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Alexco Resource (AXU) Q2 2021 Earnings Call Transcript

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AXU earnings call for the period ending June 30, 2021.

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Alexco Resource (AXU)
Q2 2021 Earnings Call
Aug 12, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Welcome to the Alexco Resource Corp. second-quarter 2021 conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions.

[Operator instructions] I would now like to turn the conference over to Rajini Bala, investor relations and communications head. Please go ahead.

Rajini Bala -- Investor Relations and Communications Head

Thank you very much. Good morning, ladies and gentlemen. Today is Thursday, August 12, 2021. My name is Rajini Bala, and I welcome you all to the Alexco Resources 2021 second-quarter results conference call.

This call is being webcast live and can be accessed through the Events and Webcast section of our website at alexcoresource.com, an audio archive of the call will be available later today. Our website also contains our most recent news releases and our financial statements for the quarter ended June 30, 2021. All amounts mentioned today are in Canadian dollars unless otherwise indicated. Today, our chairman and CEO, Clynt Nauman, will discuss our most recent results, and he will be joined by our president, Brad Thrall; and our CFO, Mike Clark, during the question-and-answer period.

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Please be reminded that some statements made today may constitute forward-looking information within the meaning of applicable securities law. Similarly, past performance discussed today does not indicate future results and our business involves several risks that could cause results to differ from projections. Investors are encouraged to review the disclosures pertaining to risks, which can be found in our most recent regulatory filings available on our website and on SEDAR and EDGAR. I will now leave you with our chairman and CEO, Clynt Nauman.

Clynt Nauman -- Chairman and Chief Executive Officer

Thank you, Rajini, and thank you to everybody who's attending this morning. Certainly good to talk to you. A little bit of a change-up this quarter. My presentation is going to be relatively brief.

And I'm not going to reiterate financial results. You have them available from filings yesterday. So rather I'm going to give you a few high-level remarks from site operations and then expand in response to any questions that you might have. I think that should be a pretty productive way to execute this discussion.

So our ramp-up of operations at Keno Hill continued during the second quarter, and we've been making good progress. I would say that our workforce is settling in. The COVID restrictions although still rigorous are not viewed as threatening at the workforce level, which is important. And so operations are hitting more of a routine type of profile.

So on the revenue side, we continue to mine ore from our Bellekeno mine. In the last quarter, we mined 6,460 odd tonnes. The head grade was just over 700 grams per tonne in the second quarter and the year-to-date head grade is a little north of 770 grams per tonne silver, with pretty strong base metal credits. So this mine continues to overachieve its block model estimates.

And -- but we are, at the present time, moving into the last stope that we would intend to mine there, and then eventually, we'll be looking to transition and redeploy resources we have in that mine, the Bellekeno mine to either Flame & Moth or to Bermingham. The one thing that I would say about the Bellekeno experience is that we have done a significant amount of long hauling. And for those that are familiar with our technical reports, you'll know that both at Bermingham and Flame & Moth, we have a long hauling component. On balance, it's a subsidiary component.

Contrary to that, at Bellekeno, we've been doing a fair amount of long hauling. And I would have to say that our experience has been very, very good. We've overachieved grades. We haven't taken a lot of dilution.

We're using much more, I guess, sophisticated or advanced long hauling methods than we used in the past, and the results have been excellent. So just to make that point that the Bellekeno experience has been really pretty pleasant in terms of operating practices, as well as output, but time to move on. So we remain on track to reach the Bermingham and Flame & Moth ore in the second half of 2021. And I would say that a Flame & Moth, which, of course, you know is situated rate very close to the mill where we are at the first production level at the 835 level, and we're about to crosscut to the ore.

It's about 120 meters to the ore, and that's going to open up about 65,000 tonnes of material. It has a grade of 600 to 700 grams in that type of range. It's the top of the Flame & Moth ore body. And we would anticipate being into that ore body in the last half of the year.

Over Bermingham, in contrast, we are in a dry called the 1,150. It's the first production drive. It's a result of the new reserves and resources that we calculated earlier this year. And we're within meters of the first ore blocks at Bellekeno.

The major portion of the Bellekeno deposit that will occupy their production component in 2022 is about 140 meters in front of us down to ramp, and that will open up when we get there about 60,000 tonne of close to 1,700 grams per tonne silver. So we're within 140 meters of that. In the meantime, we're going to be mining at the 1,100 level and extracting ore going into the third and fourth quarter. Underground development rates, as we mentioned in our published material is slower than forecasted.

And we would point to crew and experience-related issues there, but they certainly are improving, and we're pretty happy with where we're heading here. At Bermingham, the initial ore production is anticipated, as I mentioned in the third quarter, and at Flame & Moth, initial ore production is anticipated in the fourth quarter of 2021. Don't forget that we updated our mineral reserves in May of this year. They were increased by about 20% to 1.4 million, 1.5 million tonnes.

So we added about 270,000 tonnes. Small number for those used to bigger mines, but don't forget that at 400 tonnes a day, that's almost two years of production there. So the new resource has an average grade of 804 grams per tonne silver; 3.8%, zinc; 2.6%, lead, there's a little bit of gold or as some people report, and we would say in just over 1,000 grams per tonne of silver equivalent based on the normal calculations. So this new reserve has extended our mine plan, and we would anticipate producing more than 35 million ounces of silver over the next eight years.

At the mill, we processed nearly 11,000 tonnes of ore in Q2. It's 18,000, 19,000 tonnes year to date. With the year-to-date head grade of 817 grams per tonne silver, about 11% lead, and 4% zinc. So very high base metals.

In the second quarter, that mill averaged 176 tonnes per operating day for the days it was operating in Q2. And that the mill is simply operating in response to the ore is being extracted and delivered from Bellekeno. But the Q2 experience was a 65% increase in throughput over the last quarter. And all of the -- the great majority of the construction work, refitting work in terms of cyclones, a new fine ore feeder, construction of a new building, the second ore mill, the regrind mills, etc., have all been completed and stand ready for scale-up in Q3 and Q4.

The experience in the mill has been excellent, actually. Recoveries are on or ahead of our expectations. It's averaged 93% of recovery of silver in Q2 with 94% of the silver report into the lead concentrate. So payabilities are high, and that's good to see.

Year to date, recoveries are around 91% with 87% of the silver reporting to the lead concentrate. So you can see the similar trends emerging at the mill with increasing efficiency and especially payability as we go along here. So additionally, in Q2, as I mentioned before, we released an updated technical report. The mineral reserve increased, as I mentioned.

And we end up here with a run rate of 4.4 million ounces of silver per year over an initial eight-year mine life. Turning briefly to exploration. We will have a lot more to say about exploration in a couple of weeks here. the Bermingham Northeast deep exploration program is continuing.

We have four drill rigs continue to operate. They're using directional drilling technology. That is a 20,000-meter underground program. And we're about 60% of the way into that particular program, 11,500 meters have been drilled to date.

Ultimately, we should have more than 50 intercepts through the target zone in this Northeast Deeps area under the Bermingham deposit. And those targets or that zone, which as we've talked before, is 400 meters to 500 meters long, will be drilled off of 10 fences, which are being drilled with large diameter core, off of which, we drilled holes or directional holes to get a vertical hole spacing of about 20 meters. So we're doing that very deliberately to make sure or to enhance, I guess, the opportunity for us to, if -- and when we start calculating the resource for this deeper mineralization that we're able to go straight to an indicated category. We're working toward releasing initial drill results in late August.

I would say that we were -- we'd hope to have them available for the second quarter for this week, actually, but we had some duplicates and standard issues, quality issues that we had to retest of the lab was delayed as a couple of weeks. Nothing to get excited about there. It's pretty routine. This is very high-grade material to the extent that it is intercepted.

So it does give the lab some problems from time to time. Our objective in 2021 is to incorporate this drilling into a new sitewide mineral resource estimate. And, of course, that will be focused mostly at Bermingham, but it will gather in some other drilling that we did in 2020. So it's still our target to complete this resource analysis by the fourth quarter of this year and just to see where we stand at the spec at Bermingham.

So finally just to conclude, I wanted to again express my sincere thanks to our workforce. We have continued to deliver results amid the ever-evolving COVID environment. Together, we have made steady and significant progress on delivering Keno Hill back to full production. But make no mistake, we still have hard work ahead of us.

Maintaining and increasing our forecasted underground development. Advance rates is key as is continued successful recruitment of underground miners and maintenance technicians. We also need to be navigating the normal short-term supply chain issues as is most -- as are among other people in the business. So for us, it's all about execution, and that comes down to underground advance rates, continuing success in recruiting underground operators, miners, and mechanics especially, and being proactive on the supply chain challenges.

With that, I think I've said enough here to give you a high-level overview. So I'd like the operator to open the call for questions. Thank you.

Questions & Answers:


Operator

We will now begin the question-and-answer session. [Operator instructions] The first question comes from Jake Sekelsky from Alliance Global Partners. Please go ahead.

Jake Sekelsky -- Alliance Global Partners -- Analyst

Hey, guys. Thanks for taking my questions.

Clynt Nauman -- Chairman and Chief Executive Officer

Hi, Jake.

Jake Sekelsky -- Alliance Global Partners -- Analyst

Just looking at the ramp-up kind of heading into the second half of the year. I'm trying to get a sense of the pace we should be modeling for Q3 and Q4. Is there any color that you guys are able to give on how we should kind of be thinking about that curve up to 400 tonnes a day in the second half?

Clynt Nauman -- Chairman and Chief Executive Officer

I mean, let me take a shot at that, Jake. It's an evolving issue obviously, as we ramp up here. We are fully confident that we'll have an opportunity to be able to push that mill up into the higher numbers in the fourth quarter of 2021. And certainly, by the second -- by the first quarter of 2022, you're going to -- you'd be modeling sustained 400 tonne per day, 4-plus million ounce per year sort of a run rate.

That's, I mean, hypothetically. I guess if I was sort of working on a model, that's what I'd be thinking.

Jake Sekelsky -- Alliance Global Partners -- Analyst

OK. Yes. And I understand it's a moving target, but that was what I was hoping for. And then just on recoveries, I mean, obviously, we saw a significant increase quarter over quarter with both silver and zinc.

Do you expect these to trend higher in the second half as throughput ramps up and you transition to mining Bermingham and Flame & Moth material?

Clynt Nauman -- Chairman and Chief Executive Officer

Yes. Brad is the expert here. So I will say anecdotally for Brad answers though, that that mill, Jake, is operating as good or better than we've ever seen it operate. But I'll turn it over to Brad because you're correct.

The character of the ore that's going to be coming from Flame & Moth and Bermingham is slightly different. Brad?

Brad Thrall -- President

Yes. Thanks for that question, Jake. Yes. I mean, certainly, our recoveries in Q2 improved over Q1, again, about 93% on the silver side.

But I think even more important, just in the last month or two, June, July, we were just over 94% on silver. So I wouldn't say that it will continue to increase. I think we've kind of -- we've reached a point of, I think, excellent response. But again, we are transitioning from Bellekeno to Bermingham, which is a different ore.

And that will require the regrind mills for the concentrate. So yes, so I think the recoveries that you're seeing right now in that 93%, kind of 94%, that would be, I think, our expectation going forward.

Jake Sekelsky -- Alliance Global Partners -- Analyst

Got it. OK. That's helpful. That's all on my end.

Thanks again, guys.

Clynt Nauman -- Chairman and Chief Executive Officer

Thanks, Jake.

Operator

The next question comes from Joseph Reagor from ROTH Capital Partners. Please go ahead.

Joseph Reagor -- ROTH Capital Partners -- Analyst

Good morning, guys. Thanks for taking the questions. Kind of just following on a little bit of what Jake was asking on the operating rate ramp-up. You guys gave your operating rate in Q2 as 176 tonnes per day, but that's per operating day.

So I guess looking at Q3 and Q4, should we be assuming a certain percentage of days that the mill will be down as we're looking at those numbers you gave? Or were those numbers based on an expectation of the mill being fully available the rest of the year?

Clynt Nauman -- Chairman and Chief Executive Officer

Well, once again, I'll let Brad take that. But I mean, the high-level issue is that that mill is operating, Joe, in response to the ore that's being extracted from Bellekeno. And it's worked pretty much as we expected. I mean, there's runs of a couple of weeks.

We are working on optimization, debottlenecking type worked out pretty well. And for the last half of the year though, you're going to see ore being delivered from Bellekeno initially and then Bermingham. So there's going to be a supply of ore there that is going to enable us to operate that mill at a higher throughput, albeit it may not be a sustained high throughput. But I don't know, Brad, do you want to elaborate on that?

Brad Thrall -- President

Yes. I mean, I think the mill general, Joe, has been operating on a two-week-on, two-week-off schedule. And that's mostly dictated by crews and crew rotations. We want to make sure that all four of our operating crews have operating time when ore is available.

But certainly, that 176 tonne per day, I mean, that is not any indication of mechanical throughput capacity. I mean, we could operate, let's say, for a week at even higher throughputs. But I mean, so we're trying to find the right balance of sustained operations for a couple of weeks at a time. But again, being cognizant of the feed source coming from Bellekeno.

So we'll likely continue this two-week-on, two-week-off rotation at the mill into Q4. But as we get closer to the end of the year, that's when we would be looking to increase the run time that's at the mill.

Joseph Reagor -- ROTH Capital Partners -- Analyst

OK. Fair enough. And then on the capital spending front, in the first half of the year, you guys spent right around $25 million based on the cash flow statements. What should we expect as far as capital spending in the second half of the year?

Clynt Nauman -- Chairman and Chief Executive Officer

Well, I mean, there's two pieces to the capital, the way that we look at it, Joe. The first is the PP&E, and to a large extent, that is already invested. So it's all about working capital. And that is based on the fixed costs, the underlying fixed costs at the operation.

They're going to continue at about the same level that we have at the present time, offset, of course, by revenues that are returning from the ore that's being milled. So the underlying costs, I don't anticipate are going to change significantly. But it's the revenue side of the equation is going to be the important piece. So, Brad, do you want to elaborate on that?

Brad Thrall -- President

Yes. No, I think that's a fair comment. The vast majority of our PP&E, the mill, and all of these sitewide infrastructure projects, they are essentially complete. And in kind of a normal, I guess, operating burn rate, if you will.

That's pretty consistent now month in and month out. And now the focus is increasing the revenue to start to narrow that gap.

Joseph Reagor -- ROTH Capital Partners -- Analyst

OK, fair enough. I'll turn it over. Thanks, guys.

Clynt Nauman -- Chairman and Chief Executive Officer

Thanks, Joe.

Operator

The next question comes from Nicolas Dion from Cormark Securities. Please go ahead.

Nicolas Dion -- Cormark Securities -- Analyst

Hi, guys. Most of my questions have been answered. So sorry to be repetitive. But just to be clear, it sounds like the mill is performing quite well.

It's really holding the ramp-up back as the underground development rates. And the main issue there is recruitment and retention of labor. I guess the ground conditions you've encountered have underground have so far been more or less as expected. Is that all fair to say?

Clynt Nauman -- Chairman and Chief Executive Officer

Yes, that's pretty reasonable.

Nicolas Dion -- Cormark Securities -- Analyst

OK, great.

Clynt Nauman -- Chairman and Chief Executive Officer

Yes, that's a fair statement.

Nicolas Dion -- Cormark Securities -- Analyst

OK, thanks.

Operator

The next question comes from Mike Niehueser from R.F. Lafferty. Please go ahead.

Mike Niehueser -- R.F. Lafferty -- Analyst

Good morning. Thanks for the extra detail on the underground development at Flame & Moth and Bermingham. It kind of sounds like that you're going to be able to seamlessly transition right into Bermingham and Flame & Moth? Or do you anticipate that there might be a break there where the mill might be idle for more than a couple of weeks?

Clynt Nauman -- Chairman and Chief Executive Officer

Not the way that we see it, Mike. We've got plenty more to continue to come from Bermingham -- from Bellekeno, sorry. Bermingham is very close to being in the ore. So you're going to see a continuous supply of ore to the mill.

It is true though that the multiple working headings that are in the plan will be both Bermingham at the deeper level that I mentioned and also at Flame & Moth, the block of ore that we're cross-cutting to the present time. Those blocks of ore can be expected to be on stream in the first quarter of 2022. How soon do we get to them? If we get to them sooner in the fourth quarter, that's great. But our plans show a steady supply of ore to the mill, pretty much in line with what we've been seeing until we get those bigger blocks of ore underway and more headings available at Bermingham and Flame & Moth.

So I'm not exactly sure if that answers your question. We're certainly not looking at any sort of stand down or step back at the mill. We anticipate a continuous supply and increasing supply of ore to that mill.

Mike Niehueser -- R.F. Lafferty -- Analyst

That does answer. It really does sound like you're really managing your people in the days of COVID pretty well. One more follow-up about the zinc recoveries. There really was quite a jump from the first quarter and much better than the prior operation back in -- earlier in the last decade.

Is that pretty much from regrinding the concentrate? And do you think that you're going to be able to maintain those zinc recoveries going forward?

Clynt Nauman -- Chairman and Chief Executive Officer

Yes, Brad. You can go ahead.

Brad Thrall -- President

Yes, let me take a shot at that. Yes, thanks, Mike. It's not because of regrinding. It's essentially two changes.

I mean, one is pH control. I mean, in a lead zinc flotation circuit, pH control is absolutely critical. So I think we have that dialed in pretty well right now. And we've also made a few adjustments on some of our reagents on the zinc side.

So yes, and then were plus 75%, close to 80% recovery on zinc with -- in excess of 50% con grade. So that is as good as we've seen at Keno Hill. And we would expect, I think, that to continue going forward, certainly at Bermingham and especially when the regrind mills are operating in Bermingham.

Mike Niehueser -- R.F. Lafferty -- Analyst

Thank you. And one more thing, following up on that, when answering the question earlier, passing it off from Clynt to you, I wasn't sure about the answer with the new type of ore bodies. Flame & Moth and Bermingham are a little bit different in Bellekeno. Do you foresee pretty much a continuation recoveries again, seamlessly into those ore bodies? Are you expecting a few challenges you'll need to work through and optimize?

Brad Thrall -- President

Yes, there may be certainly some learning curves. I mean, again, the reason that we are installing concentrate regrind mills is all due to the Bermingham deposit, which, again, Bermingham and Flame & Moth, as you know, have lower base metals than Bellekeno. And so those regrind mills are necessary to the increase the concentrate grades to meet specs on the concentrate. So yes, I mean, it wouldn't be unusual to have some learning curve as you get into some of these new ores.

But the regrind mills are ready to go. And again, their days are less away from starting to mill that Bermingham ore.

Mike Niehueser -- R.F. Lafferty -- Analyst

Well, thank you. The directional drilling seems to be a real cool, not just from the number of downhole hits you might have but also understanding true widths there by coming in at different angles. But just from the numbers of meters drilled, it's kind of hard to get to estimate how many opportunities you've had to pierce the target down. And I'm guessing it's somewhere with 11,500 meters, you're probably around 25 to 30 hits on target there.

Is that close?

Clynt Nauman -- Chairman and Chief Executive Officer

Yes, your arithmetic is pretty good, Mike. Last time I looked, it was 33. So yes, just to elaborate on that a little bit. Yes, the directional drilling exercise has been important technically.

It is not as easy as just shooting holes in the ground from the surface. It's slow getting around the bands, if you like, or the dog legs. But we are totally focused on the end result here, which is a controlled intersection at measured distances down dip and a long strike. And from that perspective, it's certainly, I mean, is the expectation.

I would say that it is more expensive than we had anticipated, but that does not mean that we would end up running anything over budget. Rather we are going to collapse our entire effort this year into that Bermingham Deep zone and expand. We're drilling 20,000 meters in there, and what was originally planned to be a 25,000-meter program with 5,000 meters in reserve for either work in the district, that now has been collapsed into the Bermingham Deep program, and we have increased the number of intercepts or, I guess, potential intercepts or intercepts of the target zone simply because of the information that we're seeing as we go through this process. So we've increased -- we're increasing the drilling.

It's a little slower. It's a little more expensive. But at the end of the day, we'll end up with a product exactly as we expected in terms of geometry of penetrations of the target zone.

Mike Niehueser -- R.F. Lafferty -- Analyst

So with collapsing in the non-Bermingham Deep targets, what would be the gross number of meters or targets for the solely the Bermingham deep alone now?

Clynt Nauman -- Chairman and Chief Executive Officer

I think we're at like 56 or 58, something in that range. It's about another $0.75 million we're putting into that.

Mike Niehueser -- R.F. Lafferty -- Analyst

But how many -- so 58 holes --

Clynt Nauman -- Chairman and Chief Executive Officer

Yes, something in that range, yes. 

Mike Niehueser -- R.F. Lafferty -- Analyst

OK.

Clynt Nauman -- Chairman and Chief Executive Officer

Versus originally, it would be --

Mike Niehueser -- R.F. Lafferty -- Analyst

Yes, go ahead. You kind of broke up there for a second.

Clynt Nauman -- Chairman and Chief Executive Officer

No, I just said we're originally talking, Mike, if you remember, several quarters ago, 45, 50 holes, something in that range. We've increased that to the 55, 58 type range.

Mike Niehueser -- R.F. Lafferty -- Analyst

OK. Thank you. And the recent increase in reserves, that's actually in the mine plan now, that's not going to be refigured later in the year at the end of this drill program. Is that correct?

Clynt Nauman -- Chairman and Chief Executive Officer

Yes, exactly. It's a little complicated. I know, yes. So we did that primarily because this first production level at Bermingham 1120 was not in the reserves in the original mine plan.

But with the increase in the silver price, there's clearly margin in there. So it's currently in the mine plan. So that was the reason we redid that technical report. So you can expect another technical report or recalculation of the resources and reserves in the fourth quarter of this year.

And if that -- and that will primarily be driven by the deep drilling at Bermingham. But you can be reasonably sure that if the results from that drilling are encouraging, there's high possibility that we'd look at an even further report in Q1 2022 as we see whether or not the mineralization, deeper mineralization can withstand the economics of a normal underground mining plan.

Mike Niehueser -- R.F. Lafferty -- Analyst

Well, I look forward to the first quarter of next year. Just one last more of a comment than anything, but Brad mentioned burn going forward, and I was staring at your cash flow statement for the second quarter, and you actually had a positive operating cash flow, which is interesting for a project that is still in the throes of commissioning and optimization. And so congratulations on that. That's kind of a rare sight.

I can't say that that's going to be the same next quarter. But with no huge adjustments in there other than a reduction of inventories, congratulations on a good quarter, and I look forward to the exploration results. Thank you.

Clynt Nauman -- Chairman and Chief Executive Officer

Thanks, Mike.

Operator

The next question comes from Chen Lin from Lin Asset Management. Please go ahead.

Chen Lin -- Chen Lin Asset Management -- Analyst

Hi, thank you for taking my questions. Actually, most of my question has been answered. I just want to touch on a couple of points. I've been hearing that next year the zinc smelting charge has already been set and the company reporting much better term next year versus this year.

Do you see similar trend? And can you quantify that? Thank you.

Clynt Nauman -- Chairman and Chief Executive Officer

Yes, Chen, just -- Brad, I'm not sure I have an answer to that to the Zinc TCRCs at this point. Are you familiar with what in that?

Brad Thrall -- President

Well, we're currently under an offtake agreement, Chen, as you know, and those terms are set through the end of the year and then there would be I guess, adjustments on an annual basis based on benchmark kind of guidelines. So I guess that's all I can say right now in terms of our smelter, our treatment charges, they are set. But they do have an annual kind of adjustment built into the contract.

Chen Lin -- Chen Lin Asset Management -- Analyst

OK. OK. Great. Thank you.

Just also, right now, you haven't declared commercial production yet, right? You capitalized the expenses right now in the accounting and what's like kind of cash. I want to just touch a little bit on Mike's last question. What kind of cash burn without the exploration and then COVID going on, what kind of cash burn you have in the past quarter? And what do you see in your project projections by the end of the year when you start ramping up the production where the cash level will be close to the end of the year? Thank you.

Clynt Nauman -- Chairman and Chief Executive Officer

Yes. I'm going to let Mike take the first part of that in terms of the accounting treatment of the expenditures at Keno Hill, and then I can elaborate on that second portion.

Mike Clark -- Chief Financial Officer

Yes. Thanks, Clynt. Yes, so we early adopted on expensing all of our operating costs at the mine. So the amounts that you see capitalized are more of the longer-term capital expenditures that you see hitting the balance sheet.

Otherwise, all of our operating expenditures are going through the P&L right now, which is what you see for Bellekeno.

Chen Lin -- Chen Lin Asset Management -- Analyst

OK, great. Thank you.

Clynt Nauman -- Chairman and Chief Executive Officer

OK. And then on the other side of it, Chen, in terms of the burn, it's pretty straightforward arithmetic, obviously, it's driven by revenue and primarily because your underlying costs, as you know, a large number of the underlying costs are fixed. The burn, you can calculate, I think, from current financials that our fixed costs and underlying costs that site are running about $2 million to $3 million more than the revenue that we've been producing over the last quarter or so. But be aware that those -- with the throughput and concentrate side, the revenue side of the equation continues to scale up as we go into the end of the year.

So I'm not sure if that answers your question, but that's what we're anticipating.

Chen Lin -- Chen Lin Asset Management -- Analyst

OK. Great. Thanks. Yes.

Great. You did the financing actually was much higher, almost double the current stock price, and you still have a very strong balance sheet right now standing the volatility of the metals. That's a good move. And just curious, you're going to finish up the Bellekeno, right, and then you redeploy to Bermingham, Flame & Moth.

So what kind of a grade variation do you see? And what do you see the -- if recovery do you expect a similar recovery from the mill, if not better?

Mike Clark -- Chief Financial Officer

Yes. I mean, as I said, we talked about the recoveries previously, Brad was talking about that. Let me just see that the output from Bellekeno has averaged, I think, at the mine head, around 770 grams. At the first -- the initial ore at Bermingham and Flame & Moth has a slightly lower hit grade than that.

But as you get into these deeper levels, the head grades will escalate quite rapidly. So we haven't actually, and just sort of thinking through your question here, the 770 year-to-date silver grades are likely to decline slightly in the initial feed from the combined Bermingham and Flame & Moth operations, and then they'll climb very rapidly into the -- when these other production levels come on stream.

Chen Lin -- Chen Lin Asset Management -- Analyst

OK. Great. Thank you for the question and to answer my question. Good luck and looking forward to your new report with more production and more profit.

Mike Clark -- Chief Financial Officer

Yes. Thanks, Chen.

Operator

The next question comes from Martin O'Malley, private investor. Please go ahead.

Unknown speaker

Clynt, a couple of times you've indicated that you thought that the Bermingham exploration would be transformational in terms of people viewed Keno Hill. Do you still feel that way?

Clynt Nauman -- Chairman and Chief Executive Officer

Absolutely. No question. I don't know any other way to answer it. We've been lucky enough to stumble into a total -- what a geologist would call sort of an ore deposit profile.

We've stumbled into a deposit, which is unique at Keno Hill, we see the top of it. And we certainly haven't seen the bottom of it. And we're drilling holes down there at 500, 600 meters. And we're right next door to the biggest deposits in the district historically.

So yes, it's a very important discovery for a lot of reasons. And I still feel quite optimistic on the blue-sky guy, don't forget that I feel really quite -- my interest is highly peaked by what might be the outcome of our work here.

Unknown speaker

Thank you. You answered my question.

Operator

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

Clynt Nauman -- Chairman and Chief Executive Officer

Thank you, operator. I look forward to keeping you updated on our progress as we get closer to our 400 tonne per day target here. And I want to thank the shareholders for their continued support and confidence in our team. And with that, I wish you a safe and confident travels as we move into the future here.

Operator

[Operator signoff]

Duration: 43 minutes

Call participants:

Rajini Bala -- Investor Relations and Communications Head

Clynt Nauman -- Chairman and Chief Executive Officer

Jake Sekelsky -- Alliance Global Partners -- Analyst

Brad Thrall -- President

Joseph Reagor -- ROTH Capital Partners -- Analyst

Nicolas Dion -- Cormark Securities -- Analyst

Mike Niehueser -- R.F. Lafferty -- Analyst

Chen Lin -- Chen Lin Asset Management -- Analyst

Mike Clark -- Chief Financial Officer

Unknown speaker

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