ANNUAL FINANCIAL REPORT
DECEMBER 31, 2018
ALEXCO RESOURCE CORP.
Building a Sustainable Future In Silver
This Management’s Discussion and Analysis (“MD&A”) of Alexco Resource Corp. (“Alexco” or the
“Corporation”) is dated March 13, 2019 and provides an analysis of Alexco’s consolidated financial results
for the year ended December 31, 2018 compared to those of the previous year.
The following information should be read in conjunction with the Corporation’s December 31, 2018
consolidated financial statements with accompanying notes, which have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board. All dollar figures are expressed in Canadian dollars unless otherwise stated. These
documents and additional information on the Corporation are available on the Corporation’s website at
the Edgar website at
the SEDAR website at www.sedar.com and
www.alexcoresource.com,
www.sec.gov.
Except where specifically indicated otherwise, the disclosure in this MD&A of scientific and technical
information regarding exploration projects on Alexco’s mineral properties has been reviewed and
approved by Alan McOnie, FAusIMM, Vice President, Exploration, while that regarding mine development
and operations has been reviewed and approved by Neil Chambers, P.Eng., Mine Superintendent, both
of whom are Qualified Persons as defined by National Instrument 43-101 – Standards of Disclosure for
Mineral Projects (“NI 43-101”).
All dollar figures are expressed in Canadian dollars unless otherwise stated.
2018 HIGHLIGHTS AND OVERALL PERFORMANCE
CORPORATE
Overall, Alexco reported a net loss of $8,501,000 ($0.08 per share) for the year ended December
31, 2018 and a loss before tax expense of $6,994,000 including non-cash adjustments totalling
$2,597,000. The loss before taxes for 2017 was $6,341,000 including non-cash costs of
$4,658,000. The increase in the net loss in 2018 compared to 2017 was mainly attributed a non-
cash credit facility fee ($797,000), increased mine-site care and maintenance costs (increase of
$715,000) and an investment loss incurred in 2018 ($572,000) partially offset with the
Corporation’s fair value gain on the embedded derivative related to the Wheaton streaming
agreement ($3,071,000). Furthermore, in 2017 the Corporation incurred a foreign exchange gain
($963,000) and gains on investments ($1,341,000).
The Corporation’s cash and cash equivalents at December 31, 2018 totaled $8,576,000
compared to $17,906,000 at December 31, 2017, while net working capital (see Non-GAPP
Measures on page 23) totaled $10,188,000 compared to $18,676,000 at December 31, 2017. The
Corporation’s restricted cash and deposits at December 31, 2018 totalled $2,725,000 compared
to $7,092,000 at December 31, 2017.
On February 23, 2018 Alexco entered into a definitive credit agreement with Sprott Private
Resource Lending (Collector), L.P. (“Sprott”) to provide a US$15,000,000 credit facility (the
“Credit Facility”), which remains undrawn.
On April 30, 2018 Alexco replaced $6,305,000 of cash placed as security for its Keno Hill property
with a surety bond. The surety instrument is collateralized with $2,364,191 of cash with the
resulting $3,941,000 plus accrued interest being reclassified to unrestricted cash. In addition on
April 25, 2018 security posted in cash in the amount of $499,000 (US$398,000) was also
released to the Corporation on issuance of a State of Colorado “No Further Active Remediation”
filing which represents the final step in the successful completion of the Globeville Smelter
Project.
- 2 -
On June 14, 2018, the Corporation 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 compromised 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.
During the year, 1,167,351 warrants were exercised for proceeds to Alexco of $2,027,000.
On April 12, 2018 Alexco announced the appointment of Karen McMaster to the Board of
Directors. Ms. McMaster’s extensive history in the mining industry has been primarily focused on
legal counsel for environmental matters as well as exploration and mine development.
MINE OPERATIONS AND EXPLORATION
On May 2, 2018, Alexco announced completion of 550 meters (“m”) on the Bermingham
underground advanced exploration decline, initially collared in August 2017, and subsequently
completed a 4,230 m underground exploration drill program from the decline. Results from this
drilling program were released on August 9, 2018 and September 17, 2018.
Following completion of underground advanced exploration work at Bermingham, Alexco
commenced the underground ramping system at the Flame & Moth deposit. Alexco completed
the targeted Flame & Moth underground development program for 2018 with 452 m driven in
total, comprising 371 m of linear decline advance and 81 m included in support infrastructure.
During 2018, the Corporation completed a total of 15,314 m of surface exploration drilling in 55
completed holes including 7,687 m in 26 drill holes in a new reconnaissance program, and
3,756 m in 11 holes in the Bermingham in-fill drilling program, as well as 1,179 m in ten holes at
Flame & Moth for metallurgical and geotechnical purposes. A further 2,692 m was drilled on third
party properties within the district complex. Results from the surface drilling programs were
released on August 9, 2018, September 17, 2018 and January 29, 2019.
On September 20, 2018 Alexco announced an updated and expanded mineral resource estimate
for the Bermingham deposit (see news release dated September 20, 2018, entitled “Alexco
Updates Bermingham Resource”). The indicated mineral resources expanded from 17.3 million
ounces to 33.3 million ounces of contained silver at an average silver grade of 628 g/t, while
inferred mineral resources increased from 5.4 million ounces to 10.4 million ounces of contained
silver at an average silver grade of 526 g/t.
In the fourth quarter of 2018 the Corporation determined that the likely timeline to renew the
currently active Water Use Licence (“WUL”) (which includes authorization for water use and
waste deposition related to development and processing of Bermingham ores) would be near the
end of the second quarter of 2019. With this information in hand and the announcement of an
expanded mineral resource at Bermingham (above), the Corporation elected to extend the pre-
feasibility study (“PFS”) completion timeline to the end Q1 2019. With respect to the outstanding
renewal of the WUL originally expected in Q2 2019, the Corporation believes it prudent to guide
toward a third quarter issuance of this final WUL, due to continued backlog pressure in the Yukon
Water Board process.
On December 6, 2018 the Association for Mineral Exploration (“AME”) announced the recipients
of their 2018 Celebration of Excellence Award winners. Alexco’s Al McOnie (VP, Exploration),
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Seymour Iles (District Exploration Manager) and Jared Chipman (Sr. Geologist) were honored
with the H.H. ‘Spud’ Huestis Award for Excellence in Prospecting and Mineral Exploration. This
award is a result of their work on the recent discovery and delineation of more than 60 million
ounces of silver in the Flame & Moth and Bermingham deposits in the Keno Hill Silver District.
ALEXCO ENVIRONMENTAL GROUP
Alexco Environmental Group (“AEG”), recognized revenues of $19,880,000 for the year ended
December 31, 2018 for a gross profit of $6,052,000 achieving a gross margin of 30% compared
to revenues of $10,732,000 for the year ended December 31, 2017 for a gross profit of
$4,000,000 achieving a gross margin of 37%. AEG operating income before taxes for 2018 was
$1,518,000 excluding non-cash costs of $165,000 (see Note 28 in the financial statements for the
year ended December 31, 2018).
On April 3, 2018 Alexco’s wholly owned US subsidiary, Alexco Water and Environment Inc.
(“AWE”), entered into a Master Services Agreement (“MSA”) with Colorado Legacy Land LLC
(“CLL”) to become the Operator of Responsible Charge for the Schwartzwalder Mine and the
former Cañon City Uranium Mill reclamation and cleanup projects. These long-term arrangements
are expected to take more than ten years to complete and are expected to generate revenue in
excess of US$20,000,000 for AWE.
On June 15, 2018 AEG acquired Contango Strategies Ltd. (“Contango”), a private company
based in Saskatoon, Saskatchewan, for consideration of $1,388,000 comprising $971,600 in cash
and 237,999 common shares of Alexco at a value of $416,400. 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. The acquisition includes all of Contango’s operations
including $450,000 in working capital, and property, plant and equipment.
SELECTED ANNUAL CONSOLIDATED CORPORATE INFORMATION
(expressed in thousands of Canadian
dollars, except per share amounts)
Revenue
Gross profit
Net loss
Loss per share:
Basic
Diluted
Total assets
Total long-term liabilities
Dividends declared
OVERVIEW OF THE BUSINESS
As at and for the year ended December 31
2018
19,880
6,052
(8,501)
($0.08)
($0.08)
133,018
8,384
Nil
2017
10,732
4,000
(7,813)
($0.08)
($0.08)
122,324
5,669
Nil
2016
11,361
2,866
(4,524)
($0.05)
($0.05)
109,686
4,332
Nil
Alexco owns substantially all of the historic Keno Hill Silver District (“KHSD”), located in Canada's Yukon
Territory. The Bellekeno silver mine, one of the world's highest-grade silver mines with a production grade
averaging 779 g/t, commenced commercial production at the beginning of 2011 and was Canada's only
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operating primary silver mine from 2011 to 2013, producing a total of 5.6 million ounces of silver during
that time. In September 2013 Alexco suspended Bellekeno mining operations in light of a sharply reduced
silver and base metal prices. Since the suspension Alexco has focused on evaluating the Flame & Moth
and the Bermingham deposits, renegotiating third party contracts and reviewing other opportunities to
reduce future mining operating costs for future operations at Keno Hill. This work culminated with the
publication of an updated preliminary economic assessment (“PEA”) in 2017. With the PEA study in hand,
Alexco has moved forward to development of a PFS focused on potential KHSD economics related to the
return of KHSD to commercial operations including production from the Flame & Moth, Bermingham,
Lucky Queen and Bellekeno silver deposits.
Alexco also owns and operates an environmental consulting business, AEG, which provides a variety of
mine and industrial related environmental services, including management of the regulatory and
environmental permitting process, remediation technologies and reclamation and mine closure services.
AEG provides these services to both government and industry clients through its wholly owned
subsidiaries, Alexco Environmental Group Inc. (“AEG Canada”), Alexco Water and Environment Inc.
(“AWE”) and Contango Strategies Ltd. (“Contango”). Alexco also owns certain patent rights related to
mine reclamation and closure processes including the in-situ immobilization of metals in groundwater,
soils, waste stacks and pit lakes.
Alexco is a public company which is listed on the NYSE American Stock Exchange (under the symbol
AXU) and the Toronto Stock Exchange (under the symbol AXR).
OUTLOOK AND STRATEGY
Keno Hill Silver District
Alexco’s current primary focus is to re-start mining operations at Keno Hill, commodity prices, commercial
arrangements and markets considered. Alexco has the requisite permits and authorizations for future ore
production from the Flame & Moth, Lucky Queen, Bellekeno and Onek deposits. In November 2017 a
project proposal for environmental assessment was submitted to Yukon Environmental and Socio-
economic Assessment Board (“YESAB”) for future production and processing of ore from the
Bermingham deposit. A positive Decision Document was issued by the Yukon Government on July 27,
2018. Completion of the amendments to Alexco’s Quartz Mining Licence (“QML”) is now expected in Q2
2019, and a renewal of the WUL is expected in Q3 2019. At that point Alexco will be fully permitted for ore
production and processing from the Bermingham deposit in addition to the previously mentioned Flame &
Moth, Lucky Queen, Bellekeno and Onek deposits.
The KHSD is located in the Yukon Territory approximately 330 kilometers north of Whitehorse in the
vicinity of the villages of Mayo and Keno City and lies within the traditional territory of the First Nation of
Na-Cho Nyak Dun (“FNNND”). Alexco is party to a Comprehensive Cooperation and Benefits Agreement
(“CCBA”) with the FNNND, setting out common understandings, obligations and opportunities arising from
all of Alexco’s activities within the Keno Hill District including exploration, care and maintenance, District
closure activities and mine production.
Alexco Environmental Group
Alexco owns and operates AEG which carries out a variety of fee for service and turnkey project activities
related to environmental management and assessment, project permitting, remediation, water treatment
and project closure mandates in North America and elsewhere. AEG has developed a strong client base
within the mining industry and has also been able to establish new lines of business related to industrial
site soil remediation, water treatment and historical mine pool remediation as well as emergency water
treatment services. With the acquisition of Contango in June 2018, AEG has expanded its business lines
into specialized biological water treatment systems for mining, oil and gas, and industrial operations.
- 5 -
AEG provides consulting services to Alexco’s wholly owned subsidiary, Elsa Reclamation and
Development Ltd. (“ERDC”), on the on-going environmental care and maintenance program and
reclamation and closure projects at Keno Hill with the Federal Government of Canada (“Canada”) and in
accordance with the amended and restated Subsidiary Agreement (“ARSA”).
ERDC
As part of Alexco’s 2006 acquisition of the United Keno Hill Mines (“UKHM”) mineral rights in the Keno Hill
District, ERDC is party to the ARSA with Canada. Under the ARSA, ERDC is retained by Canada as a
paid contractor responsible on a continuing basis for the environmental care and maintenance and
ultimate closure reclamation of the former UKHM mineral properties. The ARSA provides that ERDC
share the responsibility for the development of the ultimate closure plan with Canada. Upon regulatory
approval, the closure plan will be implemented by ERDC. During the period required to develop the plan
and until the closure plan is executed, ERDC is also responsible for carrying out the environmental care
and maintenance at various sites within the UKHM mineral rights, for a fixed annual fee established on a
per-site basis totaling $850,000, adjustable for material changes in scope. ERDC receives agreed-to
commercial contractor rates when retained by Canada to provide environmental services in the Keno Hill
District outside the scope of care and maintenance and closure and reclamation planning under the
ARSA.
ERDC currently holds a Type B WUL under the Yukon Waters Act to undertake care and maintenance
activities in the Keno Hill area. The final Existing State of Mine (“ESM”) Reclamation Plan at Keno Hill was
completed in September 2018 and was subsequently submitted for environmental assessment by the
YESAB. The ESM Project Proposal to YESAB was declared adequate in February 2019. Subsequent to
completion of the YESAB environmental assessment process, a WUL amendment will be required from
the Yukon Water Board to authorize the activities necessary to effect closure of the site. After licencing,
funding approval from Crown-Indigenous Relations and Northern Affairs Canada (“CIRNAC”) for the final
cleanup project will be subject to review and acceptance of the project by the Treasury Board of Canada.
The final ESM Reclamation Plan is subject to amendment that may result from requirements during the
assessment, licencing, and funding approval processes.
Economic Climate
Silver, lead and zinc are the primary metals found within the Keno Hill District historically. With respect to
the economic climate during 2018, prices have steadily declined with an average silver price of US$15.71
during the year. Silver traded from a high of US$17.52 on January 25, 2018 to a low of US$13.97 on
November 14, 2018, while lead traded between US$1.22 to US$0.87 and zinc traded between US$1.64
to US$1.04 per pound. As at the date of this MD&A, spot commodity prices are approximately US$15.50
per ounce silver, US$0.95 per pound for lead and US$1.29 per pound for zinc and the Canadian-US
exchange rate is approximately US$0.75 per CAD. Consensus investment analyst forecasts over the next
two years for silver average approximately US$16.25 per ounce, for lead average approximately US$1.05
per pound, and for zinc US$1.18 per pound, with the Canadian-US exchange rate forecast at US$0.76
per CAD (see “Risk Factors” in the MD&A for the year ended December 31, 2018, including but not
limited to “Potential Profitability Of Mineral Properties Depends Upon Other Factors Beyond the Control of
the Corporation” and “General Economic Conditions May Adversely Affect the Corporation’s Growth and
Profitability” thereunder).
- 6 -
RESULTS OF OPERATIONS
Keno Hill Silver District
2018 Flame & Moth Development
During 2018 Alexco commenced the underground ramping system at the Flame & Moth deposit. Alexco
completed the targeted Flame & Moth underground development program for 2018 with 452 m driven in
total, comprising 371 m of linear decline advance and 81 m included in support infrastructure.
Approximately 336 m of ramp and infrastructure development remains to reach the first ore level access
at the Lightning Zone. In addition, a 100 m ventilation raise to surface will be required before commercial
ore production can be achieved. Completion of the remaining ramp development, raise and infrastructure
is pending completion of the PFS and a positive production decision.
The Flame & Moth decline is being constructed at a design of 15% grade and sized 3.7 m wide x 4.0 m
high and will accommodate new underground drilling headings as well as haulage up to 250 to 400
tonnes of ore per day to the primary crusher which is located within 200 m of the mine portal.
Exploration
i.
2018 Advanced Exploration Program - Bermingham
In May 2018 the Corporation completed the 550 m advanced exploration decline and from established
underground drilling stations, completed an underground drilling program designed to provide 10 – 15 m
spaced intercepts in the upper portion of the high grade Bear Vein.
The underground drilling program was completed in September 2018 with 4,230 m in 24 holes, with most
holes being extended beyond the Bear Vein to also intersect the adjacent mineralized Bermingham and
Bermingham Footwall veins.
At the same time, surface drilling continued to infill and extend mineralization in areas peripheral to the
Bermingham resources with a total of 3,756 m completed in 11 holes.
Initial 2018 results from this underground drilling campaign were announced on August 9, 2018 (see
news release dated August 9, 2018, entitled “Alexco Drills up to 12 Meters (true width) of 1,019 grams per
tonne Silver at Bermingham Deposit, Provides Update on Permitting and Underground Development”)
and further results were announced on September 17, 2018 (see news release dated September 17,
2018, entitled “Alexco Drills Intersects 4.3 Meters (Tue Width) of 3,605 Grams per Tonne Silver at
Bermingham, Completes Underground Infill/Exploration Drill Program”).
The in-drill results confirmed the previously anticipated silver grades and vein thickness with significant
intercepts reported such as the Bear Vein over a 4.29 m true width grading 3,605 g/t (115.91 oz/t) silver in
hole BMUG18-018 and 12.28 m true width grading 1,019 g/t (32.8 oz/t) silver in hole BMUG18-012. Other
significant intercepts were reported from the associated Bermingham and Bermingham Footwall veins
including 4.17 m true width grading 5,373 g/t (172.8 oz/t) Ag in hole BMUG18-015.
ii.
Updated Mineral Resource Estimate - Bermingham
The results from the 2017 and 2018 exploration drilling programs were incorporated into the updated and
expanded mineral resource estimate for the Bermingham deposit prepared by SRK Consulting (Canada)
Inc. (“SRK”) and announced on September 20, 2018 (see news release dated September 20, 2018
entitled, “Alexco Updates Bermingham Mineral Resource”).
- 7 -
The indicated mineral resources expanded from 17.3 million ounces to 33.3 million ounces of contained
silver at an average grade of 628 g/t silver, while inferred mineral resources have increased from 5.4
million ounces to 10.4 million ounces of contained silver at an average grade of 526 g/t silver. This
updated and expanded mineral resource estimate will be used as the basis for the PFS currently being
prepared.
iii.
2018 Other Exploration Areas
In October 2018 the Corporation completed its 2018 surface exploration program as planned, drilling a
total of 15,314 m in 55 completed drill holes (including the 3,756 m in 11 surface holes at Bermingham
noted above).
In addition to the exploration drilling that was focused on the Bermingham prospect, other generative
programs were undertaken on historically mined sites at the Husky, No Cash, Townsite, Eagle, Bellekeno
South and Black Cap occurrences with 26 holes completed in 7,687 m. The assay results from these
holes were announced on January 21, 2019 (see news release dated January 21, 2019, entitled “Alexco
2018 Reconnaissance Drilling Confirms Continuation of Bermingham Mineralization at Depth and
Identifies an Offset Extension, Identifies New Gold Targets”). This included:
A new exploration initiative was undertaken on third party properties within the district complex
with 2,692 m completed in eight drill holes.
11 drill holes for 1,179 m completed at the Flame & Moth deposit, for metallurgical and
geotechnical purposes.
During the fourth quarter the Corporation completed a high resolution helicopter EM-magnetic
geophysical survey totalling 1,100 line kilometers over the Galena Hill area. The data is currently being
processed and when available will assist with geological interpretation and correlation of known
mineralized structures to identify new prospective zones.
Permitting Update
Alexco has the requisite permits and authorizations for future ore production from the Bellekeno, Flame &
Moth, Lucky Queen, and Onek deposits. Permitting for production from the Bermingham deposit is
ongoing with a positive Decision Document issued by the Yukon Government on July 27, 2018. The
Decision Document outlines a number of standard terms and conditions for development and mine
production from the Bermingham deposit.
With the issuance of the Decision Document, Alexco submitted a water license amendment and renewal
application to the Yukon Water Board for processing and milling ore and discharging treated water from
the Bermingham mine.
Completion of the amendments to Alexco’s QML are expected Q2 2019, and a renewal of the WUL is
expected in Q3 2019.
Pre-feasibility Study
During the fourth quarter of 2018 the Corporation continued to work with independent consultants on the
PFS. As a result of the announcement of an expanded mineral resource at Bermingham and a delay of
the permitting timeline for the Bermingham deposit, completion of the PFS is anticipated late in the first
quarter of 2019. The PFS will address optimization of underground development and mining strategies for
- 8 -
the restart of commercial mining operations in the KHSD, including strategies related to extraction of the
recently expanded Bermingham resource.
Mine Site Care and Maintenance
Mine site care and maintenance costs for 2018 totaled $2,603,000 compared to $1,888,000 in 2017. The
increase in costs is mainly due to site-based expenditures and mill maintenance and refurbishment
initiatives related to future recommissioning of the mill and related plant. Included in mine site care and
maintenance costs is depreciation expense of $1,292,000 for 2018 compared to $1,366,000 for 2017.
General and Administrative Expenses
Corporate:
Corporate general and administrative expenses during 2018 totaled $7,498,000 compared to $8,164,000
for 2017. This includes non-cash costs of $2,649,000 in 2018 and $2,407,000 in 2017. The corporate
general and administrative expenses decreased in 2018 primarily as a result of the Corporation incurring
higher costs in 2017 related to restructuring the Amended SPA with Wheaton and professional and
consulting fees for restructuring AEG.
Environmental Services:
Environmental Services general and administrative expenses during 2018 totaled $4,672,000 compared
to $2,778,000 for 2017. The increase in general and administrative expenses in 2018 is attributable to the
additional overheads associated with operation of the Contango business and additional investment in
professional employees and support functions required to meet demand and growth in the business.
Alexco Environmental Group (AEG) and ERDC
Highlights during 2018:
AEG recognized revenues of $19,880,000 in 2018 for a gross profit of $6,052,000 achieving a
gross margin of 30% compared to revenues of $10,732,000 for a gross profit of $4,000,000
achieving a gross margin of 37% in 2017. The increase in gross profit during the 2018 period was
primarily due to new projects from both Canadian and US customers.
During the year, under the contract with Canada on the historical cleanup at Keno Hill, ERDC
submitted the ESM Reclamation Plan for environmental assessment by YESAB. In addition,
ERDC continued with detailed engineering related to the closure plan.
AEG is successfully operating two water treatment facilities in the US, the Gladstone Interim
Water Treatment Plant (“IWTP”) near Silverton Colorado and the Schwartzwalder industrial water
treatment plant near Golden Colorado, as well as four smaller water treatment facilities within the
Keno Hill District in the Yukon Territory, Canada.
Acquisition of Contango Strategies Ltd.
On June 15, 2018 AEG acquired Contango, a private company based in Saskatoon, Saskatchewan, for
consideration of $1,388,000 comprising $971,600 in cash and 237,999 common shares of Alexco at a
value of $416,400. 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. The acquisition
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included all of Contango’s operations including $450,000 in working capital, and property, plant and
equipment.
Contango specializes in biological (passive, semi-passive and active) water treatment systems for mining,
oil and gas, and industrial operations. Contango operates a year-round environmentally controlled pilot-
scale facility, which allows for the development, testing and optimization of technologies such as
bioreactors and constructed treatment wetlands. Additionally, genetic profiling using Contango’s in-house
DNA sequencing facility and microbiology laboratories can detect and identify microbes for applications
including bioreactor optimization, corrosion and fouling correction, and environmental remediation.
FOURTH QUARTER
For the quarter ended December 31, 2018 Alexco reported a net loss of $1,795,000 on total revenues of
$8,902,000 compared to a net loss of $1,790,000 on total revenues of $2,507,000 in 2017. AEG
recognized revenues of $8,902,000 in the fourth quarter of 2018 for a gross profit of $2,152,000 achieving
a gross margin of 24% compared to revenues of $2,507,000 in the fourth quarter of 2017 for a gross profit
of $993,000 achieving a gross margin of 40%. The higher 2018 period revenue was attributed to
commencement of a new project requiring construction of a Water Treatment Plant, which included lower
margin work on the front end of the project.
Mine site care and maintenance costs in fourth quarter of 2018 totaled $319,000 compared to $453,000
for the same period in 2017. The decrease in costs is mainly due to a lower depreciation charge in the
2018 period.
Corporate general and administrative expenses in the fourth quarter of 2018 totaled $1,671,000
compared to $1,895,000 in the fourth quarter of 2017. The decrease in the 2018 period relates primarily
to AEG restructuring costs incurred in the 2017 period.
Environmental Services general and administrative expenses in the fourth quarter of 2018 totaled
$1,576,000 compared to $585,000 in the fourth quarter of 2017. The increase in general and
administrative expenses in the 2018 period is attributable to an approximate 125% expansion of the
professional and operating workforce to 82 employees to meet increased client-based demand and
additional overheads associated with operation of the Contango business.
SUMMARY OF QUARTERLY RESULTS
Key financial information for the most recent eight quarters is summarized as follows, reported in
thousands of Canadian dollars except for per share amounts:
Period
Revenue
Gross
Profit
Net Income
(Loss)
Basic Income
(Loss) per
Share
Diluted
Income
(Loss) per
Share
Expenditures
Capitalized on
Mineral
Properties
2017-Q1
2017-Q2
2017-Q3
2017-Q4
2017 Total (restated)
2018-Q1
2018-Q2
2018-Q3
2018-Q4
2018 Total
1,935
2,504
3,786
2,507
10,732
2,764
3,545
4,669
8,902
19,880
549
913
1,545
993
4,000
830
1,368
1,702
2,152
6,052
(973)
(2,736)
(2,313)
(1,791)
(7,813)
(3,261)
(1,896)
(1,548)
(1,795)
(8,501)
$(0.01)
$(0.03)
$(0.02)
$(0.03)
$(0.09)
$(0.03)
$(0.02)
$(0.01)
$(0.02)
$(0.08)
$(0.01)
$(0.03)
$(0.02)
$(0.03)
$(0.09)
$(0.03)
$(0.02)
$(0.01)
$(0.02)
$(0.08)
Note: Sum of all the quarters may not add up to the yearly totals due to rounding
885
1,782
3,491
2,809
8,967
3,147
4,812
6,517
3,163
17,639
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The net loss for 2017 quarters reflect site based expenditures along with general and administrative
expenses, costs related to restructuring the Wheaton streaming agreement partially offset by AEG profits,
a foreign exchange gain and a gain on investments. The net loss from the 2018 quarters reflect fair value
adjustment losses from the Corporation’s available-for-sale investments, site based expenditures, mill
maintenance initiatives and general and administrative expenses offset by a non-cash fair value gain
related to the embedded derivative on the Wheaton streaming agreement.
The mineral property expenditures in 2017 reflect the resource estimation work being completed on the
Bermingham and Flame & Moth deposits and completion of the PEA during the first quarter followed by
the surface exploration program and commencement of the advanced underground exploration program
at the Bermingham deposit. The mineral property expenditures in the first quarter of 2018 mainly reflect
the continued advancement of the underground exploration decline at the Bermingham deposit and the
expenditures incurred in the second, third and fourth quarters of 2018 reflect completion of the advanced
exploration decline, completion of the underground drilling program at the Bermingham deposit,
commencement of
the Flame & Moth deposit and
commencement of a 15,000 m surface drilling program. The Corporation is continuing to work on a pre-
feasibility study, which will include the drill results from the 2017 surface drill program along with the 2018
drill program at the Bermingham deposit.
the underground development decline at
Liquidity, Cash Flows and Capital Resources
Liquidity
At December 31, 2018 the Corporation had cash and cash equivalents of $8,576,000, and net working
capital of $10,188,000 compared to cash and cash equivalents of $17,906,000 and net working capital of
$18,676,000 at December 31, 2017. The Corporation faces no known liquidity issues or is aware of any
significant credit risks in any of its financial assets. In addition, the Corporation’s restricted cash and
deposits at December 31, 2018 totalled $2,725,000 compared to $7,092,000 at December 31, 2017.
With its cash resources and net working capital on hand at December 31, 2018, and assuming no re-start
of full scale mining operations, Alexco anticipates it will have sufficient capital resources to service the
working capital requirements of its mine site care and maintenance, exploration activities, environmental
services business and corporate offices and administration, for at least the next 12 month period. As
noted elsewhere in this MD&A, re-start of mining operations is dependent on a number of factors,
including a supportive silver market, maintaining current metal prices and foreign exchange rates. A re-
start of underground production operations will require additional capital investment, in excess of the
capital resources currently on hand. Because of these factors, combined with its long term objectives for
the exploration and development of its mineral properties, the Corporation is likely to require future
additional funding.
Historically, Alexco’s main sources of funding have been from mining operations, AEG and equity
issuances. All sources of finance reasonably available will be considered to fund future requirements,
including but not limited to issuance of new capital, issuance of new debt and the sale of assets in whole
or in part, including mineral property interests. There can be no assurance of a re-start of mining
operations or continued access to finance in the future, and an inability to generate or secure such
funding may require the Corporation to substantially curtail and defer its planned exploration and
development activities.
- 11 -
Cash Flows
Three Months Ended
December 31
2018
2017
2018
Year Ended
December 31
2017
Cash flow from (used) in operating activities
Cash flow from investing activities
Cash flow provided by financing activities
$ (657)
(4,840)
23
$ 478
(3,965)
29
$ (5,490)
(14,161)
10,321
$ (4,054)
(7,329)
8,907
$ (5,474)
$ (3,458)
$ (9,330)
$ (2,476)
Cash outflow in operating activities was $657,000 for the fourth quarter of 2018 versus cash inflow of
$478,000 for the fourth quarter of 2017. The majority of cash outflow from operating activities during the
2018 period were expended on site-based care and maintenance costs and general and administrative
costs offset by profits from AEG. Cash outflow from investing activities were $4,840,000 for the fourth
quarter of 2018 versus a cash outflow of $3,965,000 for the fourth quarter of 2017. The cash outflow
during the fourth quarter of 2018 related to the surface exploration program and work on a pre-feasibility
study. The cash inflow from financing activities was $23,000 for the fourth quarter of 2018 versus a cash
inflow of $29,000 for the fourth quarter of 2017.
Cash used in operating activities was $5,490,000 for 2018 versus $4,054,000 for 2017. The majority of
cash consumed in operating activities during the 2018 and 2017 periods were expended on site-based
care and maintenance costs and general and administrative costs offset by profits from AEG. Cash
outflow from investing activities were $14,161,000 for 2018 versus $7,329,000 for 2017. The increased
cash outflow in 2018 primarily related to the Bermingham underground advanced exploration program,
increased surface exploration programs, underground development work at Flame & Moth deposit and
work on the prefeasibility study. Furthermore, the Corporation acquired Contango in 2018. The outflows in
2018 were partially offset with the release of restricted funds in place of a surety bond. During 2017, the
Corporation received $2,003,000 from the proceeds on the disposal of investments compared to
$207,000 outflow from purchasing investments in 2018. Cash inflow from financing activities were
$10,321,000 for 2018 compared to $8,907,000 for 2017. The 2018 cash inflow relates to proceeds from a
completed public offering consisting of 4,703,000 flow-through shares at a blended price of $1.92 per
share along with $2,245,000 from the exercise of warrants and stock options. In 2017 the Corporation
had cash inflow from proceeds totalling $8,907,000 from a private placement and the exercise of warrants
and stock options.
Silver Purchase Agreement (“SPA”) with Wheaton
On October 2, 2008 (with subsequent amendments on October 20, 2008, December 10, 2008,
December 22, 2009, March 31, 2010, January 15, 2013, March 11, 2014 and June 16, 2014), the
Corporation entered into a SPA with Wheaton under which Wheaton will receive 25% of the life of mine
payable silver produced by the Corporation from its Keno Hill Silver District properties. The SPA
anticipated that the initial silver deliveries would come from the Bellekeno property. Under the SPA, the
Corporation received up-front deposit payments from Wheaton totaling US$50,000,000 and received
further payments of the lesser of US$3.90 (increasing by 1% per annum after the third year of full
production) and the prevailing market price for each ounce of payable silver delivered, if as and when
delivered. After the initial 40 year term of the streaming interest, the Corporation is required to refund the
balance of any advance payments received and not yet notionally reduced through silver deliveries. The
Corporation would also be required to refund the balance of advance payments received and not yet
reduced if Wheaton exercised its right to terminate the streaming interest in an event of default by the
Corporation. As of September 2013, Bellekeno mining operations were suspended in light of a reduced
silver price environment.
- 12 -
On March 29, 2017 the Corporation and Wheaton amended the SPA such that Wheaton will continue to
receive 25% of the life of mine payable silver from the Keno Hill Silver District with a variable production
payment based on monthly silver head grade and monthly silver spot price. The actual monthly
production payment from Wheaton is determined based on the monthly average silver head grade at the
mill and the monthly average spot price, as determined by a grade and pricing curve with an upper ceiling
grade of 1,400 g/t silver and price of US$25 per ounce of silver and a floor grade of 600 g/t silver and
price of US$13 per ounce of silver. Additional terms of the amendment include a date for completion of
the 400 tonne per day mine and mill completion test, which has now been extended to December 31,
2020. If the completion test is not satisfied by December 31, 2020, the Corporation will be required to pay
a capacity related refund to Wheaton in the maximum amount of US$8,788,000, which can be further
proportionately reduced by mine production and mill throughput exceeding 322 tonnes per day for a 30
day period prior to December 31, 2020. The Amended SPA is secured against the Corporation’s mineral
properties until repayment of the original deposit of US$50,000,000.
As at December 31, 2018, the fair value of the embedded derivative was calculated based on the
discounted future cash flows associated with the difference between the original US$3.90 per ounce
production payment Wheaton would pay for each payable ounce delivered under the SPA and the new
production payment under the Amended SPA which varies depending on the monthly silver head grade
and silver price. The model relies upon inputs from the PEA, such as payable ounces delivered, head
grade and silver price and will be updated as a result of updated studies, mine plans and actual
production. A discount rate of 13%, representing the implied discount rate applied to the payment made
under the Amended SPA was used to calculate the net present value. There were adjustments totalling
$3,071,000 recorded during 2018 (2017 - $nil) primarily as a result of a reduction in silver price and
reduction in value of the Canadian dollar during the period. See Guidance on Embedded Derivative
below.
Capital Resources
On June 14, 2018, the Corporation 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 compromised 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. As of December 31, 2018 the Corporation had
$3,170,000 to be spent prior to December 31, 2019.
On May 30, 2017, the Corporation completed a bought deal financing and issued 4,205,820 flow-through
common shares on a private placement basis at a price of $2.15 per share for aggregate gross proceeds
of $9,042,513. As of December 31, 2018 the Corporation had incurred all $9,042,513 of these flow-
through funds.
On February 23, 2018 the Corporation entered into a definitive credit agreement with Sprott to provide a
US$15,000,000 Credit Facility. The Credit Facility remains undrawn and has the following key terms:
Term of 3 years, Maturity Date – February 23, 2021
Interest rate on funds drawn down: the greater of
o 7% plus US Dollar 3 month LIBOR and
o 8% per annum, payable monthly
Repayable in quarterly installments from October 31, 2019 through to the Maturity Date
Upon draw down of funds a 3% charge of the draw down is charged
1,000,000 share purchase warrants were issued to Sprott with a five-year term, an exercise
price of $2.25 per share and a right by the Corporation to accelerate the expiry date to 30 days
- 13 -
following the closing price of the shares exceeding $5.63 for more than 20 consecutive trading
days
Repayable in whole or in part, without penalty, provided not less than twelve (12) months of
interest has been paid on any outstanding amount
On February 14, 2019 the Corporation extended the availability period of draw down to August
23, 2019 from February 23, 2019 by issuing to Sprott 171,480 Alexco common shares.
On September 21, 2018 the Corporation filed a short form base shelf prospectus with the securities
commissions in each of the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario
and a corresponding amendment to its registration statement on Form F-10 (Registration Statement) with
the United States Securities and Exchange Commission (SEC) under the U.S./Canada Multijurisdictional
Disclosure System, which would allow the Corporation to make offerings of common shares, warrants,
subscription receipts and/or units up to an aggregate total of $50,000,000 during the 25-month period
following September 21, 2018.
The following table summarizes the current contractual obligations of the Corporation and associated
payment requirements over the next five years and thereafter:
Contractual Obligations
(expressed in thousands of dollars)
Payments Due by Period
Total
Less than
1 year
1 – 3 years
3 – 5 years
After 5 years
Operating leases
Purchase obligations
Decommissioning and rehabilitation
provision (undiscounted basis)
$ 1,440
360
$ 390
60
$ 703
180
$ 347
120
$ Nil
Nil
6,573
-
733
298
5,542
Total
$ 8,373
$ 450
$ 1,616
$ 765
$ 5,542
Guidance on Embedded Derivative
As discussed above, the valuation model for the embedded derivative related to the Wheaton SPA
currently relies upon inputs from the PEA, such as payable ounces delivered and head grade, and will be
updated as a result of updated studies, mine plans and actual production. Upon completion of the PFS,
the valuation model will replace the inputs from the PEA with inputs from the PFS. Furthermore the
valuation model for the embedded derivative has been updated to utilize a probability based dynamic
pricing structure as opposed to a static pricing structure. As such, the discount rate used and silver price
assumptions are updated quarterly based on the risk-free yield curve and silver price forward curve at
quarter end.
Based on assumptions used in the dynamic valuation model the value of the derivative asset as at
December 31, 2018 is $9,671,000. If, for example, the silver price were to decline to US$13 per ounce
and all other assumptions remained the same, the approximate derivative asset value would be
$11,230,000. Similarly, if the silver price were to increase to US$25 per ounce and all other assumptions
remained the same, the approximate derivative asset value would be negative $1,379,000, and could be
classified as a derivative liability. The impacts of these swings in derivative asset value are recorded on
the Statement of Profit and Loss through Other Income (Expenses) (see note 15 in the consolidated
financial statements for years ended December 31, 2018 and 2017).
The following table summarizes the expected stand-alone impact on the embedded derivative asset value
based on changes in model inputs:
- 14 -
Dynamic Model Input Change
Expected Impact on Embedded
Derivative Asset Value
Silver Price Increase
Silver Price Volatility Increase
Mill Silver Head Grade Increase
Decrease
Decrease
Decrease
Decrease in timeframe to reach production
Increase
Foreign Exchange: US dollar appreciates
compared to CDN dollar
Risk Free Yield Increase
Increase
Decrease
Expected Silver Ounces Mined Increase
Increase
Management expects that changes in the fair market value of the embedded derivative asset prior to
mine production will largely be driven by the risk-free yield curve and silver price forward curve as well as
proximity to production date. In a market where the price of silver is static, these changes are expected to
be nominal relative to a production scenario, at which time management expects the variability of the fair
value adjustments to increase significantly as silver ounces are mined and delivered to Wheaton.
Share Data
As at the date of this MD&A, the Corporation has 108,647,037 common shares issued and outstanding.
In addition, there are outstanding incentive share options for a further 9,202,833 common shares,
restricted share units that can be settled by way of shares issued from treasury for a further 512,334
common shares, and purchase warrants for a further 1,126,174 common shares.
Use of Financial Instruments
All of Alexco’s cash and cash equivalents at December 31, 2018 were held in the form of demand
deposits. Alexco’s restricted cash and deposits were held in the form of term deposits and demand
deposits. Alexco’s other financial instruments were its trade and other accounts receivable, its accounts
payable and accrued liabilities, and its investment in marketable securities.
At December 31, 2018, a total of $2,725,000 of Alexco’s restricted cash and deposits represents cash
collateral posted with a surety company to underwrite surety bonds for security in respect of mine-site
reclamation at certain of Alexco’s mineral properties. The balance of Alexco’s restricted cash and
deposits represent security provided in respect of certain long-term operating lease commitments. The
term deposits held at December 31, 2018 as individual financial instruments carry initial maturity periods
of one year or less. They have been classified as investments held to maturity and accordingly are carried
at amortized cost using the effective interest method. All term deposits held are high grade, low risk
- 15 -
investments, generally yielding between 1% and 2% per annum, and their carrying amounts approximate
their fair values given their short terms and low yields.
The carrying amounts of Alexco’s trade and other accounts receivable and accounts payable and accrued
liabilities are estimated to reasonably approximate their fair values, while the carrying amount of
investments in marketable securities and embedded derivative are marked to fair value at each balance
sheet date. The fair values of all of Alexco’s financial instruments measured at December 31, 2018, other
than the marketable securities that are included in investments, constitute Level 2 and Level 3
measurements within the fair value hierarchy defined under IFRS. The fair value of the investments in
marketable securities constitute as Level 1 measurements.
Substantially all of Alexco’s cash, demand deposits and term deposits are held with major financial
institutions in Canada. With respect to these instruments, management believes the exposure to credit
risk is insignificant due to the nature of the institutions with which they are held, and that the exposure to
liquidity and interest rate risk is similarly insignificant given the low-risk-premium yields and the demand or
short-maturity-period character of the deposits.
Alexco’s accounts and other receivables at December 31, 2018 total $6,811,000, comprised primarily of
AEG trade receivables and goods and services tax refunds receivable from government. Alexco’s
maximum credit risk exposure in respect of its receivables is represented by their carrying amount.
Management actively monitors exposure to credit risk under its receivables, particularly AEG trade
receivables, and considers the risk of loss to be significantly mitigated due to the financial strength of
AEG’s major customers which include government organizations as well as substantial corporate entities.
Substantially all of Alexco’s property, plant and equipment and mineral properties are located in Canada;
all of its mining operations and mineral exploration occur in Canada; and a significant portion of AEG’s
revenues are earned in Canada. However, a significant portion of AEG’s revenues are in US dollars, and
receivables arising therefrom are accordingly denominated in US dollars. Also, while a significant majority
of the Corporation’s operating costs are denominated in Canadian dollars, it does have some exposure to
costs, and therefore accounts payable and accrued liabilities, denominated in US dollars.
The Corporation has not employed any hedging activities in respect of the prices for its payable metals or
for its exposure to fluctuations in the value of the US dollar.
Off-Balance Sheet Arrangements
Alexco has no off-balance sheet arrangements as defined by National Instrument 52-109.
Related Party Transactions
The Corporation’s related parties include its subsidiaries and key management personnel:
- 16 -
Key Management Personnel Compensation
(a)
Key Management Personnel Compensation
Three Months Ended
December 31
2017
2018
Year Ended
December 31
2017
2018
Salaries and other short-term benefits
Share-based compensation
$ 520 $ 485 $ 2,130 $ 2,246
2,072
2,513
498
285
$ 1,018
$ 770
$ 4,643
$ 4,318
Key management includes the Corporation’s Board of Directors and members of senior
management.
Critical Accounting Estimates and Judgments
The preparation of the consolidated financial statements requires management to select accounting
policies and make estimates and judgments that may have a significant impact on the consolidated
financial statements. Estimates are continuously evaluated and are based on management’s experience
and expectations of future events that are believed to be reasonable under the circumstances. The
estimates management makes in this regard include those regarding future commodity prices and
foreign currency exchange rates, which are an important component of several estimates and
assumptions management must make in preparing the financial statements, including but not limited to
estimations and assumptions regarding the evaluation of the carrying amount of mineral properties and
other assets, the estimation of decommissioning and rehabilitation provisions, the estimation of
revenues and the value of the embedded derivative related to sales of concentrate, and the estimation
of the net realizable value of inventories. Management bases its estimates of future commodity prices
and foreign currency exchange rates primarily on consensus investment analyst forecasts, which are
tracked and updated as published on generally a quarterly basis. Actual outcomes can differ from these
estimates.
The most significant judgments and estimates made by management in preparing the Corporation’s
financial statements are described as follows:
Mineral Resources
The determination of the Corporation’s estimated mineral resources by appropriately
qualified persons requires significant judgements regarding the interpretation of complex
geological and engineering data including the size, depth, shape and nature of the
deposit and anticipated plans for mining, as well as estimates of future commodity prices,
foreign exchange rates, capital requirements and production costs. These mineral
resource estimates are used
the
Corporation’s financial statements, including evaluating the recoverability of the carrying
amount of its non-current non-financial assets and estimating amounts of future taxable
income in determining whether to record a deferred tax asset.
in many determinations required
to prepare
- 17 -
Impairment and Impairment Reversals of Non-Current Non-Financial Assets
The Corporation reviews and evaluates the carrying value of each of its non-current non-
financial assets for impairment and impairment reversals when events or changes in
circumstances indicate that the carrying amounts of the related asset may not be
recoverable or previous impairment losses may become recoverable. The identification of
such events or changes and the performance of the assessment requires significant
judgment. Furthermore, management’s estimates of many of the factors relevant to
completing this assessment, including commodity prices, foreign currency exchange
rates, mineral resources, and operating, capital and reclamation costs, are subject to
risks and estimation uncertainties that may further affect the determination of the
recoverability of the carrying amounts of its non-current non-financial assets.
Management has assessed indicators of impairment and impairment reversals on the
Corporation’s non-current non-financial assets and has concluded that no impairment or
impairment reversal indicators exists as of December 31, 2018.
Decommissioning and Rehabilitation Provision
Management’s determination of the Corporation’s decommissioning and rehabilitation
provision is based on the reclamation and closure activities it anticipates as being
required, the additional contingent mitigation measures it identifies as potentially being
required and its assessment of the likelihood of such contingent measures being
required, and its estimate of the probable costs and timing of such activities and
measures. Significant judgements must be made when determining such reclamation and
closure activities and measures required and potentially required.
Mineral Properties - Silver Stream Arrangement
Upon entering into a long-term streaming arrangement linked to production at
operations, Management’s judgment was required in assessing the appropriate
accounting treatment for the transaction on the closing date and in future periods. We
consider the specific terms of the arrangement to determine whether we have disposed
of an interest in the reserves and resources of the operation or executed some other
form of arrangement. This assessment considers what the counterparty is entitled to and
the associated risks and rewards attributable to them over the life of the operation.
These include the contractual terms related to the total production over the life of the
arrangement as compared to the expected production over the life of the mine, the
percentage being sold, the percentage of payable metals produced, the commodity price
referred to in the ongoing payment and any guarantee relating to the upfront payment if
production ceases.
- 18 -
Fair value of derivatives
The fair values of financial instruments that are not traded in an active market are
determined using valuation techniques. Management uses its judgment to select a
method of valuation and makes estimates of specific model inputs that are based on
conditions existing at the end of each reporting period. Refer to Note 15 for further details
on the methods and assumptions associated with the measurement of the embedded
derivative within the Silver Streaming Interest. Management has applied judgement in
concluding that the completion test as discussed in Note 15 will be met prior to December
31, 2020 or extended to a later date, therefore the capacity related refund is not likely to
be owed to Wheaton Precious Metals Corp.
Changes In and Initial Adoption of Accounting Standards and Policies
The Corporation has adopted the new IFRS pronouncements listed below as at January 1, 2018,
in accordance with the transitional provisions outlined in the respective standards and described
below. In light of the changes to the revenue standard to IFRS 15, management has changed
their treatment under IFRS 6 for the partial distribution of the mineral interest.
a) Adjustments to Consolidated Financial Statements
The table below summarizes the adjustments to previously reported figures related to the policy
change from IFRS 6:
Adjustments to Condensed Consolidated Balance Sheets
Equity before accounting changes
Adjustments to equity relating to:
Property plant and equipment
Mineral properties
Deferred income tax liabilities
Silver streaming interest
December 31
2017
January 1
2017
$ 100,060
$ 90,673
2,117
(10,229)
2,390
18,118
2,283
(10,229)
1,440
18,118
Equity after accounting changes
$ 112,456
$ 102,285
- 19 -
Adjustments to Condensed Consolidated Statements of Loss and Comprehensive Loss
Loss before accounting changes
Adjustments to loss relating to:
Depreciation and amortization
Year ended
December 31
2017
Year ended
January 1
2017
$ (7,648)
$ (4,359)
(165)
(165)
Loss after accounting changes
$ (7,813)
$ ( 4,524)
Loss per share before accounting changes:
Basic and diluted
Loss per share after accounting changes:
Basic and diluted
$ (0.08)
$ (0.04)
$ (0.09)
$ (0.05)
The Corporation has assessed the impact of IFRS 15 on its silver streaming arrangement with
Wheaton. At the date the transaction was completed, the Corporation determined that the
contract is a sale of a mineral interest and a related contract to provide extraction services. At the
time of the arrangement, the related property was E&E and thus we have retrospectively applied
a different policy under IFRS 6 to the receipt of that deposit at that point in time, in order to avoid
any complications under IFRS 15. Under its existing policy, the Corporation applies the provisions
of IFRS 6, which allows for an accounting policy choice to either apply the proceeds received as a
credit to the carrying value of the exploration and evaluation (“E&E”) asset, or account for the
transaction as a partial sale, with deferral of the gain, to be recognized on a units-of-production
sold basis. Upon the effective date of IFRS 15, the Corporation will continue to apply the
accounting for the Wheaton arrangement under IFRS 6 but has elected to change the policy to apply
the proceeds received as a credit to the carrying value of the E&E asset. Management believes
this approach to be more relevant and reliable.
Specifically, the USD $50,000,000 initial deposit recorded as consideration was applied against
the carrying value of the mineral interest, with a gain being recognized to the extent that the value
of the consideration exceeds the value of the mineral interest.
Overview of Changes to IFRS
The Corporation adopted IFRS 15 on January 1, 2018 in accordance with the transitional
provisions of the standard, applying a modified retrospective approach in restating our prior
period financial information.
IFRS 15, Revenue from Contracts with Customers deals with revenue recognition and
establishes principles for reporting useful information to users of financial statements about the
nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s
contracts with customers. Revenue is recognized when a customer obtains control of a good or
service and thus has the ability to direct the use and obtain the benefits from the good or service.
The standard replaces IAS 18, Revenue and IAS 11, Construction contracts and related
interpretations. Management’s primary focus was evaluating contracts under its Environmental
Services business, as this is currently the Corporation’s primary source of revenue. Based on
this analysis, the Corporation does not have significant changes to the timing and amount of its
revenue recognition related to environmental services under IFRS 15, as the majority of its
contracts contain a series of same or similar performance obligations. Consequently, consistent
- 20 -
with the Corporation’s existing policy, revenue is recognized “over time”, as the services are
provided.
IFRS 9, Financial Instruments, addresses the classification, measurement and recognition of
financial assets and financial liabilities. It replaces the guidance in IAS 39, Financial Instruments:
Recognition and Measurement that relate to the classification and measurement of financial
instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three
primary measurement categories for financial assets: amortized cost, fair value through other
comprehensive income (“OCI”) and fair value through profit or loss (“FVTPL”). The basis of
classification depends on the entity’s business model for managing its financial instruments and
the contractual cash flow characteristics of the instrument. For financial liabilities, the standard
retains most of the IAS 39 requirements. The main change for liabilities is that, in cases where the
fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s
own credit risk is recorded in OCI rather than in net earnings. The Corporation has made the
irrevocable classification choice to record fair value changes on its equity investments in OCI
(See Note 4 of the 2018 annual financial statements). This election resulted in a nil
reclassification from the Corporation’s retained earnings to accumulated OCI, on January 1, 2018.
Credit risk arises from cash and cash equivalents and trade receivables. While the Corporation is
exposed to credit losses due to the non-performance of its counterparties, there are no significant
concentrations of credit risk and the Corporation does not consider this to be a material risk. The
Corporations customers with whom the current business operations are with include government
bodies and reputable businesses.
The Corporation has reviewed its expected credit losses on its trade receivables carried at fair
value through other comprehensive income (“FVOCI”) on transition to IFRS 9. The Corporation
has also implemented a process for managing provisions related to trade receivables going
forward under IFRS 9. For its trade receivables, the Corporation applies the simplified approach
for determining expected credit losses, which require the Corporation to determine the lifetime,
expected losses for all its trade receivables. The expected lifetime credit loss provision for its
trade receivables is based on historical counterparty default rates and adjusted for relevant
forward looking information, when required. As the majority of its customers are considered to
have low default risk and the Corporation does not extend credit to customers with a high default
risk, the historical default rates are low and the lifetime expected credit loss allowance for trade
receivables is nominal as at January 1, 2018 and December 31, 2018. Accordingly, the
Corporation did not record any adjustment relating to the implementation of the expected credit
loss model for its trade receivables.
The Corporation has assessed the classification and measurement of its financial assets and
financial liabilities under IFRS 9 and have summarized the original measurement categories
under IAS 39 and the new measurement categories under IFRS 9 in the following table:
Original classification
IAS 39
New classification
IFRS 9
Financial Assets
Cash and cash equivalents Amortized cost
Amortized cost
Short-term deposits
Available-for-sale
Equity securities
FVTPL
Warrants
Amortized cost
Trade accounts receivable
Amortized cost
Other receivables
FVTPL
Derivative assets
Amortized cost
Amortized cost
FVTOCI
FVTPL
Amortized cost
Amortized cost
FVTPL
- 21 -
Restricted cash
Amortized cost
Amortized cost
Financial Liabilities
Trade and other payables
Derivative liabilities
Amortized cost
FVTPL
Amortized cost
FVTPL
New accounting standard not yet effective
A new standard has been issued and is relevant to the Corporation but is not yet effective and
therefore not reflected in these consolidated financial statements:
IFRS 16 relates to accounting for leases and lease obligations. It replaces the existing lease
guidance in IAS 17, Leases. The purpose of the new standard is to report all leases on the
statement of financial position and to define how leases and lease obligations are measured.
IFRS 16 is effective from January 1, 2019 and must be applied retrospectively, subject to certain
practical expedients, using either a full retrospective approach or modified retrospective
approach.
The Corporation is currently involved in various lease obligations as part of its normal course of
business. IFRS 16 applies a control model to the identification of leases, distinguishing between a
lease and a service contract on the basis of whether the customer controls the asset being
leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces
significant changes to the accounting by lessees. All leases will be recorded on the statement of
financial position, except short-term leases and low-value leases. This is expected to result in a
material increase in both rights of use assets and lease liabilities upon adoption of the standard,
and changes to the timing of recognition and classification of expenses associated to such lease
arrangements. The Corporation anticipates an increase in cash flow from operating activities as
lease payments will be recorded as financing outflows in the statement of cash flows. The
Corporation also anticipates an increase in depreciation and finance expenses and a decrease in
operating expenses.
The Corporation plans to adopt the modified retrospective approach and not restate balances for
the comparative period. On initial adoption, the Corporation has elected to use the following
practical expedients permitted under the standard:
Apply a single discount rate to a portfolio of leases with similar characteristics;
Account for leases with a remaining term of less than twelve (12) months as at January 1,
2019 as short-term leases; and
Account for lease payments as an expense and not recognize a right-of-use (“ROU”)
asset if the underlying asset is of low dollar value.
On adoption of IFRS 16, the Corporation will recognize lease liabilities in relation to leases under
the principles of the new standard measured at the present value of the remaining lease
payments, discounted using the interest rate implicit in the lease or the Corporation’s incremental
borrowing rate as at January 1, 2019. The associated ROU assets will be measured at the
amount equal to the lease liability on January 1, 2019. The Corporation has completed its review
of all existing operating leases and service contracts to identify contracts in scope for IFRS 16
and assessed contracts for embedded leases. Adoption of the new standard is expected to result
in the recognition of additional lease liabilities and ROU assets of approximately $1,000,000
each.
- 22 -
There are no other IFRS’s or International Financial Reporting Interpretations Committee
(“IFRIC”) interpretations that are not yet effective that are expected to have a material impact on
the Corporation.
Non-GAAP Measures
The Corporation presents non-GAAP measures, which are not defined in IFRS. A description and
calculation of the measure is given below and may differ from similarly named measures provided by
other issuers. We disclose this measure because we believe it assists readers in understanding Alexco’s
financial position. This measure should not be considered in isolation or used in substitute for other
measures prepared in accordance with IFRS.
Net Working Capital
Consolidated net working capital comprises those components of current assets and liabilities which
support and results from the Corporation’s ongoing running of its current operations. It is provided to give
a quantifiable indication of the Corporation’s short-term cash generation ability and business efficiency.
As a measure linked to current operations and sustainability of the business, net working capital
excludes: deferred revenue and flow-through share premium pending renunciation.
Internal Control Over Disclosure Controls and Procedures and Financial Reporting
Disclosure Controls and Procedures
Alexco’s management, with the participation of its Chief Executive Officer and Chief Financial Officer,
have evaluated the effectiveness of the Corporation’s disclosure controls and procedures. Based upon
the results of that evaluation, the Alexco’s Chief Executive Officer and Chief Financial Officer have
concluded that, as of the date of this MD&A, Alexco’s disclosure controls and procedures were effective
to provide reasonable assurance that the information required to be disclosed by Alexco in reports it files
under applicable securities legislation is recorded, processed, summarized and reported within the
appropriate time periods and forms specified in those rules and include controls and procedures designed
to ensure that information required to be disclosed by Alexco in reports it files under applicable securities
legislation is accumulated and communicated to Alexco’s management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
The management of Alexco is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is a process designed by, or under the
supervision of, the Chief Executive Officer and the Chief Financial Officer and effected by the Board of
Directors, management and other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
the accounting principles under which the Alexco’s financial statements are prepared. It includes those
policies and procedures that:
(i)
(ii)
pertain to the maintenance of records that accurately and fairly reflect, in reasonable
detail, the transactions related to and dispositions of Alexco’s assets;
provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with International Financial Reporting
- 23 -
Standards, and that Alexco receipts and expenditures are made only in accordance with
authorizations of management and Alexco’s directors; and
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of Alexco assets that could have a material effect on
Alexco’s financial statements.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial
reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Alexco’s internal control over financial reporting as at
December 31, 2018, based on the criteria set forth in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, management has concluded that Alexco’s internal control over financial reporting was
effective as at December 31, 2018.
The effectiveness of Alexco’s internal control over financial reporting as at December 31, 2018 has been
audited by PricewaterhouseCoopers LLP, Alexco’s independent registered public accounting firm.
There has been no change in Alexco’s internal control over financial reporting during Alexco’s fiscal year
ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect,
Alexco’s internal control over financial reporting.
Risk Factors
The following are major risk factors management has identified which relate to Alexco’s business
activities. Such risk factors, as well as risks not currently known to the Corporation or that the Corporation
currently deems to be immaterial, could materially affect the Corporation's future business, financial
condition, results of operations, earnings and prospects, and could cause events to differ materially from
those described in forward-looking statements relating to the Corporation. Though the following are major
risk factors identified by management, they do not comprise a definitive list of all risk factors related to the
Corporation's business and operations. Readers are encouraged to review other specific risk factors
which are discussed elsewhere in this MD&A, as well as in the Corporation’s consolidated financial
statements (under the headings “Description of Business and Nature of Operations”, “Significant
Accounting Policies” and “Financial Instruments” and elsewhere within that document) and in Alexco’s
Annual Information Form for the year ended December 31, 2018.
Negative Cash Flow From Operating Activities
The Corporation has not yet consistently achieved positive operating cash flow, and there are no
assurances that the Corporation will not experience negative cash flow from operations in the future. The
Corporation 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 Corporation's common shares, which could cause
investors to lose part or all of their investment.
Forward-Looking Statements May Prove Inaccurate
Readers 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
- 24 -
suggested by the forward-looking statements. See "Preliminary Notes – Cautionary Statement Regarding
Forward-Looking Statements".
Dilution
The Corporation expects to require additional funds to finance its growth and development strategy. If the
Corporation elects to raise additional funds by issuing additional equity securities, such financing may
substantially dilute the interests of the Corporation's shareholders. The Corporation may also issue
additional securities in the future pursuant to existing and new agreements in respect of its projects or
other acquisitions and pursuant to existing securities of the Corporation.
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 mineral resources exist, substantial expenditures will be required to confirm mineral 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 the 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.
Infrastructure
Mining, processing, development and exploration activities depend, to one degree or another, on
adequate infrastructure. Reliable roads, bridges, power sources and water supply are important
determinants, which affect capital and operating costs. The lack of availability on acceptable terms or the
delay in the availability of any one or more of these items could prevent or delay exploitation and or
development of the Corporation’s properties. If adequate infrastructure is not available in a timely manner,
there can be no assurance that the exploitation and or development of the Corporation’s properties will be
commenced or completed on a timely basis, if at all; that the resulting operations will achieve the
anticipated production volume; or that the construction costs and ongoing operating costs associated with
the exploitation and or development of the Corporation’s properties will not be higher than anticipated. In
addition, unusual or infrequent weather phenomena, sabotage, government or other interference in the
maintenance or provision of such infrastructure could adversely affect the Corporation’s operations and
profitability.
- 25 -
Figures for the 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, the Corporation
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. The determination of the Corporation’s estimated mineral
resources by appropriately qualified persons requires significant judgements regarding the interpretation
of complex geological and engineering data including the size, depth, shape and nature of the deposit
and anticipated plans for mining, as well as estimates of future commodity prices, foreign exchange rates,
capital requirements and production costs. These geological interpretations and statistical inferences
used to develop the mineral resource estimates are imprecise and are 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 Amended SPA with Wheaton, requires that to satisfy the completion test under the
Amended SPA, the Corporation 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, 2020. If the completion test is not
satisfied by December 31, 2020, the outcome could materially adversely affect the Corporation as it
would be required to pay a capacity related refund to Wheaton in the maximum amount of US$8,788,000,
which can be further reduced by mill throughput exceeding 322 tonnes per day prior to December 31,
2020. The Corporation would need to raise additional capital to finance the capacity related refund and
there is no guarantee that the Corporation will be able to raise such additional capital. In the event that
the Corporation cannot raise such additional capital, the Corporation will default under the terms of the
Amended SPA. The valuation model for the embedded derivative asset related to the SPA with Wheaton
is based on a number of assumptions. The value of the derivative asset as at December 31, 2018 is
$9,671,000. If, for example, the silver price were to increase to US$25.00 per ounce, and all other
assumptions remained the same, the approximate derivative asset value would be negative $1,379,000
and could be classified as a derivative liability.
Keno Hill Silver District
While Alexco has conducted exploration activities in the KHSD, 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.
- 26 -
Mining Operations
The business of exploration for minerals and mining involves a high degree of risk. Few properties that
are explored are ultimately developed into mineral deposits with significant value. Decisions by the
Corporation to proceed with the construction and development of mines, including Bellekeno, 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 the Corporation’s future cash flows, profitability, results of operations
and financial condition. The Corporation’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, 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, fire, rock falls and earthquakes, unusual or
unexpected ground conditions, geological formation pressures, equipment failure and failure of retaining
dams around tailings disposal areas which may result in, among other adverse effects, environmental
pollution and consequent liability; 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. No assurance can be
given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds
required for development can be obtained on a timely basis.
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 sustained
improvements in silver markets, the effectiveness of cost structure reduction measures, the maintenance
of current metal prices and the fluctuation of foreign exchange rates and the uncertainties around the
results of these factors are significant. A re-start of underground production operations will require
additional capital investment in excess of the capital resources currently on hand. There can be no
assurance of a re-start of mining operations or continued access to financing in the future, and an inability
to generate or secure such funding may require the Corporation to substantially curtail and/or defer its
planned exploration and development activities.
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 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. Any re-start of mining operations
will necessitate the re-hiring of mine and mill personnel. It may be difficult for Alexco to find and hire
qualified people in the mining industry who are situated in the Yukon, or to obtain all of the necessary
services or expertise in Yukon or to conduct operations on Alexco’s projects at reasonable rates. If
qualified people and services or expertise cannot be obtained in the Yukon, we may need to seek and
obtain those services from people located outside of this area, which may require work permits and
compliance with applicable laws and could result in delays and higher costs.
- 27 -
Dependence on Management
The success of the operations and activities of the Corporation is dependent to a significant extent on the
efforts and abilities of its management team. The Corporation does not maintain key employee insurance
on any of its employees. The Corporation depends on key personnel and cannot provide assurance that it
will be able to retain such personnel. Failure to retain such key personnel could have a material adverse
effect on the Corporation’s business and financial condition.
Permitting and Environmental Risks and Other Regulatory Requirements
The current or future operations of the Corporation, including development activities, commencement of
production on its properties and activities associated with the Corporation's mine reclamation and
remediation business, require permits, approvals, authorizations, 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, permit modifications, approvals, authorizations, licenses, and license
modifications which the Corporation 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 the Corporation might undertake. Specifically, the Corporation requires an amendment to its Quartz
Mining License and a renewal of its Water Use License in order for it to be fully permitted for the ore
production and processing from the Bermingham deposit and the Flame & Moth, Lucky Queen, Bellekeno
and Onek deposits. Additionally, subsequent to completion of the environment assessment of the
Corporation’s Existing State of Mine Reclamation Plan at Keno Hill by the Yukon Environmental and
Social-Economic Assessment Board, the Corporation will need an amendment to its WUL by the Yukon
Water Board to authorize the activities necessary to effect closure of the site. There can be no guarantee
that the Corporation will receive the amendments and the renewal. Additionally, delays in receiving any
requisite license amendments and renewals could adversely affect the Corporation’s profitability. The
Corporation had originally expected to receive the requisite amendments and renewal by Q1 2019.
However subsequent delays in the permitting process have extended the time expected for award of the
final licenses to the third quarter of 2019.
Any failure by the Corporation 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 Corporation. The Corporation may be
required to compensate those suffering loss or damage by reason of the Corporation’s mining operations
or mine reclamation and remediation activities and may have civil or criminal fines or penalties imposed
upon it for violation of applicable laws or regulations.
Amendments to current laws, regulations and permits governing operations and activities of mining
companies and mine reclamation and remediation activities could have a material adverse impact on the
Corporation. 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.
- 28 -
Surety Bonding Risks
Alexco secures its obligations for reclamation and closure costs with surety bonds provided by leading
global insurance companies in favour of regulatory authorities in the Yukon. These surety bonds include
the right of the surety bond provider to terminate the relationship with Alexco on providing notice of up to
90 days. The surety bond provider would, however, remain liable to the regulatory authorities for all
bonded obligations existing prior to the termination of the bond in the event Alexco failed to deliver
alternative security satisfactory to the regulator. Alexco may require substantial additional capital to
accomplish its exploration and development plans and fund strategic growth and there can be no
assurance that financing will be available on terms acceptable to Alexco, or at all. Alexco may require
substantial additional financing to advance the Keno Hill Silver District to production. These financing
requirements could adversely affect Alexco’s ability to access the capital markets in the future. Failure to
obtain sufficient financing, or financing on terms acceptable to Alexco, may result in a delay or indefinite
postponement of exploration, development or production at its properties. Additional financing may not be
available when needed and the terms of any agreement could impose restrictions on the operation of our
business. Failure to raise financing when needed could have a material adverse effect on our business,
financial condition, results of operations and prospects.
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.
Three of AEG’s customers accounted for 24.0%, 20.2% and 19.0%, respectively, of environmental
services revenues in the 2018 fiscal year. The loss of, or a significant reduction in the volume of business
conducted with, either of these customers could have a significant detrimental effect on AEG
environmental services business and the Corporation.
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 a
material adverse impact on the Corporation.
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 the Corporation’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 – including international trade
restrictions. During the year ended December 31, 2018, the prices of silver, lead and zinc have steadily
- 29 -
declined. 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 the Corporation cannot predict and are beyond the Corporation’s control, and such fluctuations will
impact on profitability and may eliminate profitability altogether. Mine site care and maintenance costs
during 2018 totaled $2,603,000 compared with $1,888,000 for 2017. The increase in costs was mainly
due to site-based expenditures and mill maintenance and refurbishment initiatives in 2018. 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 the Corporation.
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, unregistered liens, or land claims, and title may
be affected by undetected defects. Although the Corporation has made efforts to ensure that legal title to
its properties is properly recorded in the name of the Corporation, there can be no assurance that such
title will ultimately be secured. Title insurance generally is not available for mining claims in Canada. As a
result, the Corporation 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 the Corporation’s title
to its mineral properties would adversely affect the Corporation’ 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:
- 30 -
•
•
•
•
a global credit/liquidity or foreign currency exchange crisis could impact the cost and
availability of financing and Alexco’s overall liquidity;
the volatility of silver and other commodity prices would impact Alexco’s revenues, profits,
losses and cash flow;
volatile energy prices, commodity and consumables prices and currency exchange rates
would impact Alexco’s operating costs; and
the devaluation and volatility of global stock markets could impact the valuation of Alexco’s
equity and other securities.
These factors could have a material adverse effect on Alexco’s financial condition and results of
operations.
Operating Hazards and Risks
In the course of exploration, development and production of mineral properties, certain risks, particularly
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 the Corporation 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 the Corporation.
Adverse weather conditions could also disrupt the Corporation’s environmental services business and/or
reduce demand for the Corporation’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 the Corporation. The Corporation may be unable to acquire additional attractive mining
properties on terms it considers acceptable and there can be no assurance that the Corporation’s
exploration and acquisition programs will yield any reserves or result in any commercial mining operation.
Certain of the Corporation’s Directors and Officers are Involved with Other Natural Resource Companies,
Which May Create Conflicts of Interest from Time to Time
Some of the Corporation’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, the Corporation may miss the opportunity to participate in certain
transactions.
The Corporation 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 the Corporation’s internal control over financial reporting. The Corporation 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 the Corporation 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. The Corporation’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 the Corporation’s business and negatively impact the trading price
- 31 -
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 the Corporation’s operating
results or cause it to fail to meet its reporting obligations. Future acquisitions of companies, if any, may
provide the Corporation with challenges in implementing the required processes, procedures and controls
in its acquired operations. No evaluation can provide complete assurance that the Corporation’s internal
control over financial reporting will detect or uncover all failures of persons within the Corporation to
disclose material information otherwise required to be reported. The effectiveness of the Corporation’s
processes, procedures and controls could also be limited by simple errors or faulty judgments. Although
the Corporation 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.
- 32 -
Summary of Resources
The following table sets forth the estimated resources for the Corporation’s mineral properties:
Category1,2,9
Property
Tonnes
Indicated
Inferred
Bellekeno Deposit3&4
Lucky Queen Deposit3&5
Flame & Moth Deposit3&5
Onek3&5
Bermingham3&6
Total Indicated – Sub-Surface
Elsa Tailings7
Total Indicated – All Deposits
Bellekeno Deposit3&4
Lucky Queen Deposit3&5
Flame & Moth Deposit3&5
Onek3&5
Bermingham3&6
Total Inferred
262,000
132,300
1,679,000
700,200
1,651,500
4,425,000
2,490,000
6,915,000
243,000
257,900
365,200
285,100
616,550
1,767,750
Ag
(g/t)
585
1,167
498
191
628
523
119
378
428
473
356
118
526
404
Au
(g/t)
n/a
0.2
0.4
0.6
0.1
0.3
0.1
0.2
n/a
0.1
0.3
0.4
0.1
0.2
Pb
(%)
3.5%
2.4%
1.9%
1.2%
1.6%
1.8%
1.0%
1.5%
4.1%
1.0%
0.5%
1.2%
1.1%
1.4%
Zn
(%)
5.3%
1.6%
5.3%
11.9%
1.3%
4.7%
0.7%
3.3%
5.1%
0.8%
4.3%
8.3%
0.9%
3.4%
Contained Ag
(oz)
4,927,000
4,964,000
26,883,000
4,300,000
33,350,300
74,424,300
9,527,000
83,952,300
3,344,000
3,922,000
4,180,000
1,082,000
10,438,700
22,966,700
Historical
Resources
Silver King8
- Proven, probable and indicated
- Inferred
Notes:
99,000
22,500
1,354
1,456
n/a
n/a
1.6%
0.1%
0.1%
n/a
4,310,000
1,057,000
1. All mineral resources are classified following the CIM Definition Standards for Mineral Resources and Mineral
Reserves (May 2014) of NI 43-101.
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. The Keno Hill Silver District is comprised of five deposits: Bellekeno, Lucky Queen and Flame & Moth, Onek
and Bermingham, of which Bellekeno, Lucky Queen, Flame & Moth and Bermingham are incorporated into the
current mine plan outlined in the technical report filed on SEDAR dated March 29, 2017 with an effective date of
January 3, 2017, as amended on September 14, 2018, entitled “Preliminary Economic Assessment of the Keno
Hill Silver District Project, Yukon, Canada” (the “PEA”). The mineral resource estimates for the project are
supported by disclosure in the news release dated March 29, 2017 entitled “Alexco and Silver Wheaton Amend
Silver Purchase Agreement and Alexco Announces Positive Preliminary Economic Assessment for Expanded
Silver Production at Keno Hill” and the PEA. The mineral resource estimate for Bermingham has been updated
by disclosure in note 6 below.
4. The mineral resource estimate for the Bellekeno deposit is based on a geologic resource estimate having an
effective date of September 30, 2012. The Bellekeno indicated mineral resources are as at September 30,
2013, and reflect the geologic resource less estimated subsequent depletion from mine production.
5. The mineral resource estimate for the Lucky Queen, Flame & Moth and Onek deposits have an effective date of
January 3, 2017.
6. The resource estimate for the Bermingham deposit has an effective date of September 17, 2018 and is
supported by disclosure in the news release dated September 20, 2018 entitled “Alexco Updates Bermingham
Mineral Resource”.
7. The mineral resource estimate for the Elsa Tailings has an effective date of April 22, 2010, and is supported by
the technical report dated June 16, 2010 entitled “Mineral Resource Estimation, Elsa Tailings Project, Yukon,
Canada”.
8. Historical resources for Silver King were estimated by UKHM, as documented in an internal report entitled
“Mineral Resources and Mineable Ore Reserves” dated March 9, 1997. The historical resources were estimated
based on a combination of surface and underground drill holes and chip samples taken on the vein and
calculated using the polygonal (block) model and the 1997 CIM definitions for resource categories. Verification
of the estimate would require new drill holes into a statistically significant number of the historical resource
blocks and/or a combination of on-vein sampling. A qualified person has not done sufficient work to classify this
estimate of historical resources as current, nor is Alexco treating this historical estimate as a current Mineral
Resource.
9. The disclosure regarding the summary of estimated mineral resources for Alexco’s mineral properties within the
Keno Hill District has been reviewed and approved by Neil Chambers, P.Eng., Mine Superintendent and a
Qualified Person as defined by NI 43-101.
- 33 -
Cautionary Statement Regarding Forward-Looking Statements
This MD&A contains 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 Corporation's business
plans, including but not limited to anticipated results and developments in the Corporation’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, made as of the date of this MD&A.
Forward-looking statements may include, but are not limited to, statements with respect to 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
requirements for additional capital and sources and uses of funds. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, using words or phrases such as “expects”,
“anticipates”, “plans”, “estimates”, “intends”, “strategy”, “goals”, “objectives” or stating that certain actions,
events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative
of any of these terms and similar expressions) are not statements of historical fact and may be “forward-
looking statements”.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other
factors which could cause actual events or results to differ from those expressed or implied by the
forward-looking statements. Such factors include, but are not limited to, risks related to actual results and
timing of exploration and development activities; actual results and timing of mining activities; actual
results and timing of environmental services operations; actual results and timing of remediation and
reclamation activities; conclusions of economic evaluations; changes in project parameters as plans
continue to be refined; future prices of silver, gold, lead, zinc and other commodities; possible variations
in mineable resources, grade or recovery rates; failure of plant, equipment or processes to operate as
anticipated; accidents, labour disputes and other risks of the mining industry; First Nation rights and title;
continued capitalization and commercial viability; global economic conditions; competition; and delays in
obtaining governmental approvals or financing or in the completion of development activities.
Furthermore, forward-looking statements are statements about the future and are inherently uncertain,
and actual achievements of the Corporation 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 but not limited to those referred to in this MD&A under the heading “Risk Factors” and
elsewhere.
Forward-looking statements are based on certain assumptions that management believes are reasonable
at the time they are made. In making the forward-looking statements included in this AIF, the Corporation
has applied several material assumptions, including, but not limited to, the assumption that: (1) additional
financing needed for the capacity related refund under the silver purchase agreement with Wheaton will
be available on reasonable terms; (2) additional financing needed for further exploration and development
work on the Corporation's properties will be available on reasonable terms; (3) the proposed development
of its mineral projects will be viable operationally and economically and proceed as planned; (4) market
fundamentals will result in sustained silver, gold, lead and zinc demand and prices, and such prices will
not be materially lower than those estimated by management in preparing the annual financial statements
for the year ended December 31, 2018; (5) 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 PEA (as defined under "Description of the Business – KHSD Property"); (6) the
actual nature, size and grade of its mineral resources are materially consistent with the resource
estimates reported in the supporting technical reports; (7) labor and other industry services will be
available to the Corporation at prices consistent with internal estimates; (8) the continuances of existing
and, in certain circumstances, proposed tax and royalty regimes; and (9) that other parties will continue to
- 34 -
meet and satisfy their contractual obligations to the Corporation. 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. Other material factors and assumptions are discussed throughout this MD&A and, in
particular, under both “Critical Accounting Estimates” and “Risk Factors”.
The Corporation's forward-looking statements are based on the beliefs, expectations and opinions of
management on the date the statements are made and should not be relied on as representing the
Corporation's views on any subsequent date. While the Corporation anticipates that subsequent events
may cause its views to change, the Corporation specifically disclaims any intention or any obligation to
update forward-looking statements if circumstances or management's beliefs, expectations or opinions
should change, except as required by applicable law. For the reasons set forth above, investors should
not place undue reliance on forward-looking statements.
Cautionary Note to U.S. Investors – Information Concerning Preparation of Resource Estimates
This MD&A has 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. The terms “mineral reserve”,
“proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in
accordance with 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 (“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 all necessary permits and government
authorizations must be filed with the appropriate governmental authority.
In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and
“inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these
terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in
reports and registration statements filed with the SEC. Investors are cautioned not to assume that all or
any part of a mineral deposit in these categories will ever be converted into reserves. “Inferred mineral
resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their
economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource
will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources
may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are
cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or
legally mineable. It is reasonably expected that the majority of inferred mineral resources could be
upgraded to indicated mineral resources with continued exploration. Disclosure of “contained ounces” in a
resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits
issuers to report mineralization that does not constitute “reserves” by SEC Industry Guide 7 standards as
in place tonnage and grade without reference to unit measures.
Accordingly, information concerning mineral deposits contained in this MD&A 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.
- 35 -
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Alexco Resource Corp. is responsible for establishing and maintaining adequate internal control
over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of,
the Chief Executive Officer and the Chief Financial Officer and effected by the Board of Directors, management and
other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with International Financial Reporting Standards as issued
by the International Accounting Standards Board. It includes those policies and procedures that:
(i)
(ii)
(iii)
pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, the transactions
related to acquisitions and dispositions of Alexco’s assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with International Financial Reporting Standards, and that Alexco receipts and
expenditures are made only in accordance with authorizations of management and Alexco’s directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of Alexco assets that could have a material effect on Alexco’s financial statements.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are
subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
The effectiveness of Alexco’s internal control over financial reporting as at December 31, 2018 has been audited by
PricewaterhouseCoopers LLP, Alexco’s independent registered public accounting firm.
Management assessed the effectiveness of Alexco’s internal control over financial reporting as at December 31,
2018, based on the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded
that Alexco’s internal control over financial reporting was effective as at December 31, 2018.
“Clynton R. Nauman”
(signed)
Clynton R. Nauman
Chairman and Chief Executive Officer
March 13, 2019
“Michael Clark”
(signed)
Michael Clark
Chief Financial Officer
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Alexco Resource Corp.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Alexco Resource Corp. and its
subsidiaries, (together, the Company) as of December 31, 2018 and 2017, and the related consolidated
statements of loss and comprehensive loss, shareholders’ equity and cash flows for the years then ended,
including the related notes (collectively referred to as the consolidated financial statements). We also have
audited the Company's internal control over financial reporting as of December 31, 2018, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2018 and 2017, and their financial
performance and their cash flows for the years then ended in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board (IFRS). Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 3 and 6 to the consolidated financial statements, the Company changed the manner
in which it accounts for exploration and evaluation assets in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management's Report on Internal Control
Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated
financial statements and on the Company's internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
(Signed) “PricewaterhouseCoopers LLP”
Chartered Professional Accountants
Vancouver, Canada
March 13, 2019
We have served as the Company's auditor since 2005.
ALEXCO RESOURCE CORP.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2018
(expressed in thousands of Canadian dollars)
Note
Current Assets
Cash and cash equivalents
Accounts and other receivables
Restricted cash and deposits
Investments
Inventories
Prepaid expenses and other
Non-Current Assets
Restricted cash and deposits
Investments
Inventories
Property, plant and equipment
Mineral properties
Embedded derivative asset
Intangible assets and other
Total Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities
Environmental services contract loss provision
Deferred revenue
Flow-through share premium pending renunciation
Non-Current Liabilities
Decommissioning and rehabilitation provision
Deferred income tax liabilities
Total Liabilities
Shareholders' Equity
Total Liabilities and Shareholders' Equity
COMMITMENTS
8
9
10
11
12
10
11
12
13
14
15
16
18
24
30
December 31
2018
December 31
2017
(restated - note 6)
January 1
2017
(restated - note 6)
$
8,576
6,811
$
17,906
2,086
$
20,382
2,938
-
351
818
878
499
728
646
538
17,434
22,403
2,725
409
4,699
15,233
82,226
9,671
621
6,593
1,027
4,743
16,256
64,587
6,600
115
-
1,691
151
401
25,563
6,948
-
5,110
16,250
55,620
-
195
$
133,018
$
122,324
$
109,686
$
7,210
36
$
3,601
126
$
1,832
277
109
649
8,004
5,286
3,098
196
276
4,199
5,055
614
337
-
2,446
4,955
-
16,388
9,868
7,401
116,630
112,456
102,285
$
133,018
$
122,324
$
109,686
APPROVED ON BEHALF OF
THE BOARD OF DIRECTORS
“Terry Krepiakevich”
“Elaine Sanders”
(signed)
______________________________
Director
(signed)
______________________________
Director
The accompanying notes are an integral part of these interim condensed consolidated financial statements
ALEXCO RESOURCE CORP.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31
(expressed in thousands of Canadian dollars, except per share
and share amounts)
Note
2018
2017
(restated - note 6)
Revenues
Environmental Services Revenue
Cost of Sales
Environmental Services Costs
Total Gross Profit
General and administrative expenses
Mine site care and maintenance
Operating Loss
Other Income (Expenses)
Other income and expenses
Gain (loss) on investments
Gain on embedded derivative
Loss Before Taxes
Income Tax Provision
Current
Deferred
Net Loss
20
19,880
10,732
21
22
23
11
16
24
24
13,828
6,052
12,170
2,603
14,773
(8,721)
(772)
(572)
3,071
6,732
4,000
10,942
1,888
12,830
(8,830)
1,148
1,341
-
(6,994)
(6,341)
3
1,504
(8,501)
(798)
213
-
(585)
-
1,472
(7,813)
253
(564)
(356)
(667)
Other Comprehensive Income (Loss)
Gain (loss) on FVTOCI investments, net of tax
Items that may be reclassified subsequently to net loss
Cumulative translation adjustments, net of tax
Recycle of loss on previously recorded available-for-sale to income, net of tax
Other Comprehensive Loss
Total Comprehensive Loss
$
(9,086)
$
(8,480)
Basic and diluted loss per common share
$
(0.08)
$
(0.09)
Weighted average number of common shares outstanding
105,034,345
98,486,437
The accompanying notes are an integral part of these interim condensed consolidated financial statements
ALEXCO RESOURCE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(expressed in thousands of Canadian dollars)
Cash Flows used in Operating Activities
Net loss
Items not affecting cash from operations:
Environmental services contract loss provision
Depreciation of property, plant and equipment
Amortization of intangible assets
Share-based compensation expense
Finance costs, foreign exchange and other
Realized gain on disposition of investments
Unrealized loss (gain) on investments
Advisory fees paid in shares
Deferred income tax provision
Changes in non-cash working capital balances related to operations
(Increase) decrease in accounts and other receivables
Increase in inventories
(Increase) decrease in prepaid expenses and other current assets
Decrease in deferred revenue
Increase in accounts payable and accrued liabilities
Cash Flows (used in) from Investing Activities
Expenditures on mineral properties
Purchase or disposal of property, plant and equipment
Decrease (increase) in restricted cash
Acquisition of subsidiary
Purchase (disposal) of investments
Cash Flows from (used in) Financing Activities
Proceeds from issuance of shares
Issuance costs
Proceeds from exercise of warrants
Proceeds from exercise of stock options
Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of Year
2018
2017
(restated-note 6)
$
(8,501)
$
(7,813)
(90)
1,601
51
2,580
(2,799)
-
573
-
1,504
(4,107)
(26)
650
(88)
3,162
(152)
1,723
76
2,359
(1,418)
(1,204)
(632)
500
1,472
849
(129)
(140)
(142)
597
(5,490)
(4,054)
(17,115)
(486)
4,383
(536)
(407)
(14,161)
9,042
(966)
2,027
218
10,321
(9,330)
17,906
(7,155)
(1,982)
(195)
-
2,003
(7,329)
9,043
(716)
418
162
8,907
(2,476)
20,382
Cash and Cash Equivalents - End of Year
$
8,576
$
17,906
SUPPLEMENTAL CASH FLOW INFORMATION (see note 27)
The accompanying notes are an integral part of these interim condensed consolidated financial statements
ALEXCO RESOURCE CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
( expressed in thousands of Canadian dollars)
Common Shares
Number of Shares
Amount W arrants
Share
Options
and RS U' s
Contributed
S urplus
Accumulated
Def icit
Accumulated Other
Comprehensive
Loss
T otal
Balance ‐ December 31, 2017
(restated ‐ note 6)
Net loss
Other comprehensive loss
Share-based compensation
expense recognized
Flow-through shares equity offering,
net of issuance costs and tax
Credit Facility fee - warrants
Acquistion of Contango Strategies
Exercise of share options
Exercise of warrants
Shares issued on Option
Agreement
Share options forfeited or expired
Release of RSU settlement shares
101,280,850
$
202,389
$
2,092
$
6,660
$
15,743
$
( 113,297)
$
( 1,131)
$
112,456
-
-
-
4,703,000
-
237,999
281,666
1,167,351
10,000
-
318,036
-
-
-
6,701
-
416
323
2,563
14
-
497
-
-
-
-
938
-
-
(536)
-
-
-
-
2,947
-
-
-
(106)
-
(3,163)
(497)
-
-
-
-
-
-
-
-
3,163
-
(8,501)
-
-
-
-
-
-
-
-
-
-
(585)
-
-
-
-
-
-
-
-
(8,501)
(585)
2,947
6,701
938
416
217
2,027
14
-
-
Balance ‐ December 31, 2018
107,998,902
$
212,903
$
2,494
$
5,841
$
18,906
$
( 121,798)
$
( 1,716)
$
116,630
Balance ‐ December 31, 2016
(restated ‐ note 6)
Net loss
Other comprehensive income
costs
Shares issued - advisory fees
Shares issued - consideration for
Wheaton
Share-based compensation
expense recognized
Exercise of share options
Exercise of warrants
Share options forfeited or expired
Release of RSU settlement shares
Balance ‐ December 31, 2017
(restated ‐ note 6)
92,950,194
$
186,952
$
2,134
$
7,216
$
12,880
$
(105,483)
$
( 464)
$
103,235
-
-
4,205,820
250,000
3,000,000
-
126,340
458,878
-
289,618
-
-
7,222
500
6,600
-
240
531
-
343
-
-
72
-
-
-
-
(114)
-
-
-
-
-
-
-
2,728
(78)
-
(2,863)
(343)
-
-
-
-
-
-
-
-
2,863
-
(7,813)
-
-
-
-
-
-
-
-
-
-
(667)
-
-
-
-
-
-
-
-
(7,813)
(667)
7,294
500
6,600
2,728
162
417
-
-
101,280,850
202,388
2,092
6,660
15,743
( 113,296)
( 1,131)
112,456
The accompanying notes are an integral part of these interim condensed consolidated financial statements
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
1.
Description of Business and Nature of Operations
Alexco Resource Corp. (“Alexco” or the “Corporation”) was incorporated under the Business Corporations
Act (Yukon) on December 3, 2004 and commenced operations on March 15, 2005. Effective December 28,
2007, it was continued under the Business Corporations Act (British Columbia). The Corporation operates
two principal businesses: a mining business, comprising mineral exploration and mine development in
Yukon Territory; and through Alexco Environmental Group (“AEG”), an environmental services business,
providing consulting, remediation solutions and project management services in respect of environmental
permitting and compliance and site remediation, primarily in Canada and the United States.
The Corporation is in the process of exploring and developing its mineral properties. The recoverability of
the amounts shown for mineral properties is dependent upon the existence of economically recoverable
mineral resources or reserves, successful permitting, the ability of the Corporation to obtain necessary
financing to complete exploration and development, and upon future profitable production or proceeds from
disposition of each mineral property. The carrying amounts of mineral properties are based on a disposal of
part of a mineral property interest, costs incurred to date, adjusted for depletion and impairments and do not
necessarily represent present or future values.
Alexco is a public company which is listed on the Toronto Stock Exchange (under the symbol AXR) and the
NYSE American Stock Exchange (under the symbol AXU). The Corporation’s corporate head office is
located at Suite 1225, Two Bentall Centre, 555 Burrard Street, Box 216, Vancouver, BC, Canada, V7X 1M9.
2.
Basis of Preparation and Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, and were
approved for issue by the Board of Directors on March 13, 2019.
These consolidated financial statements have been prepared under the historical cost method, except for
derivative financial instruments, share-based compensation and certain financial assets which have been
measured at fair value. All figures are expressed in Canadian dollars unless otherwise indicated.
3.
Summary of Significant Accounting Policies
The significant accounting policies used in the preparation of these financial statements are summarized
below.
(a)
Basis of Consolidation
The Corporation’s consolidated financial statements include the accounts of the Corporation and its
subsidiaries. Subsidiaries are entities controlled by the Corporation, where control is achieved by
the Corporation being exposed to, or having rights to, variable returns from its involvement with the
entity and having the ability to affect those returns through its power over the entity. Subsidiaries
are fully consolidated from the date on which control is obtained by Alexco, and are de-
consolidated from the date that control ceases.
The following subsidiaries have been consolidated for all dates presented within these financial
statements, and are wholly owned: Alexco Keno Hill Mining Corp., Elsa Reclamation &
Development Corporation Ltd. (“ERDC”), Alexco Exploration Canada Corp., Alexco Environmental
Group Inc., Alexco Environmental Group Holdings Inc., Alexco Water and Environment Inc.
(“AWE”) and Contango Strategies Ltd. During the period January 1, 2017 through December 28,
2017, the date of the sale, amounts from Alexco Environmental (US) Group Inc. (“AEG US”) and
Alexco Financial Guarantee Corp. (“AFGC”) (together referred to as “AEG US Group”) were
consolidated by the Corporation. All significant inter-company transactions, balances, income and
expenses are eliminated on consolidation.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
(b)
Cash and Cash Equivalents
Cash and cash equivalents are unrestricted as to use and consist of cash on hand, demand
deposits and short term interest-bearing investments with maturities of 90 days or less from the
original date of acquisition and which can readily be liquidated to known amounts of cash.
Redeemable interest bearing investments with maturities of up to one year are considered cash
equivalents if they can readily be liquidated at any point in time to known amounts of cash and they
are redeemable thereafter until maturity for invested value plus accrued interest.
(c)
Inventories
Inventories include ore in stockpiles, concentrate and materials and supplies. Ore in stockpiles and
concentrate are recorded at the lower of weighted average cost and net realizable value. Cost
comprises all mining and processing costs incurred, including labor, consumables, production-
related overheads, depreciation of production-related property, plant and equipment and depletion
of related mineral properties. Net realizable value is estimated at the selling price in the ordinary
course of business less applicable variable selling expenses. Materials and supplies are valued at
the lower of cost and replacement cost, costs based on landed cost of purchase, net of a provision
for obsolescence where applicable.
When inventories have been written down to net realizable value, a new assessment of net
realizable value is made in each subsequent period. When circumstances that caused the write-
down no longer exist or when there is clear evidence of an increase in net realizable value, the
amount of the write down is reversed.
(d)
Property, Plant and Equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and
impairment write-downs. The cost capitalized is determined by the fair value of consideration given
to acquire the asset at the time of acquisition or construction, the direct cost of bringing the asset to
the condition necessary for operation, and the estimated future cost of decommissioning and
removing the asset. Repairs and maintenance expenditures are charged to operations, while major
improvements and replacements which extend the useful life of an asset are capitalized.
Depreciation of property, plant and equipment is calculated using the following methods:
Heavy machinery and equipment
Land and buildings
Leasehold improvements & Other
Roads, Camp and other site infrastructure
Ore-processing mill components
5 years straight-line
20 years straight-line
Over the term of lease, and 2 – 5 years straight-line
5 -10 years straight-line
Variously between 5 and 30 years straight-line
Gains and losses on disposals are determined by comparing the proceeds with the carrying
amount and are recognized within other gains or losses in earnings.
(e)
Mineral Properties
Exploration and Evaluation Properties
The Corporation capitalizes exploration and evaluation expenses at cost for expenditures incurred
after it has obtained legal rights to explore a specific area and before technical feasibility and
commercial viability of extracting mineral resources are demonstrable.
All direct and indirect costs relating to the exploration of specific properties with the objective of
locating, defining and delineating the resource potential of the mineral interests on specific
properties are capitalized as exploration and evaluation assets, net of any directly attributable
recoveries recognized, such as exploration or investment tax credits.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
The Corporation has elected to follow a policy of applying the proceeds received from the silver
streaming arrangement with Wheaton Precious Metals (“Wheaton”) explained further in Note 15, as
a credit to the carrying value of the Exploration and Evaluation Property. Accordingly, this has been
applied retrospectively and the initial deposit has been applied as an offset against the mineral
interest asset, with the cumulative catch up adjustment in the amount of $12,396,000 recognized in
January 1, 2017 opening retained earnings (Note 6).
At each reporting date, exploration and evaluation assets are evaluated and may be classified as
mining operations assets upon achieving technical feasibility and determination of commercial
viability.
Mining Operations Properties
Mining operations properties are recorded at cost on a property-by-property basis. The recorded
cost of mining operations properties is based on acquisition costs incurred to date, including
capitalized exploration and evaluation costs and capitalized development costs, less depletion,
recoveries and write-offs. Capitalized development costs include costs incurred to establish access
to mineable resources where such costs are expected to provide a long-term economic benefit, as
well as operating costs incurred, net of the proceeds from any sales generated, prior to the time the
property achieves commercial production.
Depletion of mining operations properties is calculated on the units-of-production basis using
estimated mine plan resources, such resources being those defined in the mine plan on which the
applicable mining activity is based. The mine plan resources for such purpose are generally as
described in an economic analysis supported by a technical report compliant with Canadian
National Instrument 43-101 Standards of Disclosure for Mineral Projects.
(f)
Intangible Assets
Customer relationships, rights to provide services and database assets acquired through business
combinations, and acquired patents, are recorded at fair value at acquisition date. All of the
Corporation’s intangible assets have finite useful lives, and are amortized using the straight-line
method over their expected useful lives.
(g)
Impairment of Non-Current Non-Financial Assets
The carrying amounts of non-current non-financial assets are reviewed and evaluated for
impairment when events or changes in circumstances indicate that the carrying amounts of the
related asset may not be recoverable. Non-current non-financial assets include property, plant,
equipment, mineral properties and finite-life intangible assets. If the recoverable amount is less
than the carrying amount of the asset, an impairment loss is recognized and the asset is written
down to recoverable value.
The recoverable amount is the higher of an asset’s “fair value less cost of disposal” and “value-in-
use”. Where the asset does not generate cash flows that are independent from other assets, the
recoverable amount of the cash-generating unit to which the asset belongs is determined, with a
cash‐generating unit being the smallest identifiable group of assets and liabilities that generate
cash inflows independent from other assets. Exploration and evaluation assets are each separately
assessed for impairment, and are not allocated by the Corporation to a cash generating unit
(“CGU”) for impairment assessment purposes. “Fair value less cost of disposal” is determined as
the amount that would be obtained from the sale of the asset or cash-generating unit in an arm’s
length transaction between knowledgeable and willing parties. In assessing “value-in-use”, the
future cash flows expected to arise from the continuing use of the asset or cash-generating unit in
its present form are estimated using assumptions that an independent market participant would
consider appropriate, and are then discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and risks specific to the asset
or unit.
Where conditions that gave rise to a recognized impairment loss are subsequently reversed, the
amount of such reversal is recognized into earnings immediately, though is limited such that the
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
revised carrying amount of the asset or cash-generating unit does not exceed the carrying amount
that would have been determined had no impairment loss been recognized for the asset or cash
generating unit.
(h)
Provisions
General
Provisions are recorded when a present legal or constructive obligation exists as a result of past
events, where it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate of the amount of the obligation can be
made.
The expense relating to any provision is presented in profit or loss net of any reimbursement.
Provisions are discounted using a current risk-free pre-tax rate that reflects where appropriate the
risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognized as a finance cost.
Decommissioning and Rehabilitation Provision
The Corporation recognizes a decommissioning and rehabilitation provision for statutory,
contractual, constructive or legal obligations to undertake reclamation and closure activities
associated with property, plant, equipment and mineral properties, generally at the time that an
environmental or other site disturbance occurs or a constructive obligation for reclamation and
closure activities is determined. When the extent of disturbance increases over the life of an
operation, the provision is increased accordingly. Provisions are measured at the present value of
the expected future expenditures required to settle the obligation, using a risk-free pre-tax discount
rate reflecting the time value of money and risks specific to the liability. The liability is increased for
the passage of time, and adjusted for changes to the current market-based risk-free discount rate
as well as changes in the estimated amount or timing of the expected future expenditures. The
associated restoration costs are capitalized as part of the carrying amount of the related asset and
then depreciated accordingly.
(i)
Revenue Recognition
Revenue from environmental services are recognized upon the transfer of promised services or
goods based on the output appropriate to the particular service contract and when a customer has
the ability to direct the use and obtain the benefits from the service or good. The Corporation
provides environmental services related to permitting and remediation activities, generally in the
mining industry, as well provide engineering, design, construction and operational services related
to water treatment systems. The Corporation identifies the performance obligations in the contract,
and the obligations are measured by reference to the transaction price. The transaction price is
established in the agreement as either a fixed price or rate per hour. If the contract has multiple
performance obligations, the Corporation will assign the transaction price to the various
performance obligations. The stand-alone selling price for services identified within the contract are
determined based on detailed billing schedules included within the underlying contract with the
customer or based on comparable projects where relevant. Generally, performance obligations for
environmental services are satisfied over time as the service is provided. Revenue is recognized
using the input method with the inputs being costs incurred on related projects. The general
payment terms are 30 to 60 days once the performance obligations have been satisfied. Typical
payments are received 30 days after the invoice has been received by the client.
Management will assess and use significant judgement to determine whether the Corporation has
promised to provide the specified good and service itself (as a principal) or to arrange for those
specified goods or services to be provided by another party (as an agent). In those arrangements
where the Corporation obtains control of the specified good or service before they are transferred
to the customer, they will be deemed to act as a principal. In those arrangements were the
Corporation is deemed to be the principal, the Corporation will recognize as revenue the “gross”
amount paid by the customer for the specified good or service. If the Corporation acts an agent, it
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
will record revenue as the net consideration that it retains for the specified good or service that was
provided to the customer.
(j)
Share-Based Compensation and Payments
The cost of incentive share options and other equity-settled share-based compensation and
payment arrangements is recorded based on the estimated fair value at the grant date and charged
to earnings over the vesting period. With respect to incentive share options, grant-date fair value is
measured using the Black-Scholes option pricing model. With respect to restricted share units,
grant-date fair value is determined by reference to the share price of the Corporation at the date of
grant. Where share-based compensation awards are subject to vesting, each vesting tranche is
considered a separate award with its own vesting period and grant-date fair value. Share-based
compensation expense is recognized over the tranche’s vesting period by a charge to earnings,
based on the number of awards expected to vest. The number of awards expected to vest is
reviewed at least annually, with any impact being recognized immediately.
(k)
Flow-Through Shares
The proceeds from the offering of flow-through shares are allocated between the shares and the
sale of tax benefits when the shares are offered. The allocation is made based on the difference
between the market value of the shares and the amount the investors pay for the flow‐through
shares. A liability is recognized for the premium paid by the investors and is then recognized in the
results of operations in the period the eligible exploration expenditures are incurred.
(l)
Warrants
When the Corporation issues units that are comprised of a combination of shares and warrants, the
value is assigned to shares and warrants based on their relative fair values. The fair value of the
shares is determined by the closing price on the date of the transaction and the fair value of the
warrants is determined based on a Black-Scholes option pricing model.
(m)
Current and Deferred Income Taxes
Income tax expense comprises current and deferred income taxes. Current and deferred income
taxes are recognized in profit or loss except to the extent that they relate to a business combination
or to items recognized directly in equity or in other comprehensive income.
Current income taxes are the expected taxes payable or receivable on the taxable income or loss
for the period, using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to taxes payable in respect of previous periods.
Deferred income taxes are recognized using the liability method, on temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for tax purposes. However, deferred income taxes are not recognized if they arise from initial
recognition of an asset or liability in a transaction other than a business combination that, at the
time of the transaction, affects neither accounting nor taxable profit nor loss. Deferred income taxes
are determined using tax rates and laws that have been enacted or substantively enacted at the
reporting date and are expected to apply when the related deferred income tax asset is realized or
the deferred income tax liability is settled.
Deferred income tax assets and liabilities are presented as non-current in the financial statements.
Deferred income tax assets and liabilities are offset if there is a legally enforceable right of offset,
and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities but they intend to settle current tax liabilities and assets on a net basis or their
tax assets and liabilities will be realized simultaneously. Deferred income tax assets are recognized
to the extent that it is probable that future taxable profits will be available against which the assets
can be utilized.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
(n)
Translation of Foreign Currencies
The financial statements of each entity in the group are measured using the currency of the primary
economic environment in which each entity operates (the “functional currency”). The consolidated
financial statements are presented in Canadian dollars.
The functional currency of all entities in the Corporation group other than AWE is the Canadian
dollar, while the functional currency of AWE is the United States dollar. The financial statements of
AWE are translated into the Canadian dollar presentation currency using the current rate method
as follows:
Assets and liabilities – at the closing rate at the date of the statement of financial position.
Income and expenses – at the average rate of the period (as this is considered a reasonable
approximation to actual rates).
All resulting changes are recognized in other comprehensive income as cumulative translation
adjustments.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither
planned nor likely in the foreseeable future, foreign exchange gains and losses arising from the
item are considered to form part of the net investment in a foreign operation and are recognized in
other comprehensive income.
When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or
significant influence over a foreign operation, the foreign currency gains or losses accumulated in
other comprehensive income related to the foreign operation are recognized in profit or loss. If an
entity disposes of part of an interest in a foreign operation which remains a subsidiary, a
proportionate amount of foreign currency gains or losses accumulated in other comprehensive
income related to the subsidiary is reallocated between controlling and non-controlling interests.
(o)
Earnings or Loss Per Share
Basic earnings per share is calculated by dividing the net income (loss) for the period by the
weighted average number of common shares outstanding during the period.
Diluted earnings (loss) per share is calculated using the treasury share method whereby all “in the
money” options, warrants and equivalents are assumed to have been exercised at the beginning of
the period and the proceeds from the exercise are assumed to have been used to purchase
common shares at the average market price during the period.
(p)
Financial Instruments
Financial assets and financial liabilities, including derivative instruments, are initially recognized at
fair value on the balance sheet when the Corporation becomes a party to the relevant contractual
provisions. Measurement
instrument’s
in subsequent periods depends on
classification.
financial
the
The Corporation classifies the financial instruments in the following categories: at fair value through
profit and loss (“FVTPL”), fair value through other comprehensive income (“FVTOCI”) or at
amortized cost.
(i) Classification
The Corporation determines the classification of financial instruments at initial recognition.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
Financial assets
a) Debt - The classification of debt instruments is driven by the Corporation’s business model for
managing the financial assets and the relevant contractual cash flow characteristics. A debt
instrument is measured at amortized cost if the objective of the business model is to hold the
debt instrument for the collection of contractual cash flows, and the asset's contractual cash
flows are comprised solely of payments of principal and interest.
b) Equity - On the day of acquisition the Corporation may make an irrevocable election (on an
instrument-by- instrument basis) to designate them as at FVTOCI. Investments in common
shares are held for longterm strategic purposes and not for trading. Upon the adoption of IFRS
9, the Company made an irrevocable election to designate these investments as FVTOCI in
order to provide a more meaningful presentation based on management’s intention, rather
than reflecting changes in fair value in net income.
Financial liabilities
Financial liabilities are measured at amortized cost; unless they are required to be measured at
FVTPL (such as instruments held for trading or derivatives) or the Corporation has opted to
measure at FVTPL.
(ii) Measurement
Financial assets and liabilities at FVTPL
Financial assets and liabilities at FVTPL are initially recognized at fair value and transaction costs
are expensed in the consolidated statement of income (loss). Realized and unrealized gains and
losses arising from changes in the fair value of the financial assets or liabilities held at FVTPL are
included in the consolidated statement of income (loss) in the period in which they occur. Where
the Corporation has opted to designate a financial liability at FVTPL, any changes associated with
our own credit risk will be recognized in Other Comprehensive Income (“OCI”).
Financial assets at FVTOCI
Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction
costs. Subsequently, the investments are measured at fair value, with gains and losses arising from
changes from initial recognition recognized in OCI.
Financial assets and liabilities at amortized cost
Financial assets and liabilities at amortized cost are initially recognized at fair value net of
transaction costs, and subsequently carried at amortized cost adjusted by any impairment.
Derivative financial instruments
When the Corporation enters into derivative contracts, these are intended to reduce the exposures
related to assets and liabilities, or forecast transactions. Derivatives are classified as FVTPL.
Derivatives embedded in financial liabilities are treated as separate derivatives when their risks and
characteristics are not closely related to the host contracts. However, the classification approach
described above is applied to all financial assets, including those that contain embedded
derivatives, without the need to separate the embedded derivative from the host contract.
(iii) Impairment of financial assets
Impairment of financial assets at amortized cost
The Corporation recognizes a loss allowance for expected credit losses on financial assets that are
measured at amortized cost.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
The Corporation is applying the simplified method for trade receivables and is calculating expected
credit losses at an amount equal to the lifetime expected credit loss.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods
if the expected credit losses are reversed after the impairment was recognized.
(iv) Derecognition
Derecognition of financial assets and liabilities
Financial assets are derecognized when the investments mature or are sold, and substantially all
the risks and rewards of ownership have been transferred. A financial liability is derecognized when
the obligation under the liability is discharged, canceled or expired. Gains and losses on
derecognition are recognized within finance income and finance costs, respectively. Gains or
losses on equity financial assets designated as FVTOCI remain within accumulated OCI.
(v) Fair value of financial instruments
The fair values of quoted investments are based on current prices. If the market for a financial
asset is not active, the Corporation establishes fair value by using valuation techniques. These
include the use of recent arm’s length transactions, reference to other instruments that are
substantially the same, discounted cash flow analysis, and option pricing models refined to reflect
the financial asset’s specific circumstances.
(q)
Fair Value Measurement
Where fair value is used to measure assets and liabilities in preparing these financial statements, it
is estimated at the price at which an orderly transaction to sell the asset or to transfer the liability
would take place between market participants at the measurement date under current market
conditions. Fair values are determined from inputs that are classified within the fair value hierarchy
defined under IFRS as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly
Level 3 – Inputs for the asset or liability that are unobservable
(r)
Goodwill
The Corporation recognizes goodwill relating to a business combination when the total purchase
price exceeds the fair value of the identifiable assets and liabilities of the acquired business.
Goodwill is tested annually for impairment of when there is an indication that the goodwill may be
impaired. Any impairment is recognized as an expense immediately. Should there be a recovery in
value, there is no reversal of previous impairments of Goodwill.
4.
New and Revised Accounting Standards
New accounting standard not yet effective
A new standard has been issued and is relevant to the Corporation but is not yet effective and therefore not
reflected in these consolidated financial statements:
IFRS 16 relates to accounting for leases and lease obligations. It replaces the existing lease guidance in
IAS 17, Leases. The purpose of the new standard is to report all leases on the statement of financial
position and to define how leases and lease obligations are measured. IFRS 16 is effective from January 1,
2019 and must be applied retrospectively, subject to certain practical expedients, using either a full
retrospective approach or modified retrospective approach.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
The Corporation is currently involved in various lease obligations as part of its normal course of business.
IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service
contract on the basis of whether the customer controls the asset being leased. For those assets determined
to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees. All
leases will be recorded on the statement of financial position, except short-term leases and low-value
leases. This is expected to result in a material increase in both rights of use assets and lease liabilities upon
adoption of the standard, and changes to the timing of recognition and classification of expenses associated
to such lease arrangements. The Corporation anticipates an increase in cash flow from operating activities
as lease payments will be recorded as financing outflows in the statement of cash flows. The Corporation
also anticipates an increase in depreciation and finance expenses and a decrease in operating expenses.
The Corporation plans to adopt the modified retrospective approach and not restate balances for the
comparative period. On initial adoption, the Corporation has elected to use the following practical
expedients permitted under the standard:
Apply a single discount rate to a portfolio of leases with similar characteristics;
Account for leases with a remaining term of less than twelve (12) months as at January 1, 2019 as
short-term leases; and
Account for lease payments as an expense and not recognize a right-of-use (“ROU”) asset if the
underlying asset is of low dollar value.
On adoption of IFRS 16, the Corporation will recognize lease liabilities in relation to leases under the
principles of the new standard measured at the present value of the remaining lease payments, discounted
using the interest rate implicit in the lease or the Corporation’s incremental borrowing rate as at January 1,
2019. The associated ROU assets will be measured at the amount equal to the lease liability on January 1,
2019. The Corporation has completed its review of all existing operating leases and service contracts to
identify contracts in scope for IFRS 16 and assessed contracts for embedded leases. Adoption of the new
standard is expected to result in the recognition of additional lease liabilities and ROU assets of
approximately $1,000,000 each.
There are no other IFRS’s or International Financial Reporting Interpretations Committee (“IFRIC”)
interpretations that are not yet effective that are expected to have a material impact on the Corporation.
5.
Critical Judgements and Major Sources of Estimation Uncertainty
The preparation of the consolidated financial statements requires management to select accounting policies
and make estimates and judgments that may have a significant impact on the consolidated financial
statements. Estimates are continuously evaluated and are based on management’s experience and
expectations of future events that are believed to be reasonable under the circumstances. The estimates
management makes in this regard include those regarding future commodity prices and foreign currency
exchange rates, which are an important component of several estimates and assumptions management
must make in preparing the financial statements, including but not limited to estimations and assumptions
regarding the evaluation of the carrying amount of mineral properties and other assets, the estimation of
decommissioning and rehabilitation provisions, the estimation of revenues and the value of the embedded
derivative related to sales of concentrate, and the estimation of the net realizable value of inventories.
Management bases its estimates of future commodity prices and foreign currency exchange rates primarily
on consensus investment analyst forecasts, which are tracked and updated as published on generally a
quarterly basis. Actual outcomes can differ from these estimates.
The most significant judgments and estimates made by management in preparing the Corporation’s financial
statements are described as follows:
Mineral Resources
The determination of the Corporation’s estimated mineral resources by appropriately qualified
persons requires significant judgements regarding the interpretation of complex geological and
engineering data including the size, depth, shape and nature of the deposit and anticipated plans
for mining, as well as estimates of future commodity prices, foreign exchange rates, capital
requirements and production costs. These mineral resource estimates are used in many
determinations required to prepare the Corporation’s financial statements, including evaluating the
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
recoverability of the carrying amount of its non-current non-financial assets and estimating amounts
of future taxable income in determining whether to record a deferred tax asset.
Impairment and Impairment Reversals of Non-Current Non-Financial Assets
The Corporation reviews and evaluates the carrying value of each of its non-current non-financial
assets for impairment and impairment reversals when events or changes in circumstances indicate
that the carrying amounts of the related asset may not be recoverable or previous impairment
losses may become recoverable. The identification of such events or changes and the performance
of the assessment requires significant judgment. Furthermore, management’s estimates of many of
the factors relevant to completing this assessment, including commodity prices, foreign currency
exchange rates, mineral resources, and operating, capital and reclamation costs, are subject to
risks and estimation uncertainties that may further affect the determination of the recoverability of
the carrying amounts of its non-current non-financial assets.
Management has assessed indicators of impairment and impairment reversals on the Corporation’s
non-current non-financial assets and has concluded that no impairment or impairment reversal
indicators exists as of December 31, 2018.
Decommissioning and Rehabilitation Provision
Management’s determination of the Corporation’s decommissioning and rehabilitation provision is
based on the reclamation and closure activities it anticipates as being required, the additional
contingent mitigation measures it identifies as potentially being required and its assessment of the
likelihood of such contingent measures being required, and its estimate of the probable costs and
timing of such activities and measures. Significant judgements must be made when determining
such reclamation and closure activities and measures required and potentially required.
Mineral Properties - Silver Stream Arrangement
Upon entering into a long-term streaming arrangement linked to production at operations,
Management’s judgment was required in assessing the appropriate accounting treatment for the
transaction on the closing date and in future periods. We consider the specific terms of the
arrangement to determine whether we have disposed of an interest in the reserves and resources
of the operation or executed some other form of arrangement. This assessment considers what the
counterparty is entitled to and the associated risks and rewards attributable to them over the life of
the operation. These include the contractual terms related to the total production over the life of the
arrangement as compared to the expected production over the life of the mine, the percentage
being sold, the percentage of payable metals produced, the commodity price referred to in the
ongoing payment and any guarantee relating to the upfront payment if production ceases.
Fair value of derivatives
The fair values of financial instruments that are not traded in an active market are determined using
valuation techniques. Management uses its judgment to select a method of valuation and makes
estimates of specific model inputs that are based on conditions existing at the end of each reporting
period. Refer to Note 15 for further details on the methods and assumptions associated with the
measurement of the embedded derivative within the Silver Streaming Interest. Management has
applied judgement in concluding that the completion test as discussed in Note 15 will be met prior
to December 31, 2020 or extended to a later date, therefore the capacity related refund is not likely
to be owed to Wheaton Precious Metals Corp.
6.
Impacts of Change in Accounting Policy and Adoption of New IFRS Pronouncements
The Corporation has adopted the new IFRS pronouncements listed below as at January 1, 2018, in
accordance with the transitional provisions outlined in the respective standards and described below. In light
of the changes to the revenue standard to IFRS 15, management has changed their treatment under IFRS 6
for the partial distribution of the mineral interest.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
Adjustments to Consolidated Financial Statements
The table below summarizes the adjustments to previously reported figures related to the policy change
pertaining to IFRS 6, which is more fully described below:
Adjustments to Condensed Consolidated Balance Sheets
Equity before accounting changes
Adjustments to equity relating to:
Property plant and equipment
Mineral properties
Deferred income tax liabilities
Silver streaming interest
December 31
2017
January 1
2017
$ 100,060
$ 90,673
2,117
(10,229)
2,390
18,118
2,283
(10,229)
1,440
18,118
Equity after accounting changes
$ 112,456
$ 102,285
Adjustments to Condensed Consolidated Statements of Loss and Comprehensive Loss
Loss before accounting changes
Adjustments to loss relating to:
Depreciation and amortization
Year ended
December 31
2017
Year ended
January 1
2017
$ (7,648)
$ (4,359)
(165)
(165)
Loss after accounting changes
$ (7,813)
$ ( 4,524)
Loss per share before accounting changes:
Basic and diluted
Loss per share after accounting changes:
Basic and diluted
$ (0.08)
$ (0.04)
$ (0.09)
$ (0.05)
The Corporation has assessed the impact of IFRS 15 on its silver streaming arrangement with Wheaton, as
described in Note 15. At the date the initial transaction was completed, the Corporation determined that the
contract was a disposal of part of a mineral interest and a related contract to provide extraction
services. Under its existing policy, the Corporation applies the provisions of IFRS 6, which allows for an
accounting policy choice to either apply the proceeds received as a credit to the carrying value of the
exploration and evaluation (“E&E”) asset, or account for the transaction as a partial sale, with deferral of the
gain, to be recognized on a units-of-production sold basis. Upon the effective date of IFRS 15, the
Corporation will continue to apply IFRS 6 guidance for the partial sale of the mineral interest, but has elected
to change the policy to apply the proceeds received as a credit to the carrying value of the E&E asset.
Management believes this approach to be more relevant and reliable.
Specifically, the USD $50,000,000 initial deposit recorded as consideration was applied against the carrying
value of the mineral interest, with a gain being recognized to the extent that the value of the consideration
exceeds the value of the mineral interest.
Overview of Changes to IFRS
The Corporation adopted IFRS 15 on January 1, 2018 in accordance with the transitional provisions of the
standard, applying a modified retrospective approach in restating our prior period financial information.
IFRS 15, Revenue from Contracts with Customers deals with revenue recognition and establishes principles
for reporting useful information to users of financial statements about the nature, amount, timing and
uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
recognized when a customer obtains control of a good or service and thus has the ability to direct the use
and obtain the benefits from the good or service. The standard replaces IAS 18, Revenue and IAS 11,
Construction contracts and related interpretations. Management’s primary focus was evaluating contracts
under our Environmental Services business, as this is currently the Corporation’s primary source of revenue.
Based on this analysis, the Corporation does not have significant changes to the timing and amount of its
revenue recognition related to environmental services under IFRS 15, as the majority of its contracts
contain a series of same or similar performance obligations. Consequently, consistent with the
Corporation’s existing policy, revenue is recognized “over time”, as the services are provided.
IFRS 9, Financial Instruments, addresses the classification, measurement and recognition of financial assets
and financial liabilities. It replaces the guidance in IAS 39, Financial Instruments: Recognition and
Measurement that relate to the classification and measurement of financial instruments. IFRS 9 retains but
simplifies the mixed measurement model and establishes three primary measurement categories for
financial assets: amortized cost, fair value through other comprehensive income and fair value through profit
or loss. The basis of classification depends on the entity’s business model for managing its financial
instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the
standard retains most of the IAS 39 requirements. The main change for liabilities is that, in cases where the
fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit
risk is recorded in OCI rather than in net earnings. There was no change in the carrying amounts on the
basis of their measurement categories or a measurement attribute on transition. The Corporation has made
the irrevocable classification choice to record fair value changes on its equity investments in OCI (Note 24).
This election resulted in a nil reclassification from the Corporation’s retained earnings to AOCI, on January
1, 2018.
Credit risk arises from cash and cash equivalents and trade receivables. While the Corporation is exposed to
credit losses due to the non-performance of its counterparties, there are no significant concentrations of
credit risk and the Corporation does not consider this to be a material risk. The Corporations customers with
whom the current business operations are with include government bodies and reputable businesses.
The Corporation has implemented a process for managing expected credit loss provisions related to trade
receivables going forward under IFRS 9. For its trade receivables, the Corporation applies the simplified
approach for determining expected credit losses, which require the Corporation to determine the lifetime,
expected losses for all its trade receivables. The expected lifetime credit loss provision for its trade
receivables is based on historical counterparty default rates and adjusted for relevant forward looking
information, when required. Because of factors including that the majority of its customers are considered to
have low default risk and the Corporation does not extend credit to customers with a high default risk, the
historical default rates are low and the lifetime expected credit loss allowance for trade receivables is
nominal as at December 31, 2018. Accordingly, the Corporation did not record any adjustment relating to the
implementation of the expected credit loss model for its trade receivables.
The Corporation has assessed the classification and measurement of our financial assets and financial
liabilities under IFRS 9 and have summarized the original measurement categories under IAS 39 and the
new measurement categories under IFRS 9 in the following table:
Original classification
IAS 39
New classification
IFRS 9
Financial Assets
Cash and cash equivalents Amortized cost
Short-term deposits
Amortized cost
Equity securities
Available-for-sale
Warrants
FVTPL
Trade accounts receivable Amortized cost
Other receivables
Derivative assets
Restricted cash
Financial Liabilities
Amortized cost
FVTPL
Amortized cost
Amortized cost
Amortized cost
Amortized cost
FVTOCI
FVTPL
Amortized cost
Amortized cost
FVTPL
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
Trade and other payables
Amortized cost
Amortized cost
Derivative liabilities
FVTPL
FVTPL
7.
Acquisition of Contango Strategies Ltd.
On June 15, 2018 the Corporation’s wholly owned subsidiary, AEG, completed the acquisition of Contango Strategies
Ltd. (“Contango”), a private Corporation based in Saskatoon, Saskatchewan. The acquisition of Contango is
considered a business combination under IFRS 3.
Contango has developed technologies beneficial to the Corporation with synergies formed that will allow the
Corporation to pursue new opportunities. AEG 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 reflecting 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) having been paid on closing with the remaining $370,000 cash payment to be
made on the first anniversary of the closing of the transaction. The acquisition includes all of Contango’s operations
including $450,000 in working capital and property, plant and equipment.
Acquisition related costs in the amount of $28,000 were incurred and have been recognized as an expense in the
consolidated statement of loss, as part of other expenses.
Goodwill of $550,000 is recognized and is primarily related to growth expectation, expected future profitability and the
substantial skill and expertise of Contango’s employees. Goodwill is reflected on the Balance Sheet under intangible
assets and is not expected to be deductible for tax purposes.
The allocation of the purchase price is preliminary and may vary based upon the completion of additional valuation
procedures and finalization of working capital adjustments pursuant to the purchase agreement.
The date of the acquisition for accounting purposes is June 15, 2018 being the closing date of the share purchase
agreement and the date the consideration was settled. The preliminary allocation of the purchase price of Contango
based on management’s estimate of fair values is as follows:
Fair value of consideration
Amount settled in cash
Fair value of common shares issued
Fair value of cash to be settled in one year
Total fair value of consideration
Fair value of identifiable assets acquired and liabilities assumed from Contango:
Cash and cash equivalents
Accounts and other receivables
Inventory
Prepaid expenses
Property, plant and equipment
Accounts payable and accrued liabilities
Net identifiable assets acquired and liabilities assumed
Goodwill on acquisition
Net cash outflow on acquisition
Acquisition costs charged to expenses
$ 602
416
370
$ 1,388
66
618
102
54
333
(335)
$ 838
$ 550
$ 536
$ 28
Below is a proforma summary of the revenues, cost of sales and net income (loss) incurred by Contango for the
period January 1, 2018 to June 14, 2018 combined with the revenue, cost of sales and net loss for Alexco for the
year ended December 31, 2018. Revenue since the date of acquisition was $1.4 million:
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
Selected Financial Information
Contango
Strategies Ltd.
Alexco Resource
Corp.
Proforma
Combined
Entities
For the period
January 1, 2018
to June 14, 2018
For the year ended
December 31, 2018
For the year
ended December
31, 2018
Environmental services revenue
$ 1,162
$ 19,880
$ 21,042
Costs of sales and other expenses
Net income (loss)
1,026
$ 136
28,381
29,407
$ (8,501)
$ (8,365)
8.
Cash and Cash Equivalents
Cash at bank and on hand
Short-term bank deposits
9.
Accounts and Other Receivables
Trade receivables 1
Interest and other
December 31
2018
December 31
2017
$ 3,629
4,947
$ 6,019
11,887
$ 8,576
$ 17,906
December 31
2018
$ 6,689
122
$ 6,811
December 31
2017
$ 1,988
98
$ 2,086
1. Trade receivables are derived primarily from the environmental consulting business (AEG).
10.
Restricted Cash and Deposits
Security for decommissioning obligations
Security for remediation services agreement
Other
Restricted cash and deposits
Less: current portion
December 31
2018
December 31
2017
$ 2,569
-
156
$ 6,507
499
86
2,725
-
7,092
499
$ 2,725
$ 6,593
Security for decommissioning obligations of $2,569,000 as at December 31, 2018 (December 31, 2017 -
$6,507,000) includes cash collateral and a surety bond representing security for future reclamation and
closure activities for the Bellekeno, Bermingham, Flame & Moth, Lucky Queen and Onek deposits. During
the second quarter of 2018, security in the amount of $6,305,000 was replaced with a surety bond
collateralized with $2,364,191, with the balance of $3,940,809 being reclassified as unrestricted cash and
cash equivalents. The remaining security under a remediation services agreement was released back to the
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
Corporation in the amount of $499,000 (US$398,000) in 2018 as the Corporation had satisfied the
requirements under that agreement.
11.
Investments
Common shares held
Warrants held
Investments
Less: current portion
December 31
2018
December 31
2017
$ 736
24
760
351
$ 673
1,082
1,755
728
$ 409
$ 1,027
As of December 31, 2018, the Corporation held 8,736,644 common shares of Banyan Gold Corp. (“Banyan”)
(December 31, 2017 – 4,775,000) and 1,320,500 common shares of Golden Predator Mining Corp. (“Golden
Predator”) (December 31, 2017 – 300,000). As of December 31, 2018, the Corporation also held 6,155,822
warrants of Banyan (December 31, 2017 – 4,375,000) with an exercise price ranging from $0.115 to $0.15
and 300,000 warrants of Golden Predator (December 31, 2017 – 1,425,000) with an exercise price of $1.00
per share.
During the year ended December 31, 2018, the Corporation recorded a pre-tax loss on investments in the
amount of the $572,000 (2017 – pre tax gain of $1,341,000). The loss on investments for the year ended
December 31, 2018 consisted of a fair value measurement adjustment on warrants held in Banyan and
Golden Predator, through the statement of loss. During the year, the Corporation also recorded in other
comprehensive income a fair value adjustment loss adjustment, net of tax of $798,000 (2017 – fair value
gain adjustment of $253,000) on common shares held in Banyan and Golden Predator.
12.
Inventories
Ore in stockpiles and mill supplies
Materials and supplies
Inventory
Less: current portion
December 31
2018
December 31
2017
$ 4,699
818
$ 4,743
646
5,517
818
5,389
646
$ 4,699
$ 4,743
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
13.
Property, Plant and Equipment
Cost
December 31, 2017
(restated – note 6)
Additions (includes
business
combinations)
Decommission
change in estimate
Land and
Buildings
Camp,
Roads, and
Other Site
Ore
Processing
Mill
Heavy
Machinery
and
Equipment
Leasehold
Improvements
& Other
Total
$ 1,709
$ 5,343
$ 22,749
$ 8,475
$ 1,335
$ 39,611
-
-
226
-
-
85
837
-
168
1,231
-
85
December 31, 2018
$ 1,709
$ 5,569
$ 22,834
$ 9,312
$ 1,503
$ 40,927
Accumulated
Depreciation
Land and
Buildings
Camp, Roads,
and Other Site
Ore
Processing
Mill
Heavy
Machinery
and
Equipment
Leasehold
Improvements
& Other
Total
December 31, 2017
(restated – note 6)
Depreciation (includes
business
combinations)
Disposal
$ 351
$ 4,692
$ 10,270
$ 6,767
$ 1,275
$ 23,355
78
-
177
1,178
-
-
766
-
140
2,339
-
-
December 31, 2018
$ 429
$ 4,869 $ 11,448
$ 7,533
$ 1,415
$ 25,694
Land and
Buildings
Camp, Roads,
and Other Site
Ore
Processing
Mill
Heavy
Machinery
and
Equipment
Leasehold
Improvements
& Other
Total
$ 1,358
$ 651
$ 12,479
$ 1,708
$ 60
$ 16,256
Net book Value
December 31, 2017
(restated – note 6)
December 31, 2018
$ 1,280
$ 700
$ 11,386
$ 1,779
$ 88
$ 15,233
During the year ended December 31, 2018, the Corporation recorded total depreciation of property, plant
and equipment of $2,339,000 (2017 – $1,993,000) of which $1,964,000 (2017 – $1,728,000) has been
charged to income with $85,000 (2017 – $142,000) recorded in environmental services cost of sales and
$1,879,000 (2017 – $1,586,000) reflected under general expenses and mine site care and maintenance.
Of the depreciation recorded for the year ended December 31, 2018, $375,000 (2017 – $265,000) were
related to property, plant and equipment used in exploration activities and has been capitalized to mineral
properties.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
14.
Mineral Properties
December 31
2017
(restated – note 6)
Expenditures
Incurred
December 31
2018
Mineral Properties
Keno Hill District Properties
Bellekeno
Lucky Queen
Onek
McQuesteni
Silver King
Flame & Moth
Bermingham
Elsa Tailings
Other Keno Hill Properties
$ 6,885
693
1,034
1,997
4,464
22,455
23,376
884
2,799
$ 238
131
31
-
-
5,856
8,708
-
2,675
$ 7,123
824
1,065
1,997
4,464
28,311
32,084
884
5,474
Total
$ 64,587
$ 17,639
$ 82,226
Mineral Properties
Keno Hill District Properties
Bellekeno
Lucky Queen
Onek
McQuesteni
Silver King
Flame & Moth
Bermingham
Elsa Tailings
Other Keno Hill Properties
December 31
2016
(restated – note 6)
Expenditures
Incurred
December 31
2017
(restated - note 6)
$ 6,809
563
1,018
1,924
4,464
21,966
15,193
884
2,799
$ 76
130
16
73
-
489
8,183
-
-
$ 6,885
693
1,034
1,997
4,464
22,455
23,376
884
2,799
Total
(i) Effective May 24, 2017, the Corporation entered into an Option Agreement with Banyan Gold Corp. (“Banyan”) to option up
to 100% the McQuesten property. In three stages, Banyan may earn up to 100% of the McQuesten property, by incurring a
minimum $2,600,000 in exploration expenditures ($717,000 incurred to December 31, 2018), issue 1,600,000 shares
(800,000 shares received to December 31, 2018), pay a total of $2,600,000 in cash or shares and grant Alexco a 6% net
smelter return (“NSR”) royalty with buybacks totalling $7,000,000 to reduce to a 1% NSR royalty on gold and 3% NSR
royalty on silver.
$ 64,587
$ 55,620
$ 8,967
December 31, 2018
Cost
Accumulated depletion and write-downs
Net book value
December 31, 2017 (restated – note 6)
Cost
Accumulated depletion and write-downs
Net book value
(a)
Keno Hill District Properties
Mining
Operations
Properties
Exploration and
Evaluation
Properties
$ 99,472
(90,459)
$ 9,013
$ 99,071
(90,459)
$ 8,612
$ 73,213
-
$ 73,213
$ 55,975
-
$ 55,975
Total
$ 172,685
(90,459)
$ 82,226
$ 155,046
(90,459)
$ 64,587
The Corporation’s mineral interest holdings in the Keno Hill District, located in Canada’s Yukon
Territory, are comprised of a number of properties.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
The majority of the Corporation’s mineral rights within the Keno Hill District were purchased from
the interim receiver of United Keno Hill Mines Limited and UKH Minerals Limited (collectively,
“UKHM”) in 2006 and are held by ERDC. As a condition of that purchase, a separate agreement
was entered into between Alexco, ERDC, the Government of Canada and the Government of
Yukon (the “Subsidiary Agreement”), under which the Government of Canada indemnified ERDC
and Alexco from and against all liabilities arising directly or indirectly from the pre-existing
environmental condition of the former UKHM mineral rights. The Subsidiary Agreement also
provided that ERDC may bring any mine into production on the former UKHM mineral rights by
designating a production unit from the mineral rights relevant to that purpose and then assuming
responsibility for all costs of the production unit’s water related care and maintenance and water
related components of closure reclamation.
Other Subsidiary Agreement terms unchanged by the amended and restated Subsidiary
Agreement (“ARSA”) include that ERDC is required to pay into a separate reclamation trust a 1.5%
net smelter return royalty, to an aggregate maximum of $4 million for all production units, from any
future production from the former UKHM mineral rights, commencing once earnings from mining
before interest, taxes and depreciation exceed actual exploration costs, to a maximum of $6.2
million, plus actual development and construction capital. That commencement threshold was
achieved during the year ended December 31, 2013, and as at December 31, 2018 a total of
$37,000 in such royalties had been paid. Additionally, a portion of any future proceeds from sales
of the acquired UKHM assets must also be paid into the separate reclamation trust. Also
substantially unchanged by the ARSA are the indemnification of pre-existing conditions and the
right to bring any mine into production on the former UKHM mineral rights. The rights of the
Government of Canada under the Subsidiary Agreement and the ARSA are supported by a general
security agreement over all of the assets of ERDC.
The ARSA can be terminated at ERDC’s election should a closure reclamation plan be prepared
but not accepted and approved, and at the Government’s election should ERDC be declared in
default under the ARSA.
(b)
Mining Operations on care and maintenance
The Corporation’s historical mining operations reflected production from one mine, Bellekeno, a
primary silver mine with lead, zinc and gold by-products. During the second quarter of 2013, both
the Lucky Queen and Onek properties were reclassified from exploration and evaluation assets to
mining operations assets as a result of the receipt of remaining operating permits, though neither
property has as yet been placed into production.
From September 2013, Bellekeno mining operations have been suspended in light of a low silver
price environment.
Keno Hill Royalty Encumbrances
As noted above, under the Subsidiary Agreement and unchanged by the ARSA, the former UKHM
mineral rights are subject to a 1.5% net smelter return royalty, to an aggregate maximum of $4
million for all production units. Certain of the Corporation’s non-UKHM mineral rights located within
or proximal to the McQuesten property are subject to a net smelter return royalty ranging from 0.5%
to 2%. Certain other of the non-UKHM mineral rights located within the McQuesten property are
subject to a separate net smelter return royalty of 2% all of which are incorporated under the Option
Agreement with Banyan. A limited number of the Corporation’s non-UKHM mineral rights located
throughout the remainder of the Keno Hill District are subject to net smelter return royalties ranging
from 1% to 1.5%.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
15.
Embedded Derivative Asset and Silver Stream
December 31
2018
December 31
2017
(restated – note 6)
Embedded derivative asset – Beginning of year
$ 6,600
$ -
Embedded derivative asset - Addition
Fair value adjustment
-
3,071
6,600
-
Embedded derivative asset – End of year
$ 9,671
$ 6,600
On October 2, 2008 (with subsequent amendments on October 20, 2008, December 10, 2008,
December 22, 2009, March 31, 2010, January 15, 2013, March 11, 2014 and June 16, 2014), the
Corporation entered into a silver purchase agreement (the "SPA") with Wheaton under which Wheaton will
receive 25% of the life of mine payable silver produced by the Corporation from its Keno Hill Silver District
properties. The SPA anticipated that the initial silver deliveries would come from the Bellekeno property.
Under the SPA, the Corporation received up-front deposit payments from Wheaton totaling US$50,000,000,
and received further payments of the lesser of US$3.90 (increasing by 1% per annum after the third year of
full production) and the prevailing market price for each ounce of payable silver delivered, if as and when
delivered. After the initial 40 year term of the SPA, the Corporation is required to refund the balance of any
advance payments received and not yet notionally reduced through silver deliveries. The Corporation would
also be required to refund the balance of advance payments received and not yet reduced if Wheaton
exercised its right to terminate the SPA in an event of default by the Corporation. As of September 2013,
Bellekeno mining operations were suspended in light of a low silver price environment.
On March 29, 2017 the Corporation and Wheaton amended the SPA (the “Amended SPA, such that
Wheaton will continue to receive 25% of the life of mine payable silver from the Keno Hill Silver District with
a variable production payment based on monthly silver head grade and monthly silver spot price. The actual
monthly production payment from Wheaton will be determined based on the monthly average silver head
grade at the mill and the monthly average silver spot price, as determined by a grade and pricing curve with
an upper ceiling grade of 1,400 grams per tonne (“g/t”) silver and price of US$25 per ounce of silver and a
floor grade of 600 g/t silver and price of US$13 per ounce of silver. Additional terms of the amendment
include a date for completion of the 400 tonne per day mine and mill completion test, which is reset to
December 31, 2020. If the completion test is not satisfied by December 31, 2020, the Corporation will be
required to pay a capacity related refund to Wheaton in the maximum amount of US$8,788,000, which can
be further proportionately reduced by mine production and mill throughput exceeding 322 tonnes per day for
a 30 day period prior to December 31, 2020. The Amended SPA is secured against the Corporation’s
mineral properties until repayment of the original deposit of US$50,000,000.
In consideration of the foregoing amendments, the Corporation issued 3,000,000 shares to Wheaton with a
fair value of $6,600,000 (US$4,934,948). Under the terms of the Amended SPA, the original US$50,000,000
deposit was notionally reduced by this amount. The variability in the future cash flows to be received from
Wheaton upon extraction and delivery of their 25% interest of future production is considered an embedded
derivative within this host contract under IFRS 9, Financial Instruments. The embedded derivative asset was
initially recorded at fair value based on the value of the consideration paid to Wheaton and is to be re-
measured at fair value on a recurring basis at each period end with changes in value being recorded within
the Statement of Loss.
As at December 31, 2018, the fair value of the embedded derivative was calculated based on the discounted
future cash flows associated with the difference between the original US$3.90 per ounce production
payment Wheaton would pay for each payable ounce delivered under the SPA and the new production
payment under the Amended SPA which varies depending on the monthly silver head grade and monthly
silver price. The model currently relies upon inputs from the preliminary economic assessment (the “PEA”),
such as payable ounces delivered and head grade, but will be updated in the future as a result of updated
studies, mine plans and actual production. The valuation model for the embedded derivative has been
updated to utilize a probability-based dynamic pricing structure as opposed to a static pricing structure. As
such, the discount rate used and silver price assumptions are updated quarterly based on the risk-free yield
curve and silver price forward curve at quarter end.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
16.
Accounts payable and accrued liabilities
Trade payables
Accrued liabilities and other
17.
Credit Facility
December 31
2018
December 31
2017
$ 3,567
3,643
$ 1,468
2,133
$ 7,210
$ 3,601
On February 23, 2018 the Corporation entered into a definitive credit agreement with Sprott Private
Resource Lending (Collector), L.P. (“Sprott”) to provide a US$15,000,000 credit facility (the “Credit Facility”).
The Credit Facility has the following key terms:
Term of 3 years, Maturity Date – February 23, 2021
Interest rate on funds drawn down: the greater of
7% plus US Dollar 3 month LIBOR and
8% per annum, payable monthly
o
o
Repayable in quarterly installments from October 31, 2019 through to the Maturity Date
Upon draw down of funds a 3% draw down fee is charged
1,000,000 share purchase warrants were issued to Sprott with a five-year term, an exercise price of
$2.25 per share and a right by the Corporation to accelerate the expiry date to 30 days following
the closing price of the shares exceeding $5.63 for more than 20 consecutive trading days
Repayable in whole or in part, without penalty, provided not less than twelve (12) months of interest
has been paid on any outstanding amount
On February 14, 2019 the Corporation extended the availability period of draw down to August 23,
2019 from February 23, 2019 by issuing to Sprott 171,480 Alexco common shares.
As of December 31, 2018, no amounts have been drawn down on the Credit Facility.
18.
Decommissioning and Rehabilitation Provision
Balance – beginning of year
Increase due to re-estimation
Accretion expense, included in finance costs
Balance – end of year
December 31
2018
December 31
2017
$ 5,055
$ 4,955
163
68
37
63
$ 5,286
$ 5,055
The Corporation’s decommissioning and rehabilitation provision consists of costs expected to be incurred in
respect of future reclamation and closure activities at the end of the life of the Bellekeno, Flame & Moth,
Bermingham, Lucky Queen and Onek mines. These activities include water treatment, land rehabilitation,
ongoing care and maintenance and other reclamation and closure related requirements.
The total inflation adjusted estimated cash flows required to settle the decommissioning and rehabilitation
provision is estimated to be $6,561,000 (2017 – $6,187,000), with the expenditures expected to be incurred
substantially over the course of the next 20 years. In determining the carrying value of the decommissioning
and rehabilitation provision as at December 31, 2018, the Corporation has used a risk-free discount rate of
2.08% (2017 – 2.11%) and an inflation rate of 2.0% (2017 – 2.0%) resulting in a discounted amount of
$5,204,000 (2017 – $5,055,000).
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
19.
Capital and Reserves
Shareholders’ Equity
The Corporation is authorized to issue an unlimited number of common shares without par value.
The following share transactions took place during the year ended December 31, 2018:
1. On June 13, 2018, the Corporation completed a bought deal public offering and issued 4,703,000
flow-through common shares at a blended price of $1.92 per share for aggregate gross proceeds of
$9,041,150. The Corporation incurred share issuance costs of $989,000.
2. 281,666 stock options were exercised for proceeds of $217,000.
3. 1,167,351 warrants were exercised for proceeds of $2,027,000.
4. 318,036 common shares were issued from treasury on the vesting of restricted share units
(“RSUs”).
5. 10,000 common shares were issued from treasury in accordance with an option agreement.
6. 237,999 common shares were issued from treasury as consideration for the acquisition of
Contango.
On September 21, 2018 the Corporation filed a short form base shelf prospectus with the securities
commissions in each of the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario
and a corresponding amendment to its registration statement on Form F-10 (Registration Statement) with
the United States Securities and Exchange Commission (SEC) under the U.S./Canada Multijurisdictional
Disclosure System, which would allow the Corporation to make offerings of common shares, warrants,
subscription receipts and/or units up to an aggregate total of $50,000,000 during the 25-month period
following September 21, 2018.
Warrants
The changes in warrants outstanding are summarized as follows:
Expiry Date
May 17, 2018
May 17, 2018
May 30, 2019
Feb 23, 2023
Exercise
Price
$1.75
$1.49
$2.15
$2.25
Balance at
December 31, 2017
4,868,620
60,900
126,174
-
Issued
Exercised
Expired
-
-
-
1,000,000
(1,106,451)
(60,900)
-
-
(3,762,169)
-
-
-
Balance at
December 31, 2018
-
-
126,174
1,000,000
5,055,694
1,000,000
(1,167,351)
(3,762,169)
1,126,174
On February 23, 2018 1,000,000 warrants were issued as a fee for the Credit Facility with Sprott (Note 17).
The warrants were capitalized as a pre-payment for services, and are being amortized over the availability
period of the facility to which it relates. The fair value of the warrants at the date of issuance was estimated
using the Black-Scholes option pricing model, assuming a risk-free rate of 1.94% per annum, an expected
life of options of 5 years, an expected volatility of 73% based on historical volatility, and no expected
dividends.
Equity Incentive Plan
Under the Corporations equity incentive plan (the “Equity Incentive Plan”), the aggregate number of common
shares issuable on the exercise of stock options or issuance of RSUs cannot exceed 10% of the number of
common shares issued and outstanding. As at December 31, 2018, a total of 7,738,833 stock options and
273,989 RSUs were outstanding under the New Plan and a total of 2,787,068 remain available for future
grants.
Incentive Stock Options
Generally stock options under the Equity Incentive Plan have a maximum term of five years, vesting 25%
upon granting and 25% each six months thereafter. The exercise price may not be less than the immediately
preceding five day volume weighted average price of the Corporation’s common shares traded through the
facilities of the exchange on which the Corporation’s common shares are listed.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
The changes in incentive share options outstanding are summarized as follows:
Balance – December 31, 2017
Stock options granted
Share-based compensation expense
Options exercised
Options forfeited or expired
Balance – December 31, 2018
Balance – December 31, 2016
Stock options granted
Share-based compensation expense
Options exercised
Options forfeited or expired
Balance – December 31, 2017
Weighted
average
exercise
price
Number of
shares issued
or issuable on
exercise
Amount
$ 2.06
$ 2.07
-
$ 0.77
$ 5.39
$ 1.66
$ 2.48
$ 2.31
-
$ 1.28
$ 4.78
$ 2.06
6,546,666
$ 6,258
2,524,000
-
(281,666)
(1,050,167)
-
2,480
(106)
(3,163)
7,738,833
$ 5,469
6,175,995
$ 6,996
1,645,500
-
(126,332)
(1,148,497)
-
2,204
(78)
(2,864)
6,546,666
$ 6,258
During the year ended December 31, 2018, the fair value of options at the date of grant was estimated using
the Black-Scholes option pricing model, assuming a risk-free rate ranging from 2.01% to 2.16% (2017 –
1.02%) per annum, an expected life of options of 4 years (2017 – 4 years), an expected volatility average of
73% based on historical volatility (2017 – 73%), an expected forfeiture rate average of 2% (2017 – 4%) and
no expected dividends (2017 – nil).
Incentive share options outstanding and exercisable at December 31, 2018 are summarized as follows:
Options Outstanding
Options Exercisable
Number of
Shares
Issuable on
Exercise
Average
Remaining
Life (Years)
Exercise Price
$0.60
$0.60
$0.84
$1.73
$1.75
$1.78
$1.93
$1.94
$2.07
$2.07
$2.32
35,000
989,333
1,422,500
600,000
42,000
150,000
60,000
475,000
1,834,000
587,000
1,544,000
7,738,833
0.96
1.12
2.12
2.44
3.63
2.49
4.36
0.12
4.08
4.08
3.09
2.73
Average
Exercise
Price
$ 0.60
$ 0.60
$ 0.84
$ 1.73
$ 1.75
$ 1.78
$ 1.93
$ 1.94
$ 2.07
$ 2.07
$ 2.32
Number of
Shares
Issuable on
Exercise
35,000
989,333
1,422,500
600,000
42,000
150,000
30,000
475,000
917,000
-
1,544,000
Average
Exercise
Price
$ 0.60
$ 0.60
$ 0.84
$ 1.73
$ 1.75
$ 1.78
$ 1.93
$ 1.94
$ 2.07
$ 2.07
$ 2.32
$ 1.66
6,204,833
$ 1.55
The weighted average share price at the date of exercise for options exercised during the year ended
December 31, 2018 was $1.96 (2017 – $2.26).
During the year ended December 31, 2018, the Corporation recorded total share-based compensation
expense of $2,480,000 (2017 – $2,204,000), which related to incentive share options, of which $368,000
(2017 – $369,000) was recorded to mineral properties and $2,112,000 (2017 – $1,835,000) has been
charged to income.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
Subsequent to December 31, 2018, a further 2,029,000 incentive stock options have been granted with an
exercise price of $1.27, 70,000 stock options were exercised, 475,000 stock options expired unexercised
and nil stock options were forfeited.
Restricted Share Units
Generally RSUs vest one-third upon issuance and one third on each of the first and second anniversary
dates of the issuance date. As at December 31, 2018, a total of 273,989 RSUs were outstanding.
The changes in RSUs outstanding are summarized as follows:
Balance – December 31, 2017
RSUs granted
Share-based compensation expense recognized
RSUs vested
Balance – December 31, 2018
Balance – December 31, 2016
RSUs granted
Share-based compensation expense recognized
RSUs vested
Balance – December 31, 2017
Number of
shares issued
or issuable
on vesting
Amount
398,325
$ 401
193,700
-
(318,036)
-
467
(497)
273,989
$ 371
452,950
$ 220
235,000
-
(289,625)
-
524
(343)
398,325
$ 401
During the year ended December 31, 2018 the Corporation granted a total of 193,700 RSUs (2017 –
235,000) with a total grant-date fair value determined to be $399,000 (2017 - $545,000). Included in general
and administrative expenses for the year ended December 31, 2018 is share-based compensation expense
of $467,000 (2017 –$524,000) related to RSU awards.
The weighted average share price at the date of vesting for RSUs during the year ended December 31,
2018 was $1.72 (2017 - $2.31).
Subsequent to December 31, 2018, a total of 625,000 RSUs were granted and 386,655 RSUs vested.
20.
Revenue from Environmental Services
The Corporation recorded environmental services revenue for the years ending December 31, 2018 and
2017 as follows:
Environmental Services
Environmental services revenue
Fee for service
Fixed price agreements
$ 15,007
4,873
$ 9,882
850
2018
2017
$ 19,880
$ 10,732
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
21.
General and Administrative Expenses by Nature of Expense
The Corporation recorded general and administrative expenses for the years ending December 31, 2018
and 2017 as follows:
Corporate
General and administrative expenses
2018
2017
Depreciation
Amortization of intangible assets
Business development and investor relations
Office, operating and non-operating overheads
Professional
Regulatory
Restructuring costs
Salaries and contractors
Share-based compensation
Travel
$ 94
11
451
788
832
184
92
2,262
2,544
240
$ 89
13
567
682
433
309
1,353
2,112
2,305
301
Environmental Services
General and administrative expenses
$ 7,498
$ 8,164
2018
2017
Depreciation
Amortization of intangible assets
Business development
Office, operating and non-operating overheads
Professional
Salaries and contractors
Travel
$ 126
39
370
1,262
142
2,556
177
$ 19
59
164
756
29
1,657
94
$ 4,672
2,778
Total General and Administrative Expenses
$ 12,170
$ 10,942
22.
Mine Site Care and Maintenance
The Corporation recorded mine site care and maintenance expenses for the years ended December 31,
2018 and 2017 as follows:
Mine site care and maintenance
Depreciation
Salaries and contractors1
Materials and equipment1
Other expenses1
2018
2017
(restated–note 6)
$ 1,292
913
346
52
$ 1,531
357
-
-
$ 2,603
$ 1,888
1.
Included in mine site care and maintenance costs are refurbishment and
mill maintenance costs.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
23.
Other Income and expenses
The Corporation recorded other income and expenses for the years ended December 31, 2018 and 2017 as
follows:
Credit Facility fee – warrants
Interest income
Foreign exchange gain (loss)
Other income (expenses)
2018
2017
$ (930)
241
(15)
(68)
$ -
188
964
(4)
$ (772)
$ 1,148
24.
Income Tax Expense
The major components of income tax expense for the years ended December 31, 2018 and 2017 are as
follows:
(a)
The income tax provision differs from the amount that would result from applying the Canadian
federal and provincial tax rate to income before taxes. These differences result from the following
items:
Accounting loss before taxes
Federal and provincial income tax rate of 27% (2017 –
26%)
Non-deductible permanent differences
Differences in foreign exchange rates
Effect of difference in tax rates
Change in deferred tax asset not recognized
Flow-through share renunciation
Change in estimate
Other
2018
2017
$ (6,994)
(1,888)
$ (6,341)
(1,648)
1,064
-
2
1,100
1,656
(427)
-
1,507
495
-
2,488
(1,075)
1,040
(72)
244
1,472
Income tax provision
$ 1,507
$ 1,472
(b)
The movement in deferred tax assets and liabilities during the year by type of temporary difference,
without taking into consideration the offsetting balances within the same tax jurisdiction, is as
follows:
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
Deferred tax liabilities
Mineral
Property
Interest
Inventory
Property,
Plant and
Equipment
Other
Total
December 31, 2016
(restated Note 6)
(Charged) credit to the
income statement
Charged to OCI
December 31, 2017
(Charged) credited to the
income statement
Charged to OCI
$ (1,483)
$ (126)
$ (1,505)
$ (3,415)
$ (6,529)
(1,390)
-
13
-
41
-
41
-
(1,295)
-
$ (2,873)
$ (113)
$ (1,464)
$ (3,374)
$ (7,824)
(5,046)
-
-
-
(598)
-
(2,930)
20
(8,554)
20
December 31, 2018
$ (7,919)
$ (113)
$ (2,062)
$ (6,284) $ (16,378)
Deferred tax assets
Mineral
Property
Interest
Loss
Carry
Forward
Property,
Plant and
Equipment
Decommissioning
and Rehabilitation
Provision
Other
Total
December 31, 2016
Credited (charged) to the
income statement
Charged to OCI
December 31, 2017
Credited (charged) to the
income statement
$ 770
$ 4,281
$ 143
$ 1,485
$ 799
$ 7,478
69
-
(13)
-
(66)
-
(121)
-
(775)
637
(906)
637
$ 839
$ 4,268
$ 77
$ 1,364
$ 661
$ 7,209
3,632
2,997
(5)
63
(612)
(6,075)
December 31, 2018
$ 4,471
$ 7,265
$ 72
$ 1,427
$ 49
$ 13,284
Net deferred tax liabilities
December 31, 2017
(restated Note 6)
Charged to the income statement
Charged to OCI
December 31, 2018
$ (614)
(2,504)
20
$ (3,098)
(c)
At December 31, 2018, the Corporation has unrecognized tax attributes, noted below, that are
available to offset future taxable income. The Corporation has not recognized the deferred tax
asset on these temporary differences because they relate to entities within the group that have a
history of losses and there is not yet adequately convincing evidence that these entities will
generate sufficient future taxable income to enable offset.
Tax loss carry forwards
Mineral property interest
Other
$ 40,650
11,150
8,587
$ 60,387
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
As at December 31, 2018, the Corporation has available non-capital losses for income tax
purposes in Canada which are available to be carried forward to reduce taxable income in future
years and for which no deferred income tax asset has been recognized, and which expire as
follows:
2033
2034
2035
2036
2037
2038
25.
Financial Instruments
Financial Assets and Liabilities
Total
$ 1,952
9,351
6,685
6,643
8,302
7,717
$ 40,650
Information regarding the carrying amounts of the Corporation’s financial assets and liabilities is summarized
as follows:
Fair value through profit or loss
Warrants
Embedded derivative - Wheaton agreement
Fair value through other comprehensive loss
Investment in marketable securities
Fair Value
Hierarchy
Classification
December 31
2018
December 31
2017
Level 2
Level 3
$ 24
$ 9,671
$ 1,082
$ 6,600
Level 1
$ 736
$ 673
$ 10,431
$ 8,355
During the year ended December 31, 2018, the fair value of warrants were estimated using the Black-
Scholes option pricing model, assuming a risk-free interest rate of 1.85% (2017 – 1.66%) per annum, an
expected life of options of 0.62 to 1.98 years (2017 – 0.17 to 2.98 years), an expected volatility of 72% to
93% (2017 – 84%) based on historical volatility and no expected dividends (2017 – nil).
During the year ended December 31, 2018, the fair value of the embedded derivative related to the Wheaton
agreement was estimated using a probability-based dynamic pricing structure resulting in a mark-to-market
adjustment of $3,071,000 (2017 – nil). The model currently relies upon inputs from the preliminary economic
assessment dated March 29, 2017, and considers payable ounces delivered and head grade. The model is
updated quarterly for the discount rate used and silver price assumptions based on the risk-free yield curve
and silver price forward curve at quarter end.
The carrying amounts of all of the Corporation’s other financial assets and liabilities, carried at amortized
cost, reasonably approximate their fair values due to their short-term nature.
Financial Instrument Risk Exposure
The Corporation’s activities expose it to a variety of financial risks: market risk (currency risk), credit risk and
liquidity risk. Risk management is carried out by management under policies approved by the Board of
Directors. Management identifies and evaluates the financial risks in co-operation with the Corporation’s
operating units. The Corporation’s overall risk management program seeks to minimize potential adverse
effects on the Corporation’s financial performance, in the context of its general capital management
objectives as further described in Note 6.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
Currency Risk
Substantially all of the Corporation’s property, plant and equipment and mineral properties are located in
Canada; all of its mining operations occur in Canada; and a significant majority of its environmental services
revenues are earned in Canada. However, if commercial production recommences at the Keno Hill Silver
District, the Corporation’s exposure to US dollar currency risk significantly increases as sales of concentrate
and the settlement of the Wheaton streaming payments will be effected in US dollars. In addition, a portion
of its environmental services revenues, and receivables arising therefrom, are also denominated in US
dollars. As well, while a significant majority of the Corporation’s operating costs are denominated in
Canadian dollars, it does have some exposure to costs, as some accounts payable and accrued liabilities
are denominated in US dollars. The Corporation is exposed to currency risk at the balance sheet date
through the following financial assets and liabilities, which are denominated in US dollars:
Cash and cash equivalents
Accounts and other receivable
Accounts payable and accrued liabilities
Net exposure
December 31
2018
December 31
2017
$ 1,374
917
(649)
$ 1,336
510
(298)
$ 1,642
$ 1,548
Based on the above net exposure at December 31, 2018, a 10% depreciation or appreciation of the US
dollar against the Canadian dollar would result in an approximately $164,000 decrease or increase
respectively in both net and comprehensive loss (2017 – $158,000). The Corporation has not employed any
currency hedging programs during the current period.
Credit Risk
Credit risk is the risk of financial loss to the Corporation if a customer or counterparty to a financial
instrument fails to meet its obligations. The Corporation’s maximum exposure to credit risk at the balance
sheet date under its financial instruments is summarized as follows:
Trade receivables
Currently due
Past due by 90 days or less, not impaired
Past due by greater than 90 days, not impaired
Cash
Demand deposits
Term deposits
December 31
2018
December 31
2017
$ 5,228
1,375
86
6,689
3,629
4,947
2,725
$ 1,035
940
13
1,988
6,019
11,887
7,092
$ 17,990
$ 26,986
Substantially all of the Corporation’s cash, cash equivalents and term deposits are held with major financial
institutions in Canada, and management believes the exposure to credit risk with respect to such institutions
is not significant. Those financial assets that potentially subject the Corporation to credit risk are primarily
receivables. Management actively monitors the Corporation’s exposure to credit risk under its financial
instruments, particularly with respect to receivables. The Corporation considers the risk of material loss to be
significantly mitigated due to the financial strength of the parties from whom the receivables are due,
including with respect to trade accounts receivable as the Corporation’s major customers include
government organizations as well as substantial corporate entities. Receivables that are past due by greater
than 90 days have been subsequently collected.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
Liquidity Risk
Liquidity risk is the risk that the Corporation will not be able to meet its obligations associated with financial
liabilities. The Corporation has a planning and budgeting process in place by which it anticipates and
determines the funds required to support its normal operating requirements as well as the growth and
development of its mining projects. The Corporation coordinates this planning and budgeting process with its
financing activities through the capital management process described in Note 26. The Corporation’s
financial liabilities are comprised of its accounts payable and accrued liabilities, the contractual maturities of
which at the balance sheet date are summarized as follows:
Accounts payable and accrued liabilities with contractual maturities
Within 90 days or less
In later than 90 days, not later than one year
26.
Management of Capital
December 31
2018
December 31
2017
$ 7,210
-
$ 3,601
-
$ 7,210
$ 3,601
The capital managed by the Corporation includes the components of shareholders’ equity as described in
the consolidated statements of shareholders’ equity. The Corporation is not subject to externally imposed
capital requirements.
The Corporation’s objectives of capital management are to create long-term value and economic returns for
its shareholders. It does this by seeking to maximize the availability of finance to fund the growth and
development of its mining projects, and to support the working capital required to maintain its ability to
continue as a going concern. The Corporation manages its capital structure and makes adjustments to it in
the light of changes in economic conditions and the risk characteristics of its assets, seeking to limit
shareholder dilution and optimize its cost of capital while maintaining an acceptable level of risk. To maintain
or adjust its capital structure, the Corporation considers all sources of finance reasonably available to it,
including but not limited to issuance of new capital, issuance of new debt and the sale of assets in whole or
in part, including mineral property interests. The Corporation’s overall strategy with respect to management
of capital at December 31, 2018 remains fundamentally unchanged from the year ended December 31,
2017.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
27.
Supplemental Cash Flow Information
Supplemental cash flow information with respect to the year ended December 31, 2018 and 2017 is
summarized as follows:
Operating Cash Flows Arising From Interest and Taxes
Interest received
Non-Cash Investing and Financing Transactions
Capitalization of share-based compensation to mineral properties
Capitalization of depreciation to mineral properties
Capitalization of re-estimation of decommissioning and rehabilitation provision
Issuance of shares related to acquistion of subsidiary
Increase in non-cash working capital related to:
Mining operations properties
Exploration and evaluation properties
2018
2017
$ 129
$ 221
$ 368
$ 375
$ 163
$ 416
$ 369
$ 265
$ 37
$ -
$ 6
$ 305
$ (23)
$ (1,130)
28.
Segmented Information
The Corporation had two operating segments during the years ended December 31, 2018 and 2017, being
firstly mining operations, including care and maintenance of the formerly operating Bellekeno mine,
producing silver, lead and zinc in the form of concentrates (suspended in September 2013), as well as
exploration, underground development and evaluation activities; and secondly environmental services
carried out through AEG, providing consulting and project management services in respect of environmental
permitting and compliance and site remediation and reclamation. The Corporation’s executive head office
and general corporate administration are included within ‘Corporate and other’ to reconcile the reportable
segments to the consolidated financial statements. An operating segment is a component of an entity that
engages in business activities, operating results are reviewed by the chief operating decision maker with
respect to resource allocation and for which discrete financial information is available. The chief operating
decision maker for the Corporation is the Chief Executive Officer. Inter-segment transactions are recorded at
amounts that reflect normal third-party terms and conditions, with inter-segment profits eliminated from the
cost base of the segment incurring the charge. Revenue from non-Canadian customers of both operating
segments was derived primarily from the United States.
Segmented information as at and for the year ended December 31, 2018 and 2017 is summarized as
follows:
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
As at and for year ended
December 31, 2018
Environmental
Services
Mining
Corporate and
Other
Total
Segment revenues
External customers
Canadian
Non-Canadian
Total revenues as reported
Cost of sales
Depreciation and amortization
Share-based compensation
Other G&A expenses
Mine site care and maintenance
Foreign exchange (gain) loss
Loss on investments
Gain on derivative
asset
Other (income) loss
$ 13,105
6,775
19,880
$ -
-
-
$ -
-
-
$ 13,105
6,775
19,880
13,828
165
-
4,507
-
35
-
(8)
-
1,292
-
86
1,311
9
113
(3,071)
68
-
105
2,544
5,701
-
(29)
459
-
(241)
13,828
1,562
2,544
10,294
1,311
15
572
(3,071)
(181)
Segment income (loss) before taxes
$ 1,353
$ 192
$ (8,539)
$ (6,994)(i)
Total assets
Total liabilities
$ 11,462
$ 4,116
$ 113,341
$ 10,284
$ 8,215
$ 1,988
$ 133,018
$ 16,388
As at and for year ended
December 31, 2017
(restated – Note 6)
Segment revenues
External customers
Canadian
Non-Canadian
Total revenues as reported
Cost of sales
Depreciation and amortization
Share-based compensation
Other G&A expenses
Mine site care and maintenance
Restructuring costs
Foreign exchange loss
Gain on investments
Other loss (income)
Environmental
Services
Mining
Corporate and
Other
Total
$ 5,881
4,851
10,732
$ -
-
-
$ -
-
-
$ 5,881
4,851
10,732
6,732
79
-
2,700
-
-
(1,080)
-
250
-
1,531
-
-
357
-
(4)
-
(247)
-
101
2,305
4,404
-
1,353
120
(1,341)
(187)
6,732
1,711
2,305
7,104
357
1,353
(964)
(1,341)
(184)
Segment income (loss) before taxes
$ 2,051
$ (1,637)
$ (6,755)
$ (6,341)(i)
Total assets
Total liabilities
$ 6,198
$ 1,642
$ 98,303
$ 6,762
$ 17,823
$ 1,464
$ 122,324
$ 9,868
(i) Represents consolidated loss before taxes.
For the year ended December 31, 2018, revenue from three customers of the Corporation’s Environmental Services
segment represents approximately $12,580,000 of the Corporation’s consolidated revenue.
ALEXCO RESOURCE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(figures in tables are expressed in thousands of Canadian dollars, except per share amounts)
29.
Related Party Transactions
The Corporation’s related parties include its subsidiaries and key management personnel. Key management
personnel compensation for the years ended December 31, 2018 and 2017 was as follows:
(a)
Key Management Personnel Compensation
2018
2017
Salaries and other short-term benefits
Share-based compensation
$ 2,130
2,513
$ 2,246
2,072
$ 4,643
$ 4,318
Key management includes the Corporation’s Board of Directors and members of senior
management.
30.
Commitments
As at December 31, 2018, the Corporation’s contractual obligations are as follows:
(a)
The Corporation has entered into various operating lease contracts for office space, motor vehicles
and office equipment. The future minimum payments under these leases as are as follows:
2019
2020
2021
2022
2023
Thereafter
$ 391
283
210
210
190
156
$ 1,440
(b)
(c)
The Corporation’s other contractual obligations,
expenditures, totaled approximately $360,000.
including with respect
to capital asset
As a consequence of its commitment to renounce deductible exploration expenditures to the
purchasers of flow-through shares, the Corporation is required to incur further renounceable
exploration expenditures totaling $3,170,000 by December 31, 2019.
Senior Management
Board of Directors
Clynton Nauman, BSc (Hons)
Chairman & Chief Executive Officer
Brad Thrall, BSc, MBA
President
Michael Clark, CPA, CA
Chief Financial Officer &
Company Ethics Officer
Alan McOnie, MSc (Geology), FAusIMM
Vice President, Exploration
Gordon Wong, CPA, CA
Vice President, Finance
Linda Broughton
Vice President, Technical Services
James Harrington, MSc
President, Alexco Environmental Group
Clynton Nauman, Chairman
Richard Zimmer, P.Eng., MBA
Elaine Sanders, CA, CPA
Michael Winn
Terry Krepiakevich, CPA, CA, ICD.D.
Rick Van Nieuwenhuyse, MSc
Karen McMaster, BA, LLB, MBA
Auditors
PricewaterhouseCoopers LLP
Vancouver, British Columbia
Legal Counsel
Fasken Martineau DuMoulin LLP
Vancouver, British Columbia
Registrar and Transfer Agent
Computershare Investor Services Inc.
Vancouver, British Columbia
CORPORATE HEADQUARTERS
Suite 1225
555 Burrard Street
Vancouver, BC V7X 1M9
Canada
Tel: 604.633.4888
Fax: 604.633.4887
Email: info@alexcoresource.com
Website: www.alexcoresource.com
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