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Section 1: 8-K/A (FORM 8-K/A)

hl20180810_8ka.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

____________________

 

FORM 8-K/A

 

Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 9, 2018

 

HECLA MINING COMPANY
(Exact Name of Registrant as Specified in Its Charter)

 

Delaware 1-8491 77-0664171
(State or Other Jurisdiction (Commission File Number) (IRS Employer Identification No.)
of Incorporation)    

  6500 North Mineral Drive, Suite 200

Coeur d'Alene, Idaho 83815-9408

(Address of Principal Executive Offices) (Zip Code)

 

(208) 769-4100

(Registrant's Telephone Number, Including Area Code)

N/A
(Former name or Former Address, if changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12(b))
     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

Explanatory Note

 

This Form 8-K/A is being filed as an amendment to the Current Report on Form 8-K filed by Hecla Mining Company with the U.S. Securities and Exchange Commission on August 9, 2018. The purpose of this Amendment is to correct amounts in the last column of the table on page 23 of the News Release dated August 9, 2018 attached as Exhibit 99.1. Except for the foregoing, this Form 8-K/A does not amend, modify or update the disclosures contained in the original
Form 8-K.

 

Item 2.02. Results of Operations and Financial Condition.

 

On August 9, 2018, Hecla Mining Company (the “Company”) issued a news release announcing the Company’s second quarter 2018 financial results. The news release is attached hereto as Exhibit 99.1 to this Form 8-K.

 

In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any of the Company’s filings or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit

Number

 

Description

     

99.1

 

News Release, dated August 9, 2018. *

 

* Furnished herewith

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated:      August 10, 2018

 

Hecla Mining Company

 

 

 

 

 

 

 

 

 

 

By:

/s/ David C. Sienko

 

 

 

David C. Sienko

Vice President & General Counsel

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

ex_121365.htm

 

NEWS RELEASE

 

Exhibit 99.1

 

HECLA REPORTS SECOND QUARTER 2018 RESULTS

 

For Period Ended: June 30, 2018

For Release: August 9, 2018

 

COEUR D'ALENE, IDAHO -- Hecla Mining Company (NYSE:HL) today announced second quarter 2018 financial and operating results.

 

HIGHLIGHTS

 

 

 

Net income applicable to common shareholders of $11.9 million, or $0.03 per share.

 

Adjusted net income applicable to common shareholders of $3.0 million, or $0.01 per share. 1

 

Sales of $147.3 million.

 

Adjusted EBITDA of $57.7 million and net debt/adjusted EBITDA (last 12 months) of 1.2x. 2,3

 

Operating cash flow of $30.6 million compared to $7.5 million in the second quarter of 2017.

 

Cost of sales and other direct production costs and depreciation, depletion and amortization ("cost of sales") of $112.3 million.

 

Cash cost, after by-product credits, of $(0.57) per silver ounce, a 319% decrease compared to the second quarter of 2017. 4

 

All in sustaining cost (AISC), after by-product credits, of $11.40 per silver ounce. 5

 

Cash and cash equivalents and short-term investments of $245 million at June 30.

 

The acquisition of Klondex Mines Ltd., and its high-grade gold mines in Nevada, is now closed, and the integration and optimization of the assets has now begun.

 

Credit rating upgrade by S&P Global to B+ from B, with a stable outlook.

 

"In the second quarter Hecla performed strongly, reflecting the investments we are making in our mines and exploration programs," said Phillips S. Baker, Jr., President and CEO. "The significant decline in our silver cash cost, after by-product credits per ounce, is a function of strong base metals prices and improved treatment charges. The decline in gold cash cost per ounce is due to higher throughput at Casa Berardi. Additionally, our exploration program continues to discover high-grade material at our operations as well as advance our exploration properties."

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

1

 

 

"We have now closed the acquisition of the high-grade Nevada mines, and are beginning their integration into Hecla," Mr. Baker added. "Our plan is to operate the mines and mill as one unit, allocating the workforce and capital to generate margins and focus on profitability, not just on production for production's sake. Fire Creek has the best margin of the 3 mines by a considerable amount, so ramping it up is our priority. We are also focused on the exceptional exploration opportunities in the 110 square mile land package. "

 

FINANCIAL OVERVIEW

 

 

Second Quarter Ended

 

Six Months Ended

HIGHLIGHTS

June 30, 2018

June 30, 2017

 

June 30, 2018

June 30, 2017

FINANCIAL DATA

 

 

 

 

 

Sales (000)

$

147,259

 

$

134,279

 

 

$

286,968

 

$

276,823

 

Gross profit (000)

$

35,002

 

$

31,207

 

 

$

73,788

 

$

66,123

 

Income (loss) applicable to common shareholders (000)

$

11,936

 

$

(24,154

)

 

$

20,038

 

$

2,542

 

Basic and diluted income (loss) per common share

$

0.03

 

$

(0.06

)

 

$

0.05

 

$

0.01

 

Net income (loss) (000)

$

12,074

 

$

(24,016

)

 

$

20,314

 

$

2,818

 

Cash provided by operating activities (000)

$

30,635

 

$

7,536

 

 

$

47,018

 

$

45,821

 

 

Net income applicable to common shareholders for the second quarter 2018 was $11.9 million, or $0.03 per share, compared to a net loss applicable to common shareholders of $24.2 million, or $0.06 per share, for the same period in 2017. The second quarter result was mainly due to the following items:

 

 

Gain on base metal derivative contracts of $16.8 million compared to a gain of $2.5 million in the second quarter of 2017.

 

Net foreign exchange gain of $2.5 million recorded in the second quarter of 2018 compared to a loss of $3.9 million in the same period of 2017.

 

Income tax provision of $0.4 million compared to $16.1 million in the second quarter of 2017, with the variance due to impacts of U.S. tax reform and lower foreign taxes.

 

Operating cash flow was $30.6 million compared to $7.5 million in the second quarter of 2017, with the increase mainly due to higher gold and base metals prices and production, partially offset by higher research and development investment.

 

Adjusted EBITDA was $57.7 million compared to $48.5 million in the second quarter of 2017, with the increase mainly due to higher gold and base metals prices.

 

Capital expenditures (excluding capitalized interest) at the operations totaled $26.8 million for the second quarter, similar to 2017. Greens Creek and Lucky Friday expenditures increased by $2.7 million and $0.3 million, respectively, offset by decreased expenditures at Casa Berardi of $2.3 million and San Sebastian of $0.7 million. Expenditures at Greens Creek, Casa Berardi, San Sebastian and Lucky Friday were $14.2 million, $9.8 million, $1.7 million, and $1.1 million respectively.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

2

 

 

Metals Prices

 

The average realized silver price in the second quarter was $16.61 per ounce, 3% lower than the $17.14 average realized silver price in the second quarter of 2017. Average realized gold, lead and zinc prices increased 3%, 19% and 13%, respectively.

 

Base Metals Forward Sales Contracts

 

The following table summarizes the quantities of base metals committed under financially settled forward sales contracts at June 30, 2018:

 

 

Pounds Under Contract

(in thousands)

 

Average Price per Pound

 

Zinc

Lead

 

Zinc

Lead

Contracts on forecasted sales

         

2018 settlements

9,039

 

5,787

   

$

1.34

 

$

1.09

 

2019 settlements

48,502

 

20,283

   

$

1.40

 

$

1.10

 

2020 settlements

42,329

 

19,401

   

$

1.40

 

$

1.13

 

2021 settlements

 

4,409

   

N/A

$

1.07

 

 

The contracts represent 44% of the forecasted payable zinc production for the 36-month period ended June 30, 2021 at an average price of $1.39 per pound and 51% of the forecasted payable lead production for the same period ended June 30, 2021 at an average price of $1.11 per pound.

 

 

OPERATIONS OVERVIEW

 

Overview

 

The following table provides the production summary on a consolidated basis for the second quarter and six months ended June 30, 2018 and 2017:

 

   

Second Quarter Ended

 

Six Months Ended

   

June 30, 2018

June 30, 2017

 

June 30, 2018

June 30, 2017

PRODUCTION SUMMARY

Silver -

Ounces produced

2,596,423

 

2,807,474

   

5,130,518

 

6,176,901

 
 

Payable ounces sold

2,313,753

 

2,688,721

   

4,405,217

 

5,557,835

 

Gold -

Ounces produced

60,313

 

52,561

   

118,121

 

108,674

 
 

Payable ounces sold

59,643

 

53,170

   

114,482

 

104,541

 

Lead -

Tons produced

5,522

 

4,420

   

11,149

 

13,056

 
 

Payable tons sold

4,745

 

4,250

   

8,613

 

10,676

 

Zinc -

Tons produced

14,299

 

12,966

   

29,510

 

28,503

 
 

Payable tons sold

10,686

 

8,978

   

20,790

 

20,825

 

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

3

 

 

The following tables provide a summary of the final production, cost of sales, cash cost, after by-product credits, per silver and gold ounce, and AISC, after by-product credits, per silver and gold ounce for the second quarter and six months ended June 30, 2018, with comparisons to the prior year period:

 

Second Quarter Ended

       

Greens Creek

Lucky

Friday

Casa Berardi

San Sebastian

   

Silver

 

Gold

Silver

 

Gold

Silver

Gold

 

Silver

Silver

 

Gold

 

Production (ounces)

June 30, 2018

2,596,423

   

60,313

 

1,999,791

   

13,719

 

24,687

 

42,722

   

12,298

 

559,647

   

3,872

 

Increase/(decrease)

 

 

(211,051

)

 

7,752

 

67,744

   

1,015

 

24,687

 

9,461

   

3,821

 

(307,303

)

 

(2,724

)

Cost of sales and other direct production costs and depreciation, depletion and amortization (000)

June 30, 2018

$

60,562

   

$

51,695

 

$

47,742

   

$

 

$

1,744

 

$

51,695

   

$

 

$

11,076

   

$

 

Increase/(decrease)

 

 

$

1,170

   

$

8,015

 

$

(6,576

)

 

$

 

$

1,744

 

$

8,015

   

$

 

$

6,002

   

$

 

Cash costs, after by-product credits, per silver or gold ounce 4, 6

June 30, 2018

$

(0.57

)

 

$

775

 

$

(3.47

)

 

$

 

$

 

$

775

   

$

 

$

9.79

   

$

 

Increase/(decrease)

 

$

(0.83

)

 

$

(197

)

$

(5.33

)

 

$

 

$

 

$

(197

)

 

$

 

$

13.10

   

$

 

AISC, after by-product credits per silver or gold ounce5

June 30, 2018

$

11.40

   

$

1,039

 

$

4.43

   

$

 

$

 

$

1,039

   

$

 

$

17.15

   

$

 

Increase/(decrease)

 

 

$

1.43

   

$

(334

)

$

(4.28

)

 

$

 

$

 

$

(334

)

 

$

 

$

17.09

   

$

 

 

 

Six Months Ended

       

Greens Creek

Lucky

Friday

Casa Berardi

San Sebastian

   

Silver

 

Gold

Silver

 

Gold

Silver

Gold

 

Silver

Silver

 

Gold

 

Production (ounces)

June 30, 2018

5,130,518

   

118,121

 

3,913,023

   

26,837

 

124,467

 

82,899

   

21,189

 

1,071,839

   

8,385

 

Increase/(decrease)

 

(1,046,383

)

 

9,447

 

51,679

   

111

 

(556,315

)

13,831

   

4,167

 

(545,914

)

 

(4,495

)

Cost of sales and other direct production costs and depreciation, depletion and amortization (000)

June 30, 2018

$

112,298

   

$

100,882

 

$

89,602

   

$

 

$

5,844

 

$

100,882

   

$

 

$

16,852

   

$

 

Increase/(decrease)

 

$

(12,255

)

 

$

14,735

 

$

(8,712

)

 

$

 

$

(8,698

)

$

14,735

   

$

 

$

5,155

   

$

 

Cash costs, after by-product credits, per silver or gold ounce 4, 6

June 30, 2018

$

(1.92

)

 

$

800

 

$

(4.22

)

 

$

 

$

 

$

800

   

$

 

$

6.46

   

$

 

Increase/(decrease)

 

$

(2.50

)

 

$

(127

)

$

(5.48

)

 

$

 

$

 

$

(127

)

 

$

 

$

9.75

   

$

 

AISC, after by-product credits per silver or gold ounce5

June 30, 2018

$

8.61

   

$

1,062

 

$

2.56

   

$

 

$

 

$

1,062

   

$

 

$

12.95

   

$

 

Increase/(decrease)

 

$

(0.22

)

 

$

(250

)

$

(3.72

)

 

$

 

$

 

$

(250

)

 

$

 

$

12.71

   

$

 

 

 

Greens Creek Mine - Alaska

 

At the Greens Creek mine, 2.0 million ounces of silver and 13,719 ounces of gold were produced in the second quarter, compared to 1.9 million ounces and 12,704 ounces, respectively, in the second quarter of 2017. The increased silver production was due to higher grades compared to the second quarter of 2017. The mill operated at an average of 2,290 tons per day (tpd) in the second quarter, which was slightly lower than the second quarter of 2017.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

4

 

 

The cost of sales for the second quarter was $47.7 million, and the cash cost, after by-product credits, per silver ounce, was $(3.47), compared to $54.3 million and $1.86, respectively, for the second quarter of 2017.4 The AISC, after by-product credits, was $4.43 per silver ounce for the second quarter compared to $8.71 in the second quarter of 2017.5 The per ounce silver costs were lower primarily due to higher gold and base metals prices and production. Approximately 5% of production is coming from automated headings. Higher by-product credits in the second quarter 2018, along with lower exploration expenditures, contributed to lower AISC, partially offset by higher capital spending. Estimates for cash cost, after by-product credits, per silver ounce have declined to $(0.50) from $0.50, and AISC, after by-product credits, declined per silver ounce to $7.00 from $7.75.

 

 

Lucky Friday Mine - Idaho

 

Preparations for the introduction of the Remote Vein Miner (RVM), expected in late 2019, continued to be a major focus at Lucky Friday in the second quarter. The RVM project is proceeding as expected and has the potential to revolutionize how the Lucky Friday is mined, making it a safer and more efficient operation. In addition, limited production and capital improvements continue to be performed by salaried staff.

 

Production has been limited since March 13, 2017 due to the ongoing strike and now the focus is completing the development necessary to accommodate the RVM in 2019. Costs related to care-and-maintenance of the mine are reported in a separate line item in our condensed consolidated statement of operations and are excluded from the calculation of cost of sales, cash cost, after by-product credits, per silver ounce and AISC, after by-product credits, per silver ounce.

 

Casa Berardi - Quebec

 

At the Casa Berardi mine, 42,722 ounces of gold were produced in the second quarter, including 8,979 ounces from the East Mine Crown Pillar (EMCP) pit, compared to 33,261 ounces in the prior year period, with the increase primarily due to higher grades. The mill operated at an average of 3,845 tpd in the second quarter, an increase of 6% over the second quarter of 2017.

 

The cost of sales was $51.7 million for the second quarter and the cash cost, after by-product credits, per gold ounce was $775, compared to $43.7 million and $972, respectively, in the prior year period.4,6 The decrease in cash cost, after by-product credits, per gold ounce is partly due to higher gold production and reduced costs related to stripping of the EMCP pit. The AISC, after by-product credits, was $1,039 per gold ounce for the second quarter compared to $1,373 in the second quarter of 2017, with the decrease primarily due to higher gold production and lower capital spending.5

 

The automated 985 drift project is working well, with the autonomous haul truck running better and with higher availability than originally anticipated. The second 40-ton Sandvik autonomous haul truck is expected to be delivered later this year. Operating two autonomous trucks is expected to result in operating savings of several million dollars a year.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

5

 

 

San Sebastian - Mexico

 

At the San Sebastian mine, 559,647 ounces of silver and 3,872 ounces of gold were produced in the second quarter, compared to 866,950 ounces and 6,596 ounces, respectively, in the prior year period. Although silver and gold production were lower compared to the second quarter of 2017, both still exceeded our estimates for the quarter due to the amount of higher-grade stockpile material processed. The mill operated at an average of 415 tpd in the second quarter, which was slightly lower than the second quarter of 2017.

 

The cost of sales was $11.1 million for the second quarter and the cash cost, after by-product credits, was $9.79 per silver ounce, compared to $5.1 million and $(3.31), respectively, in the second quarter of 2017. The cash cost, after by-product credits, increased as expected, due to lower silver production and higher mining costs, resulting from the transition of production from the high grade, shallow open pits to underground. The AISC, after by-product credits, was $17.15 per silver ounce for the second quarter compared to $0.06 in the second quarter of 2017, principally due to the same factors, including increased investment in development. A reduction in per ounce costs is expected in the second half of the year as underground production continues to ramp up.

 

The Company plans to collect a bulk sample of the Hugh Zone material from the Francine Vein in the fourth quarter and plans to process it to determine the viability of processing the material on a larger scale.

 

Nevada Operations

 

Hecla took control of the Nevada assets previously belonging to Klondex on July 20, 2018. Hecla is quickly moving forward with multiple initiatives aimed at improving the operations.

 

Key focus for the integrated Nevada operations:

 

All operations now report to a single Vice President and General Manager, Kevin Shiell.

 

Work is underway to create a unified mine plan including Fire Creek, Midas, Hollister and Hatter Graben, all feeding the Midas Mill.

 

Priority will be given to ramping up production at Fire Creek and beginning development of Hatter Graben. Midas is being ramped down, with personnel and machines moving to Hollister and Fire Creek.

 

Key focus for the Midas mill:

 

Completion of the Carbon-In-Leach (CIL) circuit to improve recoveries for processing Hollister ore.

 

Installation of new sampling equipment to better reconcile mill and mine reporting.

 

Construction of the new tailings facility.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

6

 

 

Key focus for Fire Creek:

 

Rehabilitating existing mine access, increasing development to allow increased throughput from 350 tpd to 550 tpd.

 

Rehabilitation includes improving road conditions with an engineered roadbase and introducing in-cycle shotcreting to improve development and better manage ground conditions.

 

Improving mine to mill reconciliation.

 

CAPITAL

 

Expectations for capital investment in 2018 have increased to $140-$145 million from $95-$105 million, reflecting approximately $20 million of investments to be made in the Nevada operations, including $11 million for Fire Creek development and definition drilling, $5 million for the new tailings facility at the Midas mill, and $2 million for completion of the CIL plant. The remaining change in capital estimates is due to the re-allocation of $10 million of costs relating to the RVM that is now being assembled in Sweden and is no longer a Research and Development expense and an additional $4 million of capital spending at each of Greens Creek and San Sebastian.     

 

EXPLORATION

 

Exploration (including corporate development) expenses for the second quarter were $7.8 million, an increase of $2.0 million compared to the prior year period. Full year exploration (including corporate development) expenses are expected to be $34-37 million, reflecting $10 million for the Nevada properties and more drilling at San Sebastian.

 

A complete summary of exploration for the second quarter can be found in the exploration news release entitled "Hecla Reports Continued Discoveries at the Mines, Integrates Nevada, and Advances Key Projects" issued on August 7, 2018.

 

PRE-DEVELOPMENT

 

Pre-development spending was $1.4 million for the quarter, slightly higher than the $1.1 million for the prior year period, principally to advance the permitting of Rock Creek and Montanore.

 

RESEARCH AND DEVELOPMENT

 

Research and Development spending was $2.3 million for the quarter, with completion of the design and procurement phase of the RVM project. Fabrication of the machine started at the end of the second quarter and is expected to be complete in the fourth quarter of 2018, and a testing phase in Sweden during the first half of 2019 is planned. The machine is expected to be delivered to Lucky Friday in late 2019. Expectations for 2018 Research and Development spending have declined to $6-$10 million from $12-$16 million, as investment in the RVM project are expected to be capitalized going forwards.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

7

 

 

2018 ESTIMATES7

 

The following revised estimates include the expected impact from the addition of Nevada operations through the acquisition of Klondex for the 5-month period from August 1 to December 31, 2018.

 

2018 Production Outlook

 

 

Silver Production

(Moz)

Gold Production

(Koz)

Silver Equivalent

(Moz)

Gold Equivalent

(Koz)

 

Original

(if revised)

Current

Original

(if revised)

Current

Original

(if revised)

Current

Original

(if revised)

Current

Greens Creek

7.5-8.0

7.5-8.1

 

50-55

 

21.0-22.5

300-313

300-315

Lucky Friday

               

San Sebastian

 

2.0-2.5

13-17

15-17

3.0-3.5

2.9-3.7

40-52

41-52

Casa Berardi

   

155-160

157-162

 

11.0-11.5

155-160

157-162

Nevada Operations

 

0.1-0.2

 

40-50

 

2.9-3.8

 

41-52

Total

9.5-10.5

9.6-10.8

218-232

262-284

35.0-37.5

37.8-41.5

495-525

539-581

 

 

2018 Cost Outlook

 

 

Costs of Sales (million)

Cash cost, after by-product

credits, per silver/gold ounce2,5

AISC, after by-product credits, per

produced silver/gold ounce3

 

Original

(if revised)

Current

Original

(if revised)

Current

Original

(if revised)

Current

Greens Creek

 

$198

$0.50

$(0.50)

$7.75

$7.00

Lucky Friday

           

San Sebastian

 

$44

 

$8.50

 

$12.50

Total Silver

 

$242

$2.25

$1.50

$12.75

$12.25

Casa Berardi

 

$185

 

$800

 

$1,100

Nevada Operations

 

$68

 

$800

 

$1,100

Total Gold

 

$253

 

$800

 

$1,100

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

8

 

 

2018 Capital and Exploration Outlook

 

 

Original

(if revised)

Current

2018E Capital expenditures (excluding capitalized interest)

$95-$105 million

140-145 million

2018E Exploration expenditures (includes Corporate Development)

$30-$37 million

$34-$37 million

2018E Pre-development expenditures

 

$5 million

2018E Research and Development expenditures

$12-$16 million

$6-$10 million

 

DIVIDENDS

 

Common

 

The Board of Directors elected to declare a quarterly cash dividend of $0.0025 per share of common stock, payable on or about August 31, 2018, to shareholders of record on August 24, 2018. The realized silver price was $16.61 in the second quarter and therefore did not satisfy the criteria for a larger dividend under the Company's dividend policy.

 

The Board of Directors also declared the regular quarterly dividend of $0.875 per share on the 157,816 outstanding shares of Series B Cumulative Convertible Preferred Stock. This represents a total amount to be paid of approximately $138,000. The cash dividend is payable October 1, 2018, to shareholders of record on September 14, 2018.

 

CONFERENCE CALL AND WEBCAST

 

A conference call and webcast will be held Thursday, August 9, at 10:00 a.m. Eastern Time to discuss these results. You may join the conference call by dialing toll-free 1-855-760-8158 or for international dialing 1-720-634-2922. The participant passcode is HECLA. Hecla's live and archived webcast can be accessed at www.hecla-mining.com under Investors or via Thomson StreetEvents Network.

 

ABOUT HECLA

 

Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading low-cost U.S. silver producer with operating mines in Alaska, Idaho, and Mexico and is a gold producer with operating mines in Quebec, Canada and Nevada. The Company also has exploration and pre-development properties in eight world-class silver and gold mining districts in the U.S., Canada and Mexico.

 

NOTES

 

Non-GAAP Financial Measures

 

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles in the United States (GAAP). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

9

 

 

(1) Adjusted net income (loss) applicable to common stockholders is a non-GAAP measurement, a reconciliation of which to net income (loss) applicable to common stockholders, the most comparable GAAP measure, can be found at the end of the release. Adjusted net income (loss) is a measure used by management to evaluate the Company's operating performance but should not be considered an alternative to net income (loss), or cash provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

 

(2) Adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to net income (loss), the most comparable GAAP measure, can be found at the end of the release. Adjusted EBITDA is a measure used by management to evaluate the Company's operating performance but should not be considered an alternative to net income (loss), or cash provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

 

(3) Net debt to adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to debt and net income (loss), the most comparable GAAP measurements, can be found at the end of the release. It is an important measure for management to measure relative indebtedness and the ability to service the debt relative to its peers. It is calculated as total debt outstanding less total cash on hand divided by adjusted EBITDA.

 

(4) Cash cost, after by-product credits, per silver or gold ounce is 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), can be found at the end of the release. It is an important operating statistic that management utilizes to measure each mine's operating performance. It also allows the benchmarking of performance of each mine versus those of our competitors.  As a primary silver mining company, management also uses the statistic on an aggregate basis - aggregating the Greens Creek, Lucky Friday and San Sebastian mines - to compare performance with that of other primary silver mining companies.  With regard to Casa Berardi and the Nevada operations, management uses cash cost, after by-product credits, per gold ounce to compare its performance with other gold mines.  Similarly, the statistic is useful in identifying acquisition and investment opportunities as it provides a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics. In addition, the Company may use it when formulating performance goals and targets under its incentive program. Cash cost, after by-product credits, per silver ounce is not presented for Lucky Friday for the second quarters of 2018 and 2017 and the first half of 2018, as production was limited due to the strike and results are not comparable to those from prior periods and are not indicative of future operating results under full production. The estimated fair value of the stockpile acquired at Hollister has been removed from the cash cost, after by-product credits calculation.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

10

 

 

(5) All in sustaining cost (AISC), after by-product credits, is a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization, the closest GAAP measurement, can be found in the end of the release. AISC, after by-product credits, includes cost of sales and other direct production costs, expenses for reclamation and exploration at the mines sites, corporate exploration related to sustaining operations, and all site sustaining capital costs.  AISC, after by-product credits, is calculated net of depreciation, depletion, and amortization and by-product credits. AISC, after by-product credits, per silver ounce is not presented for Lucky Friday for the second quarters of 2018 and 2017 and the first half of 2018, as production was limited due to the strike and results are not comparable to those from prior periods and are not indicative of future operating results under full production. 2018 AISC, after by-product credits, per gold ounce for the Nevada operations excludes $5 million of capital as it distorts the AISC estimates for the remainder part of the year. The estimated fair value of the stockpile acquired at Hollister has been removed from the AISC, after by-product credits calculation.

 

Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Management believes that all in sustaining costs is a non-GAAP measure that provides additional information to management, investors and analysts to help in the understanding of the economics of our operations and performance compared to other producers and in the investor's visibility by better defining the total costs associated with production. Similarly, the statistic is useful in identifying acquisition and investment opportunities as it provides a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

 

(6) Cash cost, after by-product credits, per gold ounce is only applicable to Casa Berardi production. Gold produced from Greens Creek and San Sebastian is treated as a by-product credit against the silver cash cost.

 

Other

 

(7) Expectations for 2018 includes silver, gold, lead and zinc production from Greens Creek, San Sebastian, Casa Berardi and Nevada operations converted using Au $1,225/oz, Ag $17.25/oz, Zn $1.30/lb, and Pb $1.00/lb. Lucky Friday expectations are currently suspended as there is currently a strike. Numbers may be rounded.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

11

 

 

Cautionary Statements to Investors on Forward-Looking Statements

 

This news release 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 to be covered by the safe harbor created by such sections and other applicable laws, including Canadian securities laws. Such forward-looking statements may include, without limitation: (i) estimates of future production and sales; (ii) the impact of the Klondex acquisition on Hecla's operations and results; (iii) expectations regarding the development, growth potential, financial performance of the Company’s projects; (iv) ability to complete construction of the remote vein miner and for it to operate successfully; (v) impact of the Lucky Friday strike on production and cash flow; (vi) ability to generate value from innovations being introduced into the mines; and (vii) impact of metals prices on cash costs, after by-product credits. Estimates or expectations of future events or results are based upon certain assumptions, which may prove to be incorrect. Such assumptions, include, but are not limited to: (i) there being no significant change to current geotechnical, metallurgical, hydrological and other physical conditions; (ii) permitting, development, operations and expansion of the Company’s projects being consistent with current expectations and mine plans; (iii) political/regulatory developments in any jurisdiction in which the Company operates being consistent with its current expectations; (iv) the exchange rates for the Canadian dollar and Mexican peso to the U.S. dollar, being approximately consistent with current levels; (v) certain price assumptions for gold, silver, lead and zinc; (vi) prices for key supplies being approximately consistent with current levels; (vii) the accuracy of our current mineral reserve and mineral resource estimates; and (viii) the Company’s plans for development and production will proceed as expected and will not require revision as a result of risks or uncertainties, whether known, unknown or unanticipated. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the “forward-looking statements.” Such risks include, but are not limited to gold, silver and other metals price volatility, operating risks, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, community relations, conflict resolution and outcome of projects or oppositions, litigation, political, regulatory, labor and environmental risks, and exploration risks and results, including that mineral resources are not mineral reserves, they do not have demonstrated economic viability and there is no certainty that they can be upgraded to mineral reserves through continued exploration. For a more detailed discussion of such risks and other factors, see the Company’s 2017 Form 10-K, filed on February 15, 2018, and Forms 10-Q filed on May 10, 2018 and August 9, 2018, with the Securities and Exchange Commission (SEC), as well as the Company’s other SEC filings. The Company does not undertake any obligation to publicly release revisions to any “forward-looking statement,” including, without limitation, outlook, to reflect events or circumstances after the date of this news release, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Investors should not assume that any lack of update to a previously issued “forward-looking statement” constitutes a reaffirmation of that statement. Continued reliance on “forward-looking statements” is at investors’ own risk.

 

 

 

 

For further information, please contact:

 

Mike Westerlund

Vice President - Investor Relations

800-HECLA91 (800-432-5291)

Email: hmc-info@hecla-mining.com

Website: www.hecla-mining.com

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

12

 

 

HECLA MINING COMPANY

Condensed Consolidated Statements of Income (Loss)

(dollars and shares in thousands, except per share amounts - unaudited)

 

 

   

Second Quarter Ended

   

Six Months Ended

 
   

June 30, 2018

   

June 30, 2017

   

June 30, 2018

   

June 30, 2017

 

Sales of products

  $ 147,259     $ 134,279     $ 286,968     $ 276,823  

Cost of sales and other direct production costs

    80,440       77,503       153,309       156,179  

Depreciation, depletion and amortization

    31,817       25,569       59,871       54,521  
      112,257       103,072       213,180       210,700  

Gross profit

    35,002       31,207       73,788       66,123  
                                 

Other operating expenses:

                               

General and administrative

    9,787       10,309       17,522       19,515  

Exploration

    7,838       5,853       15,198       10,367  

Pre-development

    1,415       1,052       2,420       2,304  

Research and development

    2,337       312       3,773       995  

Other operating expense

    638       699       1,153       1,362  

Provision for closed operations and environmental matters

    1,420       985       2,682       2,104  

Lucky Friday suspension-related costs

    6,801       8,024       11,818       9,605  

Acquisition costs

    1,010       (2

)

    3,517       25  
      31,246       27,232       58,083       46,277  

Income from operations

    3,756       3,975       15,705       19,846  

Other income (expense):

                               

Loss on disposition of investments

                      (167

)

Unrealized (loss) gain on investments

    (564

)

    (276

)

    (254

)

    51  

Gain (loss) on derivative contracts

    16,804       2,487       20,811       (5,322

)

Interest and other income

    108       319       52       644  

Net foreign exchange gain (loss)

    2,476       (3,883

)

    5,068       (6,145

)

Interest expense, net of amount capitalized

    (10,079

)

    (10,543

)

    (19,873

)

    (19,065

)

      8,745       (11,896

)

    5,804       (30,004

)

Income (loss) before income taxes

    12,501       (7,921

)

    21,509       (10,158

)

Income tax (provision) benefit

    (427

)

    (16,095

)

    (1,195

)

    12,976  

Net income (loss)

    12,074       (24,016

)

    20,314       2,818  

Preferred stock dividends

    (138

)

    (138

)

    (276

)

    (276

)

Income (loss) applicable to common shareholders

  $ 11,936     $ (24,154

)

  $ 20,038     $ 2,542  

Basic and diluted income (loss) per common share after preferred dividends

  $ 0.03     $ (0.06

)

  $ 0.05     $ 0.01  

Weighted average number of common shares outstanding - basic

    400,619       396,178       399,972       395,774  

Weighted average number of common shares outstanding - diluted

    403,610       396,178       402,873       399,236  

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

13

 

 

HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and shares in thousands - unaudited)

 

 

   

June 30, 2018

   

December 31, 2017

 

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 239,722     $ 186,107  

Short-term investments and securities

    5,556       33,758  

Accounts receivable:

               

Trade

    9,717       14,805  

Other, net

    19,307       17,385  

Inventories

    61,054       54,555  

Other current assets

    17,006       13,715  

Total current assets

    352,362       320,325  

Non-current investments

    7,449       7,561  

Non-current restricted cash and investments

    1,005       1,032  

Properties, plants, equipment and mineral interests, net

    2,006,592       2,020,021  

Non-current deferred income taxes

    1,179       1,509  

Other non-current assets and deferred charges

    24,007       14,509  

Total assets

  $ 2,392,594     $ 2,364,957  
                 

LIABILITIES

               

Current liabilities:

               

Accounts payable and accrued liabilities

  $ 53,835     $ 46,549  

Accrued payroll and related benefits

    23,661       31,259  

Accrued taxes

    6,143       5,919  

Current portion of capital leases

    6,015       5,608  

Current portion of debt

           

Other current liabilities

    7,364       16,116  

Current portion of accrued reclamation and closure costs

    8,315       6,679  

Total current liabilities

    105,333       112,130  

Capital leases

    8,757       6,193  

Accrued reclamation and closure costs

    78,102       79,366  

Long-term debt

    533,230       502,229  

Non-current deferred tax liability

    112,462       121,546  

Non-current pension liability

    48,973       46,628  

Other non-current liabilities

    4,438       12,983  

Total liabilities

    891,295       881,075  
                 

SHAREHOLDERS’ EQUITY

               

Preferred stock

    39       39  

Common stock

    101,643       100,926  

Capital surplus

    1,628,440       1,619,816  

Accumulated deficit

    (176,158

)

    (195,484

)

Accumulated other comprehensive loss

    (31,929

)

    (23,373

)

Treasury stock

    (20,736

)

    (18,042

)

Total shareholders’ equity

    1,501,299       1,483,882  

Total liabilities and shareholders’ equity

  $ 2,392,594     $ 2,364,957  

Common shares outstanding

    401,322       399,176  

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

14

 

 

HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)

 

   

Six Months Ended

 
   

June 30, 2018

   

June 30, 2017

 

OPERATING ACTIVITIES

               

Net income

  $ 20,314     $ 2,818  

Non-cash elements included in net income:

               

Depreciation, depletion and amortization

    62,852       56,908  

Unrealized loss on investments

    254       117  

Gain on disposition of properties, plants, equipment and mineral interests

    (166

)

    (94

)

Provision for reclamation and closure costs

    2,640       2,247  

Stock compensation

    2,441       2,831  

Deferred income taxes

    (2,977

)

    (22,113

)

Amortization of loan origination fees

    898       967  

(Gain) loss on derivative contracts

    (30,236

)

    5,386  

Foreign exchange (gain) loss

    (5,348

)

    5,201  

Other non-cash items, net

    (35

)

    2  

Change in assets and liabilities:

               

Accounts receivable

    2,471       (1,150

)

Inventories

    (6,865

)

    1,594  

Other current and non-current assets

    (2,507

)

    3,896  

Accounts payable and accrued liabilities

    8,701       (10,937

)

Accrued payroll and related benefits

    (337

)

    (4,901

)

Accrued taxes

    (672

)

    4,408  

Accrued reclamation and closure costs and other non-current liabilities

    (4,410

)

    (1,359

)

Cash provided by operating activities

    47,018       45,821  
                 
INVESTING ACTIVITIES                

Additions to properties, plants, equipment and mineral interests

    (43,304

)

    (45,964

)

Proceeds from disposition of properties, plants and equipment

    463       142  

Purchases of investments

    (31,682

)

    (23,280

)

Maturities of investments

    59,336       14,356  

Net cash used in investing activities

    (15,187

)

    (54,746

)

                 

FINANCING ACTIVITIES

               

Proceeds from issuance of stock, net of related costs

          9,610  

Acquisition of treasury shares

    (2,694

)

    (2,474

)

Dividends paid to common shareholders

    (2,000

)

    (1,981

)

Dividends paid to preferred shareholders

    (276

)

    (276

)

Credit availability and debt issuance fees paid

    (3

)

    (91

)

Repayments of debt

          (470

)

Issuance of debt

    31,024        

Repayments of capital leases

    (3,762

)

    (3,245

)

Net cash provided by financing activities

    22,289       1,073  

Effect of exchange rates on cash

    (532

)

    1,086  

Net increase (decrease) in cash, cash equivalents and restricted cash

    53,588       (6,766

)

Cash, cash equivalents and restricted cash at beginning of period

    187,139       171,977  

Cash, cash equivalents and restricted cash at end of period

  $ 240,727     $ 165,211  

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

15

 

 

HECLA MINING COMPANY

 

Production Data

 

   

Three Months Ended

 

Six Months Ended

   

June 30, 2018

   

June 30, 2017

 

June 30, 2018

   

June 30, 2017

GREENS CREEK UNIT

                                 

Tons of ore milled

    208,409       210,788         419,839       407,917  

Mining cost per ton of ore

  $ 69.83     $ 68.17       $ 69.41     $ 69.74  

Milling cost per ton of ore

  $ 33.59     $ 32.56       $ 33.11     $ 33.12  

Ore grade milled - Silver (oz./ton)

    12.46       12.11         12.08       12.40  

Ore grade milled - Gold (oz./ton)

    0.100       0.097         0.097       0.099  

Ore grade milled - Lead (%)

    3.17       2.68         3.06       2.86  

Ore grade milled - Zinc (%)

    7.84       7.20         7.95       7.50  

Silver produced (oz.)

    1,999,791       1,932,047         3,913,023       3,861,344  

Gold produced (oz.)

    13,719       12,704         26,837       26,726  

Lead produced (tons)

    5,305       4,420         10,326       9,229  

Zinc produced (tons)

    14,179       12,966         28,978       26,372  

Cash cost, after by-product credits, per silver ounce (1)

  $ (3.47

)

  $ 1.86       $ (4.22

)

  $ 1.26  

AISC, after by-product credits, per silver ounce (1)

  $ 4.43     $ 8.71       $ 2.56     $ 6.28  

Capital additions (in thousands)

  $ 14,183     $ 11,451       $ 23,665     $ 16,685  

LUCKY FRIDAY UNIT

                                 

Tons of ore milled

    3,447               13,006       57,069  

Mining cost per ton of ore

  $ 89.54     $       $ 108.08     $ 104.72  

Milling cost per ton of ore

  $ 6.15     $       $ 17.56     $ 27.16  

Ore grade milled - Silver (oz./ton)

    10.63               10.98       12.39  

Ore grade milled - Lead (%)

    7.28               7.01       7.05  

Ore grade milled - Zinc (%)

    3.43               4.43       3.99  

Silver produced (oz.)

    24,687               124,467       680,782  

Lead produced (tons)

    217               823       3,827  

Zinc produced (tons)

    120               532       2,131  

Cash cost, after by-product credits, per silver ounce (1)

  $     $       $       5.93  

AISC, after by-product credits, per silver ounce (1)

  $     $       $     $ 12.06  

Capital additions (in thousands)

  $ 1,061     $ 805       $ 2,049     $ 4,792  

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

16

 

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30, 2018

 

June 30, 2017

   

June 30, 2018

 

June 30, 2017

 
CASA BERARDI UNIT                                

Tons of ore milled - underground

    184,373       195,039       375,706       399,992  

Tons of ore milled - surface pit

    165,564       135,070       322,780       223,809  

Tons of ore milled - total

    349,937       330,109       698,486       623,801  

Surface tons mined - ore and waste

    1,961,171       2,106,308       3,637,605       4,416,543  

Mining cost per ton of ore - underground

  $ 106.75     $ 99.01     $ 106.28     $ 99.23  

Mining cost per ton - combined

  $ 73.61     $ 76.83     $ 75.28     $ 81.42  

Mining cost per ton of ore and waste - surface tons mined

  $ 3.10     $ 2.53     $ 3.48     $ 2.58  

Milling cost per ton of ore

  $ 16.71     $ 15.50     $ 16.34     $ 16.33  

Ore grade milled - Gold (oz./ton) - underground

    0.209       0.148       0.195       0.155  

Ore grade milled - Gold (oz./ton) - surface pit

    0.062       0.078       0.070       0.082  

Ore grade milled - Gold (oz./ton) - combined

    0.140       0.119       0.137       0.129  

Ore grade milled - Silver (oz./ton)

    0.04       0.03       0.03       0.03  

Gold produced (oz.) - underground

    33,743       23,780       63,265       52,430  

Gold produced (oz.) - surface pit

    8,979       9,481       19,634       16,638  

Gold produced (oz.) - total

    42,722       33,261       82,899       69,068  

Silver produced (oz.)

    12,298       8,477       21,189       17,022  

Cash cost, after by-product credits, per gold ounce (1)

  $ 775     $ 972     $ 800     $ 927  

AISC, after by-product credits, per gold ounce (1)

  $ 1,039     $ 1,373     $ 1,062     $ 1,312  

Capital additions (in thousands)

  $ 9,809     $ 12,063     $ 18,876     $ 24,474  

SAN SEBASTIAN

                               

Tons of ore milled

    37,780       38,478       72,177       75,141  

Mining cost per ton of ore

  $ 180.12     $ 41.63     $ 149.14     $ 40.16  

Milling cost per ton of ore

  $ 65.46     $ 66.97     $ 66.25     $ 65.29  

Ore grade milled - Silver (oz./ton)

    15.93       23.87       16.01       22.85  

Ore grade milled - Gold (oz./ton)

    0.115       0.182       0.127       0.182  

Silver produced (oz.)

    559,647       866,950       1,071,839       1,617,753  

Gold produced (oz.)

    3,872       6,596       8,385       12,880  

Cash cost, after by-product credits, per silver ounce (1)

  $ 9.79     $ (3.31

)

  $ 6.46     $ (3.29

)

AISC, after by-product credits, per silver ounce (1)

  $ 17.15     $ 0.06     $ 12.95     $ 0.24  

Capital additions (in thousands)

  $ 1,680     $ 2,423     $ 2,110     $ 4,130  

 

 

 

(1)

Cash cost, after by-product credits, per ounce and AISC, after by-product credits. per ounce represent non-U.S. Generally Accepted Accounting Principles (GAAP) measurements. A reconciliation of cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) to cash cost, after by-product credits can be found in the cash cost per ounce reconciliation section of this news release. Gold, lead and zinc produced have been treated as by-product credits in calculating silver costs per ounce. The primary metal produced at Casa Berardi is gold, with a by-product credit for the value of silver production.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

17

 

 

Non-GAAP Measures

(Unaudited)

 

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, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP)

 

The tables below present reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion and amortization to the non-GAAP measures of Cash Cost, Before By-product Credits, Cash Cost, After By-product Credits, AISC, Before By-product Credits and AISC, After By-product Credits for our operations at the Greens Creek, Lucky Friday, San Sebastian and Casa Berardi units for the three- and six-month periods ended June 30, 2018 and 2017 and for estimated result for the full-year of 2018.

 

Cash Cost, After By-product Credits, per Ounce is an important operating statistic that we utilize to measure each mine's operating performance. AISC, After By-product Credits, per Ounce is an important operating statistic that we utilize as a measures of our mines' net cash flow after costs for exploration, pre-development, reclamation, and sustaining capital. Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce also allow us to benchmark the performance of each of our mines versus those of our competitors. As a primary silver mining company, we also use these statistics on an aggregate basis - aggregating the Greens Creek, Lucky Friday and San Sebastian mines - to compare our performance with that of other primary silver mining companies. With regard to Casa Berardi, we use Cash Cost, After By-product Credits, per Gold Ounce AISC, After By-product Credits, per Gold Ounce to compare its performance with other gold mines. Similarly, these statistics are useful in identifying acquisition and investment opportunities as they provide a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics.

 

Cash Cost, Before By-product Credits and AISC, Before By-product Credits include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs, royalties and mining production taxes. AISC, Before By-product Credits for each mine also includes on-site exploration, reclamation, and sustaining capital costs. AISC, Before By-product Credits for our consolidated silver properties also includes corporate costs for general and administrative expense, reclamation, exploration, and pre-development. By-product credits include revenues earned from all metals other than the primary metal produced at each unit. As depicted in the tables below, by-product credits comprise an essential element of our silver unit cost structure, distinguishing our silver operations due to the polymetallic nature of their orebodies. Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce provide management and investors an indication of operating cash flow, after consideration of the average price, received from production. We also use these measurements for the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective. Cash Cost, After By-product Credits, per Ounce is a measure developed by precious metals companies (including the Silver Institute) in an effort to provide a uniform standard for comparison purposes. There can be no assurance, however, that our reporting of these non-GAAP measures are the same as those reported by other mining companies.

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

18

 

 

The Casa Berardi section below reports Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce for the production of gold, its primary product, and by-product revenues earned from silver, which is a by-product at Casa Berardi. Only costs and ounces produced relating to units with the same primary product are combined to represent Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce. Thus, the gold produced at our Casa Berardi unit is not included as a by-product credit when calculating Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the total of Greens Creek, Lucky Friday and San Sebastian, our combined silver properties.

 

In thousands (except per ounce amounts)

 

Three Months Ended June 30, 2018

 
   

Greens

Creek

   

Lucky

Friday(2)

   

San

Sebastian

   

Corporate(3)

   

Total

Silver

   

Casa

Berardi

(Gold)

   

Total

 

Cost of sales and other direct production costs and depreciation, depletion and amortization

  $ 47,742       1,744     $ 11,076             $ 60,562     $ 51,695     $ 112,257  

Depreciation, depletion and amortization

    (11,813

)

    (182

)

    (1,107

)

            (13,102

)

    (18,715

)

    (31,817

)

Treatment costs

    9,481       55       116               9,652       559       10,211  

Change in product inventory

    321       (1,160

)

    769               (70

)

    (78

)

    (148

)

Reclamation and other costs

    (449

)

    (58

)

    (319

)

            (826

)

    (139

)

    (965

)

Exclusion of Lucky Friday cash costs

          (399

)

                  (399

)

          (399

)

Cash Cost, Before By-product Credits (1)

    45,282             10,535               55,817       33,322       89,139  

Reclamation and other costs

    850               103               953       140       1,093  

Exploration

    778               2,334       434       3,546       1,330       4,876  

Sustaining capital

    14,183               1,680       517       16,380       9,809       26,189  

General and administrative

                            9,787       9,787               9,787  

AISC, Before By-product Credits (1)

    61,093             14,652               86,483       44,601       131,084  

By-product credits:

                                                       

Zinc

    (27,492

)

                          (27,492

)

            (27,492

)

Gold

    (15,716

)

          (5,057

)

            (20,773

)

            (20,773

)

Lead

    (9,022

)

                          (9,022

)

            (9,022

)

Silver

                                            (201

)

    (201

)

Total By-product credits

    (52,230

)

          (5,057

)

            (57,287

)

    (201

)

    (57,488

)

Cash Cost, After By-product Credits

  $ (6,948

)

  $     $ 5,478             $ (1,470

)

  $ 33,121     $ 31,651  

AISC, After By-product Credits

  $ 8,863     $     $ 9,595             $ 29,196     $ 44,400     $ 73,596  

Divided by ounces produced

    2,000             560               2,560       43          

Cash Cost, Before By-product Credits, per Ounce

  $ 22.65     $     $ 18.82             $ 21.81     $ 779.96          

By-product credits per ounce

    (26.12

)

          (9.03

)

            (22.38

)

    (4.70

)

       

Cash Cost, After By-product Credits, per Ounce

  $ (3.47

)

  $     $ 9.79             $ (0.57

)

  $ 775.26          

AISC, Before By-product Credits, per Ounce

  $ 30.55     $     $ 26.18             $ 33.78     $ 1,043.97          

By-product credits per ounce

    (26.12

)

          (9.03

)

            (22.38

)

    (4.70

)

       

AISC, After By-product Credits, per Ounce

  $ 4.43     $     $ 17.15             $ 11.40     $ 1,039.27          

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

19

 

 

In thousands (except per ounce amounts)

 

Three Months Ended June 30, 2017

 
   

Greens

Creek

   

Lucky

Friday(2)

   

San

Sebastian

   

Corporate(3)

   

Total

Silver

   

Casa

Berardi

(Gold)

   

Total

 

Cost of sales and other direct production costs and depreciation, depletion and amortization

  $ 54,318     $     $ 5,074             $ 59,392     $ 43,680     $ 103,072  

Depreciation, depletion and amortization

    (13,503

)

          (722

)

            (14,225

)

    (11,344

)

    (25,569

)

Treatment costs

    11,423             259               11,682       554       12,236  

Change in product inventory

    (5,542

)

          815               (4,727

)

    (212

)

    (4,939

)

Reclamation and other costs

    (694

)

          (5

)

            (699

)

    (212

)

    (911

)

Cash Cost, Before By-product Credits (1)

    46,002             5,421               51,423       32,466       83,889  

Reclamation and other costs

    667             117               784       213       997  

Exploration

    1,117             1,957       452       3,526       1,071       4,597  

Sustaining capital

    11,451             845       256       12,552       12,059       24,611  

General and administrative

                            10,309       10,309               10,309  

AISC, Before By-product Credits (1)

    59,237             8,340               78,594       45,809       124,403  

By-product credits:

                                                       

Zinc

    (21,647

)

                          (21,647

)

            (21,647

)

Gold

    (13,917

)

            (8,287

)

            (22,204

)

            (22,204

)

Lead

    (6,847

)

                          (6,847

)

            (6,847

)

Silver

                                            (142

)

    (142

)

Total By-product credits

    (42,411

)

          (8,287

)

            (50,698

)

    (142

)

    (50,840

)

Cash Cost, After By-product Credits

  $ 3,591     $     $ (2,866

)

          $ 725     $ 32,324     $ 33,049  

AISC, After By-product Credits

  $ 16,826     $     $ 53             $ 27,896     $ 45,667     $ 73,563  

Divided by ounces produced

    1,932             867               2,799       33          

Cash Cost, Before By-product Credits, per Ounce

  $ 23.81     $     $ 6.25             $ 18.37     $ 976.07          

By-product credits per ounce

    (21.95

)

          (9.56

)

            (18.11

)

    (4.25

)

       

Cash Cost, After By-product Credits, per Ounce

  $ 1.86     $     $ (3.31

)

          $ 0.26     $ 971.82          

AISC, Before By-product Credits, per Ounce

  $ 30.66     $     $ 9.62             $ 28.08     $ 1,377.21          

By-product credits per ounce

    (21.95

)

          (9.56

)

            (18.11

)

    (4.25

)

       

AISC, After By-product Credits, per Ounce

  $ 8.71     $     $ 0.06             $ 9.97     $ 1,372.96          

 

 

Investor Relations, Hecla Mining Company • 1-800-432-5291 • hmc-info@hecla-mining.com

20

 

 

In thousands (except per ounce amounts)

 

Six Months Ended June 30, 2018

 
   

Greens

Creek

   

Lucky

Friday(2)

   

San

Sebastian

   

Corporate(3)

   

Total

Silver

   

Casa

Berardi

(Gold)

   

Total

 

Cost of sales and other direct production costs and depreciation, depletion and amortization

  $ 89,602     $ 5,844     $ 16,852             $ 112,298     $ 100,882     $ 213,180  

Depreciation, depletion and amortization

    (22,452

)

    (803

)

    (1,791

)

            (25,046

)

    (34,825

)

    (59,871

)

Treatment costs

    20,869       627       320               21,816       1,094       22,910  

Change in product inventory

    5,475       (2,182

)

    3,407               6,700       (179

)

    6,521  

Reclamation and other costs

    (1,360

)

    (103

)

    (814

)

            (2,277

)

    (281

)

    (2,558

)

Exclusion of Lucky Friday cash costs

          (3,383

)

                  (3,383

)

          (3,383

)

Cash Cost, Before By-product Credits (1)

    92,134             17,974               110,108       66,691       176,799  

Reclamation and other costs

    1,699             209               1,908       283       2,191  

Exploration

    1,138             4,646       878       6,662       2,520       9,182  

Sustaining capital

    23,665             2,110       634       26,409       18,876       45,285  

General and administrative

                            17,522       17,522               17,522  

AISC, Before By-product Credits (1)

    118,636             24,939               162,609       88,370       250,979  

By-product credits:

                                                       

Zinc

    (59,634

)

                          (59,634

)

            (59,634

)

Gold

    (31,008

)

            (11,055

)

            (42,063

)

            (42,063

)

Lead

    (17,996

)

                          (17,996

)

            (17,996

)

Silver

                                            (349

)

    (349