Hecla Mining Company · NYSE:HL
Hecla Mining — Bank of America Merrill Lynch Annual Canada Mining Conference 2015
49 slides from Hecla Mining's conference presentation, Sep 10, 2015
Slide 1: Bank of America Merrill Lynch Annual Canada Mining Conference
Bank of America Merrill Lynch Annual Canada Mining Conference Toronto September 10, 2015
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: A Leading Silver, Gold, Base Metals Producer
A Leading Silver, Gold, Base Metals Producer Three producing mines in North America Quality mining assets Strong margins in both silver and gold Diversified, long-life revenue streams $56.7M free cash flow1 from mines in past Generates cash flow 4 quarters after invested $116M in capital Sol
Slide 4: Our Mission and Strategy
Our Mission To Create long-term value for shareholders from mining silver, gold and associated base metals Our Strategy Consistent, Long-Lived Production That Increases and Improves Over Time Long Life Assets Operating To Profit From Strong Geologic Knowledge To Higher Metal Understanding Reduce Cos
Slide 5: The Strategy Has Worked
The Strategy Has Worked Record (P+P) Silver Reserves for Past 9 Yrs Strong Production Growth 35 Moz AgEq1 173 Moz Ag +145% +239% 14.3 Moz AgEq1 51 Moz Ag Dec 31/06 Dec 31/14 2012 2015E Consistently Strong Liquidity Healthy Margins Silver $18.46 $291M $292M $16.32 $13.65 74% $10.71 66% $191M $192M $4
Slide 6: Share Price Outperformance
Share Price Outperformance Relative Price Performance – Normalized to Hecla (52 week) 20% 10% 0% Hecla -10% -16% -20% -17% -23% -25% -30% -25% -40% -50% -60% March-1, 2015 Sept-1, 2015 Sept-1, 2014 Hecla Pan American Coeur Silver Wheaton Tahoe First Majestic Source: Bloomberg –6–
Slide 7: Q2 2015 Highlights: Consistent Performance
Q2 2015 Highlights: Consistent Performance Q2 2014 Q2 2015 Silver Production 2.5Moz 2.5Moz Gold Production 43.6Koz 44.7Koz Revenue $117.5M $104.2M Adjusted EBITDA1 $39.8M $29.5M Cash cost, after by-product credits, per silver oz2 $5.34/oz $5.61/oz Cash cost, after by-product credits, per gold oz2 $9
Slide 8: North American Focused Asset Portfolio
North American Focused Asset Portfolio Operations in Low-Risk + Mining-Friendly Jurisdictions Corporate Offices Operating mines Pre-development Exploration project –8–
Slide 9: 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 (08/04/2015) –9–
Slide 10: Greens Creek: Consistent Low-Cost Production
Greens Creek: Consistent Low-Cost Production Silver Gold Cash cost, after by- Production Production product credits, per Ag oz1 2014, Q2/15 Actual 7.8Moz 1.9Moz 59koz 14koz $2.89/oz $3.30/oz 2015E 7.7-8.0 Moz 55koz $3.75/oz 2015E Capital $44M 2P Reserves 94.0 Moz silver @ 12.2 oz/t Ag M+I Resources
Slide 11: Greens Creek: Long-Term Outperformance
Greens Creek: Long-Term Outperformance Past 25 Years1 Consistently Revenue $4.4 billion Generates Net Income $1.1 billion Positive Free Cash Flow Free Cash Flow2 $941 million 22% Free Cash Flow Conversion Historical Production Past 25 Years Silver Production: 191.4 Moz Zinc Production: 1.4 M tons Go
Slide 12: Greens Creek – Expanding Reserves and Resources
Greens Creek – Expanding Reserves and Resources Q2 2015 Definition and Key Exploration Trends Exploration Drilling • Southern extensions of 5250, Deep 200 South and Gallagher zones • Southwest dipping mine contact at 200 South, NWW, SW Bench and Deep SW • Southeast extension of the East Ore Zone • N
Slide 13: Lucky Friday: Solid Performance
Lucky Friday: Solid Performance Cash cost, after by-product Silver Production credits, per silver oz1 2014, Q2/15 Actual 3.2 Moz 0.61 Moz $9.44/oz $12.58/oz 2015E 2.8-3.0 Moz $10.75/oz 2015E Capital $60M 2P Reserves 78.9 Moz silver @ 13.4 oz/t Ag M+I Resources 125.0Moz silver @ 5.7 oz/t Ag 1. Cash c
Slide 14: Lucky Friday #4 Shaft: Increasing Silver Grade with Depth
Lucky Friday #4 Shaft: Increasing Silver Grade with Depth 7835 Level Current Excavation Operational shaft expected in Q4/16 at a total cost of $225 million As of Q2/15: 85% completed and $184 million spent Production growth expected from higher-grade ore at depth –14–
Slide 15: Casa Berardi: Increasing Gold Exposure
Casa Berardi: Increasing Gold Exposure Cash cost, after by-product Gold Production credits, per gold oz1 2014, Q2/15 Actual 128,244 oz 31koz $826/oz $832/oz 2015E 130,000 oz $825/oz 2015E Capital $44M 2P Reserves 1.3 Moz gold @ 0.14 oz/t gold M+I Resources 1.4 Moz gold @ 0.12 oz/t gold 1. Cash cost,
Slide 16: Casa Berardi: Exploration Upside
Casa Berardi: Exploration Upside 2nd Quarter UG + Surface Drilling 124 S 124-16/22 Exploration SW 118-42/47 123-05 Definition 100 S 118-27/32 Valuation 123-02/03/04 117 U –16–
Slide 17: Casa Berardi: Promising Drill Results
Casa Berardi: Promising Drill Results South-West 107-365 Area Principale 124-250 Area Explo S 100 Area Explo S 124 Area Upper 118-530 Area Lower 123-810/830/850 Area Drill Hole True Width Gold Number (Feet) (oz/ton) CBP-0810-017 15.7 1.84 CBP-0810-019 13.5 0.77 CBP-0810-020 18.4 1.08 Upper 123-550 A
Slide 18: Our Mines Generated $56.7 Million FCF After $116 Million Capital Investment
Our Mines Generated $56.7 Million FCF After $116 Million Capital Investment (Rolling 4 quarters) Greens Creek Casa Berardi Lucky Friday $120.2 $34.8 $27.1 $15.2 44% 71% -3.9% Conversion Conversion to FCF2 Conversion to FCF1 to FCF1 1. Cash flow conversion calculated as FCF from mines/OCF 2. Based on
Slide 19: Hecla Is A Strong Cash Flow Generator
Hecla Is A Strong Cash Flow Generator Cash Bridge 2010 – Q2 2015 (US$ Millions) Partially Discretionary 1 $824.8M $1,036.4 Free Cash Flow $211.6M $609.1 Other Expenses $273.4M $171.4 $44.3 $151.2 $191.6 $104.7 $263.4 $12.52 2010 Beginning Adjusted EBITDA Capex Exploration + Pre- Dividends Basin Sett
Slide 20: Strong Growth Pipeline
Strong Growth Pipeline Recently renewed activity in Mexico and acquisition in Montana bring new short and long-term growth potential –20–
Slide 21: San Sebastian: Near-Term Growth Opportunity
San Sebastian: Near-Term Growth Opportunity Could Potentially Become a 100 Moz AgEq District Mined 11.6 Moz Ag and 177,541 oz Au from 2001-05 Total indicated resources 46% to 37.7 Moz AgEq in 2014 Total inferred resources 18% to 34.9 Moz AgEq in 2014 Near surface, high-grade veins discovered (4.5
Slide 22: San Sebastian: Significant New Discoveries
San Sebastian: Significant New Discoveries New Veins New Vein Projections Past Producing Veins Drill Hole Trace –22–
Slide 23: San Sebastian: High–Grade Resources
San Sebastian: High–Grade Resources Indicated Tons Au Ag Pb Zn Cu AgEq Au Ag Pb Zn Cu AgEq Resources T opt opt % % % opt oz oz tons tons tons Oz E. Francine 55,700 0.220 64.08 - - - 81.15 12,300 3,569,400 - - - 4,520,400 Middle Vein 783,100 0.061 13.11 - - - 17.70 47,600 10,263,800 - - - 13,860,500
Slide 24: San Sebastian: Preliminary Mine Layout
San Sebastian: Preliminary Mine Layout Plan View Topsoil 621250 622500 stockpile Topsoil Dump stockpile Dump North pit Middle pit Topsoil stockpile 2701250 Topsoil 2701250 stockpile Dump Ore Topsoil stockpile stockpile East Francine pit Dump Topsoil stockpile 621250 622500 –24–
Slide 25: Rock Creek: Long-Term Growth Opportunity
Rock Creek: Long-Term Growth Opportunity Rock Creek Could Become a 20-30 year mine Acquired Revett for ~$19 million of Hecla stock on June 15, 2015 Rock Creek: Total inferred resource 229 million oz Ag, 2.0 billion lbs Cu¹ Rock Creek permitting ongoing: SEIS for public comment expected this year fro
Slide 26: Strong Margins
Strong Margins Silver Margins Casa Berardi Margins $19.62 $1,291 $1,275 $18.53 $16.00 $1,195 $1,222 $1,194 $17.18 $16.32 $339 26% $377 30% $248 20% $362 30% $560 47% $14.28 73%$13.10 71%$11.42 71%$12.25 71% $10.71 66% $898 $974 $952 $832 $635 $5.34 $5.43 $4.58 $4.93 $5.61 Q2 2014 Q3 2014 Q4 2014 Q1
Slide 27: Consistently Strong Liquidity
Consistently Strong Liquidity (US$ millions) $312 $310 $296 $292 $212 $210 $196 $192 2013 2014 Q1 2015 Q2 2015 Cash and Cash Equivalents Available Credit Facility –27–
Slide 28: Debt is Long Term with Good Metrics
Debt is Long Term with Good Metrics Senior notes due in 2021 is the Capitalization only substantial indebtedness Actual Q2 2015 Limited covenants Cash and cash equivalents $192 No off balance sheet arrangements Capital lease liability 20 Credit Metrics Borrowing, term loans and leases 501
Slide 29: Flexible, Patient Capital Structure
Flexible, Patient Capital Structure $500M in high yield notes gives us: Growth Purchased Casa Berardi, a long-life gold mine Flexibility No restrictive maintenance covenants Low cost capital 6.875% coupon or ~5% after tax Long term borrowing Zero repayment obligations until 2021 Minimal dilu
Slide 30: Stability from diversified revenue streams
Stability from diversified revenue streams Lead and zinc positions supplement core exposure in silver and gold Consolidated Revenue by Metal #3 US lead and zinc producer Q2 2015 Periodically hedge up to 60% of payable lead and zinc 20% 28% production out to 3 years 11% Silver Gold Lead Benefit
Slide 31: What Differentiates Hecla From Its Peers
What Differentiates Hecla From Its Peers Outperformance Quality assets Our mines are Solid growth Financially and strong strong cash flow profile strong reserves generators –31–
Slide 32: Thank you
Thank you Hecla Celebrates 50 Years on the NYSE – March 25, 2015 –32–
Slide 33: Appendix
Precious metal companies… Appendix –33–
Slide 34: 2015 Expectations
2015 Expectations Cash Cost, 2015E1 Silver 2015E1 Gold Mine after by-product credits, Production (Moz) Production (oz) per silver/gold ounce2 Greens Creek 7.7-8.0 55,000 $3.75 Lucky Friday 2.8-3.0 n/a $10.75 Casa Berardi n/a 130,000 $825 Total 10.5-11 185,000 $6.00 per silver oz Equivalent Productio
Slide 35: HL Using Low 2014 Reserve Prices
HL Using Low 2014 Reserve Prices1 2014 Reserve Silver Price/oz $22.00 $19.50 $20.00 $20.00 $18.50 $19.00 $19.00 $17.25 $18.00 $18.00 $18.00 Hecla Endeavour Primero Fresnillo Pan Coeur Fortuna* SilverCrest First Kinross Goldcorp American Majestic 2014 Reserve Gold Price/oz $1,300 $1,300 $1,250 $1,260
Slide 36: HL Using Low 2014 Resource Prices
HL Using Low 2014 Resource Prices1 2014 Resource Silver Price/oz $30.00 $24.00 $22.00 $22.00 $22.00 $19.00 $19.50 $20.00 $18.00 $18.00 Endeavour Primero Fortuna SilverCrest Hecla Coeur First Kinross Goldcorp Pan Majestic American* 2014 Resource Gold Price/oz $1,500 $1,350 $1,350 $1,400 $1,400 $1,400
Slide 37: Increasing Share of Modern Demand
Increasing Share of Modern Demand Modern demand increased from 260 M oz in 1992 to 537 M oz in 2013, an increase of 106%, and an annualized increase of 4.0% 1% 5% 36% 22% 49% 30% Modern Modern 23% 29% 5% 1992 2013 Modern Investment Jewelry & Photography Coins & Medals Silverware Source - GFMS -37-
Slide 38: 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 39: Zinc Supply - US Production
Zinc Supply - US Production Hecla is the 3rd largest zinc producer in the US % of USA Zinc Production 2013 Comparison of 2013 Zinc Production Doe Run East 3.92% Tennessee Mines 125 Zinc Production (thousands tonnes) 9.37% Gordonsville 6.61% 87 Greens Creek 56 6.90% Lucky Friday Red Dog 0.45% 72.75%
Slide 40: Proven & Probable Reserves
Proven & Probable Reserves (on Dec. 31, 2014 unless otherwise noted) Proven Reserves Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) Tons Tons Greens Creek (a) United States 100.0% 4.7 15.7 0.10 3.7 9.2 74 0.5 180 440 Lucky Frid
Slide 41: Reserves & Resources Update
Reserves & Resources Update (on Dec. 31, 2014 unless otherwise noted) Measured Resources Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Greens Creek (b) United States 100.0% - - - - - - - - - Lucky Friday (2)(b) U
Slide 42: Reserves & Resources Update
Reserves & Resources Update (on Dec. 31, 2014 unless otherwise noted) Inferred Resources Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Greens Creek (b) United States 100.0% 3,452 13.6 0.09 2.8 6.6 46,881 315 97,1
Slide 43: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Reconciliation of cash cost, after by-product credits, per silver ounce to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measurements, for Greens Creek & Lucky Friday (dollars and ounces in thousan
Slide 44: Cash Cost GAAP Reconciliation
Cash Cost GAAP Reconciliation Lucky Friday Greens Creek Q2/2015 2014 Q2/2014 Q2/2015 2014 Q2/2014 Cash costs, before by-product credits (1) $ 17,494 $ 77,595 $ 19,646 Cash costs, before by-product credits (1) $ 49,540 $ 199,247 $ 50,405 By-product credits (9,774) (47,004) (12,179) By-product credits
Slide 45: Hecla Adjusted EBITDA Reconciliation to GAAP
Hecla Adjusted EBITDA Reconciliation to GAAP Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles (GAAP) Dollars are in thousands Twelve Months Ended 30-Jun-15 Net income $ 20,163 Plus: Interest expense $ 25,524 Plus: Income taxes $ (7,475) Plus: Depreciation, depletion and
Slide 46: Hecla Adjusted EBITDA Reconciliation
Hecla Adjusted EBITDA Reconciliation Reconciliation of Net Income (Loss) (GAAP) to Adjusted EBITDA (non-GAAP) 3 Months Ended Twelve Months Ended December 31, 30-Jun-15 31-Mar-15 2014 2013 2012 2011 2010 Net Income (Loss) $ (12,971) $ 12,552 $ 17,824 $ (25,130) $ 14,954 $ 151,164 $ 48,983 Plus: Inter
Slide 47: Hecla Adjusted EBITDA Reconciliation
Hecla Adjusted EBITDA Reconciliation Reconciliation of Adjusted EBITDA to Generally Accepted Accounting Principles (GAAP) Dollars are in thousands Three Months Ended 30-Jun-15 30-Jun-14 Net loss $ (12,971) $ (14,399) Plus: Interest expense, net of amount capitalized 6,359 6,962 Plus/(Less): Income t
Slide 48: Greens Creek Free Cash Flow Reconciliation
Greens Creek Free Cash Flow Reconciliation 1987-2014 Performance Revenue $4,371,624 Treatment Charges (864,312) Net Revenues 3,507,313 Freight & Selling Expense (180,663) Net Smelter Return 3,326,650 Cost of Goods Sold (1,518,773) NonCash Costs (527,076) Exploration Expense (75,318) Gain/(Loss) of S
Slide 49: 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 — Bank of America Merrill Lynch Annual Canada Mining Conference 2015 on 6ix