate by reference from Report of Foreign Private Issuer on Form 6-K that the Company files with the SEC, any
Subscription Receipt Agreement describing the terms and conditions of subscription receipts the Company is offering before the
issuance of such subscription receipts. In Canada, the Company will file on SEDAR a copy of any Subscription Receipt Agreement
after the Company has entered into it.
The following description sets forth certain
general terms and provisions of subscription receipts and is not intended to be complete. The statements made in this Prospectus
relating to any Subscription Receipt Agreement and subscription receipts to be issued thereunder are summaries of certain anticipated
provisions thereof and are subject to, and are qualified in their entirety by reference to, all provisions of the applicable Subscription
Receipt Agreement and the Prospectus Supplement describing such Subscription Receipt Agreement. The Company urges you to read the
applicable Prospectus Supplement related to the particular subscription receipts that the Company sells under this Prospectus,
as well as the complete Subscription Receipt Agreement.
The Prospectus Supplement and the Subscription
Receipt Agreement for any subscription receipts the Company offers will describe the specific terms of the subscription receipts
and may include, but are not limited to, any of the following:
|
·
|
the designation and aggregate number of subscription receipts offered;
|
|
·
|
the price at which the subscription receipts will be offered;
|
|
·
|
the currency or currencies in which the subscription receipts will be offered;
|
|
·
|
the designation, number and terms of the common shares, warrants or combination thereof to be received
by holders of subscription receipts upon satisfaction of the release conditions, and the procedures that will result in the adjustment
of those numbers;
|
|
·
|
the conditions (the "
Release Conditions
") that must be met in order for holders
of subscription receipts to receive for no additional consideration common shares, warrants or a combination thereof;
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the procedures for the issuance and delivery of common shares, warrants or a combination thereof
to holders of subscription receipts upon satisfaction of the Release Conditions;
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whether any payments will be made to holders of subscription receipts upon delivery of the common
shares, warrants or a combination thereof upon satisfaction of the Release Conditions (e.g., an amount equal to dividends declared
on common shares by the Company to holders of record during the period from the date of issuance of the subscription receipts to
the date of issuance of any common shares pursuant to the terms of the Subscription Receipt Agreement);
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the terms and conditions under which the Escrow Agent will hold all or a portion of the gross proceeds
from the sale of subscription receipts, together with interest and income earned thereon (collectively, the "
Escrowed Funds
"),
pending satisfaction of the Release Conditions;
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the terms and conditions pursuant to which the Escrow Agent will hold common shares, warrants or
a combination thereof pending satisfaction of the Release Conditions;
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the terms and conditions under which the Escrow Agent will release all or a portion of the Escrowed
Funds to the Company upon satisfaction of the Release Conditions;
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if the subscription receipts are sold to or through underwriters or agents, the terms and conditions
under which the Escrow Agent will release a portion of the Escrowed Funds to such underwriters or agents in payment of all or a
portion of their fees or commission in connection with the sale of the subscription receipts;
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procedures for the refund by the Escrow Agent to holders of subscription receipts of all or a portion
of the subscription price for their subscription receipts, plus any pro rata entitlement to interest earned or income generated
on such amount, if the Release Conditions are not satisfied;
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any contractual right of rescission to be granted to initial purchasers of subscription receipts
in the event this Prospectus, the Prospectus Supplement under which subscription receipts are issued or any amendment hereto or
thereto contains a misrepresentation;
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any entitlement of the Company to purchase the subscription receipts in the open market by private
agreement or otherwise;
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whether the Company will issue the subscription receipts as global securities and, if so, the identity
of the depositary for the global securities;
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whether the Company will issue the subscription receipts as bearer securities, registered securities
or both;
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provisions as to modification, amendment or variation of the Subscription Receipt Agreement or
any rights or terms attaching to the subscription receipts;
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the identity of the Escrow Agent;
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whether the subscription receipts will be listed on any exchange;
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material United States and Canadian federal tax consequences of owning the subscription receipts;
and
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any other terms of the subscription receipts.
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The holders of subscription receipts will
not be shareholders of the Company. Holders of subscription receipts are entitled only to receive common shares, warrants or a
combination thereof on exchange of their subscription receipts, plus any cash payments provided for under the Subscription Receipt
Agreement, if the Release Conditions are satisfied. If the Release Conditions are not satisfied, the holders of subscription receipts
shall be entitled to a refund of all or a portion of the subscription price therefor and all or a portion of the pro rata share
of interest earned or income generated thereon, as provided in the Subscription Receipt Agreement.
The Company reserves the right to set forth
in a Prospectus Supplement specific terms of the subscription receipts that are not within the options and parameters set forth
in this Prospectus. In addition, to the extent that any particular terms of the subscription receipts described in a Prospectus
Supplement differ from any of the terms described in this Prospectus, the description of such terms set forth in this Prospectus
shall be deemed to have been superseded by the description of such differing terms set forth in such Prospectus Supplement with
respect to such subscription receipts.
Description of Units
The Company may issue units comprised of
one or more of the other securities described in this Prospectus in any combination. Each unit will be issued so that the holder
of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations
of a holder of each included Security. The unit agreement, if any, under which a unit is issued may provide that the securities
comprising the unit may not be held or transferred separately, at any time or at any time before a specified date. If applicable,
the Company will file with the SEC as exhibits to the registration statement of which this Prospectus is a part, or will incorporate
by reference from a Report of Foreign Private Issuer on Form 6-K that the Company files with the SEC, any unit agreement describing
the terms and conditions of such units that Alexco is offering before the issuance of such units.
The particular terms and provisions of
units offered by any Prospectus Supplement, and the extent to which the general terms and provisions described below may apply
thereto, will be described in the Prospectus Supplement filed in respect of such units.
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The particular terms of each issue of units will be described in the related Prospectus Supplement.
This description will include, where applicable:
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the designation and aggregate number of units offered;
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the price at which the units will be offered;
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if other than Canadian dollars, the currency or currency unit in which the units are denominated;
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the terms of the units and of the securities comprising the units, including whether and under
what circumstances those securities may be held or transferred separately;
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the number of securities that may be purchased upon exercise of each unit and the price at which
and currency or currency unit in which that amount of securities may be purchased upon exercise of each unit;
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any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the
securities comprising the units; and
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any other material terms, conditions and rights (or limitations on such rights) of the units.
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The Company reserves the right to set forth
in a Prospectus Supplement specific terms of the units that are not within the options and parameters set forth in this Prospectus.
In addition, to the extent that any particular terms of the units described in a Prospectus Supplement differ from any of the terms
described in this Prospectus, the description of such terms set forth in this Prospectus shall be deemed to have been superseded
by the description of such differing terms set forth in such Prospectus Supplement with respect to such units.
DENOMINATIONS, REGISTRATION AND TRANSFER
The securities will be issued in fully
registered form without coupons attached in either global or definitive form and in denominations and integral multiples as set
out in the applicable Prospectus Supplement (unless otherwise provided with respect to a particular series of debt securities pursuant
to the provisions of the applicable indenture, as supplemented by a supplemental indenture). Other than in the case of book-entry
only securities, securities may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed)
in the city specified for such purpose at the office of the registrar or transfer agent designated by the Company for such purpose
with respect to any issue of securities referred to in the Prospectus Supplement. No service charge will be made for any transfer,
conversion or exchange of the securities, but we may require payment of a sum to cover any transfer tax or other governmental charge
payable in connection therewith. Such transfer, conversion or exchange will be effected upon such registrar or transfer agent being
satisfied with the documents of title and the identity of the person making the request. If a Prospectus Supplement refers to any
registrar or transfer agent designated by the Company with respect to any issue of securities, we may at any time rescind the designation
of any such registrar or transfer agent and appoint another in its place or approve any change in the location through which such
registrar or transfer agent acts.
In the case of book-entry only securities,
a global certificate or certificates representing the securities will be held by a designated depository for its participants.
The securities must be purchased or transferred through such participants, which includes securities brokers and dealers, banks
and trust companies. The depository will establish and maintain book-entry accounts for its participants acting on behalf of holders
of the securities. The interests of such holders of securities will be represented by entries in the records maintained by the
participants. Holders of securities issued in book-entry only form will not be entitled to receive a certificate or other instrument
evidencing their ownership thereof, except in limited circumstances. Each holder will receive a customer confirmation of purchase
from the participants from which the securities are purchased in accordance with the practices and procedures of that participant.
PLAN OF DISTRIBUTION
Alexco may sell the securities to or through
underwriters or dealers, and also may sell securities to one or more other purchasers directly or through agents. Each Prospectus
Supplement will set forth the terms of the offering, including the name or names of any underwriters or agents, the purchase price
or prices of the securities and the proceeds to the Company from the sale of the securities. Only those underwriters, dealers or
agents named in a Prospectus Supplement will be the underwriters, dealers or agents in connection with the securities offered thereby.
The securities may be sold, from time to
time, in one or more transactions at a fixed price or prices which may be changed or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated prices, including sales in transactions deemed to be
"at the market distributions" as defined in Canadian National Instrument 44-102 –
Shelf Distributions
, including
sales made directly on the TSX, the NYSE American or other existing markets for the securities. Additionally, this Prospectus and
any Prospectus Supplement may also cover the initial resale of the securities purchased pursuant thereto. The prices at which the
securities may be offered may vary as between purchasers and during the period of distribution. If, in connection with the offering
of Securities at a fixed price or prices, the underwriters have made a bona fide effort to sell all of the Securities at the initial
offering price fixed in the applicable Prospectus Supplement, the public offering price may be decreased and thereafter further
changed, from time to time, to an amount not greater than the initial public offering price fixed in such Prospectus Supplement,
in which case the compensation realized by the underwriters will be decreased by the amount that the aggregate price paid by purchasers
for the Securities is less than the gross proceeds paid by the underwriters to the Company.
In connection with any offering of securities,
other than an "at-the-market distribution", the underwriters may over-allot or effect transactions which stabilize or
maintain the market price of the securities offered at a level above that which might otherwise prevail in the open market. Such
transactions, if commenced, may be discontinued at any time.
Unless otherwise specified in a Prospectus
Supplement, there is no market through which the Company's warrants may be sold and you may not be able to resell any such securities
purchased under this Prospectus or any Prospectus Supplement. Unless otherwise specified in the applicable Prospectus Supplement,
the securities (excluding any common shares) will not be listed on any securities exchange
.
This may affect the pricing
of such securities on the secondary market, the transparency and availability of trading prices, the liquidity of the securities,
and the extent of issuer regulation. See "Risk Factors".
In connection with the sale of securities,
underwriters, dealers and agents may receive compensation from the Company or from purchasers of the securities from whom they
may act as agents in the form of discounts, concessions or commissions. Any such commissions will be paid out of the Company's
general funds. Underwriters, dealers and agents that participate in the distribution of securities may be deemed to be underwriters
and any discounts or commissions received by them from the Company and any profit on the resale of securities by them may be deemed
to be underwriting discounts and commissions under applicable securities legislation.
Underwriters, dealers and agents who participate
in the distribution of the securities may be entitled under agreements to be entered into with the Company to indemnification by
the Company against certain liabilities, including liabilities under the U.S. Securities Act of 1933 and Canadian securities legislation,
or to contribution with respect to payments which such underwriters, dealers or agents may be required to make in respect thereof.
Those underwriters, dealers and agents may be customers of, engage in transactions with, or perform services for, the Company in
the ordinary course of business.
CERTAIN INCOME TAX CONSIDERATIONS
Owning any of the Company's securities
may subject you to tax consequences both in the United States and Canada.
Although the applicable Prospectus Supplement
may describe certain Canadian and United States federal income tax consequences of the acquisition, ownership and disposition of
any securities offered under this Prospectus by an initial investor, the Prospectus Supplement may not describe these tax consequences
fully. You should consult your own tax advisor with respect to your particular circumstances.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The Company's auditors are PricewaterhouseCoopers
LLP, Chartered Professional Accountants ("
PwC
"), of Suite 1400, 250 Howe Street, Vancouver, British
Columbia, V6C 3R8. PricewaterhouseCoopers LLP, Chartered Professional Accountants, as auditors of the Company, report that they
are independent with respect to the Company within the meaning of the Chartered Professional Accountants of British Columbia Code
of Professional Conduct and within the meaning of independence under the standards of the PCAOB and SEC.
The registrar and transfer agent for the
Company's common shares is Computershare Investor Services Inc. at its principal offices in Vancouver, British Columbia and Toronto,
Ontario.
EXPERTS
Names of Experts
The following persons prepared or certified
a report, valuation, statement or opinion described or included in this Prospectus or a document incorporated by reference herein:
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Torben Jensen, P.Eng. and R. Dennis Bergen, P.Eng. of Roscoe Postle Associates Inc., Jeff Austin,
P. Eng of International Metallurgical and Environmental Inc., Gilles Arseneau, Ph.D., P.Geo of SRK Consulting (Canada) Inc. and
David Farrow, Pr.Sci.Nat, P.Geo of Geostrat Consulting Inc. prepared the PEA described under "Summary Description of Business
– Mining Business"
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Cliff
Revering, P. Eng., Principal Consultant (Geological Engineering) of SRK Consulting (Canada)
Inc., completed the mineral resource estimate on the Bermingham deposit described under
"Summary Description of Business – Recent Developments - Updated Mineral Resource
Estimate for the Bermingham Deposit"
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Alan McOnie, FAusIMM, Vice President, Exploration of Alexco, and Neil Chambers, P.Eng., an employee
of Alexco, are responsible for certain information of a scientific or technical nature relating to Alexco's properties in this
Prospectus
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Interests of Experts
Based on information provided by the
experts named above, other than with respect to Alan McOnie and Neil Chambers as described below, none of the experts named under
"Names of Experts", when or after they prepared the statement, report or valuation, has received any registered or beneficial
interests, direct or indirect, in any securities or other property of Alexco or of one of the Alexco's associates or affiliates
(based on information provided to Alexco by the experts) or is or is expected to be elected, appointed or employed as a director,
officer or employee of Alexco or of any associate or affiliate of Alexco.
Alan McOnie is currently an executive officer
and Neil Chambers is currently an employee of Alexco, as described above. Both Alan McOnie and Neil Chambers have been granted
stock options of Alexco through the course of their respective employments; however, the individual interests held by each of them
throughout their respective employment terms at all times represented less than one percent of the issued and outstanding common
shares of Alexco.
enforcement
of judgments against foreign persons OR COMPANIES
The following persons reside outside of
Canada or, in the case of companies, are incorporated, continued or otherwise organized under the laws of a foreign jurisdiction
and each has appointed an agent listed below for service of process in Canada:
Name of Person
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Name and Address of Agent
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Clynton R. Nauman
Chairman CEO & Director
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Alexco Resource Corp., Suite 1225, Two Bentall Centre, 555 Burrard Street, Vancouver, British Columbia, V7X 1M9
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Michael Winn
Director
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Alexco Resource Corp., Suite 1225, Two Bentall Centre, 555 Burrard Street, Vancouver, British Columbia, V7X 1M9
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Purchasers are advised that it may
not be possible for investors to enforce judgments obtained in Canada against any person or company that is incorporated, continued
or otherwise organized under the laws of a foreign jurisdiction, or resides outside of Canada, even if the party has appointed
an agent for service of process.
DOCUMENTS FILED AS PART OF THE REGISTRATION
STATEMENT
The following documents have been or will
be filed with the SEC as part of the registration statement of which this Prospectus forms a part: (i) the documents referred to
under the heading "Documents Incorporated by Reference"; (ii) consent of the Company's auditors, PricewaterhouseCoopers
LLP; (iii) consents of Torben Jensen, R. Dennis Bergen, Jeff Austin, Giles Arseneau, David Farrow, Alan McOnie and Neil Chambers;
and (iv) powers of attorney from the Company's directors and officers (included on the signature pages of the registration
statement).
ADDITIONAL INFORMATION
Alexco has filed with the SEC a registration
statement on Form F-10 relating to the securities. This Prospectus, which constitutes a part of the registration statement, does
not contain all of the information contained in the registration statement, certain items of which are contained in the exhibits
to the registration statement as permitted by the rules and regulations of the SEC. See "Documents Filed as Part of the Registration
Statement". Statements included or incorporated by reference in this Prospectus about the contents of any contract, agreement
or other documents referred to are not necessarily complete, and in each instance you should refer to the exhibits for a more complete
description of the matter involved. Each such statement is qualified in its entirety by such reference. Each time the Company sells
securities under the registration statement, it will provide a Prospectus Supplement that will contain specific information about
the terms of that offering. The Prospectus Supplement may also add to, update or change information contained in this Prospectus.
Alexco is subject to the information requirements
of the U.S. Securities Exchange Act of 1934, as amended (the "
U.S. Exchange Act
"), and applicable Canadian securities
legislation, and in accordance therewith files reports and other information with the SEC and with the securities regulators in
Canada. Under a multijurisdictional disclosure system adopted by the United States and Canada, documents and other information
that we file with the SEC may be prepared in accordance with the disclosure requirements of Canada, which are different from those
of the United States. As a foreign private issuer within the meanings of rules made under the U.S. Exchange Act, Alexco is exempt
from the rules under the U.S. Exchange Act prescribing the furnishing and content of proxy statements, and the Company's officers,
directors and principal shareholders are exempt from the reporting and shortswing profit recovery provisions contained in Section
16 of the U.S. Exchange Act. In addition, Alexco is not required to publish financial statements as promptly as U.S. companies.
You may
read any document that we have filed with the SEC at the SEC's public reference room in Washington, D.C. You may also obtain copies
of those documents from the public reference room of the SEC at 100 F Street, N.E., Washington, D.C. 20549 by paying a fee. You
should call the SEC at 1-800-SEC-0330 or access their website at
www.sec.gov
for further
information about the public reference room. You may read and download some of the documents we have filed with the SEC's Electronic
Data Gathering and Retrieval system at
www.sec.gov
. You may read and download any
public document that we have filed with the Canadian securities regulatory authorities at
www.sedar.com
.
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is a corporation existing under
the
Business Corporations Act
(British Columbia). Most of the Company's directors and officers, and most of the experts
named in this Prospectus, are residents of Canada or otherwise reside outside the United States, and all or a substantial portion
of their assets, and a substantial portion of the Company's assets, are located outside the United States. As a result, it may
be difficult for United States investors to effect service of process within the United States upon the Company or its directors,
officers and experts who are not residents of the United States or to enforce judgments of courts of the United States predicated
upon the Company's civil liability and the civil liability of its directors, officers and experts under the United States federal
securities laws.
The Company filed with the SEC, concurrently
with its registration statement on Form F-10 of which this Prospectus is a part, an appointment of agent for service of process
on Form F-X. Under the Form F-X, the Company has appointed DL Services Inc. as its agent for service of process in the United States
in connection suit or proceeding brought against or involving the Company in a United States court arising out of or related to
or concerning the offering of the securities under this Prospectus and any Prospectus Supplement.
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