In five short years since 2006 when Alexco was first publicly listed, we have travelled a truly remarkable road. From our beginning with small exploration programs in Yukon's Keno Hill Silver District, through a period of expanding exploration and engineering success, and finally to construction and operation of our first silver mine at Bellekeno, the Company has undergone a most impressive transformation. Through every stage of this process we have maintained a relentless focus on achieving profitable production within the shortest possible time frame, while upholding all of the financial, safety, environmental, and social values embraced by our organization. As both an Alexco shareholder and employee, I am very pleased with our success and our record of wealth creation thus far; but we clearly cannot afford to rest on our laurels or become complacent. To fully realize our corporate strategy, we must continue to deliberately grow our business and maintain our competitiveness while concurrently managing our exposure to the risk and volatility that characterize the sector in which we operate.

Alexco's significant successes over the past year are pivotal to the future of the Company. We delivered on our promise to bring the Bellekeno silver-lead-zinc mine into production, and we have established Alexco as Canada's only primary silver producer, as well as one of the highest-grade silver mining operations in the world. We are currently extracting and processing approximately 250 tonnes of silver-lead-zinc ore per day, and expect to produce at least 2 million ounces of silver along with considerable volumes of lead and zinc in calendar 2011.

We continued to optimize all facets of our business operation during the first half of 2011 and will continue to do so in 2012. Similarly, at our mining operations, we are driven toward higher output, lower costs, and maintaining our superior safety and environmental records.

In addition to our busy construction and mine commissioning activities during the past year, we also completed our most ambitious district-wide exploration season since arriving at Keno Hill in 2006. As a result of our 2010/2011 exploration drilling, we have a new underground high-grade silver discovery approximately 120 meters south of our existing Bellekeno resource, with one intercept grading nearly 80 ounces per ton. We also were able to calculate initial resources at the Onek and Lucky Queen properties, increasing our indicated resources within the District by 40%. And importantly, we have made two new and possibly significant discoveries at the Bermingham and Flame & Moth properties -- both "blind" discoveries carrying significant widths of silver mineralization, and both located on large geological structures. In a district where one of our key exploration objectives is to identify new and larger silver ore bodies, the initial character and geologic attributes of these discoveries is very exciting. Without doubt, we are positioning ourselves well to evaluate and develop additional deposits in the District.

As I write this letter, we are actively re-opening underground access and ore definition drilling at the Lucky Queen property, and are in the permitting process at the Onek project in advance of scheduling an underground drilling program. We are also reviewing our options concerning Silver King, where existing historical resources require underground review prior to a production decision. Looking ahead, our key objectives include diversifying our mine production sources and improving our economic flexibility, while steadily increasing our silver output year-over-year for the next three years.

Alexco has always had a strategy of expediting the path to production by completing early exploration and engineering work with a bias toward commercial operation. This has been especially important over the past three years -- a period characterized by buoyant silver prices. In parallel with this fast-track approach to construction we have pursued a confidently aggressive approach to permitting to deliver regulatory approvals in step with project requirements. Altogether this approach has served us extremely well, and underscores our conviction that Yukon is one of the safest and most competitive jurisdictions in the world in which to conduct business.

Alexco's environmental services business continues to perform well. Our U.S. business is expanding, and our Canadian office continues to provide key services and support to a wide variety of industry and government clients. One of the reasons we were able to permit the Bellekeno Mine in a timely manner was the fact that we used our expert in-house environmental services team to permit the project. As a result, we confidently constructed the mine and mill and related facilities in tandem with permitting stages, enabling fast-track project execution in a modern environmental regulatory regime. More recently, our U.S. group has expanded its technology reach to include active water treatment projects, with the design and construction of a high-density sludge (water treatment) plant as an interim step in a large cleanup project in Colorado. Again, as at Bellekeno, the construction and commissioning of this 115,000 gallons-per-day plant were accomplished on time and within budget, further highlighting the capacity and ability of the Alexco team to deliver and operate projects as promised.

Our share price continued to strengthen during the first half of 2011, and our trading volumes continue to increase in both Toronto and New York. In December 2010, we successfully raised an additional $41 million to enable the acceleration of additional mine development and production opportunities at Keno Hill, positioning us to aggressively execute our growth strategy. Our capital structure remains sensible and our balance sheet is strong. Bellekeno began production at a time when silver prices were at their highest in years, and despite a lot of volatility in that area, I expect the silver price to remain at a level that favors excellent profitability for Alexco's operations well into the future. Additionally, the success to date of our exploration drilling program confirms our conviction in the tremendous exploration potential of the Keno Hill Silver District. With our superior assets and proven management team, combined with the strategic advantage of our environmental services business, I firmly believe Alexco is uniquely positioned within the mining sector to continue delivering strong growth and enhanced value to our shareholders.

The success we have enjoyed this past year bodes well for the sustained future of our Company, and none of it could have been realized without a strong team of talented employees, all working towards the same goal. We would like to thank our shareholders for your continued support; your confidence in Alexco drives us forward.

Clynton R. Nauman
President, Chief Executive Officer & Director
Alexco Resource Corp.
October 6, 2011