Alexco Reports Net Income of $3.5M and Operating Cash Flows of $7.2M in First Quarter of Production

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 12, 2011) -Alexco Resource Corp. (TSX:AXR)(NYSE Amex:AXU) today announced the financial and operating results for the three months ended March 31, 2011, the third quarter of its 2011 fiscal year, which is also the first quarter of commercial production at its newly commissioned Bellekeno mine in the Keno Hill Silver District, Yukon. All dollar figures are expressed in Canadian dollars unless otherwise stated.

Third Fiscal Quarter Highlights

• Net income for quarter of $3.5 million ($0.06 basic and diluted earnings per share) and pre-tax income of $5.0 million on combined mining and consulting services revenue of $20.5 million
• Cash flows from operating activities of $7.2 million
• Bellekeno mine revenue of $18.8 million and gross profit of $9.5 million, on sales of 3,083 tonnes of lead-silver and zinc concentrate
• Production of 447,524 ounces silver, 3,682,304 pounds lead and 1,334,144 pounds zinc
• Realized metal prices averaged US$39.88 per ounce silver, US$1.20 per pound lead and US$1.07 per pound zinc
• Cash costs of production¹ of $8.88 per ounce of payable silver produced, net of by-product credits
• Bellekeno ramp up continues, maintaining calendar year 2011 production guidance of 2.8 million ounces silver, 18 million pounds lead and 8 million pounds zinc

¹ Cash costs of production per ounce of payable silver produced is a non-GAAP measure with no standardized meaning prescribed under Canadian GAAP. See page 13 of Alexco Q3 MD&A for explanation and reconciliation.

Alexco President and CEO Clynt Nauman said, "This was a historic, milestone quarter for us – our first full quarter as a silver producing company. We've started off well, despite the challenges of ramping up a mine in the middle of winter in the Yukon. Although there is always some uncertainty with the start up of a new mine that has no production track record, at this point our best estimate continues to be for about 2.8 million ounces of silver in calendar year 2011. As the only operating primary silver mine in Canada, and with exceptionally high grades and a mill with available capacity, we are now well positioned to review other mining opportunities in the Keno Hill Silver District. We are well funded for our extensive surface and underground exploration programs, and look forward to continuing success on all fronts."

Summary Financial Results and Information

Bellekeno Mine Operations

The three months ended March 31, 2011 represent Alexco's first full quarter of mining operations, with commercial production at its new Bellekeno silver-lead-zinc underground mine and ore processing complex having commenced January 1, 2011. Located in the Keno Hill Silver District in Canada's Yukon Territory, through its first full quarter of operation the Bellekeno mine produced 3,477 tonnes of concentrate comprising 2,376 tonnes of lead-silver concentrate and 1,101 tonnes of zinc concentrate, recognized revenue of $18.8 million on sales of 3,083 tonnes of concentrate and yielded a gross profit of $9.5 million. Alexco's realized metal prices in the third fiscal quarter averaged US$39.88 per ounce for silver, US$1.20 per pound for lead and US$1.07 per pound for zinc. Ramp up of mine and mill operations to full optimized levels is continuing, but the estimate of production from Bellekeno for the full calendar year of 2011 remains unchanged at 2.8 million ounces of silver, 18 million pounds of lead and 8 million pounds of zinc.

Mine operations in the third fiscal quarter generally maintained pace with processing activity, and with significant stockpiled ore from the previous quarter Alexco used the opportunity to undertake additional mine development at Bellekeno during the period. The majority of this additional development was ramp up phase primary development, capitalized at $3.3 million. However, some of the new development was in preparation for a trial of local mechanized long-hole stoping, a more efficient mining method not historically used within the Keno Hill District. Average mill throughput during the quarter was 201 tonnes per day (tpd), with daily throughputs as high as 320 tpd. Once the initial ramp up phase is completed, the average daily throughput is anticipated to increase beyond 250 tpd and ultimately to be in the range of 350 to 400 tpd.

Operating statistics for Bellekeno since the commencement of commercial production on January 1, 2011 are summarized as follows:

Keno Hill Exploration

The 2011 surface exploration program in the Keno Hill District was initiated in March, and is expected to complete approximately 15,000 meters of drilling at a number of targets across the District with surface exploration expenditures anticipated to be approximately $8 million. Surface exploration work will focus in a number of areas, including the new discoveries from last year in the Bermingham and Flame & Moth areas where the aim will be to define additional mineable silver resources.

Initial resource estimates for the Onek and Lucky Queen properties are currently in progress, as is an updated geological resource estimate for Bellekeno, and are expected to be released by mid calendar 2011. In conjunction with the completion of these resource estimates, over calendar year 2011 Alexco also intends to aggressively progress towards the development of its most advanced exploration properties within the District. Subject to receiving appropriate permits, the Company anticipates initiating advanced exploration work at the Onek, Lucky Queen and Silver King Mine areas, with the objective of enabling Alexco to make production decisions for each property in late 2011 or early 2012. This work, which also commenced in March and is currently estimated to cost approximately $10 million, includes approximately 1,500 meters of surface definition drilling in the vicinity of the historical Onek mine; approximately 1,500 meters of underground rehabilitation and development work at the historical Lucky Queen mine, in advance of approximately 2,500 meters of underground definition drilling; and a review of underground ore definition and mining options at the historical Silver King mine.

In addition, engineering and feasibility related work continues on Alexco's Elsa tailings project, where approximately 9.5 million ounces of silver have been defined within approximately 2.5 million tonnes of historical Elsa tailings (see news release dated May 6, 2010 entitled "Alexco Announces Initial Elsa Tailings Resource Estimate, Keno Hill").

Alexco Environmental Group

Separately, the Corporation's environmental consulting services business, the Alexco Environmental Group (AEG), recognized revenues of $1.7 million during the third fiscal quarter, compared to $1.3 million in 2010. Consulting costs for the quarter totaled $1.8 million, resulting in a gross loss in the quarter of $96,000. Gross profit in 2010 was $743,000, including a gain of $258,000 from a favourable re-assessment of the estimated consulting services contract loss provision. The pressure on margins from the Keno Hill care and maintenance and reclamation plan development activities is expected to continue until the closure reclamation plan is implemented, though discussions with Government to mitigate that impact are ongoing. Also, significant up-front costs were incurred in the quarter on the inception of a new AEG private sector contract which were recovered on a break-even basis, though billings under this contract are expected to be at normal profitable margins going forward.

Financial Position

Alexco's cash and cash equivalents at March 31, 2011 totaled $45.2 million compared to $27.6 million, including current restricted cash and deposits, at June 30, 2010, while net working capital totaled $51.2 million compared to $20.7 million for the same dates respectively. The increases in cash and net working capital primarily reflect net cash proceeds of $38.9 million received from a bought deal equity financing completed in December 2010 plus the results of operations from the Bellekeno mine since the commencement of commercial production. These increases were partially offset by expenditures on the 2010 and 2011 exploration programs within the Keno Hill District, as well as expenditures made by Alexco pertaining to the development, construction and commissioning of Bellekeno in excess of amounts funded through deposit amounts received from Silver Wheaton Corp.

Full Interim Report and Conference Call

Full details of Alexco's third fiscal quarter financial and operating results are described in the March 31, 2011 unaudited interim consolidated financial statements with accompanying notes and related Management's Discussion and Analysis. These documents and additional information on Alexco are available on the Company's website at www.alexcoresource.com and on SEDAR at www.sedar.com.

Alexco is holding an audio webcast conference call to discuss these results at 11 a.m. Eastern (8 a.m. Pacific) on Friday, May 13, 2011. To participate in the live call, please use one of the following methods:

Participants should connect five to ten minutes before the call.

The conference call will be recorded, and an archived audio webcast will be available at www.alexcoresource.com. Through May 18, 2011, a replay of the call will be available by telephone at the following:

Qualified Persons

The scientific and technical information on which this news release has been based regarding exploration projects on Alexco's mineral properties has been prepared by or under the supervision of Alan McOnie, FAusIMM, Vice President, Exploration with Alexco, while such information regarding mine development and operations at Alexco's mineral properties, including Bellekeno, has been prepared by or under the supervision of Thomas Fudge, P.E., Senior Vice President, Engineering and Corporate Development for Alexco. Both have reviewed this news release, and both are Qualified Persons as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects.

Keno Hill Silver District History

Between 1921 and 1988, the Keno Hill Silver District produced more than 217 million ounces of silver with average grades of 40.5 ounces per ton silver, 5.6% lead and 3.1% zinc (Yukon Government's Minfile database). The historical production grades would rank Keno Hill in the top 3% by grade of today's global silver producers. The Keno Hill Silver District is the second-largest historical silver producer in Canada.

About Alexco

Alexco is first and foremost a silver mining company, whose business is to unlock value and manage risk at mature, closed or abandoned mine sites through integration and implementation of the Company's core competencies which include management of environmental services, execution of mine reclamation and closure operations and if appropriate, rejuvenation of exploration and development of new mining opportunities. Alexco's Bellekeno mine is the only primary silver mine in Canada.

Some statements in this news release contain forward-looking information concerning the Company's anticipated results and developments in the Company's operations in future periods, planned exploration and development of its properties, plans related to its business and other matters that may occur in the future, made as of the date of this news release. Forward-looking statements may include, but are not limited to, statements with respect to future remediation and reclamation activities, future mineral exploration, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and mineral resource estimates, future mine construction and development activities, future mine operation and production, the timing of activities, the amount of estimated revenues and expenses, the success of exploration activities, permitting time lines, requirements for additional capital and sources and uses of funds. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of exploration and development activities; actual results of mining activities; actual results of consulting activities; actual results of remediation and reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of silver, gold, lead, zinc and other commodities; possible variations in mineable resources, grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; First Nation rights and title; continued capitalization and commercial viability; global economic conditions; competition; and delays in obtaining governmental approvals or financing or in the completion of development activities. Forward-looking statements are based on certain assumptions that management believes are reasonable at the time they are made. In making the forward-looking statements included in this news release, the Company has applied several material assumptions, including, but not limited to, the assumption that market fundamentals will result in sustained silver, gold, lead and zinc demand and prices.