Hecla Mining Company · NYSE:HL
Hecla Mining — Merger or Acquisition (June 2018)
66 slides from Hecla Mining's merger presentation, June 2018
Slide 1: Adding High-Grade Nevada Gold Mines
June 2018 NYSE:HL Adding High-Grade Nevada Gold Mines The Acquisition of Klondex Mines Ltd.
Slide 2: Cautionary Statements
Cautionary Statements NYSE:HL Cautionary Statement Regarding Forward Looking Statements, Statements made or information provided in this presentation that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and "forward
Slide 3: Cautionary Statements
Cautionary Statements NYSE:HL Additional Information About the Transaction and Where to Find It This material relates to Hecla’s proposed acquisition (the “Transaction”) of Klondex. Shares of Hecla’s common stock (the “Hecla Shares”) issued in connection with the proposed Transaction may be register
Slide 4: Another Step in the Strategy
Another Step in the Strategy Klondex’s assets can be improved, grow and deliver the value we see NYSE:HL Hecla’s strategy is to realize the potential of long-lived, low-cost assets with large land packages in favorable jurisdictions, Klondex is all of that. Hecla is known in the industry as an inn
Slide 5: Transaction Summary
Transaction Summary NYSE:HL Transaction ▪ Hecla has agreed to acquire all of the issued and outstanding common shares of Klondex pursuant to a Plan of Structure Arrangement ▪ Consideration to consist of either 0.6272 Hecla shares or US$2.47 in cash – 59% premium based on Klondex’s 30-day volume-weig
Slide 6: Benefits to Hecla Shareholders
Benefits to Hecla Shareholders NYSE:HL Significant production in Nevada, one of the most prolific gold mining jurisdictions in the world Increases 2017 pro-forma production by 27% (~162 koz AuEq or ~11.5 Moz AgEq)1,2 Fire Creek is a cornerstone producing asset with robust cash flows and signific
Slide 7: Benefits to Klondex Shareholders
Benefits to Klondex Shareholders NYSE:HL Immediate and significant premium of approximately 59% (30 day VWAP) with ongoing participation in upside through Hecla shares and Klondex Canada shares Meaningful ownership in a stronger pro-forma company Hecla is well capitalized, making possible critic
Slide 8: Adding Nevada to a Strong Portfolio
Adding Nevada to a Strong Portfolio Large land packages in five of the world’s best mining districts NYSE:HL Nevada “Heart of the Nevada gold district” Midas N Hollister Fire Creek –8– Source: Company disclosures.
Slide 9: The Leading Intermediate Precious Metals Producer
The Leading Intermediate Precious Metals Producer Peer leading production, with diversified revenue and NAV exposures NYSE:HL Strongest production base among peer group (2017A Production1) AuEq Production (koz) AgEq Production (Moz) 755 762 2 711 2 663 596 600 607 554 571 524 361 224 241 123 8.7 15.
Slide 10: Hecla Will Have Industry Leading Reserves
Hecla Will Have Industry Leading Reserves Unmatched combination of reserves and reserve grade NYSE:HL AuEq Reserve Grade for Select Precious Metal Producers (oz/ton AuEq) 0.323 0.291 0.210 0.117 0.085 Average: 0.086 oz/ton AuEq1 0.082 0.051 0.039 0.028 0.028 0.027 0.021 0.016 Kirkland Pro Forma Hoch
Slide 11: Hecla Retains Significant Focus on Silver
Hecla Retains Significant Focus on Silver Transaction increases Hecla’s exposure to precious metals by 6% NYSE:HL Standalone Hecla1,2 Hecla Pro Forma1,2 Hecla Long Term 20% 15% 5% 30% Silver exposure 35% 6% expected to increase through development of Rock Creek and 39% 50% Montanore Silver Gold Lead
Slide 12: Increasing Cash Flow and Improved Credit Metrics
Increasing Cash Flow and Improved Credit Metrics Transaction improves financial flexibility, moving towards credit upgrade NYSE:HL Transaction additive to operating cash … taking Hecla’s already strong credit flow1 … metrics (2017A Operating Cash Flow US$ million) Ratio Moody’s Moody’s Hecla “B” “Ba
Slide 13: Klondex Acquisition
Klondex Acquisition Strengths and opportunities analysis NYSE:HL Strengths: Opportunities: ▪ Large, strategic land position ▪ Capturing the siling effect ▪ Experts at ultra-narrow longhole ▪ Ramp-up Fire Creek mining ▪ Develop Hatter Graben ▪ Excellent focus on productivity ▪ Complete CIL installati
Slide 14: Fire Creek is a Premier Asset in a Top Tier Jurisdiction
Fire Creek is a Premier Asset in a Top Tier Jurisdiction Grade drives low cash costs and strong cash flow NYSE:HL ▪ Producing, narrow vein mine located in Lander County, Nevada, ~63 miles west of Elko, Nevada ▪ Commenced production in 2014 and has undergone extensive geological testing since 1981 ▪
Slide 15: Upside Grade Potential at Fire Creek
Upside Grade Potential at Fire Creek Assumed 15% grade upside despite history of 98-530% increase NYSE:HL Drilling Only Historical Results Drilling Mining Difference GRADE GRADE GRADE VEIN AuEq (Oz) AuEq (Oz) AuEq (Oz) Joyce 2.34 4.64 98% Karen 1.86 4.81 159% Vonnie 2.94 18.53 530% Main 2.21 5.41 14
Slide 16: Fire Creek Vein Networks Offer Extensive Opportunities
Fire Creek Vein Networks Offer Extensive Opportunities Production centers and vein networks are open in all directions NYSE:HL ▪ Mineralized structures have predictive sigmoid pattern VTEM conductor ▪ Current reserves and resources provide mining trends inventory out to 2023 ▪ Identified veins are o
Slide 17: Excellent Land Position Near Many Large Gold Mines
Excellent Land Position Near Many Large Gold Mines Located along significant trends NYSE:HL N Twin Creeks - NEM Midas Turqoise Ridge - ABX Pinson - Waterton Hollister Hollister Exodus - NEM Goldstrike - ABX Winnemucca Valmy - NEM Gold Quarry - NEM Marigold - SSR Battle Mountain Mule Canyon - NEM Pho
Slide 18: Hollister & Midas Expected To Benefit From Hecla's Operational Expertise
Hollister & Midas Expected To Benefit From Hecla’s Operational Expertise NYSE:HL Overview Upside Potential Hollister / Hatter Graben ▪ Producing, high-grade gold and ▪ Hatter Graben provides the next leg of growth; silver mine located ~18 miles – Mineralized veins: 1,400 ft. vertically and 2,000 ft.
Slide 19: Hecla's Track Record of Adding Value
Hecla’s Track Record of Adding Value An extensive history of optimizing assets NYSE:HL Casa Berardi Greens Creek San Sebastian Operational enhancements and Increased recoveries/ low cost Prudent, high impact capital mill optimization production differentiated mining model ▪ Throughput has increased
Slide 20: Culture of Innovation Drives Productivity Improvements
Culture of Innovation Drives Productivity Improvements Technology and best practices expect to be leveraged across K’s assets NYSE:HL Autonomous Haulage Jumbo/Stope Drill in Operation at Casa Automation: Drilling Berardi During Shift Change ▪ 24 hour truck ▪ Adds 15 meters/day operation drives cost
Slide 21: Innovating Across the Mines Portfolio
Innovating Across the Mines Portfolio NYSE:HL Projects 2014 2015 2016 2017 2018 2019 2020 2021 Automated Stope Drilling Installed In Operation CB Automated Drill Jumbo Utilized 2 Add/Deploy 3rd In Operation CB (GC H2/18) Drills drill Tele-Remote UG Mucking Acquired Mucker In Operation GC (CB H1/20)
Slide 22: A History of Adding Reserves
A History of Adding Reserves 263 million reserve ounces added; 22% added by Greens Creek acquisition NYSE:HL 250 200 Reserves Greens Creek 177 Moz Production Acquisition 150 Silver Ounces ( millions) (Total Gain 263 Moz) 100 50 Gain in Reserve oz - (50) (100) Cumulative Production (150) 138 Moz (200
Slide 23: A Roadmap for Further Growth and Value Creation
A Roadmap for Further Growth and Value Creation NYSE:HL Robust Near Term Growth Longer Term Development Hollister Ramp Up • Production to reach full steady Fire Creek Mine Plan state capacity in 2018 • Potential for significant upside and increased production through New Open Pits at Casa developing
Slide 24: A Further Transformation of Hecla
A Further Transformation of Hecla Consistent with strategy and expertise NYSE:HL Now with seven large land positions located in Alaska, Quebec, Nevada, Mexico and Idaho which are some of the safest and most prolific mining jurisdictions in the world Proven operational excellence to be leveraged ac
Slide 25: Appendix
Appendix NYSE:HL Midas San Sebastian Greens Creek Lucky Friday Fire Creek Hollister Casa Berardi –25–
Slide 26: 2018 Outlook
2018 Outlook Lowering cash cost and AISC, after by-product credits, per silver ounce NYSE:HL Production Outlook Silver Production (Moz) Gold Production (Koz) Silver Equivalent (Moz)4 Gold Equivalent (koz)4 Greens Creek 7.5 – 8.0 50 - 55 21.0 – 22.5 300 - 313 Lucky Friday San Sebastian 2.0 – 2.5 13 –
Slide 27: Klondex Canada – Highlights
Klondex Canada – Highlights NYSE:HL Highlights Asset Locations ▪ Klondex Canada will hold Klondex’s Canadian assets which are located primarily in Manitoba and are comprised of the True North Mine, the Bison Manitoba properties and 10% buy-back rights on Snow Lake Property. Various early-stage Ontar
Slide 28: Fire Creek Asset Overview
Fire Creek Asset Overview A company-making asset in Nevada NYSE:HL Underground Mine – Nevada, USA Fire Creek Site Overview ▪ Commenced production in 2014 ▪ Narrow vein mine located in Ladner Country, Nevada ▪ Underground mine utilizing traditional long-hole/ drift and fill stoping, in conjunction wi
Slide 29: Midas Asset Overview
Midas Asset Overview Well-located mill ties Nevada assets together NYSE:HL Underground Mine – Nevada, USA Midas Site Overview ▪ Commenced production in 2014 ▪ Narrow vein mine located in Elko Country, Nevada ▪ Underground mine utilizing traditional longhole, shrinkage, and cut and fill methods ▪ Con
Slide 30: Midas – Potential to the South
Midas – Potential to the South Systematic vein orientations define new target in vicinity of mine NYSE:HL -30-
Slide 31: Hollister / Hatter Graben Asset Overview
Hollister / Hatter Graben Asset Overview Significant upside at Hatter Graben NYSE:HL Underground Mine – Nevada, USA Hollister Site Overview ▪ Re-started production in Q4-2017 ▪ Narrow vein mine located in Elko Country, Nevada ▪ Underground mine utilizing traditional longhole, and cut and fill method
Slide 32: Hollister Mine – Near Term Targets
Hollister Mine – Near Term Targets Vein extensions and parallel structures NYSE:HL +50,000 +100,000 Au oz Au oz Potential Potential +50,000 Au oz Potential 0 Feet 1,000 Hatter Target 3,500’ SW 250 to 2 million Au oz Potential -32-
Slide 33: Hollister – Upside at Hatter Graben
Hollister – Upside at Hatter Graben Potential of one vein = 1.1 million gold ounces; Multiple veins identified NYSE:HL WEST PLAN VIEW EAST A Hollister Mine A’ Gloria 425k AuEq Oz Hatter Graben Hatter Graben Veins Tertiary Unconformity OPEN ~ 600 ft. OPEN Ordovician HATTER GRABEN INTERCEPTS OPEN Dril
Slide 34: Greens Creek
Greens Creek Consistent low-cost production in a wilderness area / National Monument NYSE:HL 2017 Q1 2017 Q1 2018 2018E Silver Production (Moz) 8.4 1.9 1.9 7.5-8.0 Gold Production (koz) 50.8 14.0 13.1 50-55 Cost of Sales $201.8 M $44.0 M $41.9 M $198 M Cash cost, after by-product $0.71/oz $0.65/oz $
Slide 35: Greens Creek: A Strong Cash Flow Generator
Greens Creek: A Strong Cash Flow Generator Significant improvement in performance since Hecla became operator NYSE:HL Cumulative Net Cash Flow $1,162 $1,061 $983 $941 $875 $812 $698 Hecla became operator $504 $324 $216 $122 $(11) $(118) (in millions) -35-
Slide 36: Growing Production While Replacing Reserves
Growing Production While Replacing Reserves Greens Creek throughput has grown 14% since purchase in 2008 NYSE:HL Hecla becomes operator ▪ Automation drive beginning in 2017 leads to further efficiencies ▪ Consistent exploration success enables reserves to be maintained –36–
Slide 37: Greens Creek: Adding to the Known Trends
Greens Creek: Adding to the Known Trends Drilling continues to add to resources and convert to reserves NYSE:HL Plan View - First Quarter 2018 Drilling Upper Plate Trends of Definition & Mineralization Exploration East Ore Definition & Exploration Upper Plate Exploration Deep 200 South Gallagher Def
Slide 38: Casa Berardi
Casa Berardi Making a good mine great NYSE:HL 2017 Q1 2017 Q1 2018 2018E Gold Production (koz) 156.7 35.8 40.2 155-160 Cost of Sales $180.2 M $42.5 M $49.2 M $185 M Cash cost, after by- product credits, per gold $820/oz $886/oz $827/oz $800/oz oz1 AISC, after by-product $1,174/oz $1,256/oz $1,086/oz
Slide 39: Growing Production and Reserves
Growing Production and Reserves Casa Berardi throughput and reserves have grown 69% and 53% since purchase in 2013 NYSE:HL Hecla becomes operator ▪ Successfully stabilized, then increased throughput rates since becoming operator ▪ Began surface open-pit mining in 2016 ▪ Consistent exploration succes
Slide 40: Autonomous Haulage In Operation
985 Drift Autonomous Haulage In Operation Truck runs 24 hours a day; cost savings expected NYSE:HL Control room Loading 40-tonne autonomous Sandvik truck -40-
Slide 41: Casa Berardi Longitudinal Section
Casa Berardi Longitudinal Section Aggressive exploration adds to reserve and resource base NYSE:HL Looking North WEST PILLAR PIT PRINCIPAL PIT 134 PIT EMCP PIT 160 PIT West Pillar 123 146/148 160 121/123 123 118 123 East Mine Area 118 Surface Drilling Mineralization Underground Drilling trends 118-1
Slide 42: Casa Berardi: Mineralization Along Deformation Zone
Casa Berardi: Mineralization Along Deformation Zone Surface view showing drilling areas with potential to define/expand open pits NYSE:HL -42-
Slide 43: Lucky Friday
Lucky Friday Positioning for growth and longevity NYSE:HL 2017 Q1 2017 Q1 2018 2018E Silver Production (koz) 838.7 681 100 TBD Cost of Sales $15.1 M $14.5 M $4.1 M TBD Cash cost, after by-product $5.81/oz $5.93/oz - TBD credits, per silver oz1 AISC, after by-product $12.48/oz $12.06/oz N/A TBD credi
Slide 44: #4 Shaft Gives Access to the High Grade Zone
#4 Shaft Gives Access to the High Grade Zone At least 30 more years of mine-life expected 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 Dec. 31, 2015 AgEq *Ag Equivalent
Slide 45: Continuous Mechanical Cutting To Eliminate Drill/Blast
Continuous Mechanical Cutting To Eliminate Drill/Blast Delivery late 2019: Could revolutionize the Lucky Friday NYSE:HL Could Improve Safety and Productivity Atlas Copco Test Mine 2016 3D Graphic of Remote Vein Miner -45-
Slide 46: San Sebastian
San Sebastian Just-in-time mining; looking to make it a long-term mine NYSE:HL 2017 Q1 2017 Q1 2018 2018E Silver Production 3.3 Moz 751 koz 512 koz 2.0-2.5 Moz Gold Production (koz) 25.2 6.3 4.5 13-17 Cost of Sales $23.7 M $6.6 M $5.8 M $44 M Cash cost, after by-product $(3.36)/oz $(3.27)/oz $2.81/o
Slide 47: Underground Design Layout
Underground Design Layout Ore haulage ramping up NYSE:HL N North Ramp –47–
Slide 48: San Sebastian: Strong Exploration Potential
San Sebastian: Strong Exploration Potential Continued polymetallic and oxide discoveries near mine infrastructure NYSE:HL Middle Vein N Polymetallic Exploration Drilling West Francine Vein Exploration Drilling Trace of New Underground Ramp East Francine Francine Vein Vein Exploration Polymetallic Dr
Slide 49: Francine Vein – Expanding Polymetallic
Francine Vein – Expanding Polymetallic NYSE:HL Polymetallic mineralization for over 5,000 feet of strike length; Oxide to the east FRANCINE VEIN LONGITUDINAL SECTION (Looking NE) FRANCINE VEIN EAST FRANCINE VEIN $NSR POLYMETALLIC OXIDE VALUE MINERALIZATION PER TON MINERALIZATION (5.9 FT DILUTED) 35.
Slide 50: New Middle Vein Polymetallic Metal Zone
New Middle Vein Polymetallic Metal Zone Predicting a horizonal polymetallic zone below the oxide reserve NYSE:HL MIDDLE VEIN POLYMETALLIC ZONE $NSR VALUE LONGITUDINAL SECTION PER TON (5.9 FT (Looking NE) DILUTED) MIDDLE VEIN OXIDE MIDDLE VEIN POLYMETALLIC MINERALIZATION 10.2 oz/ton silver 3% Cu, 10%
Slide 51: Rock Creek & Montanore Asset Overviews
Rock Creek & Montanore Asset Overviews Final stages of permitting, expecting to advance in 2018 NYSE:HL Mine overview Rock Creek Site Overview ▪ Montanore, a silver-copper mine located in Libby, Montana, was acquired from Mines Management in 2016 ▪ Rock Creek, a silver-copper mine located in Noxon,
Slide 52: Zeus Exemplifies High-Grade Opportunities at Fire Creek
Zeus Exemplifies High-Grade Opportunities at Fire Creek Geophysical anomalies successfully identify high-grade mineralization NYSE:HL ▪ The Zeus target was identified by a geophysical anomaly ~0.75 miles away from current mine workings ▪ Follow up drilling outlined significant high-grade mineralizat
Slide 53: Significant Fire Creek District Targets and Potential
Significant Fire Creek District Targets and Potential Successful geophysical model and structural patterns provide target-rich environment NYSE:HL ▪ Proven repeatability of vein structural N pattern ▪ VTEM and IP Resistivity geophysical techniques and soil geochemistry can be used to trace extension
Slide 54: Klondex Canada – Exploration and Identified Targets
Klondex Canada – Exploration and Identified Targets NYSE:HL True North Mine: Exploration and Identified Bison Manitoba Properties: Potential Targets Exploration Upside ▪ 710 / 711 zones ▪ Property contains a large land package with over ~14.3 – 64,227ft of drilling completed square miles – Intercept
Slide 55: Klondex Canada – Management, Board and Capital Structure
Klondex Canada – Management, Board and Capital Structure NYSE:HL Proposed Management Team Capital Structure ▪ John Antwi, CEO (All figures shown are in US$mm) Implied Share Price US$1.89 – Previously SVP, Corporate Development and Planning at Klondex Implied Share Price C$2.45 1 Basic Shares Outstan
Slide 56: 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 57: Production Cash Cost per GEO Sold Reconciliation to GAAP
Production Cash Cost per GEO Sold Reconciliation to GAAP NYSE:HL Fire Creek Years ended December 31, All amounts in thousands except per ounce amounts 2015 2016 2017 Average realized price per gold ounce sold $1,156 $1,250 $1,261 Average realized price per silver ounce sold $15.77 $17.00 $17.15 Silv
Slide 58: Production Cash Cost per GEO Sold Reconciliation to GAAP
Production Cash Cost per GEO Sold Reconciliation to GAAP NYSE:HL Midas Years ended December 31, All amounts in thousands except per ounce amounts 2016 2017 Average realized price per gold ounce sold $1,252 $1,260 Average realized price per silver ounce sold $17.48 $17.30 Silver ounces equivalent to
Slide 59: Production Cash Cost per GEO Sold Reconciliation to GAAP
Production Cash Cost per GEO Sold Reconciliation to GAAP NYSE:HL Hollister Years ended December 31, All amounts in thousands except per ounce amounts 2017 Average realized price per gold ounce sold $1,273 Average realized price per silver ounce sold $16.69 Silver ounces equivalent to revenue from on
Slide 60: Cash Cost and AISC Reconciliation to GAAP
Cash Cost and 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 Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs,
Slide 61: Cash Cost and AISC Reconciliation to GAAP
Cash Cost and 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 Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs,
Slide 62: Cash Cost and AISC Reconciliation to GAAP
Cash Cost and 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 Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs,
Slide 63: Cash Cost and AISC Reconciliation to GAAP
Cash Cost and 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 Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs
Slide 64: Greens Creek Free Cash Flow Reconciliation
Greens Creek Free Cash Flow Reconciliation NYSE:HL Greens Creek Free Cash Flow Reconciliation (in thousands) 2017 1987-2017* Gross profit $ 76,588 $ 1,333,702 Non-cash elements in gross profit: Depreciation, depletion and amortization 56,328 668,380 Other 2,360 1,340 Working capital changes 1,378 (1
Slide 65: Proven & Probable Mineral Reserves
Proven & Probable Mineral Reserves (on Dec. 31, 2017 unless otherwise noted) NYSE:HL –65–
Slide 66: Klondex Proven & Probable Mineral Reserves
Klondex Proven & Probable Mineral Reserves NYSE:HL Reserves 11/30/2017 Proven Reserves Asset Tons (000) Gold (oz/ton) Gold (g/tonne) Silver (oz/ton) Silver (g/tonne) Gold Equiv. (oz/ton) Gold Equiv. (g/tonne) Gold (000 oz) Silver (000 oz) Gold Equiv. (000 oz) Midas 141 0.261 8.95 9.18 314.8 0.388 13
Hecla Mining Company — Merger or Acquisition (June 2018) on 6ix