Hecla Mining Company · NYSE:HL
Hecla Mining — Q3 2016 Earnings Presentation
39 slides from Hecla Mining's earnings presentation, Nov 8, 2016
Slide 1: Third Quarter 2016 Earnings Conference Call
Third Quarter 2016 Earnings Conference Call November 8, 2016
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: Strategy Creates Per Share Value
Strategy Creates Per Share Value Captive Extend Price Cycles Mine Life Production Reserves & Cash-Flow Resources Long-Lived Capture Low-Cost Mines High Return Price Cycles Investments Improve High Productivity Return Investments LONG TERM GOALS: Investment Grade & S&P 500 Listing –3–
Slide 4: Strong Production Growth
Strong Production Growth Silver Production Growth AgEq1 Production Growth 4.3 Moz 10.3 Moz +67% 8.8 Moz 2.6 Moz Q3 2015 Q3 2016 Q3 2015 Q3 2016 Gold Production Growth 52.1 Koz 43.6 Koz +19% It all starts with production, which has increased significantly Q3 2015 Q3 2016 –4–
Slide 5: Production Generates Financial & Share Performance
Production Generates Financial & Share Performance LTM Adjusted EBITDA2: On Track For A Record Year Growing Cash Flow From Operations $234 M $87 M +82% +225% $129 M $27 M LTM Q3 2015 LTM Q3 2016 Q3 2015 Q3 2016 Liquidity: Strong and Getting Stronger Outperformed Peer Share Prices YTD 300% 250% $2923
Slide 6: Completed the Montanore Acquisition
Completed the Montanore Acquisition Rock Creek & Montanore Silver Resources Greater Than Hecla’s Reserves Total Hecla Rock Creek Montanore (proven & probable)4 (inferred resource)5 (inferred resource) 175 million oz. 229 million oz. 231 million oz. Silver Silver Silver 2 billion lbs. 2 billion lbs.
Slide 7: 2016 Expectations: Higher Production, Lower Cost
2016 Expectations: Higher Production, Lower Cost Bold=Changed estimate Cash cost, 2016E6 Silver 2016E Gold Mine after by-product credits, Production (Moz) Production (oz) per silver/gold ounce7 Greens Creek 8.5 53,000 $5.00 per silver oz Lucky Friday 3.4 $9.00 per silver oz San Sebastian 4.35 35,000
Slide 8: Financial Review
Financial Review –8–
Slide 9: Q3 2016: Strong Financial Performance
Q3 2016: Strong Financial Performance Silver Production Gold Production 4.3 Moz 52.1 Koz 43.6 Koz +19% 2.6 Moz +67% Q3 2015 Q3 2016 Q3 2015 Q3 2016 Q3 2016 Q3 2015 Revenue $179.4 M $104.9 M Cash provided by operating activities $87.0 M $26.8 M Cash cost, after by-product credits, per silver oz10 $3.
Slide 10: Silver and Gold Margin Expansion
Silver and Gold Margin Expansion Silver Margins Gold Margins $1,341 $1,254 $1,187 $19.53 $1,121 $1,089 $17.26 $426 32% 34% 52% $14.93 $406 $14.54 $15.85 $328 29% $14.26 $653 46% $498 $13.46 81% $11.77 78% 48% 61% $8.71 79% $7.02 $591 $915 $793 $781 $601 $7.52 $5.55 $3.16 $3.80 $3.68 Q3 2015 Q4 2015
Slide 11: Q3 2016: Strong Mine Free Cash Flow
Q3 2016: Strong Mine Free Cash Flow Numbers in millions (USD) Greens Creek Casa Berardi 75% $55.8 $(14.2) Conversion $20.6 $(16.1) to FCF13 22% $41.7 Conversion to FCF13 $4.5 11 12 OCF Capex FCF OCF 11 Capex FCF 12 San Sebastian 96% Lucky Friday Conversion 66% $8.0 $(2.1) Conversion to FCF13 $(0.5)
Slide 12: Diversified Revenue Stream Q3 2016
Diversified Revenue Stream Q3 2016 Mitigates Risk and Enhances Economics #1 Silver and #3 Lead and Zinc Producer in the U.S. 23% 25% Greens Creek 48% of 45% 8% 52% Total Revenue 9% Silver Production: 4.3 Moz Cash Costs, after by-product 17% 21% Zinc Production: 14.8 Ktons Realized Price: $1.01/oz cr
Slide 13: Improving Debt Metrics
Improving Debt Metrics LTM* Adjusted EBITDA2 Net Debt/LTM Adjusted EBITDA15 $234 M $177 M 3.1x 3.0x $128 M $117 M 2.0x 1.4x LTM Q4 2015 LTM Q1 2016 LTM Q2 2016 LTM Q3 2016 LTM Q4 2015 LTM Q1 2016 LTM Q2 2016 LTM Q3 2016 Four Consecutive Quarters of Improving Debt Metrics * LTM = Last twelve months –
Slide 14: Q3 2016 Waterfall Chart: Increasing cash balances
Q3 2016 Waterfall Chart: Increasing cash balances Numbers in millions (USD) $16 ($42) $75 2 Insurance Proceeds ($4) ($1) ($10) $192 Capex Exploration + Pre- Dividends development Other $159 Adjusted EBITDA Q3 2016 Adjusted Insurance Capex Exploration + Dividends Other Q3 2016 Beginning EBITDA Procee
Slide 15: Operations Review
Operations Review –15–
Slide 16: Strong Q3 2016 Production
Strong Q3 2016 Production Greens Creek Silver Production Casa Berardi Gold Production 31.9 Koz 2.4 Moz 29.3 Koz +9% 2.0 Moz +20% Q3 2015 Q3 2016 Q3 2015 Q3 2016 Lucky Friday Silver Production San Sebastian Silver Production* 0.9 Moz 1.0 Moz +50% 0.6 Moz Q3 2015 Q3 2016 Q3 2015 Q3 2016 *San Sebastian
Slide 17: Greens Creek: Investing in Productivity Improvements
Greens Creek: Investing in Productivity Improvements Average Recoveries Have Increased 7% Improving Mining Based On Data Adding $100 M Value, More Projects to Come CCO2 80% SCALP Silver Recovery % 75% CO2 pH 70% Control 65% 2014 2015 Working to Reduce Power Costs Installing Tele-Remote Mucking & Aut
Slide 18: Casa Berardi: Multiple Stage Pits Move Up Cash Flow
Casa Berardi: Multiple Stage Pits Move Up Cash Flow New permit increases throughput Previous permit: 1,100,000 tonnes per year (1,213,000 tons) New permit: 1,250,000 tonnes per year (1,378,000 tons) –18–
Slide 19: Lucky Friday: New Mining Technique Increase Cash Flows
Lucky Friday: New Mining Technique Increase Cash Flows, Lower Development Standard LFUL: 5 cuts per ramp Optimized LFUL: 10 cuts per ramp Lower development expenditure Stopes turn around faster –19–
Slide 20: San Sebastian: High Grade Additions to Middle Vein
San Sebastian: High Grade Additions to Middle Vein Mill Secured for 2018, Working on Plan to Mine Underground CURRENT OPEN PIT POTENTIAL UNDER- MINING AREA GROUND MINING AREA (STUDIES IN PROGRESS) –24– -20-
Slide 21: Exploration
Exploration –21–
Slide 22: San Sebastian: Mine Life Extension
San Sebastian: Mine Life Extension N NEW 2016 MIDDLE VEIN DISCOVERY AREA EAST FRANCINE EXTENSION DISCOVERY AREA NEW 2016 WEST FRANCINE VEIN DISCOVERY AREA EXPLANATION Potential Pit Expansion Areas Current Pit Design Exploration Target Vein or Vein Projection Mine Infrastructure –22–
Slide 23: Middle Vein Resource Upgrades and Exploration Potential
Middle Vein Resource Upgrades and Exploration Potential 2016 Exploration Drilling Area NEW 2016 CURRENT OPEN PIT (In Progress) RESOURCE AREA MINING AREA 0.24 oz/ton gold and 50 oz/ton silver over 8.6 ft. 0.60 oz/ton gold and 0.28 oz/ton gold and 149 oz/ton silver over 4.7 ft. 58 oz/ton silver over 5
Slide 24: North Vein Resource Upgrade and Deeper Zone
North Vein Resource Upgrade and Deeper Zone –24–
Slide 25: Great Exploration Potential
Great Exploration Potential 140 S 134 S 124 U 124 S LI U LI U (Ext.) 123 U Surface Drilling Underground Drilling -25-
Slide 26: Strong Drill Results Throughout Casa Berardi
Strong Drill Results Throughout Casa -26-
Slide 27: Greens Creek: Converting Resources to Reserves
Greens Creek: Converting Resources to Reserves Indicated: 484,400 silver ounces and 7,000 gold ounces East Ore Resource Main Ramps Inferred: 11.4 million silver Mined Stopes ounces and 105,900 gold ounces Reserve Plan Measured Resource Indicated Resource Inferred Resource Mineralization trends Indic
Slide 28: Exploring Along Trends
Hi = MINING COMPANY 22 4<~—- Exploring Along Trends NCE 1891 Upper Trend: East above Klaus - 9a -5250 / 5250 Upper Plate Middle Trend: East below Klaus - 9a - SW - 200S - D200S Bench-Gallagher Lower Trend: West- 9a - NWW - D200S Wall - Lower Gallagher Areas of highest potential to host new mineraliz
Slide 29: Conclusion
Conclusion –29–
Slide 30: Priority Uses for Growing Cash Flow
Priority Uses for Growing Cash Flow Creating Shareholder Value Sustaining and High-Return Dividends, Debt M&A Organic Growth Buyback Projects Organic Growth Projects: San Sabastian: ROIC= +1,000% Casa Berardi EMCP: IRR = +90% Greens Creek Recovery Improvements: IRR = +600% Prioritize investmen
Slide 31: Appendix
Appendix Precious metal companies… –31–
Slide 32: Endnotes
Endnotes 1. Silver equivalent is calculated using the average market prices for the time period noted. 2. This release refers to a non-GAAP measure of adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), which is a measure of our operating performance. Adjuste
Slide 33: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Reconciliation of Generally Accepted Accounting Principles (GAAP) measure to Cash Cost, Before By-product Credits, per Ounce and Cash Cost, After By-product Credits, per Ounce, for Greens Creek, Lucky Friday & San Sebastian (dollars and ounces in thousands, except per o
Slide 34: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Numbers in thousands (USD) 1. 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 and admin
Slide 35: Adjusted EBITDA Reconciliation to GAAP
Adjusted EBITDA Reconciliation to GAAP Numbers in thousands (USD) This presentation refers to a non-GAAP measure of adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which is a measure of our operating performance. Adjusted EBITDA is calculated as net loss
Slide 36: Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP
Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP Numbers in thousands (USD) As of and for the Twelve Months Ended 30-Sep-16 30-Jun-16 31-Mar-16 31-Dec-15 30-Sep-15 Net Income (Loss) $ (13,676) $ (49,355) $ (100,138) $ (86,968) $ (7,100) Plus: Interest expense, net of amount capital
Slide 37: Proven & Probable Reserves
Proven & Probable Reserves (on Dec. 31, 2015 unless otherwise noted) Reserves and Resources - 12/31/2015 Proven Reserves Silver Gold Lead Zinc Silver Gold Lead Zinc Copper Asset Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) Tons Tons Tons Greens Creek (a) 10 20.8 0.12 3.7 9.0 210 1 370 910 — Lu
Slide 38: Reserves & Resources
Reserves & Resources (on Dec. 31, 2015 unless otherwise noted) Measured Resources Silver Gold Lead Zinc Silver Gold Lead Zinc Copper Asset Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Tons Greens Creek (b) — — — — — — — — — Lucky Friday (2)(b) 13,762 6.1 — 4.1 2.3 83,711 — 569,19
Slide 39: Reserves & Resources
Reserves & Resources (on Dec. 31, 2015 unless otherwise noted) Inferred Resources Silver Gold Lead Zinc Silver Gold Lead Zinc Copper Asset Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Tons Greens Creek (b) 3,255 12.8 0.09 2.8 6.7 41,730 300 89,630 219,540 — Lucky Friday (8)(b) 4,