Yeah, Alexco has been a disappointment for well over a year now. I’ve still got a position, and had a good trade earlier in the year buying in February and then trimming some back in March on the rally…. but not nearly enough. I personally added more AXU back to the position in May and June (most recently at $0.39). It closed today at $0.37 so I’m underwater on the trade now for 2022 and got spanked on that position.

The issue with AXU is that they are waaaay behind schedule on getting their mine ramped up to their projected commercial production (which they were supposed to have achieved over a year ago now…. with many stalls, ramp up issues, issues with not enough stopes feeding the mill, costs coming in higher, and not enough throughput). As a result, they’ve burned through too much capital and haven’t offset it with solid revenues, and then did a capital raise at much lower levels, which just pissed off many of their longer-term supporters. At this point they’ve created a bit of a mess with investor perception and sentiment, and have not executed well at all as a new producer.

To make matters worse they’ve suspended milling for the rest of the year as they work to get more stopes opened up and achieve their 400 tonnes per day metric when they start production back up again the beginning of next year.

They did fantastic as an explorer, and then did great as a developer, when they were drilling out repetitive bonanza grade zingers, and expanding a larger and larger high-grade resource, and putting out very attractive economic studies. The issue they had, like so many companies do, is when they moved into graduating as a profitable producer. The issue most companies have is getting the projected revenues coming in fast enough to offset the project debt and cash burn to get into a profitable position. Sadly, most run into challenges, are under-funded, and then can’t get off the mat fast enough to get escape velocity and get into profitable steady-state production.

We’ve seen this same pattern play out with so many new PM producers…. Harte Gold, Red Eagle, Sage Gold, Northern Vertex [now Elevation Gold], Pure Gold, Gold Mountain, Aurcana, Americas Gold and Silver (with their Relief Canyon mine), and McEwen Mining (on almost every mine they’ve tried to get into production), etc…. In fact, the only companies I remember really executing well as new producers were Atlantic Gold (taken out), Roxgold (taken out), K92, and West African Resources. Then more recently Mako Mining, Minera Alamos, and Thor Explorations have actually done a good job of pushing out of the gate with minimal issues.

For most new mines going into production, especially new producers with single asset mines, it is a real challenge, and fledgling producers usually struggle for their first year or two, and often are punished by investors that were in them for the pre-production stories. There are eventually points (usually a few years in) where they get their ships turned around and may outperform their peers or larger producers, or become wounded animals that are picked off by the larger producers in a takeover (like Richmond, Klondex, Primero, Crocodile, Guyana Goldfields, Fiore, TMAC, etc…).

Those can be interesting points to get into position and with Alexco it’s hard to know exactly where they are in the process at present. They seem to be gradually getting things into position for better quarters ahead, with more stopes opened up and supplying ore from both Flame & Moth and Bermingham, but I’m personally concerned that they’ve burned through so much capital once again, that they are going to need to raise again. This makes them ripe for a takeover from a larger and more competent producer that may want to diversify into Canada for silver production, but also could keep them under pressure and in the hurt longer for a few more quarters. I can’t imagine Q2 was very good, but we’ll see those numbers in about a month or so, and it doesn’t sound like they’ll be producing anything in Q3 or Q4 as they work to get more underground stopes opened up (something they should have done BEFORE going into production). If silver does fall down to $18.50-$19 as some are worried about, then it may just kick their legs out from underneath them, so that is a legit concern.

At this point Alexco is really oversold and has been severely punished by the market, so I’m waiting to see if AXU is going to get their ship turned around while milling is down the 2nd half of this year. It’s possible I may have to take it as a tax loss for 2022 though, because it’s been my worst performing Silver stock out of the 20 I hold in that sector. So far it’s been a big disappointment, and I won’t be adding any more to the position with so many other better choices and positions I hold that I’d feel better adding to instead.

In a way, I’d like to see a white knight ride in from a larger company to put them out of their misery in a takeover, and then just exit the position on the takeover premium for hopefully a wash. AXU may be a good contrarian play at this point, for someone that isn’t already in position, or possibly waiting until they announce going back into production again at year-end or the beginning of next year. Personally I just can’t see allocating much more of my capital to it, as I’ve got plenty of other silver positions that are performing much better on a relative basis, that don’t have nearly as much capital risk or operational risk at present. Again, the big concern I’ve got is that they are going to pull a Pure Gold and need to finance yet again at even lower prices to get back out of development mode and into production again, and that would really vex current investors and tank the share price even further. Fugly…. really fugly….

As noted in their recent market update from last week, waiting for higher metals prices isn’t the main reason for stockpiling ore. Their primary issue has been the inability to meet the 400 tpd nameplate throughput needed to operate profitably. Sure, maybe the silver price will bounce higher by the end of the year or beginning of next year and that will definitely help out as well, but the issue is they faceplanted going into production last year and for the first half of this year. Their operations team should have had way more stopes opened up and far more ore stockpiled long before starting up the milling, so they didn’t have enough underground capacity and ore to feed the beast. Now the present issue and going concern is their cash burn without the associated revenues, so the risk of another dilutive financing looms large.

Still sounds like silver isn’t priced right….

Yeah, good thoughts Wolfster, and it would not surprise me if that $19K area falls again, to see even more damage inflicted. $19k was that top from 2017 (when everyone and their grandmothers got involved over Thanksgiving) and then it nosedived down to $3k in just a mere number of months. There is a lot of pricing memory around that level, and it was interesting when it dove down below it briefly to $17.6K on June 18th (over the weekend) and then shot right back up above $20k again.

Good point about the weekends being quite volatile for Bitcoin and really all cryptos . We saw some of the big moves in Ethereum, Polkadot, Cardano, Solana, Dogecoin, Shiba Inu, etc… over different weekend moves in the past. I guess since they trade 24/7 that many investors are more tuned in over the weekends to cryptos, when other markets are closed, and many of the other trading vehicles for cryptos in the general markets are not available.

I’d love to see Bitcoin fall under $19k again, and maybe dive below that recent low of $17,567 from 2 weeks back. There is a rumor that Michael Saylor would have a margin call on all his Bitcoin held in Microstrategies at around $16k, so if that triggered, a move down closer to $10k would not be a surprise. That would be something good to pounce on for a speculative trade.

To be clear, I’m no HODLer, just a swing-trader, but I’ve made money in the crypto space trading GBTC and trading a half-dozen of the crypto miners, and have been waiting for a good capitulation low to give it another go.

>> Man, have you been watching the all-out carnage in the crypto miners? Truly epic.

Check out the 1 year charts for Riot, Hut 8, Hive, Argo Blockchain, Bitfarms, etc…. These things are down 70%-90% and investors have been absolutely decimated (even worse than the PM juniors). It has my contrarian alarm going off to look for bottom fishing opportunities, but it would be great to see them thrashed just a little bit further first. The higher energy prices can’t be doing these companies any favors, and it is nice to see reality and gravity setting in as those companies were priced up in the stratosphere for so long in looney-tunes land.

Ongoing capping action. I would like to hear the “official government” explanation. I guess we will hear it from The Bar at Jackson Hole.