Hecla Mining Company · NYSE:HL
Hecla Mining — Deutsche Bank Leveraged Finance Conference 2017
54 slides from Hecla Mining's conference presentation, Oct 4, 2017
Slide 1: Mining Innovation Is Here
October 4, 2017 NYSE:HL Mining Innovation Is Here (there will be winners)
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: A Tipping Point
A Tipping Point Changing mining practices NYSE:HL 1. Not All Ounces Have the Same Value 2. Why Invest in Hecla? Mining companies give leverage to metal Our strategy is to acquire long-lived and through reserves/resources low-cost assets that we can invest in and improve But not all reserves ar
Slide 4: Not All Ounces Have the Same Value
NYSE:HL Not All Ounces Have the Same Value –4–
Slide 5: Reserves Have Grown Dramatically
Reserves Have Grown Dramatically Hecla Added 299 M oz of silver reserves in past 10 years NYSE:HL 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 2008 2009 2010 2011 2012 2013 2014 2015 2016 –5–
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: Higher Grades Increase Operating and Financial Flexibility
Higher Grades Increase Operating and Financial Flexibility 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 resource update released for 2
Slide 8: Ounces in North America Are Worth More Than in 3rd World Countries
Ounces in North America Are Worth More Than in 3rd World Countries NYSE:HL –8–
Slide 9: Why Invest in Hecla?
NYSE:HL Why Invest in Hecla? -9-
Slide 10: 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 11: 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 12: 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 13: 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 14: 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 15: Innovation is Here: And It's a Game Changer
NYSE:HL Innovation is Here: And It’s a Game Changer -15-
Slide 16: The Need to Improve Productivity
The Need to Improve Productivity What percentage of variable cost was labor in 1900? Today? NYSE:HL The future of mining: Moving miners back from the face Shaft operator also operates rock breakers from surface –16–
Slide 17: 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 -17-
Slide 18: 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 19: First We WIFI the Mines
First We WIFI the Mines Is key to increased safety & productivity NYSE:HL Improving Mining Based On Data Ventilation on Demand Will Be Functioning in 2017 -19-
Slide 20: Then We Can Increase Productivity
Then We Can Increase Productivity Greens Creek tele-remote LHD increased productivity NYSE:HL –20–
Slide 21: 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 22: 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 -- 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 credits2 Un
Slide 23: #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 24: Testing Battery Powered LHD
Testing Battery Powered LHD Could reduce ventilation needs versus diesel NYSE:HL -24-
Slide 25: Continuous Mechanical Cutting To Eliminate Drill/Blast
Continuous Mechanical Cutting To Eliminate Drill/Blast A 5-Year investment that could revolutionize the Lucky Friday NYSE:HL Could Improve Safety and Productivity Atlas Copco Test Mine 2016 -25-
Slide 26: 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 27: Increasing Value at Casa Berardi
Increasing Value at Casa Berardi Oversized mill generates value with higher throughput NYSE:HL Trendline -27-
Slide 28: EMCP Pit is Transforming Casa Berardi
EMCP Pit is Transforming Casa Berardi The first in a growing number of pits that will operate for years to come 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 *
Slide 29: 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 -29-
Slide 30: Automated Truck Operational Later This Year
Automated Truck Operational Later This Year Modeled after the Williams operation NYSE:HL Surface control center Optical scanner & camera Safety gated area 40 tonne autonomous truck now on site -30-
Slide 31: 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 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: Innovation: A Key to Maximizing Value
Innovation: A Key to Maximizing Value There will be winners NYSE:HL Innovators realize: Lower costs and higher margins Increased reserves Longer mine lives Better environmental/safety records Expanded horizon of acquisition opportunities The ability to mine challenging deposits -33-
Slide 34: Thank You
MINING COMPANY NYSE:HL =] \o) > = = © <= = -34-
Slide 35: Appendix
MINING COMPANY NYSE:HL Appendix -35-
Slide 36: 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 37: 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 38: 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 39: Measured and Indicated Mineral Resources
Measured and Indicated Mineral Resources (on Dec. 31, 2016 unless otherwise noted) NYSE:HL -39-
Slide 40: 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 41: 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 42: 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, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sus
Slide 43: 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 44: 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 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 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 47: 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 48: 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 49: 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 50: 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 51: 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 52: Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP
Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP NYSE:HL –52–
Slide 53: Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP
Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP NYSE:HL Numbers in thousands (USD) –53–
Slide 54: Greens Creek Free Cash Flow Reconciliation
Greens Creek Free Cash Flow Reconciliation NYSE:HL Greens Creek Free Cash Flow Reconciliation (in thousands) 2016 1987-2016* Gross profit $ 69,149 $ 1,337,900 Non-cash elements in gross profit: Depreciation, depletion and amortization 52,564 612,052 Other 2,544 (1,020) Working capital changes 7,847
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