Hecla Mining Company · NYSE:HL
Hecla Mining — Tumazos Conference 2022
67 slides from Hecla Mining's conference presentation, Aug 9, 2022
Slide 1: Hecla Mining Company: United States' Largest Silver Producer
HECLA MINING COMPANY United States’ Largest Silver Producer Tumazos Conference August 9, 2022 RESPONSIBLE. SAFE. INNOVATIVE. 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 Note Regarding Reserves and Resources This presentation uses the terms “mineral resources,” “measured mineral resources,” “indicated mineral resources” and “inferred mineral resources.” Mineral resources that are not mineral reserves do not have demonstrated
Slide 4: Positioned for Industry Leading Growth
POSITIONED FOR INDUSTRY LEADING GROWTH High-grade, low-cost silver mines paves the way for 17-20 Moz silver production in US & Canada • Positioned to be the fastest growing silver producer Low Operating • Potential silver production of 17-20 million ozs Risk Portfolio with Alexco, Lucky Friday UCB &
Slide 5: Hecla Mines 40% of All Silver Produced in the USA
HECLA MINES 40% OF ALL SILVER PRODUCED IN THE USA Half of the world’s production is from Mexico, Peru and China; U.S./Canadian production is scarce 2021 U.S. Silver Production Hecla’s Share of U.S. Production* (Moz) 12.9 Hecla 40% Other 60% 6.5 3 Countries. Produce ~50% of World Production U.S. Prod
Slide 6: Greens Creek: Consistent Performance
GREENS CREEK: CONSISTENT PERFORMANCE Strong free cash flow generation supported by steady production and stable costs • Generated $2.6 billion in cash flow from operations and $1.7 billion in free cash flow since 1987 • $185 million in free cash flow in 2021, $82 million in free cash flow in H1/2022
Slide 7: Hecla's Flagship Asset - Greens Creek Is a Tier Asset
HECLA’S FLAGSHIP ASSET - GREENS CREEK IS A TIER 1 ASSET 2021: 9.2 Moz silver production, $209 M cash flow, $185 M free cash flow* Cumulative Cash Flow from Operations and Free Cash Flow* Greens Creek Throughput has Grown 15% Since Purchase in 2008 Greens Creek Production and Reserves 900 16 $ millio
Slide 8: Lucky Friday: On Track to Be 5 Moz/Yr Producer
LUCKY FRIDAY: ON TRACK TO BE 5 Moz/YR PRODUCER Record throughput, continuous improvements from UCB method drive cash flow • 6th quarter of positive free cash flow generation • 5 million ounces/year average is 2x the best average production rate of the last 80 years • Underhand Closed Bench (UCB) min
Slide 9: Lucky Friday on Track to Be 5 Moz/Yr Producer
LUCKY FRIDAY ON TRACK TO BE 5 Moz/YR PRODUCER Higher grades at depth are supported by success of UCB mining method 30 Vein – *AgEq Grade (opt) < 10 10 - 20 MINED 20 - 30 1997 – 2021 30 - 35 > 35 December 31, 2021 6500 LEVEL *Ag Equivalent Values Based on metal prices of $17/oz Ag, $0.90/lb Pb, and $
Slide 10: Underhand Closed Bench Mining Method
UNDERHAND CLOSED BENCH MINING METHOD Large scale blasting proactively manages seismic risk and increases throughput • The UCB method uses advanced drilling and blasting techniques to proactively fragment the mineralized ore zone • Safer: miners work below engineered backfill and above a de-stressed
Slide 11: Lucky Friday: Positioned for Long-Term Value
LUCKY FRIDAY: POSITIONED FOR LONG-TERM VALUE UCB expected to contribute to productivity improvements • UCB method’s success and higher grades mined at depth position Lucky Friday to be a flagship asset for the next decade Lucky Friday: Silver Production by Decade* 51 (Millions oz) 30 28 28 27 26 18
Slide 12: Casa Berardi: Stable Production, Cost Focus
CASA BERARDI: STABLE PRODUCTION, COST FOCUS Production supported by strong mill performance; Costs prone to inflationary pressures • Reserve mine life of 14 years, an additional 1.8 million ounces in M&I and Inferred resources. • Innovation Feats: • Mill throughput has increased by 40% since acquisi
Slide 13: Alexco Acquisition Consistent with Strategic Drivers
ALEXCO ACQUISITION CONSISTENT WITH STRATEGIC DRIVERS Achieves the 8 key factors that Hecla considers for internal and external investments Highly Prospective and Top-Rated Mining Jurisdiction Among the World’s Highest-Grade Silver Deposits KENO HILL Long Mine Life SILVER DISTRICT Increase Throughput
Slide 14: Keno Hill Silver District Overview
KENO HILL SILVER DISTRICT OVERVIEW Historical Production of over 200 million ounces of silver at 40 oz Ag per ton • Property contains excellent exploration potential to host deposits similar in size and grade to the Hector-Calumet, Bermingham, or Flame and Moth deposits • Numerous untested or poorly
Slide 15: Setting Up Bermingham for Consistent Performance
SETTING UP BERMINGHAM FOR CONSISTENT PERFORMANCE Focus on development & drilling the 8 million oz Bear zone ‘22/’23 Expected Focus: 800m to 1,200m of development 3,000m to 4,000m of infill & definition drilling (~8M Ag oz) Arctic Zone NE Zone Bear Zone Bermingham Deep 2021 Reserves Infill & definiti
Slide 16: Smaller Flame & Moth to Supplement Bermingham
SMALLER FLAME & MOTH TO SUPPLEMENT BERMINGHAM Development and drilling will focus on the 2 million oz upper lightning zone ‘22/’23 Expected Focus: 500m to 600m of development 600m to 700m of infill & definition drilling (~2M Ag oz) Christal Zone Lightning Zone 2021 Reserves Infill & definition (15.6
Slide 17: Guidance: Production & Silver Costs Affirmed
GUIDANCE: PRODUCTION & SILVER COSTS AFFIRMED Silver production long term outlook projects 15% growth by ‘24 without Keno Hill Changes in blue Silver Production Gold Production Silver Equivalent Consolidated Production Outlook* (Moz) (Koz) (Moz)8 Gold Equivalent (Koz)8 2022 Total 12.9 – 13.5 165 - 17
Slide 18: Financial Strength and Flexibility
FINANCIAL STRENGTH AND FLEXIBILITY Balance sheet fortified by free cash flow generation • H1/2022 Revenues of $382.3 million • H1/2022 Cash flow from operations $78.1 million, free cash flow of $22.3 million (2) • Cash and equivalents of $198.2 million, liquidity of $335 million* • Net leverage rati
Slide 19: Free Cash Flow Generation
FREE CASH FLOW GENERATION Low-cost silver mines generate margins even at low silver prices • Margin generation from silver mines even at low silver assets due to high grade; strong operational performance offsets inflationary impacts • 9th consecutive quarter of free cash flow generation, 2.8x incre
Slide 20: Cost Inflation Tied to Labor and Consumables
COST INFLATION TIED TO LABOR AND CONSUMABLES Increases in key input price assumptions has outpaced guidance assumptions • Included 5% inflation assumption when setting guidance, Year to date, key inputs like diesel, ground support, cyanide have increased more than 15% • Increase in contractors and w
Slide 21: Leading Dividend Policy
LEADING DIVIDEND POLICY More cash returned to shareholders as dividend yield increases synchronously with silver prices Industry’s only silver-linked dividend policy pays an annual normal dividend (15 cents per share) plus a silver price-linked dividend that starts at $20/oz silver price. $9.0 At $2
Slide 22: Positioned for Industry Leading Growth
POSITIONED FOR INDUSTRY LEADING GROWTH High-grade, low-cost silver mines paves the way for 17-20 Moz silver production in US & Canada • Positioned to be the fastest growing silver producer Low Operating • Potential silver production of 17-20 million ozs Risk Portfolio with Alexco, Lucky Friday UCB &
Slide 23: Appendix
Appendix NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 23
Slide 24: ESG
ESG NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 24
Slide 25: Commitment to Responsible Mining
COMMITMENT TO RESPONSIBLE MINING Complementary ESG Vision and Track-Record Small Environmental Safety Large Community Benefit Footprint • Well-established safety culture • Net zero on emissions in 2021* • Support >2,300 families • Casa Berardi awarded the John T. Ryan • 43.7% reduction in Scope 1&2
Slide 26: Hecla Is Among the Safest Mining Companies
HECLA IS AMONG THE SAFEST MINING COMPANIES Implemented NMA’s CORESafety in 2012, became industry leader 76% reduction since SHMS inception • ~49,000 hours of safety and health training in 2021 • Reduced AIFR by 76% since 2012 • Hecla 1.45 rate in 2021 is 30% better than national average NYSE: HL RES
Slide 27: Hecla Changes Lives
HECLA CHANGES LIVES Largest private employer within the communities we operate, jobs and benefits that last a lifetime • Total direct economic impact of $700 million in 2021 • More than $845K in scholarships and donations • More than a living wage – longevity, benefits • Support for communities duri
Slide 28: 2022 Exploration and Pre-Development
2022 Exploration and Pre-Development NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 28
Slide 29: Hecla's 2022 Exploration
HECLA’S 2022 EXPLORATION 19 drill rigs company wide focused on expanding and discovery of resources Nevada • Drilling ongoing at Midas • Development of Hatter Graben drift and exploration drilling suspended due to high water inflows • Drilling at Aurora later this year Greens Creek • Drilling to exp
Slide 30: Montana Assets
MONTANA ASSETS Working to advance underground data collection and permitting Permitting Strategy – Taking a reset Site Overview • Executing strategy to expedite authorization for underground evaluation and data collection via existing infrastructure. • Focus on permitting additional underground eval
Slide 31: Greens Creek: Over 30 Years and Still Exploring and Adding Reserves
GREENS CREEK: OVER 30 YEARS AND STILL EXPLORING AND ADDING RESERVES Upgrading Resources (Upper Plate, 9A, and East Ore), Exploring (Gallagher and Lil’Sore) From 1989 to 2021, Greens Creek has mined more than 20 million tons containing: • 330m ounces of silver • 2.7m ounces of gold • 4b pounds of zin
Slide 32: Greens Creek – District and Near Mine Growth Potential
GREENS CREEK – DISTRICT AND NEAR MINE GROWTH POTENTIAL In-mine mineralization open for expansion and district potential for new deposits Continuation of resource expansion along mineralized trends • Ore tons have doubled in the past 15 years • Pace is driven by development access • 5250 exploration
Slide 33: Casa Berardi Drilling Focused on Expanding Resources
CASA BERARDI DRILLING FOCUSED ON EXPANDING RESOURCES Positive drilling results in the West, Principal, and East Mine areas Positive Drilling Results 113 Zone • Confirming Mineralization and new intersection north of the Casa Berardi fault 124 Zone • Positive near surface assay results potentially ex
Slide 34: Midas - Green Racer Sinter Discovery Location
MIDAS - GREEN RACER SINTER DISCOVER LOCATION 2 core drills focused on expanding high-grade mineralization and drill testing additional targets NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 34
Slide 35: Midas - Green Racer Sinter Longitudinal Section
MIDAS - GREEN RACER SINTER LONGITUDINAL SECTION 2022 exploration drilling to test 1.7 miles of strike length on the Racer Structure 0.25 oz/t gold, 63.9 oz/t silver over 1.2 ft (0.9 feet est. true width) 0.02 oz/t gold, 12.6 oz/t silver over 2.1 ft (1.7 feet est. true width) NYSE: HL RESPONSIBLE. SA
Slide 36: Midas - Green Racer Sinter Longitudinal Section
MIDAS - GREEN RACER SINTER LONGITUDINAL SECTION 2022 exploration drilling to test 1.7 miles of strike length on the Racer Structure 0.84 oz/t gold, 0.6 oz/t silver over 2.2 ft (1.9 feet est. true width) NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 36
Slide 37: NV Exploration - Hollister Underground Exploration
NV EXPLORATION - HOLLISTER UNDERGROUND EXPLORATION Drift development and exploration drilling advancing N Drillholes Planned Completed 1000 Feet NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 37
Slide 38: Hollister – Hatter Graben Drillhole HUC-111 Significant Intercepts
HOLLISTER – HATTER GRABEN DRILLHOLE HUC-111 SIGNIFICANT INTERCEPTS A Cross Section Looking Northeast A’ 0.12 oz/ton gold and 12.7 1.27 oz/ton gold and oz/ton silver over 0.4 feet 1.1 oz/ton silver over 0.9 feet V805 V795 V790 V780 V770 V760 V750 V740 5,000 ft V700 0.30 oz/ton gold and 3.2 Rhyolite o
Slide 39: San Sebastian - Exploring for Larger Zones of Mineralization
SAN SEBASTIAN - EXPLORING FOR LARGER ZONES OF MINERALIZATION 2022 drilling in progress at La Roca and San Sebastian Mine Middle Vein NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 39
Slide 40: Guidance
Guidance NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 40
Slide 41: 2022 Guidance: Production and Costs by Operation
2022 GUIDANCE: PRODUCTION AND COSTS BY OPERATION Changes in blue 2022 Production Outlook Silver Production Gold Production Silver Equivalent Gold Equivalent (Koz)6 (Moz) (Koz) (Moz)6 Greens Creek* 8.6 – 8.9 40 – 43 20.7 – 21.2 268 – 275 Lucky Friday* 4.3 – 4.6 N/A 8.9 – 9.3 116 – 120 Casa Berardi N/
Slide 42: Silver Market
Silver Market NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 42
Slide 43: A Very Short History on Silver Demand
A VERY SHORT HISTORY ON SILVER DEMAND Despite declining photography demand, silver industrial and investment demand has been in a secular bull market since 2000 and is stronger in 2021 and the future Five distinct periods of silver demand, three that are strengthening • Monetary by governments (2000
Slide 44: Silver Supply Comes from Mine Production & Recycling
SILVER SUPPLY COMES FROM MINE PRODUCTION & RECYCLING Mine production accounts for more than 80% of supply • 2021 saw an increase in mined silver as COVID-19 disruptions from 2020 recovered Million oz 1,047 1,012 1,000 1,000 997 953 146 147 149 148 173 162 900 864 850 836 823 781 2016 2017 2018 2019
Slide 45: Silver Mine Supply Dependent on Other Metals
SILVER MINE SUPPLY DEPENDENT ON OTHER METALS Over half of supply is a by-product of copper, lead and zinc mines 29% 29% 30% 31% 32% 32% 31% Lead/Zinc 21% 23% Copper 23% 23% 25% 23% 25% 17% 15% 15% 16% 16% 16% Gold 16% 33% 33% 31% 29% 29% 27% 28% Primary Silver 2015 2016 2017 2018 2019 2020 2021 Sour
Slide 46: Mine Supply Expected to Increase in 2022
MINE SUPPLY EXPECTED TO INCREASE IN 2022 Increase is largely driven by higher output mines in Mexico • U.S. production of silver expected to remain similar to 2021 levels Mined Silver Supply* Million Ounces 1.2 1.2 2.1 2.7 19.9 843.1 (2.4) (4.2) 822.6 2021 N. America Asia CIS Africa Oceania Europe C
Slide 47: Silver Demand Has Three Main Components
SILVER DEMAND HAS THREE MAIN COMPONENTS Green energy demand is new and growing – bolstered by photovoltaics and EVs Silver Demand Consumer Products/Industrial Million oz Million oz 4.5% CAGR over 5 Other years 35 Brazing 6% Jewelry & Alloys Silverware 48 Photovoltaics 255 9% 127 23% 24% Industrial 5
Slide 48: Endnotes
ENDNOTES 1. Net debt to adjusted EBITDA is a non-GAAP measurement, a reconciliation of adjusted EBITDA and net debt to the closest GAAP measurements of net income (loss) and debt can be found in the appendix. It is an important measure for management to measure relative indebtedness and the ability
Slide 49: Operational Overview
Operational Overview NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 49
Slide 50: Diverse Asset Portfolio in Mining Friendly Jurisdictions
DIVERSE ASSET PORTFOLIO IN MINING FRIENDLY JURISDICTIONS Low cost, high margin, low tonnage assets in best jurisdictions Fundamental Operations Greens Creek Casa Berardi Lucky Friday Location/Fraser Ranking1 4 - Alaska, USA 6 - Quebec, Canada 7 - Idaho, USA Prim ary Product Silver Gold Silver 2021 %
Slide 51: Low-Cost Profile Silver Assets
LOW-COST PROFILE SILVER ASSETS Greens Creek in the best 20% & Lucky Friday expected in the best 30% of primary silver mines in 2022 Silver AISC Curve of Primary Silver Mines – 12 Months Ended December 31, 2021 US$/oz 40 30 20 10 0 -10 -20 -30 0 Greens Creek 25 Lucky Friday 50 75 100 2022E Lucky Frid
Slide 52: Acquisition Highlights
ACQUISITION HIGHLIGHTS Consistent with strategy and expertise Among the World’s Highest-Grade Silver Deposits Highly Prospective and Top-Rated Mining Jurisdiction Aligned on Community and Environmental Stewardship Poised to Unlock Value at Keno Hill Significant Exploration Upside Ideal Portfolio Fit
Slide 53: Greens Creek S-K 1300 Technical Report Highlights
GREENS CREEK S-K 1300 TECHNICAL REPORT HIGHLIGHTS Tier 1 asset that will maintain production and solid free cash flow generation profile Technical Report S-K 1300 Highlights* Mine life, based on reserve plan years 14 Ore Tons Processed ktons 12,700 Silver Grade** opt 11.3 Silver Recovery** % 76.5 To
Slide 54: Lucky Friday Technical Report Highlights
LUCKY FRIDAY TECHNICAL REPORT HIGHLIGHTS Positioned for long-term value with strong free cash flow generation in the next decade Technical Report S-K 1300 Highlights Mine life, based on reserve plan years 17 Ore Tons Processed ktons 5,456 Silver Grade opt 13.7 Silver Recovery % 96.4 Total Silver Pro
Slide 55: Casa Berardi S-K 1300 Technical Report Highlights
CASA BERARDI S-K 1300 TECHNICAL REPORT HIGHLIGHTS Solid asset with consistent free cash flow generation Technical Report S-K 1300 Highlights* Mine life, based on reserve plan years 14 Ore Milled Mtonnes 20.9 Gold Grade – Open pit** g/t 2.61 Gold Grade – Underground** g/t 5.27 Gold Recovery** % 83.5
Slide 56: Adjusted EBITDA Reconciliation to GAAP
ADJUSTED EBITDA RECONCILIATION TO GAAP Reconciliation of Net Income (GAAP) to Adjusted EBITDA (non-GAAP) Dollars in thousands (USD) Trailing Twelve Months Q1 2022 Q2 2022 Net (loss) income $ 17,797 $ 4,920 Plus: Interest expense 41,607 41,841 Plus/(Less): Income and mining tax provision (benefit) (2
Slide 57: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP Silver Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Ounce (n
Slide 58: Free Cash Flow (Non-GAAP) Reconciliation
FREE CASH FLOW (NON-GAAP) RECONCILIATON Consolidated Reconciliation of Cash provided by operating activities (GAAP) to Free Cash Flow (non-GAAP) in millions Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Cash provided by operating activities $ 37.5 $ 73.4 $ 64.9 $ 37.9 $ 86.
Slide 59: Free Cash Flow (Non-GAAP) Reconciliation
FREE CASH FLOW (NON-GAAP) RECONCILIATON Greens Creek, Lucky Friday, and Casa Berardi Reconciliation of Cash provided by operating activities (GAAP) to Free Cash Flow (non-GAAP) Three Months Ended in thousands Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 Q1 2021 Greens Creek Cash provided (used) by operat
Slide 60: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP Greens Creek Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Ou
Slide 61: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP Lucky Friday Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Ou
Slide 62: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP Casa Berardi Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Costs, After By-product Credits, per Ou
Slide 63: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP 2022 silver and gold estimates Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non- GAAP) and All-In Sustaining Costs, Before By-product Credits, per Ounce and All-In Sustaining Co
Slide 64: Proven & Probable Mineral Reserves
PROVEN & PROBABLE MINERAL RESERVES(1) (On December 31, 2021 unless otherwise noted) Investors are cautioned that Reserves and Resources are as of December 31, 2021, and are dynamic during the year due to mining depletion, changing metal prices, changing costs or project NYSE: HL economics, and new d
Slide 65: Measured and Indicated Mineral Resources
MEASURED AND INDICATED MINERAL RESOURCES On December 31, 2021 unless otherwise noted) Measured Resources (8) Silver Gold Lead Zinc Copper Silver Gold Lead Zinc Copper Asset Location Ownership Tons (000) (oz/ton) (oz/ton) % % % (000 oz) (000 oz) (Tons) (Tons) Tons (11,12) Greens Creek United States 1
Slide 66: Inferred Mineral Resources
INFERRED MINERAL RESOURCES (On December 31, 2021 unless otherwise noted) Inferred Resources (10) Silver Gold Lead Zinc Copper Silver Gold Lead Zinc Copper Asset Location Ownership Tons (000) (oz/ton) (oz/ton) % % % (000 oz) (000 oz) (Tons) (Tons) Tons Greens Creek (11,12) United States 100.0% 2,152
Slide 67: Mineral Resources Footnotes
MINERAL RESOURCES FOOTNOTES (7) The term "mineral resources" means a concentration or occurrence of material of economic interest in or on the Earth's crust in such form, grade or quality, and quantity that there are reasonable prospects for economic extraction. A mineral resource is a reasonable es