A new financial arrangement has put the Alexco Resource Corp. in a good position, says the company president and chief executive officer.

Clynton Nauman said last week the agreement with Silver Wheaton Corp. reduces the company's operating costs for its Bellekeno Mine in Keno City and other silver deposits expected to come on line once Alexco recommences production.

The agreement also provides the company with greater flexibility to maintain operations through a fluctuating silver market, he explained during a teleconference following the announcement.

Nauman pointed out when the company suspended operations at the Bellekeno Mine last September, it said it would pursue methods to reduce its production costs by 20 to 25 per cent.

The agreement with Silver Wheaton fits with that initiative, he explained.

Key to agreement, said Nauman, is a sliding scale that will determine the price of each ounce of silver sold to Silver Wheaton.

In the original 2008 agreement, Silver Wheaton provided $50 million in financing to Alexco. In return, it received the right to buy 25 per cent of the silver produced by the company for $3.90 an ounce.

In effect, if it cost Alexco $20 to produce one ounce of silver and the price of silver was $20 an ounce, it was losing $16 for every ounce sold to Silver Wheaton and Silver Wheaton was earning that $16.

Under the new arrangement, which still has to be approved, Silver Wheaton retains the right to purchase 25 per cent of Alexco's silver.

The parties, however, have agreed to a sliding scale designed to insulate Alexco when prices are low while generating greater profits for Silver Wheaton when silver is high.

When the price is at $19.45 per ounce, for instance, Silver Wheaton will pay $18 an ounce, allowing Alexco to recover its production costs.

When the price is $35 an ounce or higher, Silver Wheaton will pay the original $3.90 an ounce, allowing the company to earn $31 in profit for every ounce.

At $35 an ounce, Alexco is still able to absorb the loss to Silver Wheaton and profit through the sale of the remaining 75 per cent of its silver sales.

To effect the new arrangement, Alexco must pay $20 million to Silver Wheaton, and Silver Wheaton must reinvest at least $5 million of that money if Alexco goes to the market to raise $10 million or more towards the $20-million payment.

Nauman explained in an interview this morning Alexco and Silver Wheaton both want to see production recommence, as it re-establishes a revenue stream for both companies, and this deal achieves that goal.

Of course, he added, the price of silver is still key in any decision going forward.

The price of silver this morning was $23.36.

If Alexco was in production today, Silver Wheaton would be paying approximately $14 per ounce, according to figures provide last week to help explained the new arrangement.

Nauman said Alexco wants to be back in production in the first three months of 2015, or in the second quarter at the latest.

In its new business case including the new sliding price scale, Alexco has been able to reduce its cost of production from approximately $22 to $16, though the savings are dependent upon raising daily production.

Up until operations were suspended last September, the company was averaging 270 tonnes per day through the mill, with Bellekeno as the only source of ore.

Nauman said Alexco wants to expand processing at the mill to 400 tonnes per day, with 350 to 370 tonnes coming from its new Flame and Moth deposit, which the company is currently steering through the permitting phase.

The daily tonnage will be topped up to 400 with ore from the Bellekeno Mine, he explained.

Nauman said if and when production recommences, he doesn't anticipate much of a change in the total workforce, which was in the neighourhood of 170 to 175 when operations were suspended.

The life of the Flame and Moth deposit is estimated at over five years, though there are drilling crews currently conducting further exploration work at the new deposit, he explained.