VANCOUVER, March 29, 2017 /CNW/ - Alexco Resource
Corp. (NYSE‑MKT:AXU, TSX:AXR) ("Alexco" or the "Corporation")
today reports financial results for the fourth quarter and year
ended December 31, 2016. All
figures are expressed in Canadian dollars unless otherwise
stated. For the fourth quarter of 2016 Alexco recorded a net
loss of $1.8 million ("M") or
$0.02 per share, including
$0.7 M in depreciation and other
non-cash costs. Alexco Environmental Group ("AEG") recorded
revenues of $11.4 M for the year
ended December 31, 2016, with an
annual gross profit of $2.9 M,
achieving a gross margin of 25.2%. For the full year 2016
Alexco recorded a net loss of $4.4 M
or $0.05 per share, including
$3.2 M in depreciation, share-based
compensation expense and other non-cash costs offset by a gain of
$2.7 M on investments held. The
working capital position at year end was $23.4 M.
2016 Highlights
- Improving and strong unrestricted cash position with cash and
cash equivalents at December 31, 2016
of $20.4 M and net working capital of
$23.4 M compared to $8.2 M and $12.6 M,
respectively, at December 31,
2015.
- The Corporation completed its 2016 Bermingham diamond drill
program at Keno Hill with 50 holes for a total of 17,371 meters
("m"). Drill results extended the previously defined Arctic Zone of
silver mineralization and outlined a new zone of high grade silver
mineralization beginning approximately 160m from surface and
extending at least 270m down plunge.
- On May 17, 2016, the Corporation
closed a non-brokered private placement of units of the Corporation
("Units") at a price of $1.20 per
Unit pursuant to which the Corporation issued 10,839,972 Units for
aggregate gross proceeds of $13,007,966.
- 4,364,575 warrants were exercised for proceeds of $6.2 M.
- Investments in marketable securities were disposed of for
proceeds of $1.8 M and a pre-tax
realized gain of $1.5 M. In addition,
warrants held as an investment had a pre-tax fair value measurement
adjustment increase of $1.2 M.
- AEG, recognized revenues of $11.4
M in 2016 for a gross profit of $2.9
M and a gross margin of 25.2%.
- A performance bond was released to Alexco in the amount of
$3.8 M (US$2.9
M) related to the AEG's Globeville Smelter Project in
Denver Colorado.
Highlights Subsequent to 2016
- The Corporation announced an updated mineral resource estimate
for the Bermingham deposit, expanding the indicated mineral
resources from 5.2 M ounces to 17.3 M ounces while inferred mineral
resources increased from approximately 0.7 M ounces to 5.5 M ounces
of contained silver.
- Alexco released an updated National Instrument 43-101 compliant
Preliminary Economic Assessment ("PEA") for its 100% owned Keno
Hill Silver District in Canada's
Yukon Territory ("KHSD PEA") and
announced an amended silver purchase agreement (the "Amended SPA")
with Silver Wheaton Corp. ("Silver Wheaton") (see 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").
- Investments in marketable securities were disposed of for
proceeds of $2.0 M and a pre-tax
realized gain of $1.8 M.
- Alexco entered into a non-binding Letter Agreement with Banyan
Gold Corp. ("Banyan") to option up to 100% of Alexco's McQuesten
property located in the KHSD. In three stages, Banyan may earn up
to 100% of the McQuesten property, by incurring a minimum of
$2.6 M in exploration expenditures,
issue 1.6 M shares, pay a total of $2.6
M in cash or shares and grant Alexco a 6% Net smelter return
("NSR") royalty with buybacks totalling $7
M to reduce to a 1% NSR royalty on gold and 3% NSR royalty
on silver.
Alexco's President and Chief Executive Officer Clynt Nauman said, "A lot was accomplished by
Alexco in 2016, nothing more important than our exploration success
at Bermingham along with raising additional capital, establishing
the portal for our Flame & Moth underground access and
commencing an updated Keno Hill Preliminary Economic Assessment
subsequently completed in March 2017. With the March 29, 2017 announcement of a Silver Wheaton
amended silver purchase agreement, Alexco launches into 2017
squarely focused on moving forward with additional surface
exploration, underground exploration and development, mill
upgrades, and preparation of a prefeasibility level study, all
necessary steps on the way to a final production decision."
Summary Financial Results and Information
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|
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(expressed in
thousands of
dollars, except per share
amounts)
|
Three Months
Ended
December
31
|
|
Year
Ended
December
31
|
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
Environmental
services revenue
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2,939
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4,128
|
|
11,361
|
14,662
|
|
|
|
|
|
|
Gross profit from
environmental services
|
881
|
611
|
|
2,866
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3,251
|
|
|
|
|
|
|
Loss before
taxes
|
(1,579)
|
(1,765)
|
|
(3,967)
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(6,616)
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Net
loss
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(1,761)
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(1,502)
|
|
(4,359)
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(5,509)
|
Total
comprehensive loss
|
(1,893)
|
(1,539)
|
|
(4,111)
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(6,037)
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Loss per share –
basic and diluted
|
($0.02)
|
($0.02)
|
|
($0.05)
|
($0.08)
|
Cash flows
consumed from operating activities
|
(1,156)
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(905)
|
|
(4,608)
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(4,391)
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Keno Hill Silver District PEA
On March 29, 2017, Alexco
announced the release of an independent technical report with an
effective date of January 3, 2017
prepared by Roscoe Postle Associates Inc. ("RPA") entitled
"Preliminary Economic Assessment of the Keno Hill Silver District
Project, Yukon, Canada" (the
"PEA").
Highlights of the revised PEA include:
- Alexco's project pre-tax and after-tax net present value
("NPV") is $104.3 M and $79.4 M (at a 5% discount rate), respectively,
and pre-tax and after-tax internal rate of return ("IRR") is 89%
and 75%, respectively, at assumed silver prices of US$18.60/oz in 2018 and US$19.35/oz in 2019 through 2025.
- At current spot metal prices and US/Cdn foreign exchange rate
(as of March 27, 2017), the project
has a pre-tax and after-tax NPV of $121.1
M and $90.5 M (at a 5%
discount rate), respectively, and a pre-tax and after-tax IRR of
92% and 78%, respectively.
- Average annualized mill throughput is 143,000 tonnes per year
over an eight year period at an average feed grade of 843 grams per
tonne ("g/t") silver ("Ag"), 3.3% lead ("Pb"), 4.6% zinc ("Zn") and
0.39 g/t gold ("Au").
- Payable production is anticipated to be a total of
approximately 25.1 M ounces of silver, 77.3 M pounds ("lbs") of
zinc, 67 M lbs of lead and 4,870 ounces of Au over an eight (8)
year mine life. Average annualized payable silver production is 3.5
M ounces per year, with the initial three years of annualized
payable silver production averaging 4.1 M ounces per year.
- Initial capital costs of $27 M
are estimated to achieve production and positive cash flow with
less than one year payback.
In addition, upon achieving commercial production, Alexco has
calculated all-in sustaining costs ("AISC") (contained silver,
by-product basis) over LOM to be US$13.51/oz of silver (including direct operating
costs, sustaining capital, the Silver Wheaton stream, corporate
general and administrative and ongoing surface exploration costs),
and AISC over the first full three (3) years of production to be
US$12.18/oz of silver.
Amended Silver Purchase Agreement with Silver Wheaton
On March 29, 2017 the Corporation
and certain of its subsidiaries and Silver Wheaton entered into an
amendment agreement to the Silver Purchase Agreement (the "Amended
SPA") pursuant to which, among other things, the following
amendments were made to the Silver Purchase Agreement:
- Silver Wheaton will continue to receive 25% of the life of mine
payable silver from the KHSD. The production payment (originally
US$3.90 per ounce) will be based on
monthly silver head grade and monthly silver price.
- The actual monthly production payment will fall within a
defined grade and pricing range governed by upper and lower numeric
criteria (ceiling grade/price and floor grade/price) pursuant to
the following formula:
(Ceiling Grade –
Deemed
Shipment Head Grade)
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X
|
(Ceiling Price –
Deemed
Shipment Silver Price)
|
X
|
Market
Price
|
(Ceiling Grade –
Floor
Grade)
|
(Ceiling Price –
Floor Price)
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|
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|
|
Floor
Grade
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=
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600 g/t Ag
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|
Floor
Price
|
=
|
|
US$13/oz
Ag
|
|
Ceiling
Grade
|
=
|
|
1,400 g/t
Ag
|
|
Ceiling
Price
|
=
|
|
US$25/oz
Ag
|
|
Deemed Shipment Head
Grade
|
=
|
|
Calculated monthly
mill silver head grade
|
|
Deemed Shipment
Silver Price
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=
|
|
Average monthly
silver price
|
|
Market
Price
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=
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|
Spot silver price
prior to day of sale
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|
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- The date for completion of the 400 tonne per day mine and mill
completion test date was extended to December 31, 2019;
- The Silver Wheaton area of interest remains one (1) km around
existing Alexco holdings in the KHSD.
In consideration of the foregoing amendments, the Corporation
has agreed, subject to TSX and NYSE-MKT approval, to issue
3,000,000 shares to Silver Wheaton with a fair value of
US$4,934,948.
Keno Hill Exploration and Development
2017 Exploration Program
The Corporation has planned a surface exploration program of
approximately 12,000m surface diamond drilling budgeted to cost
$3.2 M primarily to further explore
structural targets in the immediate vicinity of the Bermingham
area. The bulk of the surface exploration will be conducted in the
summer with results expected to be released no later than the
fourth quarter of 2017.
The Corporation is also planning an underground exploration
program at the Bermingham prospect. Subject to permitting, an
exploration decline will be driven 600m and approximately 5,000m of
infill and confirmation drilling will be completed for a total
estimated cost of $8.7 M (including
underground equipment rebuilds and purchase). The timeline and
costs incorporate management's estimates for the necessary permits
required to carry out the development of the Bermingham exploration
decline; permitting uncertainty and delays may cause timelines and
costs to increase.
2016 Exploration Program
The Corporation completed an exploration program totalling 50 holes
for 17,371m of surface diamond drilling to follow up on prior
identification of high grade silver results at the Bermingham
prospect. A total of $3.4 million was
invested in an expanded exploration program, the majority funded by
way of a $3 million flow-through
financing in December 2015. The
Corporation expended an additional $300,000 to gather geotechnical and
hydrogeological information, as well as undertake a preliminary
metallurgical program to test the Bermingham mineralization.
Interim drill results on 18 holes were released on September 13, 2016 (see September 13, 2016 press release entitled "Alexco
Confirms, Expands High Grade Silver Zone at Bermingham Deposit;
Drilling Continues") with the final results of the final 32 of 50
drill holes released on December 8,
2016 (see December 8, 2016
press release entitled "Alexco expands Bermingham Silver
Deposit, Initial Tests Confirm Excellent Metallurgical
Performance").
Other Development
In October the Company completed installation of the underground
portal and infrastructure at the Flame & Moth deposit and drove
the first 20m of the production ramp. This will allow resumption of
development activities to begin at full scale in the future. This
ramp will ultimately be driven to the upper production levels of
the Flame & Moth silver deposit.
The Corporation also completed a mill maintenance program in
2016. Additionally, a mechanical assessment and maintenance of
equipment was part of the routine process of maintaining operating
assets in a condition where resumption of processing operations
could be completed.
Permitting
As a result of the Company filing an updated Reclamation and
Closure Plan for its current operations and the future development
of the Flame & Moth deposit, the Quartz Mining License ("QML")
required that Alexco increase its posted security from $4.2 M to $6.3 M.
On July 26, 2016 the
Corporation posted the additional $2.1
M in cash for security and is currently working with the
Yukon Government to substitute a portion of the cash posted in
exchange for a pledge of assets.
The Company expects a Water Use License amendment hearing to
occur in the second quarter of 2017, which is the final remaining
permit required to commence mining operations at the Flame &
Moth deposit.
The Corporation plans to drive an underground exploration
decline 600m at the Bermingham deposit, which will require an
amendment to its Class IV permit. This is expected to be received
by the end of the second quarter of 2017 although delays can occur
in the Yukon permitting process as
a result of changing laws, regulations and policies in the
environmental assessment process.
Alexco Environmental Group
In 2016 Alexco Environmental Group ("AEG"), recognized revenues
of $11.4 M in 2016 for a gross profit
of $2.9 M and a gross margin of 25.2%
compared to revenues of $14.7 M in
2015 for a gross profit of $3.3 M and
a gross margin of 22.2%. The increase in gross margin from the
prior year was primarily due to AEG reducing third party work on
both external projects and for the Keno Hill Reclamation
Plan. The reduction in revenue was primarily due to the bulk
of Keno Hill Reclamation Plan being developed in 2015 and then
entering the review stage of the process in 2016, which involved
less billable work to be performed by AEG. Furthermore, in the US a
decrease in revenues resulted from the substantial completion of
the Globeville project in Colorado
in 2015.
AEG is successfully operating two major water treatment
facilities in the US, the Gold King and Schwartzwalder plants, as
well as four smaller water treatment facilities at Keno Hill in
Canada.
At the Gold King Project in southern Colorado, the US
Environmental Protection Agency authorized an expansion of the
plant to approximately double the treatment capacity of the IWTP.
Construction related to this and upgrades were completed in 2016.
AEG has been awarded an extension to operate Gold King the IWTP to
the end of 2017.
On the Globeville Smelter Project, a Completion Report, which
documents the work completed at the site and the monitoring
results, was submitted to the State of
Colorado in July 2016. The
Completion Report triggered the release of $3.8 M (US$2.9 M)
to AEG with the remaining $522,000
(US$398,000) to be held as a
performance bond for a period up to 2 years.
Financial
Alexco's cash and cash equivalents at December 31, 2016 totaled $20.4 M compared to $8.2
M at December 31, 2015, while
net working capital totaled $23.4 M
compared to $12.6 M for the same
dates. In addition, the Corporation's restricted cash and
deposits at December 31, 2016
totalled $6.9 M compared to
$8.9 M at December 31, 2015. With its cash resources and
net working capital on hand at December 31,
2016, Alexco anticipates it will have sufficient capital
resources to carry out all of its currently-anticipated exploration
programs, environmental services business and corporate offices and
administration as planned for 2017.
Financial Report and Conference Call for Fourth Quarter and
Year End 2016
Full details of the financial and operating results for the year
ended December 31, 2016 are described
in Alexco's consolidated financial statements with accompanying
notes and related Management's Discussion and Analysis. These
documents and additional information on Alexco, including its
annual information form, are available on the Company's website at
www.alexcoresource.com and on SEDAR at www.sedar.com and on EDGAR
at www.sec.gov/edgar.shtml.
Alexco is holding an audio webcast conference call to discuss
these results at 11:00a.m. Eastern
(8:00 a.m. Pacific) on Thursday, March 30, 2017. To participate in
the live call, please use one of the following methods:
Dial toll free from
Canada or the US:
|
1-888-504-7961
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Dial from outside
Canada or the US:
|
1-647-792-1278
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Conference ID
#:
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4158221
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Live audio
webcast:
|
www.alexcoresource.com
|
Participants should connect five to ten minutes before the
call.
The conference call will be recorded, and an archived audio
webcast will be available at www.alexcoresource.com.
Qualified Persons
The disclosure in this news release of scientific and technical
information regarding exploration projects on Alexco's mineral
properties has been reviewed and approved by Alan McOnie, FAusIMM, Vice President,
Exploration, who is a Qualified Persons as defined by National
Instrument 43-101 ‑ Standards of Disclosure for Mineral
Projects.
About Alexco
Alexco Resource Corp. owns the Bellekeno silver mine, one of
several mineral properties held by Alexco which encompass
substantially all of the historical KHSD located in Canada's Yukon
Territory. Employing a unique business model, Alexco also
provides mine-related environmental services, remediation
technologies and reclamation and mine closure services to both
government and industry clients through the Alexco Environmental
Group, its wholly-owned environmental services division.
Please visit the Alexco website at www.alexcoresource.com
Certain statements ("forward-looking statements") in this
news release contain forward-looking information concerning the
Company's anticipated results and developments in the Company's
operations in future periods, planned exploration and development
of its properties, plans related to its business and other matters
that may occur in the future, made as of the date of this news
release. Forward-looking statements may include, but are not
limited to, statements with respect to the 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 and reports, the amount
of estimated revenues and expenses, the success of exploration
activities, permitting time lines, requirements for additional
capital and sources and uses of funds. Forward-looking
statements are subject to a variety of known and unknown risks,
uncertainties and other factors which could cause actual events or
results to differ from those expressed or implied by the
forward-looking statements. Such factors include, among
others, risks related to actual results and timing of exploration
and development activities; actual results and timing of mining
activities; actual results and timing of environmental services
activities; actual results and timing of remediation and
reclamation activities; conclusions of economic evaluations;
changes in project parameters as plans continue to be refined;
future prices of silver, gold, lead, zinc and other commodities;
possible variations in mineable resources, grade or recovery rates;
failure of plant, equipment or processes to operate as anticipated;
accidents, labour disputes and other risks of the mining industry;
First Nation rights and title; continued capitalization and
commercial viability; global economic conditions; competition; and
delays in obtaining governmental approvals or financing or in the
completion of development activities. Forward-looking
statements are based on certain assumptions that management
believes are reasonable at the time they are made. In making
the forward-looking statements included in this news release, the
Company has applied several material assumptions, including, but
not limited to, the assumption that the Company will be able to
raise additional capital as necessary, that the proposed
exploration and development will proceed as planned, and that
market fundamentals will result in sustained silver, gold, lead and
zinc demand and prices. There can be no assurance that
forward-looking statements will prove to be accurate and actual
results and future events could differ materially from those
anticipated in such statements. The Company expressly
disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information,
future events or otherwise, except as otherwise required by
applicable securities legislation.
SOURCE Alexco Resource Corp.