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Alexco Resource's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Then about $3.50 of increase in the per ounce cash cost of silver compared to the second quarter of last year, is because the remaining areas that had approximately 15% lower ore grades. And as you see in the releases, the ore grades were about 704 grams in this second quarter versus 822 previously. And these lower ore grades had a number of what I would term newly identified knock-on effects in the mill and we’ll talk about that.

The remaining $1.50 an ounce difference is primarily due to increased transportation costs. The mill actually operated quite well during the second quarter given the adjustments to accommodate the lower grades. We processed 17% more tons during the second quarter compared to a year ago, and availabilities remained at 90% or higher even that we experienced some delays from mechanical issues or failures on some floatation cell agitators. The mill also experienced a two-day shutdown because of a major wildfire in the area, and just anecdotally, we’re very proud of how our people handled that temporary evacuation process, both our employees and also supporting local residents in Keno City.

These adjustments in the mill to scale up and scale down in terms of throughput certainly negatively impacted the recovery rates for the quarter. However, the main issue was a period of about a month when head grades were often below 600 grants per ton, the lower head grade having a correlation to lower recovery, which we’re addressing.

In addition, as I mentioned before we did have these account wise potential delays in the lead circle, which impacted lead recovery. We’ve addressed those issues with increased replacements in the space and we don’t anticipate that this will be an issue going forward. Clearly, we need to overcome all of these issues to improve mill throughput to design capacity and we are continuing to put in place the plan and the structure to achieve that.

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