Hecla Mining Company · NYSE:HL
Hecla Mining — Jefferies 11th Annual Industrials Conference 2015
51 slides from Hecla Mining's conference presentation, Aug 12, 2015
Slide 1: Jefferies 11th Annual Industrials Conference
Jefferies 11th Annual Industrials Conference New York August 12, 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 free cash flow1 from mines in 2014 Generates cash flow After investing $132M in capital expenditure
Slide 4: Our Mission and Strategy
Our Mission: Creating long-term value for shareholders from mining silver, gold and associated base metals. The Strategy: Provide consistent, long-lived production that increases and improves over time. –4–
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: Strong Performance
Strong Performance 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 $21.28 $291M $292M $18.46 $14.44 68% $13.65 74% $191M $192M $6.84
Slide 7: 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 8: 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 9: 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 10: Q2 2015 Highlights
Q2 2015 Highlights Q2 2014 Q2 2015 Silver Production 2.5Moz 2.5Moz Gold Production 43.6Koz 44.7Koz Revenue $117.5M $104.2M Adjusted EBITDA1 $39.8M $29.5M Cash cost, after by-product credits, per silver oz2 $5.34/oz $5.61/oz Cash cost, after by-product credits, per gold oz2 $952/oz $832/oz 1. Adjuste
Slide 11: 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 –11–
Slide 12: Higher Grade Mines Than Peers
Higher Grade Mines Than Peers BMO Silver Coverage, Silver Equiv. Reserves vs. Grade Higher Grade HL Source: BMO Capital Markets (08/04/2015) –12–
Slide 13: Greens Creek: Consistent Low-Cost Production
Greens Creek: Consistent Low-Cost Production Silver Gold Cash cost, after by- Production Production product credits, per Ag oz1 2014, Q2/15 Actual 7.8Moz 1.9Moz 59koz 14koz $2.89/oz $3.30/oz 2015E 7.7-8.0 Moz 55koz $3.75/oz 2015E Capital $40M 2P Reserves 94.0 Moz silver @ 12.2 oz/t M+I Resources 9.1
Slide 14: Greens Creek: Long-Term Outperformance
Greens Creek: Long-Term Outperformance Past 25 Years1 Consistently Revenue $4.4 billion Generates Net Income $1.1 billion Positive Free Cash Flow Free Cash Flow2 $941 million 22% Free Cash Flow Conversion Historical Production Past 25 Years Silver Production: 191.4 Moz Zinc Production: 1.4 M tons Go
Slide 15: Greens Creek – Expanding Reserves and Resources
Greens Creek – Expanding Reserves and Resources Q2 2015 Definition and Key Exploration Trends Exploration Drilling • Southern extensions of 5250, Deep 200 South and Gallagher zones • Southwest dipping mine contact at 200 South, NWW, SW Bench and Deep SW • Southeast extension of the East Ore Zone • N
Slide 16: Lucky Friday: Solid Performance
Lucky Friday: Solid Performance Cash cost, after by-product Silver Production credits, per silver oz1 2014, Q2/15 Actual 3.2 Moz 0.61 Moz $9.44/oz $12.58/oz 2015E 2.8-3.0 Moz $10.75/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, a
Slide 17: Lucky Friday #4 Shaft
Lucky Friday #4 Shaft: Expected to Grow Silver Production 60% Beginning in Late 2017 7835 Level Current Excavation Operational shaft expected in Q4/16 at a total cost of $225 million As of Q2/15: 85% completed and $184 million spent Production growth expected from higher-grade ore at depth –
Slide 18: Casa Berardi: Great Addition
Casa Berardi: Great Addition Cash cost, after by-product Gold Production credits, per gold oz1 2014, Q2/15 Actual 128,244 oz 31koz $826/oz $832/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-product cr
Slide 19: Casa Berardi: Exploration Upside
Casa Berardi: Exploration Upside 2nd Quarter UG + Surface Drilling 124 S 124-16/22 Exploration SW 118-42/47 123-05 Definition 100 S 118-27/32 Valuation 123-02/03/04 117 U –19–
Slide 20: Casa Berardi: Promising Drill Results
Casa Berardi: Promising Drill Results South-West 107-365 Area Principale 124-250 Area Explo S 100 Area Explo S 124 Area Upper 118-530 Area Lower 123-810/830/850 Area Drill Hole True Width Gold Number (Feet) (oz/ton) CBP-0810-017 15.7 1.84 CBP-0810-019 13.5 0.77 CBP-0810-020 18.4 1.08 Upper 123-550 A
Slide 21: Our Mines Are Strong Cash Flow Generators
Our Mines Are Strong Cash Flow Generators (2014) 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% ($18.2) 66% 17% Conversion Conversion Conversion to FCF2 to FCF1 to FCF1 OCF* Capex FCF** #4 FCF** w/o #4 Shaft w
Slide 22: Hecla Is A Strong Cash Flow Generator
Hecla Is A Strong Cash Flow Generator Cash Bridge 2010 – Q2 2015 (US$ Millions) Partially Discretionary 1 $824.8M $1,036.4 Free Cash Flow $211.6M $609.1 Other Expenses $273.4M $171.4 $44.3 $151.2 $191.6 $104.7 $263.4 $12.52 2010 Beginning Adjusted EBITDA Capex Exploration + Pre- Dividends Basin Sett
Slide 23: Strong Growth Pipeline
Strong Growth Pipeline Recently renewed activity in Mexico and acquisition in Montana bring new short and long-term growth potential –23–
Slide 24: 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 25: San Sebastian: Significant New Discoveries
San Sebastian: Significant New Discoveries New Veins New Vein Projections Past Producing Veins Drill Hole Trace –25–
Slide 26: San Sebastian: High-Grade Resources
San Sebastian: High–Grade Resources Indicated Tons Au Ag Pb Zn Cu AgEq Au Ag Pb Zn Cu AgEq Resources T opt opt % % % opt oz oz tons tons tons Oz E. Francine 55,700 0.220 64.08 - - - 81.15 12,300 3,569,400 - - - 4,520,400 Middle Vein 783,100 0.061 13.11 - - - 17.70 47,600 10,263,800 - - - 13,860,500
Slide 27: 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 –27–
Slide 28: Rock Creek: Long-Term Growth Opportunity
Rock Creek: Long-Term Growth Opportunity Rock Creek Could Become a 20-30 year mine Acquired Revett for ~$19 million of Hecla stock on June 15, 2015 Rock Creek: Total inferred resource 229 million oz Ag, 2.0 billion lbs Cu¹ Rock Creek permitting ongoing: SEIS for public comment expected this year fro
Slide 29: Strong Margins
Strong Margins Silver Margins Casa Berardi Margins $19.62 $1,291 $1,275 $18.53 $16.00 $1,195 $1,222 $1,194 $17.18 $16.32 $339 26% $377 30% $248 20% $362 30% $560 47% $14.28 73%$13.10 71%$11.42 71%$12.25 71% $10.71 66% $898 $974 $952 $832 $635 $5.34 $5.43 $4.58 $4.93 $5.61 Q2 2014 Q3 2014 Q4 2014 Q1
Slide 30: Consistently Strong Liquidity
Consistently Strong Liquidity (US$ millions) $312 $310 $296 $292 $212 $210 $196 $192 2013 2014 Q1 2015 Q2 2015 Cash and Cash Equivalents Available Credit Facility –30–
Slide 31: 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 32: Debt is Long Term with Good Metrics
Debt is Long Term with Good Metrics Senior notes due in 2021 is the Capitalization only substantial indebtedness Actual Q2 2015 Limited covenants Cash and cash equivalents $192 No off balance sheet arrangements Capital lease liability 20 Credit Metrics Borrowing, term loans and leases 501
Slide 33: 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 Q2 2015 Hedge up to 60% of payable lead and zinc production out to 20% 28% 3 years 11% Silver Gold Lead Benefit: More stable
Slide 34: 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 –34–
Slide 35: Thank you
Thank you Hecla Celebrates 50 Years on the NYSE – March 25, 2015 –35–
Slide 36: Appendix
Precious metal companies… Appendix –36–
Slide 37: 2015 Expectations
2015 Expectations Cash Cost, 2015E1 Silver 2015E1 Gold Mine after by-product credits, Production (Moz) Production (oz) per silver/gold ounce2 Greens Creek 7.7-8.0 55,000 $3.75 Lucky Friday 2.8-3.0 n/a $10.75 Casa Berardi n/a 130,000 $825 Total 10.5-11 185,000 $6.00 per silver oz Equivalent Productio
Slide 38: HL Using Low 2014 Resource Prices
HL Using Low 2014 Resource Prices1 2014 Resource 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 Resource Gold Price/oz $1,500 $1,350 $1,350 $1,400 $1,400 $1,400
Slide 39: 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 -39-
Slide 40: 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 41: 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 42: Proven & Probable Reserves
Proven & Probable Reserves (on Dec. 31, 2014 unless otherwise noted) 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 Frid
Slide 43: 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 44: 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 45: 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 46: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Lucky Friday Greens Creek Q2/2015 2014 Q2/2014 Q2/2015 2014 Q2/2014 Cash costs, before by-product credits (1) $ 17,494 $ 77,595 $ 19,646 Cash costs, before by-product credits (1) $ 49,540 $ 199,247 $ 50,405 By-product credits (9,774) (47,004) (12,179) By-product credits
Slide 47: 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 30-Jun-15 Net income $ 20,163 Plus: Interest expense $ 25,524 Plus: Income taxes $ (7,475) Plus: Depreciation, depletion and
Slide 48: Hecla Adjusted EBITDA Reconciliation
Hecla Adjusted EBITDA Reconciliation Reconciliation of Net Income (Loss) (GAAP) to Adjusted EBITDA (non-GAAP) 3 Months Ended Twelve Months Ended December 31, 30-Jun-15 31-Mar-15 2014 2013 2012 2011 2010 Net Income (Loss) $ (12,971) $ 12,552 $ 17,824 $ (25,130) $ 14,954 $ 151,164 $ 48,983 Plus: Inter
Slide 49: Hecla Adjusted EBITDA Reconciliation
Hecla Adjusted EBITDA Reconciliation Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles (GAAP) Dollars are in thousands Three Months Ended 30-Jun-15 30-Jun-14 Net loss $ (12,971) $ (14,399) Plus: Interest expense, net of amount capitalized 6,359 6,962 Plus/(Less): Income t
Slide 50: Greens Creek Free Cash Flow Reconciliation
Greens Creek Free Cash Flow Reconciliation 1987-2014 Performance Revenue $4,371,624 Treatment Charges (864,312) Net Revenues 3,507,313 Freight & Selling Expense (180,663) Net Smelter Return 3,326,650 Cost of Goods Sold (1,518,773) NonCash Costs (527,076) Exploration Expense (75,318) Gain/(Loss) of S
Slide 51: 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 Caa1/
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