Hecla Mining Company · NYSE:HL
Hecla Mining — Shareholder Meeting (May 2015)
58 slides from Hecla Mining's shareholder meeting presentation, May 21, 2015
Slide 1: Annual Meeting of Shareholders
Annual Meeting of Shareholders Montreal May 21, 2015
Slide 2: Cautionary Statements
Cautionary Statements Cautionary Statement Regarding Forward Looking Statements, This presentation 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
Slide 3: A Leading Silver, Gold, Base Metals Producer
A Leading Silver, Gold, Base Metals Producer Three producing mines in North America Quality mining assets Strong margins in both silver and gold Diversified, long-life revenue streams $61.5M of cash flow from mines in 2014 Generates cash flow While also investing $34.5M to extend Lucky Fri
Slide 4: Our Mission and Strategy
Our Mission: Creating value for shareholders by discovering, acquiring, developing, producing and marketing mineral resources at a profit. The Strategy: 1. Invest in existing mines to extend mine life, reduce risk and for low-cost production growth 2. Acquire high quality assets, with low-cost poten
Slide 5: Successful Implementation of our Strategy
Successful Implementation of our Strategy: Three operating mines: Greens Creek – high margins, free cash flow, reserves High-Quality Lucky Friday – long life, production growth from new shaft Assets Casa Berardi – operational and exploration upside Record silver and silver equivalent produ
Slide 6: What Differentiates Hecla From Its Peers
What Differentiates Hecla From Its Peers Outperformance Quality assets Our mines are Solid growth Financially and strong strong cash flow profile strong reserves generators –6–
Slide 7: Hecla's Outperformance YTD
Hecla’s Outperformance YTD 2015 Relative Price Performance Hecla 15% 30% 20% 15% 10% 11% 8% 0% -10% 10% -20% -30% 2-Jan 22-Jan 11-Feb 3-Mar 23-Mar 12-Apr 2-May Hecla Intermediate Silver Index Junior Silver Index Silver Spot 1. Source – Bloomberg (January 1, 2015 – May 5, 2015) Intermediate S
Slide 8: Why the Outperformance?
Why the Outperformance? Record (P+P) Silver Reserves for Past 9 Yrs Strong Production Growth 34.5 Moz AgEq1 173 Moz Ag +239% +142% 14.3 Moz AgEq1 51 Moz Ag Dec 31/06 Dec 31/14 2012 2014 Consistently Strong Liquidity Healthy Margins Silver $291M $296M $21.28 $18.46 $14.44 68% $13.65 74% $191M $196M $
Slide 9: 2014 Highlights and Achievements
2014 Highlights and Achievements $501M revenue 31%1 Record 34.5M silver equivalent production 50%2 Record 11.1M ounces silver production 24% Record 187K ounces gold production 56% 173M ounces P & P silver reserves 1.9% Record $174M adjusted EBITDA 29%3 $210M cash at year end vs. $212M at
Slide 10: Hecla: A Transformed Company Since 2012
Hecla: A Transformed Company Since 2012 2012 2014 % Change Silver production 6.4Moz 11.1Moz +73% Silver equivalent production 14.3Moz 34.5Moz +142% Gold production 56Koz 187Koz +237% Revenue $321M $501M +56% Operating cash flow $69M $138M1 +101% 1. Pro-forma 2014 OCF includes the $55.4 M f
Slide 11: Q1 2015 Highlights
Q1 2015 Highlights Q1 2014 Q1 2015 Silver Production 2.5Moz 2.9Moz Gold Production 46.3Koz 40.7Koz Revenue $126M $119M Adjust EBITDA1 $45M $33M Cash cost, after by-product credits, per silver oz2 $3.83/oz $4.93/oz Cash cost, after by-product credits, per gold oz2 $886/oz $974/oz 1. Adjusted EBITDA i
Slide 12: North American Focused Asset Portfolio
North American Focused Asset Portfolio Operations in Low-Risk + Mining-Friendly Jurisdictions Corporate Offices Operating mines Pre-development Exploration project –12–
Slide 13: Higher Grade Mines Than Peers
Higher Grade Mines Than Peers BMO Silver Coverage, Silver Equiv. Reserves vs. Grade Higher Grade HL Source: Company filings, MEG, BMO Capital Markets (03/31/2015) –13–
Slide 14: Greens Creek: Consistent Low-Cost Production
Greens Creek: Consistent Low-Cost Production Silver Gold Cash cost, after by-product Production Production credits, per Ag oz1 2014, Q1/15 Actual 7.8Moz 2.0Moz 58,753 oz $2.89/oz $3.23/oz 2015E 7.3 Moz 55,000 oz $4.50/oz 2015E Capital $40M 2P Reserves 94.0 Moz silver @ 12.2 oz/t M+I Resources 9.1 Mo
Slide 15: Greens Creek: Strong Financial Performance
Greens Creek: Strong Financial Performance Past 25 Years1 Consistently Revenue $4.4 billion Generates Net Income $1.1 billion Positive Free Cash Flow Free Cash Flow $941 million 22% Free Cash Flow Conversion Historical Production Past 25 Years Silver Production: 191.4 Moz Zinc Production: 1.4 M tons
Slide 16: Greens Creek: Expanding Reserves & Resources
Greens Creek: Expanding Reserves & Resources Q1 2015 Definition and Exploration Drilling Exploration drilling downtrend continues to return high-grade mineralization In-fill drilling should convert resources to reserves Expect to extend mine life –16–
Slide 17: Lucky Friday: Solid Performance
Lucky Friday: Solid Performance Silver Production Cash cost, after by-product credits, per silver oz1 2014, Q1/15 Actual 3.2 Moz 0.84 Moz $9.44/oz $9.05/oz 2015E 3.2 Moz $8.75/oz 2015E Capital $58M 2P Reserves 78.9 Moz silver @ 13.4 oz/t M+I Resources 125.0Moz silver @ 5.7 oz/t 1. Cash cost, after b
Slide 18: Lucky Friday #4 Shaft: Expected to Grow Production 60%
Lucky Friday #4 Shaft: Expected to Grow Production 60% Beginning in Late 2017 Operational shaft expected in Q3/16 at a total cost of $225 million As of Q1/15: 80% completed and $180 million spent Production growth expected from higher grade ore at depth –18–
Slide 19: Casa Berardi: Great New Addition
Casa Berardi: Great New Addition Cash cost, after by- Gold Production product credits, per gold oz1 2014, Q1/15 Actual 128,244 oz 25,411 oz $826/oz $974/oz 2015E 130,000 oz $825/oz 2015E Capital $44M 2P Reserves 1.3 Moz gold @ 0.14 oz/t M+I Resources 1.4 Moz gold @ 0.12 oz/t 1. Cash cost, after by-p
Slide 20: Casa Berardi: Exploration Upside
Casa Berardi: Exploration Upside –20–
Slide 21: Casa Berardi: Increasing Resources
Casa Berardi: Increasing Resources Southwest Zone 124 Zone 113 Zone 985 Level 118 Zone New Zone 117 123 Zone 4.0 gpt Au/4.6 m 15.8 gpt Au/4.5 m –21–
Slide 22: HL Using Low 2014 Reserve Prices
HL Using Low 2014 Reserve Prices1 2014 Reserve Silver Price/oz $22.00 $19.50 $20.00 $20.00 $18.50 $19.00 $19.00 $17.25 $18.00 $18.00 $18.00 Hecla Endeavour Primero Fresnillo Pan Coeur Fortuna* SilverCrest First Kinross Goldcorp American Majestic 2014 Reserve Gold Price/oz $1,300 $1,300 $1,250 $1,260
Slide 23: Our Mines Are Strong Cash Flow Generators
Our Mines Are Strong Cash Flow Generators Greens Creek Casa Berardi Lucky Friday $104.0 $60.9 $29.3 $69.1 $33.8 $50.4 $17.5 $16.3 $10.6 $34.5 OCF* Capex FCF** OCF* Capex FCF** 48% ($18.2) 72% 15% Conversion Conversion Conversion to FCF2 to FCF1 to FCF1 OCF* Capex FCF** #4 FCF** w/o #4 Shaft w/ #4 Sh
Slide 24: Spending Within Adjusted EBITDA
Spending Within Adjusted EBITDA Cash Bridge Q1 2015 (US$ Millions) Largely Discretionary $33.2 M 1 1 35.0 209.7 196.2 27.0 5.1 1.1 6.2 2 9.1 Includes #4 Shaft Capex of $10M Q1 2015 Beginning Adjusted EBITDA Capex Exploration + Pre- Dividends Interest Expense Other Q1 2015 Ending Cash development Cas
Slide 25: Hecla Is A Strong Cash Flow Generator
Hecla Is A Strong Cash Flow Generator Cash Bridge 2010 – 2014 (US$ Millions) Partially Discretionary $971.9 1 $752.7M Available Cash Flow $219.2M $550.4 Other Expenses $265.3M $160.1 $42.2 $209.7 $151.2 $104.7 $263.4 $1.92 2010 Beginning Adjusted EBITDA Capex Exploration + Pre- Dividends Basin Settl
Slide 26: Strong Growth Pipeline
Strong Growth Pipeline Recently renewed activity in Mexico and proposed acquisition in Montana bring new short and long-term growth potential –26–
Slide 27: San Sebastian: Near-Term Growth Opportunity
San Sebastian: Near-Term Growth Opportunity Could Potentially Become a 100 Moz AgEq District Mined 11.6 Moz Ag and 177,541 oz Au from 2001-05 Total inferred resources 46% to 37.7 Moz AgEq in 2014 Total inferred resources 18% to 34.9 Moz AgEq in 2015 Near surface, high-grade veins discovered 4.5 mi
Slide 28: San Sebastian: Significant New Discoveries
San Sebastian: Significant New Discoveries N FOCUS OF RECENT DRILLING SAN SEBASTIAN CONCESSIONS New Veins New Vein Projections Past Producing Veins Focus Area Drill Hole Trace Cross Section 0 500 Meters –28–
Slide 29: San Sebastian: High Grade Near Surface
San Sebastian: High Grade Near Surface NE SW East Francine North Vein 328 ft Francine Middle Vein 0 500 Approximate 1 : 500 Scale 3D Cross Section Vein Surface to 328 feet (100 meters): Silver Equivalent (Oxide) Hugh Zone 16.2 million ounces indicated resources Average grade of 0.11 oz/ton gold and
Slide 30: San Sebastian: Preliminary Mine Layout
San Sebastian: Preliminary Mine Layout Plan View Topsoil 621250 622500 stockpile Topsoil Dump stockpile Dump North pit Middle pit Topsoil stockpile 2701250 Topsoil 2701250 stockpile Dump Ore Topsoil stockpile stockpile East Francine pit Dump Topsoil stockpile 621250 622500 –30–
Slide 31: Financial Strength: Strong Margins
Financial Strength: Strong Margins Silver Margins Casa Berardi Margins $32.11 $1,298 $1,291 $1,275 $1,222 $1,195 $339 $248 $412 $377 $21.28 26% 20% 32% 30% $560 $18.46 $17.18 $29.41 47% $14.44 $952 $974 $13.65 $12.25 $886 68% $898 74% 71% $635 92% $6.84 $4.81 $4.93 $2.70 2012 2013 2014 Q1/2015 Q1 20
Slide 32: Consistently Strong Liquidity
Consistently Strong Liquidity (US$ millions) $312 $310 $291 $294 $212 $210 $191 $194 2012 2013 2014 Q1 2015 Cash and Cash Equivalents Available Credit Facility –32–
Slide 33: Reasonable Debt Level In Capital Structure
Reasonable Debt Level In Capital Structure Senior notes due in 2021 are the Capitalization ($ in millions) only substantial indebtedness Actual Q1 2015 – Limited covenants Cash & cash equivalents $196 No off-balance sheet arrangements Capital lease liability 22 Credit Metrics – Total Net Debt/
Slide 34: High Yield is "Good" Debt
High Yield is “Good” Debt $500M in high yield notes gives us: Growth Purchased Casa Berardi, a long-life gold mine Flexibility No restrictive financial covenants Low cost capital 6.875% coupon or ~5% after tax Long term borrowing Zero repayment obligations until 2021 Minimal dilution A ben
Slide 35: Stability from diversified revenue streams
Stability from diversified revenue streams Lead and zinc positions supplement core exposure in silver and gold Consolidated Revenue by Metal #3 US lead and zinc producer Q1 2015 Hedge up to 60% of payable lead and zinc production out to 3 years 16% 11% 37% Benefit: More stable revenue Curren
Slide 36: Hecla is Undervalued
Hecla is Undervalued % Undervalued Per Consensus Estimates P/CFPS – 2015 -20% EV/RESERVES (Silver Eq.) -34% 14.4x P/CF - 2015 11.8x 10.1x 10.2x Average, 9.7x 8.9x 9.0x 7.7x 5.4x Hecla Silver Peers 1. Valuations based on prices as of April 7, 2015. Source – Bloomberg. EV/Reserves and EV/Production ar
Slide 37: Thank you
Thank you Hecla Celebrates 50 Years on the NYSE – March 25, 2015 –37–
Slide 38: Appendix
Precious metal companies… Appendix –38–
Slide 39: 2015 Expectations
2015 Expectations 2015E1 Silver 2015E1 Gold Cash Cost Mine after by-product credits, per Production (Moz) Production (oz) silver/gold ounce2 Greens Creek 7.3 55,000 $4.50 Lucky Friday 3.2 n/a $8.75 Casa Berardi n/a 130,000 $825 Total 10.5 185,000 $6.00 Equivalent Production: Including 35³ all Metals
Slide 40: HL Using Low 2014 Resource Prices
HL Using Low 2014 Resource Prices1 2014 Reserve Silver Price/oz $30.00 $24.00 $22.00 $22.00 $22.00 $19.00 $19.50 $20.00 $18.00 $18.00 Endeavour Primero Fortuna SilverCrest Hecla Coeur First Kinross Goldcorp Pan Majestic American* 2014 Reserve Gold Price/oz $1,500 $1,350 $1,350 $1,400 $1,400 $1,400 $
Slide 41: Greens Creek: Advancing Killer Creek
Greens Creek: Advancing Killer Creek Drilling has defined copper, silver, zinc, lead bearing stockwork veins Drilling has defined base metal mineralization at mine contact Mineralization within 1 mile of mine infrastructure A A’ Azimuth 51 -41-
Slide 42: Casa Berardi - In A Golden Neighborhood
Casa Berardi - In A Golden Neighborhood -42-
Slide 43: San Sebastian: Successful 2014 RAB Drilling
San Sebastian: Successful 2014 RAB Drilling -43-
Slide 44: Good Early Stage Exploration Potential
Good Early Stage Exploration Potential Heva (Au): 100% Hecla: $0.7M proposal 20 holes, 6,750 m Extend high-grade resource blocks and change perception. Fayolle JV (Au): $0.5M proposal 24 holes, 8,100 m proposal Test the Cinco and Paré areas for new deposits. Opinaca (Au) JV-Earn in (Au): $1.2M propo
Slide 45: Silver - The Metal of This Age
Silver - The Metal of This Age Has the highest electrical conductivity of all the metals 80% more conductive than aluminum 50% more conductive than gold, 6% more conductive than copper Critically important in the miniaturization of circuits as electronic items become increasingly compact and
Slide 46: Increasing Share of Modern Demand
Increasing Share of Modern Demand Modern demand increased from 260 M oz in 1992 to 537 M oz in 2013, an increase of 106%, and an annualized increase of 4.0% 1% 5% 36% 22% 49% 30% Modern Modern 23% 29% 5% 1992 2013 Modern Investment Jewelry & Photography Coins & Medals Silverware Source - GFMS -46-
Slide 47: Silver Consumption per Capita Increases
Silver Consumption per Capita Increases Increasing Silver Consumption Per Person in China and India 0.80 0.80 Japan 0.70 0.70 South Korea 0.60 0.60 Silver Ounce Per Capita Silver Ounce Per Capita 0.50 0.50 United Japan 0.40 0.40 States Germany 0.30 0.30 United 0.20 States 0.20 Germany South 0.10 Kor
Slide 48: Zinc Supply - US Production
Zinc Supply - US Production Hecla is the 3rd largest zinc producer in the US % of USA Zinc Production 2013 Comparison of 2013 Zinc Production Doe Run East 3.92% Tennessee Mines 125 Zinc Production (thousands tonnes) 9.37% Gordonsville 6.61% 87 Greens Creek 56 6.90% Lucky Friday Red Dog 0.45% 72.75%
Slide 49: Zinc Supply Shortage Expected
Zinc Supply Shortage Expected Hecla is the 3rd largest zinc supplier in the US Demand is expected to exceed mine production around 2017 Major Mine Shutdowns Annual Capacity Mine (MT) CLOSED Perseverance 115K (2013) CLOSED Brunswick 240K (2013) EXPECTED Century 510K TO CLOSE (2015) EXPECTED Lishe
Slide 50: 240 Million Ounces
Added 240 Moz of Reserves Over Past 11 Years1 Silver Ounces Discovered or Acquired 240 Moz Over the Past 11 Years 200 Millions 11-Year Reserves and Cumulative Ounces Mined 173 Moz 150 240 Million Ounces 100 Reserve Additions 50 0 (50) Cumulative Production (100) Lucky Friday reserves Greens Creek re
Slide 51: Proven & Probable Reserves
Proven & Probable Reserves Proven Reserves Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) Tons Tons Greens Creek (a) United States 100.0% 4.7 15.7 0.10 3.7 9.2 74 0.5 180 440 Lucky Friday (a) United States 100.0% 3,840 13.7 - 8
Slide 52: Reserves & Resources Update
Reserves & Resources Update (on Dec. 31, 2014 unless otherwise noted) Measured Resources Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Greens Creek (b) United States 100.0% - - - - - - - - - Lucky Friday (2)(b) U
Slide 53: Reserves & Resources Update
Reserves & Resources Update (on Dec. 31, 2014 unless otherwise noted) Inferred Resources Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Greens Creek (b) United States 100.0% 3,452 13.6 0.09 2.8 6.6 46,881 315 97,1
Slide 54: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Reconciliation of cash cost, after by-product credits, per silver ounce to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measurements, for Greens Creek & Lucky Friday (dollars and ounces in thousan
Slide 55: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Lucky Friday Greens Creek Q1/2015 Q4/2014 Q3/2014 Q2/2014 Q1/2014 Q1/2015 Q4/2014 Q3/2014 Q2/2014 Q1/2014 (1) Cash costs, before by-product credits (1) $ 18,133 $ 18,361 $ 21,668 $ 19,646 $ 17,920 Cash costs, before by-product credits $ 47,113 $ 51,828 $ 50,415 $ 50,405
Slide 56: Hecla Adjusted EBITDA Reconciliation to GAAP
Hecla Adjusted EBITDA Reconciliation to GAAP Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles (GAAP) Dollars are in thousands Twelve Months Ended 31-Mar-15 Net income $ 18,734 Plus: Interest expense 26,127 Plus: Income taxes (7,584) Plus: Depreciation, depletion and amor
Slide 57: Hecla Adjusted EBITDA Reconciliation
Hecla Adjusted EBITDA Reconciliation Reconciliation of Net Income (Loss) (GAAP) to Adjusted EBITDA (non-GAAP) Twelve Months Ended December 31, 2014 2013 2012 2011 2010 Net Income (Loss) $ 17,824 $ (25,130) $ 14,954 $ 151,164 $ 48,983 Plus: Interest expense, net of amount capitalized 26,775 21,689 2,
Slide 58: HL: No Debt Repayment Obligations Until 2021
HL: No Debt Repayment Obligations Until 2021 Peer Comparison Date Gross Current 1 Issuer Issued Coupon Maturity Proceeds Rating Hecla 12-Apr-13 6.875% Sr. Unsecured 1-May-21 $500 B3/B AuRico Gold 17-Mar-14 7.750% Sr. Secured 1-Apr-20 $315 B3/B Coeur 24-Jan-13 7.875% Sr. Unsecured 1-Feb-21 $450 B3/B+
Hecla Mining Company — Shareholder Meeting (May 2015) on 6ix