Hecla Mining Company · NYSE:HL
Hecla Mining — IPO Roadshow (September 2008)
43 slides from Hecla Mining's IPO roadshow presentation, Sep 3, 2008
Slide 1: Investor Presentation September 2008
Investor Presentation September 2008
Slide 2: Cautionary Statements
Cautionary Statements Cautionary Statements Cautionary Note Regarding Forward Looking Statements Statements made which are not historical facts, such as anticipated payments, litigation outcome, production, sales of assets, exploration results and plans, costs, and prices or sales performance are “f
Slide 3: Offering Summary
Offering Summary Offering Summary Issuer Hecla Mining Company Offer Size 30 million shares Over-Allotment 15% greenshoe Offer Type Fully registered offer in the U.S. Private placement in Canada and Europe Exchange / Ticker NYSE / HL Use of Proceeds Repayment of bridge facility General corporate purp
Slide 4: Why Hecla?
Why Hecla? Why Hecla? Attractive production profile – mining a great product Consistently one of the lowest cost silver producers in North America Geo-politically stable locations Largest silver producer in the U.S. 100% of silver reserves in the U.S. Additional exploration opportunities in the U.S.
Slide 5: Why Silver? A High Growth Metal
6%/annum increase in industrial/consumer demand over last five years (54% of total demand) • New/expanded sophisticated consumer uses (cell phones, laptops) • Developing countries are urbanizing Physical properties – versatile & difficult to substitute Jewelry/Silverware steady (26%) Photography use
Slide 6: Transforming Transactions
On April 16, 2008, Hecla completed the acquisition of 70.3% of the Greens Creek joint venture, increasing our ownership interest to 100% Funded with $700 million in cash and approximately $50 million in common stock Gives Hecla control of 100% of the fifth largest silver mine in the world Nearly dou
Slide 7: Silver Production Growth
Silver Silver Production Growth Production Growth Note: 2008 production estimates include 3.5 months of 29.7% of Greens Creek and 8.5 months of 100.0% of Greens Creek 11 million ounces 5.6 million ounces
Slide 8: Largest Silver Producer
Greens Creek is the largest silver mine owned by any N. American-listed silver company (2007 Production) Largest Silver Producer Largest Silver Producer * SLW purchases silver metal under contract from mine owners Source: Public filings
Slide 9: Low Cost Producer
($6) ($4) ($2) $0 $2 $4 $6 $8 $10 ($6) ($4) ($2) $0 $2 $4 $6 $8 $10 Low Cost Producer Low Cost Producer 2007 Cash Costs 2007 Cash Costs Source: GFMS World Silver Survey Greens Creek is the lowest cost mine owned by any North American listed silver company
Slide 10: Low Costs = High Margins
Low Costs = High Margins Low Costs = High Margins
Slide 11: Silver Reserve Growth
194% increase * Pro forma 100% Greens Creek Silver Reserve Growth Silver Reserve Growth
Slide 12: Locations of Peer Group Silver Reserves
Australia 22% Bolivia 71% Chile 3% Argentina 4% Argentina 100% Bolivia 13% Argentina 17% Peru 44% Mexico 26% Sweden 10% Greece 3% Peru 4% Mexico 83% USA 100% Coeur Silver Wheaton Silver Standard Apex Silver Locations of Peer Group Locations of Peer Group Silver Reserves Silver Reserves Pan American
Slide 13: Relative Valuation - Cash Flow
Relative Valuation - Relative Valuation - Cash Flow Cash Flow Note: Enterprise values as of August 19, 2008 except for Hecla 30% Greens Creek, which is as of February 11, 2008 Enterprise Value = Market Capitalization + Debt + Preferred Stock + Minority Interests – Cash and Equivalents Hecla generate
Slide 14: Diversified Portfolio in Stable Geographies
Diversified Portfolio in Diversified Portfolio in Stable Geographies Stable Geographies *San Sebastian, Mexico *San Juan Silver, Colorado Greens Creek, Alaska Lucky Friday Unit, Idaho Coeur d’Alene, Idaho Vancouver, BC Silver Properties Corporate Offices Exploration Projects *
Slide 15: Greens Creek Mine
Hecla’s ownership interest: 100% Underground silver-zinc-gold-lead mine World’s fifth largest silver mine Low cash cost producer due to significant byproduct credits In operation since 1989 with good history of reserve replacement Hecla’s attributable 2008 production estimate : 6 million oz. of silv
Slide 16: Greens Creek Long-Term Potential
Greens Creek Greens Creek Property Boundary Property Boundary Projected Mine Contact Projected Mine Contact 1 mile 1 mile Greens Creek Greens Creek Long-Term Potential Long-Term Potential
Slide 17: Lucky Friday Mine
Mullan, Idaho Lucky Friday Mine Lucky Friday Mine Hecla’s ownership interest: 100% Underground silver-lead-zinc mine Low cash cost producer due to byproduct credits In operation since 1942 with good history of reserve replacement Excellent exploration potential 2008 production estimate: • 3 million
Slide 18: Lucky Friday: Excellent Exploration Potential
Lucky Friday: Lucky Friday: Excellent Excellent Exploration Potential Exploration Potential Mined Out Area Identified Reserve and Other Exploration Opportunities Potential Discovery Areas
Slide 19: A World Class District
A World Class District A World Class District The Silver Valley, North Idaho 1.2 billion oz of historical silver production 300 million oz silver from Hecla’s land position Very significant vertical continuity in the district Large 25-square-mile claims area Under-explored with modern exploration te
Slide 20: Mining Company
MINING COMPANY
Slide 21: Slide 21
Slide 22: Mexican Silver Belt
Mexican Silver Belt Mexican Silver Belt Santa Eulalia Batopilas Parral San Dimas Fresnillo Zacatecas Real de Angeles Pachuca Guanajuato Taxco Real de Catorce Concepcion del Oro MEXICAN SILVER BELT 10.2 Billion Ounces of Historical Silver Production SAN SEBASTIAN Penasquito
Slide 23: San Sebastian Exploration Targets
San Sebastian San Sebastian Exploration Targets Exploration Targets
Slide 24: San Juan Silver JV
San Juan Silver JV San Juan Silver JV Hecla’s earn-in interest: 70% Excellent exploration potential District has historically used narrow-vein mining 84 million ounces of historic silver production 100 million+ oz potential – mostly on patented ground Land package consolidated In February 2008, Hecl
Slide 25: San Juan Silver - Major Veins
Equity OH Amethyst Bulldog Alpha Corsair 1 mile Homestake San Juan patented San Juan unpatented 25 sq. miles 30 miles of prospective veins An immediate drilling program $23 million of work and stock for 70% of JV San Juan Silver - San Juan Silver - Major Veins Major Veins
Slide 26: Project Pipeline
Silver Valley 3D compilation 25-square-mile target area Lucky Friday ‘Gap’ area and deep underground drilling 5250 Zone West Gallagher Zone Surface drilling for new deposit Idaho Alaska 511-square-mile target area -- multiple targets Hugh Zone evaluation Rio Grande Mexico San Juan Silver Mining J.V.
Slide 27: Why Hecla?
Why Hecla? Why Hecla? Attractive production profile – mining a great product Consistently one of the lowest cost silver producers in North America Geo-politically stable locations Largest silver producer in the U.S. 100% of silver reserves in the U.S. Additional exploration opportunities in the U.S.
Slide 28: Appendix
APPENDIX
Slide 29: Silver - A High Growth Metal
Silver – Silver – A High Growth Metal A High Growth Metal • Global aluminum consumption and industrial demand of silver have followed a similar trend in the past. Both have high end consumer uses. • Silver’s long-term industrial demand growth could be expected to parallel aluminum’s future estimated
Slide 30: Industrial Demand Grows as GDP Grows
Industrial Demand Grows Industrial Demand Grows as GDP Grows as GDP Grows Source: GFMS, China GDP – World Bank Industrial uses of silver in China have increased with the growth of GDP per capita
Slide 31: Silver - The Rest of the Story
Silver – Silver – The Rest of the Story The Rest of the Story Investment Silver is an investment vehicle Silver’s investment demand is driven by same factors as gold’s (i.e. weak US dollar, negative real interest rates in US, ongoing credit market crisis, inflation fears) Jewelry and Silverware Stea
Slide 32: Silver: Not Easily Substitutable
Silver: Not Easily Silver: Not Easily Substitutable Substitutable Silver has unique properties that make it versatile and difficult to substitute Natural bactericide/biocide – water purification, wound dressings Photosensitive – photography, x-rays Highly reflective – mirrors, glass coatings Chemica
Slide 33: Silver Industrial Demand is Price Inelastic
Silver Industrial Demand Silver Industrial Demand is Price Inelastic is Price Inelastic
Slide 34: Strong Silver Industry Fundamentals
Strong Silver Industry Strong Silver Industry Fundamentals Fundamentals Positive trends in end markets Growth of the middle class in China and India Growing use of mobile phones/other consumer products Computerization in the third world Continued demand for industrial applications Demand is relative
Slide 35: Silver Supply & Demand
Silver Supply & Demand Silver Supply & Demand 1,000 1,100 Mined Silver production Industrial Applications Photography Jewelry Silverware Coins & Medals Source: World Silver Survey 2008
Slide 36: Silver and Gold Prices (2003 - 2008 YTD)
Silver and Gold Prices Silver and Gold Prices (2003 – (2003 – 2008 YTD) 2008 YTD)
Slide 37: Reserves
Grade Contained Metal Ore Silver Gold Lead Zinc Silver Gold Lead Zinc (tons) (oz/ton) (oz/ton) (%) (%) (000 oz.) (000 oz.) (MM lbs.) (MM lbs.) Proven reserves Lucky Friday 760,700 12.3 — 7.2 2.5 9,325 — 9,325 — Probable reserves Lucky Friday 680,000 11.9 — 7.5 2.5 8,065 — Greens Creek 8,454,000 13.7
Slide 38: Exploration and Capital Expenditures
$47 mil Lucky Friday $47 mil $42.2 mil $ 75 mil Exploration and Exploration and Capital Expenditures Capital Expenditures (US$ in millions) Source: Hecla Mining Silver Valley $5.5 Mexico $5 San Juan Silver $5 Greens Creek $4 Lucky Friday $3 Other $2.5
Slide 39: Key Strategies
Maintain low cash cost position among precious metal producers Exploit and develop existing asset base Grow through new and existing exploration opportunities Build on the Greens Creek transaction through new acquisitions Key Strategies Key Strategies
Slide 40: Snapshot
Snapshot Snapshot Market cap: US$899 million Basic shares outstanding: 126.3 million Fully diluted shares: 126.4 million Listings: NYSE: “HL” 2008 share liquidity: 3.5 million/day Cash: US$45.8 million Based on share price at August 19, 2008 and diluted shares outstanding calculated using the treasu
Slide 41: Experienced Management
Experienced Management Experienced Management Phillips S. Baker, Jr. President and Chief Executive Officer (21 years in mining) James A. Sabala Senior Vice President and Chief Financial Officer (27 years in mining) Ronald W. Clayton Senior Vice President – Operations (28 years in mining) Dr. Dean W.
Slide 42: Enterprise Value Reconciliation
Enterprise Value Enterprise Value Reconciliation Reconciliation Market Capitalization Plus: Total Debt Plus: Preferred Stock Less: Cash and Cash Equivalents Enterprise Value $898.9 360.0 156.7 (45.8) $1,369.8 Based on share price at August 19, 2008 and diluted shares outstanding calculated using the
Slide 43: Cash Cost per Ounce Reconciliation
Cash Cost per Ounce Cash Cost per Ounce Reconciliation Reconciliation Includes 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 and marketing expense, on-site general