MMC News

Hecla Reports Third Quarter 2017 Results

November 07, 2017

Record gold production, increased throughput and higher base metals prices substantially reduced cash costs, after by-product credits, per gold and silver ounce.

COEUR D'ALENE, Idaho--(BUSINESS WIRE)-- Hecla Mining Company (NYSE:HL) today announced third quarter financial and operating results.

HIGHLIGHTS (Compared to Third Quarter of 2016)

  • Net income applicable to common stockholders of $1.3 million, or $0.00 per share.
  • Adjusted net income applicable to common stockholders of $16.0 million, or $0.04 per share.1
  • Cost of sales and other direct production costs and depreciation, depletion and amortization ("cost of sales") of $97.2 million.
  • Silver cash cost, after by-product credits, of negative $0.63 per ounce, the lowest in 7 years.2
  • All in sustaining cost ("AISC"), after by-product credits, of $6.65 per silver ounce, down 47%.3
  • Gold production of 63,046 ounces, up 21% as a result of strongest performance of Casa Berardi since its acquisition.
  • Capital expenditures of $24.4 million, a 44% decline.
  • Cash and cash equivalents and short-term investments of $205.9 million at September 30, 2017, up $4 million over the second quarter.
  • Lowering estimates for annual cash cost, after by-product credits, per silver ounce for Greens Creek and San Sebastian.
  • The strike by the union workers at Lucky Friday continues.

"The third quarter continued Hecla's strong operating performance, which coupled with higher zinc and lead prices, resulted in silver cash costs, after by-product credits, of negative $0.63 per ounce, the lowest in 7 years and allows us to lower our cost guidance," said Phillips S. Baker Jr., President and CEO. "Both Casa Berardi and Greens Creek set records for throughput and San Sebastian had its strongest silver production of the year. The operating performance combined with lower capital expenditure allows Hecla to continue to generate positive cash flow and strengthen our balance sheet."

FINANCIAL OVERVIEW

               
        Third Quarter Ended     Nine Months Ended
HIGHLIGHTS      

September 30,
2017

   

September 30,
2016

   

September 30,
2017

   

September 30,
2016

FINANCIAL DATA                          
Sales (000)       $140,839     $179,393     $417,662     $481,712
Gross profit (000)       $43,637     $58,685     $109,760     $147,958
Income applicable to common shareholders (000)       $1,274     $25,651     $3,816     $48,871
Basic and diluted income per common share       $—     $0.07     $0.01     $0.13
Net income (000)       $1,412     $25,789     $4,230     $49,285
Cash provided by operating activities (000)       $28,294     $86,976     $74,115     $173,114
                           

Net income applicable to common shareholders for the third quarter was $1.3 million, or $0.00 per share, compared to $25.7 million, or $0.07 per share, for the same period a year ago, the result mainly due to the following items:

  • Sales of $140.8 million impacted by the ongoing strike at Lucky Friday and build-up of product inventory during the quarter of approximately $12.9 million, primarily due to the timing of concentrate shipments at Greens Creek.
  • Lower realized silver and gold prices, partially offset by higher zinc and lead prices.
  • Mark to market loss on base metal derivatives contracts of $11.2 million due to the higher zinc and lead prices, compared to the third quarter of 2016 when there wasn't an active hedging program.
  • Net foreign exchange loss of $4.8 million versus a gain of $2.4 million in third quarter of 2016 due to the strength of the Canadian dollar.
  • Interest expense, net of amount capitalized, of $9.4 million in the third quarter of 2017, increased over the $5.6 million recognized in the third quarter of 2016, primarily due to interest being capitalized in the 2016 period related to construction of the #4 Shaft.
  • An increase of $4.6 million in exploration and pre-development expenditures over the third quarter of 2016, particularly focused on San Sebastian and Casa Berardi.
  • Lucky Friday suspension costs of $3.7 million, along with $1.1 million in non-cash depreciation expense, in the third quarter of 2017. Limited production and capital improvements are being performed by salaried staff.

Operating cash flow was $28.3 million compared to $87.0 million in the third quarter of 2016, with the decrease due to the timing of concentrate shipments, primarily at Greens Creek and increased payment of estimated income taxes in Mexico. These factors were partially offset by an increase in gold production and higher base metals prices.

Adjusted EBITDA was $60.8 million compared to $78.8 million in the third quarter of 2016, with the decrease mainly due to lower and no concentrate shipments at Greens Creek and Lucky Friday, respectively, and lower precious metals prices, partially offset by an increase in gold sales and higher base metals prices.4

Capital expenditures at the operations totaled $25.5 million for the third quarter 2017 compared to $42.0 million in the third quarter of 2016, with the decrease due to completion of the #4 Shaft, limited activity at Lucky Friday due to the ongoing strike, and reduced capital spending at Greens Creek and Casa Berardi, partially offset by costs related to underground development at San Sebastian. Expenditures were $13.8 million at Casa Berardi, $8.2 million at Greens Creek, $3.4 million at San Sebastian and $0.2 million at Lucky Friday.

Metals Prices

The average realized silver price in the third quarter was $17.01 per ounce, 13% lower than the $19.53 price realized in the third quarter of 2016. The average realized gold price in the third quarter was $1,283 per ounce, 4% lower than the prior year period. Realized lead and zinc prices increased by 27%, and 43% respectively, from the third quarter of 2016.

OPERATIONS OVERVIEW

Overview

The following table provides the production summary on a consolidated basis for the third quarter and nine months ended September 30, 2017 and 2016:

                   
            Third Quarter Ended     Nine Months Ended
            September 30, 2017     September 30, 2016     September 30, 2017     September 30, 2016
PRODUCTION SUMMARY                  
Silver -   Ounces produced       3,323,157     4,316,663     9,500,058     13,200,765
    Payable ounces sold       2,540,817     4,284,842     8,098,652     12,222,084
Gold -   Ounces produced       63,046     52,126     171,720     170,779
    Payable ounces sold       57,380     50,348     161,921     161,217
Lead -   Tons produced       5,370     10,411     18,426     31,840
    Payable tons sold       2,936     9,967     13,612     28,380
Zinc -   Tons produced       14,497     14,825     43,000     50,321
    Payable tons sold       8,444     13,596     29,269     37,948
                               

The following tables provide a summary of the final production, cost of sales, cash cost, after by-product credits, per silver and gold ounce, and AISC, after by-product credits, per silver and gold ounce for the third quarter and nine months ended September 30, 2017:

                                       
Third Quarter End                   Greens Creek     Lucky Friday     Casa Berardi     San Sebastian
September 30, 2017       Silver     Gold     Silver     Gold     Silver     Gold     Silver     Silver     Gold
Production (ounces)         3,323,157         63,046         2,344,315       12,563         88,298         44,141       9,659         880,885       6,342  
Increase/(decrease) over 2016         (23 )%       21 %       (4 )%     5 %       (90 )%       38 %     16 %       (10 )%     (23 )%

Cost of sales and other direct production costs and depreciation, depletion and amortization (000)

      $ 48,606       $ 48,595       $ 41,927       N/A       $       $ 48,595       N/A       $ 6,680       N/A  
Increase/(decrease) over 2016         (42 )%       34 %       (28 )%     N/A         N/A         34 %     N/A         2 %     N/A  

Cash costs, after by-product credits, per silver or gold ounce 2,5

      $ (0.63 )     $ 750       $ (0.15 )     N/A       $ 11.60       $ 750       N/A       $ (3.12 )     N/A  

Increase/(decrease) over 2016

        (117 )%       (18 )%       (103 )%     N/A         28 %       (18 )%     N/A         23 %     N/A  

AISC, after by-product credits, per silver or gold ounce 3

      $ 6.65       $ 1,091       $ 4.47       N/A       $ 13.37       $ 1,091       N/A       $ (0.83 )     N/A  
Increase/(decrease) over 2016         (47 )%       (24 )%       (59 )%     N/A         (34 )%       (24 )%     N/A         65 %     N/A  
                                                         
                                                         
Nine Months Ended                   Greens Creek     Lucky Friday     Casa Berardi     San Sebastian
September 30, 2017       Silver     Gold     Silver     Gold     Silver     Gold     Silver     Silver     Gold
Production (ounces)         9,500,058         171,720         6,205,659       39,289         769,080         113,209       26,681         2,498,638       19,222  
Increase/(decrease) over 2016         (28 )%       1 %       (12 )%     (1 )%       (72 )%       9 %     11 %       (27 )%     (29 )%
Cost of sales and other direct production costs and depreciation, depletion and amortization (000)       $ 173,160       $ 134,742       $ 140,241       N/A       $ 14,542       $ 134,742       N/A       $ 18,377       N/A  
Increase/(decrease) over 2016         (24 )%       26 %       (5 )%     N/A         (74 )%       26 %     N/A         (22 )%     N/A  

Cash costs, after by-product credits, per silver or gold ounce 2,5

      $ 0.16       $ 858       $ 0.73       N/A       $ 6.58       $ 858       N/A       $ (3.23 )     N/A  
Increase/(decrease) over 2016         (95 )%       14 %       (84 )%     N/A         (30 )%       14 %     N/A         5 %     N/A  
AISC, after by-product credits, per silver or gold ounce 3       $ 8.06       $ 1,226       $ 5.60       N/A       $ 12.21       $ 1,226       N/A       $ (0.14 )     N/A  
Increase/(decrease) over 2016         (32 )%       (1 )%       (45 )%     N/A         (43 )%       (1 )%     N/A         94 %     N/A  
                                                         

Greens Creek Mine - Alaska

At the Greens Creek mine, 2.3 million ounces of silver and 12,563 ounces of gold were produced in the third quarter, compared to 2.4 million ounces and 11,988 ounces, respectively, in the third quarter of 2016. Lower silver production resulted from lower grades due to mine sequencing. The mill operated at an average of 2,391 tons per day (tpd) in the third quarter, a record and 9% higher than the third quarter of 2016.

The cost of sales for the third quarter was $41.9 million, and the cash cost, after by-product credits, per silver ounce, was negative $0.15, compared to $58.4 million and $4.80, respectively, for the third quarter of 2016.2 The AISC, after by-product credits, was $4.47 per silver ounce for the third quarter compared to $11.02 in the third quarter of 2016.3 The per ounce silver costs were lower primarily due to higher base metals prices and the number of tons milled.

Lucky Friday Mine - Idaho

At the Lucky Friday mine, 88,298 ounces of silver were produced in the third quarter, compared to 887,364 ounces in the third quarter of 2016, with the decrease due to the ongoing strike by unionized employees. Limited production and capital improvements are being performed by salaried staff.

There was no cost of sales for the third quarter, as there were no concentrate shipments during the quarter, and the cash cost, after by-product credits, per silver ounce, was $11.60, compared to $19.5 million and $9.07, respectively, for the third quarter of 2016.2 The AISC, after by-product credits, was $13.37 per silver ounce for the third quarter compared to $20.22 in the third quarter of 2016, with the decrease due to lower capital spending as a result of completion of the #4 Shaft, partially offset by the costs of the ongoing strike.3

Casa Berardi - Quebec

At the Casa Berardi mine, a record 44,141 ounces of gold were produced in the third quarter, including 8,949 ounces from the East Mine Crown Pillar (EMCP) pit, compared to 31,949 ounces in the third quarter of 2016, with the increase primarily due to higher ore throughput and gold grades. The mill operated at an average of 3,545 tpd in the third quarter, an increase of 26% over the third quarter of 2016 due to ramp up of the EMCP pit, and set a monthly throughput record of 3,913 tpd in September.

The cost of sales was $48.6 million for the third quarter and the cash cost, after by-product credits, per gold ounce was $750, compared to $36.3 million and $915, respectively, in the prior year period.2,5 The decrease in cash cost, after by-product credits, per gold ounce is due to the higher gold production and reduced stripping at the EMCP pit. The AISC, after by-product credits, was $1,091 per gold ounce for the third quarter compared to $1,442 in the third quarter of 2016, primarily due to higher gold production, reduced stripping, and lower capital spending.5

The higher gold grades and production are expected to continue in the fourth quarter of 2017, combined with the reduced stripping costs at the EMCP pit, the improved cash cost, after by-product credits, and the AISC, after by-product credits, is anticipated to continue in the fourth quarter.

Automation of the 985 drift, which is under construction, is on track for commissioning by the end of the year, as are several other innovations such as the control room.

San Sebastian - Mexico

At the San Sebastian mine, 880,885 ounces of silver and 6,342 ounces of gold were produced in the third quarter, compared to 975,610 ounces and 8,189 ounces, respectively, in the third quarter of 2016. The lower silver and gold production was expected with lower ore throughput and lower gold grades. The mill operated at an average of 397 tpd in the third quarter.

The cost of sales was $6.7 million for the third quarter and the cash cost, after by-product credits, was negative $3.12 per silver ounce, compared to $6.5 million and negative $4.03, respectively, in the third quarter of 2016.2 The AISC, after by-product credits, was negative $0.83 per silver ounce for the third quarter compared to negative $2.39 in the third quarter of 2016, principally due to lower gold by-product credits and increased exploration and capital spending.3

Work is underway to transition from open pit mining and stockpile feeds to underground mining, which is expected to occur in early 2018. Construction of the ramp to connect the new portal to a ramp being driven from the existing workings continues, and the construction should be completed by year end. The Company has extended the mill agreement until the end of 2020.

EXPLORATION AND PRE-DEVELOPMENT

Expenditures

Exploration (including corporate development) expenses were $7.3 million, an increase of $3.4 million compared to the third quarter of 2016. Full year exploration (including corporate development) expenses are expected to be $20-$25 million, up from $14.7 million in 2016, in part reflecting more exploration at San Sebastian, Casa Berardi and Greens Creek and drilling at Kinskuch and Little Baldy.

A complete summary of exploration for the third quarter can be found in the news release entitled "Hecla Reports Third Quarter Drilling and Exploration Update" released on November 2, 2017.

PRE-DEVELOPMENT

Pre-development spending was $1.8 million for the quarter, for permitting of Rock Creek and Montanore.

The US Forest Service issued its Final Supplemental Environmental Impact Statement and its draft Record of Decision ("ROD") for Rock Creek in late June. That ROD was subject to a 45 day formal comment period, and the agency must consider any comments it receives prior to issuing its final ROD. We anticipate the final ROD in early 2018.

At the Montanore project, the Montana Federal District Court remanded the ROD to the US Forest Service and US Fish and Wildlife Service for further review. The Court's decision allows the agencies to issue a ROD for just the initial evaluation phase of the project, which has minimal environmental effects.

BASE METALS AND CURRENCY HEDGING

Base Metals Forward Sales Contracts

The following table summarizes the quantities of base metals committed under financially settled forward sales contracts at September 30, 2017:

               
        Pounds Under Contract      
        (in thousands)     Average Price per Pound
        Zinc     Lead     Zinc     Lead
Contracts on forecasted sales                          
2017 settlements       441     2,866     $ 1.23     $ 1.05
2018 settlements       39,463     17,968     $ 1.27     $ 1.05
2019 settlements       14,330     8,267     $ 1.30     $ 1.07
2020 settlements       3,307     2,205     $ 1.27     $ 1.07
                           

The contracts represent 26% of the forecasted payable zinc production for the next three years at an average price of $1.27 per pound, and 33% of the forecasted payable lead production for the next three years at an average price of $1.06 per pound.

Foreign Currency Forward Purchase Contracts

The following table summarizes the quantities of Canadian dollars and Mexican pesos committed under financially settled forward purchase contracts at September 30, 2017:

             
      Currency Under Contract      
      (in thousands of CAD/MXN)     Average Exchange Rate
      CAD     MXN     CAD/USD     MXN/USD
2017 settlements     30,000     43,300     1.30     19.86
2018 settlements     76,500         1.29    
2019 settlements     63,600         1.31    
2020 settlements     30,000         1.29    
                         

2017 ESTIMATES7

The Company is providing updated annual estimates as follows:

2017 Production Outlook

                           
        Silver Production     Gold Production     Silver Equivalent     Gold Equivalent
        (Moz)     (Koz)     (Moz)     (Koz)
Greens Creek       7.8-8.2     51-53     23.0-23.6     325-332
Lucky Friday       0.8-0.9           1.8-2.0     25-28
San Sebastian       3.0-3.4     24-25     4.7-5.2     66-73
Casa Berardi             155-157     11.1-11.2     155-157
Total       11.6-12.5     230-235     40.6-42.0     571-590
                           

 

2017 Cost Outlook

                     
       

Costs of Sales
(million)

   

Cash cost, after by-
product credits, per
silver/gold ounce4,6

   

AISC, after by-product
credits, per produced
silver/gold ounce5

Greens Creek       $201     $1.00     $7.00
Lucky Friday       $15     $7.50     $13.00
San Sebastian       $24     $(2.00)     $1.00
Total Silver       $240     $1.00     $9.00
Casa Berardi       $181     $800     $1,150
Total Gold       $181     $800     $1,150
                     

2017 Capital and Exploration Outlook

         
2017E Capital expenditures (excluding capitalized interest)       $105-$110 million
2017E Exploration expenditures (includes Corporate Development)       $22-25 million
2017E Pre-development expenditures       $5 million
         

DIVIDENDS

The Board of Directors declared a quarterly cash dividend of $0.0025 per share of common stock, payable on or about December 1, 2017, to stockholders of record on November 21, 2017. The realized silver price was $17.01 in the third quarter and therefore did not satisfy the criteria for a larger dividend under the Company's dividend policy.

The Board of Directors also declared the regular quarterly dividend of $0.875 per share on the 157,816 outstanding shares of Series B Cumulative Convertible Preferred Stock. This represents a total amount to be paid of approximately $138,000. The cash dividend is payable on or about January 2, 2018 to shareholders of record on December 15, 2017.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Tuesday, November 7, at 11:00 a.m. Eastern Time to discuss these results. You may join the conference call by dialing toll-free 1-855-760-8158 or for international dialing 1-720-634-2922. The participant passcode is HECLA. Hecla's live and archived webcast can be accessed at www.hecla-mining.com under Investors or via Thomson StreetEvents Network.

ABOUT HECLA

Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading low-cost U.S. silver producer with operating mines in Alaska, Idaho, and Mexico and is a gold producer with an operating mine in Quebec, Canada. The Company also has exploration and pre-development properties in seven world-class silver and gold mining districts in the U.S., Canada and Mexico, and an exploration office and investments in early-stage silver exploration projects in Canada.

NOTES

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles (GAAP). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

(1) Adjusted net income applicable to common stockholders is a non-GAAP measurement, a reconciliation of which to net income applicable to common stockholders, the most comparable GAAP measure, can be found at the end of the release. Adjusted net income is a measure used by management to evaluate the Company's operating performance but should not be considered an alternative to net income, or cash provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

(2) Cash cost, after by-product credits, per silver and gold ounce is a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization (sometimes referred to as "cost of sales" in this release), can be found at the end of the release. It is an important operating statistic that management utilizes to measure each mine's operating performance. It also allows the benchmarking of performance of each mines versus those of our competitors. As a primary silver mining company, management also uses the statistic on an aggregate basis - aggregating the Greens Creek, Lucky Friday and San Sebastian mines - to compare performance with that of other primary silver mining companies. With regard to Casa Berardi, management uses cash cost, after by-product credits, per gold ounce to compare its performance with other gold mines. Similarly, the statistic is useful in identifying acquisition and investment opportunities as it provides a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

(3) All in sustaining cost (AISC), after by-product credits, is a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization, the closest GAAP measurement, can be found in the end of the release. AISC, after by-product credits, includes cost of sales and other direct production costs, expenses for reclamation and exploration at the mines sites, corporate exploration related to sustaining operations, and all site sustaining capital costs. AISC, after by-product credits, is calculated net of depreciation, depletion, and amortization and by-product credits.

Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Management believes that all in sustaining costs is a non-GAAP measure that provides additional information to management, investors and analysts to help (i) in the understanding of the economics of our operations and performance compared to other producers and (ii) in the transparency by better defining the total costs associated with production. Similarly, the statistic is useful in identifying acquisition and investment opportunities as it provides a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

(4) Adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to net income, the most comparable GAAP measure, can be found at the end of the release. Adjusted EBITDA is a measure used by management to evaluate the Company's operating performance but should not be considered an alternative to net income, or cash provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

(5) Cash cost, after by-product credits, per gold ounce is only applicable to Casa Berardi production. Gold produced from Greens Creek and San Sebastian is treated as a by-product credit against the silver cash cost.

Other

(6) Expectations for 2017 includes silver, gold, lead and zinc production from Greens Creek, San Sebastian and Casa Berardi converted using Au $1,225/oz, Ag $17.25/oz, Zn $1.30/lb, and Pb $1.05/lb. Lucky Friday expectations are currently suspended as there is currently a strike. Numbers may be rounded.

Cautionary Statements to Investors on Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbor created by such sections and other applicable laws, including Canadian securities laws. Such forward-looking statements may include, without limitation: (i) estimates of future production and sales; (ii) estimates of future costs including cash cost, after by-product credits per ounce of silver/gold and AISC, after by-product credits, per ounce of silver/gold; (iii) estimates for 2017 for silver and gold production, silver equivalent production, cash cost, after by-product credits, AISC, after by-product credits, capital expenditures and exploration and pre-development expenditures (which assumes metal prices of gold at $1,225/oz, Ag $17.25/oz, Zn $1.30/lb, Pb $1.05; USD/CAD assumed to be $0.78, USD/MXN assumed to be $0.06) and the impact of the Lucky Friday strike; and (iv) expectations regarding the development, growth potential, financial performance and exploration potential of the Company’s projects, including the EMCP pits in Quebec and San Sebastian operations. Estimates or expectations of future events or results are based upon certain assumptions, which may prove to be incorrect. Such assumptions, include, but are not limited to: (i) there being no significant change to current geotechnical, metallurgical, hydrological and other physical conditions; (ii) permitting, development, operations and expansion of the Company’s projects being consistent with current expectations and mine plans; (iii) political/regulatory developments in any jurisdiction in which the Company operates being consistent with its current expectations; (iv) the exchange rate for the Canadian dollar to the U.S. dollar, being approximately consistent with current levels; (v) certain price assumptions for gold, silver, lead and zinc; (vi) prices for key supplies being approximately consistent with current levels; (vii) the accuracy of our current mineral reserve and mineral resource estimates; and (viii) the Company’s plans for development and production will proceed as expected and will not require revision as a result of risks or uncertainties, whether known, unknown or unanticipated. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the “forward-looking statements.” Such risks include, but are not limited to gold, silver and other metals price volatility, operating risks, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, community relations, conflict resolution and outcome of projects or oppositions, litigation, political, regulatory, labor and environmental risks, and exploration risks and results, including that mineral resources are not mineral reserves, they do not have demonstrated economic viability and there is no certainty that they can be upgraded to mineral reserves through continued exploration. For a more detailed discussion of such risks and other factors, see the Company’s 2016 Form 10-K, filed on February 23, 2017, with the Securities and Exchange Commission (SEC), as well as the Company’s other SEC filings. The Company does not undertake any obligation to release publicly revisions to any “forward-looking statement,” including, without limitation, outlook, to reflect events or circumstances after the date of this news release, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Investors should not assume that any lack of update to a previously issued “forward-looking statement” constitutes a reaffirmation of that statement. Continued reliance on “forward-looking statements” is at investors’ own risk.

Cautionary Statements to Investors on Reserves and Resources

Reporting requirements in the United States for disclosure of mineral properties are governed by the SEC and included in the SEC's Securities Act Industry Guide 7, entitled “Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations” (Guide 7). However, the Company is also a “reporting issuer” under Canadian securities laws, which require estimates of mineral resources and reserves to be prepared in accordance with Canadian National Instrument 43-101 (NI 43-101). NI 43-101 requires all disclosure of estimates of potential mineral resources and reserves to be disclosed in accordance with its requirements. Such Canadian information is being included here to satisfy the Company's “public disclosure” obligations under Regulation FD of the SEC and to provide U.S. holders with ready access to information publicly available in Canada.

Reporting requirements in the United States for disclosure of mineral properties under Guide 7 and the requirements in Canada under NI 43-101 standards are substantially different. This document contains a summary of certain estimates of the Company, not only of proven and probable reserves within the meaning of Guide 7, which requires the preparation of a “final” or “bankable” feasibility study demonstrating the economic feasibility of mining and processing the mineralization using the three-year historical average price for any reserve or cash flow analysis to designate reserves and that the primary environmental analysis or report be filed with the appropriate governmental authority, but also of mineral resource and mineral reserve estimates estimated in accordance with the definitional standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. The terms “measured resources”, “indicated resources,” and “inferred resources” are Canadian mining terms as defined in accordance with NI 43-101. These terms are not defined under Guide 7 and are not normally permitted to be used in reports and registration statements filed with the SEC in the United States, except where required to be disclosed by foreign law. The term “resource” does not equate to the term “reserve”. Under Guide 7, the material described herein as “indicated resources” and “measured resources” would be characterized as “mineralized material” and is permitted to be disclosed in tonnage and grade only, not ounces. The category of “inferred resources” is not recognized by Guide 7. Investors are cautioned not to assume that any part or all of the mineral deposits in such categories will ever be converted into proven or probable reserves. “Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of such a “resource” will ever be upgraded to a higher category or will ever be economically extracted. Investors are cautioned not to assume that all or any part of a “resource” exists or is economically or legally mineable. Investors are also especially cautioned that the mere fact that such resources may be referred to in ounces of silver and/or gold, rather than in tons of mineralization and grades of silver and/or gold estimated per ton, is not an indication that such material will ever result in mined ore which is processed into commercial silver or gold.

Qualified Person (QP) Pursuant to Canadian National Instrument 43-101

Dean McDonald, PhD. P.Geo., Senior Vice President - Exploration of Hecla Mining Company, who serves as a Qualified Person under National Instrument 43-101, supervised the preparation of the scientific and technical information concerning Hecla’s mineral projects in this news release. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of sample, analytical or testing procedures for the Greens Creek Mine are contained in a technical report prepared for Hecla titled “Technical Report for the Greens Creek Mine, Juneau, Alaska, USA” effective date March 28, 2013, and for the Lucky Friday Mine are contained in a technical report prepared for Hecla titled “Technical Report on the Lucky Friday Mine Shoshone County, Idaho, USA” effective date April 2, 2014, for the Casa Berardi Mine are contained in a technical report prepared for Hecla titled "Technical Report on the Mineral Resource and Mineral Reserve Estimate for the Casa Berardi Mine, Northwestern Quebec, Canada" effective date March 31, 2014 (the "Casa Berardi Technical Report"), and for the San Sebastian Mine are contained in a technical report prepared for Hecla titled "Technical Report for the San Sebastian Ag-Au Property, Durango, Mexico" effective date September 8, 2015. Also included in these three technical reports is a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors. Copies of these technical reports are available under Hecla's profile on SEDAR at www.sedar.com.

The current Casa Berardi drill program was performed on core sawed in half and included the insertion of blanks and standards of variable grade in every 24 core samples. Standards were generally provided by Analytical Solutions Ltd and prepared in 30 gram bags. Samples were sent to the Swastika Laboratories in Swastika, Ontario, a registered accredited laboratory, where they were dried, crushed, and split for gold analysis. Analysis for gold was completed by fire assay with AA finish. Gold over-limits were analyzed by fire assay with gravimetric finish. Data received from the lab were subject to validation using in-built program triggers to identify outside limit blank or standard assays that require re-analysis. Over 5% of the original pulps and rejects are sent for re-assay to ALS Chemex in Val d’Or for quality control.

Dr. McDonald reviewed and verified information regarding drill sampling, data verification of all digitally-collected data, drill surveys and specific gravity determinations relating to the Casa Berardi mine. The review encompassed quality assurance programs and quality control measures including analytical or testing practice, chain-of-custody procedures, sample storage procedures and included independent sample collection and analysis. This review found the information and procedures meet industry standards and are adequate for Mineral Resource and Mineral Reserve estimation and mine planning purposes.

 
HECLA MINING COMPANY

Condensed Consolidated Statements of Income

(dollars and shares in thousands, except per share amounts - unaudited)

 
        Third Quarter Ended     Nine Months Ended
       

September 30,
2017

   

September 30,
2016

   

September 30,
2017

   

September 30,
2016

Sales of products       $ 140,839       $ 179,393       $ 417,662       $ 481,712  
Cost of sales and other direct production costs         68,358       90,529       224,537       249,162  
Depreciation, depletion and amortization         28,844       30,179       83,365       84,592  
          97,202       120,708       307,902       333,754  
Gross profit         43,637       58,685       109,760       147,958  
                           
Other operating expenses:                          
General and administrative         9,529       11,155       29,044       31,728  
Exploration         7,255       3,859       17,622       10,171  
Pre-development         1,757       550       4,061       1,475  
Research and development         1,130             2,125        
Other operating expense         134       962       1,615       2,535  
Gain on disposition of properties, plants, equipment and mineral interests         (4,830 )     (8 )     (4,924 )     (319 )
Provision or closed operations and reclamation         2,940       2,162       5,044       4,779  
Lucky Friday suspension-related costs         4,780             14,385        
Acquisition costs               1,765             2,167  
          22,695       20,445       68,972       52,536  
Income from operations         20,942       38,240       40,788       95,422  
Other income (expense):                          
(Loss) gain on derivative contracts         (11,226 )     7       (16,548 )      
Loss on disposition of investments                     (167 )      
Unrealized (loss) gain on investments         (124 )     49       (73 )     488  
Foreign exchange (loss) gain         (4,764 )     2,375       (10,909 )     (7,713 )
Interest and other income         541       145       1,185       346  
Interest expense, net of amount capitalized         (9,358 )     (5,574 )     (28,423 )     (16,655 )
          (24,931 )     (2,998 )     (54,935 )     (23,534 )
(Loss) income before income taxes         (3,989 )     35,242       (14,147 )     71,888  
Income tax benefit (provision)         5,401       (9,453 )     18,377       (22,603 )
Net income         1,412       25,789       4,230       49,285  
Preferred stock dividends         (138 )     (138 )     (414 )     (414 )
Income applicable to common shareholders       $ 1,274       $ 25,651       $ 3,816       $ 48,871  
Basic income per common share after preferred dividends       $ 0.00       $ 0.07       $ 0.01       $ 0.13  
Diluted income per common share after preferred dividends       $ 0.00       $ 0.07       $ 0.01       $ 0.13  
Weighted average number of common shares outstanding - basic         398,848       387,578       396,809       383,458  
Weighted average number of common shares outstanding - diluted         401,258       389,918       400,176       386,318  
                                     

 

 
HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and share in thousands - unaudited)

 
        September 30, 2017     December 31, 2016
ASSETS              
Current assets:              
Cash and cash equivalents       $ 172,923       $ 169,777  
Short-term investments and securities         32,973         29,117  
Accounts receivable:              
Trade         6,982         20,082  
Other, net         19,413         9,967  
Inventories         62,727         50,023  
Other current assets         16,317         12,125  
Total current assets         311,335         291,091  
Non-current investments         7,098         5,002  
Non-current restricted cash and investments         1,076         2,200  
Properties, plants, equipment and mineral interests, net         2,025,607         2,032,685  
Non-current deferred income taxes         44,683         35,815  
Other non-current assets and deferred charges         6,384         4,884  
Total assets       $ 2,396,183       $ 2,371,677  
               
LIABILITIES              
Current liabilities:              
Accounts payable and accrued liabilities       $ 46,847       $ 60,064  
Accrued payroll and related benefits         29,085         36,515  
Accrued taxes         5,081         9,061  
Current portion of capital leases         5,852         5,653  
Current portion of debt                 470  
Current portion of accrued reclamation and closure costs         6,514         5,653  
Other current liabilities         22,418         8,809  
Total current liabilities         115,797         126,225  
Capital leases         7,436         5,838  
Accrued reclamation and closure costs         80,758         79,927  
Long-term debt         501,917         500,979  
Non-current deferred tax liability         122,723         122,855  
Non-current pension liability         43,451         44,491  
Other non-current liabilities         11,160         11,518  
Total liabilities         883,242         891,833  
               
SHAREHOLDERS’ EQUITY              
Preferred stock         39         39  
Common stock         100,886         99,806  
Capital surplus         1,617,669         1,597,212  
Accumulated deficit         (166,602 )       (167,437 )
Accumulated other comprehensive loss         (20,884 )       (34,602 )
Treasury stock         (18,167 )       (15,174 )
Total shareholders’ equity         1,512,941         1,479,844  
Total liabilities and shareholders’ equity       $ 2,396,183       $ 2,371,677  
Common shares outstanding         399,019         395,287  
                       

 

 
HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)

 
        Nine Months Ended
       

September 30,
2017

   

September 30,
2016

OPERATING ACTIVITIES              
Net income       $ 4,230       $ 49,285  
Non-cash elements included in net income:              
Depreciation, depletion and amortization         87,634         83,900  
Loss on disposition of investments         167          
Gain on disposition of properties, plants, equipment and mineral interests         (4,924 )       (319 )
Unrealized loss (gain) on investments         73         (488 )
Provision for reclamation and closure costs         3,379         3,685  
Acquisition costs                 1,048  
Stock compensation         4,943         4,814  
Deferred income taxes         (24,280 )       10,330  
Amortization of loan origination fees         1,415         1,397  
Loss on derivative contracts         16,718         337  
Foreign exchange loss         11,171         7,555  
Other non-cash items, net         (1 )       5  
Change in assets and liabilities:              
Accounts receivable         4,903         5,776  
Inventories         (9,611 )       (44 )
Other current and non-current assets         (2,685 )       (539 )
Accounts payable and accrued liabilities         (7,759 )       2,042  
Accrued payroll and related benefits         (913 )       8,621  
Accrued taxes         (4,469 )       (2,894 )
Accrued reclamation and closure costs and other non-current liabilities         (5,876 )       (1,397 )
Cash provided by operating activities         74,115         173,114  
               
INVESTING ACTIVITIES              
Additions to properties, plants, equipment and mineral interests         (70,390 )       (120,236 )
Acquisition of other companies, net of cash acquired                 (3,931 )
Proceeds from disposition of properties, plants and equipment         151         348  
Insurance proceeds received for damaged property         5,628          
Purchases of investments         (36,916 )       (32,847 )
Maturities of short-term investments         31,169         7,240  
Changes in restricted cash and investment balances         1,124         (3,900 )
Net cash used in investing activities         (69,234 )       (153,326 )
               
FINANCING ACTIVITIES              
Proceeds from issue of stock, net of related costs         9,610         8,121  
Acquisition of treasury shares         (2,993 )       (4,363 )
Dividends paid to common shareholders         (2,978 )       (2,882 )
Dividends paid to preferred shareholders         (414 )       (414 )
Debt origination fees         (476 )       (107 )
Repayments of debt         (470 )       (1,807 )
Payments on capital leases         (5,065 )       (6,328 )
Net cash used in financing activities         (2,786 )       (7,780 )
Effect of exchange rates on cash         1,051         627  
Net increase in cash and cash equivalents         3,146         12,635  
Cash and cash equivalents at beginning of period         169,777         155,209  
Cash and cash equivalents at end of period       $ 172,923       $ 167,844  
                       

 

 
HECLA MINING COMPANY

Production Data

 
        Three Months Ended     Nine Months Ended
       

September 30,
2017

   

September 30,
2016

   

September 30,
2017

   

September 30,
2016

GREENS CREEK UNIT                          
Tons of ore milled         219,983         202,523       627,900       610,879
Mining cost per ton       $ 69.46       $ 69.66     $ 69.64     $ 69.20
Milling cost per ton       $ 31.01       $ 31.55     $ 32.38     $ 31.07
Ore grade milled - Silver (oz./ton)         13.65         15.40       12.84       14.61
Ore grade milled - Gold (oz./ton)         0.089         0.088       0.095       0.095
Ore grade milled - Lead (%)         2.77         2.92       2.83       3.05
Ore grade milled - Zinc (%)         7.47         6.86       7.49       7.90
Silver produced (oz.)         2,344,315         2,445,328       6,205,659       7,020,688
Gold produced (oz.)         12,563         11,988       39,289       39,497
Lead produced (tons)         4,851         4,803       14,080       15,236
Zinc produced (tons)         14,325         12,144       40,697       42,330
Cash cost, after by-product credits, per silver ounce (1)       $ (0.15 )     $ 4.80     $ 0.73     $ 4.68
AISC, after by-product credits, per silver ounce (1)       $ 4.47       $ 11.02     $ 5.60     $ 10.18
Capital additions (in thousands)       $ 8,206       $ 14,163     $ 24,891     $ 35,200
LUCKY FRIDAY UNIT                          
Tons of ore milled         7,302         74,397       64,371       216,247
Mining cost per ton       $ 150.89       $ 99.13     $ 112.60     $ 99.27
Milling cost per ton       $ 13.15       $ 25.99     $ 22.93     $ 24.77
Ore grade milled - Silver (oz./ton)         12.87         12.40       12.45       13.05
Ore grade milled - Lead (%)         7.68         7.89       7.12       8.01
Ore grade milled - Zinc (%)         3.21         3.85       3.9       3.94
Silver produced (oz.)         88,298         887,364       769,080       2,721,991
Lead produced (tons)         519         5,608       4,346       16,604
Zinc produced (tons)         172         2,681       2,303       7,991
Cash cost, after by-product credits, per silver ounce (1)       $ 11.60       $ 9.07     $ 6.58     $ 9.34
AISC, after by-product credits, per silver ounce (1)       $ 13.37       $ 20.22     $ 12.21     $ 21.35
Capital additions (in thousands)       $ 208       $ 9,725     $ 5,000     $ 32,218
                                     

 

               
       

Three Months Ended

   

Nine Months Ended

       

September 30,
2017

   

September 30,
2016

   

September 30,
2017

   

September 30,
2016

CASA BERARDI UNIT                          
Tons of ore milled - underground         206,209         201,086         606,201         636,274  
Tons of ore milled - surface pit         119,936         57,014         343,745         57,014  
Tons of ore milled - total         326,145         258,100         949,946         693,288  
Surface tons mined - ore and waste         2,010,524         1,217,526         6,427,067         1,217,526  
Mining cost per ton of ore - underground       $ 98.96       $ 86.22       $ 98.71       $ 88.85  

Mining cost per ton of ore - combined

      $ 82.95       $ 92.17       $ 81.95       $ 90.53  
Mining cost per ton of ore and waste - surface tons mined       $ 3.42       $ 5.05       $ 2.84       $ 5.05  
Milling cost per ton       $ 16.19       $ 18.07       $ 16.28       $ 18.88  
Ore grade milled - Gold (oz./ton) - underground         0.193         0.161         0.167         0.181  
Ore grade milled - Gold (oz./ton) - surface pit         0.084         0.070         0.086         0.070  
Ore grade milled - Gold (oz./ton) - combined         0.153         0.141         0.137         0.172  
Ore grade milled - Silver (oz./ton)         0.03         0.04         0.03         0.04  
Gold produced (oz.) - underground         35,192         28,437         87,622         100,770  
Gold produced (oz.) - surface pit         8,949         3,512         25,587         3,512  
Gold produced (oz.) - total         44,141         31,949         113,209         104,282  
Cash cost, after by-product credits, per gold ounce (1)       $ 750       $ 915       $ 858       $ 750  
AISC, after by-product credits, per gold ounce (1)       $ 1,091       $ 1,442       $ 1,226       $ 1,243  
Capital additions (in thousands)       $ 13,775       $ 17,603       $ 38,249       $ 50,385  
SAN SEBASTIAN                          
Tons of ore milled         36,482         40,192         111,623         108,750  
Mining cost per ton       $ 35.69       $ 59.49       $ 38.70       $ 83.31  
Milling cost per ton       $ 69.42       $ 66.88       $ 66.64       $ 68.52  
Ore grade milled - Silver (oz./ton)         25.48         25.77         23.71         33.70  
Ore grade milled - Gold (oz./ton)         0.184         0.216         0.183         0.265  
Silver produced (oz.)         880,885         975,610         2,498,638         3,434,052  
Gold produced (oz.)         6,342         8,189         19,222         27,000  
Cash cost, after by-product credits, per silver ounce (1)       $ (3.12 )     $ (4.03 )     $ (3.23 )     $ (3.40 )
AISC, after by-product credits, per silver ounce (1)       $ (0.83 )     $ (2.39 )     $ (0.14 )     $ (2.25 )
Capital additions (in thousands)       $ 3,350       $ 530       $ 7,480       $ 1,223  
                           
(1) Cash cost, after by-product credits, per ounce and AISC, after by-product credits. per ounce represent non-U.S. Generally Accepted Accounting Principles (GAAP) measurements. A reconciliation of cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) to cash cost, after by-product credits can be found in the cash cost per ounce reconciliation section of this news release. Gold, lead and zinc produced have been treated as by-product credits in calculating silver costs per ounce. The primary metal produced at Casa Berardi is gold, with a by-product credit for the value of silver production.
 

 

Non-GAAP Measures
(Unaudited)

Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP)

The tables below present reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion and amortization to the non-GAAP measures of (i) Cash Cost, Before By-product Credits, (ii) Cash Cost, After By-product Credits, (iii) AISC, Before By-product Credits and (iv) AISC, After By-product Credits for our operations at the Greens Creek, Lucky Friday, San Sebastian and Casa Berardi units and for the Company for the three- and nine-month periods ended September 30, 2017 and 2016, and for estimated amounts for the twelve months ended December 31, 2017.

Cash Cost, After By-product Credits, per Ounce is a measure developed by precious metals companies (including the Silver Institute) in an effort to provide a uniform standard for comparison purposes. There can be no assurance, however, that these non-GAAP measures as we report them are the same as those reported by other mining companies.

Cash Cost, After By-product Credits, per Ounce is an important operating statistic that we utilize to measure each mine's operating performance. We have recently started reporting AISC, After By-product Credits, per Ounce which we use as a measure of our mines' net cash flow after costs for exploration, pre-development, reclamation, and sustaining capital. This is similar to the Cash Cost, After By-product Credits, per Ounce non-GAAP measure we report, but also includes on-site exploration, reclamation, and sustaining capital costs. Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce also allow us to benchmark the performance of each of our mines versus those of our competitors. As a primary silver mining company, we also use these statistics on an aggregate basis - aggregating the Greens Creek, Lucky Friday and San Sebastian mines - to compare our performance with that of other primary silver mining companies. With regard to Casa Berardi, we use Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce to compare its performance with other gold mines. Similarly, these statistics are useful in identifying acquisition and investment opportunities as they provide a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics.

Cash Cost, Before By-product Credits and AISC, Before By-product Credits include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs, royalties and mining production taxes. AISC, Before By-product Credits for each mine also includes on-site exploration, reclamation, and sustaining capital costs. AISC, Before By-product Credits for our consolidated silver properties also includes corporate costs for general and administrative expense, exploration and sustaining capital projects. By-product credits include revenues earned from all metals other than the primary metal produced at each unit. As depicted in the tables below, by-product credits comprise an essential element of our silver unit cost structure, distinguishing our silver operations due to the polymetallic nature of their orebodies.

In addition to the uses described above, Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce provide management and investors an indication of operating cash flow, after consideration of the average price, received from production. We also use these measurements for the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective.

The Casa Berardi section below reports Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce for the production of gold, its primary product, and by-product revenues earned from silver, which is a by-product at Casa Berardi. Only costs and ounces produced relating to units with the same primary product are combined to represent Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce. Thus, the gold produced at our Casa Berardi unit is not included as a by-product credit when calculating Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the total of Greens Creek, Lucky Friday and San Sebastian, our combined silver properties. Similarly, the silver produced at our other three units is not included as a by-product credit when calculating the similar gold metrics for Casa Berardi.

         
In thousands (except per ounce amounts)       Three Months Ended September 30, 2017
       

Greens
Creek

   

Lucky
Friday(2)

   

San
Sebastian

    Corporate(3)    

Total
Silver

   

Casa
Berardi
(Gold)

    Total
Cost of sales and other direct production costs and depreciation, depletion and amortization       $ 41,927             $ 6,680             $ 48,607       $ 48,595       $ 97,202  
Depreciation, depletion and amortization         (12,607 )             (641 )             (13,248 )       (15,596 )       (28,844 )
Treatment costs         12,067       440         422               12,929         682         13,611  
Change in product inventory         7,675       1,960         (627 )             9,008         (288 )       8,720  
Reclamation and other costs         (394 )     18         (494 )             (870 )       (124 )       (994 )
Cash Cost, Before By-product Credits (1)         48,668       2,418         5,340               56,426         33,269         89,695  
Reclamation and other costs         666       38         117               821         123         944  
Exploration         1,944       (2 )       1,495       477       3,914         1,161         5,075  
Sustaining capital         8,210       119         402       1,105       9,836         13,775         23,611  
General and administrative                         9,529       9,529               9,529  
AISC, Before By-product Credits (1)         59,488       2,573         7,354               80,526         48,328         128,854  
By-product credits:                                            
Zinc         (27,046 )     (293 )                   (27,339 )             (27,339 )
Gold         (13,907 )             (8,088 )             (21,995 )             (21,995 )
Lead         (8,067 )     (1,102 )                   (9,169 )             (9,169 )
Silver                                       (161 )       (161 )
Total By-product credits         (49,020 )     (1,395 )       (8,088 )             (58,503 )       (161 )       (58,664 )
Cash Cost, After By-product Credits       $ (352 )     $ 1,023       $ (2,748 )           $ (2,077 )     $ 33,108       $ 31,031  
AISC, After By-product Credits       $ 10,468       $ 1,178       $ (734 )           $ 22,023       $ 48,167       $ 70,190  
Divided by ounces produced         2,344       88         880               3,312         44        
Cash Cost, Before By-product Credits, per Ounce       $ 20.75       $ 27.44       $ 6.07             $ 17.03       $ 753.70        
By-product credits per ounce         (20.90 )     (15.84 )       (9.19 )             (17.66 )       (3.65 )      
Cash Cost, After By-product Credits, per Ounce       $ (0.15 )     $ 11.60       $ (3.12 )           $ (0.63 )     $ 750.05        
AISC, Before By-product Credits, per Ounce       $ 25.37       $ 29.21       $ 8.36             $ 24.31       $ 1,094.86        
By-product credits per ounce         (20.90 )     (15.84 )       (9.19 )             (17.66 )       (3.65 )      
AISC, After By-product Credits, per Ounce       $ 4.47       $ 13.37       $ (0.83 )           $ 6.65       $ 1,091.21        
                                               

 

         
In thousands (except per ounce amounts)       Three Months Ended September 30, 2016
       

Greens
Creek

   

Lucky
Friday(2)

   

San
Sebastian

   

Corporate(3)

   

Total
Silver

   

Casa
Berardi
(Gold)

    Total
Cost of sales and other direct production costs and depreciation, depletion and amortization       $ 58,397       $ 19,484       $ 6,532             $ 84,413       $ 36,295       $ 120,708  
Depreciation, depletion and amortization         (16,091 )       (2,946 )       (677 )             (19,714 )       (10,465 )       (30,179 )
Treatment costs         15,114         5,211         348               20,673         218         20,891  
Change in product inventory         (10,407 )       (46 )       930               (9,523 )       3,460         (6,063 )
Reclamation and other costs         2,273         (171 )       (140 )             1,962         (115 )       1,847  
Cash Cost, Before By-product Credits (1)         49,286         21,532         6,993               77,811         29,393         107,204  
Reclamation and other costs         682         165         42               889         117         1,006  
Exploration         349                 1,051       421       1,821         655         2,476  
Sustaining capital         14,162         9,725         506       76       24,469         16,078         40,547  
General and administrative                         11,155       11,155               11,155  
AISC, Before By-product Credits (1)         64,479         31,422         8,592               116,145         46,243         162,388  
By-product credits:                                            
Zinc         (17,152 )       (4,201 )                   (21,353 )             (21,353 )
Gold         (13,807 )             (10,922 )             (24,729 )             (24,729 )
Lead         (6,577 )       (9,284 )                   (15,861 )             (15,861 )
Silver                                       (162 )       (162 )
Total By-product credits         (37,536 )       (13,485 )       (10,922 )             (61,943 )       (162 )       (62,105 )
Cash Cost, After By-product Credits       $ 11,750       $ 8,047       $ (3,929 )           $ 15,868       $ 29,231       $ 45,099  
AISC, After By-product Credits       $ 26,943       $ 17,937       $ (2,330 )           $ 54,202       $ 46,081       $ 100,283  
Divided by ounces produced         2,445         887         976               4,308         32        
Cash Cost, Before By-product Credits, per Ounce       $ 20.15       $ 24.26       $ 7.16             $ 18.06       $ 920.00        
By-product credits per ounce         (15.35 )       (15.19 )       (11.19 )             (14.38 )       (5.07 )      
Cash Cost, After By-product Credits, per Ounce       $ 4.80       $ 9.07       $ (4.03 )           $ 3.68       $ 914.93        
AISC, Before By-product Credits, per Ounce       $ 26.37       $ 35.41       $ 8.80             $ 26.96       $ 1,447.40        
By-product credits per ounce         (15.35 )       (15.19 )       (11.19 )             (14.38 )       (5.07 )      
AISC, After By-product Credits, per Ounce       $ 11.02       $ 20.22       $ (2.39 )           $ 12.58       $ 1,442.33        
                                             

 

         
In thousands (except per ounce amounts)       Nine Months Ended September 30, 2017
       

Greens
Creek

   

Lucky
Friday(2)

   

San
Sebastian

    Corporate(3)    

Total
Silver

   

Casa
Berardi
(Gold)

    Total
Cost of sales and other direct production costs and depreciation, depletion and amortization       $ 140,241       $ 14,542       $ 18,377             $ 173,160       $ 134,742       $ 307,902  
Depreciation, depletion and amortization         (39,442 )       (2,433 )       (2,036 )             (43,911 )       (39,454 )       (83,365 )
Treatment costs         37,621         4,257         906               42,784         1,774         44,558  
Change in product inventory         5,398         1,811         (192 )             7,017         881         7,898  
Reclamation and other costs         (1,474 )       (163 )       (1,089 )             (2,726 )       (354 )       (3,080 )
Cash Cost, Before By-product Credits (1)         142,344         18,014         15,966               176,324         97,589         273,913  
Reclamation and other costs         1,999         217         351               2,567         353         2,920  
Exploration         3,339         (1 )       4,984       1,307       9,629         3,029         12,658  
Sustaining capital         24,895         4,109         2,379       2,275       33,658         38,245         71,903  
General and administrative                         29,044       29,044               29,044  
AISC, Before By-product Credits (1)         172,577         22,339         23,680               251,222         139,216         390,438  
By-product credits:                                            
Zinc         (72,472 )       (4,353 )                   (76,825 )             (76,825 )
Gold         (42,675 )             (24,032 )             (66,707 )             (66,707 )
Lead         (22,696 )       (8,599 )                   (31,295 )             (31,295 )
Silver                                       (450 )       (450 )
Total By-product credits         (137,843 )       (12,952 )       (24,032 )             (174,827 )       (450 )       (175,277 )
Cash Cost, After By-product Credits       $ 4,501       $ 5,062       $ (8,066 )           $ 1,497       $ 97,139       $ 98,636  
AISC, After By-product Credits       $ 34,734       $ 9,387       $ (352 )           $ 76,395       $ 138,766       $ 215,161  
Divided by ounces produced         6,206         769         2,498               9,473         113        
Cash Cost, Before By-product Credits, per Ounce       $ 22.94       $ 23.42       $ 6.39             $ 18.62       $ 862.02        
By-product credits per ounce         (22.21 )       (16.84 )       (9.62 )             (18.46 )       (3.97 )      
Cash Cost, After By-product Credits, per Ounce       $ 0.73       $ 6.58       $ (3.23 )           $ 0.16       $ 858.05        
AISC, Before By-product Credits, per Ounce       $ 27.81       $ 29.05       $ 9.48             $ 26.52       $ 1,229.72        
By-product credits per ounce         (22.21 )       (16.84 )       (9.62 )             (18.46 )       (3.97 )      
AISC, After By-product Credits, per Ounce       $ 5.60       $ 12.21       $ (0.14 )           $ 8.06       $ 1,225.75        
                                                                 

 

         
In thousands (except per ounce amounts)       Nine Months Ended September 30, 2016
       

Greens
Creek

   

Lucky
Friday(2)

   

San
Sebastian

    Corporate(3)    

Total
Silver

   

Casa
Berardi
(Gold)

    Total
Cost of sales and other direct production costs and depreciation, depletion and amortization       $ 146,984       $ 56,696       $ 23,435             $ 227,115       $ 106,639       $ 333,754  
Depreciation, depletion and amortization         (40,746 )       (8,775 )       (2,508 )             (52,029 )       (32,563 )       (84,592 )
Treatment costs         46,069         15,323         1,193               62,585         627         63,212  
Change in product inventory         (6,083 )       (1,102 )       1,743               (5,442 )       4,212         (1,230 )
Reclamation and other costs         348         (556 )       (1,583 )             (1,791 )       (344 )       (2,135 )
Cash Cost, Before By-product Credits (1)         146,572         61,586         22,280               230,438         78,571         309,009  
Reclamation and other costs         2,045         495         126               2,666         345         3,011  
Exploration         1,368                 2,349       1,286       5,003         2,280         7,283  
Sustaining capital         35,199         32,203         1,494       486       69,382         48,860         118,242  
General and administrative                         31,728       31,728               31,728  
AISC, Before By-product Credits (1)         185,184         94,284         26,249               339,217         130,056         469,273  
By-product credits:                                            
Zinc         (52,104 )       (10,685 )                   (62,789 )             (62,789 )
Gold         (42,017 )             (33,961 )             (75,978 )             (75,978 )
Lead         (19,598 )       (25,485 )                   (45,083 )             (45,083 )
Silver                                       (409 )       (409 )
Total By-product credits         (113,719 )       (36,170 )       (33,961 )             (183,850 )       (409 )       (184,259 )
Cash Cost, After By-product Credits       $ 32,853       $ 25,416       $ (11,681 )           $ 46,588       $ 78,162       $ 124,750  
AISC, After By-product Credits       $ 71,465       $ 58,114       $ (7,712 )           $ 155,367       $ 129,647       $ 285,014  
Divided by ounces produced         7,021         2,722         3,434               13,177         104        
Cash Cost, Before By-product Credits, per Ounce       $ 20.88       $ 22.63       $ 6.49             $ 17.49       $ 753.45        
By-product credits per ounce         (16.20 )       (13.29 )       (9.89 )             (13.95 )       (3.92 )      
Cash Cost, After By-product Credits, per Ounce       $ 4.68       $ 9.34       $ (3.40 )           $ 3.54       $ 749.53        
AISC, Before By-product Credits, per Ounce       $ 26.38       $ 34.64       $ 7.64             $ 25.74       $ 1,247.15        
By-product credits per ounce         (16.20 )       (13.29 )       (9.89 )             (13.95 )       (3.92 )      
AISC, After By-product Credits, per Ounce       $ 10.18       $ 21.35       $ (2.25 )           $ 11.79       $ 1,243.23        
                                             

 

         
In thousands (except per ounce amounts)       Estimate for the Twelve Months Ended December 31, 2017
       

Greens
Creek

   

Lucky
Friday(2)

   

San
Sebastian

    Corporate(3)    

Total
Silver

   

Casa
Berardi
(Gold)

    Total
Cost of sales and other direct production costs and depreciation, depletion and amortization       $ 201,000       $ 15,000       $ 24,000             $ 240,000       $ 181,000       $ 421,000  
Depreciation, depletion and amortization         (56,000 )       (3,000 )       (3,000 )             (62,000 )       (55,000 )       (117,000 )
Treatment costs         48,000         5,000         1,000               54,000         1,000         55,000  
Change in product inventory         (1,000 )       3,000         2,000               4,000         (1,000 )       3,000  
Reclamation and other costs         (2,000 )       1,000         1,000                       (1,000 )       (1,000 )
Cash Cost, Before By-product Credits (1)         190,000         21,000         25,000               236,000         125,000         361,000  
Reclamation and other costs         2,000                 1,000               3,000         1,000         4,000  
Exploration         4,000                 5,000       2,500       11,500         4,000         15,500  
Sustaining capital         39,000         4,400         3,000       2,000       48,400         48,000         96,400  
General and administrative                         35,000       35,000               35,000  
AISC, Before By-product Credits (1)         235,000         25,400         34,000               333,900         178,000         511,900  
By-product credits:                                            
Zinc         (97,000 )       (5,000 )                   (102,000 )             (102,000 )
Gold         (56,000 )             (31,000 )             (87,000 )             (87,000 )
Lead         (30,000 )       (10,000 )                   (40,000 )             (40,000 )
Silver                                       (1,000 )       (1,000 )

Total By-product credits

        (183,000 )       (15,000 )       (31,000 )             (229,000 )       (1,000 )       (230,000 )
Cash Cost, After By-product Credits       $ 7,000       $ 6,000       $ (6,000 )           $ 7,000       $ 124,000       $ 131,000  
AISC, After By-product Credits       $ 52,000       $ 10,400       $ 3,000             $ 104,900       $ 177,000       $ 281,900  
Divided by ounces produced         7,800         800         3,000               11,600         155        
Cash Cost, Before By-product Credits, per Ounce       $ 24.36       $ 26.25       $ 8.33             $ 20.34       $ 806        
By-product credits per ounce         (23.46 )       (18.75 )       (10.33 )             (19.74 )       (6 )      
Cash Cost, After By-product Credits, per Ounce       $ 0.90       $ 7.50       $ (2.00 )           $ 0.60       $ 800        
AISC, Before By-product Credits, per Ounce       $ 30.13       $ 31.75       $ 11.33             $ 28.78       $ 1,148        
By-product credits per ounce         (23.46 )       (18.75 )       (10.33 )             (19.74 )       (6 )      
AISC, After By-product Credits, per Ounce       $ 6.67       $ 13.00       $ 1.00             $ 9.04       $ 1,142        
                                             
(1)     Includes all direct and indirect operating costs related to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs, royalties and mining production taxes, before by-product revenues earned from all metals other than the primary metal produced at each unit. AISC, Before By-product Credits also includes on-site exploration, reclamation, and sustaining capital costs.
       
(2)     The unionized employees at Lucky Friday have been on strike since March 13, 2017, and production at Lucky Friday has been limited since that time. For the first nine months of 2017, costs related to suspension of full production totaling approximately $11.1 million, along with $3.3 million in non-cash depreciation expense for that period, have been excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization, Cash Cost, Before By-product Credits, Cash Cost, After By-product Credits, AISC, Before By-product Credits, and AISC, After By-product Credits.
       
(3)     AISC, Before By-product Credits for our consolidated silver properties includes corporate costs for general and administrative expense, exploration and sustaining capital.
       

 

Reconciliation of Net Income Applicable to Common Shareholders (GAAP) to Adjusted Net Income Applicable to Common Stockholders (non-GAAP)

This release refers to a non-GAAP measure of adjusted net income applicable to common stockholders and adjusted net income per share, which are indicators of our performance. They exclude certain impacts which are of a nature which we believe are not reflective of our underlying performance. Management believes that adjusted net income per common share provides investors with the ability to better evaluate our underlying operating performance.

               
Dollars are in thousands (except per share amounts)       Three Months Ended
September 30,
    Nine Months Ended
September 30,
        2017     2016     2017     2016
Net income applicable to common shareholders (GAAP)       $ 1,274       $ 25,651       $ 3,816     $ 48,871  
Adjusting items:                        
Losses (gains) on derivatives contracts         11,226         (7 )       16,548        
Provisional price (gains) losses         (1,244 )       1,141         (564 )     (376 )
Environmental accruals                 689               1,351  
Foreign exchange loss (gain)         4,764         (2,375 )       10,909       7,713  
Lucky Friday suspension-related costs         4,780                 14,385        
Acquisition costs                 1,765               2,167  
Bond offering costs                         887        
Gain on disposal of properties, plants, equipment and mineral interests         (4,830 )       (8 )       (4,924 )     (319 )
Nonrecurring deferred income tax adjustments                         (17,486 )      
Income tax effect of above adjustments                 (1,432 )

 

          (1,129 )
Adjusted net income applicable to common shareholders       $ 15,970       $ 25,424       $ 23,571     $ 58,278  
Weighted average shares - basic         398,848         387,578         396,809       383,458  
Weighted average shares - diluted         401,258         389,918         400,176       386,318  
Basic adjusted net income per common share       $ 0.04       $ 0.07       $ 0.06     $ 0.15  
Diluted adjusted net income per common share       $ 0.04       $ 0.07       $ 0.06     $ 0.15  
                         

 

Reconciliation of Net Income (Loss) (GAAP) and Debt (GAAP) to Adjusted EBITDA (non-GAAP) and Net Debt (non-GAAP)

This release refers to the non-GAAP measures of adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), which is a measure of our operating performance, and net debt to adjusted EBITDA for the last 12 months (or "LTM adjusted EBITDA"), which is a measure of our ability to service our debt. Adjusted EBITDA is calculated as net income (loss) before the following items: interest expense, income tax provision, depreciation, depletion, and amortization expense, exploration expense, pre-development expense, acquisition costs, foreign exchange gains and losses, gains and losses on derivative contracts, Lucky Friday suspension-related costs, provisional price gains and losses, stock-based compensation, unrealized gains on investments, provisions for closed operations, and interest and other income (expense). Net debt is calculated as total debt, which consists of the liability balances for our Senior Notes, capital leases, and other notes payable, less the total of our cash and cash equivalents and short-term investments. Management believes that, when presented in conjunction with comparable GAAP measures, Adjusted EBITDA and net debt to LTM adjusted EBITDA are useful to investors in evaluating our operating performance and ability to meet our debt obligations. The following table reconciles net income (loss) and debt to Adjusted EBITDA and net debt:

                     
Dollars are in thousands       Three Months Ended     Nine Months Ended     Twelve Months Ended
       

September
30, 2017

   

September
30, 2016

   

September
30, 2017

   

September
30, 2016

   

September
30, 2017

   

September
30, 2016

Net income (loss)       $ 1,412       $ 25,789       $ 4,230       $ 49,285       $ 24,492       $ (13,678 )
Plus: Interest expense, net of amount capitalized         9,358         5,574         28,423         16,655         33,564         22,694  
Plus/(Less): Income taxes         (5,401 )       9,453         (18,377 )       22,603         (13,552 )       83,106  
Plus: Depreciation, depletion and amortization         28,844         30,179         83,365         84,592         114,241         115,432  
Plus: Exploration expense         7,255         3,859         17,622         10,171         22,171         13,168  
Plus: Pre-development expense         1,757         550         4,061         1,475         5,723         1,854  
Plus: Acquisition costs                 1,765                 2,167         528         2,167  
Plus: Lucky Friday suspension-related costs         4,780                 14,385                 14,385          
Less: Gain on disposition of properties, plants, equipment and mineral interests         (4,830 )       (8 )       (4,924 )       (319 )       (4,752 )       (90 )
Plus: Stock-based compensation         2,120         1,347         4,951         4,561         6,322         5,950  
Plus: Provision for closed operations and environmental matters         1,132         1,680         3,379         3,685         4,507         4,693  
Plus/(Less): Foreign exchange loss (gain)         4,764         (2,375 )       10,909         7,713         6,122         2,680  
Plus/(Less): Losses (gains) on derivative contracts         11,226         (7 )       16,548                 12,125          
(Less)/Plus: Provisional price losses/(gains)         (1,244 )       1,141         (564 )       (376 )       730         (449 )
(Less)/Plus: Other         (417 )       (194 )       (945 )       (834 )       (441 )       (1,426 )
Adjusted EBITDA       $ 60,756       $ 78,753       $ 163,063       $ 201,378       $ 226,165       $ 236,101  
Total debt                               $ 515,205       $ 515,757  
Less: Cash, cash equivalents and short-term investments                               $ (205,896 )     $ (192,378 )
Net debt                               $ 309,309       $ 323,379  
Net debt/LTM adjusted EBITDA (non-GAAP)                                 1.4         1.4  
                                       

 

Reconciliation of Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)

This release refers to a non-GAAP measure of free cash flow, calculated as cash provided by operating activities, less additions to properties, plants, equipment and mineral interests. Management believes that, when presented in conjunction with comparable GAAP measures, free cash flow is useful to investors in evaluating our operating performance. The following table reconciles cash provided by operating activities to free cash flow:

         
Dollars are in thousands       Three Months Ended
       

September
30, 2017

   

September
30, 2016

Cash provided by operating activities       $ 28,294       $ 86,976  
Less: Additions to properties, plants equipment and mineral interests         (24,426 )       (43,276 )
Less: Troy reclamation insurance settlement                 (16,000 )
Free cash flow       $ 3,868       $ 27,700  

 

View source version on businesswire.com: http://www.businesswire.com/news/home/20171107005615/en/

Hecla Mining Company
Mike Westerlund, 800-HECLA91 (800-432-5291)
Vice President - Investor Relations
[email protected]
www.hecla-mining.com

 

Source: Hecla Mining Company

Original Article: http://ir.hecla-mining.com/file/Index?KeyFile=390970825

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