Categories: Press Releases

Hecla Reports Third Quarter 2022 Results

November, 09, 2022

Positive free cash flow generation from all operations for the first nine months

Hecla Mining Company (NYSE:HL) today announced third quarter 2022 financial and operating results.

Figure 1: Plan view showing drilling locations and areas where assays have been received in relation to the multiple ore zones at Greens Creek (Graphic: Business Wire)

Figure 1: Plan view showing drilling locations and areas where assays have been received in relation to the multiple ore zones at Greens Creek (Graphic: Business Wire)

THIRD QUARTER HIGHLIGHTS

  • Record throughput at Greens Creek; Lucky Friday produced 1 million silver ounces for two consecutive quarters
  • Consolidated silver production guidance increased, operating and capital cost guidance maintained
  • Deferred approximately $24 million in sales at Greens Creek and Lucky Friday to the fourth quarter
  • Keno Hill has completed 30% of total planned pre-production development as of October 31, 2022
  • Net loss applicable to common stockholders of $(23.7) million or $(0.04) per share (basic), and adjusted net loss of $(12.0) million or $(0.02) per share1
  • Adjusted EBITDA of $26.6 million, net debt to adjusted EBITDA ratio of 1.92
  • All operations free cash flow positive year to date with total cost of sales for silver of $246.4 million and all-in sustaining cost (AISC) per silver ounce of $10.17
  • $144.7 million in cash and cash equivalents with approximately $260 million in available liquidity
  • Positive drilling results at Keno Hill and Greens Creek with intercepts in excess of 100 ounces of silver per ton at Keno Hill and wide high-grade intercepts at Greens Creek
  • Strong safety performance with an all-injury frequency rate of 1.32 for the first nine months, 37% below the U.S. average and an improvement of 19% over the nine-month period in 2021

“Hecla reported another quarter of solid operational performance as Greens Creek achieved its best ever throughput and Lucky Friday's production exceeded 1 million ounces for the second consecutive quarter,” said Phillips S. Baker Jr., President & CEO. “Free cash flow generation was lower for the quarter due to deferral of the sale of about a million ounces of silver and other metals, increased capital investment in our mines, and Alexco acquisition costs. All operations are free cash flow positive year to date and reflect the strong margins at our silver operations despite lower prices and an inflationary environment.”

Baker continued, “Hecla is the United States’ largest silver miner, producing about 40% of all the silver mined. With Keno Hill's pre-production development on plan, we should become Canada's largest silver miner in the next few years.”

FINANCIAL OVERVIEW

"Total cost of sales" as used in this release is comprised of cost of sales and other direct production costs and depreciation, depletion and amortization.

In Thousands unless stated otherwise

Q3-2022

Q2-2022

Q1-2022

Q4-2021

Q3-2021

YTD-2022

YTD-2021

FINANCIAL AND OPERATIONAL HIGHLIGHTS

Sales

$

146,339

 

$

191,242

 

$

186,499

 

$

185,078

 

$

193,560

 

$

524,080

 

$

622,395

 

Total cost of sales

$

137,892

 

$

153,979

 

$

141,070

 

$

131,837

 

$

158,332

 

$

432,941

 

$

457,835

 

Gross profit

$

8,447

 

$

37,263

 

$

45,429

 

$

53,241

 

$

35,228

 

$

91,139

 

$

164,560

 

(Loss) income applicable to common stockholders

$

(23,664

)

$

(13,661

)

$

4,015

 

$

11,737

 

$

(1,117

)

$

(33,310

)

$

22,806

 

Basic (loss) income per common share (in dollars)

$

(0.04

)

$

(0.03

)

$

0.01

 

$

0.02

 

$

 

$

(0.06

)

$

0.04

 

Adjusted EBITDA 2

$

26,554

 

$

70,474

 

$

58,202

 

$

58,249

 

$

49,414

 

$

155,230

 

$

220,531

 

Net Debt to Adjusted EBITDA2,*

 

1.9

 

 

 

 

 

 

 

1.1

 

Cash (used in) provided by operating activities

$

(24,322

)

$

40,183

 

$

37,909

 

$

53,355

 

$

42,742

 

$

53,770

 

$

166,982

 

Capital Expenditures

$

(37,430

)

$

(34,329

)

$

(21,478

)

$

(28,838

)

$

(26,899

)

$

(93,237

)

$

(80,210

)

Free Cash Flow 3

$

(61,752

)

$

5,854

 

$

16,431

 

$

24,517

 

$

15,843

 

$

(39,467

)

$

86,772

 

Production Highlights

Silver ounces produced

 

3,549,392

 

 

3,645,454

 

 

3,324,708

 

 

3,226,927

 

 

2,676,084

 

 

10,525,917

 

 

9,660,313

 

Silver payable ounces sold

 

2,479,724

 

 

3,387,909

 

 

2,687,261

 

 

2,606,622

 

 

2,581,690

 

 

8,554,894

 

 

9,027,180

 

Gold ounces produced

 

44,747

 

 

45,719

 

 

41,707

 

 

47,977

 

 

42,207

 

 

132,173

 

 

153,350

 

Gold payable ounces sold

 

40,443

 

 

44,225

 

 

41,053

 

 

44,156

 

 

53,000

 

 

125,721

 

 

157,454

 

Cash Costs and AISC, each after by-product credits4,5

Silver cash costs per ounce

$

3.43

 

$

(1.14

)

$

1.09

 

$

1.69

 

$

2.49

 

$

1.11

 

$

1.26

 

Silver AISC per ounce

$

14.20

 

$

8.55

 

$

7.64

 

$

10.08

 

$

12.82

 

$

10.17

 

$

8.88

 

Gold cash costs per ounce

$

1,349

 

$

1,371

 

$

1,516

 

$

1,143

 

$

1,163

 

$

1,409

 

$

1,127

 

Gold AISC per ounce

$

1,738

 

$

1,641

 

$

1,810

 

$

1,494

 

$

1,450

 

$

1,729

 

$

1,349

 

Realized Prices

Silver, $/ounce

$

18.30

 

$

20.68

 

$

24.68

 

$

23.49

 

$

23.97

 

$

21.25

 

$

25.75

 

Gold, $/ounce

$

1,713

 

$

1,855

 

$

1,880

 

$

1,802

 

$

1,792

 

$

1,817

 

$

1,794

 

Lead, $/pound

$

0.95

 

$

0.97

 

$

1.08

 

$

1.13

 

$

1.02

 

$

0.98

 

$

1.00

 

Zinc, $/pound

$

1.23

 

$

1.44

 

$

1.79

 

$

1.74

 

$

1.35

 

$

1.47

 

$

1.34

 

*Reflects trailing twelve months ending September 30,2022. Reconciliations are available at the end of the release.

Sales in the third quarter declined by $44.9 million compared to the second quarter of 2022 primarily due to lower realized prices for all metals, and lower revenue from the deferral of silver concentrate shipments from Greens Creek and Lucky Friday to the fourth quarter. Compared to the prior quarter, realized silver prices have declined 12%, gold has declined 8%, lead and zinc prices are lower by 2% and 15% respectively. In comparison to the same quarter last year, gold prices are relatively unchanged, while silver prices have declined by 24% with lead and zinc lower by 7% and 9% respectively. The deferral of approximately 1 million ounces of silver, 1,800 ounces of gold, and 1,300 tons of lead in the silver concentrate shipments at Greens Creek was to ensure adequate volumes of concentrate for cost-effective shipping. At Lucky Friday the deferral was due to a planned multi week shutdown of the Trail smelter for maintenance. This concentrate is being shipped to a new customer and represents approximately 5% of Lucky Friday's annual concentrate production.

Total cost of sales for silver were $76.7 million for the third quarter and were lower by $14.2 million over the prior quarter due to lower depreciation and higher product inventory. Cash costs and AISC (each after by-product credits) for silver were $3.43 and $14.20 per silver ounce respectively. Cash costs increased by $4.57 per ounce over the prior quarter primarily due to lower by-product credits attributable to lower lead and zinc production as well as lower prices. AISC increased by $5.65 per silver ounce over the prior quarter due to the factors affecting cash costs.4,5

Total cost of sales for gold were $59.5 million and declined marginally over the prior quarter. Gold cash cost per ounce, after by-product credits, declined by $22 attributable to higher production. AISC increased by $97 per ounce due to higher sustaining capital and exploration spend partially offset by higher production.4,5

Labor and the current inflationary environment are challenging at all operations. Labor availability remains constrained in the market with a shortage of skilled miners and maintenance workers. Inflationary pressures have led to a 10-15% increase in costs since the beginning of the year. Labor and input costs for steel, reagents, fuel, and other consumables continue to remain elevated impacting all the operations.

In the first half of the year, by-product credits helped offset the inflationary pressures for the silver segment due to strong by-product production as well as prices. However, lower base metal production and prices in the third quarter reduced the by-product credits. The inflationary environment is expected to remain challenging for the fourth quarter and into 2023.

Loss applicable to common stockholders for the third quarter was $(23.7) million, or $(0.04) per share, compared to a loss of $(13.7) million, or $(0.03) per share, in the second quarter of 2022, impacted by the following factors:

  • Gross profit decreased by $28.8 million primarily due to lower revenues and higher per unit costs as described above
  • Exploration and pre-development expenses increased by $3.9 million reflecting increased exploration and drilling activity across Hecla's mines and projects during the exploration season
  • General and administrative expenses increased by $1.3 million reflecting incremental costs following the Alexco acquisition

Partially offset by:

  • A net foreign exchange gain of $5.7 million versus $4.5 million in the prior quarter reflecting the appreciation of the U.S. dollar (“USD”) against the Canadian dollar (“CAD”) during the current quarter
  • Lower unrealized losses on our investment portfolio of $10.6 million reflecting a smaller reduction in the fair value of the portfolio compared to the prior quarter
  • An income tax benefit of $9.5 million versus a provision of $0.3 million in the prior quarter

Cash used in operating activities was $24.3 million, compared to cash provided by operating activities of $40.2 million in the prior quarter. However, cash provided before working capital changes increased over the prior quarter. Working capital changes in the third quarter were negative $36.7 million compared to $32.6 million in the prior quarter, and are primarily related to an increase in ending inventory from the deferral of silver concentrate shipments at Greens Creek and Lucky Friday to the fourth quarter and semi-annual interest payment on the outstanding debt.

Capital expenditures totaled $37.4 million, an increase of $3.1 million over the prior quarter as planned. Expenditures were at Greens Creek of $7.0 million, Lucky Friday of $16.1 million, Casa Berardi of $10.8 million, and Keno Hill of $3.6 million. Free cash flow for the quarter was negative $61.8 million, a decline of $67.6 million over the prior quarter due to the increase in working capital changes and higher capital spend.3

Forward Sales Contracts for Base Metals and Foreign Currency

The Company uses financially settled forward sales contracts to manage exposures to changes in prices of zinc and lead. At September 30, 2022, the Company had contracts covering approximately 39% of the forecasted payable zinc production (through 2025) at an average price of $1.32 per pound, and 38% of the forecasted payable lead production (through 2024) at an average price of $1.00 per pound. The fair value of the net metal derivative contracts on our forecasted hedges was an asset of $27.4 million, an increase of $11.3 million over the prior quarter.

The Company also manages CAD exposure through forward contracts. At September 30, 2022, the Company had hedged approximately 52% of forecasted CAD direct production costs for Casa Berardi through 2026 at an average CAD/USD rate of 1.31. The Company has also hedged approximately 32% of capital costs for Casa Berardi for 2022 at 1.33. At the Keno Hill, 66% of planned spend for the fourth quarter is hedged at an average CAD/USD rate of 1.34. The fair value of the net currency derivatives contracts is a liability of $10.8 million, an increase of $12.7 million over the prior quarter.

OPERATIONS OVERVIEW
Greens Creek Mine - Alaska

Dollars are in thousands except cost per ton

Q3-2022

Q2-2022

Q1-2022

Q4-2021

Q3-2021

YTD-2022

YTD-2021

GREENS CREEK

Tons of ore processed

 

229,975

 

 

209,558

 

 

211,687

 

 

221,814

 

 

211,142

 

 

651,220

 

 

620,153

 

Total production cost per ton

$

185.34

 

$

197.84

 

$

192.16

 

$

174.55

 

$

181.60

 

$

191.58

 

$

178.29

 

Ore grade milled - Silver (oz./ton)

 

13.6

 

 

14.0

 

 

13.8

 

 

12.6

 

 

11.1

 

 

13.8

 

 

13.8

 

Ore grade milled - Gold (oz./ton)

 

0.07

 

 

0.08

 

 

0.07

 

 

0.07

 

 

0.07

 

 

0.07

 

 

0.08

 

Ore grade milled - Lead (%)

 

2.4

 

 

3.0

 

 

2.8

 

 

2.6

 

 

2.7

 

 

2.7

 

 

3.0

 

Ore grade milled - Zinc (%)

 

6.3

 

 

7.2

 

 

6.6

 

 

6.3

 

 

7.1

 

 

6.7

 

 

7.4

 

Silver produced (oz.)

 

2,468,280

 

 

2,410,598

 

 

2,429,782

 

 

2,262,635

 

 

1,837,270

 

 

7,308,660

 

 

6,980,587

 

Gold produced (oz.)

 

11,412

 

 

12,413

 

 

11,402

 

 

10,229

 

 

9,734

 

 

35,227

 

 

35,859

 

Lead produced (tons)

 

4,428

 

 

5,184

 

 

4,883

 

 

4,731

 

 

4,591

 

 

14,495

 

 

15,142

 

Zinc produced (tons)

 

12,580

 

 

13,396

 

 

12,494

 

 

12,457

 

 

13,227

 

 

38,470

 

 

41,191

 

Sales

$

60,875

 

$

92,723

 

$

86,090

 

$

87,865

 

$

84,806

 

$

239,688

 

$

296,978

 

Total cost of sales

$

(52,502

)

$

(60,506

)

$

(49,636

)

$

(49,251

)

$

(55,193

)

$

(162,644

)

$

(163,861

)

Gross profit

$

8,373

 

$

32,217

 

$

36,453

 

$

38,614

 

$

29,613

 

$

77,044

 

$

133,117

 

Cash flow from operations

$

7,749

 

$

41,808

 

$

56,295

 

$

50,632

 

$

40,626

 

$

105,852

 

$

157,387

 

Exploration

$

3,776

 

$

929

 

$

165

 

$

696

 

$

2,472

 

$

4,870

 

$

3,895

 

Capital additions

$

(6,988

)

$

(14,668

)

$

(3,092

)

$

(9,544

)

$

(6,228

)

$

(24,748

)

$

(14,339

)

Free cash flow 3

$

4,537

 

$

28,069

 

$

53,368

 

$

41,784

 

$

36,870

 

$

85,974

 

$

146,943

 

Cash cost per ounce, after by-product credits4

$

2.65

 

$

(3.29

)

$

(0.90

)

$

0.50

 

$

0.74

 

$

(0.49

)

$

(1.03

)

AISC per ounce, after by-product credits5

$

8.61

 

$

3.48

 

$

1.90

 

$

5.66

 

$

5.94

 

$

4.69

 

$

2.40

 

Greens Creek produced 2.5 million ounces of silver and the mill achieved record mill throughput of 2,500 tons per day. Lead and zinc production for the quarter declined 15% and 6% respectively due to lower grades which led to the deferral of a silver concentrate shipment into the fourth quarter to ensure adequate volumes for cost effective shipping. Costs associated with the shipment were included in inventory in the third quarter, and the approximate revenue and cash flow impact of this deferral in the fourth quarter is expected to be $18 million.

Cash cost per silver ounce increased by $5.94 over the prior quarter primarily due to lower by-product credits. AISC per silver ounce increased by $5.13 compared to the prior quarter due to the reasons impacting cash costs, and increased exploration which was partially offset by lower capital spending.4,5

Cash flow from operations for the quarter was $7.7 million, a decline of $34.1 million over the prior quarter; free cash flow for the quarter was $4.5 million, a decline of $23.5 million. For the first nine months of the year, Greens Creek has generated $105.8 million in cash flow from operations and $86.0 million in free cash flow respectively and remains on track to achieve its production and cost guidance for the year.

Lucky Friday Mine - Idaho

Dollars are in thousands except cost per ton

Q3-2022

Q2-2022

Q1-2022

Q4-2021

Q3-2021

YTD-2022

YTD-2021

LUCKY FRIDAY

Tons of ore processed

 

90,749

 

 

97,497

 

 

77,725

 

 

80,097

 

 

78,227

 

 

265,971

 

 

241,740

 

Total production cost per ton

$

207.10

 

$

211.45

 

$

247.17

 

$

198.83

 

$

190.66

 

$

220.41

 

$

189.06

 

Ore grade milled - Silver (oz./ton)

 

12.5

 

 

13.2

 

 

12.0

 

 

12.5

 

 

11.2

 

 

12.7

 

 

11.3

 

Ore grade milled - Lead (%)

 

8.5

 

 

8.8

 

 

8.2

 

 

8.1

 

 

7.2

 

 

8.5

 

 

7.4

 

Ore grade milled - Zinc (%)

 

4.2

 

 

3.9

 

 

3.6

 

 

3.3

 

 

3.3

 

 

3.9

 

 

3.5

 

Silver produced (oz.)

 

1,074,230

 

 

1,226,477

 

 

887,858

 

 

955,401

 

 

831,532

 

 

3,188,565

 

 

2,608,727

 

Lead produced (tons)

 

7,172

 

 

8,147

 

 

5,980

 

 

6,131

 

 

5,313

 

 

21,299

 

 

17,006

 

Zinc produced (tons)

 

3,279

 

 

3,370

 

 

2,452

 

 

2,296

 

 

2,319

 

 

9,101

 

 

7,673

 

Sales

$

28,460

 

$

35,880

 

$

38,040

 

$

32,938

 

$

29,783

 

 

102,380

 

 

98,550

 

Total cost of sales

$

(24,166

)

$

(30,348

)

$

(29,265

)

$

(23,252

)

$

(23,591

)

 

(83,779

)

$

(74,287

)

Gross profit

$

4,294

 

$

5,532

 

$

8,775

 

$

9,686

 

$

6,192

 

$

18,601

 

$

24,263

 

Cash flow from operations

$

11,624

 

$

21,861

 

$

11,765

 

$

16,953

 

$

15,017

 

$

45,250

 

$

45,641

 

Capital additions

$

(16,125

)

$

(11,501

)

$

(9,652

)

$

(9,109

)

$

(9,133

)

$

(37,278

)

 

(20,776

)

Free cash flow 3

$

(4,501

)

$

10,360

 

$

2,113

 

$

7,844

 

$

5,884

 

$

7,972

 

$

24,865

 

Cash cost per silver ounce, after by-product credits4

$

5.23

 

$

3.07

 

$

6.57

 

$

4.50

 

$

6.35

 

$

4.77

 

$

7.37

 

AISC per silver ounce, after by-product credits5

$

15.98

 

$

9.91

 

$

13.15

 

$

12.54

 

$

16.79

 

$

12.86

 

$

15.00

 

Lucky Friday produced 1.1 million ounces of silver during the third quarter, a 12% decrease over the prior quarter due to lower mined tons and feed grades attributable to mine sequencing, commissioning of new equipment, and prioritization of projects for increasing future throughput and production. The third quarter also marked two consecutive quarters of throughput exceeding 90,000 tons and silver production exceeding 1 million ounces.

At the Lucky Friday, 2,000 dry metric tonnes of silver concentrate was inventoried to be shipped to a new customer in the fourth quarter. Costs associated with the deferral of this concentrate shipment were in inventory in the third quarter, and impact on revenues and cash flow for the fourth quarter is expected to be approximately $6.0 million. Total cost of sales was $24.2 million, a decrease of $6.2 million over the prior quarter due to lower depreciation expense, an increase in concentrate inventory, and lower ore volume mined and production. Cash cost and AISC per silver ounce (each after by-product credits) were $5.23 and $15.98, respectively, and higher compared to the prior quarter due to lower production, and lower by-product credits because of lower base metal production and prices.4,5

Casa Berardi Mine - Quebec

Dollars are in thousands except cost per ton

Q3-2022

Q2-2022

Q1-2022

Q4-2021

Q3-2021

YTD-2022

YTD-2021

CASA BERARDI

Tons of ore processed – underground

 

162,215

 

 

176,576

 

 

161,609

 

 

161,355

 

 

167,435

 

 

500,400

 

 

533,262

 

Tons of ore processed – surface pit

 

227,726

 

 

225,042

 

 

224,541

 

 

225,662

 

 

230,708

 

 

677,309

 

 

607,967

 

Tons of ore processed – total

 

389,941

 

 

401,618

 

 

386,150

 

 

387,017

 

 

398,143

 

 

1,177,709

 

 

1,141,229

 

Surface tons mined – ore and waste

 

2,822,906

 

 

2,149,412

 

 

1,892,339

 

 

1,507,457

 

 

1,483,231

 

 

6,864,657

 

 

4,996,522

 

Total production cost per ton

$

114.52

 

$

113.07

 

$

117.96

 

$

108.82

 

$

86.95

 

 

115.15

 

$

95.13

 

Ore grade milled – Gold (oz./ton) – underground

 

0.15

 

 

0.19

 

 

0.14

 

 

0.17

 

 

0.16

 

 

0.17

 

 

0.16

 

Ore grade milled – Gold (oz./ton) - surface pit

 

0.06

 

 

0.05

 

 

0.05

 

 

0.07

 

 

0.04

 

 

0.06

 

 

0.06

 

Ore grade milled – Gold (oz./ton) – combined

 

0.10

 

 

0.10

 

 

0.09

 

 

0.11

 

 

0.09

 

 

0.09

 

 

0.10

 

Gold produced (oz.) – underground

 

22,181

 

 

22,866

 

 

19,374

 

 

22,910

 

 

24,170

 

 

64,421

 

 

75,180

 

Gold produced (oz.) – surface pit

 

11,154

 

 

10,440

 

 

10,866

 

 

14,356

 

 

5,552

 

 

32,460

 

 

22,065

 

Gold produced (oz.) – total

 

33,335

 

 

33,306

 

 

30,240

 

 

37,266

 

 

29,722

 

 

96,881

 

 

97,245

 

Silver produced (oz.) – total

 

6,882

 

 

8,379

 

 

7,068

 

 

7,967

 

 

7,012

 

 

22,329

 

 

25,604

 

Sales

$

56,939

 

$

62,639

 

$

62,101

 

$

60,054

 

$

56,065

 

$

181,679

 

$

185,098

 

Total cost of sales

$

(59,532

)

$

(61,870

)

$

(62,168

)

$

(57,069

)

$

(58,164

)

$

(183,570

)

$

(172,760

)

Gross profit/(loss)

$

(2,593

)

$

769

 

$

(67

)

$

2,985

 

$

(2,099

)

 

(1,891

)

$

12,338

 

Cash flow from operations

$

8,721

 

$

7,417

 

$

8,089

 

$

10,029

 

$

17,058

 

$

24,227

 

$

71,164

 

Exploration

$

2,624

 

$

1,341

 

$

2,635

 

$

2,124

 

$

4,382

 

$

6,600

 

$

3,551

 

Capital additions

$

(10,771

)

$

(8,093

)

$

(7,808

)

$

(9,537

)

$

(11,488

)

$

(26,672

)

$

(40,080

)

Free cash flow 3

$

574

 

$

665

 

$

2,916

 

$

2,616

 

$

9,952

 

$

4,155

 

$

34,635

 

Cash Cost per gold ounce, after by-product credits4

$

1,349

 

$

1,371

 

$

1,516

 

$

1,137

 

$

1,175

 

$

1,409

 

$

1,127

 

AISC per gold ounce, after by-product credits5

$

1,738

 

$

1,641

 

$

1,810

 

$

1,470

 

$

1,476

 

$

1,729

 

$

1,387

 

Casa Berardi produced 33,335 ounces of gold compared to 33,306 ounces in the prior quarter. The mill continues to perform well and operated at an average quarterly throughput of 4,239 tons per day ("tpd") with a new record set in September as monthly production throughput reached 4,856 tpd, beating the last monthly record in May 2022 of 4,533 tpd.

Total cost of sales for the third quarter 2022 was $59.5 million, a reduction of $2.3 million from the $61.9 million in the prior quarter. Cash cost per gold ounce decreased by $22 over the prior quarter to $1,349 primarily due to higher production. AISC per gold ounce increased by $97 to $1,738 driven by higher exploration and capital spend partially offset by higher production.4,5

Keno Hill - Yukon Territory

At the Keno Hill mine, focus is on development and drilling of the Bermingham and Flame & Moth deposits to bring the mine into full and consistent production by the end of 2023. As of October 31, 2022, 30% of total planned pre-production development is complete, and we expect to complete approximately 50% of the development by the end of the fourth quarter.

Fourth quarter capital spending is forecast at $10-$12 million for development, infill drilling, and equipment purchases. Since the acquisition, Keno Hill is seeing its lowest turnover in the mine's recent history and is expected to achieve the hiring rate for production. We are implementing Hecla's Health and Safety Management System and Environmental Management System in the fourth quarter.

EXPLORATION AND PRE-DEVELOPMENT UPDATE

Exploration and pre-development expenditures were $15.1 million for the quarter with focus on exploration drilling at Keno Hill, exploration and definition drilling at Greens Creek, underground drilling at the West Mine in Casa Berardi, and exploration drilling at the large land packages at Aurora, Nevada and Republic, Washington.

Keno Hill, Yukon Territory

Exploration drilling on the underexplored Coral Wigwam target area has discovered high-grade silver mineralization. Assay results to date include 101.5 oz/ton silver over 7.3 feet estimated true width.

Greens Creek, Alaska

At Greens Creek, drilling has focused on resource expansion and conversion which have yielded positive results. Three underground core drills are focused on resource conversion in the 200 South and East ore zones and on exploration in the East, 5250, 200 South, and Gallagher Fault Block zones. Additionally, two helicopter supported core drills are focused on drilling extensions to the Upper Plate Zone near the mine and the Lil’Sore target area approximately 3 miles northwest of the mine. These positive results continue to confirm and expand mineral zones. Significant assay intercepts for different zones are:

  • Southwest Bench: 74.3 oz/ton silver, 0.52 oz/ton gold, 5.7% zinc and 2.9% lead over 10.5 feet and 25.7 oz/ton silver, 0.15 oz/ton gold, 6.4% zinc, and 3.1% lead over 20.1 feet
  • 200 South: 18.5 oz/ton silver, 0.02 oz/ton gold, 2.6% zinc, and 1.1% lead over 44.7 feet
  • East Zone: 51.6 oz/ton silver, 0.05 oz/ton gold, 0.1% zinc, and 0.0% lead over 11.1 feet and 227.8 oz/ton silver, 2.84 oz/ton gold, 4.2% zinc, and 0.4% lead over 2.9 feet
  • West Zone: 37.0 oz/ton silver, 0.26 oz/ton gold, 18.3% zinc, and 9.5% lead over 47.2 feet and 55.2 oz/ton silver, 0.16 oz/ton gold, 16.5% zinc, and 8.9% lead over 31.2 feet

Detailed complete drill assay highlights can be found in Table A at the end of the release.

Figure 1: Plan view showing drilling locations and areas where assays have been received in relation to the multiple ore zones at Greens Creek

Casa Berardi, Quebec

At Casa Berardi, up to seven underground core drills and one surface core drill were focused on definition and exploration drilling in multiple zones and target areas and one surface core drill was focused on condemnation drilling.

Drilling targeted the 113, 118, 119 and Lower Inter zones. In the 113 Zone, two drill rigs are testing offsets and depth extensions of multiple 113 lenses. In the 118 Zone, drilling has been focused on defining continuity and expanding mineralization in the 118-14, and 118-15 lenses up and down plunge and to the east. Most of the 118 drilling has been showing good vertical continuity of mineralization. The drilling targeting the 119-02 lens show that the structure remains open at depth while closing to the east. Highlights include:

  • 113: 0.56 oz/ton gold over 9.5 feet, including 1.61 oz/ton gold over 2.6 feet
  • 118: 0.20 oz/ton gold over 8.2 feet
  • 119: 0.16 oz/t gold over 14.8 feet.

More complete drill assay highlights can be found in Table A at the end of the release.

Aurora, Nevada

Exploration drilling has confirmed wide and high-grade vein mineralization along the Martinez-Juniata-Chesco mineral trend. This mineralization continues to be open for expansion along strike and dip. Some significant intercepts are:

  • Martinez Zone: 0.40 oz/ton gold and 1.8 oz/t silver over 31.1 feet estimated true width, which includes 1.26 oz/ton gold and 4.4 oz/t silver over 6.7 feet estimated true width.
  • Juniata Zone: 0.43 oz/ton gold and 1.9 oz/ton silver over 14.9 feet estimated true width, which includes 0.76 oz/ton gold, 3.5 oz/ton silver over 8.0 feet estimated true width.
  • Chesco Zone: 0.73 oz/ton gold and 7.7 oz/ton silver over 12.2 feet estimated true width

Republic, Washington

Exploration drilling identified high-grade vein mineralization at both the Lone Pine-Blacktail and Tom Thumb target areas. Wide zones of lower grade, potentially bulk mineable, material surround some of the high-grade vein intercepts at Lone Pine-Blacktail. Drilling also discovered an offset segment of the Tom Thumb Vein 850 feet across the Mud Lake Fault into the basin.

DIVIDENDS

Common Stock

TheBoard of Directors declared a quarterly cash dividend of $0.00375 per share of common stock for the minimum dividend component. The common stock dividend is payable on or about December 7, 2022, to stockholders of record on November 25, 2022. The realized silver price was $18.30 per ounce in the third quarter and did not satisfy the criterion for the silver-linked component under the Company's common stock dividend policy.

Preferred Stock

TheBoard of Directors elected to declare a quarterly cash dividend of $0.875 per share of preferred stock, payable on or about January 3, 2023, to stockholders of record on December 15, 2022.

2022 GUIDANCE

The Company has reaffirmed its guidance for annual production, cost, and exploration and pre-development. The Company is maintaining its consolidated capital guidance with lower forecasted capital spend at the Lucky Friday and Casa Berardi due to timing of expenditures, offset by the inclusion of Keno Hill.

 

(millions)

 

Previous

Current

Capital expenditures

$150 - $160

$150 - $160

Greens Creek

$42 - $45

$42 - $45

Lucky Friday

$60 - $64

$56 - $58

Casa Berardi

$45 - $48

$42 - $45

Keno Hill

NA

$10 - $12

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Wednesday, November 9, 2022 at 10:00 a.m. Eastern Standard Time to discuss these results. 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. Please dial-in and provide the Conference ID number at least 10 minutes prior to the start time to join the call and mitigate any hold times. Hecla's live and archived webcast can be accessed at www.hecla-mining.com under Investors/Events & Webcasts.

ONE ON ONE CALLS

Hecla will make available members of management for one on one calls with any interested parties on Wednesday, November 9, from 12:00 p.m. to 2:00 p.m. Eastern Standard Time.

Hecla invites stockholders, investors, and other interested parties to schedule a personal, 30-minute virtual meeting (video or telephone) with a member of management to discuss operations, exploration, 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 hmc-info@hecla-mining.com or 208-769-4100.

One-on-One meeting URL: https://calendly.com/2022-november-vie

ABOUT HECLA

Founded in 1891, Hecla is the largest silver producer in the United States. In addition to operating mines in Alaska, Idaho, 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 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.

(2) Adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to net income(loss), 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 total debt outstanding less total cash on hand divided by adjusted EBITDA.

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

(4) 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, 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.

(5) 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, 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.

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. When a forward-looking statement 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. Forward-looking statements often address our expected future business and financial performance and financial condition and often contain words such as “anticipate,” “intend,” “plan,” “will,” “could,” “would,” “estimate,” “should,” “expect,” “believe,” “project,” “target,” “indicative,” “preliminary,” “potential” and similar expressions. Forward-looking statements in this news release may include, without limitation: (i) the Company could be the largest silver producer in the U.S. and Canada; (ii) the Company will be able to bring Keno Hill into full and consistent production before the end of 2023; (iii) the Company will be able to increase throughput and increase future production at the Lucky Friday; (iv) the Company will achieve 50% of planned pre-production development at Keno Hill by the end of 2022 and will achieve full and consistent production by year end 2023 with the hiring rate required for production; and (v) mine-specific and Company-wide 2022 estimates of future production, sales and costs 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 2022. 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) 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; (ix) counterparties performing their obligations under hedging instruments and put option contracts; (x) sufficient workforce is available and trained to perform assigned tasks; (xi) weather patterns and rain/snowfall within normal seasonal ranges so as not to impact operations; (xii) relations with interested parties, including Native Americans, remain productive; (xiii) maintaining availability of water rights; (xiv) factors do not arise that reduce available cash balances; and (xv) 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) the Company takes a material impairment charge on its Nevada operations; and (xi) the Company is unable to remain in compliance with all terms of its credit agreement in order to maintain continued access to the revolver. For a more detailed discussion of such risks and other factors, see the Company’s 2021 Form 10-K, filed with the Securities and Exchange Commission (SEC) on February 23, 2022 and Form 10-Q filed with the SEC on August 5, 2022 for a more detailed discussion of factors that may impact expected future results, 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.

Qualified Person (QP)

Kurt D. Allen, MSc., CPG, VP - Exploration of Hecla Mining Company and Keith Blair, MSc., CPG, Chief Geologist of Hecla Limited, who serve as a Qualified Person under S-K 1300 and NI 43-101, supervised the preparation of the scientific and technical information concerning Hecla’s mineral projects in this news release. Technical Report Summaries (each a “TRS”) for each of the Company’s material properties are filed as exhibits 96.1, 96.2 and 96.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and are available at www.sec.gov. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of analytical or testing procedures for (i) the Greens Creek Mine are contained in its TRS and in a NI 43-101 technical report titled “Technical Report for the Greens Creek Mine” effective date December 31, 2018, (ii) the Lucky Friday Mine are contained in its TRS and in its technical report titled “Technical Report for the Lucky Friday Mine Shoshone County, Idaho, USA” effective date April 2, 2014, (iii) Casa Berardi are contained in its TRS and in its technical report titled “Technical Report on the mineral resource and mineral reserve estimate for Casa Berardi Mine, Northwestern Quebec, Canada” effective date December 31, 2018, and (iv) the San Sebastian Mine, Mexico, 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 each TRS and the four 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. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of sample, analytical or testing procedures are contained in technical reports prepared for Klondex Mines Ltd. for (i) the Fire Creek Mine (technical report dated March 31, 2018), (ii) the Hollister Mine (technical report dated May 31, 2017, amended August 9, 2017), and (iii) the Midas Mine (technical report dated August 31, 2014, amended April 2, 2015). Copies of these technical reports are available under Hecla’s profile on SEDAR at www.sedar.com. Mr. Allen and Mr. Blair reviewed and verified information regarding drill sampling, data verification of all digitally collected data, drill surveys and specific gravity determinations relating to all the mines. 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 Operations

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

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 2022

 

September 30, 2021

 

September 30, 2022

 

September 30, 2021

Sales

 

$

146,339

 

 

$

193,560

 

 

$

524,080

 

 

$

622,395

 

Cost of sales and other direct production costs

 

 

104,900

 

 

 

112,542

 

 

 

326,579

 

 

 

318,917

 

Depreciation, depletion and amortization

 

 

32,992

 

 

 

45,790

 

 

 

106,362

 

 

 

138,918

 

Total cost of sales

 

 

137,892

 

 

 

158,332

 

 

 

432,941

 

 

 

457,835

 

Gross profit

 

 

8,447

 

 

 

35,228

 

 

 

91,139

 

 

 

164,560

 

Other operating expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

11,003

 

 

 

8,874

 

 

 

28,989

 

 

 

27,985

 

Exploration and pre-development

 

 

15,128

 

 

 

17,108

 

 

 

39,136

 

 

 

35,039

 

Care and maintenance costs

 

 

5,092

 

 

 

6,910

 

 

 

16,539

 

 

 

17,014

 

Provision for closed operations and environmental matters

 

 

1,781

 

 

 

7,564

 

 

 

4,154

 

 

 

12,297

 

Other operating expense

 

 

902

 

 

 

3,344

 

 

 

5,310

 

 

 

10,626

 

Total other operating expenses

 

 

33,906

 

 

 

43,800

 

 

 

94,128

 

 

 

102,961

 

(Loss) income from operations

 

 

(25,459

)

 

 

(8,572

)

 

 

(2,989

)

 

 

61,599

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(10,874

)

 

 

(10,469

)

 

 

(31,785

)

 

 

(31,484

)

Fair value adjustments, net

 

 

(4,240

)

 

 

9,287

 

 

 

(14,703

)

 

 

(10,651

)

Net foreign exchange gain (loss)

 

 

5,667

 

 

 

3,995

 

 

 

8,111

 

 

 

24

 

Other income (expense)

 

 

1,853

 

 

 

247

 

 

 

4,828

 

 

 

(192

)

Total other (expense) income

 

 

(7,594

)

 

 

3,060

 

 

 

(33,549

)

 

 

(42,303

)

(Loss) income before income and mining taxes

 

 

(33,053

)

 

 

(5,512

)

 

 

(36,538

)

 

 

19,296

 

Income and mining tax (provision) benefit

 

 

9,527

 

 

 

4,533

 

 

 

3,642

 

 

 

3,924

 

Net (loss) income

 

 

(23,526

)

 

 

(979

)

 

 

(32,896

)

 

 

23,220

 

Preferred stock dividends

 

 

(138

)

 

 

(138

)

 

 

(414

)

 

 

(414

)

(Loss) income applicable to common stockholders

 

$

(23,664

)

 

$

(1,117

)

 

$

(33,310

)

 

$

22,806

 

Basic (loss) income per common share after preferred dividends

 

$

(0.04

)

 

$

 

 

$

(0.06

)

 

$

0.04

 

Weighted average number of common shares outstanding – basic

 

 

554,531

 

 

 

536,966

 

 

 

544,000

 

 

 

535,542

 

Weighted average number of common shares outstanding – diluted

 

 

554,531

 

 

 

536,966

 

 

 

544,000

 

 

 

541,769

 

HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)

 

Quarter Ended

Nine Months Ended

 

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

OPERATING ACTIVITIES

 

 

 

 

Net (loss) income

$

(23,526

)

$

(979

)

$

(32,896

)

$

23,220

 

Non-cash elements included in net (loss) income

 

 

 

 

Depreciation, depletion and amortization

 

33,087

 

 

46,939

 

 

106,743

 

 

139,800

 

Write-down of inventory

 

1,405

 

 

93

 

 

2,159

 

 

6,524

 

Fair value adjustments, net

 

17,671

 

 

(13,192

)

 

3,486

 

 

(7,978

)

Provision for reclamation and closure costs

 

1,518

 

 

1,638

 

 

4,789

 

 

7,821

 

Stock compensation

 

1,773

 

 

1,472

 

 

4,298

 

 

4,774

 

Deferred income taxes

 

(16,538

)

 

(10,141

)

 

(17,828

)

 

(17,886

)

Foreign exchange loss (gain)

 

(4,911

)

 

(3,842

)

 

(8,353

)

 

615

 

Other non-cash items, net

 

1,472

 

 

98

 

 

2,454

 

 

1,167

 

Change in assets and liabilities:

 

 

 

 

Accounts receivable

 

15,589

 

 

5,634

 

 

34,788

 

 

(3,798

)

Inventories

 

(11,120

)

 

16,653

 

 

(19,472

)

 

22,372

 

Other current and non-current assets

 

(2,526

)

 

(2,475

)

 

(3,420

)

 

1,650

 

Accounts payable, accrued and other current liabilities

 

(38,827

)

 

(8,200

)

 

(21,708

)

 

(14,689

)

Accrued payroll and related benefits

 

1,401

 

 

3,522

 

 

1,679

 

 

(1,829

)

Accrued taxes

 

3,031

 

 

3,729

 

 

(2,652

)

 

2,730

 

Accrued reclamation and closure costs and other non-current liabilities

 

(3,821

)

 

1,793

 

 

(297

)

 

2,489

 

Cash provided by operating activities

 

(24,322

)

 

42,742

 

 

53,770

 

 

166,982

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

Additions to properties, plants, equipment and mineral interests

 

(37,430

)

 

(26,899

)

 

(93,237

)

 

(80,210

)

Proceeds from sale of investments

 

6,888

 

 

 

 

9,375

 

 

 

Proceeds from disposition of properties, plants and equipment

 

18

 

 

431

 

 

748

 

 

562

 

Purchases of investments

 

(8,641

)

 

 

 

(30,540

)

 

 

Proceeds from exchange of investments

 

 

 

1,811

 

 

 

 

1,811

 

Purchase of carbon credits

 

 

 

(200

)

 

 

 

(200

)

Acquisition, net

 

8,952

 

 

 

 

8,952

 

 

 

Pre-acquisition advance to Alexco

 

(25,000

)

 

 

 

(25,000

)

 

 

Changes in restricted cash and investment balances

 

2,011

 

 

 

 

2,011

 

 

 

Net cash used in investing activities

 

(53,202

)

 

(24,857

)

 

(127,691

)

 

(78,037

)

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Draw on revolving credit facility

 

25,000

 

 

 

 

25,000

 

 

 

Proceeds from issuance of stock, net of related costs

 

4,542

 

 

 

 

4,542

 

 

 

Acquisition of treasury shares

 

 

 

 

 

(3,677

)

 

(4,525

)

Dividends paid to common and preferred stockholders

 

(3,522

)

 

(6,178

)

 

(10,549

)

 

(17,169

)

Credit facility fees paid

 

(443

)

 

(26

)

 

(517

)

 

(108

)

Repayments of finance leases

 

(1,889

)

 

(1,828

)

 

(5,222

)

 

(5,598

)

Net cash used in financing activities

 

23,688

 

 

(8,032

)

 

9,577

 

 

(27,400

)

Effect of exchange rates on cash

 

517

 

 

(443

)

 

(804

)

 

(471

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

(53,319

)

 

9,410

 

 

(65,148

)

 

61,074

 

Cash, cash equivalents and restricted cash at beginning of period

 

199,234

 

$

182,547

 

 

211,063

 

 

130,883

 

Cash, cash equivalents and restricted cash at end of period

$

145,915

 

$

191,957

 

$

145,915

 

$

191,957

 

Supplemental disclosure of cash flow information:

 

 

 

 

Cash paid for interest

$

18,430

 

$

18,674

 

$

37,179

 

$

37,173

 

Cash paid for income and mining taxes, net

$

1,173

 

$

830

 

$

13,061

 

$

10,299

 

HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and shares in thousands - unaudited)

 

September 30, 2022

 

December 31, 2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

144,669

 

 

$

210,010

 

Accounts receivable:

 

 

 

Trade

 

12,477

 

 

 

36,437

 

Other, net

 

12,846

 

 

 

8,149

 

Inventories

 

92,005

 

 

 

67,765

 

Derivative assets

 

7,190

 

 

 

2,709

 

Other current assets

 

14,733

 

 

 

16,557

 

Total current assets

 

283,920

 

 

 

341,627

 

Investments

 

13,299

 

 

 

10,844

 

Restricted cash

 

1,246

 

 

 

1,053

 

Properties, plants, equipment and mineral interests, net

 

2,553,974

 

 

 

2,310,810

 

Operating lease right-of-use asset

 

11,632

 

 

 

12,435

 

Deferred income taxes

 

45,562

 

 

 

45,562

 

Derivative assets

 

20,794

 

 

 

2,503

 

Other non-current assets

 

4,202

 

 

 

3,974

 

Total assets

$

2,934,629

 

 

$

2,728,808

 

LIABILITIES

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

87,850

 

 

$

68,100

 

Accrued payroll and related benefits

 

26,385

 

 

 

28,714

 

Accrued taxes

 

7,344

 

 

 

12,306

 

Finance and operating leases

 

12,489

 

 

 

8,098

 

Derivative liabilities

 

5,774

 

 

 

19,353

 

Other current liabilities

 

10,949

 

 

 

14,553

 

Accrued reclamation and closure costs

 

10,594

 

 

 

9,259

 

Total current liabilities

 

161,385

 

 

 

160,383

 

Finance and operating leases

 

20,242

 

 

 

17,726

 

Accrued reclamation and closure costs

 

105,717

 

 

 

103,972

 

Long-term debt

 

530,745

 

 

 

508,095

 

Deferred tax liability

 

154,225

 

 

 

149,706

 

Derivative liabilities

 

5,560

 

 

 

18,528

 

Other non-current liabilities

 

1,987

 

 

 

9,611

 

Total liabilities

 

979,861

 

 

 

968,021

 

STOCKHOLDERS’ EQUITY

 

 

 

Preferred stock

 

39

 

 

 

39

 

Common stock

 

150,839

 

 

 

136,391

 

Capital surplus

 

2,241,649

 

 

 

2,034,485

 

Accumulated deficit

 

(397,096

)

 

 

(353,651

)

Accumulated other comprehensive income (loss)

 

(8,965

)

 

 

(28,456

)

Treasury stock

 

(31,698

)

 

 

(28,021

)

Total stockholders’ equity

 

1,954,768

 

 

 

1,760,787

 

Total liabilities and stockholders’ equity

$

2,934,629

 

 

$

2,728,808

 

Common shares outstanding

 

603,702

 

 

 

545,535

 

Non-GAAP Measures
(Unaudited)

Reconciliation of Cost of Sales (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 Cash Cost, Before By-product Credits, Cash Cost, After By-product Credits, AISC, Before By-product Credits and AISC, After By-product Credits for our operations at the Greens Creek , Lucky Friday, Casa Berardi and Nevada Operations units for the nine month periods ended September 30, 2022 and 2021 and the three month periods ended September 30, June 30 and March 31, 2022.

Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce are measures developed by precious metals companies (including the Silver Institute and the World Gold Council) 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. AISC, After By-product Credits, per Ounce is an important operating statistic that we utilize as a measures of our mines' net cash flow after costs for exploration, pre-development, reclamation, and sustaining capital. 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 silver and gold mining company, we also use these statistics on an aggregate basis - aggregating the Greens Creek and Lucky Friday mines - to compare our performance with that of other silver mining companies, and aggregating Casa Berardi and Nevada Operations for comparison to other gold mining companies. 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, reclamation, exploration, and pre-development. 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. 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, Nevada Operations and combined gold properties information 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 and Nevada Operations. 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 and Nevada Operations units is not included as a by-product credit when calculating CashCost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the total of Greens Creek and Lucky Friday, our combined silver properties. Similarly, the silver produced at our other two units is not included as a by-product credit when calculating the gold metrics for Casa Berardi and Nevada Operations.

Reconciliation of Cost of Sales to Non-GAAP Measures, continued

In thousands (except per ounce amounts)

Three Months Ended September 30, 2022

 

Three Months Ended June 30, 2022

 

Nine Months Ended September 30, 2022

 

Nine Months Ended September 30, 2021

Greens Creek

 

Lucky Friday

 

Other

 

Total Silver

 

Greens Creek

 

Lucky Friday

 

Other

 

Total Silver

 

Greens Creek

 

Lucky Friday

 

Other

 

Total Silver

 

Greens Creek

 

Lucky Friday

 

Other(2)

 

Total Silver

Total cost of sales

$

52,502

 

 

$

24,164

 

 

 

 

$

76,666

 

 

$

60,506

 

 

$

30,348

 

 

 

 

$

90,854

 

 

$

162,644

 

 

$

83,779

 

 

 

 

$

246,423

 

 

$

163,861

 

 

$

74,287

 

 

$

95

 

 

$

238,243

 

Depreciation, depletion and amortization

 

(10,305

)

 

 

(7,261

)

 

 

 

 

(17,566

)

 

 

(13,629

)

 

 

(8,862

)

 

 

 

 

(22,491

)

 

 

(35,354

)

 

 

(24,155

)

 

 

 

 

(59,509

)

 

 

(42,410

)

 

 

(20,328

)

 

 

 

 

 

(62,738

)

Treatment costs

 

9,477

 

 

 

4,791

 

 

 

 

 

14,268

 

 

 

8,778

 

 

 

4,803

 

 

 

 

 

13,581

 

 

 

27,369

 

 

 

13,271

 

 

 

 

 

40,640

 

 

 

27,444

 

 

 

13,087

 

 

 

 

 

 

40,531

 

Change in product inventory

 

4,464

 

 

 

3,022

 

 

 

 

 

7,486

 

 

 

(1,102

)

 

 

503

 

 

 

 

 

(599

)

 

 

9,899

 

 

 

2,620

 

 

 

 

 

12,519

 

 

 

(156

)

 

 

(1,757

)

 

 

 

 

 

(1,913

)

Reclamation and other costs

 

(118

)

 

 

(152

)

 

 

 

 

(270

)

 

 

(1,005

)

 

 

(256

)

 

 

 

 

(1,261

)

 

 

(1,988

)

 

 

(769

)

 

 

 

 

(2,757

)

 

 

(1,777

)

 

 

(840

)

 

 

(95

)

 

 

(2,712

)

Cash Cost, Before By-product Credits (1)

 

56,020

 

 

 

24,564

 

 

 

 

 

80,584

 

 

 

53,548

 

 

 

26,536

 

 

 

 

 

80,084

 

 

 

162,570

 

 

 

74,746

 

 

 

 

 

237,316

 

 

 

146,962

 

 

 

64,449

 

 

 

 

 

 

211,411

 

Reclamation and other costs

 

705

 

 

 

282

 

 

 

 

 

987

 

 

 

705

 

 

 

282

 

 

 

 

 

987

 

 

 

2,115

 

 

 

846

 

 

 

 

 

2,961

 

 

 

2,543

 

 

 

792

 

 

 

 

 

 

3,335

 

Exploration

 

3,776

 

 

 

 

 

 

722

 

 

4,498

 

 

 

929

 

 

 

 

 

 

769

 

 

1,698

 

 

 

4,870

 

 

 

 

 

 

2,207

 

 

7,077

 

 

 

3,895

 

 

 

 

 

 

1,359

 

 

 

5,254

 

Sustaining capital

 

10,219

 

 

 

11,264

 

 

 

187

 

 

21,670

 

 

 

14,668

 

 

 

8,110

 

 

 

99

 

 

22,877

 

 

 

30,843

 

 

 

24,937

 

 

 

334

 

 

56,114

 

 

 

17,459

 

 

 

19,104

 

 

 

 

 

 

36,563

 

General and administrative

 

 

 

 

 

 

 

11,003

 

 

11,003

 

 

 

 

 

 

 

 

 

9,692

 

 

9,692

 

 

 

 

 

 

 

 

 

28,989

 

 

28,989

 

 

 

 

 

 

 

 

 

27,985

 

 

 

27,985

 

AISC, Before By-product Credits (1)

 

70,720

 

 

 

36,110

 

 

 

11,912

 

 

118,742

 

 

 

69,850

 

 

 

34,928

 

 

 

10,560

 

 

115,338

 

 

 

200,398

 

 

 

100,529

 

 

 

31,530

 

 

332,457

 

 

 

170,859

 

 

 

84,345

 

 

 

29,344

 

 

 

284,548

 

By-product credits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zinc

 

(26,244

)

 

 

(7,155

)

 

 

 

 

(33,399

)

 

 

(32,828

)

 

 

(8,227

)

 

 

 

 

(41,055

)

 

 

(87,723

)

 

 

(21,358

)

 

 

 

 

(109,081

)

 

 

(74,571

)

 

 

(14,457

)

 

 

 

 

 

(89,028

)

Gold

 

(17,019

)

 

 

 

 

 

 

 

(17,019

)

 

 

(20,364

)

 

 

 

 

 

 

 

(20,364

)

 

 

(55,966

)

 

 

 

 

 

 

 

(55,966

)

 

 

(56,299

)

 

 

 

 

 

 

 

 

(56,299

)

Lead

 

(6,212

)

 

 

(11,796

)

 

 

 

 

(18,008

)

 

 

(8,271

)

 

 

(14,543

)

 

 

 

 

(22,814

)

 

 

(22,449

)

 

 

(38,175

)

 

 

 

 

(60,624

)

 

 

(23,265

)

 

 

(30,762

)

 

 

 

 

 

(54,027

)

Total By-product credits

 

(49,475

)

 

 

(18,951

)

 

 

 

 

(68,426

)

 

 

(61,463

)

 

 

(22,770

)

 

 

 

 

(84,233

)

 

 

(166,138

)

 

 

(59,533

)

 

 

 

 

(225,671

)

 

 

(154,135

)

 

 

(45,219

)

 

 

 

 

 

(199,354

)

Cash Cost, After By-product Credits

$

6,545

 

 

$

5,613

 

 

$

 

$

12,158

 

 

$

(7,915

)

 

$

3,766

 

 

$

 

$

(4,149

)

 

$

(3,568

)

 

$

15,213

 

$

 

$

11,645

 

 

$

(7,173

)

 

$

19,230

 

 

$

 

 

$

12,057

 

AISC, After By-product Credits

$

21,245

 

 

$

17,159

 

 

$

11,912

 

$

50,316

 

 

$

8,387

 

 

$

12,158

 

 

$

10,560

 

$

31,105

 

 

$

34,260

 

 

$

40,996

 

 

$

31,530

 

$

106,786

 

 

$

16,724

 

 

$

39,126

 

 

$

29,344

 

 

$

85,194

 

Divided by ounces produced

 

2,469

 

 

 

1,075

 

 

 

 

 

3,544

 

 

 

2,410

 

 

 

1,226

 

 

 

 

 

3,636

 

 

 

7,309

 

 

 

3,189

 

 

 

 

 

10,498

 

 

 

6,981

 

1,777

 

2,609

 

 

 

 

 

9,590

 

Cash Cost, Before By-product Credits, per Silver Ounce

$

22.69

 

 

$

22.87

 

 

 

 

$

22.74

 

 

$

22.21

 

 

$

21.65

 

 

 

 

$

22.03

 

 

$

22.24

 

 

$

23.44

 

 

 

 

$

22.61

 

 

$

21.05

 

 

$

24.70

 

 

 

 

$

22.05

 

By-product credits per ounce

 

(20.04

)

 

 

(17.64

)

 

 

 

 

(19.31

)

 

 

(25.50

)

 

 

(18.58

)

 

 

 

 

(23.17

)

 

 

(22.73

)

 

 

(18.67

)

 

 

 

 

(21.50

)

 

 

(22.08

)

 

 

(17.33

)

 

 

 

 

(20.79

)

Cash Cost, After By-product Credits, per Silver Ounce

$

2.65

 

 

$

5.23

 

 

 

 

$

3.43

 

 

$

(3.29

)

 

$

3.07

 

 

 

 

$

(1.14

)

 

$

(0.49

)

 

$

4.77

 

 

 

 

$

1.11

 

 

$

(1.03

)

 

$

7.37

 

 

 

 

$

1.26

 

AISC, Before By-product Credits, per Silver Ounce

$

28.65

 

 

$

33.62

 

 

 

 

$

33.51

 

 

$

28.98

 

 

$

28.49

 

 

 

 

$

31.72

 

 

$

27.42

 

 

$

31.53

 

 

 

 

$

31.67

 

 

$

24.48

 

 

$

32.33

 

 

 

 

$

29.67

 

By-product credits per ounce

 

(20.04

)

 

 

(17.64

)

 

 

 

 

(19.31

)

 

 

(25.50

)

 

 

(18.58

)

 

 

 

 

(23.17

)

 

 

(22.73

)

 

 

(18.67

)

 

 

 

 

(21.50

)

 

 

(22.08

)

 

 

(17.33

)

 

 

 

 

(20.79

)

AISC, After By-product Credits, per Silver Ounce

$

8.61

 

 

$

15.98

 

 

 

 

$

14.20

 

 

$

3.48

 

 

$

9.91

 

 

 

 

$

8.55

 

 

$

4.69

 

 

$

12.86

 

 

 

 

$

10.17

 

 

$

2.40

 

 

$

15.00

 

 

 

 

$

8.88

 

Reconciliation of Cost of Sales to Non-GAAP Measures, continued

In thousands (except per ounce amounts)

Three Months Ended
September 30, 2022

 

Three Months Ended
June 30, 2022

 

Nine Months Ended
September 30, 2022

 

Nine Months Ended
September 30, 2021

 

Casa
Berardi

 

Total Gold

 

Casa
Berardi

 

Total Gold

 

Casa
Berardi

 

Total Gold

 

Casa
Berardi

 

Nevada
Operations(3)

 

Corporate(3)

 

Total Gold

Total cost of sales

$

59,532

 

 

$

59,532

 

 

$

61,870

 

 

$

61,870

 

 

$

183,570

 

 

$

183,570

 

 

$

172,760

 

 

$

46,832

 

 

 

 

$

219,592

 

Depreciation, depletion and amortization

 

(15,089

)

 

 

(15,089

)

 

 

(15,459

)

 

 

(15,459

)

 

 

(46,394

)

 

 

(46,394

)

 

 

(61,159

)

 

 

(15,021

)

 

 

 

 

(76,180

)

Treatment costs

 

429

 

 

 

429

 

 

 

457

 

 

 

457

 

 

 

1,345

 

 

 

1,345

 

 

 

1,723

 

 

 

1,731

 

 

 

 

 

3,454

 

Change in product inventory

 

420

 

 

 

420

 

 

 

(793

)

 

 

(793

)

 

 

(936

)

 

 

(936

)

 

 

(2,401

)

 

 

(9,951

)

 

 

 

 

(12,352

)

Reclamation and other costs

 

(203

)

 

 

(203

)

 

 

(209

)

 

 

(209

)

 

 

(623

)

 

 

(623

)

 

 

(632

)

 

 

299

 

 

 

 

 

(333

)

Exclusion of Nevada Operations costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Cost, Before By-product Credits (1)

 

45,089

 

 

 

45,089

 

 

 

45,866

 

 

 

45,866

 

 

 

136,962

 

 

 

136,962

 

 

 

110,291

 

 

 

23,890

 

 

 

 

 

134,181

 

Reclamation and other costs

 

204

 

 

 

204

 

 

 

209

 

 

 

209

 

 

 

623

 

 

 

623

 

 

 

632

 

 

 

681

 

 

 

 

 

1,313

 

Sustaining Exploration

 

2,314

 

 

 

2,314

 

 

 

1,178

 

 

 

1,178

 

 

 

4,886

 

 

 

4,886

 

 

 

3,551

 

 

 

 

 

 

 

 

3,551

 

Sustaining capital

 

10,457

 

 

 

10,457

 

 

 

7,597

 

 

 

7,597

 

 

 

25,587

 

 

 

25,587

 

 

 

21,030

 

 

 

195

 

 

 

 

 

21,225

 

AISC, Before By-product Credits (1)

 

58,064

 

 

 

58,064

 

 

 

54,850

 

 

 

54,850

 

 

 

168,058

 

 

 

168,058

 

 

 

135,504

 

 

 

24,766

 

 

 

 

 

160,270

 

By-product credits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Silver

$

(131

)

 

 

(131

)

 

$

(188

)

 

 

(188

)

 

 

(485

)

 

 

(485

)

 

 

(656

)

 

 

(1,131

)

 

 

 

 

(1,787

)

Total By-product credits

 

(131

)

 

 

(131

)

 

 

(188

)

 

 

(188

)

 

 

(485

)

 

 

(485

)

 

 

(656

)

 

 

(1,131

)

 

 

 

 

(1,787

)

Cash Cost, After By-product Credits

$

44,958

 

 

$

44,958

 

 

$

45,678

 

 

$

45,678

 

 

$

136,477

 

 

$

136,477

 

 

$

109,635

 

 

$

22,759

 

 

$

 

$

132,394

 

AISC, After By-product Credits

$

57,933

 

 

$

57,933

 

 

$

54,662

 

 

$

54,662

 

 

$

167,573

 

 

$

167,573

 

 

$

134,848

 

 

$

23,635

 

 

$

 

$

158,483

 

Divided by gold ounces produced

 

33

 

 

 

33

 

 

 

33

 

 

 

33

 

 

 

97

 

 

 

97

 

 

 

97

 

 

 

20

 

 

 

 

 

117

 

Cash Cost, Before By-product Credits, per Gold Ounce

$

1,353

 

 

$

1,353

 

 

$

1,377

 

 

$

1,377

 

 

$

1,415

 

 

$

1,415

 

 

$

1,134

 

 

$

1,180

 

 

 

 

$

1,142

 

By-product credits per ounce

 

(4

)

 

 

(4

)

 

 

(6

)

 

 

(6

)

 

 

(6

)

 

 

(6

)

 

 

(7

)

 

 

(56

)

 

 

 

 

(15

)

Cash Cost, After By-product Credits, per Gold Ounce

$

1,349

 

 

$

1,349

 

 

$

1,371

 

 

$

1,371

 

 

$

1,409

 

 

$

1,409

 

 

$

1,127

 

 

$

1,124

 

 

 

 

$

1,127

 

AISC, Before By-product Credits, per Gold Ounce

$

1,742

 

 

$

1,742

 

 

$

1,647

 

 

$

1,647

 

 

$

1,735

 

 

$

1,735

 

 

$

1,394

 

 

$

1,223

 

 

 

 

$

1,364

 

By-product credits per ounce

 

(4

)

 

 

(4

)

 

 

(6

)

 

 

(6

)

 

 

(6

)

 

 

(6

)