The rapid growth of Alexco is certainly a hallmark of our Company over the last year. Barely a year ago we were a Company with a small number of employees, some big ideas and a lot of technical and geological help from NovaGold Resources, which remains our largest and most important shareholder. Over the course of a year, Alexco has grown its environmental services business eight fold, identified a significant silver resource at its large Keno Hill project and increased its market capitalization by more than 115% while maintaining a strong, debt-free balance sheet. Indeed, the Company continues to expand its outstanding abilities as a skilled and successful operator in the field of mineral exploration, while generating a steadily increasing cash flow stream from its mine-related environmental remediation and permitting services business.

The Keno Hill silver district in Canada's Yukon Territory is perfectly suited to Alexco's business model of managing risk and unlocking value at mature, orphaned or abandoned mine sites and mining districts. Accomplishments in 2007 in both the exploration and environmental aspects of our business have been unprecedented, particularly at Keno Hill, which is a relatively under explored silver district. In my view we are just beginning to unlock value in this important silver district, and I am confident that with continued investment in and application of contemporary exploration and environmental science we will achieve even more rapid progress and success than experienced to date.

Keno Hill is an immense silver district of which Alexco controls more than 230 square kilometers. We are committed to a significant and sustained investment in exploration, to both define known mineralization that has potential for production in the near term and to discover new deposits in this historically productive area. To date we have drilled over 33,000 meters and invested over $25 million in exploration of the Keno Hill district. Our exploration drilling has been directed from the "big picture" toward specific targets and new discoveries, such as Lucky Queen South and Silver King East, while resource drilling has been focused from discovery holes outward to a resource limit, such as the program underway at Bellekeno, Onek and Husky Southwest.

While Alexco has met with success on both the exploration and resource definition fronts, we are most proud of our progress in the historical mine areas of Bellekeno and the adjacent Onek mine, where we are rapidly outlining a silver and silver-equivalent resource with the potential to move quickly toward a production decision. At Bellekeno we have drilled 36 holes in three juxtaposed mineralized zones that have been traced for 1,000 meters along strike and up to 250 meters down plunge, and range in thickness from 1.5 to more than 13 meters. Silver grades in these zones range from approximately 30 to 40 ounces per ton ("oz/t") silver in the Southwest Zone, which is a lead-dominated sulfide zone, to 10 to 20 oz/t silver in the East Zone, which is a zinc-dominated sulfide system.

Alexco is advancing toward a primary silver production decision at Keno Hill. In an industry dominated by large miners producing silver as a by product of either base metal or gold production, only about 25% of annual global silver production is derived from primary silver mines, placing Alexco in a group with good exposure to rising silver markets. Silver has outperformed gold as an investment since 2003, when the silver bull market began. From a gold-to-silver price ratio of approximately 80:1 prior to 2003, silver currently trades in a range of approximately 50 to 60:1. Some predict this range will continue to narrow as silver is increasingly recognized as both an industrial metal with expanding application and an investment vehicle for those trying to insulate themselves from currency and inflationary pressures. Alexco's management is certainly bullish on silver, and expects the trend of rising silver prices to continue.

While busy advancing silver targets through our exploration program at Keno Hill, Alexco has also achieved success in its services business. Revenues from the services business, now in its second full year of operation, increased eight fold to more than $4 million while margins were maintained at approximately 28%. To help meet growing demand in this sector, Alexco acquired proprietary environmental remediation technologies and related professionals in the United States and expanded its office locations from Vancouver, British Columbia and Whitehorse, Yukon into Denver, Colorado. Alexco also increased its presence in the Northwest Territories with continuing work in support of the expanding resource industry.

While I am happy with the achievements of Alexco in terms of exploration progress and expansion of its services business, I am not comfortable with our record with the First Nation of Na-cho Nyak Dun ("FNNND") on whose traditional territory the Keno Hill district is located. Despite having signed a Memorandum of Understanding in March of this year and initiating the flow of benefits to FNNND, Alexco suffered a setback in August when FNNND announced that they were withdrawing from talks with the Governments of the Yukon and Canada in matters related to permitting and environmental planning at Keno Hill. Although the basis of the announcement by FNNND was frustration with their government relationships and not with Alexco, it nevertheless had a severe impact on our share price. Subsequent discussions with all parties have settled this issue on an interim basis while we embark on a more comprehensive and inclusive series of initiatives to ensure that mutually beneficial arrangements are established for the long term.

Alexco's primary objective in 2008 is to continue to expand the Company and shareholder value. To help achieve this, it is my goal to reposition the Company from an integrated junior explorer and service provider to a company on the road to becoming a domestic silver producer with a stand-alone, value-adding services business. Milestones to achieve this goal include completing the appropriate technical and economic studies at the Bellekeno and Onek projects at Keno Hill such that a production decision can be made for both deposits in 2008 or early 2009. We will also work to expand our services business revenue by a further 25% while maintaining a strong balance sheet with no debt.

Given the successes of 2007, I am confident we will achieve our goals in 2008, and more. The achievements of 2007 are the result of an exceptional team of employees and investors working together to unlock value in every task or project we undertake. Alexco's values of employee safety, environmental excellence and community commitment are nowhere better exemplified than through the achievements of our employees, who continue to excel in all aspects of our business.

With the growth of the business we must also build our senior management team, and in October transitioned our CFO function from Elaine Sanders, who also holds the position of VP Finance with NovaGold, to David Whittle, who will focus his attention on the financial and strategic aspects of our business. We want to thank Elaine for her contributions and tireless achievements in helping get the Company "off the ground," and wish her the very best in her continuing career in the NovaGold executive group.

Finally, I want to thank you, the shareholder, for your continued support and interest in our growing enterprise. I look forward to reporting back to you next year with great results from all areas of the Company.

Clynton R. Nauman


President, Chief Executive Officer & Director
Alexco Resource Corp.
October 24, 2007