Hecla Mining Company · NYSE:HL
Hecla Mining — Barclays High Yield Bond & Syndicated Loan Conference 2017
55 slides from Hecla Mining's conference presentation, June 2017
Slide 1: Barclays High Yield Bond Conference
June 2017 NYSE:HL Barclays High Yield Bond Conference Improving Productivity And Safety With Innovation
Slide 2: Cautionary Statements
Cautionary Statements NYSE:HL 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
Slide 3: Strategy Created Per Share Value In 2016
Strategy Created Per Share Value In 2016 2017 focus is on improving productivity through innovation NYSE:HL Growth Captive Extend Price Cycles Mine Life Production Reserves & Cash-Flow Resources Long-Lived Capture Price Cycles Low-Cost Mines Improve High Productivity High Return Investment
Slide 4: Hecla Advancing Innovation Quickly
Hecla Advancing Innovation Quickly Partial implementation has meaningful value creation for Hecla NYSE:HL ORE SORTING AT SURFACE INITIAL TEST IMPLEMENTATION ELECTRIC VEHICLES UNDERGROUND IN PROGRESS ORE SORTING CONTINUOUS MUCKING NOT STARTED ELECTRIC MINE SMART ELECTRIC U/G MINING FULLY MECHANICAL C
Slide 5: Innovation: A Key to Maximizing Value
Innovation: A Key to Maximizing Value Is the industry at a tipping point like the late ‘70’s? NYSE:HL Those who innovate will realize: Lower costs and higher margins Increased reserves Longer mine lives Better environmental/safety records The rest will struggle to An expanded horizon of ma
Slide 6: 299 Million Ounces Added Moz of Reserves Over Past Years
Added 299 Moz of Reserves Over Past 10 Years Unchanged reserve despite replacing record production and lowest exploration budget NYSE:HL since 2009 250 200 Reserve Additions 172 Moz 150 100 Silver Ounces (millions) 299 Million Ounces 50 - (50) (100) Cumulative Production 127 M oz (150) (200) 2007 20
Slide 7: Gold & Silver 2016 Reserve Prices
Gold & Silver 2016 Reserve Prices Hecla’s price assumption assures high margin ounces NYSE:HL HL Reserve $20.00 Year $18.50 Prices $17.50 $18.00 $18.00 $18.00 $16.29 $16.50 2012 $26.50 $14.50 $15.00 2013 $20.00 2014 $17.25 2015 $14.50 2016 $14.50 Hecla Fresnillo Endeavour Agnico Coeur Silver Goldcor
Slide 8: Two Of The Ten Highest Grade Mines In The World
Two Of The Ten Highest Grade Mines In The World Lucky Friday not far behind NYSE:HL 6. 10. –8–
Slide 9: Higher Grade Mines Than Peers
Higher Grade Mines Than Peers BMO silver coverage, silver equiv. reserves vs. grade NYSE:HL 1,600 800 Higher Grades Silver Eq. Reserves (Moz) 1,200 600 Reserve Grade (g/t) 800 400 400 200 0 0 FRES THO BCM PAAS* HL* CDE* SSRI* FVI HOC FR EDR* MAG Silver Other Metals Silver Eq Grade *Reserve and resou
Slide 10: Strong Financial Performance
Strong Financial Performance NYSE:HL Net Income Adjusted EBITDA1 $27 M $54 M $47 M +$27 M +16% -$1 M Q1/2016 Q1/2017 Q1/2016 Q1/2017 Outperformed Peer Share Prices Increasing Liquidity & Decreasing Debt Metrics 300% Hecla $313 M 250% Peer Average 1.1x 200% +188% $100 M +59% (63%) 150% 100% +85% $213
Slide 11: Strong Silver and Gold Margins
Strong Silver and Gold Margins 95% silver cash margin is one of the industry’s highest NYSE:HL Silver Margins Gold Margins 52% 78% 81% 82% 95% 32% 27% 79% 34% 33% 3 3 -11-
Slide 12: Diversified Revenue Stream Q1/2017
Diversified Revenue Stream Q1/2017 Mitigates risk and enhances economics NYSE:HL #1 Silver and #3 Lead and Zinc Producer in the U.S. Greens Creek 37% 37% 41% of Total Revenue Silver Production: 3.4 Moz Cash Costs, after by-product 8% Zinc Production: 15.5 Ktons 18% Realized Price: $1.26/oz credits:
Slide 13: Improving Debt Metrics
Improving Debt Metrics Q1 2017 NYSE:HL LTM* Adjusted EBITDA1 Net Debt/LTM Adjusted EBITDA2 $265 M $272 M $234 M 2.0x $177 M 1.4x 1.2x 1.1x LTM Q2 2016 LTM Q3 2016 LTM Q4 2016 LTM Q1 2017 LTM Q2 2016 LTM Q3 2016 LTM Q4 2016 LTM Q1 2017 Total liquidity ~$313 m $506 M high yield notes due 2021 Ne
Slide 14: North American Focused Asset Portfolio
North American Focused Asset Portfolio Operations in low-risk & mining-friendly jurisdictions NYSE:HL –14–
Slide 15: A Roadmap for Further Value and Growth Creation
A Roadmap for Further Value and Growth Creation NYSE:HL A Strong Immediate Securing The Foundation Growth Long-Term Future Greens Creek Productivity Existing Mines Greens Creek Lucky Friday #4 Shaft Lucky Friday Rock Creek Casa Berardi Casa Berardi EMCP pit Montanore San Sebastian Exploration Drilli
Slide 16: Greens Creek
Greens Creek Consistent low-cost production in a wilderness area / National Monument NYSE:HL 2016 Q1 2016 Q1 2017 2017E Silver Production (Moz) 9.3 2.5 1.9 7.4 - 8.0 Gold Production (koz) 54 16 14 54 – 60 Cost of Sales $191.3 M $44.9 M $44.0 M $228 M Cash cost, after by-product $3.84/oz $3.96/oz $0.
Slide 17: Connectivity Is Key To Increased Safety & Productivity
Connectivity Is Key To Increased Safety & Productivity NYSE:HL Improving Mining Based On Data Ventilation on Demand Will Be Fully Functioning in 2017 -17-
Slide 18: Creating Value During The Shift Change
Creating Value During The Shift Change Automated LHD operates during shift change/blasting increasing productivity NYSE:HL Blasting & Blasting & Shift Change Shift Change Utilization Operating Operating Operating Hours in the Day -18-
Slide 19: Automated LHD Already At Work
Automated LHD Already At Work Purchased the MINExpo demo unit NYSE:HL –19–
Slide 20: Hecla Has Significantly Improved Recoveries
Hecla Has Significantly Improved Recoveries Expect further improvements from Woodgrove SFR flotation cells NYSE:HL Increases payable silver and gold by having it report to bulk con instead of the zinc con Cost approx. $1.3 million Payback expected in 6-12 months IRR in excess of 100% Compl
Slide 21: Lucky Friday
Lucky Friday Positioning for growth and longevity NYSE:HL 2016 Q1 2016 Q1 2017 2017E Silver Production (Moz) 3.6 .977 .681 TBD Cost of Sales $76.2 M $18.5 M $14.5 M TBD Cash cost, after by-product $8.89/oz $9.05/oz $5.93/oz TBD credits, per silver oz3 AISC, after by-product $20.66/oz $21.78/oz $12.0
Slide 22: #4 Shaft Gives Access to the High Grade Zone
#4 Shaft Gives Access to the High Grade Zone Reserve grade 4 ounces higher than 2013, production grade increasing 0.5oz/yr NYSE:HL 20 Years Past Mining ORE GRADE VALUES *AgEq Grade (opt) Mine Face (Galena) > 24 97.2 opt Silver 18 - 24 6500 Level 47.5% Lead 12 - 18 6 - 12 <6 7500 Level 900’@ +24 opt
Slide 23: Continuing Testing Battery Powered LHD
Continuing Testing Battery Powered LHD Technology could reduce ventilation needs vs diesel NYSE:HL -23-
Slide 24: Casa Berardi
Casa Berardi Making a good mine great NYSE:HL 2016 Q1 2016 Q1 2017 2017E Gold Production (koz) 146 30.4 36 150 – 165 Cost of Sales $155.7 M $29.2 M $42.5 M $170 M Cash cost, after by- product credits, per gold $764/oz $781/oz $886/oz $800/oz oz3 AISC, after by-product $1,244/oz $1,322/oz $1,256/oz $
Slide 25: Casa Berardi
Casa Berardi Increased throughput more than 100% NYSE:HL Trendline -25-
Slide 26: EMCP Pit is Transforming Casa Berardi
EMCP Pit is Transforming Casa Berardi Creating value NYSE:HL Optimizing the mill: ~2,300 tpd (2015A) to ~3,400 tpd (2017E), adds 5,000 Au oz (2016E) and 30,000 Au oz (2017E) Increasing operating flexibility: More consistent operations Strong Returns: IRR of 90%1 Location of EMCP Pit Report pre
Slide 27: Investing in Productivity Improvements
Investing in Productivity Improvements NYSE:HL Automated Shaft and Jumbo/Stope Drill Rock Breakers Automation: Drilling During Shift Change $200K investment Adds 15M/day Internally sourced Increased drilling Increases efficiency accuracy 2 automated drills in operation 1 stope drill Tr
Slide 28: 985 Automation in 2017
985 Automation in 2017 Two 40 tonne Sandvik trucks should save $5M, lessons for other operations NYSE:HL 123 & 118 Lower 985 Automated Drift -28-
Slide 29: First Automated Truck Arrives in 2017
First Automated Truck Arrives in 2017 Modeled after the Williams operation NYSE:HL Surface control center Optical scanner & camera Safety gated area -29-
Slide 30: San Sebastian
San Sebastian Just-in-time mining; looking to make it a long-term mine NYSE:HL 2016 Q1 2016 Q1 2017 2017E Silver Production (Moz) 4.3 1.2 751 koz 3.0 – 3.4 Gold Production (koz) 34 9.3 6.3 21 – 25 Cost of Sales $31.2 M $7.7 M $6.6 M $36 M Cash cost, after by-product $(3.35)/oz $(3.26)/oz $(3.27)/oz
Slide 31: Mining Underground By The End of 2017
Mining Underground By The End of 2017 Access development is underway NYSE:HL North Portal CURRENT MIDDLE VEIN RESOURCE WEST MIDDLE VEIN EXPLORATION EAST MIDDLE VEIN DRILLING EXPLORATION DRILLNG North Ramp Under Construction Existing Workings -31-
Slide 32: How Else Does San Sebastian Become Sustainable?
How Else Does San Sebastian Become Sustainable? Ore sorting is a potential way of upgrading the ore NYSE:HL Ag Grade vs Recovery Initial results indicate a reduction of 100% Average Grade (ppm) Cumulative Recovery 6600 mass by 60% while maintaining 90% 80% 5600 of the silver and 93% of the gold 60
Slide 33: Rock Creek & Montanore
Rock Creek & Montanore Final stages of permitting, expecting to advance in 2018 NYSE:HL Rock Creek Montanore Potential Mine Life 20-30 years each Hecla stock acquisition cost $19 M $54 M 148.1 Moz Ag / 183.4 Moz Ag / Big potential 1.3 Blbs Cu 1.5 Blbs Cu Advanced permitting SEIS Final EIS, RODs** We
Slide 34: Continuing to Execute the Strategy
Continuing to Execute the Strategy Expect good per share results NYSE:HL Growth Captive Extend Price Cycles Mine Life Production Reserves & Cash-Flow Resources Long-Lived Capture Price Cycles Low-Cost Mines Improve High Productivity High Return Investments Return Investments LONG TERM GO
Slide 35: Appendix
MINING COMPANY NYSE:HL Appendix -35-
Slide 36: Endnotes
Endnotes NYSE:HL 1. 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 income (loss) before the following items: interest
Slide 37: Increasing Share of Modern Demand
Increasing Share of Modern Demand NYSE:HL Modern demand increased from 260 Moz in 1992 to 544 Moz 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 2015E Modern Investment Jewelry & Silverware Photography Coins & Medals Source - GFMS
Slide 38: Proven & Probable Mineral Reserves
Proven & Probable Mineral Reserves (on Dec. 31, 2016 unless otherwise noted) NYSE:HL (a) Mineral reserves are based on $1200 gold, $14.50 silver, $0.90 lead, $1.05 zinc, unless otherwise stated. (1) Mineral reserves are based on $1200 gold and a US$/CAN$ exchange rate of 1:1.4 Reserve diluted to an
Slide 39: Measured and Indicated Mineral Resources
Measured and Indicated Mineral Resources (on Dec. 31, 2016 unless otherwise noted) NYSE:HL -39-
Slide 40: Inferred Mineral Resources
Inferred Mineral Resources (on Dec. 31, 2016 unless otherwise noted) NYSE:HL (b) Mineral resources are based on $1350 gold, $21 silver, $0.95 lead, $1.10 zinc and $3.00 copper, unless otherwise stated. (2) Measured and indicated resources from Gold Hunter and Lucky Friday vein systems are diluted an
Slide 41: 2006 – 2015 Reserve Table
2006 – 2015 Reserve Table NYSE:HL 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 2,345,500
Slide 42: AISC Reconciliation
AISC Reconciliation Expecting lower AISC in 2017 NYSE:HL Total Silver Properties and Corporate Year Ended In thousands (except per ounce amounts) December 31, Estimate for 2016 2017 Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 298,740 $ 357,40
Slide 43: Cash Cost Reconciliation to GAAP
Cash Cost Reconciliation to GAAP Silver Operations NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization, the most comparable GAAP measurement, After By-product Credits, per Silver Ounce for Greens Creek, Lucky Friday and San Sebastian
Slide 44: AISC Reconciliation to GAAP
AISC Reconciliation to GAAP Silver Operations NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to All- In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Oun
Slide 45: Cash Cost Reconciliation to GAAP
Cash Cost Reconciliation to GAAP Greens Creek NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to All- In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Oun
Slide 46: AISC Reconciliation to GAAP
AISC Reconciliation to GAAP Greens Creek NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to All- In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Ounce (n
Slide 47: Cash Cost Reconciliation to GAAP
Cash Cost Reconciliation to GAAP Lucky Friday NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to All- In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Oun
Slide 48: AISC Reconciliation to GAAP
AISC Reconciliation to GAAP Lucky Friday NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to All- In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Ounce (n
Slide 49: Cash Cost Reconciliation to GAAP
Cash Cost Reconciliation to GAAP San Sebastian NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to All- In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Ou
Slide 50: AISC Reconciliation to GAAP
AISC Reconciliation to GAAP San Sebastian NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to All- In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Ounce (
Slide 51: Cash Cost Reconciliation to GAAP
Cash Cost Reconciliation to GAAP Casa Berardi NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to All- In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Oun
Slide 52: AISC Reconciliation to GAAP
AISC Reconciliation to GAAP Casa Berardi NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to All- In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Ounce (n
Slide 53: Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP
Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP NYSE:HL Numbers in thousands (USD) Reconciliation of Net Income (Loss) (GAAP) to Adjusted EBITDA (non-GAAP) For the Twelve Months Ended 31-Mar-17 31-Dec-16 30-Sep-16 30-Jun-16 31-Mar-16 Net Income (Loss) $ 96,999 $ 69,547 $ (13,676)
Slide 54: Reconciliation Cash Provided by Operating Activities to Free Cash Flow
Reconciliation Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP) NYSE:HL Dollars are in thousands Three Months Ended March 31, 2017 2016 Cash provided by operating activities $ 38,285 $ 18,748 Less: Additions to properties, plants equipment and mineral (21,658) (34,654) inter
Slide 55: Greens Creek Free Cash Flow Reconciliation
Greens Creek Free Cash Flow Reconciliation NYSE:HL 1987-2016 Dollars are in thousands Performance Gross Revenues $4,961,131 Treatment Charges (958,927) Net Revenues 4,002,204 Freight & Selling Expense (195,474) Net Smelter Return 3,806,730 Cost of Goods Sold (1,775,194) NonCash Costs (612,052) Explo
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