Hecla Mining Company · NYSE:HL
Hecla Mining — Deutsche Bank Annual Leveraged Finance Conference 2016
47 slides from Hecla Mining's conference presentation, Sep 28, 2016
Slide 1: Deutsche Bank: Strong Performance
Deutsche Bank Strong Performance September 28, 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: Why Invest in Hecla?
Why Invest in Hecla? 1. Strong Silver & Gold Exposure 2. Record Setting Performance Q2 • Silver reserves 175 M oz • $171 M Revenue • Gold reserves 2 M oz • 12 M oz AgEq* Production • Significant zinc and lead • All 4 mines performing strongly exposure too *Metal price assumptions: Au $1,150/oz, Ag $
Slide 4: Production Growth Increased Revenue & Cash Flow and Lowered Cash Costs
Production Growth Increased Revenue & Cash Flow and Lowered Cash Costs 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
Slide 5: Mining Industry Has Destroyed Value
Mining Industry Has Destroyed Value But Hecla Is An Exception 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 Hecla PM
Slide 6: Creating Shareholder Value
Creating Shareholder Value Silver Equivalent Reserve Per Share Silver Equivalent Production Per Share 0.11 0.87 0.64 0.06 2011 2015 2011 2016E 1. 2011 Prices - $35.30 Ag, $1,592 Au: 2015 Prices - $15.57 Ag, $1,150 Au: 2016E Prices - $15.00/oz Ag, $1,150 Au -6-
Slide 7: Consistently True to Our Mission While Executing Our Strategy
Consistently True to Our Mission While Executing Our Strategy Our Mission To create long-term value for shareholders from mining silver, gold and associated base metals with a conservative capital structure Our Strategy Consistent, long-lived production that increases and improves over time Long lif
Slide 8: Sustainable, Industry-Leading Reserve & Production Growth
Sustainable, 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 Reserves Ag Production Growth Au Production Growth 15.8 Moz 233 Koz 2.1 Moz +146% +241% +320% 6.4 Moz 0.6 Moz
Slide 9: Our Strategy Has Worked
Our Strategy Has Worked Adjusted EBITDA*: In 6 Months is More Than a Liquidity: Strong and Getting Stronger Year Ago $312 M $310 M (in millions) $174.4 $255 M $259 M** $234 M $130.3 $124.3 $116.8 2013 2014 2015 6Mos/2016 ** Includes $2.6 million held as L/C Share Price Outperformance Outperformed Go
Slide 10: Our Mines Generate Free Cash Flow (Q2)
Our Mines Generate Free Cash Flow (Q2) 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) $(
Slide 11: A Roadmap for Value and Growth
A ROADMAP FOR VALUE AND GROWTH A Strong Immediate Securing Foundation Growth The Long Term Future Greens Creek Productivity Greens Creek Lucky Friday Rock Creek #4 Shaft Lucky Friday Casa Berardi Montanore Casa Berardi EMCP pit San Sebastian Exploration Drilling –11–
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) FCF 1H 2016³ $28.8 milli
Slide 13: Greens Creek Investing in Productivity Improvements
Greens Creek Investing in Productivity Improvements Average Recoveries Have Increased Improving Mining Based On Data More to Come 78% CCO2 75% SCALP CO2 pH Control 70% 2014 2015 Working to Reduce Power Costs Installing Tele-Remote Mucking & Autonomous Trucking Up to 15% more productivity –13–
Slide 14: Lucky Friday: Positioned for Growth and Longevity
Lucky Friday: Positioned for Growth and Longevity Cash cost, after by-product Silver Production Cost of Sales 1,2 credits, per silver oz 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 Resourc
Slide 15: #4 Shaft: Access to the Expanding High-Grade Zone at Lucky Friday
#4 Shaft: Access to the Expanding High- Grade Zone at Lucky Friday 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
Slide 16: Casa Berardi: Making a Good Mine Great
Casa Berardi: Making a Good Mine Great 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 17: EMCP Pit is Transforming Casa: Adds Value
EMCP Pit is Transforming Casa: Adds Value Optimizing the mill: ~2,300 tpd (2015A) to ~3,100 tpd (2017E), adds 5,000 Au oz (2016E) and 30,000 Au oz (2017E) Extending mine life: 5.5 year project, Principal Pit to follow Increasing operating flexibility: Lowering cost per ounce Strong Returns:
Slide 18: EMCP: Rapid Progress to Mining Ore
EMCP: Rapid Progress to Mining Ore Work Begins – November 2015 First Ore - July 2016 Photo - August 2016 –18–
Slide 19: 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 20: San Sebastian: Exceeding Expectations
San Sebastian: Exceeding Expectations Performance for 1H 2016: ~$48 million in Free Cash Flow¹ (PEA $43 M LOM) 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)2 per silver ounce Higher recoveries and lower mine costs than
Slide 21: Drilling Brings Low Cost Growth Potential
Drilling Brings Low Cost Growth Potential Opportunity to expand pits with drilling/resource conversion (low cost) Exciting high grade discoveries West of Middle Vein (65.1 oz/ton silver and 0.68 oz/ton gold over 7.8 feet) No acquisitions required –21–
Slide 22: Rock Creek & Montanore: Securing Hecla's Long-Term Future
Rock Creek & Montanore: Securing Hecla’s Long- Term Future Each could become a 20-30 year mine Low acquisition costs: Revett $19 M and Montanore $54 M of Hecla stock Big potential: Each project has ~1/4 B oz Ag and~2 B lbs Cu¹ Advanced permitting: Rock Creek (SEIS), Montanore2 (Final EIS, RODs), bei
Slide 23: Debt Metrics Dramatically Improved Due to Production Growth
Debt Metrics Dramatically Improved Due to Production Growth 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 $1,3
Slide 24: 2016 Expectations: Higher Production, Lower Cost & More Exploration
2016 Expectations: Higher Production, Lower Cost & More Exploration Bold=Improved estimate Cash Cost, 2016E1 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
Slide 25: A History of Beating Forecasts
A History of Beating Forecasts 2013 2014 2015 2016E MET BEAT BEAT Orig Rev 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
Slide 26: Thank You
Thank You #4 Shaft Excavation Complete, Operational by Year End –26–
Slide 27: Appendix
Precious metal companies… Appendix –27–
Slide 28: 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 3rd largest lead and zinc producer in US Periodically hedge up to 60% of payable lead and zinc production out t
Slide 29: 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 30: 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% Casa Berardi 31% 0% Lucky Friday 0% 13% San Sebastian 21% 1. Based on realized prices 2016: Silver - $17.26, Gold - $1,254, Zinc - $0.89
Slide 31: 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) –31–
Slide 32: #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 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: 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 35: 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 36: 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 37: 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 38: 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 39: 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 40: 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 41: 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 42: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Reconciliation of cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) to cash cost, after by-product credits, per silver ounce (dollars and ounces in thousands, except per ounce – unaudited) Greens Creek Lucky Friday Q2/20
Slide 43: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Reconciliation of cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) to cash cost, after by-product credits, per silver ounce (dollars and ounces in thousands, except per ounce – unaudited) San Sebastian Q2/2016 6mos/2016
Slide 44: Hecla Adjusted EBITDA Reconciliation to GAAP
Hecla Adjusted EBITDA Reconciliation to GAAP Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles Dollars are in thousands Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles Twelve Months Dollars are in thousands Ended Twelve Months 31-Dec-13 Ended
Slide 45: 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 46: 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
Slide 47: 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/
Hecla Mining Company — Deutsche Bank Annual Leveraged Finance Conference 2016 on 6ix