Alexco Resource Corp.
Q1 2018 Earnings Call Transcript

Published: 14 May 2018

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to the Alexco Resource Corp 2018 First Quarter Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Alexco’s Director of Investor Relations, Lisa May. Please go ahead.

[Lisa May:]

Good morning. Today is Monday, May 14, 2018, and I would like to welcome you to Alexco Resource Corp's March 31, 2018 first quarter conference call. This conference call is being webcast live and can be accessed at the Company's website at alexcoresource.com. You may sign up on the Alexco website to receive future news releases and other event updates as they are issued. You will also find Alexco's news release with quarterly information -- pardon me, quarterly financial results there. This conference call will be recorded and archived on the Company's website under Events and Webcasts. Giving presentations on today's call will be Clynt Nauman, Chairman and Chief Executive Officer; Brad Thrall, President; and Mike Clark, Chief Financial Officer. We will have a question-and-answer period after our presentations. Before we get started, I need to remind you that some statements made today may contain forward-looking information. Our business involves a number of risks that could cause results to differ from projections and investors are urged to consider those disclosures and discussions pertaining to risks that can be found in Alexco's SEDAR filings. It should also be noted that past performance discussed in this conference call is not indicative of future results. I’d now like to turn the call over to Clynt Nauman.

[Clynt Nauman:]

Thanks, Lisa, and thank you everybody for joining us today for the review of our 2018 first quarter results, in addition to an overview of remainder of 2018. So after a successful 2017 in terms of putting the building blocks in place for the future success at Keno Hill, we're continuing to move forward with the sole focus of putting Keno Hill, the Silver District back into production and thereby completing our transition from explorer developer to developer producer. Our execution strategy remains consistent disciplined to ensure risks internal and external are managed and measured in terms of executing each step in a safe and effective manner. It is by using this approach that we believe we’re moving the Company steadily up the value curve. From a broader perspective, we continue to believe Alexco is exceptionally well positioned and has a unique opportunity. Our operations are located in one of the safest and most highly regarded mining jurisdictions in the world and we have a relatively new mining infrastructure complex including a 400 ton per day conventional flotation mill, and we have the ability to move to production in a relatively short timeframe. After that, a robust project and globally competitive silver grades and I think you can understand our enthusiasm and confidence in the longer-term future of our company. On the call today, I'll briefly highlight results from Q1 2018 and then give some guidance on our plans for the next 12 months. Brad Thrall, President of Alexco will discuss the operations, development and progress of our underground work at Keno Hill and Mike Clark will walk us through a summary of the financials. On that note, we released our financial results on Friday outlining a net loss of $3.3 million for the quarter ended March 31, 2018. Of this, August $2 million were non-cash items comprising depreciation expense, share-based compensation expense, and mark-to-market adjustments on third-party investments. Operating highlights in Q1 included the following. Firstly, we ended the quarter with cash and cash equivalents of 13.2 million and working capital of 18.3 million. Further to that subsequent to quarter end, we had another 4.5 million to our treasury by a restructuring of our restricted cash balance through surety mechanisms as well as obtaining final signoff on an environmental project in the lower 48. With the addition of this cash, we believe we have plenty of runways to evaluate the engineering optimization ideas emerging from our prefeasibility study which and those ideas will result in may be a modified schedule as well as more accurate accounting of our financial and working capital position at that time. Secondly, our environmental business AEG recognized revenues of 2.8 million in the first quarter for a gross profit of $830,000 achieving a gross margin of 30%. This is a 7% improvement in the same period of last year in terms of that gross profit and margins then beat up to 30% from 28% last year. In a chronological sense during the quarter, in January, we initiated a prefeasibility study looked at engineering and optimization work at the Flame & Moth deposit in addition to other elements of the mine plant. This has been a very interesting study with our team addressing everything from underground efficiency to metallurgical improvements to ultimate capacity options. In February, we established a credit facility for up to $15 million U.S. with Sprott Private Resource Lending. And finally by March and under a contract with the Government of Canada for the historical cleanup at Keno Hill, we completed the Keno Hill Reclamation and Closure Plan. Since the end of the quarter, there have been several other milestones achieved. In April, AEG’s U.S. subsidiary Alexco Water Environment entered into a master services agreement with Colorado Legacy Land, LLC, 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 10 years to complete and are expected to generate revenue in excess of $20 million for Alexco Water and Environment. Also in April, we’re pleased to announce the addition of Karen McMaster to our Board with over 25 years of experience working in the mining sector, focused on environmental sustainability, First Nations and community relations. We look forward to having Karen join our Board and helping to add new value to our overall business. And finally in May, we saw the substantial completion of the Bermingham decline, which represents about 40% of the underground development work specifically underground access related development required to enable us to move into production. Now, let’s put all of that in context with the work we’ve completed in previous quarters and the scope of work plan for the remainder of 2018. The prefeasibility study is expected to be published near the end of Q3. It will provide a detailed mine plan with updated reserves and resources for the Bermingham deposit, including results from the 2017 service exploration program and the ongoing 5,000 meter underground drill program. It will also identify engineering improvements both underground and surface and it will re-estimate remaining capital and operating costs as the project closes in on the production decision. At this point, I am going to turn it over to Brad Thrall to continue with the discussion on the advanced exploration date in Bermingham and other operations for the next 12 months. Brad?

[Brad Thrall:]

Thanks, Clynt, and good morning everyone. As we’ve discussed over the last couple of falls, our focus at Keno Hill over the past six months or so, has been advancing the underground exploration decline at the Bermingham deposit. After receipt of our amended class 4 permit in August of 2017, we began advancing the Bermingham underground exploration decline in September of 2017 and on May 2nd of this year, we announced substantial completion of the decline. Over this period, we have completed 590 meters of primary ramp development and associated remark phase. We’ve also completed the construction of two separate underground exploration drill stations that will allow the simultaneous use of two underground diamond drills. Two underground exploration drills have already been mobilized to site and within the next couple of days, we will commence a 5,000 meter infill and confirmation drilling program at Bermingham. The primary focus will be on the upper portions of the deposit that are included in the early years of the PEA mine plan. Using two drills, it will take approximately two to 2.5 months to complete this underground exploration program. In addition, this underground drilling will allow us to gather additional geotechnical and hydrological information that will be used in the detailed mine planning process for Bermingham. The Bermingham underground infill drilling program will tighten up the spacing to approximately 10 to 12 meter centers for anticipated mining blocks in and around the upper portion of Bermingham. The targeted infill area contains an estimated 110,000 tons of potentially mineable ore with an estimated head grade of 1,560 grams per ton of silver, 4.2% lead and 2.2% zinc, comprising the first two years of production. The majority of the targeted zones is in the of the Bear Vein, stiffly plunging approximately 3 meter effective 50 meter wide zone of high grade mineralization. One of the objectives of this program is to upgrade the existing inferred resources to indicated status and upgrade existing indicated resources to measured resource status. Results from this drill program will then be incorporated in the prefeasibility level study that began earlier in Q1. The drill program and study will also increase our confidence in the geological model as well as advancing our mine design and studies. Some additional exploration work looking for extensions to the high grade mineralization will also be completed from these underground stations. Our mill refurbishment and improvement program continues into the second quarter with the objective of being systematically inspect and repair existing mill equipment after a sustained care and maintenance period as well as implementing some modified -- some identified process improvements. As part of this program, we will be installing a second grinding circuit later this summer to increase the grinding capacity of the 400 ton per day mill. With the completion of the Bermingham deposit, our mining and support crews at Keno Hill are currently deploying to the Flame & Moth portal where we will begin advancing the decline at Flame & Moth to reach the upper portions of this deposit. As part of our mine optimization process, our engineers have developed and optimized decline design at Flame & Moth that totals 570 meter including the necessary water management sump and remark base. We are currently completing geotechnical confirmation drilling from surface as part of this optimized design. Construction continues with Flame & Moth water treatment plant that will be housed within the current mill building and is necessary for treatment and discharge of water when we begin development of Flame & Moth decline in the next week or so. In November 2017, we submitted a YESAB project proposal for environmental assessment of permitting for the eventual production and processing of ore from Bermingham. Once we are through the environmental assessment process which is expected to be complete in the second quarter of this year, we will then submit amendments to our Quartz Mining License and Water Use License. We expect to have an amended QML in the third quarter of this year and an amended water use license in early 2019 which is the final authorization required to extract and process ore from the Bermingham deposit. So at this point, I’m going to turn it back over to Clynt to summarize what we are working towards over the next 12 months. Clynt?

[Clynt Nauman:]

Thanks, Brad, and just picking up in a couple of Brads points. Recent engineering and optimization work at Flame & Moth has resulted in the plan to reposition the primary ramp to reach the first ore level access. This change may compress this Flame & Moth underground development schedule by as much as two months. As you can imagine, we’re assessing the scheduling implications of this favorable change but we’re also assessing the permitting implications of these developments. As Brad mentioned, the project proposal for environmental assessment of the Bermingham deposit was submitted to the Yukon Environmental and Socioeconomic Assessment Board in November of 2017. This assessment will be the underpinning of the authorizations necessary for future production and processing of ore from the Bermingham deposit. Unfortunately, we're once again seeing materially increasing timelines for environmental assessment and authorization processes in the Yukon and we feel compelled to guide towards the issuance of the required amendments to Alexco' water license from Q4 in 2018 to Q1 of 2019. As a result, we find ourselves potentially in a position because of reduced meters in the Flame & Moth ramp of possibly having a complete [Audio Gap] work before the appropriate authorizations are obtained for production [Audio Gap] [0

[Mike Clark:]

Thank Clynt. This financial report is for Alexco's quarter ended March 31, 2018. Note that we report in Canadian dollars so all dollars amounts will be in Canadian dollars unless stated otherwise. For the first quarter, we recorded a net loss of CAD3.3 million or a loss of CAD0.03 per share. The loss for the quarter included non-cash cost totaling CAD2 million which is comprised of CAD 383,000 of depreciation and amortization cost, CAD1.1 million per share based compensation expense and CAD500,000 for mark-to-market adjustments on warrants and other. This compares to a 2017 Q1 net loss of CAD973,000 for a loss of CAD0.01 per share. The increase in net loss in 2018 period compared to 2017 was mainly attributed to the 2017 period incurring gain on the sale of investments for CAD2.3 million compared to a loss on investments of CAD374,000 in the 2018 period. This was offset slightly by increased profit in AEG in the 2018 period. AEG revenues for the quarter were CAD2.8 million with a gross profit of CAD830,000 achieving a margin of 30% compared to revenues in Q1 of 2017 of CAD1.9 million and a gross profit of CAD549,000 achieving a margin of 28%. The increase in gross profit during the 2018 period was mainly due to AEG initiating remediation work at the Schwartzwalder Mine and the former Cañon City Uranium Mill in Colorado. Mine site care and maintenance costs in the first quarter of 2018 totaled CAD681,000 compared to CAD443,000 for the same period in 2017. The increase in costs is mainly as a result of the increase maintenance and refurbishment occurring in the mill in the 2018 period. Included in mine site care and maintenance costs for 2018 and 2017 first quarter is depreciation expense of CAD301,000 and CAD409,000, respectively. Corporate general and administrative expenses were CAD2.7 million for the first quarter of 2018 and 2017. The main components included in corporate G&A, our share-based compensation expense, salaries, professional fees business development and IR and other corporate overheads. Environmental services general and administrative expenses in the first quarter of 2018 totaled CAD679,000 compared to CAD753,000 in the first quarter of 2017. The decrease in general and administrative expenses is a result of higher business development expenses being incurred in the 2017 period. During the quarter, we established a credit facility for $15 million U.S. with Sprott Private Resource Lending and as of the date of this webcast, no amounts have been drawn on the credit facility. The key terms of the credit facility include a term of three years with an availability period to draw down of 12 months. This availability period can be extended by a further six months by issuing to Sprott 171,000 shares of Alexco. Interest rate on funds drawn down is approximately 9% to 10% using current LIBOR upon draw down of funds a 3% drawdown fee will be charged, and we issued a 1 million share purchase warrants with the five-year term exercised at a price of 2.25 per warrant. Subsequent to quarter end $6.3 million of cash place as security for Keno Hill property was replaced with a surety bond. The surety instrument is collateralized with $2.4 million of cash. This resulted in the freeing up to $4 million back to the Company in restricted cash. In addition, security posted in cash for the Globeville Smelter Project in Denver, Colorado in the amount of $513,000 was also returned to the Company subsequent to quarter end. At March 31, 2018, the Corporation had cash and cash equivalents of 13.2 million and net working capital of $18.4 million. This compares to cash and cash equivalents of $17.9 million and net working capital of $18.4 million at December 31, 2017. In addition, the Corporation's restricted cash and deposits were $7.1 million at March 31, 2018 and December 31, 2017. However, as previously mentioned, $4.5 million of those restricted funds were reclassified to unrestricted cash subsequent to quarter end.

[Lisa May:]

Thank you, Mike. Operator, would you provide instructions for the Q&A session please.

[Operator:]

[Operator Instructions] Our first question comes from Jake Sekelsky of ROTH Capital Partners.

[Jake Sekelsky:]

Starting at Flame & Moth, can you just remind us the total cost of the decline there and when you expect to complete it? I mean do you expect to see any savings from the repositioning of the ramp? And if so, can you just quantify that for us? I am just trying to get a handle on capital costs here over the next few quarters.

[Brad Thrall:]

This is Brad. If we were to just use kind of the ballpark numbers of let’s say 600 meters to get to the initial ore level accesses, the direct costs for decline development is in that $6,500 to a $7,000 per meter kind of range and that’s a pretty good estimate based on our experience. So that puts about $3.5 million to $4 million to reach that mineralization. We will have some additional capital required for underground mining equipment. That would be on top of that, but for the most part the equipment that we’ve already purchased for Bermingham will be used there. So, our advance rates right now we’re planning about 3.5 meters per day, at that Flame & Moth. So again that’s kind of the schedule to that we would anticipate to get to those initial over accesses down the Flame & Moth.

[Jake Sekelsky:]

And just switching over to permitting at Bermingham, I mean with the final -- why are these permits now expecting in the first quarter of 2019? Can you maybe just give some color in this, is this mean -- is the function of increased activity up in Yukon? Or is this something specific to you guys? Or any insight on that would be helpful?

[Brad Thrall:]

Well, I can assure there’s nothing specific to Alexco. I mean if nothing else, Alexco is more familiar and has been through this process more than most. I think that there’ve been some changes in the Yukon in terms of the -- at the federal level in terms of the regulations or the statutes actually. And that's certainly playing into some of the delays in our perspective, and yes, you're maybe right, there may be increased pressure in the system, generally, we don't see anything different. We just see the timelines as being extended as these various agencies and authorities work their way through the process, so nothing specific, nothing to be concerned about. Just the timelines have clearly increased in the course over the last year or 18 months.

[Jake Sekelsky:]

And then just lastly on exploration, will any of the 15,000 meter service program be included in PFS, I am assuming answer is no, but?

[Brad Thrall:]

Well, I mean, we’ll see where we get to, at some point we’re going to have a cut off, the results, right. So, we’re -- some of the initial service work is actually being done at Bermingham. I think in our current -- in our currently distributed materials, you’ll see that there’s a number of intersections in and around that deposit that require follow-ups. So we’re doing that right off the back. And -- but only with one drill and the other one is working on other projects and prospects. So, yes, some of it make it in there, I would hope that the early Bermingham stuff would get in there, but I would be surprised if we could get anything else other than that.

[Operator:]

Our next question comes from Mike Niehueser of Scarsdale Equities.

[Mike Niehueser:]

Brad, a question or a clarification for you, did I hear you say that you are going to have to amend the Quartz Mining License?

[Brad Thrall:]

That’s correct, Mike, that's again pretty routine for when you bring any kind of new mine into the plan if you will, it does require an amendment both the course mining license as well as the water license.

[Mike Niehueser:]

And that’s for regarding Bermingham then?

[Brad Thrall:]

That’s correct.

[Mike Niehueser:]

I guess I thought that that was already done and we are just waiting for the water license, but so we have the Quartz License in the third quarter and hopefully the water license from the first quarter of next year?

[Brad Thrall:]

Just to remind you, Mike, yes. We just amended our Quartz Mining License recently for Flame & Moth, and the permit on which we did the Bermingham decline was a class 4 mining land used permit. So, again, just that’s the standard process, so we will need to amend both QML and the water license for Bermingham production.

[Mike Niehueser:]

And the back to the Flame & Moth decline, I kind of recall that wasn’t that going to be about like 900 meters? Wasn’t that the way was it originally advertised?

[Brad Thrall:]

Again, there is obviously more than just the primary ramp development. There is level accesses. There is ore accesses. There is a vent raise secondary escape that needs to be put in place before you can go into production. So currently the only optimized design that we are looking at shades about 200 meter off of the overall ramp development that's required to get into production and beyond that is obviously ongoing capital development.

[Mike Niehueser:]

Okay, and it sounds like because of permitting the permitting, as you look at a mine decision to go ahead, it almost I get the feeling that you might practically be able to move ahead with the decision based on what you have at Flame & Moth with the Bermingham to follow. I mean is the mining decision dependent upon permitting at the Bermingham?

[Brad Thrall:]

I mean there is a metric that Mike as I’m sure everybody understands that in terms of the economics as well as the logistical considerations. So, Bermingham, the real issue is Bermingham is a value driver clearly. And yes, we do have other options available to us, but just simple arithmetic would tell you that putting the highest grade material through the mill first and ramping up to 400 times a day as fast as possible gives you the best possible economic scenario. And so, we're working our way through what this delay at Bermingham might mean. Quite frankly, we don't have any answers at this point, and we will just see how this sort of unfolds as we go through the next quarter or so. And certainly by the time, we worked our way through the various trade off studies associated with the prefeasibility study.

[Mike Niehueser:]

Also with the underground drilling at 10 meter facings, if it does get delayed it seems like you would have more time to do more drilling from underground. And isn't that pretty much of the feasibility level quality drilling?

[Brad Thrall:]

Yes, I mean you would hope that we will have to see what the geostatisticians have to say for extremely high-grade deposit like that there have been you'd be hoping to move into measured resource and into reserves probably probable, would be a speculation. And yes, you're right, I hadn't thought about that where actually, we could sit down there and drill a little more. Right now, we just got this 5000 meter program laid out. It covers the first couple of years of production at the originally assumed production rate. If we were going to do additional drilling from underground, we'd move more into an exploration type of a program I would think, and we probably would not continue with two drills maybe drop back to one, but I mean that's just speculation and we haven't really given a lot of thought at this point.

[Mike Niehueser:]

And the Sprott agreement, there's a lot of moving parts with your finances this quarter and I'm sure higher silver price and a little bit of more money moving into space would help. But are you looking at, are you looking at the Sprott as a backstop? And I'm kind of guessing you're going to need about 10 million to 15 million to move back into production, and what are your thoughts on the ability to raise equity as maybe a preference to the line?

[Brad Thrall:]

Yes, I mean that's you know as I explained when we were talking, I still feel like we have plenty of runway. Don't forget that we'd had this other you know $4.5 million when move over to unrestricted. We know what our burn is and we have plenty of time, the smelters continue to be very aggressive in terms of trying to lay their hand on the product that we are producing, and we have various other considerations that we're looking at, at the present time. So, we don't feel pressed and we're going to continue to look at these various options as we move forward here.

[Mike Niehueser:]

Well, two more questions real quick, if I could. I was surprised by that you mentioned you're initiating new drilling deeper level silver and base metal. I know that's where Hector-Calumet ended was in higher base metals, and I'm trying to picture a cross-section of the area. Are you, you must have a high level of confidence that there's something there to go after. I know you're kind of looking for the low hanging fruit near the surface. But what's your thinking behind looking for deeper targets? Is it related to Hector-Calumet? Or I've got to believe you're holding something back that you see something?

[Brad Thrall:]

Well, thanks for the questions Mike. No not really hanging, holding anything back, it's just you know I'm convinced that continuing into exploration obviously with the success that we have had and you know adds value and has added value. And the one thing that we have not really taken a shot at in the last 10 years or so, is trying to figure out what the lower levels of some of these very high grade deposits might look like and Birmingham would be a good example. Birmingham, the Birmingham discovery is the top of an ore deposit. It's one that we did not crop out on the surface, which is an anomaly in terms of the identified mineralization at Keno Hill and it's one that we would reasonably expect would pickup base metal content as it, the deeper in the system, and we certainly have drill holes in and around Birmingham, which would indicate that the system continues at depth. At the present time with the top of that system as it's about 160 meters below surface and in a vertical stance the bottom of what we’ve drilled is probably not a lot more than 200 or 230 meters, and there’s another [Audio gap] productive stratigraphic and structural column that would extend below that. So, the other part of the question is more difficult to answer is what the value of finding something that’s relatively large at a deeper level. What it displays any of the existing mine plan? Probably not, but I’d want to make sure that in the short term we don't do anything to sterilize a deeper opportunity. And I do think that if there's bigger deposits around and they are deeper, we’ll see that we’re better off to know about them sooner rather than later. So, I mean that’s my thesis and I also want to caution that this deeper drilling program is something that we have asked the geologist to lay out over the next 3, 4, 5 years. So, it’s not like we’re going to go out and drill a whole bunch of holes at a time. We’re going -- they’re going to be measured over several years, and if we drill 3, 4, 5 a year I’d be plenty happy with that.

[Mike Niehueser:]

Last question with Cañon City work, it sounded like you were getting into that work right away that was in the last quarter. Did some of that revenue show up this quarter? And how frontend loaded is that work to where we might see a pop in revenues for the environmental business?

[Brad Thrall:]

I think most reflection of that will come in the second quarter. I mean, yes, the second quarter and third quarter of this year, it is -- it’s not necessarily front end loaded, but it is going to go along on a clip of $4 million, $5 million a year. In the first quarter, it was basically transition work as we’ve transitioned the ownership. As the ownership with transitioned from quarter to Colorado Legacy Land, so the amount of revenue coming from that project will increase over the course of 2019 -- 2018, sorry.

[Operator:]

Our next question comes from Mike Kozak of Cantor Fitzgerald.

[Mike Kozak:]

A couple of quick ones from me, so first of all at Flame & Moth. Is the plant still to kind of drive or commit to the first 250 meters? And then decide, if you’re going to continue based on current marking conditions silver price et cetera? Or are you committing to the full, I think it’s the 570 meters, of the ramp at this point?

[Clynt Nauman:]

I mean I think that I don’t have -- we don’t have any plan to just cut it off after 200 meters at this juncture. The ramp has been shortened. We have a better handle on our costs and certainly from the Company perspective, we are launching into that decline anticipating that we’re going to drive it to the ore. It doesn’t mean to say that anywhere along the way as if we run into abnormal or extraordinary conditions that we wouldn’t sort of reevaluate where we’re at.

[Mike Kozak:]

And then question for, Brad. I think you've mentioned that you’re in the process of adding another ball mill for the plant. My question is that just due to some of the maybe the harder or do you seeing a drill core, if you are seeing any at Bermingham? Or this can allow you to push back into the process plan beyond 400 tons per day?

[Brad Thrall:]

Mike, a little bit of both actually. If you recall, during our time when we were in operations the limitation in that mill was for any capacity. So, this is to ensure that you know that limitation will be addressed going forward when we commissioned the million again. And, yes, I mean it will -- the second ball mill will actually exceed 400 tons per day of capacity but that will obviously result in other things within that mill becoming with the next bottleneck. So, we're not actively designing an expansion in the mill right now, but it certainly does set us up in the future for potential processing rates beyond 400 tons per day, which of course would require future amendments again to our permit.

[Operator:]

[Operator Instructions] Our next question comes from [Robert Sinha] of Cedar Hill Capital. Capital.

[Unidentified Analyst:]

This question is for Clynt. Clynt, can you sketch out further, the newly imposed regulatory burden from the Yukon? I know you said you didn't have much concern about it, but I would like to know about it little bit more than just uncertainty explanation is given?

[Clynt Nauman:]

Thanks for the question. You know, there is nothing different in the process nothing is changed on the regulatory in terms of the rules of the process. It's just of the timelines that in our things were getting done within by the assessors and the regulators in the past appear to be lengthening. And we see that across the industry. So, that's what makes us a little unsettled. We went into this process is for example previously based on our prior experience thinking that one-year would be enough amend Quartz Mining License and water license for the purpose of processing of ore from the Bermingham deposit. That application was submitted in November of last year and that's why we guided towards the fourth quarter decision. It’s apparent to us as we have worked their way through the first quarter that delays in the assessment process. Initially, we have purchased back a little bit and we know that as we go down the line you into the water license process, we know that process is not acting as not been as efficient in meeting in a anticipated timelines as it has in the past. For whatever reason, there are things that are out of our control, and we will continue to press the regulators for resolution here, but we think that the most prudent thing to do is just, is to guide to a delay in getting those amendments. So just to reiterate nothing has changed is just as the timelines in terms of the feedback from the assessors and anticipated for the regulators is going to slow then we thought.

[Operator:]

This concludes the question-and-answer-session. I would like to turn the conference back over to Mr. Nauman for any closing remarks.

[Clynt Nauman:]

Thank you for joining us today. We remain dedicated to moving the Keno Hill Silver District back to production. Our ambitious plans are well under way and we'll continue over the coming year. While we've completed the first underground development decline and have identified development improvements resulting in both cost and plan savings, there's still much to do. We have 530 meters of decline to advance and an extensive underground drilling program of 5000 meters to execute and a prefeasibility level study to complete. In addition, we'll conduct an extensive surface exploration program in search of the next Hector Calumate like deposit. A strengthened cash position gives us plenty of run way to meet our objectives in a disciplined and deliberate manner. As explained, there will be a clear project decision point as we progress with the decision to continue and complete the development of the Flame & Moth decline with the final decision point obviously to proceed to production which will come towards the end of 2018. As always, we appreciate your support and interest in Alexco. And with that. I'll turn it back to Lisa to close the call.

[Lisa May:]

You've been listening to the Alexco Resource March 31, 2018 first quarter conference call. We encourage investors to visit Alexco's website for further information at alexcoresource.com. If you have further questions, please call my direct line at 778-945-6577 or email me directly at [e-mail]. This concludes today's call. Thank you for joining us and have a good day.

[Operator:]

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.