Filed Pursuant to General Instruction II.L of Form F-10

File No. 333-227024

 

The information in this prospectus supplement and the accompanying prospectus is not complete and may be changed. This prospectus supplement and the accompanying prospectus are not an offer to sell these securities and are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus Supplement Dated March 24, 2020

 

PROSPECTUS SUPPLEMENT
(To Base Shelf Prospectus dated September 21, 2018)

  

 

 

ALEXCO RESOURCE CORP.

 

 

C$[●]

 

[●] Common Shares at a price of C$[●] per Common Share

 

This prospectus supplement of Alexco Resource Corp. (“Alexco” or the “Company”) hereby qualifies the distribution (the “Offering”) of [●] common shares of the Company (the “Offered Shares”) at a price of C$[●] per Offered Share (the “Offering Price”). The Offering is being made pursuant to an underwriting agreement (the “Underwriting Agreement”) dated March [●], 2020 among the Company, Cormark Securities Inc. (“Cormark”) and Cantor Fitzgerald Canada Corporation (“Cantor” and together with Cormark, the “Co-Lead Underwriters”), and including Canaccord Genuity Corp. (together with the Co-Lead Underwriters, the “Underwriters”). The Company and the Underwriters expect the size of the Offering will be for an anticipated minimum of C$5,000,000. The Offering Price was determined by arm’s length negotiation between the Company and the Co-Lead Underwriters, on behalf of the Underwriters. See “Plan of Distribution”.

  

The outstanding common shares of the Company (the “Common Shares”) are listed on the Toronto Stock Exchange (the “TSX”) and the NYSE American (the “NYSE American”), both under the symbol “AXU”. On March 23, 2020, the closing price of the Common Shares on the TSX and the NYSE American was C$2.02 and US$1.38 per Common Share, respectively. The Company has applied to list the Offered Shares on the TSX and the NYSE American. The TSX and NYSE American have not conditionally approved the Company’s listing applications and there is no assurance that the TSX or NYSE American will approve the listing applications. 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 as issued by the International Accounting Standards Board (“IFRS”), 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   C$[●]   C$[●]   C$[●]
Total   C$[●]   C$[●]   C$[●]

   

Notes:

(1) Pursuant to the Underwriting Agreement, the Company has agreed to pay the Underwriters a cash fee (the “Underwriters’ Fee”) equal to 6.0% of the aggregate gross proceeds of the Offering. See “Plan of Distribution”.
   
(2) After deducting the Underwriters’ Fee, but before deducting expenses of the Offering estimated to be an aggregate of C$[●], 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, Underwriters’ Fee and net proceeds to the Company (before deducting expenses of the Offering) will be C$[●], C$[●] and C$[●], respectively. This prospectus supplement and accompanying prospectus also qualify for distribution the Over-Allotment Option and the Over-Allotment Shares (as defined herein) issued pursuant to the exercise of the Over-Allotment Option. See “Plan of Distribution”.


The Company has also granted to the Underwriters an option (the “Over-Allotment Option”) exercisable, in whole or in part and from time to time, at the sole discretion of the Underwriters, at any time up to 30 days following the closing of the Offering, to purchase up to an additional [●] Common Shares (“Over-Allotment Shares”) at the Offering Price to cover over-allotments, if any. A purchaser who acquires Over-Allotment Shares forming part of the Underwriters’ 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. Unless the context otherwise requires, references in this prospectus supplement and the accompanying prospectus to “Offered Shares” include any Over-Allotment Shares issued pursuant to the Over-Allotment Option.

 

The following table sets out the number of securities issuable under the Over-Allotment Option:

  

  2  

 

   

Underwriters’ Position Maximum size or number of securities available Exercise period Exercise price
Over-Allotment Option [●] Common Shares 30 days following closing of the Offering C$[●] per Common Share

  

The Underwriters, as principals, conditionally offer the Offered Shares, subject to prior sale, if, as and when issued by the Company and accepted by the Underwriters 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 Underwriters by Cassels Brock & Blackwell LLP with respect to certain Canadian legal matters, and Troutman Sanders LLP with respect to certain United States legal matters.

 

The Underwriters propose 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 Underwriters may decrease the offering price and change the other selling terms. The compensation realized by the Underwriters will decrease by the amount that the aggregate offering price paid by the purchasers for the Offered Shares is less than the gross proceeds paid by the Underwriters 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 March 27, 2020, or such other date as may be agreed upon by the Company and the Co-Lead Underwriters (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, except in limited circumstances. Purchasers of Offered Shares will receive only a customer confirmation from the Underwriters or other registered dealers from whom the Offered Shares are purchased. See “Plan of Distribution”.

 

The Underwriters 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 Suite 400, 725 Granville Street, Vancouver, British Columbia, Canada, V7Y 1G5.

 

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.

  

  3  

 

 

 

TABLE OF CONTENTS

 

Prospectus Supplement

 

  Page
GENERAL MATTERS S-i
CAUTIONARY NOTE TO UNITED STATES INVESTORS CONCERNING  MINERAL RESERVE AND MINERAL RESOURCE ESTIMATES S-i
NOTICE REGARDING PRESENTATION OF FINANCIAL INFORMATION S-ii
CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION S-ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS S-iii
MARKETING MATERIALS S-vi
SUMMARY S-1
RISK FACTORS S-3
DESCRIPTION OF SECURITIES BEING DISTRIBUTED S-4
USE OF PROCEEDS S-5
CONSOLIDATED CAPITALIZATION S-6
PRIOR SALES S-6
PRICE RANGE AND TRADING VOLUME S-7
PLAN OF DISTRIBUTION S-8
LEGAL MATTERS S-10
DOCUMENTS INCORPORATED BY REFERENCE S-10
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT S-11
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS S-11
AUDITORS, TRANSFER AGENT AND REGISTRAR  S-16
EXPERTS  S-16
WHERE YOU CAN FIND ADDITIONAL INFORMATION  S-17

  

Prospectus dated September 21, 2018

 

ABOUT THIS PROSPECTUS 2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 2
CAUTIONARY NOTE TO UNITED STATES INVESTORS CONCERNING MINERAL RESERVE AND RESOURCE ESTIMATES 4
CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION 5
DOCUMENTS INCORPORATED BY REFERENCE 6
SUMMARY DESCRIPTION OF BUSINESS 8
RISK FACTORS 12
USE OF PROCEEDS 19
PRIOR SALES 20
TRADING PRICE AND VOLUME 22
DIVIDEND POLICY 22
CONSOLIDATED CAPITALIZATION 23
DESCRIPTION OF SHARE CAPITAL 23
DESCRIPTION OF SECURITIES OFFERED UNDER THIS PROSPECTUS 24
DENOMINATIONS, REGISTRATION AND TRANSFER 29
PLAN OF DISTRIBUTION 29
CERTAIN INCOME TAX CONSIDERATIONS 30
AUDITORS, TRANSFER AGENT AND REGISTRAR 30
EXPERTS 31
ENFORCEMENT OF JUDGMENTS AGAINST FOREIGN PERSONS OR COMPANIES 31
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT 32
ADDITIONAL INFORMATION 32

 

  -i-  

 

  

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 Underwriters have 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 Underwriters 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.

 

Market data and certain industry forecasts used in this prospectus supplement and the accompanying prospectus and the documents incorporated by reference herein and therein were obtained from market research, publicly available information and industry publications. The Company believes that these sources are generally reliable, but the accuracy and completeness of this information is not guaranteed. The Company has not independently verified such information, and it does not make any representation as to the accuracy of such information.

 

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 MINERAL 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 mineral reserve and mineral 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. These definitions differ materially from the definitions in SEC Industry Guide 7 (“SEC Industry Guide 7”) under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”). For example, the terms “mineral reserve” and “probable mineral reserve” as used herein are Canadian mining terms as defined in NI 43-101, and these definitions differ from the definitions in SEC Industry Guide 7. Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report 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 SEC Industry Guide 7 reserves. Under Canadian rules, inferred mineral resources can only be used in economic studies as provided under NI 43-101. 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. An “inferred mineral resource” is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An inferred mineral resource has a lower level of confidence than that applying to an indicated mineral resource and must not be converted to a mineral reserve. 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 contained in prospectus supplement and the accompanying prospectus and the documents incorporated by reference herein and therein that contain descriptions of the Corporation’s mineral deposits 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, including SEC Industry Guide 7.

 

The SEC has adopted amendments to its disclosure rules to modernize the mineral property disclosure requirements for issuers whose securities are registered with the SEC. These amendments became effective February 25, 2019 (the “SEC Modernization Rules”) and, following a two-year transition period, the SEC Modernization Rules will replace the historical property disclosure requirements for mining registrants that are included in SEC Industry Guide 7. Following the transition period, as a foreign private issuer that files its annual report of Form 40-F with the SEC pursuant to the multi-jurisdictional disclosure system, the Company is not required to provide disclosure on its mineral properties under the SEC Modernization Rules and will continue to provide disclosure under NI 43-101 and the CIM Definition Standards. If the Company ceases to be a foreign private issuer or lose its eligibility to file its annual report on Form 40-F pursuant to the multi-jurisdictional disclosure system, then the Company will be subject to the SEC Modernization Rules which differ from the requirements of NI 43-101 and the CIM Definition Standards.

 

  S-i  

 

  

NOTICE REGARDING PRESENTATION OF FINANCIAL INFORMATION

 

The consolidated financial statements as at December 31, 2019 and 2018 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 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 “C$” or “$” are to Canadian dollars and references to “US$” are to United States dollars. On March 23, 2020, the daily rate as reported by the Bank of Canada for the conversion of one Canadian dollar into United States dollars was C$1.00 equals US$0.6905.

 

  S-ii  

 

 

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:

 

    Year Ended
December 31
    2019   2018
         
Highest rate during period   US$0.7699   US$0.8138
Lowest rate during period   US$0.7353   US$0.7330
Average rate during period   US$0.7537   US$0.7721
Rate at the end of period   US$0.7699   US$0.7330

 

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 timelines. 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”.

 

  S-iii  

 

 

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 may be 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, 2019; (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” below); (7) the actual nature, size and grade of its mineral resources and mineral reserves are materially consistent with the mineral resource and mineral reserve estimates reported in the supporting technical reports, including the PFS; (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 mineral 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:

 

negative cash flow from operating activities;

 

forward-looking statements may prove inaccurate;

 

dilution;

 

exploration, evaluation and development;

 

infrastructure

 

figures for the Company's resources are estimates based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated;

 

amendments to Share Purchase Agreement with Wheaton;

 

Keno Hill District;

 

mining operations;

 

employee recruitment and retention;

 

dependence on management;

 

permitting and environmental risks and other regulatory requirements;

 

surety bond risks;

 

potential profitability of mineral properties depends upon factors beyond the control of the Company;

 

  S-iv  

 

 

First Nation rights and title;

 

title to mineral properties;

 

capitalization and commercial viability;

 

critical accounting estimates and judgments;

 

general economic conditions may adversely affect the Company’s growth and profitability;

 

operating hazards and risks;

 

competition;

 

certain of the Company’s directors and officers are involved with other natural resource companies, which may create conflicts of interest from time to time;

 

the Company may fail to maintain adequate internal control over financial reporting pursuant to the requirements of the Sarbanes-Oxley Act;

 

as a “foreign private issuer”, the Company is exempt from Section 14 proxy rules and Section 16 of the Securities Exchange Act of 1934;

 

it may be difficult to enforce judgments or bring actions outside the United States against the Company and certain of the Company’s directors; and

 

It may be difficult to anticipate the effects of the Coronavirus (COVID-19) on the Company.

 

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 11, 2020 for the year ended December 31, 2019 (the “2019 AIF”) and the Company’s Annual MD&A (as defined below – see “Documents Incorporated by Reference”), 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.

 

  S-v  

 

 

MARKETING MATERIALS

 

In connection with the Offering, the Underwriters used the Term Sheet (as defined herein) 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.

  

  S-vi  

 

 

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 14 of the 2019 AIF and the “Risk Factors” section beginning on page 23 of the Annual MD&A.

 

The Company

 

The Company’s business consists of mineral exploration and mine development and operation in Canada, primarily in Yukon Territory.

 

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 with an effective date of March 28, 2019, as amended and issued on February 13, 2020, 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 2019 AIF and the PFS, contain further details regarding the business of Alexco. See “Documents Incorporated by Reference.”

 

  S-1  

 

 

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.

 

Securities Offered   [●] Offered Shares
Offering Size   The Company and the Underwriters expect the size of the Offering will be for an anticipated minimum of C$5,000,000.
Option to purchase additional Offered Shares   The Company has granted to the Underwriters an option to purchase up to an additional [●] Offered Shares at the Offering Price on the same terms and conditions as the Offering, exercisable in whole or in part and from time to time, for a period of up to 30 days following closing of the Offering to cover over-allotments, if any.
Plan of Distribution   The Offering is made pursuant to the Underwriting Agreement dated March [●], 2020 between the Company and the Underwriters. See “Plan of Distribution” for details regarding the Underwriters’ Fee.
Use of Proceeds   The Company anticipates that the net proceeds from this Offering will be approximately C$[●], after deducting the Underwriters’ Fee and other expenses related to the Offering.  The Company intends to use the net proceeds of the Offering for preservation and measured advancement of mine development activity at the Keno Hill Silver Project, exploration and for general working capital purposes. 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 investor 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   On or about March 27, 2020 or such other date as the Company and the Co-Lead Underwriters mutually agree (the “Closing Date”).
Trading symbol   TSX and NYSE American: AXU

  

  S-2  

 

 

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 14 in the 2019 AIF, the factors set out under the “Risk Factors” section beginning on page 23 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.

 

COVID-19 Public Health Crisis

 

The Company’s business, operations and financial condition could be materially and adversely affected by the outbreak of epidemics or pandemics or other health crises, including the recent outbreak of COVID-19. To date, there have been a large number of temporary business closures, quarantines and a general reduction in consumer activity in a number of countries including Canada, the United States, Europe and China. The outbreak has caused companies and various international jurisdictions to impose travel, gathering and other public health restrictions. While these effects are expected to be temporary, the duration of the various disruptions to businesses locally and internationally and the related financial impact cannot be reasonably estimated at this time. Similarly, the Company cannot estimate whether or to what extent this outbreak and the potential financial impact may extend to countries outside of those currently impacted. Such public health crises can result in volatility and disruptions in the supply and demand for silver and other metals and minerals, global supply chains and financial markets, as well as declining trade and market sentiment and reduced mobility of people, all of which could affect commodity prices, interest rates, credit ratings, credit risk, share prices and inflation. The risks to the Company of such public health crises also include risks to employee health and safety, a slowdown or temporary suspension of operations in geographic locations impacted by an outbreak, increased labor and fuel costs, regulatory changes, political or economic instabilities or civil unrest. At this point, the extent to which COVID-19 will or may impact the Company is uncertain and these factors are beyond the Company’s control; however, it is possible that COVID-19 may have a material adverse effect on the Company’s business, results of operations and financial condition.

 

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, 2020, the closing price of the Common Shares on the TSX has ranged from a low of C$1.32 to a high of C$2.95 and on the NYSE American has ranged from a low of US$0.92 to a high of US$2.32.

 

  S-3  

 

 

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 (including in respect of the proceeds of the Offering) 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 March 23, 2020, 119,994,664 Common Shares of the Company were issued and outstanding.

 

  S-4  

 

 

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 C$[●] after deducting the Underwriters’ Fee of C$[●] and expenses in the aggregate amount of approximately C$[●]. If the Over-Allotment Option is exercised in full, the net proceeds from the Offering are estimated to be approximately C$[●] after deducting the Underwriters’ Fee and the estimated expenses relating to the Offering of approximately C$[●]. See “Plan of Distribution”.

 

The Company intends to use the net proceeds from the Offering for preservation and measured advancement of mine development activity at the Keno Hill Silver Project, exploration 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 

(C$[●]) 

Development and site expenditures at Keno Hill Silver Project   C$[●]
General corporate and working capital purposes(1)   C$[●]
Total   C$[●]

 

 

 

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 Underwriters’ 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. To the extent that the Company has negative cash flow in any future period, certain of the proceeds from the sale of the Offered Shares may be used to fund such negative cash flow from operating activities.

 

  S-5  

 

 

CONSOLIDATED CAPITALIZATION

 

There have been no material changes in the share and loan capital of the Company on a consolidated basis from December 31, 2019 to the date of this Prospectus Supplement. As of December 31, 2019, after giving effect to the Offering and an aggregate of 843,997 Common Shares pursuant to the exercise of stock options and the vesting of restricted stock units, the share capital of the Company will increase by the amount of the net proceeds of the Offering 843,997 Common Shares pursuant to the exercise of stock options and the vesting of restricted stock units. Since December 31, 2019, the number of outstanding convertible securities of the Company have not changed other than a decrease by an aggregate of 843,997 Common Shares issuable pursuant to the exercise of stock options and vesting of restricted stock units previously noted.

 

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
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 Private Placement
April 23, 2019 Underwriter’s Warrants 55,266 $1.70 Private Placement
May 10, 2019 Common Shares 5,333 $1.42 Vesting of Restricted Share Units
June 7, 2019 Common Shares 6,500,000 US$1.00 Shelf Prospectus Supplement Offering
June 7, 2019 Underwriter’s Warrants 260,000 US$1.00 Shelf Prospectus Supplement Offering
July 17, 2019 Common Shares 256,000 US$1.00 Exercise of Warrants
July 22, 2019 Common Shares 4,000 US$1.00 Exercise of Warrants
July 25, 2019 Common Shares 20,000 $0.60 Exercise of Stock Options
July 25, 2019 Common Shares 10,000 $0.84 Exercise of Stock Options
August 20, 2019 Common Shares 89,000 $0.60 Exercise of Stock Options
August 27, 2019 Common Shares 37,500 $0.84 Exercise of Stock Options
August 28, 2019 Common Shares 2,000 $1.75 Exercise of Stock Options
August 26, 2019 Common Shares 55,266 $1.70 Exercise of Warrants
August 29, 2019 Common Shares 666,667 $2.25 Exercise of Warrants

 

  S-6  

 

 


Date of Issue
Type of Securities No. of Securities Issue or Exercise Price per Security
Reason for Issue
September 3, 2019 Common Shares 90,000 $0.84 Exercise of Stock Options
September 6, 2019 Common Shares 5,000 $1.27 Exercise of Stock Options
September 9, 2019 Common Shares 333,333 $2.25 Exercise of Warrants
September 23, 2019 Common Shares 66,000 $0.60 Exercise of Stock Options
October 17, 2019 Common Shares 15,000 $0.60 Exercise of Stock Options
October 17, 2019 Common Shares 35,000 $0.84 Exercise of Stock Options
December 12, 2019 Common Shares 190,000 $0.60 Exercise of Stock Options
December 17, 2019 Stock Options 1,974,900 $2.61 Grant of Stock Options
December 17, 2019 Restricted Share Units 235,000 $2.61 Grant of Restricted Share Units
December 17, 2019 Restricted Share Units 78,331 $2.59 Vesting of Restricted Share Units
December 17, 2019 Deferred Share Units 280,000 $2.61 Grant of Deferred Share Units
December 23, 2019 Common Shares 53,000 $2.07 Exercise of Stock Options
December 23, 2019 Common Shares 100,000 $1.73 Exercise of Stock Options
December 30, 2019 Common Shares 50,000 $0.84 Exercise of Stock Options
January 8, 2020 Common Shares 208,334 $2.87 Vesting of Restricted Share Units
January 20, 2020 Common Shares 542,333 $0.60 Exercise of Stock Options
January 21, 2020 Common Shares 30,000 $2.07 Exercise of Stock Options
February 3, 2020 Common Shares 43,330 $2.29 Vesting of Restricted Share Units
February 6, 2020 Common Shares 12,000 $0.60 Exercise of Stock Options
February 6, 2020 Common Shares 5,000 $0.84 Exercise of Stock Options
February 24, 2020 Common Shares 3,000 $2.07 Exercise of Stock Options

 

PRICE RANGE AND TRADING VOLUME

 

The outstanding Common Shares are listed on the TSX and the NYSE American, both 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

(C$)

Low
(C$)

Volume
High
(US$)
Low
(US$)

Volume
2020
March 1 - 23 2.41 1.00 19,489,999 1.80 0.72 39,439,626
February 3.05 1.68 15,173,631 2.30 1.23 29,962,816
January 3.12 2.00 13,452,009 2.40 1.68 30,163,072
2019
December 3.19 2.29 5,772,990 2.46 1.72 35,585,473
November 2.53 2.01 4,645,080 1.93 1.53 20,395,977
October 2.73 2.14 4,639,227 2.08 1.62 21,029,102
September 3.73 2.2 9,195,616 2.81 1.66 43,010,521
August 3.45 2.09 8,457,795 2.60 1.57 38,449,986
July 2.45 1.37 5,142,117 1.87 1.04 19,731,516
June 1.62 1.26 2,482,756 1.24 0.95 10,212,529
May 1.47 1.31 904,631 1.1 0.95 4,145,785
April 1.60 1.265 2,022,902 1.22 0.93 7,848,470
March 1.86 1.53 1,389,235 1.41 1.15 6,574,805

 

  S-7  

 

  

On March 23, 2020 the closing price of the Common Shares on the TSX and the NYSE American was C$2.02 and US$1.38 per Common Share, respectively.

 

PLAN OF DISTRIBUTION

 

Subject to and pursuant to the Underwriting Agreement, the Company has agreed to sell and the Underwriters have severally, and not jointly nor jointly and severally, agreed to purchase on the Closing Date, a total of [●] Offered Shares at the Offering Price of C$[●] per Offered Share, payable in cash to the Company against delivery of such Offered Shares, on the Closing Date. The Company and the Underwriters expect the size of the Offering will be for an anticipated minimum of C$5,000,000. The Offering Price was determined by arm’s length negotiation between the Company and the Co-Lead Underwriters, on behalf of the Underwriters. Closing is expected to occur on or about March 27, 2020, or such other date as may be agreed upon by the Company and the Co-Lead Underwriters. 

 

In consideration for their services in connection with the Offering, the Underwriters will be paid the Underwriters’ Fee equal to 6.0% of the gross proceeds of the Offering (C$[●] per Offered Share, for an aggregate fee payable by the Company of C$[●], exclusive of the Over-Allotment Shares). The Company has agreed in the Underwriting Agreement to reimburse the Underwriters for their legal fees and certain other expenses in connection with the Offering.

 

The obligations of the Underwriters under the Underwriting Agreement may be terminated at their discretion upon the occurrence of certain events specified in the Underwriting Agreement including standard “litigation out”, “disaster out” “regulatory out”, “material adverse change out”, “market out”, and “breach out” rights of termination. The Underwriters are, however, obligated to take up and pay for all of the Offered Shares if any of the Offered Shares are purchased under the Underwriting Agreement. The Underwriters, as principals, are conditionally offering the Offered Shares, subject to prior sale, if, as and when issued to and accepted by them, subject to certain conditions contained in the Underwriting Agreement, such as receipt by the Underwriters of officers’ certificates and legal opinions.

 

Pursuant to the Underwriting Agreement, the Company has granted to the Underwriters 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 [●] Over-Allotment 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. A purchaser who acquires Over-Allotment Shares forming part of the Underwriters’ 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 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.

 

The Company has applied to list the Offered Shares on the TSX and the NYSE American. The TSX and NYSE American have not conditionally approved the Company’s listing applications and there is no assurance that the TSX or NYSE American will approve the listing applications. Listing will be subject to the Company fulfilling all of the listing requirements of the TSX and the NYSE American.

 

  S-8  

 

 

Pursuant to policies of certain Canadian securities regulatory authorities, the Underwriters 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 Underwriters 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 Underwriters may carry out these transactions on the TSX and NYSE American, in the over-the-counter market or otherwise.

 

The Underwriters propose 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 Underwriters may decrease the offering price and change the other selling terms. The compensation realized by the Underwriters will decrease by the amount that the aggregate offering price paid by the purchasers for the Offered Shares is less than the gross proceeds paid by the Underwriters to the Company. The decrease in the offering price will not decrease the amount of net proceeds of the Offering to the Company.

 

The Company has agreed, pursuant to the Underwriting Agreement, to indemnify the Underwriters and their affiliates and their directors, officers, employees, shareholders and agents and each other person, if any, controlling the Underwriters or their affiliates and against certain liabilities, including liabilities under Canadian and U.S. securities legislation in certain circumstances or to contribute to payments the Underwriters may have to make because of such liabilities.

 

Except as contemplated by the Underwriting Agreement, the Company has agreed that it will not, without the prior written consent of Cormark (not to be unreasonably withheld), directly or indirectly issue, offer, pledge, sell, contract to sell, contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer, lend or dispose of directly or indirectly, any Common Shares or securities or other financial instruments convertible into or having the right to acquire Common Shares or enter into any agreement or arrangement under which the Company would acquire or transfer to another, in whole or in part, any of the economic consequences of ownership of Common Shares, whether that agreement or arrangement may be settled by the delivery of Common Shares or other securities or cash, or agree to become bound to do so, or disclose to the public any intention to do so, during the period from the date hereof and ending 90 days following the Closing Date; provided that, notwithstanding the foregoing, the Company may: (i) grant of options or other securities (including restricted share units and deferred share units) in the normal course pursuant to the Company’s stock option plan or other stock-based compensation plans, and issue Common Shares in accordance with the terms thereof; and (ii) issue equity securities pursuant to the exercise or conversion, as the case may be, of any warrants, special warrants or other convertible securities of the Company outstanding on the date hereof. 

 

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 Underwriters 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 Underwriters or their U.S. affiliates participating in the Offering. The Underwriters and their U.S. affiliates 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 Underwriters and their U.S. affiliates 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 Underwriters in their capacity as underwriters, and should not be relied upon by investors.

 

  S-9  

 

 

The Underwriters and their 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 Underwriters and their 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 for the Offered Shares will be received by the Underwriters subject to rejection or allotment in whole or in part and the right is reserved to close the subscription book at any time without notice. An electronic deposit evidencing the Offered Shares is expected to be registered to CDS and will be deposited with CDS on the Closing Date or such other date as may be agreed upon between the Company and the Underwriters. Except in limited circumstances, a purchaser of such Offered Shares will receive only a customer confirmation from the registered dealer through which such Offered Shares are purchased.

 

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 Underwriters by Cassels Brock & Blackwell LLP with respect to Canadian legal matters and Troutman Sanders 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 Cassels Brock & Blackwell 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:

 

(a) the 2019 AIF, filed on SEDAR on March 11, 2020;

 

(b) the management information circular of Alexco dated April 26, 2019 prepared in connection with Alexco’s annual general meeting of shareholders held on June 6, 2019, filed on SEDAR on May 2, 2019;

 

  S-10  

 

 

(c) the audited consolidated financial statements of Alexco for the year ended December 31, 2019, 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 11, 2020;

 

(d) the material change report dated February 24, 2020 in respect of the sale of shares of the Company’s subsidiary, Alexco Environmental Group Holdings Inc., filed on SEDAR on February 25, 2020; and

 

(e) the template version of the term sheet (the “Term Sheet”) dated March 24, 2020 in connection with the Offering.

 

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 and before the termination of the distribution under the Offering 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 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. 

 

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.

 

  S-11  

 

 

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:

 

· an individual who is a citizen or resident of the United States;

 

· 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;

 

· an estate whose income is subject to U.S. federal income taxation regardless of its source; or

 

· 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.

 

  S-12  

 

 

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.

 

  S-13  

 

 

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.

 

  S-14  

 

 

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 a 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.

 

  S-15  

 

 

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.

 

  S-16  

 

 

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 Offered 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.

  

  S-17  

 

 

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.

 

  I-1  

 

 

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".

 

  ii  

 

 

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".

 

  iii  

 

 

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS 2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 2
CAUTIONARY NOTE TO UNITED STATES INVESTORS CONCERNING MINERAL RESERVE AND RESOURCE ESTIMATES 4
CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION 5
DOCUMENTS INCORPORATED BY REFERENCE 6
SUMMARY DESCRIPTION OF BUSINESS 8
RISK FACTORS 12
USE OF PROCEEDS 19
PRIOR SALES 20
TRADING PRICE AND VOLUME 22
DIVIDEND POLICY 22
CONSOLIDATED CAPITALIZATION 23
DESCRIPTION OF SHARE CAPITAL 23
DESCRIPTION OF SECURITIES OFFERED UNDER THIS PROSPECTUS 24
DENOMINATIONS, REGISTRATION AND TRANSFER 29
PLAN OF DISTRIBUTION 29
CERTAIN INCOME TAX CONSIDERATIONS 30
AUDITORS, TRANSFER AGENT AND REGISTRAR 30
EXPERTS 31
ENFORCEMENT OF JUDGMENTS AGAINST FOREIGN PERSONS OR COMPANIES 31
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT 32
ADDITIONAL INFORMATION 32
ENFORCEABILITY OF CIVIL LIABILITIES 33

 

 

 

 

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".

 

   2  

 

 

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;

 

   3  

 

 

· 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.

 

   4  

 

 

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  

 

   5  

 

 

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.

 

   6  

 

 

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.

 

   7  

 

 

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 "District") is a silver mining region in Canada, encompassing over 35 former mines that produced variously from approximately 1918 through 1988.

 

   8  

 

 

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.

 

   9  

 

 

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").

 

   10  

 

 

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.

 

   11  

 

 

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.

 

   12  

 

 

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.

 

   13  

 

 

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.

 

   14  

 

 

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.

 

   15  

 

 

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.

 

   16  

 

 

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.

 

   17  

 

 

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.

 

   18  

 

 

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".

 

   19  

 

  

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

 

   20  

 

 

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.

 

   21  

 

 

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.

 

   22  

 

 

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.

 

   23  

 

 

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.

 

   24  

 

 

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;

 

   25  

 

 

· 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;

 

   26  

 

 

· 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;

 

· 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;

 

· 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);

 

· 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;

 

· 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;

 

· 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;

 

· 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;

 

· 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;

 

· 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;

 

· any entitlement of the Company to purchase the subscription receipts in the open market by private agreement or otherwise;

 

· whether the Company will issue the subscription receipts as global securities and, if so, the identity of the depositary for the global securities;

 

· whether the Company will issue the subscription receipts as bearer securities, registered securities or both;

 

· provisions as to modification, amendment or variation of the Subscription Receipt Agreement or any rights or terms attaching to the subscription receipts;

 

· the identity of the Escrow Agent;

 

· whether the subscription receipts will be listed on any exchange;

 

   27  

 

 

· material United States and Canadian federal tax consequences of owning the subscription receipts; and

 

· any other terms of the subscription receipts.

 

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.

 

· The particular terms of each issue of units will be described in the related Prospectus Supplement. This description will include, where applicable:

 

· the designation and aggregate number of units offered;

 

· the price at which the units will be offered;

 

· if other than Canadian dollars, the currency or currency unit in which the units are denominated;

 

· 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;

 

· 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;

 

· any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; and

 

   28  

 

 

· any other material terms, conditions and rights (or limitations on such rights) of the units.

 

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.

 

   29  

 

 

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.

 

   30  

 

 

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:

 

· 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"

 

· 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"

 

· 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

 

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   Name and Address of Agent
Clynton R. Nauman
Chairman CEO & Director
  Alexco Resource Corp., Suite 1225, Two Bentall Centre, 555 Burrard Street, Vancouver, British Columbia, V7X 1M9
     
Michael Winn
Director
  Alexco Resource Corp., Suite 1225, Two Bentall Centre, 555 Burrard Street, Vancouver, British Columbia, V7X 1M9

 

   31  

 

 

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.

 

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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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