Hecla Mining Company · NYSE:HL
Hecla Mining — JP Morgan High Yield & Leveraged Finance Conference 2018
54 slides from Hecla Mining's conference presentation, February 2018
Slide 1: JP Morgan High Yield & Leveraged Finance Conference
February 2018 NYSE:HL JP Morgan High Yield & Leveraged Finance Conference Creating Value Through Innovative Mining
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: Creating Value
A SILVER, Gold & Base Metals Company Our long-lived, low-cost mines create opportunities NYSE:HL Creating Value Mill Run Throughput 985 Autonomous Truck Ventilation on Demand Productivity Reducing Costs Improvements New New Mines Discoveries San Sebastian Sulphides 160 Zone Rock Creek
Slide 4: Strong Exposure to Metals
Strong Exposure to 5 Metals Diversifies revenue, reduces risk NYSE:HL 2017 Total Metal Exposure Lead Production 11% Gold 26% Zinc 11% Silver 12.5 Moz Gold 232 koz Copper 22% Zinc 55 ktons Silver 30% Lead 23 ktons Lead Zinc Copper Silver Gold -4-
Slide 5: 11-Year Cumulative Silver Reserves and Ounces Mined
11-Year Cumulative Silver Reserves and Ounces Mined 263 million reserve ounces added; 22% added by Greens Creek acquisition NYSE:HL 250 200 Gain in Reserve oz Reserves Greens Creek 177 Moz Acquisition 150 Silver Ounces (millions) (Total Gain 263 Moz) 100 50 ‐ Production (50) (100) Cumulative Product
Slide 6: 2018 Silver and Gold Mineral Reserve Prices
2018 Silver and Gold Mineral Reserve Prices Reserve growth despite lowest price assumptions NYSE:HL HL Reserve $17.50 $18.00 $18.00 $18.00 Year $17.26 Prices $16.00 $15.00 $14.50 2012 $26.50 2013 $20.00 2014 $17.25 2015 $14.50 2016 $14.50 2017 $14.50 Hecla* Fresnillo Agnico Eagle* Endeavour Coeur *
Slide 7: Highest Grade of Our Peers
Highest Grade of Our Peers Hecla’s growth has been high quality ounces 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 re
Slide 8: Hecla Has Only North American Ounces
Hecla Has Only North American Ounces Worth more than in other countries NYSE:HL –8–
Slide 9: Strong Financial Performance
Strong Financial Performance Reduction in cash cost, after by-product credits, per gold and silver ounce NYSE:HL 2017 2016 Revenue $577.8 M $646.0 M Cost of sales and other direct production costs and depreciation, depletion and amortization* - Silver $240.6 M $298.7 M Cost of sales and other direct
Slide 10: Strong Financial Performance
Strong Financial Performance Driven by mine throughput and base metal prices NYSE:HL Cash Cost per Silver Ounce2 AISC – per Silver Ounce3 (After By-Product Credits) (After By-Product Credits) 2017 2016 $3.10/oz $11.68/oz 3rd highest silver Highest silver 33% production production $7.86/oz 3rd
Slide 11: 2017 Mine Cash Flow Generation
2017 Mine Cash Flow Generation Greens Creek and San Sebastian the major contributors NYSE:HL Combined Hecla’s Four Operating Mines Generated $277 M in Operating Cash Flow and $156.4 M in Free Cash Flow4 Greens Creek San Sebastian 82% 74% Conversion to Conversion to Free Cash Flow4 Free Cash Flow4 Ca
Slide 12: Stable Debt Metrics
Stable Debt Metrics 2017 NYSE:HL 5 Net Debt/LTM Adjusted EBITDA Total liquidity ~$320 M (includes undrawn $100M line of credit) 1.4x 1.3x 1.3x $506 M high yield notes due 1.2x 1.1x 2021 Net debt is total debt minus cash, cash equivalents and short- term investments LTM Q4 2016 LTM Q1 2017 LTM
Slide 13: Innovation is Here: And It's a Game Changer
NYSE:HL Innovation is Here: And It’s a Game Changer -13-
Slide 14: Labor is Largest Direct Production Cost
Labor is Largest Direct Production Cost Increasing productivity has highest impact on the bottom line NYSE:HL Estimated annual cost breakdown -14-
Slide 15: 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 -15-
Slide 16: Greens Creek
Greens Creek Consistent low-cost production in a wilderness area / National Monument NYSE:HL Q4 2017 2017 2018E Silver Production (Moz) 2.1 8.4 7.5-8.0 Gold Production (koz) 11.6 50.8 50-55 Cost of Sales $61.6 M $201.8 M $198 M Cash cost, after by-product credits, per silver oz2 $0.66/oz $0.71/oz $0
Slide 17: First We WIFI the Mines
First We WIFI the Mines Data collection is the key to increasing productivity & safety NYSE:HL Improving Mining Based On Data Ventilation on Demand In Testing 14 of 54 Greens Creek fans on test with variable frequency drives Expected $23,000 savings per fan per year; approximately $1 million/yea
Slide 18: Ventilation on Demand and Teleremote LHD
Ventilation on Demand and Teleremote LHD Increase productivity and lower costs NYSE:HL –18–
Slide 19: Significantly Improved Recoveries
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% Commissioned in
Slide 20: Lucky Friday
Lucky Friday Positioning for growth and longevity NYSE:HL Q4 2017 2017 2018E Silver Production (koz) 69.6 838.7 TBD Cost of Sales $0.6 M $15.1 M TBD Cash cost, after by-product $(2.65)/oz $5.81/oz TBD credits, per silver oz2 AISC, after by-product $15.57/oz $12.48/oz TBD credits3 2017 Sustaining Cap
Slide 21: Lucky Friday Strike Update
Lucky Friday Strike Update Binding third-party arbitration possible NYSE:HL Reached agreement for binding third-party arbitration with the United Steelworkers. Agreement subject to ratification vote by the union membership in March. If ratified, the three arbitrators, in early May, will select a
Slide 22: #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 23: Testing Battery Powered LHD
Testing Battery Powered LHD Could reduce ventilation needs versus diesel NYSE:HL -23-
Slide 24: 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 -24-
Slide 25: Casa Berardi: Record Gold Production
Casa Berardi: Record Gold Production Improving performance with higher grades and throughput NYSE:HL Q4 2017 2017 2018E Gold Production (koz) 43.4 156.7 155-160 Cost of Sales $45.4 M $180.2 M $185 M Cash cost, after by-product credits, per gold oz2 $719/oz $820/oz $800/oz AISC, after by-product $1,0
Slide 26: Casa Berardi Ramp-Up
Casa Berardi Ramp-Up Throughput almost doubled since acquisition NYSE:HL Tons Milled Per Day 3,764 91%* 1,970 Q4 2013 Q4 2017 *Increase since acquisition in 2013. -26-
Slide 27: 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 28: 985 Drift 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 -28-
Slide 29: Autonomous Haulage
Autonomous Haulage NYSE:HL -29-
Slide 30: San Sebastian
San Sebastian “Just-in-time mining” features very low cash costs, after by-product credits NYSE:HL Q4 2017 2017 2018E Silver Production (Moz) .759 3.3 2.0-2.5 Gold Production (koz) 6.0 25.2 13-17 Cost of Sales $5.3 M $23.7 M $44 M Cash cost, after by-product $(3.80)/oz $(3.36)/oz $8.50/oz credits, p
Slide 31: Underground Oxide then Sulphide Production
Underground Oxide then Sulphide Production Middle Vein then Hugh Zone NYSE:HL Sulphide production (Hugh Zone) expected before 2019 -31-
Slide 32: Francine Vein Polymetallic Potential
Francine Vein Polymetallic Potential Polymetallic mineralization traced for over 5,000 feet of strike length NYSE:HL FRANCINE VEIN LONGITUDINAL SECTION (Looking NE) Limit of Current Hugh Zone West Francine Vein Resource Target Area PROSPECTIVE FOR POLYMETALLIC MINERALIZATION Polymetallic 9.1 oz/ton
Slide 33: Middle Vein Polymetallic Potential
Middle Vein Polymetallic Potential Predicting a horizonal polymetallic zone below the oxide reserve NYSE:HL MIDDLE VEIN LONGITUDINAL SECTION (Looking NE) MIDDLE VEIN MIDDLE VEIN NORTH RAMP OPEN PIT SHELL $NSR VALUE PER TON (5.9 FT DILUTED) 97 ZONE POLYMETALLIC PROSPECTIVE FOR MINERALIZATION POLYMETA
Slide 34: 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 148.7 Moz Ag / 183.4 Moz Ag / Big potential 1.3 Blbs Cu 1.5 Blbs Cu Advanced permitting SEIS Final EIS, RODs** We
Slide 35: 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)6 Gold Equivalent (koz)6 Greens Creek 7.5 – 8.0 50 - 55 21.0 – 22.5 300 - 313 Lucky Friday San Sebastian 2.0 – 2.5 13 –
Slide 36: Appendix
. MINING COMPANY NYSE:HL Appendix -36-
Slide 37: Endnotes
Endnotes NYSE:HL 1. Cash provided by operating activities before working capital changes is a non-GAAP measure calculated as cash provided by operating activities plus or minus changes in working capital balances. 2. Cash cost, after by-product credits, per silver and gold ounce represents a non-GAA
Slide 38: Safety First
Safety First First hardrock mining company to complete NMA CORESafety Program NYSE:HL Hecla All Injury Frequency Rate (AIFR) 7 6.06 6 55% 5.35 5.41 5 4.57 Incident Rate 4 3.42 3 2.76 2 1 0 2012 2013 2014 2015 2016 2017 -38-
Slide 39: Proven & Probable Mineral Reserves
Proven & Probable Mineral Reserves (on Dec. 31, 2017 unless otherwise noted) NYSE:HL -39-
Slide 40: Measured and Indicated Mineral Resources
Measured and Indicated Mineral Resources (on Dec. 31, 2017 unless otherwise noted) NYSE:HL -40-
Slide 41: Inferred Mineral Resources
Inferred Mineral Resources (on Dec. 31, 2016 unless otherwise noted) NYSE:HL -41-
Slide 42: 2008 – 2016 Reserve Table
2008 – 2016 Reserve Table NYSE:HL –42–
Slide 43: Cash Cost and AISC Reconciliation to GAAP
Cash Cost and AISC 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 A
Slide 44: 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 (GAAP) to Cash Cost, After By-Product Credits, per Silver Ounce (Non-GAAP) In thousands, except per ounce amounts 2013 2014 2015 2
Slide 45: Cash Cost Reconciliation to GAAP
Cash Cost Reconciliation to GAAP NYSE:HL Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, After By-Product Credits, per Silver Ounce (Non-GAAP) In thousands, except per ounce amounts 2007 2008 2009 2010 2011 2012 2013
Slide 46: 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 47: 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 48: 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 49: 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 Ounc
Slide 50: 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 51: Cash Cost and AISC Reconciliation to GAAP
Cash Cost and AISC Reconciliation to GAAP 2018 estimates 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 Cost
Slide 52: Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP
Adjusted EBITDA Reconciliation and Net Debt Reconciliation to GAAP NYSE:HL Dollars in thousands (USD) Three Months Ended Twelve Months Ended 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16 Net income (loss) $ (27,749) $ 20,262 $ (23,519) $ 69,547 Plus: Interest expense, net of amount capitalized 9,589 5,141
Slide 53: Operations Free Cash Flow Reconciliation
Operations Free Cash Flow Reconciliation NYSE:HL Greens Creek Free Cash Flow Reconciliation Lucky Friday Free Cash Flow Reconciliation (in thousands) (in thousands) 2017 2017 Gross Profit $ 76,588 Gross Profit $ 6,448 Non cash elements in gross profit: Non cash elements in gross profit: Depreciation
Slide 54: 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 $ 1,414,488 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
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