Hecla Mining Company · NYSE:HL
Hecla Mining — Bank of America Merrill Lynch Global Metals, Mining & Steel Conference 2016
43 slides from Hecla Mining's conference presentation, May 11, 2016
Slide 1: Bank of America Merrill Lynch Global Metals, Mining & Steel Conference
Bank of America Merrill Lynch Global Metals, Mining & Steel Conference May 11, 2016
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 Four producing mines in North America Quality mining assets Strong margins in both silver and gold Diversified, long-life revenue streams Record Q1 AgEq production of 12M oz Record Setting Record silver reserves of 175 M oz, 10th Performance yea
Slide 4: The Mining Industry Has Made Bad Decisions – But There Are Exceptions
The Mining Industry Has Made Bad Decisions – But There Are Exceptions Silver Reserves Gold Reserves Total Project +3% 0% Write-downs 2013 - 2015 -60% -18% $0 PM Group1 Hecla Peer Group1 Hecla $34.3B Silver Production Gold Production PM Group Hecla +30% +58% 0% +5% 2013 to 2015 Comparison PM Group1 H
Slide 5: 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 to reduce
Slide 6: The Strategy Has Worked
The Strategy Has Worked Record (P+P) Ag Reserves for Past 10 Yrs Strong Production Growth 41.0 Moz AgEq1 37.5 Moz AgEq1 175 Moz +9.3% +243% +162% 14.3 Moz AgEq1 51 Moz 2006 2015 2012 2015 2016E Strong Liquidity Healthy Margins $291 M $234 M Silver $17.18 $100 M $14.93 $100 M $12.25 71% $11.77 79% $1
Slide 7: Q1 2016 Highlights
Q1 2016 Highlights Silver Production Gold Production 61% 37% Q1 2016 Q1 2015 Revenue $131.0 M $119.1 M Operating Cash Flow $18.7 M $21.4 M Cash cost, after by-product credits, per silver oz1 $3.16/oz $4.93/oz Cash cost, after by-product credits, per gold oz1 $781/oz $974/oz 1. Cash cost, after by-pr
Slide 8: Lowest Gold & Silver 2016 Reserve Prices
Lowest Gold & Silver 2016 Reserve Prices $19.00 $17.50 $17.00 $17.00 $16.00 $16.00 $14.50 Hecla Agnico Eagle Endeavour Pan American Kinross Coeur - LT* Newmont $1,200 $1,200 $1,200 $1,180 $1,150 $1,100 $1,100 Hecla Agnico Eagle Endeavour Pan American Coeur - LT* Kinross Newmont *Coeur’s short-term r
Slide 9: North American Focused Asset Portfolio
North American Focused Asset Portfolio Operations in Greens Creek Admiralty Island, AK Low-Risk + Mining-Friendly Jurisdictions Corporate Offices Opinaca / Wildcat Operating mines Casa Berardi James Bay, QC Vancouver, BC Val d’Or, QC Pre-development Fayolle Val d’Or, QC Coeur d’Alene, ID Rock Creek
Slide 10: 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 (02/05/2016) –10–
Slide 11: 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 2015, Q1 2016 8.5Moz 2.46Moz 61koz 16koz $3.91/oz $3.96/oz 2016E 8.1Moz 52koz $5.00/oz 2016E Capital $48M (Includes $14M for tailings expansion) 2P Reserves 88.7 Moz silve
Slide 12: Greens Creek: Strong Cash Generation
Greens Creek: Strong Cash Generation Past 26 Years1 Consistently Revenue $4.6 billion Generates Net Income $1.2 billion Positive Free Cash Flow Free Cash Flow2 $983 million 21% Free Cash Flow Conversion Historical Production Past 26 Years Silver Production: 200 Moz Zinc Production: 1.4 M tons Gold P
Slide 13: Greens Creek – Resource Conversion to Reserves
Greens Creek – Resource Conversion to Reserves Indicated: 484,400 silver ounces and 7,000 gold ounces East Ore Resource Main Ramps Inferred: 11.4 million silver Mined Stopes ounces and 105,900 gold ounces Reserve Plan Measured Resource Indicated Resource Inferred Resource Mineralization trends Indic
Slide 14: Strong Growth Pipeline
Strong Growth Pipeline Rock Creek Potential large silver and Lucky Friday copper mine #4 Shaft Higher grade In permitting Higher cash flow Casa Berardi 20 years+ mine EMCP pit life 2025+ More cash flow Shaft completion San Sebastian IRR 90% 2016 New cash flow 2017+ Minimal capital Now stripping IRR
Slide 15: San Sebastian: Hecla's Newest Mine
San Sebastian: Hecla’s Newest Mine Silver Gold Cash cost, after by- Production Production product credits, per Ag oz1 2015, Q1 2016 87koz 1.2Moz 870 oz 9koz $6.71/oz ($3.27) 2016E 3.8Moz 20koz $1.00/oz 2016E Capital $2M 2P Reserves 8.0 Moz silver @ 27.7 oz/t Ag M+I Resources 9.3 Moz silver @ 5.9 oz/
Slide 16: Rapid Progress To Mining
Rapid Progress To Mining Opening Ceremony (December) 1,797 oz/ton Silver 1,808 oz/ton Silver 11.6 oz/ton Gold 7.2 oz/ton Gold 801 oz/ton Silver Blasting, East Francine pit 1.2 oz/ton Gold High Grade Mineralization at East Francine –16–
Slide 17: Mining Only 20% Of Reserve + Resource
Mining Only 20% Of Reserve + Resource 2015 Resource (AgEq)* Indicated 1.6 Mtons @14.7 oz/ton= 22.9 Moz Potential 100 Moz Inferred 2.7 Mtons AgEq @11.6 oz/ton=31.2 Moz District Mine plan based on 289 Kton Reserve at 46.6 AgEq oz/t, or * Resource is exclusive of Reserve 13.5 Moz AgEq –17–
Slide 18: Exploration Drilling Extending Veins
Exploration Drilling Extending Veins N MIDDLE VEIN DRILLING SAN SEBASTIAN MINE AREA EAST FRANCINE TRENCHES LEGEND Vein Drill Hole Trace Trench Trace 0 500 AMC Mine Plan Meters –18–
Slide 19: Significant Depth Potential
Significant Depth Potential AMC PIT SHELL NEW RESOURCE (2015) INFILL & GEOTECHNICAL DRILLING (2015) Drawings to Scale –19–
Slide 20: Casa Berardi: Increasing Gold Exposure
Casa Berardi: Increasing Gold Exposure Cash cost, after by-product Gold Production credits, per gold oz1 2015, Q1 2016 128k oz 30.4koz $772/oz $781/oz 2016E 135koz $700/oz 2016E Capital $61M (Includes $19M for EMCP pit) 2P Reserves 1.3 Moz gold @ 0.13 oz/t gold M+I Resources 1.3 Moz gold @ 0.12 oz/t
Slide 21: EMCP Pit: Robust Economics
EMCP Pit: Robust Economics* Increase Production: ~2,300 tpd (2015A) to ~3,100 tpd (2017E), 5,000 Au oz (2016E) to 30,000 Au oz (2017E) Extend Mine Life: 5.5 year project, Principal Pit to follow Lower Cost Per Ounce: expected to decrease cost structure Strong Returns: NPV (12%) of C$37.5M an
Slide 22: EMCP Pit – Looking East
MINING COMPANY L25 Years = @ SINCE 1891 EMCP Pit - Looking East
Slide 23: Lucky Friday: Solid Performance
Lucky Friday: Solid Performance Cash cost, after by-product Silver Production credits, per silver oz1 2015, Q1 2016 3.0Moz 977koz $11.23/oz $9.05/oz 2016E 3.1Moz $9.00/oz 2016E Capital $37M (Including $20M for #4 Shaft) 2P Reserves 78.7 Moz silver @ 15.5 oz/t Ag M+I Resources 128.1 Moz silver @ 6.2
Slide 24: #4 Shaft: Increasing Grade with Depth
#4 Shaft: Increasing Grade with Depth Silver Shaft ORE GRADE VALUES *AgEq Grade (opt) > 24 18 - 24 4050 Level #4 Shaft 12 - 18 6 - 12 <6 4900 Level Mining Activity 5900 Level Dec. 31, 2015 *Ag Equivalent Values Based Upon: Resource Prices $20.00/oz Ag, $0.90/lb Pb, $0.90/lb Zn 5900 Level 6500 Level
Slide 25: High-Grade Zone Expands
High-Grade Zone Expands ORE GRADE VALUES *AgEq Grade (opt) > 24 18 - 24 12 - 18 6 - 12 20 Years <6 Past Mining Dec. 31, 2015 *Ag Equivalent Values Based Mine Face (Galena) Upon: Resource Prices $20.00/oz 97.2 opt Silver Ag, $0.90/lb Pb, $0.90/lb Zn 6500 Level 47.5% Lead 7500 Level 900’@ +24 opt AgEq
Slide 26: 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 received from the Forest Service in Febru
Slide 27: 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 Q1/2016 No maintenance covenants Cash and cash equivalents $134 No off balance sheet arrangements Capital lease liability 16 Credit Metrics Borrowing, term loans and leases
Slide 28: Flexible, Patient Capital Structure
Flexible, Patient Capital Structure $500M in High Yield Notes Brings: 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 diluti
Slide 29: Diversification Over Metals Brings Stability
Diversification Over 4 Metals Brings Stability Lead and zinc positions supplement core exposure in silver and gold Consolidated Revenue by Metal Q1 2016 Largest silver producer in US 15% 3rd largest lead and zinc 9% 39% producer in US Periodically hedge up to 60% of payable lead and zinc 37% p
Slide 30: 2016 Expectations
2016 Expectations Cash Cost, 2016E1 Silver 2016E1 Gold Mine after by-product credits, Production (Moz) Production (oz) per silver/gold ounce2 Greens Creek 8.1 52,000 $5.00 per silver oz Lucky Friday 3.1 $9.00 per silver oz San Sebastian 3.8 20,000 $1.00 per silver oz Casa Berardi 135,000 $700 per go
Slide 31: Thank you!
Thank you! Battery Powered LHD – Now in service at the Lucky Friday -31-
Slide 32: Appendix
Precious metal companies… Appendix –32–
Slide 33: Strong Margins
Strong Margins $17.18 Silver Margins Casa Berardi Margins $16.32 $1,222 $14.93 $1,194 $1,187 $14.54 $1,121 $14.26 $1,089 $248 20% 71% $362 30% 29% $406 34% 66% 48% $328 61% 46% $12.25 $10.71 $7.02 $498 $8.71 79% $11.77 $832 $781 $974 $7.52 $793 $5.61 $591 $4.93 $5.55 $3.16 Q1 2015 Q2 2015 Q3 2015 Q4
Slide 34: Increasing Share of Modern Demand
Increasing Share of Modern Demand Modern demand increased from 260 M oz in 1992 to 544 M oz in 2014, an increase of 109%, and an annualized increase of 4.0% 1% 5% 18% 36% 51% 30% Modern Modern 26% 29% 4% 1992 2014 Modern Investment Jewelry & Photography Coins & Medals Silverware Source - GFMS -34-
Slide 35: Proven & Probable Reserves
Proven & Probable Reserves (on Dec. 31, 2015 unless otherwise noted) Reserves and Resources - 12/31/2015 Proven Reserves Silver Gold Lead Zinc Silver Gold Lead Zinc Copper Asset Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) Tons Tons Tons Greens Creek (a) 10 20.8 0.12 3.7 9.0 210 1 370 910 — Lu
Slide 36: Reserves & Resources
Reserves & Resources (on Dec. 31, 2015 unless otherwise noted) Measured Resources Silver Gold Lead Zinc Silver Gold Lead Zinc Copper Asset Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Tons Greens Creek (b) — — — — — — — — — Lucky Friday (2)(b) 13,762 6.1 — 4.1 2.3 83,711 — 569,19
Slide 37: Reserves & Resources
Reserves & Resources (on Dec. 31, 2015 unless otherwise noted) Inferred Resources Silver Gold Lead Zinc Silver Gold Lead Zinc Copper Asset Tons (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Tons Greens Creek (b) 3,255 12.8 0.09 2.8 6.7 41,730 300 89,630 219,540 — Lucky Friday (8)(b) 4,
Slide 38: 2006 – 2014 Reserve Table
2006 – 2014 Reserve Table 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 628,976 13.10 - 8,
Slide 39: Higher Reserves With Lower Price Assumptions
Higher Reserves With Lower Price Assumptions 180 $30.00 $26.50 175.4 Moz 175 172.9 Moz $25.00 169.8 Moz 170 165 $20.00 $20.00 160 $17.25 $15.00 155 $14.50 150.0 Moz 150 $10.00 145 $5.00 140 135 $- 2012 2013 2014 2015 Silver Reserves (Moz) Silver Reserve Price 1. See Proven and Probable reserves data
Slide 40: 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 measurement, for Greens Creek, Lucky Friday & San Sebastian* (dollars and ou
Slide 41: 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 measurement (dollars and ounces in thousands, except per ounce – unaudited)
Slide 42: Hecla Adjusted EBITDA Reconciliation to GAAP
Hecla Adjusted EBITDA Reconciliation to GAAP Reconciliation of Adjusted EBITDA to Net Loss (GAAP) Dollars are in thousands Three Months Ended 31-Mar-16 Net loss $ (618) Plus: Interest expense 5,711 Plus: Income taxes 1,654 Plus: Depreciation, depletion and amortization 25,875 Plus: Exploration expen
Slide 43: Greens Creek Free Cash Flow Reconciliation
Greens Creek Free Cash Flow Reconciliation 1987-2015 Performance Revenue $4,640,526 Treatment Charges (911,508) Net Revenues 3,729,019 Freight & Selling Expense (188,234) Net Smelter Return 3,540,785 Cost of Goods Sold (1,648,047) NonCash Costs (567,499) Exploration Expense (78,894) Gain/(Loss) of S