Hecla Mining Company · NYSE:HL
Hecla Mining — Jefferies 13th Annual Industrials Conference 2017
55 slides from Hecla Mining's conference presentation, August 2017
Slide 1: Jefferies Annual Industrials Conference
August 2017 NYSE:HL Jefferies Annual Industrials 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: 299 Million Ounces Silver Reserves
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 6: 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 7: 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. –7–
Slide 8: 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 9: Strong Financial Performance
Strong Financial Performance NYSE:HL Cash Cost per Silver Ounce1 Extended San Sebastian Mill lease (After By-Product Credits) Mines on plan, 2H stronger as expected Tax provision 93% Significantly lower capex $3.80/oz Lucky Friday strike continues $0.26/oz Q2 2016 Q2 2017 AISC – per Silver
Slide 10: Diversified Revenue Stream Q2/2017
Diversified Revenue Stream Q2/2017 Mitigates risk and enhances economics NYSE:HL #1 Silver and #3 Lead and Zinc Producer in the U.S. 26% Greens Creek 42% Silver Production: 2.8 Moz 53% of Cash Costs, after by-product Total Revenue 11% credits: $0.26/oz1 Realized Price: $17.14/oz 21% Zinc Production:
Slide 11: Strong Silver and Gold Margins
Strong Silver and Gold Margins 98% silver cash margin is one of the industry’s highest NYSE:HL Silver Margins Gold Margins $19.53 $1,341 $1,254 $1,260 $17.26 $17.16 $17.90 $17.14 $1,221 $1,202 $426 $288 32% 23% $335 52% $402 27% 33% $13.46 $15.85 $653 81% $14.16 82% 95% 98% 78% $17.06 $16.88 $972 $9
Slide 12: Improving Debt Metrics
Improving Debt Metrics Q2 2017 NYSE:HL 3 4 LTM* Adjusted EBITDA Net Debt/LTM Adjusted EBITDA 2.0x $265 M $272 M $234 M $242 M 1.4x $177 M 1.2x 1.3x 1.1x LTM Q2 2016 LTM Q3 2016 LTM Q4 2016 LTM Q1 2017 LTM Q2 2017 LTMQ2 2016 LTM Q3 2016 LTM Q4 2016 LTM Q1 2017 LTM Q2 2017 Total liquidity ~$302 M
Slide 13: North American Focused Asset Portfolio
North American Focused Asset Portfolio Operations in low-risk & mining-friendly jurisdictions NYSE:HL –13–
Slide 14: Greens Creek
Greens Creek Consistent low-cost production in a wilderness area / National Monument NYSE:HL 2016 Q2 2016 Q2 2017 2017E Silver Production (Moz) 9.3 2.2 1.9 7.4 - 8.0 Gold Production (koz) 54 12 13 54 – 60 Cost of Sales $191.3 M $43.7 M $54.3 M $228 M Cash cost, after by-product $3.84/oz $5.38/oz $1.
Slide 15: 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 -15-
Slide 16: 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 -16-
Slide 17: Innovation At Work
Innovation At Work Greens Creek tele-remote LHD increased productivity NYSE:HL –17–
Slide 18: 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% Commi
Slide 19: Lucky Friday
Lucky Friday Positioning for growth and longevity NYSE:HL 2016 Q2 2016 Q2 2017 2017E Silver Production (Moz) 3.6 .858 -- TBD Cost of Sales $76.2 M $18.7 M $ (1) M TBD Cash cost, after by-product $8.89/oz $9.94/oz -- TBD credits, per silver oz1 AISC, after by-product $20.66/oz $22.05/oz -- TBD credit
Slide 20: #4 Shaft
#4 Shaft Increasing grade with depth NYSE:HL Shaft is now operational Production growth expected from higher-grade ore at depth Silver Shaft 4050 Level #4 Shaft ORE GRADE VALUES *AgEq Grade (opt) 4900 Level Mining Activity > 24 5900 Level 18 - 24 12 - 18 5900 Level 6 - 12 6500 Level <6 Dec. 31,
Slide 21: #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 22: Continuing Testing Battery Powered LHD
Continuing Testing Battery Powered LHD Technology could reduce ventilation needs vs diesel NYSE:HL -22-
Slide 23: Casa Berardi
Casa Berardi Making a good mine great NYSE:HL 2016 Q2 2016 Q2 2017 2017E Gold Production (koz) 146 42 33.3 150 – 165 Cost of Sales $155.7 M $41.2 M $43.7 M $170 M Cash cost, after by- product credits, per gold $764/oz $601/oz $972/oz $800/oz oz1 AISC, after by-product $1,244/oz $1,034/oz $1,373/oz $
Slide 24: Casa Berardi Increased Throughput
Casa Berardi Increased Throughput more than 100% NYSE:HL Trendline -24-
Slide 25: EMCP Pit is Transforming Casa Berardi
EMCP Pit is Transforming Casa Berardi Creating value NYSE:HL Optimizing the mill: ~2,300 tpd (2015) to ~3,600 tpd (Q2 2017) Increasing operating flexibility: More consistent operations Strong Returns: IRR of 90%* Location of EMCP Pit *Report prepared for the Company’s use by Mine Development A
Slide 26: 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 -26-
Slide 27: 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 40 tonne autonomous truck now onsite -27-
Slide 28: San Sebastian
San Sebastian Just-in-time mining; looking to make it a long-term mine NYSE:HL 2016 Q2 2016 Q2 2017 2017E Silver Production (Moz) 4.3 1.3 867 koz 3.0 – 3.4 Gold Production (koz) 34 9.5 6.6 21 – 25 Cost of Sales $31.2 M $9.2 M $5.1 M $36 M Cash cost, after by-product $(3.35)/oz $(3.05)/oz $(3.31)/oz
Slide 29: San Sebastian: Strong Exploration Potential
San Sebastian: Strong Exploration Potential Current open pits, development and drilling advances NYSE:HL SAN JUDAS VEIN TRACE OF EXPLORATION N DRILLING NEW UG RAMP (IN PROGRESS) EAST MIDDLE VEIN EXPLORATION & INFILL DRILLING MIDDLE VEIN EXPLORATION & INFILL DRILLING EXPLANATION Q2 2017 Drilling Area
Slide 30: Mining Underground By The End of 2017
Mining Underground By The End of 2017 Ramp development proceeding as planned NYSE:HL North Portal CURRENT MIDDLE VEIN RESOURCE WEST MIDDLE VEIN EXPLORATION EAST MIDDLE VEIN DRILLING EXPLORATION DRILLNG North Ramp Existing Workings -30-
Slide 31: Velardeña Mill Secured Through 2020
Velardeña Mill Secured Through 2020 NYSE:HL North Ramp Under Construction -31-
Slide 32: 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 33: Interior Secretary Has Unique Experience
Interior Secretary Has Unique Experience Former Montana Congressman, geologist, knows the project NYSE:HL Ryan Zinke US Representative for Montana since 2015 (former state Senator) Geologist from Whitefish, Montana Has visited our sites Strong supporter of economic development in NW Montana
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: 2017 Expectations
2017 Expectations Expectations will be updated once Lucky Friday strike has ended NYSE:HL Production Outlook Silver Production (Moz) Gold Production (Koz) Silver Equivalent (Moz)6 Gold Equivalent (koz)6 Greens Creek 7.4 – 8.0 54 - 60 22.8 – 23.9 322 - 336 Lucky Friday TBD - TBD TBD San Sebastian 3.0
Slide 37: Endnotes
Endnotes NYSE:HL 1. 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, depletion and amortization (sometimes referred to as "cost of sales" in this release),
Slide 38: Items of Note
Items of Note NYSE:HL Expect to begin depreciating the #4 Shaft in Q2 Total depreciation for 2017 estimated to be $143 million G&A increased in 2016 due to accrual for the Annual Incentive Plan and Long Term Incentive Plan based on strong performance against long-term goals and against peers
Slide 39: 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 40: Measured and Indicated Mineral Resources
Measured and Indicated Mineral Resources (on Dec. 31, 2016 unless otherwise noted) NYSE:HL -40-
Slide 41: 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 42: 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 43: 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 44: 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 45: 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 46: 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 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 –53–
Slide 54: Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP
Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP NYSE:HL Numbers in thousands (USD) –54–
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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