Second highest silver revenues in company history

COEUR D’ALENE, Idaho–(BUSINESS WIRE)– Hecla Mining Company (NYSE:HL) today announced first quarter 2023 financial and operating results.

FIRST QUARTER HIGHLIGHTS

Operational

• Produced 4.0 million ounces of silver, a 10% increase over the fourth quarter of 2022 and more than any quarter since 2016.
• Record quarterly gold production of 14,885 ounces at Greens Creek; lead production was the 2^nd highest in Company’s history.
• Greens Creek achieved record quarterly throughput of 2,591 tons per day (“tpd”).
• Keno Hill development 75% complete and remains on track for third quarter mill startup.
• Achieved All-injury frequency rate (“AIFR”) of 1.13, lowest since 2012 led by Lucky Friday’s AIFR of 0.62, a safety record for the mine while at full production.

Financial

• Sales of $199.5 million with silver revenues 38% and gold revenues 35%; silver revenues were 2^nd highest in Company history.
• Consolidated silver total cost of sales of $100.8 million and cash cost and AISC per silver ounce (each after by-product credits) of $2.14 and $8.96, respectively.^3,4
• Cash flow from operations of $40.6 million, silver operations generated $89.5 million in cash flow from operations, and $68.6 million in free cash flow.²
• Net loss applicable to common stockholders of $3.3 million or $0.01 per share, and adjusted net income of $6.6 million or $0.01 per share.⁵
• Adjusted EBITDA of $61.9 million, net debt to adjusted EBITDA ratio of 1.9.¹
• Strong balance sheet with $95.9 million in cash and cash equivalents, credit facility undrawn, and $240 million in available liquidity.

Environmental, Social, Governance

• Casa Berardi received Quebec’s John T. Ryan safety award for lowest reportable injury frequency rate for the second time in three years.
• Net zero in 2022 as scope 1&2 CO₂ emissions offset with certified emission reduction credits.

Strategic

• ATAC Resources acquisition announced for CAD $31 million; transaction expected to close in the third quarter.

“As we continue our growth in silver production, silver revenues are now exceeding gold revenues for the second consecutive quarter,” said Phillips S. Baker Jr., President and CEO. “Greens Creek had excellent operational performance achieving record throughput and very strong silver and record gold production, and Lucky Friday exceeded 1.2 million ounces of silver production for third time out of the last four quarters.”

Baker continued, “Greens Creek and Lucky Friday generated $69 million in free cash flow with both mines exceeding $31 million. Our first priority in capital allocation of this free cash flow is investing it in our mines – particularly Keno Hill, which remains on track to produce more than 2.5 million ounces of silver this year, Casa Berardi, where we are beginning the transition to a primarily open pit operation, and Lucky Friday, where we are completing the ore bunker and service hoist.”

Baker concluded, “Hecla produced 45% of United States silver in 2022, making us the nation’s largest silver producer. With almost 17 million ounces of silver production expected in 2023 and potentially increasing to 20 million ounces by 2025, Hecla is expected to become Canada’s largest silver producer as well. Our production growth provides shareholders more exposure to silver from long-lived, low-cost mines that will help provide silver needed for solar power, the fastest growing renewable energy source.”

FINANCIAL OVERVIEW

In the following table and throughout this release, “total cost of sales” is comprised of cost of sales and other direct production costs and depreciation, depletion and amortization.

Net loss applicable to common stockholders decreased to $3.3 million in the first quarter of 2023 from $4.6 million in the fourth quarter of 2022 due to:

• Increased gross profit of $9.9 million due to higher revenues arising from higher realized metals prices (except lead) and lower cost of sales.
• Decreased general and administrative expenses of $2.3 million as a result of a higher incentive compensation accrued in the fourth quarter of 2022.
• Decreased provision for closed operations and environmental matters of $3.6 million reflecting the Troy Mine accrual recorded in the fourth quarter of 2022.
• Decreased exploration and pre-development expenses of $1.9 million reflecting lower expenditures across our portfolio.

The above items were partly offset by:

• Decreased fair value adjustments, net of $6.8 million resulting from changes in our marketable securities portfolio.
• Increased ramp-up and suspension costs of $3.8 million as a result of continued ramp-up at Keno Hill.
• Increased income and mining tax expense of $7.2 million, reflecting increased taxable income from our U.S. assets

Consolidated silver total cost of sales in the first quarter decreased by 2% to $100.8 million from the prior quarter due to lower fuel prices partially offset by higher labor costs. Cash costs and AISC per silver ounce, each after by-product credits, were $2.14 and $8.96, respectively.^3,4 The decrease in cash costs per ounce was due to higher silver production, lower total cost of sales, higher by-product credits due to higher gold and lead production, and higher gold prices, with AISC further impacted by lower sustaining capital due to timing of expenditures ^3,4

Consolidated total gold cost of sales decreased by 2% to $63.7 million primarily due to lower labor and consumables costs attributable to lower underground tonnage at Casa Berardi. Cash costs and AISC per gold ounce, each after by-product credits, were $1,775 and $2,392, respectively.^3,4 The increase in cash costs per ounce was primarily due to lower gold production resulting from lower grades, with AISC further impacted by higher sustaining capital.

Adjusted EBITDA for the quarter was $61.9 million, in line with the prior quarter as higher gross profit and lower depreciation, depletion and amortization and general and administrative expenses in the quarter were offset by the monetization of zinc hedges in the prior quarter. The ratio of net debt (calculated as long-term debt and finance leases less cash) to adjusted EBITDA was unchanged at 1.9, with long-term debt and finance leases of $526.0 million and cash and equivalents of $95.9 million at the end of the quarter.¹ The Company also issued stock under its ATM program in the first quarter for net proceeds of $11.9 million.

Cash provided by operating activities was $40.6 million, an increase of 12% over the prior quarter due to higher gross profit and favorable working capital changes partially offset by the monetization of zinc hedges in the prior quarter.

Capital expenditures, net of leases, totaled $54.4 million compared to $56.1 million in prior quarter. The decrease was due to timing related lower capital spend at Greens Creek, which was offset by higher capital spend at Casa Berardi primarily attributable to the tailings expansion, higher development, and equipment capital spend at Keno Hill as the mine prepares for mill startup in the third quarter of 2023, and higher capital spend at Lucky Friday with the service hoist and coarse ore bunker projects expected to be completed by the fourth quarter.

Free cash flow for the quarter was negative $13.8 million, compared to negative $20.0 million in the prior quarter due to higher gross profit, lower production costs, favorable working capital changes, and lower capital spending.²

Forward Sales Contracts for Base Metals and Foreign Currency

The Company uses financially settled forward sales contracts to manage exposures to zinc and lead price changes. On March 31, 2023, the Company had contracts covering approximately 29% of the forecasted payable zinc production for 2023 at an average price of $1.47 per pound, and 38% of the forecasted payable lead production (through 2025) at an average price of $0.99 per pound.

The Company also manages CAD exposure through forward contracts. On March 31, 2023, the Company had hedged approximately 47% of forecasted Casa Berardi CAD direct production costs through 2026 at an average CAD/USD rate of 1.32. The Company has also hedged approximately 21% of Casa Berardi capital costs through 2026 at 1.35. At Keno Hill, 70% of the total planned spend for 2023 and 2024 is hedged at an average CAD/USD rate of 1.36.

OPERATIONS OVERVIEW

Greens Creek Mine – Alaska

Greens Creek produced 2.8 million ounces of silver in the first quarter, an increase of 14% over the prior quarter due to higher throughput and grades. Gold production for the quarter was 14,885 ounces, a record in the mine’s history and a 15% increase over the prior quarter. The mine achieved yet another quarterly throughput record of 2,591 tpd.

First quarter sales were $98.6 million and increased 3% over the prior quarter due to higher metal production except for zinc, which declined due to mine sequencing, and higher realized prices for silver, gold, and zinc. Total cost of sales for the quarter were $66.3 million, a decline of 5% over the prior quarter due to both lower fuel prices and fuel consumption as hydro power availability increased during the quarter, partially offset by higher labor costs. Cash costs and AISC per silver ounce, each after by-product credits, were $1.16 and $3.82 and decreased over the prior quarter due to higher silver production, lower production costs, and higher gold by-product credits (attributable to higher gold realized price and production). AISC was also favorably impacted by lower capital spend in the quarter due to timing.^3,4

Cash flow from operations was $43.3 million and decreased slightly over the prior quarter due to unfavorable working capital changes primarily related to an increase in accounts receivables. Free cash flow for the quarter was $37.1 million, an increase of 10% over the prior quarter due to the timing of capital spend.²

Lucky Friday Mine – Idaho

Lucky Friday produced 1.3 million ounces of silver, an increase of 3% over the prior quarter attributable to higher throughput.

Sales in the first quarter were $49.1 million, an increase of 8% over the prior quarter due to higher silver and lead production and higher realized prices. Total cost of sales were $34.5 million, an increase of 5% over the prior quarter due to increased sales volumes and higher labor costs, including higher profit sharing with the miners due to increased profitability. Cash costs and AISC per silver ounce, each after by-product credits, were $4.30 and $10.69 respectively and decreased over the prior quarter due to higher production and higher by-product credits. Lower sustaining capital spend for the quarter impacted AISC favorably.^3,4

Cash flow from operations was $46.1 million, higher than that of full year 2022, and an increase of $53.6 million over the prior quarter due to favorable working capital changes, which also included the receipt of $6.7 million related to a deferred silver concentrate shipment in the fourth quarter. Capital expenditures, net of leases, were $14.7 million, as the Company continues to invest in key projects including the service hoist and coarse ore bunker, increased development, and pre-production drilling to achieve the annual throughput goal of 425,000 tons in the fourth quarter of 2023. Free cash flow was $31.4 million, an increase of $52.6 million over the prior quarter primarily due to the increase in cash flow from operations.²

Casa Berardi – Quebec

Casa Berardi produced 24,686 ounces of gold in the first quarter, a decrease of 20% over the prior quarter due to a 22% decline in overall gold grades primarily attributable to lower underground grades, partially offset by a 4% increase in mill recoveries. The mill continued to perform well, achieving a record quarterly throughput of 4,768 tpd.

Total cost of sales were $63.0 million, a decrease of 4% over the prior quarter primarily due to planned lower underground tonnage which resulted in lower underground labor, contractor, and consumables costs, partially offset by higher open pit tons. Cash costs and AISC per ounce, each after by-product credits, were $1,775 and $2,392, respectively, and increased over the prior quarter primarily due to lower gold production, with AISC also impacted by higher capital spend.^3,4

Cash flow from operations for the quarter was negative $0.7 million, a decrease of $10.9 million due to lower production and unfavorable working capital changes. Free cash flow for the quarter was negative $16.7 million, a decrease of $15.5 million over the prior quarter due to lower cash flow from operations and higher planned capital spend. ²

Expected gold production remains weighted towards the second half of 2023. Cash costs and AISC, each after by-product credits, per gold ounce, are also expected to trend lower in the second half of the year.

Underground grade at the mine has declined by approximately 30% since 2018 in accordance with the mine plan. Smaller stopes and higher relative development have contributed to cost increases, which have been further exacerbated by inflationary pressures over the past year. The Company remains focused on underground exploration, but the mine is beginning the transition from an underground to an open pit operation. The F160 pit acts as a bridge between mining at the underground mines and mining higher grade open pit material, which is in the permitting pipeline. The higher grade open pit ore has reserve grades approximately 70% higher than the F160 pit. The mine is undergoing a period of transition and investment over the next few years and remains a key operation in the Company’s portfolio.

Keno Hill – Yukon Territory

At Keno Hill, ramp-up and development activities continued through the first quarter as the mine remains on track to commence production in the third quarter. As of the end of April, approximately 75% of the development required for production was complete. Capital spending for the first quarter was $17.1 million and included mine development, equipment purchases, and critical infrastructure projects including plant – reconfiguring the secondary crushing circuit and installing underground infrastructure. The workforce is about 290 people, in line with the plan. Ore from Flame & Moth and Bermingham deposit is being stockpiled. 2023 silver production is expected to exceed 2.5 million ounces with full throughput achieved by the end of the year.

EXPLORATION AND PRE-DEVELOPMENT

Exploration and pre-development expenses totaled $4.9 million for the first quarter of 2023. Exploration and definition drilling activities primarily focused on targets at Casa Berardi, Greens Creek, and Keno Hill. In addition to drilling activities, surface, and underground targets were advanced through ongoing 3D detailed geological modeling at San Sebastian, Republic, and all our operating properties. At San Sebastian, geophysical surveys are ongoing and are planned to begin at Republic during the second quarter.

DIVIDENDS

Common Stock

TheBoard of Directors declared a quarterly cash dividend of $0.00625 per share of common stock, consisting of $0.00375 per share for the minimum dividend component and $0.0025 per share for the silver-linked component. The common stock dividend is payable on or about June 9, 2023, to stockholders of record on May 22, 2023. The first quarter realized silver price was $22.62, satisfying the criterion for the Company’s common stock silver-linked dividend policy component.

Preferred Stock

TheBoard of Directors elected to declare a quarterly cash dividend of $0.875 per share of preferred stock, payable on or about July 3, 2023, to stockholders of record on June 15, 2023.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Wednesday, May 10, at 10:00 a.m. Eastern Time to discuss these results. We recommend that you dial in at least 10 minutes before the call commencement. You may join the conference call by dialing toll-free 1-888-330-2391 or for international dialing 1-240-789-2702. The Conference ID is 4812168 and must be provided when dialing in. Hecla’s live and archived webcast can be accessed at https://events.q4inc.com/attendee/379963057 or at www.hecla.com under News & Media.

VIRTUAL INVESTOR EVENT

Hecla will be holding a Virtual Investor Event on Wednesday, May 10, from 12:00 p.m. to 2:00 p.m. Eastern Time.

Hecla invites shareholders, investors, and other interested parties to schedule a personal, 30-minute virtual meeting (video or telephone) with a member of senior management to discuss Financial, Exploration, Operations, ESG, or general matters. Click on the link below to schedule a call (or copy and paste the link into your web browser). You can select a topic once you have entered the meeting calendar. If you are unable to book a time, either due to high demand or for other reasons, please reach out to Anvita M. Patil, Vice President, Investor Relations and Treasurer at [email protected] or 208-769-4100.

One-on-One meeting URL: https://calendly.com/2023-may-vie

ANNUAL MEETING

Hecla will host its Annual Meeting of Shareholders (the “AGM”) on Tuesday, May 23, 2023, at 10:00 a.m. Pacific Time. During the AGM, management will provide an overview of the Company’s activities.

Hybrid Format

The AGM will be held in person at the Northwest Museum of Arts & Culture (Eric Johnston Auditorium), 2316 West First Avenue, Spokane, Washington, and online at www.virtualshareholdermeeting.com/HL2023.

For details explaining how to attend, communicate and vote virtually at the AGM please see the Company’s Proxy Statement dated April 11, 2023, filed under the Company’s profile on EDGAR at www.sec.gov and on SEDAR at www.sedar.com. Shareholders who have questions about voting their shares or attending the AGM may contact Investor Relations by telephone at 1.800.432.5291 or by email at [email protected].

ABOUT HECLA

Founded in 1891, Hecla Mining Company (NYSE:HL) is the largest silver producer in the United States. In addition to operating mines in Alaska, Idaho, and Quebec, Canada, the Company is developing a mine in the Yukon, Canada, and owns a number of exploration and pre-development projects in world-class silver and gold mining districts throughout North America.

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 United States 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. The non-GAAP financial measures cited in this release and listed below are reconciled to their most comparable GAAP measure at the end of this release.

⁽¹⁾ 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. Net debt to adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to debt and net income (loss), the most comparable GAAP measurements, can be found at the end of the release. It is an important measure for management to measure relative indebtedness and the ability to service the debt relative to its peers. It is calculated as long-term debt and finance leases outstanding less total cash on hand divided by adjusted EBITDA.

⁽²⁾ Free cash flow is a non-GAAP measure calculated as cash provided by operating activities less additions to properties, plants and equipment, and mineral interests. Cash provided by operating activities for the Greens Creek, Lucky Friday, and Casa Berardi operating segments excludes exploration and pre-development expense, as it is a discretionary expenditure and not a component of the mines’ operating performance.

⁽³⁾ Cash cost, after by-product credits, per silver and gold ounce is a non-GAAP measurement, a reconciliation of which to total cost of sales, the sum of cost of sales and other direct production costs and depreciation, depletion and amortization (sometimes referred to as “total 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 mine versus those of our competitors. As a primary silver mining company, management also uses the statistic on an aggregate basis – aggregating the Greens Creek and Lucky Friday mines – to compare performance with that of other silver mining companies, and aggregating Casa Berardi and the Nevada operations, to compare its performance with other gold mining companies. 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⁾ 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 total cost of sales and other direct production costs, expenses for reclamation at the mine sites and all site sustaining capital costs. AISC, after by-product credits, is calculated net of depreciation, depletion, and amortization and by-product credits. Prior year presentation has been adjusted to conform with current year presentation.

⁽⁵⁾ Adjusted net income (loss) applicable to common stockholders is a non-GAAP measurement, a reconciliation of which to net income (loss) applicable to common stockholders, the most comparable GAAP measure, can be found at the end of the release. Adjusted net income (loss) is a measure used by management to evaluate the Company’s operating performance but should not be considered an alternative to net income (loss) as defined by GAAP. 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 (loss) per common share provides investors with the ability to better evaluate our underlying operating performance.

Current GAAP measures used in the mining industry, such as total cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Management believes that AISC 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.

Other

⁽⁶⁾ Expectations for 2023 include silver, gold, lead and zinc production from Greens Creek, Lucky Friday, Keno Hill, and Casa Berardi converted using Au $1,800/oz, Ag $22/oz, Zn $1.15/lb., and Pb 0.90$/lb., CAD/USD 1.30. Numbers may be rounded.

Cautionary Statement Regarding Forward-Looking Statements, Including 2023 Outlook

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. Words such as “may”, “will”, “should”, “expects”, “intends”, “projects”, “believes”, “estimates”, “targets”, “anticipates” and similar expressions are used to identify these forward-looking statements. Such forward-looking statements may include, without limitation: (i) Lucky Friday will achieve throughout of 1,200 tpd by the end of 2023 and complete the service hoist and coarse ore bunker capital projects by the fourth quarter of 2023; (ii) Keno Hill mill start will occur in the third quarter with ramp-up to 440 tons per day by the end of 2023 and silver production in excess of 2.5 million ounces in 2023; (iii) the Company will set new production records in 2023 with almost 17 million ounces of silver production; (iv) the Company will be able to increase silver production to 20 million ounces by 2025; (v) the Company will become the largest silver producer in Canada by 2025; (vi) Casa Berardi’s cash cost and AISC per gold ounce (each net of by-product credits) will trend lower in the second half of 2023 and gold production will increase; (vii) Greens Creek will achieve throughput rate of 2,600 tpd by the fourth quarter, (viii) ATAC Resources transaction will close in the third quarter of 2023, and; (ix) mine-specific and Company-wide 2023 estimates of future production (for 2024 and 2025), sales and total cost of sales, as well as cash cost and AISC per ounce (in each case after by-product credits) and Company-wide estimated spending on capital, exploration and pre-development for 2023. The material factors or assumptions used to develop such forward-looking statements or forward-looking information include that 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, to which the Company’s operations are subject.

Estimates or expectations of future events or results are based upon certain assumptions, which may prove to be incorrect, which could cause actual results to differ from forward-looking statements. 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 USD/CAD 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; (viii) there being no significant changes to Company plans for 2023 and beyond due to COVID-19 or any other public health issue, including, but not limited to with respect to availability of employees, vendors and equipment; (ix) 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; (x) counterparties performing their obligations under hedging instruments and put option contracts; (xi) sufficient workforce is available and trained to perform assigned tasks; (xii) weather patterns and rain/snowfall within normal seasonal ranges so as not to impact operations; (xiii) relations with interested parties, including First Nations and Native Americans, remain productive; (xiv) maintaining availability of water rights; (xv) factors do not arise that reduce available cash balances; and (xvi) there being no material increases in our current requirements to post or maintain reclamation and performance bonds or collateral related thereto.

In addition, material risks that could cause actual results to differ from forward-looking statements include, but are not limited to: (i) gold, silver and other metals price volatility; (ii) operating risks; (iii) currency fluctuations; (iv) increased production costs and variances in ore grade or recovery rates from those assumed in mining plans; (v) community relations; (vi) conflict resolution and outcome of projects or oppositions; (vii) litigation, political, regulatory, labor and environmental risks; (viii) 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; (ix) the failure of counterparties to perform their obligations under hedging instruments; (x) we take a material impairment charge on any of our assets; and (xi) inflation causes our costs to rise more than we currently expect. For a more detailed discussion of such risks and other factors, see the Company’s (i) 2022 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 17, 2023. 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 presentation, 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.

Original Article: https://ir.hecla.com/News–Media/news-releases/news-details/2023/Hecla-Reports-First-Quarter-2023-Results/default.aspx