Hecla Mining Company · NYSE:HL
Hecla Mining — Jefferies Industrials Conference 2016
49 slides from Hecla Mining's conference presentation, Aug 11, 2016
Slide 1: Jefferies Industrials Conference: Strong Performance
Jefferies Industrials Conference Strong Performance August 11, 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: A Leading Silver, Gold, Base Metals Producer
A Leading Silver, Gold, Base Metals Producer Four producing mines in North America Quality mining assets Strong margins in both silver and gold Diversified, long-life revenue streams Record Q2 Sales of 171 M Record Setting Record silver reserves of 175 Moz, 10th Performance year in a row,
Slide 4: The Mining Industry Has Made Bad Decisions – But There Are Exceptions
The Mining Industry Has Made Bad Decisions – But There Are Exceptions Silver Reserves Gold Reserves Total Project +3% 0% Write-downs 2013 - 2015 -60% -18% $0 PM Group1 Hecla Peer Group1 Hecla $34.3B Silver Production Gold Production PM Group Hecla +30% +58% 0% +5% 2013 to 2015 Comparison PM Group1 H
Slide 5: Our Mission
Our Mission To create long-term value for shareholders from mining silver, gold and associated base metals Our Strategy Consistent, long-lived production that increases and improves over time Long life assets Operating to profit from Strong geologic knowledge to higher metal understanding to reduce
Slide 6: Industry Leading Reserve & Production Growth
Industry Leading Reserve & Production Growth Record (P+P) Ag Reserves1 Strong Production Growth (AgEq)2 175 Moz 44 Moz +243% +208% 51 Moz 14.3 Moz 2006 2015 2012 2016E (P+P) Au Reserves1 Ag Production Growth Au Production Growth 4.2 Moz 63.0 Koz 2.1 Moz +71% 44.7 Koz +41% +250% 0.6 Moz 2.5 Moz 2006
Slide 7: Our Strategy Has Worked
Our Strategy Has Worked Adjusted EBITDA* Liquidity (in millions) $312 M $310 M $174.4 $255 M $259 M** $234 M $130.3 $124.3 $116.8 $212 M $210 M $155 M $159 M $134 M 2013 2014 2015 Q1/2016 Q2/2016 2013 2014 2015 6Mos/2016 Cash, Cash Equivalents and Short-term Investments Available Credit Facility **
Slide 8: Q2 2016 Highlights
Q2 2016 Highlights Silver Production Gold Production 4.2 Moz 41% 71.2% 2.5 Moz Q2 2015 Q2 2016 Q2 2016 Q2 2015 Revenue $171.3 M $104.2 M Operating Cash Flow $67.4 M $30.8 M Cash cost, after by-product credits, per silver oz1 $3.80/oz $5.61/oz Cash cost, after by-product credits, per gold oz1 $601/oz
Slide 9: 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 (07/08/2016) –9–
Slide 10: Our Mines Generate Cash Flow
Our Mines Generate Cash Flow Greens Creek Casa Berardi $41.9 $(14.7) 65% 40% Conversion $28.9 $(17.2) Conversion to FCF1 to FCF1 $27.2 $11.7 OCF* Capex FCF** OCF Capex FCF San Sebastian 99% Lucky Friday 60% Conversion $5.0 $(2.1) Conversion to FCF1 to FCF2 $27.8 $(0.2) $27.6 $3.0 $(8.2) $(5.2) OCF*
Slide 11: North American Focused Asset Portfolio
North American Focused Asset Portfolio Operations in Greens Creek Low-Risk + Mining-Friendly Admiralty Island, AK Jurisdictions Corporate Offices Opinaca / Wildcat Operating mines Casa Berardi James Bay, QC Vancouver, BC Val d’Or, QC Pre-development Fayolle Val d’Or, QC Montanore1, Libby, MT Val d’O
Slide 12: Greens Creek: Consistent Low-Cost Production
Greens Creek: Consistent Low- Cost Production Silver Gold Cost Cash cost, after by-product Production Production of Sales credits, per Ag oz1,2 Q2 2016 2.11 Moz 12 koz $43.7 M $5.38/oz 2016E 8.3 Moz 53 koz - $5.00/oz 2016E Capital $48 M (Includes $14M for tailings expansion) 2P Reserves 88.7 Moz sil
Slide 13: Greens Creek: Strong Cash Generation
Greens Creek: Strong Cash Generation Past 26 Years1 Consistently Revenue $4.6 billion Generates Net Income $1.2 billion Positive Free Cash Flow Free Cash Flow2 $983 million 21% Free Cash Flow Conversion Historical Production Past 26 Years Silver Production: 200 Moz Zinc Production: 1.4 M tons Gold P
Slide 14: Greens Creek – Resource Conversion to Reserves
Greens Creek – Resource Conversion 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 15: Strong Growth Pipeline
Strong Growth Pipeline Rock Creek & Montanore¹ Two potential Lucky Friday large silver #4 Shaft and copper mines Higher grade Higher cash flow In permitting Casa Berardi EMCP pit 20 years+ mine life 2025+ More cash flow IRR 90% Shaft completion San Sebastian 2016 New cash flow 5k oz Au 2017+ Minimal
Slide 16: San Sebastian: Hecla's Newest Mine
San Sebastian: Hecla’s Newest Mine Silver Gold Cost of Cash cost, after by-product Production Production Sales credits, per Ag oz1,2 Q2 2016 1.3 Moz 9.5 koz $9.2 M $(3.05) 2016E 4.35 Moz 35 koz - $1.00/oz 2016E Capital $2 M 2P Reserves 8.0 Moz silver @ 27.7 oz/t Ag M+I Resources 9.3 Moz silver @ 5.9
Slide 17: San Sebastian: Exceeding Expectations
San Sebastian: Exceeding Expectations Performance for 1H 2016: ~$48 million in Free Cash Flow¹ Only $700 K of capital Produced 2,458,442 oz Ag and 18,811 ounces gold Cash cost, after by-product credits of ($3.15) per silver ounce Head grade 38.3 oz/ton Ag and 0.294 oz/ton Au Higher recov
Slide 18: San Sebastian – Drilling to Expand Pits
San Sebastian – Drilling to Expand Pits N MIDDLE VEIN DISCOVERY AREA MIDDLE VEIN DRILLING AREAS MIDDLE VEIN PIT EAST OF MINE TARGETS EXPLANATION Vein Mine Footprint Drill Hole or Trench 1 –22–
Slide 19: Casa Berardi: Increasing Gold Exposure
Casa Berardi: Increasing Gold Exposure Cash cost, after by-product Gold Production Cost of Sales credits, per gold oz1,2 Q2 2016 42 koz $41.2 M $601/oz 2016E 145 koz - $700/oz 2016E Capital $61 M (Includes $19 M for EMCP pit) 2P Reserves 1.3 Moz gold @ 0.13 oz/t gold M+I Resources 1.3 Moz gold @ 0.1
Slide 20: Casa Berardi: Drilling Success on Surface and Underground
Casa Berardi: Drilling Success on Surface and Underground –20–
Slide 21: EMCP Pit: Robust Economics
EMCP Pit: Robust Economics* Increase Production: ~2,300 tpd (2015A) to ~3,100 tpd (2017E), 5,000 Au oz (2016E) and 30,000 Au oz (2017E) Extend Mine Life: 5.5 year project, Principal Pit to follow Lower Cost Per Ounce: expected to decrease cost structure Strong Returns: NPV (12%) of C$37.5M a
Slide 22: EMCP Pit – First Ore July 22, 2016
EMCP Pit – First Ore July 22, 2016 July 2016 –22–
Slide 23: Lucky Friday: Solid Performance
Lucky Friday: Solid Performance Cash cost, after by-product Silver Production Cost of Sales credits, per silver oz1,2 Q2 2016 858 koz $18.7 M $9.94/oz 2016E 3.1 Moz - $9.00/oz 2016E Capital $37 M (Including $20 M for #4 Shaft) 2P Reserves 78.7 Moz silver @ 15.5 oz/t Ag M+I Resources 128.1 Moz silver
Slide 24: #4 Shaft: Increasing Grade with Depth
#4 Shaft: Increasing Grade with Depth Silver Shaft ORE GRADE VALUES *AgEq Grade (opt) > 24 18 - 24 4050 Level 12 - 18 #4 Shaft 6 - 12 <6 4900 Level Mining Activity 5900 Level Dec. 31, 2015 *Ag Equivalent Values Based Upon: Resource Prices $20.00/oz Ag, $0.90/lb Pb, $0.90/lb Zn 5900 Level 6500 Level
Slide 25: High-Grade Zone Expands
High-Grade Zone Expands ORE GRADE VALUES *AgEq Grade (opt) > 24 18 - 24 20 Years 12 - 18 Past Mining 6 - 12 <6 Mine Face (Galena) Dec. 31, 2015 97.2 opt Silver 6500 Level 47.5% Lead *Ag Equivalent Values Based Upon: Resource Prices $20.00/oz Ag, $0.90/lb Pb, $0.90/lb Zn 7500 Level 900’@ +24 opt AgEq
Slide 26: #4 Shaft Excavation Complete, Operational by Year End
#4 Shaft Excavation Complete, Operational by Year End –26–
Slide 27: 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 received from the Forest Service in Febru
Slide 28: Improving Debt Metrics
Improving Debt Metrics Actual Actual Q1/2016 Q2/2016 Change Cash, cash equivalents and short-term investments $134 $159 Capital lease liability 16 15 Borrowing, term loans and leases 503 502 Total debt $519 $517 Net debt $385 $358 Shareholders' equity $1,347 $1,379 Total capitalization $1,866 $1,896
Slide 29: Flexible, Patient Capital Structure
Flexible, Patient Capital Structure $500M in High Yield Notes Brings: Growth Purchased Casa Berardi, a long-life gold mine Flexibility No restrictive maintenance covenants Low cost capital 6.875% coupon or ~5% after tax Long term borrowing Zero repayment obligations until 2021 Minimal diluti
Slide 30: Diversification Over Metals Brings Stability
Diversification Over 4 Metals Brings Stability Lead and zinc positions supplement core exposure in silver and gold Consolidated Revenue by Metal Q2 2016 Largest silver producer in US 8% 10% 3rd largest lead and zinc 38% producer in US 44% Periodically hedge up to 60% of payable lead and zinc p
Slide 31: 2016 Expectations: Higher Production, Lower Cost
2016 Expectations: Higher Production, Lower Cost 1 Cash Cost, 2016E Silver 2016E1 Gold Mine after by-product credits, Production (Moz) Production (oz) per silver/gold ounce2 Greens Creek 8.3 53,000 $5.00 per silver oz Lucky Friday 3.1 $9.00 per silver oz San Sebastian 4.35 35,000 $1.00 per silver oz
Slide 32: A History of Beating Forecasts
A History of Beating Forecasts 2013 2014 2015 2016E MET BEAT BEAT JAN Q2 Silver Production (M oz) 8-9E 8.9A 9-10E 11.1A 10-11E 11.6A 14.0 15.75 BEAT BEAT BEAT Gold Production (K oz) 60E1 62.5A1 180E 187A 185E 189A 207 233 Cash cost, after by- MISS BEAT BEAT product credits, per silver oz $5.00E $6.8
Slide 33: Increasing Share of Modern Demand
Increasing Share of Modern Demand Modern demand increased from 260 M oz in 1992 to 544 M oz in 2014, an increase of 109%, and an annualized increase of 4.0% 0% 5% 43% 36% 29% 30% Modern Modern 24% 29% 4% 1992 2015F Modern Investment Jewelry & Photography Coins & Medals Silverware Source - GFMS -33
Slide 34: Thank you!
Thank you! Automated stope drill in operation at Casa Berardi allows drilling to continue between shifts -34-
Slide 35: Appendix
Precious metal companies… Appendix –35–
Slide 36: Silver and Gold Margin Expansion
Silver and Gold Margin Expansion 1. Cash cost, after by-product credits, per silver/gold ounce represents a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measurement, can be fo
Slide 37: Diversified Revenue Stream (Q2): Diversifies Risk and Enhances Economics
Diversified Revenue Stream (Q2): Diversifies Risk and Enhances Economics #1 Silver and #3 Lead and Zinc Producer in the U.S. Greens Creek Consolidated Revenue1 35% 10% 8% 38% Casa Berardi 44% 31% 0% Lucky Friday 0% 13% Silver Gold Lead Zinc San Sebastian 21% 1. Based on realized prices 2016: Silver
Slide 38: 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 39: 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 40: 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 41: 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,
Slide 42: 2006 – 2014 Reserve Table
2006 – 2014 Reserve Table Silver Silver Gold Silver Gold Proven Reserves Tons (oz/ton) Gold (oz/ton) (ounces) (ounces) 2011 Proven Reserves Tons (oz/ton) Gold (oz/ton) Silver (ounces) (ounces) 2006 Proven Reserves Greens Creek - - - - - Greens Creek (29.73%) - - - - - Lucky Friday 628,976 13.10 - 8,
Slide 43: Higher Reserves With Lower Price Assumptions
Higher Reserves With Lower Price Assumptions 180 $30.00 $26.50 175.4 Moz 175 172.9 Moz $25.00 169.8 Moz 170 165 $20.00 $20.00 160 $17.25 $15.00 155 $14.50 150.0 Moz 150 $10.00 145 $5.00 140 135 $- 2012 2013 2014 2015 Silver Reserves (Moz) Silver Reserve Price 1. See Proven and Probable reserves data
Slide 44: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Reconciliation of cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measurement, to cash cost, after by-product credits, per silver ounce, for Greens Creek, Lucky Friday & San Sebastian* (dollars and o
Slide 45: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Casa Berardi Q2/2016 Q1/2016 Q4/2015 Q3/2015 Q2/2015 Cost of sales and other direct production costs and depreciation, depletion $ 41,183 $ 29,159 $ 39,161 $ 37,459 $ 36,769 and amortization (GAAP) Depreciation, depletion and amortization (13,597) (8,501) (12,757) (11,5
Slide 46: Hecla Adjusted EBITDA Reconciliation to GAAP
Hecla Adjusted EBITDA Reconciliation to GAAP Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles Dollars are in thousands Twelve Months Dollars are in thousands Ended Twelve Months 31-Dec-13 Ended
Slide 47: Hecla Adjusted EBITDA Reconciliation to GAAP
Hecla Adjusted EBITDA Reconciliation to GAAP Reconciliation of Net Loss (GAAP) to Adjusted EBITDA Dollars are in thousands Twelve Months Ended 31-Mar-16 30-Jun-16 Net loss $ (100,138) $ (49,355) Plus: Interest expense 24,908 23,737 Plus: Income taxes 56,525 68,153 Plus: Depreciation, depletion and a
Slide 48: Hecla Adjusted EBITDA Reconciliation to GAAP
Hecla Adjusted EBITDA Reconciliation to GAAP Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles Dollars are in thousands Twelve Months Dollars are in thousands Ended Twelve Months 31-Dec-13 Ended
Slide 49: Greens Creek Free Cash Flow Reconciliation
Greens Creek Free Cash Flow Reconciliation Dollars are in thousands 1987-2015 Performance Revenue $4,640,526 Treatment Charges (911,508) Net Revenues 3,729,019 Freight & Selling Expense (188,234) Net Smelter Return 3,540,785 Cost of Goods Sold (1,648,047) NonCash Costs (567,499) Exploration Expense
Hecla Mining Company — Jefferies Industrials Conference 2016 on 6ix