Hecla Mining Company · NYSE:HL
Hecla Mining — Silver and Gold Summit 2019
48 slides from Hecla Mining's conference presentation, Oct 24, 2019
Slide 1: Silver and Gold Summit: Value in Precious Metals
SILVER AND GOLD SUMMIT Value in Precious Metals October 2019 RESPONSIBLE. SAFE. INNOVATIVE. Hecla Mining Company NYSE: HL
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: Cautionary Statements (cont'd)
CAUTIONARY STATEMENTS (cont’d) Cautionary Statement Regarding Forward Looking Statements (Cont’d) In addition, material risks that could cause actual results to differ from forward-looking statements include, but are not limited to: (i) gold, silver and other metals price volatility; (ii) operating
Slide 4: Hecla Has Fundamental Value
HECLA HAS FUNDAMENTAL VALUE Strength obscured by the challenges Characteristics are unique among peers Asset Overview • Largest primary silver producer in the US, third largest producer of lead and zinc • Best mining jurisdictions: Alaska, Quebec, Idaho, Nevada, and Durango (Mexico) • Mine lives are
Slide 5: Solid Plans to Deal with Challenges
SOLID PLANS TO DEAL WITH CHALLENGES Does not impair Hecla’s fundamental value found in Greens Creek and Casa Berardi Challenges Plans Refinancing the 2021 debt • Bring the net revolver debt to zero by year end • Increase EBITDA so Debt/EBITDA ratio is < 2.5 • Refinance in 1H20 Ramping Lucky Friday p
Slide 6: Diverse Asset Portfolio in Mining Friendly Jurisdictions
DIVERSE ASSET PORTFOLIO IN MINING FRIENDLY JURISDICTIONS Significant value in the fundamental operations, building block for more value Fundamental Operations Growth / Transformation Greens Creek Casa Berardi San Sebastian Nevada Lucky Friday Location/ Risk Score1 Alaska, USA (85.5) Quebec, Canada (
Slide 7: Our Best Mines Keep Getting Better
OUR BEST MINES KEEP GETTING BETTER New Technical Reports show over $1.5 billion of NPV from reserves alone Greens Creek Casa Berardi Expect 40% more free cash flow in the next 5 years than the $72 million 1 averaged in the past 5 years (current prices). Once pits stripped could generate Greens Creek
Slide 8: Growth/Transformative Mines
Growth/Transformative Mines NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 8
Slide 9: Lucky Friday Grade Increasing at Depth
LUCKY FRIDAY GRADE INCREASING AT DEPTH Eventually expect 60% more annual silver production compared to historic production NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 9
Slide 10: El Toro Oxide Continues to Grow
EL TORO OXIDE CONTINUES TO GROW Intersection with HW Vein causes bulge; mining scenarios being evaluated EL TORO VEIN LONGITUDINAL SECTION (Looking NE) 12.8 oz/ton silver Cross- 28.1 oz/ton silver 0.06 oz/ton gold Section 0.37 oz/ton gold ETV- $NSR over 4.9 feet over 7.9 feet VALUE ETHWV PER TON (5.
Slide 11: Nevada Is Hecla's Newest Asset
NEVADA IS HECLA’S NEWEST ASSET Why we invested in Nevada • 110-square mile land position with three, one-ounce head grade mines. • Hatter Graben, part of Hollister, that has 1.4 oz head grades, the potential for a million-ounce orebody. • Opportunity to improve Fire Creek operations to lower the cut
Slide 12: Stabilized Financial Position
Stabilized Financial Position NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 12
Slide 13: Improving Conditions in the High Yield Market
IMPROVING CONDITIONS IN THE HIGH YIELD MARKET Cost of a potential refinancing has declined dramatically Yield on Debt of Hecla and Peers Since May • Central Banks have signaled 12.8% lower interest rate 11.5% • Average yield of peers has 9.8% improved 360 basis points 9.0% 7.9% • Hecla’s yield has i
Slide 14: Hecla Positioned for Refinancing High Yield Notes
HECLA POSITIONED FOR REFINANCING HIGH YIELD NOTES Expect 2H19 to have increased production, lower costs and higher free cash flow Expect more gold production in 2H19 Expect similar silver production in 2H19 Gold and silver prices are higher Stopped the outspend in Nevada Reduced capital, exploration
Slide 15: Other Supporting Information
Other Supporting Information NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 15
Slide 16: Steps Taken to Improve Near-Term Liquidity
STEPS TAKEN TO IMPROVE NEAR-TERM LIQUIDITY Reduced expenditures by $25 million (Capital, Exploration and G&A) Bought put option contracts to establish a floor for silver and gold prices through Q1 2020 Worked with revolver syndicate of banks to relieve leverage covenants through the expected refinan
Slide 17: Longer Term View
LONGER TERM VIEW Are comfortable carrying some debt as part of capital structure • Reduces the need for large, dilutive equity issuances • Revenue comes from four metals, reduces risk Expect to refinance high yield debt by May 2020 (due May 2021) Reviewing other options including amortizing bank loa
Slide 18: Nevada Operational Changes
NEVADA OPERATIONAL CHANGES Taking action to reduce cost structure Midas Mill • Mining of available faces expected to continue at Fire Creek until mid-2020 and until Q3 2019 at Midas. • Reduction of $25 million in expenditures in Capital, Exploration and G&A. • 25% reduction in personnel in Nevada co
Slide 19: Leading Precious Metal, Lead and Zinc Producer with Diverse Assets
LEADING PRECIOUS METAL, LEAD AND ZINC PRODUCER WITH DIVERSE ASSETS AND COMMODITY MIX #1 Silver and #3 lead and zinc producer in the U.S. Silver Production: 3.0 Moz Cost of Sales: $61.7 M Cash Costs, after by-product credits: $3.50/oz 16% Realized Price: $15.01/oz 25% 5% Gold Production: 60.8 Koz Cos
Slide 20: Capital Allocation Priorities (After Debt Service)
CAPITAL ALLOCATION PRIORITIES (AFTER DEBT SERVICE) Strong cash flow from operations invested in discretionary projects Investment in exploration, technology and innovation has generated robust double digit returns: Much higher than dividends, share buybacks, debt repayment (in millions) Total 3-year
Slide 21: Record of Growing Reserves
RECORD OF GROWING RESERVES Significant increases at much lower prices Silver Reserves Growth Gold Reserves Growth 120.0 1.5 2.8 191.0 2.0 (76.7) (millions of ounces) (millions of ounces) 147.7 133%*** (1.3) 0.7 685%*** 2013 Beginning Reserves Reserves Added, Silver Produced, Reserves, Replaced and 2
Slide 22: The Most Conservative Silver Price Assumption in the Industry
THE MOST CONSERVATIVE SILVER PRICE ASSUMPTION IN THE INDUSTRY Reserves are the basis for value creation Price Assumption is at the discretion of management HL Reserve $19.00 Year Prices $18.50 $18.00 $18.00 2012 $26.50 $17.50 $17.00 2013 $20.00 $16.00 $16.61 $16.00 2014 $17.25 Silver $15.50 $15.00 $
Slide 23: Culture of Innovation Drives Productivity Improvements
CULTURE OF INNOVATION DRIVES PRODUCTIVITY IMPROVEMENTS Technology and best practices to be leveraged across Klondex’ assets Autonomous Haulage in Jumbo/Stope Drill Operation at Casa Berardi Automation: Drilling During Shift Change • 2- 24 hour trucks operation drives cost savings • Adds 15 meters/da
Slide 24: Significant Returns on Innovation Investments
SIGNIFICANT RETURNS ON INNOVATION INVESTMENTS Small investments can result in large returns: 2 case studies Greens Creek (ventilation on demand) Casa Berardi (automated haulage) Installing variable speed drives in ventilation fans 2 self-driving underground haulage vehicles Budget $307,000 ins
Slide 25: Solid Returns from Discretionary Expenses
SOLID RETURNS FROM DISCRETIONARY EXPENSES Returns quantitative/foundations for safety and efficiency Discretionary Item Returns Recovery Improvements driven by PH control using CO2 & Lead scalping Increased Silver recoveries 6% to 7% per year, has returned $50M cash to date and process - GC another
Slide 26: Culture of Innovation Drives Productivity Improvements
CULTURE OF INNOVATION DRIVES PRODUCTIVITY IMPROVEMENTS Problem solving drives the innovation Projects 2014 2015 2016 2017 2018 2019 2020 2021 Automated Stope Drilling Installed In Operation Casa Berardi Automated Drill Jumbo Utilized 2 Drills Add/Deploy 3rd drill In Operation Casa Berardi (Greens Cr
Slide 27: Appendix
Appendix NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 27
Slide 28: Adjusted EBITDA Reconciliation to GAAP
ADUSTED EBITDA RECONCILLIATION TO GAAP Reconciliation of Net (Loss) Income (GAAP) to Adjusted EBITDA (non-GAAP) Dollars in thousands (USD) Twelve Months Ended 31-Dec-13 31-Dec-14 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 Net (loss) income $ (25,130) $ 17,824 $ (94,738) $ 61,569 $ (28,520) $ (26,563) P
Slide 29: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP 2019 estimates Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Befor
Slide 30: Cash Cost and AISC Reconciliation to GAAP: Silver Operations
CASH COST AND AISC RECONCILIATION TO GAAP Silver Operations Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Be
Slide 31: Cash Cost and AISC Reconciliation to GAAP: Gold Operations
CASH COST AND AISC RECONCILIATION TO GAAP Gold Operations Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Befo
Slide 32: Cash Cost and AISC Reconciliation to GAAP: Greens Creek
CASH COST AND AISC RECONCILIATION TO GAAP Greens Creek Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Before
Slide 33: Cash Cost and AISC Reconciliation to GAAP: Casa Berardi
CASH COST AND AISC RECONCILIATION TO GAAP Casa Berardi Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Before
Slide 34: Cash Cost and AISC Reconciliation to GAAP: Nevada Operations
CASH COST AND AISC RECONCILIATION TO GAAP Nevada Operations Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Be
Slide 35: Cash Cost and AISC Reconciliation to GAAP: San Sebastian
CASH COST AND AISC RECONCILIATION TO GAAP San Sebastian Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Before
Slide 36: Cash Cost and AISC Reconciliation to GAAP: Lucky Friday
CASH COST AND AISC RECONCILIATION TO GAAP Lucky Friday Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Before
Slide 37: Operations Free Cash Flow Reconciliation
OPERATIONS FREE CASH FLOW RECONCILIATION Greens Creek Free Cash Flow Reconciliation Casa Berardi Free Cash Flow Reconciliation (in thousands) (in thousands) 1 2018 2018 1987-2018 Gross Profit $ 10,938 Gross profit $ 75,288 $ 1,408,990 Non cash elements in gross profit: Non-cash elements in gross pro
Slide 38: Proven & Probable Mineral Reserves
PROVEN & PROBABLE MINERAL RESERVES (On December 31, 2018 unless otherwise noted) Investors are cautioned that Reserves and Resources are as of December 31, 2018, and are dynamic during the year due to mining depletion, changing metal prices, changing costs or project economics, and new drill or mini
Slide 39: Proven & Probable Mineral Reserves
PROVEN & PROBABLE MINERAL RESERVES (On December 31, 2018 unless otherwise noted) (1) The term “reserve” means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The term “economically,” as used in the definition of rese
Slide 40: Measured and Indicated Mineral Resources
MEASURED AND INDICATED MINERAL RESOURCES (ON DEC. 31, 2018 UNLESS OTHERWISE NOTED) Investors are cautioned that Reserves and Resources are as of December 31, 2018, and are dynamic during the year due to mining depletion, changing metal prices, changing costs or project economics, and new drill or mi
Slide 41: Inferred Mineral Resources
INFERRED MINERAL RESOURCES (ON DEC. 31, 2018 UNLESS OTHERWISE NOTED) Inferred Resources Tons Silver Gold Lead Zinc Copper Silver Gold Lead Zinc Copper Asset (000) (oz/ton) (oz/ton) % % % (000 oz) (000 oz) (Tons) (Tons) Tons Greens Creek (6) 2,470 14.6 0.09 3.0 7.3 - 35,982 219 74,410 181,400 - Lucky
Slide 42: Inferred Mineral Resources
INFERRED MINERAL RESOURCES (On December 31, 2018 unless otherwise noted) Note: All estimates are in-situ except for the proven reserves at Greens Creek and San Sebastian which are in surface stockpiles. Resources are exclusive of reserves. (6) Mineral resources are based on $1350 gold, $21 silver, $
Slide 43: Proven & Probable Mineral Reserves (2013)
PROVEN & PROBABLE MINERAL RESERVES (On December 31, 2013 unless otherwise noted) Proven Reserves Tons Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) Tons Tons Greens Creek (a) United 100.0% 14 12.9 0.13 3.0 8.1 182 2 430 1,15 States
Slide 44: Measured and Indicated Mineral Resources (2013)
MEASURED AND INDICATED MINERAL RESOURCES (ON DEC. 31, 2013 UNLESS OTHERWISE NOTED) Measured Resources Tons Silver Gold Lea Zinc Silver Gold Lead Zinc d Asset Location Ownership (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Greens Creek (2)(a) United 100.0% 7 17.6 0.08 4.4 10.5 118 1 29
Slide 45: Inferred Mineral Resources (2013)
INFERRED MINERAL RESOURCES (ON DEC. 31, 2013 UNLESS OTHERWISE NOTED) Inferred Resources Tons Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership (000) (oz/ton) (oz/ton) % % (000 (000 oz) (Tons) (Tons) oz) Greens Creek (9)(a) United States 100.0% 2,385 13.3 0.09 2.7 6.5 31,752 216 63
Slide 46: Proven & Probable Mineral Reserves; Measured and Indicated, and Inferred Resources
PROVEN & PROBABLE MINERAL RESERVES; MEASURED AND INDICATED, AND INFERRED RESOURCES (On December 31, 2013 unless otherwise noted) Note: All estimates are in-situ except for the proven reserve at Greens Creek which is in a surface stockpile. Resources are exclusive of reserves. Totals may not represen
Slide 47: 2008 – 2018 Reserve Table
2008 – 2018 RESERVE TABLE Silver Gold Gold Silver Gold Gold 2008 Proven Reserves Tons (oz/ton) (oz/ton) Silver (ounces) (ounces) 2014 Proven Reserves Tons (oz/ton) (oz/ton) Silver (ounces) (ounces) Greens Creek - - - - - Greens Creek 4,700 15.70 0.100 74,000 5,000 Lucky Friday 1,270,000 12.40 - 15,8
Slide 48: Endnotes
ENDNOTES 1. Cost of sales and other direct production costs and depreciation, depletion and amortization. 2. Cash cost, after by-product credits, per silver and gold ounce represents a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation