Hecla Mining Company · NYSE:HL
Hecla Mining — Gold Forum Americas 2020
62 slides from Hecla Mining's conference presentation, Sep 20, 2020
Slide 1: A Tipping Point
A TIPPING POINT The Impact of Hecla’s Characteristics and Silver Price September 2020 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 Statement Regarding Forward Looking Statements (Cont’d) In addition, material risks that could cause actual results to differ from forward-looking statements include, but are not limited to: (i) gold, silver and other metals price volatility; (ii) operating
Slide 4: Hecla Is Both Unique and Exceptional
HECLA IS BOTH UNIQUE AND EXCEPTIONAL Seven characteristics that no other mining company has What is different about Hecla? Key Asset Locations Location Primarily USA (only meaningful silver producer) Metals Silver, gold, zinc, lead (only 10 operating companies that silver is important value driver f
Slide 5: Hecla Produces a Third of All Silver Produced in the USA
HECLA PRODUCES A THIRD OF ALL SILVER PRODUCED IN THE USA Half of the world’s production is from Mexico, Peru and China; U.S. production is scarce 2019 U.S. Silver Production (31.5 Moz) Hecla’s Share of U.S. Production (Moz) 10.7 34.0% 66.0% 7.1 Hecla Other . 3 Countries Produce 50% of World Producti
Slide 6: High-Grade Silver Mines of Size Are Scarce
HIGH-GRADE SILVER MINES OF SIZE ARE SCARCE Hecla has 2 of the 5 largest mines and the 2 highest grade mines 350 40 35 300 30 250 25 AgEq* (Moz) 200 AgEq Grade 20 (opt) 150 15 100 10 50 5 0 0 Greens Creek Fresnillo Saucito Rochester Lucky Friday La Colorada San Julian Dolores Palmarejo San Jose Compl
Slide 7: Large Reserves Despite Conservative Valuation
LARGE RESERVES DESPITE CONSERVATIVE VALUATION Hecla has the lowest marginal ounce at $14.50 silver price Price assumption is at the discretion of management HL Reserve Year Prices $18.00 $17.00 $17.00 $17.00 $17.00 $17.00 $17.00 $17.30 2012 $26.50 $16.00 $16.00 $14.50 2013 $20.00 2014 $17.25 Silver
Slide 8: Reserves Continue to Grow
RESERVES CONTINUE TO GROW Despite being more conservative: growth with low price assumptions is exceptional Silver Reserves Growth (millions of ounces) Gold Reserves Growth (millions of ounces) 2.1 (1.6) 1.5 2.7 153.8 (76.7) 212.2 265%3 147.7 629%3 0.7 2013 Beginning Reserves added Gold produced Add
Slide 9: Generating Substantial Margins
GENERATING SUBSTANTIAL MARGINS Silver margins could exceed 50% of the silver price Silver Margins Gold Margins 17% 44% 51% 35% 49% 19% 20% 26% 14% (29)% Cost of Sales (000s)2 AISC, After By-Product Credits, per Ag-Au/Oz3 2020 2020 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q2 2019 Q3 2019 Q4 2019 Q1 20
Slide 10: Year to Date Production Is Strong - Outlook Increased
YEAR TO DATE PRODUCTION IS STRONG - OUTLOOK INCREASED Achieving strategic priorities of increasing cash on the balance sheet and dividends Production Silver Production (Moz) Gold Production (Koz) Estimated 9 Month 9.9-10.0 161 Prior Outlook 10.9-11.9 195-208 Current Outlook 12.5-13.0 200-210 *Equiva
Slide 11: A Dividend Policy That Pays Now and Can Grow Is Rare
A DIVIDEND POLICY THAT PAYS NOW AND CAN GROW IS RARE If the realized silver price averages $25, Hecla should have the second highest dividend yield among silver producers and the relative yield should grow as silver rises Silver Producers* Dividend Policy 0.91% •Base dividend increased 50% •Silver L
Slide 12: Operational Review
OPERATIONAL REVIEW Continued performance despite COVID-19 challenges NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 12
Slide 13: Greens Creek: Strong Production, Cash Flow
GREENS CREEK: STRONG PRODUCTION, CASH FLOW Despite COVID-19 silver production outlook increased by about 10% Estimated 2020 2019 Q3 2019 Q1 2020 Q2 2020 Q3 2020 Outlook Silver Production (Moz) 9.9 2.5 2.8 2.8 2.4 10-10.3 Gold Production (Koz) 56.6 14 12.3 13.1 11 47-48 Cost of Sales2 $211.7 M $40.5
Slide 14: Lucky Friday: Doubling Production
LUCKY FRIDAY: DOUBLING PRODUCTION 3rd Quarter production is a third higher than prior quarter and 2.5 times higher than last year Estimated 2020 2019 Q3 2019 Q1 2020 Q2 2020 Q3 2020 Outlook Silver Production 633 174 96 470 600 1.6-1.8 (Koz) Return to full production expected Ramp up to be completed
Slide 15: Casa Berardi: Continuing the Transition
CASA BERARDI: CONTINUING THE TRANSITION Making mill improvements to capture more value from higher gold prices Estimated 2020 2019 Q3 2019 Q1 2020 Q2 2020 Q3 2020 Outlook Gold Production (Koz) 134.4 36.5 26.8 30.8 29 114-124 Cost of Sales2 $217.7 M $51.2M $48.3 M $45.6 M $180 M Cash cost, after by-p
Slide 16: Hecla Is Both Unique and Exceptional
HECLA IS BOTH UNIQUE AND EXCEPTIONAL Seven characteristics that no other mining company has What is different about Hecla? Key Asset Locations Location Primarily USA (only meaningful silver producer) Metals Silver, gold, zinc, lead (only 10 operating companies that silver is important value driver f
Slide 17: Appendix
Appendix NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 17
Slide 18: 2nd Quarter Higher Prices Led to Free Cash Flow Generation
2ND QUARTER HIGHER PRICES LED TO FREE CASH FLOW GENERATION Few silver miners generated substantial free cash flow in 2Q Q2/2020 (in $ millions) Cash Flow from Capital Free Cash Flow** Lucky Friday Operations – Expenditures Cash Ramp- Before Lucky Friday Ramp-up Costs* up Costs Realized silver price
Slide 19: Hecla Early Reaction to COVID-19 Lead to Strong Quarter
HECLA EARLY REACTION TO COVID-19 LEAD TO STRONG QUARTER Positioned to more than survive the pandemic Protected the workforce Government action had minimal impact on • Implemented pandemic plans on March 10th production with U.S. operations essentially • Started significant monitoring and social dist
Slide 20: 2020 Estimates Have Margin and Low Capital and Low Exploration
2020 ESTIMATES HAVE MARGIN AND LOW CAPITAL AND LOW EXPLORATION Silver Production (Moz) Gold Production (Koz) Silver Equivalent (Moz)1 Gold Equivalent (Koz)1 Production Outlook Greens Creek 8.9-9.3 46-48 21.5-22.1 240 – 246 Lucky Friday 1.4-1.8 n/a 3.2-3.6 35 – 40 San Sebastian 0.6-0.8 6-7 1.1-1.4 12
Slide 21: Strong Safety Performance in 2020
STRONG SAFETY PERFORMANCE IN 2020 Commitment to safety and adoption of CORESafety is driving results Injury frequency rates have been on a steady decline since 2014 • Lucky Friday received 2018 Sentinels of Safety for excellent safety record NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 21
Slide 22: Hecla's Strongest Mine - Greens Creek Is Growing
HECLA’S STRONGEST MINE - GREENS CREEK IS GROWING 22% increase in silver reserves in 2019; 10mm oz silver production, $101 mm in cash flow Cumulative Gross Profit and Cumulative Net Cash Flow* Greens Creek Throughput has Grown 15% Since Purchase in 2008 Cumulative Gross Profit and Net Cash Flow Green
Slide 23: Lucky Friday Ramp-Up Continues
LUCKY FRIDAY RAMP-UP CONTINUES Full production rate expected by year end • Mining deemed essential in Idaho • Minimal effect on workforce • Over 96% of the expected workforce in-place • #2 hoist project completed on budget during quarter • Ongoing production ramp-up; expected full production rate by
Slide 24: Lucky Friday Expected Full Production by Year End
LUCKY FRIDAY EXPECTED FULL PRODUCTION BY YEAR END Expect 60% more annual silver production compared to historic production as go deeper NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 24
Slide 25: Casa Berardi Mill Operation Improvements Are Expected
CASA BERARDI MILL OPERATION IMPROVEMENTS ARE EXPECTED Increased mill availability will improve throughput, production, and cashflow – reviewing other opportunities • Improvements in availability seen in December continuing • Feed from underground and open pit provides flexibility to reach full capac
Slide 26: Growing Open Pits and New High Grade Underground
GROWING OPEN PITS AND NEW HIGH GRADE UNDERGROUND West Mine Crown Pillar (WMCP) latest addition to the pits; 148 Zone underground improving the dynamic Casa Berardi • Now 5 proposed open pits that are growing in size • High grade discovered in 148 Zone (East mine) added earlier in mine plan • Excelle
Slide 27: San Sebastian – Just in Time Mine
SAN SEBASTIAN – JUST IN TIME MINE Resulted in a five-year mine life; exploration and processing success needed Q2 2019 2019 Q2 2020 Silver Production (Moz) 0.441 1.9 0.159 Gold Production (Koz) 3.5 15.7 1.3 Cost of Sales2 $11.1 M $50.5 M $4.0 M Cash cost, after by-product credits, per silver oz3 $9.
Slide 28: Nevada Is Hecla's Newest Asset
NEVADA IS HECLA’S NEWEST ASSET Why we invested in Nevada • 110-square mile land position with three, one- ounce head grade mines • Hatter Graben, part of Hollister, that has 1.4 oz head grades, the potential for a million-ounce orebody • Opportunity to improve Fire Creek operations to lower the cut-
Slide 29: Advances in Nevada
ADVANCES IN NEVADA Bulk sample program underway; favorable hydrology study • Complete mining of oxide resource • Processing agreement with third party for bulk sample of Type 2 ore • Have collected 16,000 of the targeted 30,000 tons of Type 2 ore • Ground conditions, water inflow, productivity, and
Slide 30: Roadmap for Further Growth and Value Creation
ROADMAP FOR FURTHER GROWTH AND VALUE CREATION Largest inventory of growth projects in Hecla’s 129-year history Longer-Term Development Fire Creek Mine Plan • Potential for significant upside and increased production through developing Fire Creek to the north, Zeus and North veins Robust Near-Term Gr
Slide 31: Balance Sheet Is Also Unique
BALANCE SHEET IS ALSO UNIQUE Very liquid – very long dated Liquidity Position Long Dated Debt Proforma 08/01/20 As at 06/30/20 1 Revolver Previous Revolver Extended Revolver 6.875% Senior Notes 7.25%Senior Notes IQ Notes $200 Cash $507 $76 $475 Revolver ~$276mm $200 $250 $150-250 $37 2021 2022 2023
Slide 32: ESG Commitment: Communities and Education
ESG COMMITMENT: COMMUNITIES AND EDUCATION Investing in future generations and communities, COVID-19 relief Charitable Donations and Volunteerism • More than $3.4 million in Hecla Charitable Foundation contributions since 2009 • Foundation is focused on four areas: education, community programs, yout
Slide 33: Hecla Has Low Cost, Long Mine Lives
HECLA HAS LOW COST, LONG MINE LIVES Mining in the best jurisdictions Characteristics are Unique Asset Overview • Largest silver producer in the U.S., 3rd largest zinc and lead producer, 5th largest Quebec gold producer • Best mining jurisdictions: Alaska, Quebec, Idaho, Nevada, and Durango (Mexico)
Slide 34: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP 2020 Silver Estimates 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 35: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP 2020 Gold Estimates 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 36: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP Silver Operations 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, Be
Slide 37: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP Gold Operations 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, Befo
Slide 38: Free Cash Flow (Non-GAAP) Reconciliation
FREE CASH FLOW (NON-GAAP) RECONCILIATON Reconciliation of Cash Flow from Operations (GAAP) to Free Cash Flow (Non GAAP) Q2 2020 In 000 USD Q2/2020 Cash Flow from Operations 37,526 Add: Lucky Friday cash ramp-up costs 2,900 Cash Flow from Operations before Lucky Friday Cash Ramp-up 40,426 Less: Capit
Slide 39: Greens Creek Free Cash Flow (Non-GAAP) Reconciliation
GREENS CREEK FREE CASH FLOW (NON-GAAP) RECONCILIATON NYSE: HL RESPONSIBLE. SAFE. INNOVATIVE. l 39
Slide 40: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP Greens Creek 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, Before
Slide 41: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP Casa Berardi 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, Before
Slide 42: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP San Sebastian 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, Before
Slide 43: Cash Cost and AISC Reconciliation to GAAP
CASH COST AND AISC RECONCILIATION TO GAAP Lucky Friday 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, Before
Slide 44: Proven & Probable Mineral Reserves
PROVEN & PROBABLE MINERAL RESERVES(1) (On December 31, 2019 unless otherwise noted) Proven Reserves Tons Silver Gold Lead Zinc Copper Silver Gold Lead Zinc Copper Asset (000) (oz/ton) (oz/ton) % % % (000 oz) (000 oz) (Tons) (Tons) (Tons) Greens Creek (2) 7 14.8 0.08 2.6 5.4 - 106 1 180 390 - Lucky F
Slide 45: Measured and Indicated Mineral Resources
MEASURED AND INDICATED MINERAL RESOURCES (On Dec. 31, 2019 unless otherwise noted) Measured Resources Tons Silver Gold Lead Zinc Copper Silver Gold Lead Zinc Copper Asset (000) (oz/ton) (oz/ton) % % % (000 oz) (000 oz) (Tons) (Tons) (Tons) Greens Creek (5) 76 12.5 0.09 2.6 9.4 - 949 7 2,000 7,140 -
Slide 46: Inferred Mineral Resources
INFERRED MINERAL RESOURCES (On Dec. 31, 2019 unless otherwise noted) Inferred Resources Tons Silver Gold Lead Zinc Copper Silver Gold Lead Zinc Copper Asset (000) (oz/ton) (oz/ton) % % % (000 oz) (000 oz) (Tons) (Tons) (Tons) Greens Creek (5) 1,848 13.7 0.09 3.1 7.4 - 25,393 159 56,670 135,880 - Luc
Slide 47: Mineral Resources (Notes)
MINERAL RESOURCES (NOTES) (On December 31, 2019 unless otherwise noted) Note: All estimates are in-situ except for the proven reserves at Greens Creek and San Sebastian which are in surface stockpiles. Resources are exclusive of reserves. (5) Mineral resources are based on $1500 gold, $21 silver, $1
Slide 48: 2009 – 2018 Reserve Table
2009 – 2018 RESERVE TABLE Silver Gold Silver Gold Silver Gold Silver Gold 2014 Proven Reserves Tons (oz/ton) (oz/ton) (ounces) (ounces) 2009 Proven Reserves Tons (oz/ton) (oz/ton) (ounces) (ounces) Greens Creek 4,700 15.70 0.100 74,000 5,000 Greens Creek - - - - - Lucky Friday 3,840,000 13.70 - 52,5
Slide 49: Proven & Probable Mineral Reserves
PROVEN & PROBABLE MINERAL RESERVES (On December 31, 2013 unless otherwise noted) Proven Reserves Tons Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) Tons Tons Greens Creek (a) United 100.0% 14 12.9 0.13 3.0 8.1 182 2 430 1,15 States
Slide 50: Measured and Indicated Mineral Resources
MEASURED AND INDICATED MINERAL RESOURCES (On Dec. 31, 2013 unless otherwise noted) Measured Resources Tons Silver Gold Lea Zinc Silver Gold Lead Zinc d Asset Location Ownership (000) (oz/ton) (oz/ton) % % (000 oz) (000 oz) (Tons) (Tons) Greens Creek (2)(a) United 100.0% 7 17.6 0.08 4.4 10.5 118 1 29
Slide 51: Inferred Mineral Resources
INFERRED MINERAL RESOURCES (On Dec. 31, 2013 unless otherwise noted) Inferred Resources Tons Silver Gold Lead Zinc Silver Gold Lead Zinc Asset Location Ownership (000) (oz/ton) (oz/ton) % % (000 (000 oz) (Tons) (Tons) oz) Greens Creek (9)(a) United States 100.0% 2,385 13.3 0.09 2.7 6.5 31,752 216 63
Slide 52: Proven & Probable Mineral Reserves; Measured, Indicated and Inferred Resources
PROVEN & PROBABLE MINERAL RESERVES; MEASURED AND INDICATED, AND INFERRED RESOURCES (On December 31, 2013 unless otherwise noted) Note: All estimates are in-situ except for the proven reserve at Greens Creek which is in a surface stockpile. Resources are exclusive of reserves. Totals may not represen
Slide 53: Endnotes
ENDNOTES 1. Silver and gold equivalent is calculated using the average market prices for the time period noted. 2. Cost of sales and other direct production costs and depreciation, depletion and amortization. 3. Cash cost, after by-product credits, per silver and gold ounce represents a non-GAAP mea
Slide 54: Responsible. Safe. Innovative.
RESPONSIBLE. SAFE. INNOVATIVE. Believe in earning and maintaining our social license to operate • We must be responsible operators in the communities where we live and work • We provide career jobs for our 1,800 employees • Create a culture where safety is non-negotiable • Protect and partner with t
Slide 55: Our Priority: ESG
OUR PRIORITY: ESG Implement SASB Standards on ESG • Our core values of being responsible, safe and innovative are reflected in our commitment to operating as a responsible, ethical and sustainable business • Utilize the industry-specific SASB standards to report on the ESG aspects of our company • C
Slide 56: Our Commitment: Environment
OUR COMMITMENT: ENVIRONMENT Reducing greenhouse gas emissions and conserving energy • 60% less diesel fuel consumption at Greens Creek through the use of interruptible hydropower • The biomass heating project installed at the Casa Berardi Mine is expected to reduce 2,732 tonnes of greenhouse gas emi
Slide 57: Our Commitment: Tailings Management
OUR COMMITMENT: TAILINGS MANAGEMENT Emphasis on safety and stability • Design, construct, operate, decommission and close our tailings facilities to ensure stability • Approximately half of the tailings produced is used as backfill at Greens Creek, Lucky Friday, and Casa Berardi • Early adopter of t
Slide 58: Our Commitment: Reclamation
OUR COMMITMENT: RECLAMATION Every mine begins with a reclamation plan • Begin each mine with a reclamation plan to restore the land to its natural state for productive uses • More than $175 million committed to ensuring mined lands are successfully reclaimed following operations • Completed reclamat
Slide 59: Our Commitment: Water Management
OUR COMMITMENT: WATER MANAGEMENT Robust program of sampling, quality analysis and audits • All water output must meet applicable federal and state (or provincial) water quality permit conditions • More than 95 percent of the process plant water needs at our Casa Berardi Mine are met by recycling wat
Slide 60: Our Commitment: Safety
OUR COMMITMENT: SAFETY Safety is non-negotiable at Hecla • Practice continuous improvement where we adapt/change to minimize risks of injury or an accident SAFETY IS EMBEDDED IN OUR CULTURE • Goal is always 0 injuries/fatalities • First hardrock mining company to achieve NMA’s CORESafety certificati
Slide 61: Our Commitment: Communities and Education
OUR COMMITMENT: COMMUNITIES AND EDUCATION Investing in future generations and communities Education and Training • $900,000 toward sustainable career development programs at Greens Creek Mine since 2011 • More than $1 million in donations toward student scholarships by the Hecla UQAT Foundation in Q
Slide 62: Our Commitment: Indigenous Peoples
OUR COMMITMENT: INDIGENOUS PEOPLES We partner with First Nations in local communities • Hecla Quebec and the Gitanyow Band in upper British Columbia have entered into an exploration agreement that addresses mutual benefits from future exploration activity in the area – including employment, contract