Alexco Resource: Not just a silver optionality play for silver bugs
In the latest episode of Discovery Watch, responding to listener's question about Alexco Resource (AXR) John Kaiser notes that the company is working on a pre-feasibility study for its high-grade Keno Hill Silver District in the Yukon. However, given the project's economic dependence on a higher silver price, the prospect of a PFS sometime next year is not what excites Mr. Kaiser about the stock.
Instead, the company's Alexco Environmental Group (AEG) division is what catches Mr. Kaiser's attention. As Kaiser explains, before AXR went public, it acquired an environmental remediation company which in fact won the remediation work for Keno Hills. The AEG division is active beyond the Yukon and has won four clean up contracts in Colorado reports Mr. Kaiser.
According to the company in the third quarter AEG:
Recognized revenues of $4,669,000 in the third quarter of 2018 for a gross profit of $1,702,000 achieving a gross margin of 36% compared to revenues of $3,786,000 for a gross profit of $1,545,000 achieving a gross margin of 41% in the third quarter of 2017. The increase in gross profit during the 2018 period was primarily due to services provided to US customers that utilized a higher portion of internal labour.
So, while AXR works on its PFS and waits for higher silver price, the company has what may well be the equivalent of a junior mining crown jewel that could come in handy in the next resource industry bull market.
Mr. Kaiser believes AEG can potentially give AXR a competitive advantage when things heat up again in mining. Mr. Kaiser says,
It has this in-house environmental remediation capacity which when bidding on projects, former mine sites that do require clean-up that would give this company an edge to outbid without blowing themselves up...
That all adds up to something more than an optionality play on silver. Kaiser characterizes AXR as
Not just a silver optionality play for silver bugs...but also a potential growth platform where they can leverage the very nature of this story into expanding and acquiring other projects and building if and when we get back into resource sector bull market.
Mr. Kaiser also provides an update on last news from Scandium International Mining (SCY) and Nevada Exploration (NGE).