TABLE OF CONTENTS

GLOSSARY OF TECHNICAL TERMS

The following is a glossary of certain mining terms and abbreviations used in this AIF:

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	The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study. The terms “Mineral Reserve”, “Proven Mineral Reserve” and “Probable Mineral Reserve” used in this AIF are mining terms defined under CIM standards and used in accordance with NI 43-101. Mineral Reserves, Proven Mineral Reserves and Probable Mineral Reserves presented under CIM standards may not conform with the definitions of “reserves” or “proven reserves” or “probable reserves” under United States Industry Guide 7. See “Preliminary Notes – Technical Disclosure Cautionary Note to U.S. Investors – Information Concerning Preparation of Resource Estimates”.
Mineral Resource, Measured Mineral Resource, Indicated Mineral Resource, Inferred Mineral Resource	Mineral Resources are sub-divided, in order of increasing geological confidence, into inferred, indicated and measured categories. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource but has a lower level of confidence than a Measured Mineral Resource.   A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.   The terms “mineral resource”, “measured mineral resource”, “indicated mineral resource”, and “inferred mineral resource” used in this AIF are mining terms defined under CIM standards and used in accordance with NI 43-101. They are not defined terms under United States Industry Guide 7 and generally may not be used in documents filed with the SEC by U.S. companies. See “Technical Disclosure Cautionary Note to U.S. Investors – Information Concerning Preparation of Resource Estimates”.
Mineralization	The concentration of metals and their chemical compounds within a body of rock.
Modifying Factors	The factors used to convert Mineral Resources to Mineral Reserves.  These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.
Ore	A metal or mineral or a combination of these of sufficient value as to quality and quantity to enable it to be mined at a profit after the application of Modifying Factors.
Ounce or oz	A troy ounce or twenty penny weights or 480 grains or 31.103 grams.
Outcrop	An exposure of bedrock at the surface.

 

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Pb	Lead.
Probable Mineral Reserve	The economically mineable part of an Indicated Mineral Resource and, in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.
Proven Mineral Reserve	The economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors.
PFS	A Pre-Feasibility Study is a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on the Modifying Factors and the evaluation of any other relevant factors which are sufficient for a Qualified Person, acting reasonably, to determine if all or part of the Mineral Resource may be converted to a Mineral Reserve at the time of reporting. A Pre-Feasibility Study is at a lower confidence level than a Feasibility Study.
Quartz	A mineral composed of silicon dioxide.
Strike	Direction or trend of a geologic structure as it intersects the horizontal.
Ton (T)	Also referred to as “short ton”, a United States unit of weight equivalent to 2,000 pounds.
Tonne (t)	A metric unit of weight equivalent to volume multiplied by specific gravity; equivalent to 1.102 tons or 1,000 kilograms (2,204.6 pounds).
tpd	Tonnes per day
Vein	Thin sheet-like intrusion into a fissure or crack, commonly bearing quartz.
Zn	Zinc.

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CORPORATE STRUCTURE

The Corporation was incorporated under the Business Corporations Act (Yukon) on December 3, 2004 under the name “Alexco Resource Corp.” Effective December 28, 2007, it was continued under the Business Corporations Act (British Columbia).

The Corporation's head office is located at Suite 1225, Two Bentall Centre, 555 Burrard Street, Box 216, Vancouver, British Columbia, V7X 1M9, Canada, and its registered and records office is located at 400 - 725 Granville Street, Vancouver, British Columbia, V7Y 1G5, Canada.

At the end of its most recently completed financial year, the Corporation had the following wholly-owned subsidiaries:

Note:

(1)        As described above under “General Development of the Business – Three Year History and Significant Acquisitions”, AEG was sold on February 14, 2020. The information provided above regarding the AEG subsidiaries is presented as at the financial year-end of December 31, 2019.

Unless otherwise indicated or the context otherwise requires, reference to the term the “Corporation” or “Alexco” in this AIF includes Alexco Resource Corp. and its subsidiaries.

GENERAL DEVELOPMENT OF THE BUSINESS

Formation of the Corporation

In 2005, the Corporation completed a series of transactions pursuant to which it acquired a number of mineral property interests and rights to certain operating contracts in Yukon Territory and British Columbia, the most significant of which properties are located in Yukon Territory’s Keno Hill Silver District.

The Corporation operates a mining business, comprised of mineral exploration and mine development and operation in Canada, primarily in Yukon Territory.

As at December 31, 2019 the Corporation also operated an Environmental Group Division, AEG, through the provision of a variety of mine and industrial site related environmental services, which was sold on February 14, 2020, as described below.

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In June 2005, the Corporation was selected as the preferred purchaser of the assets of United Keno Hill Mines Limited and UKH Minerals Limited (collectively, “UKHM”) by a court appointed interim receiver and receiver-manager of UKHM. In February 2006, following negotiation of a subsidiary agreement (the “Subsidiary Agreement”) between the Government of Canada, the Government of Yukon (collectively, the “Government Group”) and the Corporation, the Supreme Court of Yukon conditionally approved the purchase of the assets of UKHM by Alexco through its wholly-owned subsidiary, ERDC, final closing of which acquisition was effected in December 2007. Under the terms of the Subsidiary Agreement, the Corporation is indemnified by the Government of Canada for all liabilities, including environmental liabilities, arising directly or indirectly as a result of the pre-existing condition of the Keno Hill mineral rights and other assets acquired from UKHM. The Subsidiary Agreement provides that ERDC may bring any mine into production on the UKHM Mineral Rights (as hereinafter defined) by designating a production unit from the mineral rights relevant to that purpose and then assuming responsibility for all costs of the production unit’s water related care and maintenance and water related components of closure reclamation. The Subsidiary Agreement further requires ERDC to pay into a separate reclamation trust a 1.5% net smelter return royalty, up to an aggregate maximum of $4 million for all production units, from any future production from the UKHM Mineral Rights, commencing once earnings from mining before interest, taxes and depreciation exceed actual exploration costs, up to a maximum of $6.2 million, plus actual development and construction capital.

Also, under the Subsidiary Agreement, ERDC is retained through the Government Group as a paid contractor responsible on a continuing basis for the environmental care and maintenance and ultimate closure reclamation of the former UKHM Mineral Rights. The original Subsidiary Agreement provided that ERDC was responsible for the development of the ultimate closure reclamation plan for fees of 65% of agreed commercial contractor rates, and this plan development is currently ongoing. Upon acceptance and regulatory approval, the closure reclamation plan will be implemented by ERDC at full agreed commercial contractor rates. During the period required to develop the plan, the original Subsidiary Agreement also provided that ERDC was responsible for carrying out the environmental care and maintenance of the UKHM Mineral Rights for a reducing fixed annual fee adjusted each year for certain operating and inflationary factors.

In July 2013, an amended and restated Subsidiary Agreement (the “ARSA”) was executed with the Government of Canada. Recognizing that developing the closure reclamation plan is more complicated than originally anticipated, the ARSA provides for the Government of Canada to contribute a higher proportion of closure plan development costs than provided for under the Subsidiary Agreement, retroactive to 2009. Going forward, ERDC will receive 95% of agreed commercial contractor rates for ongoing development of the closure reclamation plan. Furthermore, with respect to care and maintenance activity during the closure reclamation planning phase, the original reducing fee scale is replaced by a fixed fee of $850,000 per year, representing approximately 50% of estimated fully-billable care and maintenance fees.

Since 2006, the Corporation has carried out exploration activities on several of its properties within the Keno Hill District, with a significant component of that activity having been focused on the Bellekeno property and the Bellekeno mine, which commenced commercial production effective January 1, 2011.

Wheaton Precious Metals Silver Purchase Agreement

In October 2, 2008, the Corporation entered into a Silver Purchase Agreement with Wheaton Precious Metals (formerly Silver Wheaton). The agreement was subsequently amended on October 20, 2008, December 10, 2008, December 22, 2009, March 31, 2010, January 15, 2013, March 11, 2014 and June 16, 2014, respectively). Under the terms of the agreement:

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In light of a sharply reduced silver price environment, Bellekeno mining operations were suspended as of September 30, 2013.

On March 29, 2017 the Corporation and certain of its subsidiaries and Wheaton entered into an amendment agreement to the Silver Purchase Agreement (the “Amended SPA”) pursuant to which, among other things, the following amendments were made to the Silver Purchase Agreement:

In consideration of the foregoing amendments, the Corporation issued 3,000,000 shares to Wheaton with a fair value of US$4,934,948.

Three-Year History

2019 to date

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Alexco retained ownership of ERDC and will execute the clean-up of historical mines in the District under its existing contractual arrangement with the Federal Government of Canada.

2018

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2017

DESCRIPTION OF THE BUSINESS

The Corporation operates a mining business, comprised of mineral exploration and mine development and operation in Canada, primarily in Yukon Territory.

At December 31, 2019, the Corporation had 115 permanent and seasonal employees. A total of 11 were employed in the care and maintenance of the Bellekeno mine and mill site care and maintenance, a further 9 were employed in mineral exploration and evaluation activities. A total of 82 were employed in the environmental services business (which has since been sold), with the remaining 13 employed in respect of executive management and administrative support. Significant aspects of both the mining business and the environmental services business require specialized skills and knowledge in areas that include geology, mining, metallurgy, engineering, environmental contamination treatment, permitting and regulatory compliance, as well as environmental and social policy issues. Any re-start of Alexco’s mining operations will necessitate the hiring of additional mine and mill personnel.

Mining Business

The Corporation's principal mining business activities are currently being carried out within the Keno Hill District in Yukon Territory. The Keno Hill District (the "District") is a storied silver mining region in Canada, encompassing over 35 former mines that produced variously from approximately 1918 through 1988, with published information from the Yukon Government’s Minfile database reporting more than 214 million ounces of silver produced at average grades of 44.7 ounces per tonne silver, 5.6% lead and 3.1% zinc.

The Corporation’s mineral property holdings within the Keno Hill district cover the most prospective geological areas to host silver mineralization, including all of the significant historic producing former mines and most of the other mineral occurrences. In addition to the deposits described below that are within the Keno Hill Silver District (previously defined as “KHSD”) as detailed in the prefeasibility study with an effective date of March 28, 2019, as amended February 13, 2020, the Corporation holds several other less advanced property interests within the District, including but not limited to the Silver King, Elsa, Husky, Sadie Ladue and McQuesten properties, which potentially could become material properties depending on the results of exploration programs the Corporation may carry out on them in the future, as well as the separate Elsa Tailings Property (see technical report dated June 16, 2010, entitled “Mineral Resource Estimation, Elsa Tailings Project ,Yukon, Canada”). In the Keno Hill District, Yukon, Alexco owns 100% of 725 Quartz Mining Leases, 873 Quartz Claims, 24 Placer Mining Claims, one Quartz Mining Licence and 50% of three Quartz Mining Leases, two (2) Crown Grants 50% of three Quartz Mining Leases, in addition to six (6) fee simple lots and seven (7) surface leases.  Of those, the mineral rights acquired from UKHM (the “UKHM Mineral Rights”) and therefore subject to the capped 1.5% net smelter return royalty provided for under the Subsidiary Agreement (see “General Development of the Business – Three Year History and Significant Acquisitions”) total 676 quartz mining leases, 121 quartz mining claims and two (2) crown grants.

Other non-material mineral property interests of the Corporation include Harlan properties in the Yukon, and certain net smelter return royalties in respect of the Brewery Creek, Ida-Oro (formerly Klondike) and Sprogge properties in the Yukon and the Telegraph Creek, Iskut River, Kiniskan Lake and Manson Creek properties in British Columbia.

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KHSD Property

The Corporation’s KHSD property (as detailed in the PFS) encompasses the Flame & Moth, Bermingham, Lucky Queen, Bellekeno, and Onek deposits.

An independent technical report dated May 8, 2019 with an effective date of March 28, 2019, as amended February 13, 2020, prepared by Mining Plus Canada ("Mining Plus”) entitled "NI 43-101 Technical Report, Prefeasibility Study of the Keno Hill Silver District Project, Yukon Territory, Canada" (the “PFS”) was filed and is available on SEDAR under the Corporation's profile at www.sedar.com.

Attached as Schedule "A" to this AIF is the summary contained in the PFS, which has been updated and conformed to be consistent with other disclosure within this AIF.

The detailed disclosure contained in the PFS is hereby incorporated by reference. Re-start of mining operations and/or development work is dependent on a number of factors, including permitting, sustained improvements in silver markets and the effectiveness of cost structure reduction measures. Accordingly, there is no certainty as to when these factors will be achieved.

Environmental Services

General

As described above under “General Development of the Business – Three Year History and Significant Acquisitions”, AEG was sold on February 14, 2020. The information provided in this section is presented as at the financial year-end of December 31, 2019, unless otherwise indicated.

The Corporation’s Environmental Group Division, AEG, is in the business of managing risk and unlocking value at mature, closed or abandoned sites through integration and implementation of the Corporation's core competencies, which include management of environmental services, implementation of innovative treatment technologies, execution of site reclamation and closure operations, and, if appropriate, rejuvenation of exploration and development activity. The Corporation’s principal markets for these services are in Canada, the United States and the Americas, with the Canadian market serviced primarily through subsidiaries including ERDC, the U.S. market and the balance of the Americas through certain subsidiaries not including ERDC. The Corporation provides its services to a range of industrial sectors, but with a particular focus on current and former mine sites.

The Corporation offers its clients a unique combination of environmental remediation expertise in the area of site reclamation and closure, an ability to manage complex permitting and regulatory programs on a turnkey basis, and strong operations management. In addition, the Corporation seeks to strategically leverage off its environmental services group, accessing opportunities to enhance asset value through effective liability risk management and efficient site operations. This is accomplished through unlocking potential exploration and development opportunities at contaminated or abandoned sites through cost effective and responsible environmental remediation and liability transfer.

The Corporation executes its environmental services business plan by using and applying the intellectual property assets, including the Patents, and the specialized skill sets and knowledge it maintains in-house. While there are a significant number of firms providing environmental services in North America, these assets, skill sets and knowledge provide Alexco with a strong competitive advantage. Consolidated revenue from environmental services for the year ended December 31, 2019 totaled $29,206,000, compared to $19,880,000 in 2018, all of which was derived from sales to external unrelated parties. During the year ended December 31, 2019, the Corporation recorded revenues from two customers representing 10% or more of total environmental services revenue, in the amounts of $8,740,000 and $6,730,000. During 2018 AEG had three customers representing 10% or more of total revenue, in the amounts of $4,780,000, 4,020,000 and $3,780,000.

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Keno Hill Project

As described above (see “General Development of the Business – Three Year History and Significant Acquisitions”), under the Subsidiary Agreement, Alexco’s subsidiary ERDC was retained through the Government Group as a paid contractor responsible on a continuing basis for the environmental care and maintenance and ultimate closure reclamation of the former UKHM Mineral Rights.

Pursuant to the Subsidiary Agreement, ERDC shares the responsibility for the development of the ultimate closure reclamation plan with the Government of Canada, for which it would receive fees of 65% of agreed commercial contractor rates, and this plan development is currently ongoing. Upon acceptance and regulatory approval, the closure reclamation plan will be implemented by ERDC at full agreed contractor rates. During the period required to develop the plan and until the closure plan is executed, ERDC is also responsible for carrying out the environmental care and maintenance at various sites within the UKHM Mineral Rights, for a fixed annual fee adjusted each year for certain operating and inflationary factors and determined on a site-by-site basis. Under the Subsidiary Agreement, the portion of the annual fee amount so determined which was billable by ERDC in respect of each site reduced by 15% each year until all site-specific care and maintenance activities were replaced by closure reclamation activities; provided however that should a closure reclamation plan be prepared but not accepted and approved, the portion of annual fees billable by ERDC would revert to 85% until the Subsidiary Agreement was either amended or terminated. ERDC receives agreed commercial contractor rates when retained by the Government Group to provide environmental services in the Keno Hill District outside the scope of care and maintenance and closure reclamation planning under the Subsidiary Agreement. As a result of these terms, the Corporation has previously recognized an environmental services contract loss provision to reflect aggregate future losses estimated to be realized with respect to care and maintenance activity during the closure planning phase.

In July 2013, the Corporation executed an amended and restated Subsidiary Agreement, the ARSA, with the Government of Canada. Recognizing that developing the closure reclamation plan is more complicated than originally anticipated, the ARSA provides for the Government of Canada to contribute a higher proportion of those costs than provided for under the Subsidiary Agreement. Going forward, ERDC receives 95% of agreed commercial contractor rates for ongoing development of the closure reclamation plan. Furthermore, with respect to care and maintenance activity during the closure planning phase, the original reducing fee scale was replaced by a fixed fee of $850,000 per year, representing approximately 50% of estimated fully-billable fees.

Competitive Conditions

The exploration and mining business is a competitive business. Significant and increasing competition exists for mining opportunities internationally. The Corporation competes with numerous other companies possessing much greater financial and technical research resources. Competition is particularly intense with respect to the acquisition of desirable undeveloped gold properties. Please see “Risk Factors”.

Employees

In the exploration and mining business there is significant and increasing competition for attracting and retaining employees. Please see “Risk Factors”.

Social and Environmental Policies

The Corporation maintains a written Code of Business Conduct and Ethics (the “Code”), compliance with which is mandatory for all directors, officers and employees, and the full text of which may be viewed at the Corporation’s web site. Included within the Code is a requirement that all directors, officers and employees comply with all laws and governmental regulations applicable to Alexco’s activities, including but not limited to maintaining a safe and healthy work environment, promoting a workplace that is free from discrimination or harassment and conducting all activities in full compliance with all applicable environmental laws. All directors, officers and employees are required to certify in writing their acknowledgement of and compliance with the Code, at the time of hiring and at least annually thereafter. A senior executive of the Corporation is formally appointed the role of Company Ethics Officer, responsible for ensuring adherence to the Code, investigating any reported violations, and ensuring appropriate responses, including corrective action and preventative measures, are taken when required.

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RISK FACTORS

The following are major risk factors management has identified which relate to the Corporation’s business activities. Such risk factors, as well as risks not currently known to the Corporation or that the Corporation currently deems to be immaterial, could materially affect the Corporation's future business, financial condition, results of operations, earnings and prospects, and could cause events to differ materially from those described in forward-looking statements relating to the Corporation. Though the following are major risk factors identified by management, they do not comprise a definitive list of all risk factors related to the Corporation's business and operations. Readers are encouraged to review other specific risk factors which are discussed elsewhere in this AIF, as well as in the Corporation’s consolidated financial statements (under the headings “Description of Business and Nature of Operations”, “Significant Accounting Policies” and “Financial Instruments” and elsewhere within that document) and in the Corporation’s annual and quarterly management’s discussion and analysis (under the headings “Critical Accounting Estimates” and “Risk Factors” and elsewhere within that document) for its most recently completed financial year, being the year ended December 31, 2019, and its other disclosure documents, all as filed on the SEDAR website at www.sedar.com.

Negative Cash Flow From Operating Activities

The Corporation has not yet consistently achieved positive operating cash flow, and there are no assurances that the Corporation will not experience negative cash flow from operations in the future. The Corporation has incurred net losses in the past and may incur losses in the future and will continue to incur losses until and unless it can derive sufficient revenues from its mineral projects. Such future losses could have an adverse effect on the market price of the Corporation's common shares, which could cause investors to lose part or all of their investment.

Forward-Looking Statements May Prove Inaccurate

Readers are cautioned not to place undue reliance on forward-looking statements. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, of both a general and specific nature, that could cause actual results to differ materially from those suggested by the forward-looking statements. See "Preliminary Notes – Cautionary Statement Regarding Forward-Looking Statements".

Dilution

The Corporation expects to require additional funds to finance its growth and development strategy. If the Corporation elects to raise additional funds by issuing additional equity securities, such financing may substantially dilute the interests of the Corporation's shareholders. The Corporation may also issue additional securities in the future pursuant to existing and new agreements in respect of its projects or other acquisitions and pursuant to existing securities of the Corporation.

Exploration, Evaluation and Development

Mineral exploration, evaluation and development involves a high degree of risk and few properties which are explored are ultimately developed into producing mines. With respect to the Corporation’s properties, should any mineral resources exist, substantial expenditures will be required to confirm mineral reserves which are sufficient to commercially mine, and to obtain the required environmental approvals and permitting required to commence commercial operations. Should any mineral resource be defined on such properties there can be no assurance that the mineral resource on such properties can be commercially mined or that the metallurgical processing will produce economically viable and saleable products. The decision as to whether a property contains a commercial mineral deposit and should be brought into production will depend upon the results of exploration programs and/or technical studies, and the recommendations of duly qualified engineers and/or geologists, all of which involves significant expense. This decision will involve consideration and evaluation of several significant factors including, but not limited to: (1) costs of bringing a property into production, including exploration and development work, preparation of appropriate technical studies and construction of production facilities; (2) availability and costs of financing; (3) ongoing costs of production; (4) market prices for the minerals to be produced; (5) environmental compliance regulations and restraints (including potential environmental liabilities associated with historical exploration activities); and (6) political climate and/or governmental regulation and control.

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The ability of the Corporation to sell, and profit from the sale of any eventual production from any of the Corporation’s properties will be subject to the prevailing conditions in the marketplace at the time of sale. Many of these factors are beyond the control of the Corporation and therefore represent a market risk which could impact the long-term viability of the Corporation and its operations.

Infrastructure

Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important determinants, which affect capital and operating costs. The lack of availability on acceptable terms or the delay in the availability of any one or more of these items could prevent or delay exploitation and or development of the Corporation’s properties. If adequate infrastructure is not available in a timely manner, there can be no assurance that the exploitation and or development of the Corporation’s properties will be commenced or completed on a timely basis, if at all; that the resulting operations will achieve the anticipated production volume; or that the construction costs and ongoing operating costs associated with the exploitation and or development of the Corporation’s properties will not be higher than anticipated. In addition, unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect the Corporation’s operations and profitability.

Figures for the Corporation's Resources are Estimates Based on Interpretation and Assumptions and May Yield Less Mineral Production Under Actual Conditions than is Currently Estimated

In making determinations about whether to advance any of its projects to development, the Corporation must rely upon estimated calculations as to the mineral resources and grades of mineralization on its properties. Until ore is actually mined and processed, mineral resources and grades of mineralization must be considered as estimates only. The determination of the Corporation’s estimated mineral resources by appropriately qualified persons requires significant judgements regarding the interpretation of complex geological and engineering data including the size, depth, shape and nature of the deposit and anticipated plans for mining, as well as estimates of future commodity prices, foreign exchange rates, capital requirements and production costs. These geological interpretations and statistical inferences used to develop the mineral resource estimates are imprecise and are drawn from drilling and sampling which may prove to be unreliable. Alexco cannot be certain that:

Any material changes in mineral resource estimates and grades of mineralization will affect the economic viability of placing a property into production and a property’s return on capital. The Corporation's resource estimates have been determined and valued based on assumed future prices, cut-off grades and operating costs that may prove to be inaccurate. Extended declines in market prices for silver, gold, lead, zinc and other commodities may render portions of the Corporation’s mineralization uneconomic and result in reduced reported mineral resources.

Amendments to Share Purchase Agreement with Wheaton

The amendments to the SPA with Wheaton, requires that to satisfy the completion test under the Amended SPA, the Corporation will need to recommence operations on the KHSD Property and operate the mine and mill at 400 tonnes per day on or before December 31, 2020. If the completion test is not satisfied by December 31, 2020, the outcome could materially adversely affect the Corporation as it would be required to pay a capacity related refund to Wheaton in the maximum amount of US$8.8 million. The Corporation would need to raise additional capital to finance the capacity related refund and there is no guarantee that the Corporation will be able to raise such additional capital. In the event that the Corporation cannot raise such additional capital, the Corporation will default under the terms of the Amended SPA. The valuation model for the embedded derivative asset related to the SPA with Wheaton is based on a number of assumptions. The value of the derivative asset as at December 31, 2019 is $15,160,000. If, for example, the silver price was to increase to US$25.00 per ounce, and all other assumptions remained the same, the approximate derivative asset value would be negative ($1,652,000) and could be classified as a derivative liability.

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Keno Hill District

While the Corporation has conducted exploration activities in the Keno Hill District, further review of historical records and/or additional exploration and geological testing will be required to determine whether any of the mineral deposits it contains are economically recoverable. There is no assurance that such exploration and testing will result in favourable results. The history of the Keno Hill District has been one of fluctuating fortunes, with new technologies and concepts reviving the District numerous times from probable closure until 1989, when it did ultimately close down for a variety of economic and technical reasons. Many or all of these economic and technical issues will need to be addressed prior to the commencement of any future production on the Keno Hill properties.

Mining Operations

The business of exploration for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into mineral deposits with significant value. Decisions by the Corporation to proceed with the construction and development of mines, including Bellekeno, are based on development plans which include estimates for metal production and capital and operating costs. Until completely mined and processed, no assurance can be given that such estimates will be achieved. Failure to achieve such production and capital and operating cost estimates or material increases in costs could have an adverse impact on the Corporation’s future cash flows, profitability, results of operations and financial condition. The Corporation’s actual production and capital and operating costs may vary from estimates for a variety of reasons, including: actual resources mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; short-term operating factors, such as the need for sequential development of resource bodies and the processing of new or different resource grades; revisions to mine plans; risks and hazards associated with mining; natural phenomena, such as inclement weather conditions, water availability, floods, fire, rock falls and earthquakes, unusual or unexpected ground conditions, geological formation pressures, equipment failure and failure of retaining dams around tailings disposal areas which may result in, among other adverse effects, environmental pollution and consequent liability; and unexpected labour shortages or strikes. Costs of production may also be affected by a variety of factors, including changing waste ratios, metallurgical recoveries, labour costs, commodity costs, general inflationary pressures and currency rates. In addition, the risks arising from these factors are further increased while any such mine is progressing through the ramp-up phase of its operations and has not yet established a consistent production track record. No assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.

Furthermore, mining operations at the Bellekeno mine project were suspended as of early September 2013 as a result of sharp and significant declines in precious metals prices during the second quarter of 2013. Re-start of mining operations at Keno Hill is dependent on a number of factors, including sustained improvements in silver markets, the effectiveness of cost structure reduction measures, the maintenance of current metal prices and the fluctuation of foreign exchange rates and the uncertainties around the results of these factors are significant. A re-start of underground production operations will require additional capital investment in excess of the capital resources currently on hand. There can be no assurance of a re-start of mining operations or continued access to financing in the future, and an inability to generate or secure such funding may require the Corporation to substantially curtail and/or defer its planned exploration and development activities.

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Employee Recruitment and Retention

Recruitment and retention of skilled and experienced employees is a challenge facing the mining sector as a whole. During the late 1990s and early 2000s, with unprecedented growth in the technology sector and an extended cyclical downturn in the mining sector, the number of new workers entering the mining sector was depressed and significant number of existing workers departed, leading to a so-called “generational gap” within the industry. Since the mid-2000s, this factor was exacerbated by competitive pressures as the mining sector experienced an extended cyclical upturn. Any re-start of mining operations will necessitate the re-hiring of mine and mill personnel. It may be difficult for Alexco to find and hire qualified people in the mining industry who are situated in the Yukon, or to obtain all of the necessary services or expertise in Yukon or to conduct operations on Alexco’s projects at reasonable rates. If qualified people and services or expertise cannot be obtained in the Yukon, we may need to seek and obtain those services from people located outside of this area, which may require work permits and compliance with applicable laws and could result in delays and higher costs.

Dependence on Management

The success of the operations and activities of the Corporation is dependent to a significant extent on the efforts and abilities of its management team. The Corporation does not maintain key employee insurance on any of its employees. The Corporation depends on key personnel and cannot provide assurance that it will be able to retain such personnel. Failure to retain such key personnel could have a material adverse effect on the Corporation’s business and financial condition.

Permitting and Environmental Risks and Other Regulatory Requirements

The current or future operations of the Corporation, including development activities, commencement of production on its properties and activities associated with the Corporation's mine reclamation and remediation business, require permits, approvals, authorizations, or licenses from various federal, territorial and other governmental authorities, and such operations are and will be governed by laws, regulations and agreements governing prospecting, development, mining, production, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities and in mine reclamation and remediation activities generally experience increased costs and delays as a result of the need to comply with the applicable laws, regulations and permits. There can be no assurance that all permits, permit modifications, approvals, authorizations, licenses, and license modifications which the Corporation may require for the conduct of its operations will be obtainable on reasonable terms or that such laws and regulations would not have an adverse effect on any project which the Corporation might undertake. Specifically, the Corporation requires a renewal of its Water Use License in order for it to be fully permitted for the ore production and processing from the Bermingham deposit and the Flame & Moth, Lucky Queen, Bellekeno and Onek deposits. Additionally, subsequent to completion of the environment assessment of the Corporation’s Existing State of Mine Reclamation Plan at Keno Hill by the Yukon Environmental and Social-Economic Assessment Board, the Corporation will need an amendment to its WUL by the Yukon Water Board to authorize the activities necessary to effect closure of the site. There can be no guarantee that the Corporation will receive the amendments and the renewal. Additionally, delays in receiving any requisite license amendments and renewals could adversely affect the Corporation’s profitability. The Corporation had originally expected to receive the WUL renewal in 2019. However subsequent delays in the permitting process have extended the time expected for award of the final license to the first quarter of 2020.

Any failure by the Corporation to comply with applicable laws, regulations and permitting requirements may result in enforcement actions including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions against the Corporation. The Corporation may be required to compensate those suffering loss or damage by reason of the Corporation’s mining operations or mine reclamation and remediation activities and may have civil or criminal fines or penalties imposed upon it for violation of applicable laws or regulations.

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Amendments to current laws, regulations and permits governing operations and activities of mining companies and mine reclamation and remediation activities could have a material adverse impact on the Corporation. As well, policy changes and political pressures within and on federal, territorial and First Nation governments having jurisdiction over or dealings with the Corporation could change the implementation and interpretation of such laws, regulations and permits, also having a material adverse impact on the Corporation. Such impacts could result in one or more of increases in capital expenditures or production costs, reductions in levels of production at producing properties or abandonment or delays in the development of new mining properties.

Surety Bonding Risks

Alexco secures its obligations for reclamation and closure costs with surety bonds provided by leading global insurance companies in favour of regulatory authorities in the Yukon. These surety bonds include the right of the surety bond provider to terminate the relationship with Alexco on providing notice of up to 90 days. The surety bond provider would, however, remain liable to the regulatory authorities for all bonded obligations existing prior to the termination of the bond in the event Alexco failed to deliver alternative security satisfactory to the regulator. Alexco may require substantial additional capital to accomplish its exploration and development plans and fund strategic growth and there can be no assurance that financing will be available on terms acceptable to Alexco, or at all. Alexco may require substantial additional financing to advance the Keno Hill Silver District to production. These financing requirements could adversely affect Alexco’s ability to access the capital markets in the future. Failure to obtain sufficient financing, or financing on terms acceptable to Alexco, may result in a delay or indefinite postponement of exploration, development or production at its properties. Additional financing may not be available when needed and the terms of any agreement could impose restrictions on the operation of our business. Failure to raise financing when needed could have a material adverse effect on our business, financial condition, results of operations and prospects.

Potential Profitability of Mineral Properties Depends Upon Factors Beyond the Control of the Corporation

The potential profitability of mineral properties is dependent upon many factors beyond the Corporation’s control. For instance, world prices of and markets for gold, silver, lead and zinc are unpredictable, highly volatile, potentially subject to governmental fixing, pegging and/or controls and respond to changes in domestic, international, political, social and economic environments – including international trade restrictions. During the year ended December 31, 2018, the prices of silver, lead and zinc have steadily declined. Another factor is that rates of recovery may vary from the rate experienced in tests and a reduction in the recovery rate will adversely affect profitability and, possibly, the economic viability of a property. Profitability also depends on the costs of operations, including costs of labour, materials, equipment, electricity, environmental compliance or other production inputs. Such costs will fluctuate in ways the Corporation cannot predict and are beyond the Corporation’s control, and such fluctuations will impact on profitability and may eliminate profitability altogether. Mine site care and maintenance costs during 2019 totaled $2,062,000 compared with $2,603,000 for 2018. The costs were mainly consistent between periods with decrease due to less site-based expenditures and mill maintenance expenditures in 2019. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for development and other costs have become increasingly difficult, if not impossible, to project. These changes and events may materially affect the financial performance of the Corporation.

First Nation Rights and Title

The nature and extent of First Nation rights and title remains the subject of active debate, claims and litigation in Canada, including in the Yukon and including with respect to intergovernmental relations between First Nation authorities and federal, provincial and territorial authorities. There can be no guarantee that such claims will not cause permitting delays, unexpected interruptions or additional costs for the Corporation’s projects. These risks may have increased after the Supreme Court of Canada decision of June 26, 2014 in Tsilhqot'in Nation v. British Columbia.

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Title to Mineral Properties

The acquisition of title to mineral properties is a complicated and uncertain process. The properties may be subject to prior unregistered agreements of transfer, unregistered liens, or land claims, and title may be affected by undetected defects. Although the Corporation has made efforts to ensure that legal title to its properties is properly recorded in the name of the Corporation, there can be no assurance that such title will ultimately be secured. Title insurance generally is not available for mining claims in Canada. As a result, the Corporation may be constrained in its ability to operate its mineral properties or unable to enforce its rights with respect to its mineral properties. An impairment to or defect in the Corporation’s title to its mineral properties would adversely affect the Corporation’ business and financial condition.

Capitalization and Commercial Viability

The Corporation will require additional funds to further explore, develop and mine its properties. The Corporation has limited financial resources, and there is no assurance that additional funding will be available to the Corporation to carry out the completion of all proposed activities, for additional exploration or for the substantial capital that is typically required in order to place a property into commercial production. Although the Corporation has been successful in the past in obtaining financing through the sale of equity securities, there can be no assurance that the Corporation will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result in the delay or indefinite postponement of further exploration and development of its properties.

Critical Accounting Estimates and Judgments

The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions that affect the reported amounts and the valuation of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the period reported. Actual outcomes could differ from these estimates. The Corporation's consolidated financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Significant judgments about the future and other sources of estimation uncertainty at the financial position reporting date, including those that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made include, but are not limited to, uncertainties and assumptions with respect to mineral resources, impairment and impairment reversals of non-current non-financial assets, decommissioning and rehabilitation provision, and the fair value of derivatives. If the Corporation’s management rely on the information in the financial statements in making certain decisions, which information later proves to be inaccurate, it could have an adverse effect on the operating results of the Corporation.

The Corporation prepares budgets and estimates of cash costs and capital costs for its operations. Despite the Corporation’s best efforts to budget and estimate such costs, the costs required by the Corporation’s projects may be significantly higher than anticipated. The Corporation’s actual costs may vary from estimates for a variety of reasons, including: short-term operating factors; risk and hazards associated with mining; natural phenomena, such as inclement weather conditions and unexpected labour shortages or strikes. Operational costs may also be affected by a variety of factors, including: ore grade metallurgy, labour costs, the cost of commodities, general inflationary pressures and currency exchange rates. Many of these factors are beyond the Corporation’s control. Failure to achieve estimates or material increases in costs could have an adverse impact on the Corporation’s business, results of operations and financial condition. Furthermore, delays in mining projects or other technical difficulties may result in even further capital expenditures being required. Any delays or costs overruns or operational difficulties could have a material adverse effect on the Corporation’s business, results of operations and financial condition.

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General Economic Conditions May Adversely Affect the Corporation’s Growth and Profitability

The unprecedented events in global financial markets since 2008 have had a profound impact on the global economy and led to increased levels of volatility. Many industries, including the mining industry, are impacted by these market conditions. Some of the impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign currency exchange and precious metal markets, and a lack of market liquidity. If the current turmoil and volatility levels continue they may adversely affect the Corporation's growth and profitability. Specifically:

These factors could have a material adverse effect on Alexco’s financial condition and results of operations.

Operating Hazards and Risks

In the course of exploration, development and production of mineral properties, certain risks, particularly including but not limited to unexpected or unusual geological operating conditions including rock bursts, cave-ins, fires, flooding and earthquakes, may occur. It is not always possible to fully insure against such risks and the Corporation may decide not to insure against such risks as a result of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline in the value of the securities of the Corporation.

Adverse weather conditions could also disrupt the Corporation’s environmental services business and/or reduce demand for the Corporation’s services.

Competition

Significant and increasing competition exists for mining opportunities internationally. There are a number of large established mining companies with substantial capabilities and far greater financial and technical resources than the Corporation. The Corporation may be unable to acquire additional attractive mining properties on terms it considers acceptable and there can be no assurance that the Corporation’s exploration and acquisition programs will yield any reserves or result in any commercial mining operation.

Certain of the Corporation’s Directors and Officers are involved with Other Natural Resource Companies, Which May Create Conflicts of Interest from Time to Time

Some of the Corporation’s directors and officers are directors or officers of other natural resource or mining-related companies. These associations may give rise to conflicts of interest from time to time. As a result of these conflicts of interest, the Corporation may miss the opportunity to participate in certain transactions.

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The Corporation May Fail to Maintain Adequate Internal Control Over Financial Reporting Pursuant to the Requirements of the Sarbanes-Oxley Act

Section 404 of the Sarbanes-Oxley Act (“SOX”) requires an annual assessment by management of the effectiveness of the Corporation’s internal control over financial reporting. The Corporation may fail to maintain the adequacy of its internal control over financial reporting as such standards are modified, supplemented or amended from time to time, and the Corporation may not be able to ensure that it can conclude, on an ongoing basis, that it has effective internal control over financial reporting in accordance with Section 404 of SOX. The Corporation’s failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm the Corporation’s business and negatively impact the trading price or the market value of its securities. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Corporation’s operating results or cause it to fail to meet its reporting obligations. Future acquisitions of companies, if any, may provide the Corporation with challenges in implementing the required processes, procedures and controls in its acquired operations. No evaluation can provide complete assurance that the Corporation’s internal control over financial reporting will detect or uncover all failures of persons within the Corporation to disclose material information otherwise required to be reported. The effectiveness of the Corporation’s processes, procedures and controls could also be limited by simple errors or faulty judgments. Although the Corporation intends to expend substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, there is no certainty that it will be successful in complying with Section 404 of SOX.

As a “foreign private issuer”, the Corporation is exempt from Section 14 proxy rules and Section 16 of the Securities Exchange Act of 1934

The Corporation is a “foreign private issuer” as defined in Rule 3b-4 under the United States Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”). Equity securities of the Corporation are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the U.S. Exchange Act pursuant to Rule 3a12-3 of the U.S. Exchange Act. Therefore, the Corporation is not required to file a Schedule 14A proxy statement in relation to the annual meeting of shareholders. The submission of proxy and annual meeting of shareholder information on Form 6-K may result in shareholders having less complete and timely information in connection with shareholder actions. The exemption from Section 16 rules regarding reports of beneficial ownership and purchases and sales of common shares by insiders and restrictions on insider trading in our securities may result in shareholders having less data and there being fewer restrictions on insiders’ activities in our securities.

It may be difficult to enforce judgments or bring actions outside the United States against the Corporation and certain of our directors

The Corporation is a Canadian corporation and certain of its directors, officers and experts are neither citizens nor residents of the United States. A substantial part of the assets of the Corporation and of certain of these persons are located outside the United States. As a result, it may be difficult or impossible for an investor:

It may be difficult to anticipate the effects of the Coronavirus to the Corporation

Readers are cautioned that the Corporation has not assessed the potential impacts, if any, that the Coronavirus may have on its business and operations, which could include the Company’s ability to purchase products and/or services at reasonable costs in the operation of its business.

DIVIDENDS

The Corporation has not paid any dividends on its common shares since its incorporation. Any decision to pay dividends on common shares in the future will be made by the board of directors on the basis of the earnings, financial requirements and other conditions existing at such time.

DESCRIPTION OF CAPITAL STRUCTURE

The authorized capital of the Corporation consists of an unlimited number of common shares, without par value. As at the close of business on March 11, 2020, 119,994,664 common shares of the Corporation were issued and outstanding.

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The holders of the common shares are entitled to vote at all meetings of holders of common shares, to receive dividends if, as and when declared by the directors and to participate rateably in any distribution of property or assets upon the liquidation, winding-up or other dissolution of the Corporation. The common shares carry no pre-emptive rights, conversion or exchange rights, or redemption, retraction, repurchase, sinking fund or purchase fund provisions. There are no provisions requiring a holder of common shares to contribute additional capital and no restrictions on the issuance of additional securities by the Corporation. There are no restrictions on the repurchase or redemption of common shares by the Corporation except to the extent that any such repurchase or redemption would render the Corporation insolvent.

MARKET FOR SECURITIES

Trading Price and Volume

The common shares of the Corporation are listed and posted for trading on the Toronto Stock Exchange (the “TSX”) and on the NYSE American Equities Exchange (the “NYSE American”) under the symbol “AXU”. Prior to August 12, 2019, the trading symbol on the Toronto Stock Exchange was “AXR”. The following tables set forth the market price range and trading volumes of the Corporation’s common shares on each of the TSX and NYSE American for the periods indicated in 2019.

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Securities Not Listed or Quoted

The only classes of securities of the Corporation that are not listed or quoted on a marketplace are stock options, restricted shares units (“RSUs”), and deferred share units (“DSUs”). As of December 31, 2019, 9,892,900 stock options, 412,006 RSUs and 280,000 DSUs were outstanding.

Prior Sales

The following table sets forth, for the financial year ended December 31, 2019, details of the price at which securities have been issued or are to be issued by the Corporation, the number of securities issued at that price and the date on which the securities were issued:

Notes:

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DIRECTORS AND OFFICERS

Name, Occupation and Security Holding

The name, province or state, country of residence, position or office held with the Corporation and principal occupation during the past five years of each director and executive officer of the Corporation as at December 31, 2019 and as at the date hereof are described as follows:

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Each of the Corporation’s directors is elected by the Corporation’s shareholders at an annual meeting to serve until the next annual meeting of shareholders or until a successor is elected or appointed. The board of directors appoints the Corporation’s executive officers annually after each annual meeting, to serve at the discretion of the board of directors.

Based on information provided by such persons, as at the date hereof the directors and executive officers of the Corporation as a group beneficially owned, directly or indirectly, or exercised control or direction over, an aggregate of 5,914,072 common shares of the Corporation (including 1,940,299 shares owned by ALM Investments ULC (formerly Asset Liability Management Group ULC), a company controlled by Mr. Nauman), representing 4.9% of the issued and outstanding common shares of the Corporation. In addition, the directors and executive officers of the Corporation as a group also hold stock options for the purchase of an aggregate of 7,326,000 common shares in the capital of the Corporation, representing 74% of all outstanding options of the Corporation. Lastly, the directors and executive officers of the Corporation as a group held RSUs and DSUs that can be settled by way of shares issued from treasury for a further 395,335 and 280,000 common shares, respectively.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

To the knowledge of the Corporation, none of the Corporation's directors or executive officers is, as at the date of this AIF, or has been, within ten years before the date of this AIF, a director, chief executive officer or chief financial officer of any Corporation (including the Corporation) that:

“Order” means a cease trade order, an order similar to a cease trade order, or an order that denied the relevant Corporation access to any exemption under securities legislation and, in each case, that was in effect for a period of more than 30 consecutive days.

None of the Corporation's directors or executive officers or, to the Corporation's knowledge, any shareholder holding a sufficient number of securities of the Corporation to affect materially the control of the Corporation:

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Conflicts of Interest

The directors of the Corporation are required by law to act honestly and in good faith with a view to the best interest of the Corporation and to disclose any interests which they may have in any project or opportunity of the Corporation. If a conflict of interest arises at a meeting of the board of directors, any director in a conflict will disclose his interest and abstain from voting on such matter. In determining whether or not the Corporation will participate in any project or opportunity, that director will primarily consider the degree of risk to which the Corporation may be exposed and its financial position at that time.

To the best of the Corporation's knowledge, there are no known existing or potential conflicts of interest among the Corporation, its promoters, directors, officers or other members of management of the Corporation as a result of their outside business interests except that certain of the directors, officers, promoters and other members of management serve as directors, officers, promoters and members of management of other public companies, and therefore it is possible that a conflict may arise between their duties as a director, officer, promoter or member of management of such other companies.

As described above under “General Development of the Business – Three Year History and Significant Acquisitions”, AEG was sold on February 14, 2020. The information provided in this section is presented as at the financial year-end of December 31, 2019 unless otherwise indicated.

James Harrington, MSc., the Senior Vice President and Chief Technical Officer of AEG Canada (a subsidiary of the Corporation), owns a holding company (“Arete”) which holds all of the shares of Alexco Environmental Group (US) Inc., a former subsidiary of the Corporation (“AEG US”). The sale of AEG US to Mr. Harrington’s holding company is not considered a material transaction and was reviewed and approved by a special committee of independent directors, as well as the board of directors, of the Corporation prior to completion of the transaction. The purpose of the transaction was to enable Arete to complete the purchase of a redevelopment project which involves significant environmental work, which could, if purchased, provide an opportunity for the Corporation’s environmental group with respect to the environmental work without exposing the Corporation to environmental risk from ownership of such project.

The directors and officers of the Corporation are aware of the existence of laws governing accountability of directors and officers for corporate opportunity and requiring disclosures by directors of conflicts of interest and the Corporation relies upon such laws in respect of any directors’ and officers’ conflicts of interest or in respect of any breaches of duty by any of its directors or officers. Such directors or officers in accordance with the Business Corporations Act (British Columbia) are required to disclose all such conflicts and to govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.

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AUDIT COMMITTEE INFORMATION

Audit Committee Charter

The following is the text of the Audit Committee’s Charter:

“GENERAL

The primary function of the Audit Committee, under the supervision of the Board of Directors of the Company (the “Board”), is to assist the Board in fulfilling its oversight responsibilities regarding the integrity of the Company's accounting and financial reporting processes and provision of financial information to the shareholders and others, the systems of internal controls and disclosure controls, the Company's internal and external audit process, the Company's policies with regard to ethics and business practices, and monitoring compliance with the Company's legal and regulatory requirements with respect to its financial statements.

The Audit Committee is accountable to the Board. In the course of fulfilling its specific responsibilities hereunder, the Audit Committee is expected to maintain open communications between the Company's external auditor, senior management and the Board.

The Audit Committee does not plan or perform audits or warrant or attest to the accuracy or completeness of the Company's financial statements or financial disclosure or compliance with generally accepted accounting procedures as these are the responsibilities of management and the external auditor.

COMPOSITION

The Audit Committee shall be comprised of at least three directors of the Company, who generally shall be appointed or confirmed by the Board annually. The Chair of the Audit Committee shall be appointed by the Board, failing which the members of the Audit Committee may designate a Chair by a majority vote of the full Audit Committee membership. All members of the Audit Committee shall be directors and shall meet the independence, financial literacy and experience requirements under applicable laws, rules and regulations binding on the Company from time to time, including without limitation the applicable rules of any stock exchanges upon which the Company's shares are listed and the requirements for independence and financial literacy under National Instrument 52-110 – Audit Committees (“NI 52-110”) in Canada, Section 803A of the NYSE Amex Company Guide and Rule 10A-3 of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”). Subject to certain exemptions outlined in NI 52-110, every member of the Audit Committee must be “independent” and “financially literate”, as such terms are defined in NI 52-110. Furthermore, at least one member of the Audit Committee shall qualify as a “financial expert” as such term is defined in Item 407 of Regulation S-K under the Exchange Act.

PROCEDURAL MATTERS

The Audit Committee:

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RESPONSIBILITIES

Subject to the powers and duties of the Board, the Board hereby delegates to the Audit Committee the following powers and duties to be performed by the Audit Committee on behalf of and for the Board.

Financial Reporting, Accounting and Financial Management

The Audit Committee has primary responsibility for overseeing the actions of management in all aspects of financial management and reporting. The Audit Committee shall:

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External Auditor

The Audit Committee has primary responsibility for the selection, appointment, dismissal, compensation and oversight of the external auditor, subject to the overall approval of the Board. For this purpose, the Audit Committee may consult with management, but the external auditor shall report directly to the Audit Committee. The specific responsibilities of the Audit Committee with regard to the external auditor are to:

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Audit and Financial Reporting Process

The Audit Committee has a duty to receive, review and make any inquiry regarding the completeness, accuracy and presentation of the Company's financial statements to ensure that the financial statements fairly present the financial position and risks of the organization and are prepared in accordance with the applicable generally accepted accounting principles. To accomplish this, the Audit Committee shall:

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Interim Financial Statements

Pursuant to its mandate, the Board shall generally approve the Company's annual and interim financial statements. Notwithstanding the foregoing, on an exceptions basis the Board may from time to time delegate to the Audit Committee the power to approve the Company's interim financial statements.

The Audit Committee shall:

Code of Ethics

The Audit Committee has primary responsibility for overseeing the application of, and compliance with, the Company's Code of Business Conduct and Ethics (the “Code”). The Audit Committee shall review at least annually:

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COMPLAINTS UNDER WHISTLEBLOWER POLICY

To ensure that the Company has adequate procedures in place for the confidential and anonymous (where permitted by law) receipt, retention, and treatment of complaints received by the Company regarding (a) accounting, internal accounting controls, or auditing matters, and (b) compliance with the Code and all applicable government laws, rules and regulations, the Audit Committee has recommended, established procedures for and the Board has adopted a Company Whistleblower Policy. All such complaints shall be dealt with under the terms of that Policy.”

Composition of the Audit Committee

As at December 31, 2019 and the date of this AIF, the members of the Audit Committee are Terry Krepiakevich, Elaine Sanders and Richard Zimmer, with Mr. Krepiakevich serving as the Chair of the Audit Committee. All of these members are financially literate and independent for the purposes of National Instrument 52-110 (“NI 52-110”).

Mr. Krepiakevich qualifies as a financial expert and is financially sophisticated, in that he has an understanding of generally accepted accounting principles and financial statements; is able to assess the general application of accounting principles in connection with the accounting for estimates, accruals and reserves; has experience analyzing or evaluating financial statements that entail accounting issues of equal complexity to the Corporation's financial statements (or actively supervising another person who did so); and has a general understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions.

Mr. Krepiakevich is a member of the board of directors of several publicly-listed and private companies since July 2011. From June 2006 to July 2011, Mr. Krepiakevich was the Chief Financial Officer of SouthGobi Resources Ltd., a publicly-listed mining company focused on exploring and developing coal deposits in Mongolia’s South Gobi Region. Previously, Mr. Krepiakevich was Chief Financial Officer for Extreme CCTV Inc., a publicly traded company on the TSX involved in manufacturing high tech surveillance equipment, and Vice-President Finance and Chief Financial Officer of Maynards Industries Ltd., a private firm specializing in retailing, auctioneering, liquidating, and mergers and acquisition services. Prior to his position with Maynards, Mr. Krepiakevich was a senior officer in a number of private and public issuers. He is a Canadian qualified Chartered Professional Accountant and was employed with the international accounting firm Peat Marwick Thorne (KPMG), where he worked with a number of companies in mining and related industries.

Ms. Sanders is the Vice President, Chief Financial Officer and Corporate Secretary for Trilogy Metals Inc. Prior to Trilogy Metals Inc. Ms. Sanders served as Vice President, Chief Financial Officer and Corporate Secretary for NovaGold Resources Inc. Ms. Sanders has over 20 years of experience in audit, finance, and accounting with public and private companies and Bachelor of Commerce degree from the University of Alberta, is a Canadian qualified Chartered Professional Accountant and a Certified Public Accountant in the United States.

Mr. Zimmer is a corporate director and is the former President and Chief Executive Officer of Far West Mining Ltd., which was acquired by Capstone Mining Corp. in 2011. Prior to Far West, Mr. Zimmer worked for Teck Corporation, Teck-Cominco and Teck-Pogo Inc. From 1992 to 2007 he served in various engineering and operating roles and from 1998 to 2007, as Vice President and Project Manager for Teck-Pogo Inc. on the design and construction of the Pogo Mine near Fairbanks, Alaska. Before joining Teck, Mr. Zimmer was employed with Bow Valley Industries as Senior Staff Engineer responsible for evaluation of new mining ventures. Mr. Zimmer has over 40 years of experience in the mining industry and has a B.Sc. degree, B. Eng., MBA and is a P.Eng. in the Province of British Columbia.

Reliance on Certain Exemptions

At no time since the commencement of the Corporation's most recently completed financial year has the Corporation relied on the exemption in Section 2.4 of NI 52-110 (De Minimis Non-audit Services), Section 3.2 of NI 52-110 (Initial Public Offerings), Section 3.3(2) of NI 52-110 (Controlled Companies), Section 3.4 of NI 52-110 (Events Outside Control of Member), Section 3.5 of NI 52-110 (Death, Disability or Resignation of Audit Committee Member), Section 3.6 of NI 52-110 (Temporary Exemption for Limited and Exceptional Circumstances) or Section 3.8 of NI 52-110 (Acquisition of Financial Literacy), or an exemption from NI 52-110, in whole or in part, granted under Part 8 of NI 52-110 (Exemptions).

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Audit Committee Oversight

At no time since the commencement of the Corporation's most recently completed financial year was a recommendation of the Committee to nominate or compensate an external auditor not adopted by the board of directors.

Pre-Approval Policies and Procedures

The Audit Committee nominates and engages the independent auditors to audit the financial statements, and approves all audit, audit-related services, tax services and other services provided by the Corporation’s independent registered public accounting firm, PricewaterhouseCoopers LLP, Chartered Professional Accountants (“PwC”). Any services provided by PwC that are not specifically included within the scope of the audit must be pre-approved by the audit committee prior to any engagement. The audit committee is permitted to approve certain fees for audit-related services, tax services and other services pursuant to a de minimus exception before the completion of the engagement. No fees paid to PwC in either of the fiscal years ended December 31, 2019 or 2018 were approved pursuant to the de minimus exception.

External Auditor Service Fees (By Category)

PwC, is the independent registered public accounting firm for the Corporation and have acted as the Corporation's independent auditor for the years ended December 31, 2019 and 2018. The chart below sets forth the total amount billed the Corporation by PwC for services performed in these periods and breaks down these amounts by category of service (for audit fees, audit-related fees, tax fees and all other fees):

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

The Corporation is not a party to any legal proceedings involving a claim for damages in excess of ten percent of the Corporation’s current assets, nor is a party to any regulatory actions, and is not aware of any such proceedings or actions known to be contemplated.

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INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

The directors, executive officers and principal shareholders of the Corporation or any associate or affiliate of the foregoing have had no material interest, direct or indirect, in any transactions in which the Corporation has participated within the three most recently completed financial periods prior to the date of this AIF or in the current financial year, and do not have any material interest in any proposed transaction, which has materially affected or is reasonably expected to materially affect the Corporation, except as set out elsewhere in this AIF or as follows:

Certain directors and/or officers of the Corporation have subscribed for common shares of the Corporation pursuant to the public and private placement financings of the Corporation.

TRANSFER AGENTS AND REGISTRARS

The registrar and transfer agent for the common shares of the Corporation in British Columbia and Ontario is Computershare Investor Services Inc., at its offices in Vancouver, British Columbia.

MATERIAL CONTRACTS

The Wheaton SPA, as amended (as described under the heading “General Development of the Business – Three Year History and Significant Acquisitions”), is the only material contract entered into by the Corporation within the year ended December 31, 2019 or before such time that are still in effect, other than in the ordinary course of business. The Wheaton SPA and subsequent amendments are available on the SEDAR website at www.sedar.com under the Corporation’s profile.

INTERESTS OF EXPERTS

Names of Experts

The following sets forth each person named as having prepared or certified a report, valuation, statement or opinion described or included in a filing (including this AIF), or referred to in a filing, made under National Instrument 51-102 by the Corporation during, or relating to, its most recently completed financial year and whose profession or business gives authority to the report, valuation, statement or opinion made by the person or company:

The Corporation’s independent auditors are PwC, who have issued the ​Report of Independent Registered Public Accounting Firm dated March 11, 2020 in respect of the Corporation’s annual financial statements as at December 31, 2019 and December 31, 2018 and for each of the years ended December 31, 2019 and December 31, 2018 and the Corporation’s internal control over financial reporting as at December 31, 2019.

Interests of Experts

Alan McOnie is currently an executive officer and Neil Chambers is currently an employee of the Corporation, as described above. Both Alan McOnie and Neil Chambers have been granted stock options of the Corporation through the course of their respective employments; however, the individual interests held by each of them throughout their respective employment terms at all times represented less than one percent of the issued and outstanding common shares of the Corporation.

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The Corporation’s independent auditors are PwC. PwC has advised the Corporation that they are independent with respect to the Corporation within the meaning of the Chartered Professional Accountants of British Columbia Code of Professional Conduct and within the meaning of the Public Company Accounting Oversight Board Rule 3520, Auditor Independence.

ADDITIONAL INFORMATION

Additional information relating to the Corporation may be found on SEDAR at www.sedar.com, as well as at the Corporation’s web site at www.alexcoresource.com.

Additional information, including directors' and officers' remuneration and indebtedness, principal holders of the Corporation's securities, and securities authorized for issuance under equity compensation plans, where applicable, is contained in the Corporation's information circular for its most recent annual general meeting of securityholders that involved the election of directors.

Additional financial information is provided in the Corporation's consolidated financial statements and management's discussion and analysis for its most recently completed financial period, being the year ended December 31, 2019.

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SCHEDULE "A"

Summary from PFS

“1.1 Executive Summary

Mining Plus Canada Consulting Ltd. (Mining Plus) was retained by Alexco Resource Corp. (“Alexco”) to prepare a Preliminary Feasibility Study (“PFS” or the “Study”) and Independent Technical Report (the “Technical Report”) on the Keno Hill Silver Project (the “Project”), located in the Yukon Territory, Canada. The purpose of this Technical Report is to disclose the results of the PFS. This Technical Report conforms to National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”).

Alexco is a public company with its headquarters in Vancouver, B.C. Alexco, through wholly owned subsidiaries, owns the mineral rights for the Keno Hill Silver District (“KHSD” or the “District”) following its successful bid for the assets of United Keno Hill Mines Ltd in 2006. Alexco acquired the properties with all pre-existing liabilities subject to indemnification from the Federal Government of Canada.

The Project contemplates the conventional mining and milling of silver-lead-zinc ore from four deposits in the District. There is an existing mill which will process a high grade silver-lead-zinc ore from four deposits across the District. Over the eight year mine life contemplated in this PFS, the mines will produce 1.18 million (“M”) tonnes of mill feed (the probable Mineral Reserves) at an average 805 grams per tonne (“g/t”) silver (“Ag”), 2.98% lead (“Pb”), 4.13% zinc (“Zn”) and 0.34 g/t gold (“Au”). Following commissioning, the mill will produce two concentrates; a high grade lead-silver concentrate averaging 15,890 g/t Ag, 54% Pb, and 3.7 g/t Au, and a zinc-silver concentrate averaging 649 g/t Ag and 53% Zn. The annualized silver product in concentrate is 4.0 M ounces (“oz”).

The KHSD is a historic mining district, with the first production recorded in 1913. Since that time, an estimated 200 million ounces of silver has been produced from over 30 small mines across the district. Due to the high grade, steeply dipping veins which host the mineralization, the historic mines were typically small underground operations “chasing the vein”, followed by open pit operations beginning in the 1970’s to recover the crown pillars.

In the late 1980’s, the then-owner United Keno Hill Mining Company (“UKHM”) declared bankruptcy and the site was eventually declared abandoned in 2001, reverting to the Government of Canada. Alexco was the successful bidder in a commercial sale and purchase process and in 2006 became the 100% owner of the assets. Through this transaction, Alexco has the right to mine the deposits and the obligation to develop, permit and implement a reclamation and closure plan for the legacy liabilities across the District. Alexco is fully indemnified for the historic liabilities.

Alexco has been actively developing the Keno Hill Silver District since 2006. Alexco built a new mill complex in 2010 which operated for three years, processing material from the Bellekeno Mine. Since suspending mining operations in 2013, Alexco has maintained the District on a care and maintenance status and focused on additional exploration leading to increases in the estimated Mineral Resources for the Bermingham and Flame & Moth deposits. In 2018, Alexco completed over 1,000 meters (“m”) of underground development work including an advanced exploration decline at the Bermingham deposit and a new portal and ramp at the Flame & Moth deposit.

The estimated Mineral Resource includes the Bellekeno, Lucky Queen, Flame & Moth, Onek, and Bermingham. The total estimated Mineral Resource inclusive of estimated probable Mineral Reserves is shown in Table 1-1.

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Notes:

The mine plan for this Project comprises mining from four deposits (also referred to as “mines”); Bermingham, Flame & Moth, Bellekeno, and Lucky Queen. The majority of the mill feed will come from Bermingham and Flame & Moth (over 90%). Two mines will be operating at any given time, with the exception of the initial three month ramp up period of ore from Bellekeno only.

The mine plan is based on conventional mining methods. Based on the orientation, width of the veins, review of historic mining in the District, and geotechnical information, a combination of mechanized overhand cut and fill, and longhole stoping with cemented rock fill have been selected as the appropriate mining methods for all four deposits. The deposits require the use of mining methods that can adequately support the vein and that are flexible and selective while minimizing the direct mining costs. The backfill is planned to be a mixture of waste rock fill and tailings from the dry stack tailings facility (“DSTF”) with cement added as required.

The estimated probable Mineral Reserves calculated by the Qualified Person (from Mining Plus) for this Project are 1.18 M tonnes grading 805 g/t Ag, 2.98% Pb, 4.13% Zn and 0.34 g/t gold for an overall silver equivalent (“AgEq”) grade of 1,136 g/t AgEq as of March 28, 2019.

The District mill will be recommissioned at the currently permitted average throughput of 400 tonnes per day (“tpd”) (157,000 tonne per year (“tpy”)) with a planned increase in throughput in Year 3, for an overall life-of-mine (“LOM”) average throughput of 430 tpd. The mill is a conventional flotation mill producing two concentrates. Tailings are thickened, filtered, and placed in a conventional DSTF, which will be progressively reclaimed.

The Bellekeno, Flame & Moth and Lucky Queen mines have all permits and authorizations in place to commence full scale mine production. Although licences are also in place for Onek, there are currently no plans for production from this deposit. The Bermingham deposit requires a final licence amendment, expected in the third quarter of 2019, to commence production. The mill and tailings facilities are fully permitted.

The Project risks are substantially minimized compared to a greenfields project by a combination of Alexco’s previous operations at Keno Hill, the recently completed underground development and drilling, the existing and well maintained infrastructure both onsite and offsite (including grid power) and the safe jurisdiction of the Yukon.

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The initial capital cost is $23.2 M. This initial capital (pre-production prior to achieving positive cash flow) comprises $17.9 M of mine development and PP&E and $5.3 M of net working capital for the initial construction and ramp up period of five months. The LOM sustaining capital is estimated at $76.5 M, primarily for ongoing mine development.

The direct operating costs for the Project are estimated at a total of $362 M or $312 per tonne of ore. These comprise $226 M direct mine costs, $70 M of direct mill costs, and $67 M for site general and administrative (“G&A”) costs (excluding corporate). However corporate costs are included in calculation of all-in sustaining costs (“AISC”). The AISC is a non-GAAP financial measure that does not have any standardized meaning. Alexco has adopted the practice of calculating this performance measure as the net cost of producing an ounce of silver (our primary payable metal) after deducting revenues gained from incidental by-product production.

Revenue derives from selling four metals (silver as main product and lead, zinc and gold as by-products), reporting to two concentrates; a lead-silver concentrate and a zinc-silver concentrate. The Project will produce a total of 58,200 tonnes of lead-silver concentrate and 67,800 tonnes of zinc-silver concentrate over the eight year mine life. Over the LOM, the payable metals produced in these concentrates total 27.2 M oz Ag, 65.4 M pounds (“lbs”) Pb, 67.2 M lbs Zn and 4,707 oz Au.

Metal pricing was based on information from external sources. The LOM net revenue (“Net Smelter Return”) is $652 M and the total cash flow is at $174 M. These are based on metal pricing assumptions as follows:

The project economics show this to be a robust project with low capital and high returns with a pre-tax net present value at a 5% discount rate (“NPV₅”) of $136.2 M and after-tax NPV₅ of $101.2 M. The pre-tax internal rate of return (“IRR”) is 84% and after-tax IRR is 74%. Considering the Project on a stand-alone basis, the undiscounted after-tax cash flow totals $129.3 million over the mine life. Simple payback occurs approximately two years from start of production, approximately 26 months after the end of the initial capital period).

The brownfields nature of the Project means a relatively rapid timeline to full production of six months total. The pre-production period is expected to require up to three months, during which the mill modifications and construction of the additional surface infrastructure (expansion of camp, offices) will be completed. Once the permitting process is completed, underground development will continue, and the mill will be re-commissioned. The ramp up to full production in the mill is expected to take three months.

Exploration will continue at Keno Hill, to expand the current resources and in the short term is particularly focused on the Bermingham deposit. Alexco plans approximately 7,500 m of surface diamond drilling at Bermingham and other areas in Galena Hill in 2019; this is not included in the Project costs summarized in this Technical Report. It is recognized that there remains considerable estimated Mineral Resources in the indicated category after extraction of the probable Mineral Reserves considered herein.

The Keno Hill Silver Project is located on Alexco’s Keno Hill Silver District (KHSD) in the central Yukon. The site is located approximately 350 km north of Whitehorse, Yukon, Canada in central Yukon and is in the traditional territory of First Nation of Na-Cho Nyäk Dun (FNNND). Access to the property is via the Alaska, Klondike and Silver Trail highways from Whitehorse to Mayo (407 km) and an all-weather gravel road northeast from Mayo to Elsa (45 km); a total distance of 452 km.

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Alexco Keno Hill Mining Corp. (AKHM) is a wholly-owned subsidiary of Alexco and has been incorporated for operation of mineral extraction and development in the KHSD. Elsa Reclamation and Development Company Ltd. (ERDC), a wholly owned subsidiary of Alexco, continues to advance the development and eventual implementation of the District Wide Closure Plan (ESM Reclamation Plan) which addresses the historic environmental liabilities of the district from past mining activities. The potential liabilities associated with the historic operations in the KHSD are indemnified by the Government of Canada under the terms and conditions of the commercial agreement subject to the requirement for ERDC to develop, permit and implement the site Reclamation Plan. The Reclamation Plan for the historic liabilities is currently being reviewed by the Yukon Environmental and Socio-economic Assessment Board (YESAB).

Alexco has been actively developing the KHSD since 2006 under this unique contractual arrangement with the Government of Canada whereby it can enter into production at historic and newly discovered deposits within the district while it undertakes reclamation activities to remediate historic environmental impacts.

The KHSD quartz mining claims and quartz mining leases are held by one of two wholly-owned subsidiaries of Alexco: ERDC or AKHM. The current property ownership, access and licences cover the areas included in the geological model, Mineral Resources and Mineral Reserves in this study.

Alexco has exploration, maintenance, and camp facilities near the location of the historic mining town of Elsa, which is located just off the Silver Trail Highway, and administration, mill and mine facilities at the mill complex located near Keno City, as shown in Figure 1-1. The KHSD is well connected by a network of public and private gravel roads. A large number of roads constructed for past mining operations are still serviceable. The KHSD is supplied with electrical power by Yukon Energy Corporation from two hydroelectric plants near Mayo.   The area is covered by NTS map sheets 105M/13 and 105M/14.

The central Yukon is characterized by a subarctic continental climate with cold winters and warm summers. Exploration and mining work can be carried out year-round. Annual precipitation averages 28 cm. Half of this amount falls as snow, which starts to accumulate in October and remains into May or June. The landscape surrounding the KHSD is characterized by rolling hills and mountains with a relief of up to 1,600 m. The highest elevation is Keno Hill at 1,975 m. Slopes are gentle except the north slopes of Keno Hill and Sourdough Hill.

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Source: 2018 photo from Alexco files

Figure 1-1 View of the Existing District Mill Showing the Dry Stack Tailings Facility and Christal Lake

The Keno Hill mining camp area has a rich history of exploration and mining dating back to the beginning of the 1900s. Notable periods of interest in the historic evolution of the Keno Hill mining camp included:

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Alexco acquired the KHSD in 2006 and produced from Bellekeno mine from 2011 to 2013. Exploration has resulted in development and identification of the Lucky Queen, Flame & Moth, Onek, and Bermingham deposits.

The Keno Hill mining camp is located in the northwestern part of the Selwyn Basin in an area characterized by the Robert Service and Tombstone Thrust Sheets that are overlapping and trend northwest. The area is underlain by Upper Proterozoic to Mississippian rocks that were deposited in a shelf environment during the formation of the northern Cordilleran continental margin. The KHSD geology is dominated by the Mississippian Keno Hill Quartzite comprising the Basal Quartzite Member and conformably overlying Sourdough Hill Member. The unit is overthrust in the south by the Upper Proterozoic Hyland Group Yusezyu Formation and is conformably underlain in the north by the Devonian Earn Group (McOnie and Read, 2009).

Mineralization is of the polymetallic silver-lead-zinc vein type that typically exhibits a succession of hydrothermally precipitated minerals from the vein wall towards the vein centre. However, in the KHSD, multiple pulses of hydrothermal fluids or fluid boiling, probably related to repeated reactivation and breccia formation along the host fault structures, have formed a series of vein stages with differing mineral assemblages and textures. Supergene alteration may have further changed the nature of the mineralogy in the veins. Much of the supergene zone may have been removed due to glacial erosion.

In general, common gangue minerals include (manganiferous) siderite and, to a lesser extent, quartz and calcite. Silver predominantly occurs in argentiferous galena and argentiferous tetrahedrite (freibergite). In some assemblages, silver is also found as native silver, in polybasite, stephanite, and pyrargyrite. Lead occurs in galena and zinc in sphalerite, which at the KHSD can be either an iron-rich or iron-poor variety. Other sulphides include pyrite, pyrrhotite, arsenopyrite, and chalcopyrite.

The Keno Hill mining camp has long been recognized as a polymetallic silver-lead-zinc vein district with characteristics possibly similar to other well-known mining districts in the world. Examples of this type of mineralization include the Kokanee Range (Slocan), British Columbia; Coeur d’Alene, Idaho; Freiberg and the Harz Mountains, Germany; and Príbram, Czech Republic.

In the KHSD, the largest accumulation of minerals of economic interest occur in areas of increased hydrothermal fluid flow in structurally prepared competent rocks such as the Basal Quartzite Member and Triassic Greenstone. Incompetent rocks like phyllites tend to produce fewer and smaller (if any) open spaces, limiting fluid flow and resulting mineral precipitation.

The exploration conducted by Alexco since 2005 is the first comprehensive exploration effort in the KHSD since 1997. The work has included a program of geologic data compilation, aerial geophysical surveying, and surface core drilling. Alexco converted the historic maps and documents from nearly 70 years of mining in the district to digital form. The digital data has been used to construct district scale maps and three-dimensional (3D) mine models.

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Since acquiring the Keno Hill property, Alexco has completed a total of 737 surface diamond drill holes for a total of 189,529 m. In addition, a total of 431 underground holes for 29,673 m has also been completed, mainly at Bellekeno, but also includes 24 holes for 4,213 m HQ drilled in 2018 from the Bermingham exploration decline.

Exploration drilling by Alexco has primarily been conducted to test targets immediately adjacent to historic resource areas and, to a lesser extent, to evaluate targets based on interpretation of exploration data. The objective has been to locate structurally controlled vein mineralization.

Standard logging and sampling conventions are used to capture information from the drill core. Since 2010 all core logging data has been directly digitally entered to the geology database with data including comments captured in separate tables including lithology, structure, mineralization type, intensity of oxidation, phases and abundance of veining, alteration, stratigraphy, and geotechnical.

Definitions for resource categories used in this report are consistent with the CIM definitions incorporated by reference into NI 43-101. The resource evaluations reported herein are a reasonable representation of the global polymetallic Mineral Resources in the Bellekeno, Lucky Queen, Flame & Moth, Onek, and Bermingham deposits given the current level of sampling.

The Mineral Resources have been estimated in conformity with the generally accepted CIM Estimation of Mineral Resources and Mineral Reserves Best Practices Guidelines (CIM, 2003) and are reported in accordance with NI 43-101. Mineral resources are not mineral reserves and have not demonstrated economic viability.

In the opinion of the QPs from SRK Consulting (Canada) Inc. (SRK), the resource evaluations reported herein are a reasonable representation of the global polymetallic Mineral Resources in the Bellekeno, Lucky Queen, Flame & Moth, Onek, and Bermingham deposits given the current level of sampling. The databases used to update the Bellekeno mine and Flame & Moth mineral resource estimates were audited by the Qualified Persons (QPs). The QPs are of the opinion that the current drilling information is sufficiently reliable to interpret with confidence the boundaries for the polymetallic mineralization and that the assay data are sufficiently reliable to support mineral resource estimation.

Mintec’s MineSight software was used to construct the geological solids for all five deposits. The Lucky Queen and Onek, geological models and database were imported into GEMS format Access databases for geostatistical analysis, block model construction, metal grades estimates, and the tabulation of the Mineral Resources. Maptek’s Vulcan software was used for geostatistical analysis and block model estimation for the Bermingham mineral resource estimate. Isatis was used for geostatistical analysis and variography, block model construction, estimating metal grades, and mineral resource tabulation for Bellekeno. The Lucky Queen, Flame & Moth, and Onek block models were estimated using GEMS.

Methodology for the five deposits employed the following procedures:

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A summary of the mineral resource estimate for the Project is shown in Table 1-2.

Notes:

The Mineable Shape Optimizer (MSO) tool was used to create mineable shapes using the NSR values coded into the block models. The results generated from the MSO process were used as guidance to generate detailed development layouts and crosscut designs. The economic viability of all stope blocks and levels were tested to ensure that all the probable Mineral Reserves are economically viable.

The Mineral Reserves (Table 1-3) show the total Mineral Reserves for the Keno Hill Silver District; all Mineral Reserves are probable Mineral Reserves. External dilution and mineable recovery has been applied to the Mineral Reserves. Please note that rounding of tonnes, average grades, and contained metal may result in apparent discrepancies with totals rounded.

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Notes:

The Mineral Reserves identified comply with CIM definitions and standards for a NI 43-101 technical report. Detailed information on mining, processing and other relevant factors are contained in the following sections and combined demonstrate that the KHSD Project is an economically viable project.

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The project contains four separate deposits: Bellekeno, Bermingham, Flame & Moth, and Lucky Queen. All are characterized by high-grades and narrow vein widths. A photo of the existing Bellekeno portal is shown in Figure 1-2, and similarly of the current Bermingham portal in

Figure 1-3.

Source: 2018 photo from Alexco files

Figure 1-2 View of the Current Bellekeno Portal

Source: 2-18 photo from Alexco files

Figure 1-3 View of the Current Bermingham Portal

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The KHSD is historically known for locally challenging ground conditions encountered that limit the applicable mining methods to fully supported methods with limited spans, such as cut and fill or very small scale longhole. For most of its historic mining life, the most successful method was square set stoping with timber.

Historical mining methods used in the KHSD have included cut and fill, small scale longhole stoping, shrinkage stoping, and square set stoping. The veins typically have dips around 70 to 80 degrees but vary between deposits from approximately 50 degrees at Lucky Queen to 80 degrees at Flame & Moth.

Numerous geotechnical studies have been carried out on the KHSD most recently by Jacobs Engineering (Jacobs, 2019). Geotechnical data for this study was only available for the Flame & Moth and Bermingham deposits which comprise approximately 90% of the PFS mill feed. Operational experience gained during previous production mining at the Lucky Queen and Bellekeno deposits has been used to guide (but not directly influence) the development of geotechnical mine design parameters for the PFS. At a feasibility level the geotechnical conditions of the Lucky Queen and Bellekeno would need to be verified.

To understand the ground conditions at the KHSD Project, geotechnical domains were created for the BM and FM deposits. Preliminary geotechnical parameters were assessed using major lithology types as identified by Alexco geology personnel. The geotechnical domains are outlined below on which ground support designs have been based:

Based on the estimated rock mass classification Q values, ground support classes were developed for standard lateral development and production drifts for the Flame & Moth and Bermingham deposits. Mining of the Lucky Queen and Bellekeno deposits will exploit existing underground development. For this study, previously used ground support standards or the standards outlined for the Flame & Moth and Bermingham deposits (whichever provides greater capacity) will be used in the limited additional development that is planned. The ground support uses conventional technology; a combination of shotcrete, rock bolts and mesh.

In general, the infrastructure and development excavations are open for the long-term, and support has been designed accordingly. The infrastructure has been designed to avoid areas with potential poor ground conditions; in some situations, this is unavoidable, and support will be increased to provide long term stability.

The mine design strategy for the Project was to design as many areas as practical using small scale longhole mining methods while planning mechanized overhand cut and fill for areas where ground conditions were poor, or where the combination of vein dip and true width was not compatible with longhole stoping methods. A 3D design of the development and stope shapes was completed for all four deposits using Deswik Software.

Based on the orientation, width of the veins, review of historic mining in the district, and geotechnical information, a combination of mechanized overhand cut and fill, and longhole stoping with cemented rock fill has been selected as the appropriate mining methods for all four deposits. The deposits require the use of mining methods that can adequately support the vein and that are flexible and selective while minimizing the direct mining costs. The backfill is planned to be a mixture of waste rock fill and tailings from the DSTF with cement added as required.

For the majority of the mine life two deposits will be providing mill feed at all times. The only exceptions are early in the mine life when only the Bellekeno mine will be producing the mill feed and late in the mine life. There will be a 10-month development period at Flame & Moth and Bermingham with steady state production being reached in Year 2 of the 8-year mine life. Steady state production over the 8-year mine life will average about 160,000 tonnes per annum.

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Revenue comes from selling four metals (silver as main product and lead, zinc and gold as by-products), reporting to two concentrates; a lead-silver concentrate and a zinc-silver concentrate. Stope shapes and mining areas were created and manually validated based upon an NSR value per tonne cutoff of $339. This NSR cutoff value was calculated by using the initial operating cost estimate. Mining recovery was applied at 95% for Bellekeno, Flame & Moth, Bermingham and Lucky Queen which is in line with Alexco’s historic operational experience. All stope shapes and mining areas were reviewed to remove any unprofitable areas.

To maximize project value a higher cutoff value was selected on a mine-by-mine basis. This accelerates payback and eliminates the scheduling of marginal or near marginal tonnes. Based on the directive of Alexco management to target minimum 650 g/t Ag average LOM head grade for each deposit. The cut off values selected to meet this mandate are in Table 1-4 below.

Stope dilution is calculated in the block model for each block, based on the specific block width, and is also reported to give an average dilution for the entire stope. To factor in unplanned dilution outside the stopes shapes boundaries, a dilution skin of 0.5 m was applied to both the hanging wall (HW) and footwall (FW) during the stope optimizer process. This dilution was considered when evaluating whether or not shapes are economic to ensure only diluted economic stope shapes are included in the mine plan.

Internal dilution (Planned Dilution) is primarily a function of the width of the orebody and minimum mining width. Minimum mining width for cut and fill method in both Bermingham and Flame & Moth deposits is 3.5 m wide and for the Lucky Queen deposit is 2.5 m wide which is determined from the size of the equipment selected and consistent with the geotechnical design parameters. For longhole stoping, the minimum mining width is planned at 1.8m. Dilution for the four deposits is; Flame & Moth 15%, Bermingham 37%, Lucky Queen 39%, and Bellekeno 21%.

The underground mine design for all four deposits results in total probable Mineral Reserves of 1,177,380 tonnes (diluted) with an average grade of 805 g/t Ag, 2.98% Pb, and 4.13% Zn. The overall NSR value for the reserve is $554/tonne.

A monthly production schedule was generated using excel for each task associated with mine development and production. This schedule was created using Deswik Scheduling software and targeted approximately 16,000 tonnes ore/month coming from two deposits at any given time. The total annual mill feed and waste production from the four mines are summarized in Table 1-5 below.

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