Toggle SGML Header (+)


Section 1: 8-K (HECLA MINING COMPANY 8-K)





UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  February 21, 2019

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.





Item 2.02.   Results of Operations and Financial Condition.

          On February 21, 2019, Hecla Mining Company (the “Company”) issued a news release announcing the Company’s fourth quarter 2018 and twelve months ended December 31, 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 this Item 2.02, including Exhibit 99.1, 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 documents 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 8.01   Other Events

Dividends

As disclosed in Exhibit 99.1, the Company also announced it would pay a dividend on its shares of common stock in the amount of $0.0025, to shareholders of record as of March 5, 2019, payable on or about March 13, 2019.    In addition to the common stock dividend, the Company also announced it declared a dividend of $0.875 on its Series B Cumulative Convertible Preferred Stock to shareholders of record as of March 15, 2019, payable on or about April 1, 2019.  

Item 9.01.  Financial Statements and Exhibits.

(d)  Exhibits

 

(d)  Exhibits

 
 

Exhibit

Number

Description
 

99.1

News Release, dated February 21, 2019.


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:

February 21, 2019

 

 

Hecla Mining Company

 

 

By:

/s/ David C. Sienko

David C. Sienko

Vice President & General Counsel

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

Hecla Reports Fourth Quarter and Full Year 2018 Results

Record gold production; Record reserves for gold, silver, and lead

COEUR D'ALENE, Idaho--(BUSINESS WIRE)--February 21, 2019--Hecla Mining Company (NYSE:HL) today announced fourth quarter and full year 2018 financial and operating results.

YEAR-END HIGHLIGHTS

"Greens Creek and Casa Berardi are the economic engines of Hecla, and the continued increase in reserves and resources, extended mine life and positive changes to the mine plans are surfacing additional value at these operations,” said Phillips S. Baker, Jr., President and CEO. “This allows investment in our three other mines, which all have the potential to be long-lived with strong economics like Greens Creek and Casa Berardi. The turnaround of the Nevada operations continues with an increasing development rate at Fire Creek that should allow the mine to have operating consistency as we increase production. This is the same approach we took when we first acquired Greens Creek and Casa Berardi. Substantial exploration is planned for both Fire Creek and Hollister this year as we work to convert resources to reserves and discover additional resources. With the Hatter Graben decline about 15% complete, we expect to start drilling between the current Hollister mine area and the Hatter Graben soon."

"At San Sebastian we continue to discover and mine oxide mineralization while we take a bulk sample to determine the potential economics of the sulfide ore," Mr. Baker continued.

     

1,2

   

Non-GAAP measures. See pages 10 and 11 for more information.

7

See page 11 for details of equivalent production.

 

SILVER AND GOLD RESERVE SUMMARY

Proven and probable silver reserves are 191 million ounces, an increase of 8% over December 31, 2017 levels. Proven and probable gold reserves are 2.9 million ounces, an increase of 26% over December 31, 2017 levels. Proven and probable zinc and lead reserves of 932,000 tons and 774,000 tons are increases of 11% and 5%, respectively, over December 31, 2017 levels. The reserves for gold, silver and lead are the highest in Company history. The price assumptions used for 2018 reserves of $14.50 for silver, $1,200 for gold, $1.15 for zinc and $0.90 for lead are unchanged from last year, with the exception of zinc, which was $1.05 in 2017. The silver price assumption is among the lowest in the industry.

Please refer to the reserves and resources tables at the end of this press release, or to the press release entitled "Hecla Reports Record Gold, Silver and Lead Reserves" issued on February 14, 2019, for the breakdown between proven and probable reserve and resource levels, as well as a detailed summary of the Company's exploration programs.

Revised NI 43-101 Technical Reports for Greens Creek and Casa Berardi are expected by April. At Greens Creek, the optimized mine plan accelerates access to higher-grade ore, enabling the expected highest margin reserves to be extracted in the earlier years of the mine plan. In addition, the increase in reserves is expected to extend the mine life, excluding resources, by about three years to 2030.

FINANCIAL OVERVIEW

      Fourth Quarter Ended       Twelve Months Ended
HIGHLIGHTS      

December 31,

2018

     

December 31,

2017

December 31,

2018

     

December 31,

2017

FINANCIAL DATA                          
Sales (000) $ 136,520       $ 160,113 $ 567,137       $ 577,775
Gross profit (loss) (000) $ (1,265 ) $ 46,310 $ 79,099 $ 152,449
Loss applicable to common stockholders (000) $ (23,831 ) $ (29,105 ) $ (27,115 ) $ (29,072 )
Basic and diluted loss per common share $ (0.05 ) $ (0.07 ) $ (0.06 ) $ (0.07 )
Cash provided by operating activities (000) $ 19,011 $ 41,763 $ 94,221 $ 115,878
 

Net loss applicable to common stockholders for the fourth quarter and full year of 2018 was $23.8 million and $27.1 million, or $0.05 and $0.06 per basic share, respectively, compared to net losses applicable to common stockholders of $29.1 million, or $0.07 per basic share, for both periods of the prior year. Among items impacting the results for the 2018 periods compared to 2017 were the following:


Cash provided by operating activities for the fourth quarter and full year of 2018 of $19.0 million and $94.2 million, respectively, was $22.8 million and $21.7 million lower, respectively, as compared to the prior year periods. The decrease in 2018 was mainly the result of lower production and higher exploration spending, as well as acquisition costs, partly offset by cash proceeds from settlement of base metals derivative contracts prior to their maturity date.

Adjusted EBITDA was $28.1 million for the fourth quarter of 2018, compared to $71.1 million for the same period of 2017, and $211.9 million for the full year of 2018, compared to $231.9 million in 2017.3 The decreases were due to lower production and higher exploration spending.


Capital expenditures at the operations totaled $53.2 million for the fourth quarter of 2018, including $17.6 million at Nevada operations, $13.6 million at Casa Berardi, $12.2 million at Greens Creek, $7.3 million at Lucky Friday, and $2.5 million at San Sebastian. Capital expenditures for the year 2018 totaled $140.6 million at the operations, compared to $103.4 million in 2017.

Metals Prices

Average realized silver prices in the fourth quarter and full year 2018 were $14.58 and $15.63 per ounce, respectively, compared to $16.87 and $17.23, respectively, for the prior year periods. Realized prices for gold for the fourth quarter and full year 2018 were $1,237 and $1,265 per ounce, respectively, 3% lower compared to the fourth quarter 2017, while the price for the year ended slightly higher. Average realized prices for lead and zinc for the fourth quarter of 2018 were 23% and 21% lower, respectively, compared to the prior year period. The average realized prices for lead and zinc for the full year of 2018 were 2% and 4% lower, respectively, compared to 2017.

OPERATIONS OVERVIEW

Overview

The following table provides the production summary on a consolidated basis for the fourth quarter and twelve months ended December 31, 2018 and 2017:

          Fourth Quarter Ended       Twelve Months Ended
             

December 31,

2018

     

December 31,

2017

December 31,

2018

     

December 31,

2017

PRODUCTION SUMMARY                  
Silver - Ounces produced 2,715,385       2,984,786 10,369,503       12,484,844
Payable ounces sold 2,260,690 3,210,306 9,254,385 11,308,958
Gold - Ounces produced 70,987 60,964 262,103 232,684
Payable ounces sold 64,478 58,008 247,528 219,929
Lead - Tons produced 4,704 4,307 20,091 22,733
Payable tons sold 3,615 4,348 16,214 17,960
Zinc - Tons produced 13,711 12,107 56,023 55,107
Payable tons sold 9,201 10,066 39,273 39,335
 

3

   

Non-GAAP measures. See page 11 for more information.

 

The following table provides a summary of the final production, cost of sales, cash cost, after by-product credits, per silver or gold ounce, and AISC, after by-product credits, per silver and gold ounce, for the fourth quarter and twelve months ended December 31, 2018:

Fourth Quarter     Total   Greens Creek  

Lucky Friday

  San Sebastian   Casa Berardi   Nevada Operations
2018     Silver   Gold   Silver   Gold   Silver   Silver   Gold   Gold   Silver   Gold   Silver
Production (ounces)     2,715,385     70,987     2,163,563     13,097     13,026     443,302     2,928     35,864     7,338     19,098     88,156
Increase/(decrease) over 2017     (9 )%   16 %   1 %   13 %   (81 )%   (42 )%   (51 )%   (17 )%   (26 )%   N/A   N/A
Cost of sales & other direct production costs and depreciation, depletion and amortization (000)     $ 62,846     $ 74,938     $ 48,302     N/A   $ 3,906     $ 10,638     N/A   $ 47,253     N/A   $ 27,686     N/A
Increase/(decrease) over 2017     (7 )%   62 %   (22 )%   N/A   591 %   100 %   N/A   2 %   N/A   N/A   N/A
Cash costs, after by-prod credits, per silver or gold ounce 1,4     $ 4.01     $ 1,048     $ 1.79     N/A   N/A   $ 14.78     N/A   $ 940     N/A   $ 1,251     N/A
Increase/(decrease) over 2017     $ 4.56     $ 329     $ 1.13     N/A   N/A   $ 18.58     N/A   $ 221     N/A   N/A   N/A

AISC, after by-prod credits, per silver or gold ounce 2

    $ 13.53     $ 1,582     $ 7.92     N/A   N/A   $ 19.51     N/A   $ 1,348     N/A   $ 2,020     N/A
Increase/(decrease) over 2017     $ 6.30     $ 543     $ 1.69     N/A   N/A   $ 20.15     N/A   $ 309     N/A   N/A   N/A
 
Twelve Months Ended Total Greens Creek Lucky Friday San Sebastian Casa Berardi Nevada Operations
Dec 31, 2018     Silver   Gold   Silver   Gold   Silver   Silver   Gold   Gold   Silver   Gold   Silver
Production (ounces)     10,369,503     262,103     7,953,003     51,493     169,041     2,037,072     14,979     162,744     38,086     32,887     172,301
Increase/(decrease) over 2017     (17 )%   13 %   (5 )%   1 %   (80 )%   (37 )%   (41 )%   4 %   4 %   N/A   N/A
Cost of sales & other direct production costs and depreciation, depletion and amortization (000)     $ 241,631     $ 246,407     $ 190,066     N/A   $ 9,750     $ 41,815     N/A   $ 199,402     N/A   $ 47,005     N/A
Increase/(decrease) over 2017     0.4 %   33 %   (6 )%   N/A   (35 )%   76 %   N/A   8 %   N/A   N/A   N/A
Cash costs, after by-prod credits, per silver or gold ounce 1,4     $ 1.08     $ 871     $ (1.13 )   N/A   N/A   $ 9.69     N/A   $ 800     N/A   $ 1,221     N/A
Increase/(decrease) over 2017     $ 1.08     $ 51     $ (1.84 )   N/A   N/A   $ 13.05     N/A   $ (19 )   N/A   N/A   N/A

AISC, after by-prod credits, per silver or gold ounce 2

    $ 11.44     $ 1,226     $ 5.58     N/A   N/A   $ 14.68     N/A   $ 1,080     N/A   $ 1,950     N/A
Increase/(decrease) over 2017     $ 3.58     $ 52     $ (0.18 )   N/A   N/A   $ 14.94     N/A   $ (94 )   N/A   N/A   N/A
         

Greens Creek Mine - Alaska

For the fourth quarter, silver production was 2,163,563 ounces and gold production was 13,097 ounces, increases of 1% and 13%, respectively, compared to the prior year periods. Full year 2018 silver production was 7,953,003 ounces, a decrease of 5% compared to the prior year period, and 2018 gold production was 51,493 ounces, an increase of 1%. The decrease in silver production resulted from lower grades, and gold production was modestly higher due to higher throughput. The mill operated at an average of 2,310 tons per day (tpd) in the fourth quarter and 2,316 tpd for the full year. The annual throughput was a record.

The cost of sales for the fourth quarter and full year 2018 was $48.3 million and $190.1 million, respectively, a decrease of 22% and 6%, respectively, over the prior year periods. The cash cost, after by-product credits, per silver ounce, for the quarter and full year was $1.79 and $(1.13), respectively, an increase from $0.66 for the fourth quarter 2017, and a decrease from $0.71 for the full year 2017.1 The AISC, after by-product credits, was $7.92 per silver ounce for the fourth quarter and $5.58 for the full year of 2018, up for the quarter from $6.23 and lower for the year from $5.76.2 The higher per silver ounce cash cost, after by-product credits, for the quarter was primarily due to higher production costs and lower by-product credits. The increase in AISC, after by-product credits, for the quarter resulted from higher capital spending. The decrease in cash cost, after by-product credits, per silver ounce for the full year of 2018 was due to higher by-product credits. The impact of higher by-product credits on AISC, after by-product credits, was partially offset by higher capital spending for the full year of 2018.

For the full year of 2018, Greens Creek generated cash provided by operating activities of approximately $125.1 million and spent $40.8 million on additions to properties, plants and equipment, resulting in free cash flow of $84.3 million.5

Casa Berardi - Quebec

Gold production of 35,864 ounces during the fourth quarter 2018, including 4,849 ounces from the East Mine Crown Pillar (EMCP) pit, was 17% lower than the same period of 2017 due to lower grades. Full year 2018 gold production of 162,744 ounces, including 32,097 ounces from the EMCP pit, was higher than the prior year period by 4% and the highest since acquisition of the operation. The mill operated at an average of 3,515 tpd in the fourth quarter 2018 and 3,769 tpd for the year, which is a record and 218 tpd more than 2017, as well as approximately 1,800 tpd more than at acquisition.

Cost of sales was $47.3 million and $199.4 million for the fourth quarter and full year 2018, respectively, increases of 2% and 8%, respectively, over the prior year periods. The cash cost, after by-product credits, per gold ounce of $940 for the fourth quarter 2018 increased 31% over the prior year period, due to lower gold production.7 For the full year 2018, the cash cost, after by-product credits, per gold ounce, decreased to $800, from $820 for the prior year period, due to higher gold production and expensing of EMCP pit stripping costs during the first half of 2017.1,4 The AISC, after by-product credits, was $1,348 per gold ounce for the fourth quarter and $1,080 for the full year 2018 compared to $1,039 and $1,174 in the same periods of 2017. The increase for the quarter was due to higher capital spending, with the decrease for the full year due to higher gold production and lower capital spending.2


For the full year of 2018, Casa Berardi generated cash provided by operating activities of approximately $82.9 million and spent $39.7 million on additions to properties, plants and equipment, resulting in free cash flow of $43.2 million.5

San Sebastian - Mexico

Silver production was 443,302 ounces for the fourth quarter and 2,037,072 ounces for the full year of 2018 compared to 759,100 and 3,257,738 for the same periods of 2017. Gold production was 2,928 ounces for the fourth quarter and 14,979 ounces for the full year of 2018, compared to 5,955 and 25,177 for the same periods of 2017. The lower metal production was expected due to lower grades as a result of the transition from shallow, high-grade open pits to underground production. The mill operated at an average of 487 tpd in the fourth quarter 2018 and 429 tpd for the year.

The cost of sales was $10.6 million and $41.8 million for the fourth quarter and full year 2018, respectively, compared to $5.3 million and $23.7 million, respectively, for the same periods in 2017. Cash cost, after by-product credits, per silver ounce was $14.78 in the fourth quarter and $9.69 for the full year of 2018, compared to ($3.80) and ($3.36) for the same periods of 2017.1 The AISC, after by-product credits, was $19.51 for the fourth quarter and $14.68 for the full year of 2018 compared to ($0.64) and ($0.26) for the same periods of 2017.2 The increases in cash cost, after by-product credits, per silver ounce and AISC, after by-product credits, per silver ounce, were due to lower silver and gold production and higher mining costs as a result of the transition to underground mining.

A review of sulfide ore is underway, including a bulk sample to test the capabilities of the third-party plant.

Nevada Operations

For the fourth quarter of 2018, 19,098 gold ounces and 88,156 silver ounces were produced. For the period July 20, 2018 to December 31, 2018, 32,887 gold ounces and 172,301 silver ounces were produced. During 2018, the Nevada operations focused on development at Fire Creek and Hollister, limiting production as little development had been undertaken earlier in the year by Klondex. While the development rate at Fire Creek has exceeded the planned advance, the focus remains on finding ways to maintain the development rate in all ground conditions. In addition, the increasing development is providing additional drill platforms to enhance the exploration program, and five drills are operating for stope design, in-fill drilling and exploration. The Company's plan is to increase Fire Creek's throughput from 350 tons per day to 520 tons per day by mid-2019. At Hollister, the development of a decline to the Hatter Graben exploration target is underway with completion of the initial phase expected to be late in 2019.


During the period July 20, 2018 to December 31, 2018, approximately $32.6 million in capital and $9.3 million in exploration expense was invested in Nevada. Of the $32.6 million in capital, $12.4 million related to the completion of the tailings facility at Midas which is expected to provide the waste capacity for four years of full production, while $13.2 million was for development needed to increase Fire Creek throughput, and $1.5 million was for completing the carbon in leach "CIL" circuit at the Midas Mill to increase the recoveries from Hollister ore.

Lucky Friday Mine - Idaho

Silver production was 13,026 ounces in the fourth quarter and 169,041 ounces for the full year 2018, a decrease from 69,578 ounces and 838,658 ounces in the fourth quarter and full year of 2017, respectively, due to the ongoing strike by unionized employees, which began in March 2017. The Company continues to invest in the mine, with limited production and capital improvements being performed by salaried staff.

Construction of the RVM machine continues in Sweden, and is expected to be completed, along with testing of the unit, and sent to the Company in 2020.

EXPLORATION AND PRE-DEVELOPMENT

Exploration

Exploration (including corporate development) expenses were $8.1 million, and $35.7 million for the fourth quarter and full year 2018, respectively. This represents an increase of 37% and 52% over the fourth quarter and full year 2017. These increases were primarily the result of the addition of the Nevada operations and increased exploration at San Sebastian, the Kinskuch project in British Columbia and the Little Baldy project in northern Idaho.

A complete summary of exploration activities can be found in the news release entitled "Hecla Reports Record Reserves For Silver, Gold, and Lead" released on February 14, 2019.

Pre-development

Pre-development spending was $1.3 million in the fourth quarter and $4.9 million for the full year 2018, principally to advance the permitting at Rock Creek and Montanore.

     

1,2,4,5

   

Non-GAAP measure. See pages 10-11 for more information.

 

Rock Creek

In August 2018, the Kootenai National Forest issued the Final Record of Decision (ROD) for Phase I (evaluation phase) of the Rock Creek Project, a proposed underground copper and silver mine in northwestern Montana near Noxon in Sanders County. The Company is updating its plan of operation to reflect the ROD, and agency approval is anticipated in early 2019. The project remains the subject of ongoing litigation.

Montanore

In May 2017, the Federal District court judge in Missoula, Montana remanded back to the U.S. Forest Service and U.S. Fish and Wildlife Service their approvals for the Montanore project. The court advised that the agencies could proceed with the approval of the evaluation phase of the project. The U.S. Forest Service determined a focused supplemental Environmental Impact Statement ("EIS") would be prepared on the evaluation phase and published its notice of intent to do so in the Federal Register in December 2017. It is anticipated that the agency will complete its assessment and issue a new ROD in 2019. As a part of this permitting process, the U.S. Fish and Wildlife Service is preparing updated terrestrial and aquatic biological opinions for the project. The project remains the subject of ongoing litigation.

RESEARCH AND DEVELOPMENT

The Research and Development activities of the Company consisted primarily of work being conducted on the RVM, the focus of which is shifting towards fabrication of the unit, with delivery expected in 2020.

BASE METALS AND CURRENCY HEDGING

Base Metals Forward Sales Contracts

There were no forward sales contracts outstanding at December 31, 2018, other than provisional hedges (which address changes in prices between shipment and settlement with customers).

Foreign Currency Forward Purchase Contracts

The following table summarizes the Canadian dollars and Mexican pesos the Company has committed to purchase under foreign exchange forward contracts at December 31, 2018:


               

Currency Under Contract

(in thousands of CAD/MXN)

      Average Exchange Rate
CAD       MXN CAD/USD       MXN/USD
2019 settlements 114,800       124,320 1.30       20.28
2020 settlements 68,900 7,100 1.29 20.72
2021 settlements 49,900 1.28
2022 settlements 21,000 1.27
 

2019 ESTIMATES6

2019 Production Outlook

                 

Silver Production

(Moz)

     

Gold Production

(Koz)

     

Silver Equivalent

(Moz)

 

     

Gold Equivalent

(Koz)

 

Greens Creek       7.7       50       24.0       305
Lucky Friday       0.2       N/A       0.2       N/A
San Sebastian       2.0       14       3.0       40
Casa Berardi       N/A       150       11.7       150
Nevada Operations       0.1       76       6.1       77
Total       10.0       290       45.0       572
                       

2019 Cost Outlook

                 

Costs of Sales

(million)

     

Cash cost, after by-

product credits, per

silver/gold ounce1,4

     

AISC, after by-product

credits, per produced

silver/gold ounce2

Greens Creek       $202       $0       $5.50
Lucky Friday       N/A       N/A       N/A
San Sebastian       $41       $9.00       $12.00
Total Silver       $243       $1.10       $11.00
Casa Berardi       $210       $850       $1,150
Nevada Operations       $90       $900       $1,325
Total Gold       $300       $875       $1,250
                 

2019 Capital and Exploration Outlook

2019E Capital expenditures (excluding capitalized interest)                 $150 million
2019E Exploration expenditures (includes Corporate Development)                 $25 million
2019E Pre-development expenditures                 $2.5 million
2019E Research and Development expenditures                 $3.5 million
                 

1,2,4,6

   

Non-GAAP measures. See pages 10-11 for more information.

 

DIVIDENDS

The Board of Directors declared a quarterly dividend of $0.0025 per share of common stock, payable on or about March 13, 2019, to shareholders of record on March 5, 2019. The Company's realized silver price was $14.58 in the fourth 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 April 1, 2019, to shareholders of record on March 15, 2019.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held today, Thursday, February 21, 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 by 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 growing gold producer with operating mines in Nevada and Quebec, Canada. The Company also has exploration and pre-development properties in seven world-class silver and gold mining districts in the U.S., Canada and Mexico, and an exploration office and investments in early-stage silver exploration projects in Canada.

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 (GAAP). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The non-GAAP financial measures cited in this release and listed below are reconciled to their most comparable GAAP measure at the end of this release.

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


(2) 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.

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 (i) in the understanding of the economics of our operations and performance compared to other producers and (ii) in the transparency 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.

(3) Adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to net income, 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, 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.

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

(5) Free cash flow is a non-GAAP measure calculated as cash provided by operating activities less additions to properties, plants and equipment.


Other

(6) Expectations for 2019 include silver, gold, lead and zinc production from Greens Creek, San Sebastian, Casa Berardi and Nevada Operations converted using Au $1,250/oz, Ag $16.00/oz, Zn $1.25/lb, and Pb $1.00/lb. Lucky Friday expectations are currently suspended as there is currently a strike. Numbers may be rounded.

(7) Silver and gold equivalent calculation based on average actual prices for each metal in the year as follows: $15.71 for Ag, $1,269 for Au, $1.02 for Pb, and $1.33 for Zn.

Cautionary Statement Regarding Forward Looking Statements, Including 2019 Outlook

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 costs including cost of sales, cash cost, after by-product credits per ounce of silver/gold and AISC, after by-product credits, per ounce of silver/gold; (ii) estimates for 2019 for silver and gold production and silver equivalent production, cash cost, after by-product credits, AISC, after by-product credits, capital expenditures and exploration and pre-development expenditures (which assumes metal prices of gold at $1,250/oz, Ag $16.00/oz, Zn $1.25/lb, Pb $1.00/lb; USD/CAD assumed to be $0.79, USD/MXN assumed to be $0.06; and (iii) the Company’s mineral reserves and resources. 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: (a) there being no significant change to current geotechnical, metallurgical, hydrological and other physical conditions; (b) permitting, development, operations and expansion of the Company’s projects being consistent with current expectations and mine plans; (c) political/regulatory developments in any jurisdiction in which the Company operates being consistent with its current expectations; (d) the exchange rate for the Canadian dollar to the U.S. dollar, being approximately consistent with current levels; (e) certain price assumptions for gold, silver, lead and zinc; (f) prices for key supplies being approximately consistent with current levels; (g) the accuracy of our current mineral reserve and mineral resource estimates; and (h) 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 2018 Form 10-K, filed on February 22, 2019, with the Securities and Exchange Commission (SEC), as well as the Company’s other SEC filings. The Company does not undertake any obligation to release publicly 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.


Cautionary Statements to Investors on Reserves and Resources

Reporting requirements in the United States for disclosure of mineral properties are governed by the SEC and included in the SEC's Securities Act Industry Guide 7, entitled “Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations” (Guide 7). Although the SEC has recently issued new rules rescinding Guide 7, the new rules are not binding until January 1, 2022, and at this time the Company still reports in accordance with Guide 7. However, the Company is also a “reporting issuer” under Canadian securities laws, which require estimates of mineral resources and reserves to be prepared in accordance with Canadian National Instrument 43-101 (NI 43-101). NI 43-101 requires all disclosure of estimates of potential mineral resources and reserves to be disclosed in accordance with its requirements. Such Canadian information is included herein to satisfy the Company's “public disclosure” obligations under Regulation FD of the SEC and to provide U.S. holders with ready access to information publicly available in Canada.

Reporting requirements in the United States for disclosure of mineral properties under Guide 7 and the requirements in Canada under NI 43-101 standards are substantially different. This document contains a summary of certain estimates of the Company, not only of proven and probable reserves within the meaning of Guide 7, but also of mineral resource and mineral reserve estimates estimated in accordance with the definitional standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Under Guide 7, the term "reserve" means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The term "economically", as used in the definition of reserve, means that profitable extraction or production has been established or analytically demonstrated to be viable and justifiable under reasonable investment and market assumptions. The term "legally", as used in the definition of reserve, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a reserve to exist, Hecla must have a justifiable expectation, based on applicable laws and regulations, that issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with Hecla's current mine plans. The terms “measured resources”, “indicated resources,” and “inferred resources” are Canadian mining terms as defined in accordance with NI 43-101. These terms are not defined under Guide 7 and are not normally permitted to be used in reports and registration statements filed with the SEC in the United States, except where required to be disclosed by foreign law. The term “resource” does not equate to the term “reserve”. Under Guide 7, the material described herein as “indicated resources” and “measured resources” would be characterized as “mineralized material” and is permitted to be disclosed in tonnage and grade only, not ounces. The category of “inferred resources” is not recognized by Guide 7. Investors are cautioned not to assume that any part or all of the mineral deposits in such categories will ever be converted into proven or probable reserves. “Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of such a “resource” will ever be upgraded to a higher category or will ever be economically extracted. Investors are cautioned not to assume that all or any part of a “resource” exists or is economically or legally mineable. Investors are also especially cautioned that the mere fact that such resources may be referred to in ounces of silver and/or gold, rather than in tons of mineralization and grades of silver and/or gold estimated per ton, is not an indication that such material will ever result in mined ore which is processed into commercial silver or gold.


Qualified Person (QP) Pursuant to Canadian National Instrument 43-101

Dean McDonald, PhD. P.Geo., Senior Vice President - Exploration of Hecla Mining Company, who serves as a Qualified Person under National Instrument 43-101, supervised the preparation of the scientific and technical information concerning Hecla’s mineral projects in this news release. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of sample, analytical or testing procedures for the Greens Creek Mine are contained in a technical report prepared for Hecla titled “Technical Report for the Greens Creek Mine, Juneau, Alaska, USA” effective date March 28, 2013, and for the Lucky Friday Mine are contained in a technical report prepared for Hecla titled “Technical Report on the Lucky Friday Mine Shoshone County, Idaho, USA” effective date April 2, 2014, for the Casa Berardi Mine are contained in a technical report prepared for Hecla titled "Technical Report on the Mineral Resource and Mineral Reserve Estimate for the Casa Berardi Mine, Northwestern Quebec, Canada" effective date March 31, 2014 (the "Casa Berardi Technical Report"), and for the San Sebastian Mine are contained in a technical report prepared for Hecla titled "Technical Report for the San Sebastian Ag-Au Property, Durango, Mexico" effective date September 8, 2015. Also included in these four technical reports is a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of sample, analytical or testing procedures for the Fire Creek Mine are contained in a technical report prepared for Klondex Mines, dated March 31, 2018; the Hollister Mine dated May 31, 2017, amended August 9, 2017; and the Midas Mine dated August 31, 2014, amended April 2, 2015. Copies of these technical reports are available under Hecla's and Klondex's profiles on SEDAR at www.sedar.com.

The current Casa Berardi drill program was performed on core sawed in half and included the insertion of blanks and standards of variable grade in every 24 core samples. Standards were generally provided by Analytical Solutions Ltd and prepared in 30-gram bags. Samples were sent to the Swastika Laboratories in Swastika, Ontario, a registered accredited laboratory, where they were dried, crushed, and split for gold analysis. Analysis for gold was completed by fire assay with AA finish. Gold over-limits were analyzed by fire assay with gravimetric finish. Data received from the lab were subject to validation using in-built program triggers to identify outside limit blank or standard assays that require re-analysis. Over 5% of the original pulps and rejects are sent for re-assay to ALS Chemex in Val d’Or for quality control.

Dr. McDonald reviewed and verified information regarding drill sampling, data verification of all digitally-collected data, drill surveys and specific gravity determinations relating to the Casa Berardi mine. The review encompassed quality assurance programs and quality control measures including analytical or testing practice, chain-of-custody procedures, sample storage procedures and included independent sample collection and analysis. This review found the information and procedures meet industry standards and are adequate for Mineral Resource and Mineral Reserve estimation and mine planning purposes.


           

HECLA MINING COMPANY

Condensed Consolidated Statements of (Loss) Income

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

 
Fourth Quarter Ended Twelve Months Ended

December 31,

2018

     

December 31,

2017

December 31,

2018

     

December 31,

2017

Sales of products $ 136,520   $ 160,113   $ 567,137   $ 577,775  
Cost of sales and other direct production costs 102,192 80,190 353,994 304,727
Depreciation, depletion and amortization 35,593   33,613   134,044   120,599  
Total cost of sales 137,785   113,803   488,038   425,326  
Gross (loss) profit (1,265 ) 46,310   79,099   152,449  
 
Other operating expenses:
General and administrative 8,693 6,567 36,542 35,611
Exploration 8,086 5,888 35,695 23,510
Pre-development 1,272 1,387 4,887 5,448
Research and development 399 1,151 5,441 3,276
Other operating (income) expense (171 ) 923 1,596 2,513
Loss (gain) on disposition of property, plants, equipment and mineral interests 581 (1,118 ) (2,793 ) (6,042 )
Suspension-related costs 2,356 6,916 20,693 21,301
Acquisition costs 389 10,045 25
Provision for closed operations and reclamation 1,585   1,657   6,119   6,701  
23,190   23,371   118,225   92,343  
(Loss) income from operations (24,455 ) 22,939   (39,126 ) 60,106  
Other income (expense):
(Loss) gain on derivative contracts (18 ) (4,702 ) 40,253 (21,250 )
Gain (loss) on disposition of investments 2 1 (34 ) (166 )
Unrealized loss on investments (355 ) (174 ) (2,816 ) (247 )
Net foreign exchange gain (loss) 7,454 578 10,310 (9,680 )
Interest and other (expense) income (613 ) 507 (907 ) 1,692
Interest expense (10,925 ) (9,589 ) (40,944 ) (38,012 )
(4,455 ) (13,379 ) 5,862   (67,663 )
(Loss) income before income taxes (28,910 ) 9,560 (33,264 ) (7,557 )
Income tax benefit (provision) 5,217   (38,527 ) 6,701   (20,963 )
Net loss (23,693 ) (28,967 ) (26,563 ) (28,520 )
Preferred stock dividends (138 ) (138 ) (552 ) (552 )
Loss applicable to common stockholders $ (23,831 ) $ (29,105 ) $ (27,115 ) $ (29,072 )
Basic loss per common share after preferred dividends $ (0.05 ) $ (0.07 ) $ (0.06 ) $ (0.07 )
Diluted loss per common share after preferred dividends $ (0.05 ) $ (0.07 ) $ (0.06 ) $ (0.07 )
Weighted average number of common shares outstanding basic 480,572   399,133   433,419   397,394  
Weighted average number of common shares outstanding diluted 480,572   399,133   433,419   397,394  
 
 

                       

HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and shares in thousands - unaudited)

 
                December 31, 2018           December 31, 2017
ASSETS                            
Current assets:
Cash and cash equivalents $ 27,389 $ 186,107
Investments 33,758
Accounts receivable 25,818 32,190
Inventories 87,533 55,466
Other current assets 23,410   13,715  
Total current assets 164,150 321,236
Non-current investments 6,583 7,561
Non-current restricted cash and investments 1,025 1,032
Properties, plants, equipment and mineral interests, net 2,520,004 1,999,311
Deferred income tax asset 1,987 1,509
Other non-current assets and deferred charges 10,195   14,509  
Total assets $ 2,703,944   $ 2,345,158  
                             
LIABILITIES                            
Current liabilities:
Accounts payable and accrued liabilities $ 77,861 $ 46,549
Accrued payroll and related benefits 30,034 31,259
Accrued taxes 7,727 5,919
Current portion of capital leases 5,264 5,608
Current portion of accrued reclamation and closure costs 3,410 6,679
Accrued interest 5,961 5,745
Other current liabilities 5,937   10,371  
Total current liabilities 136,194 112,130
Capital leases 7,871 6,193
Accrued reclamation and closure costs 104,979 79,366
Long-term debt 532,799 502,229
Deferred income tax liability 173,537 124,352
Non-current pension liability 47,711 46,628
Other non-current liabilities 9,890   12,983  
Total liabilities 1,012,981   883,881  
                             
STOCKHOLDERS’ EQUITY                            
Preferred stock 39 39
Common stock 121,956 100,926
Capital surplus 1,880,481 1,619,816
Accumulated deficit (248,308 ) (218,089 )
Accumulated other comprehensive loss (42,469 ) (23,373 )
Treasury stock (20,736 ) (18,042 )
Total stockholders’ equity 1,690,963   1,461,277  
Total liabilities and stockholders’ equity $ 2,703,944   $ 2,345,158  
Common shares outstanding 482,604   399,176  
 
 

                       

HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)

 
                December 31, 2018           December 31, 2017
OPERATING ACTIVITIES                            
Net loss $ (26,563 ) $ (28,520 )
Non-cash elements included in net loss:
Depreciation, depletion and amortization 140,905 126,467
Loss on disposition of investments 167
Unrealized loss on investments 2,816 251
Gain on disposition of properties, plants, equipment and mineral interests (2,793 ) (6,042 )
Provision for reclamation and closure costs 6,090 4,508
Deferred income taxes (9,699 ) 19,392
Stock compensation 6,278 6,323
Acquisition costs
Amortization of loan origination fees 2,077 1,864
(Gain) loss on derivative contracts (15,366 ) 20,741
Foreign exchange (gain) loss (7,104 ) 10,208
Adjustment of inventory to market value 8,191
Other non-cash charges, net (32 ) 51
Change in assets and liabilities:
Accounts receivable 9,843 (2,414 )
Inventories (27,512 ) (3,744 )
Other current and non-current assets (1,726 ) (11,595 )
Accounts payable and accrued liabilities 17,795 (16,434 )
Accrued payroll and related benefits (2,425 ) 2,092
Accrued taxes 645 (2,234 )
Accrued reclamation and closure costs and other non-current liabilities (7,199 ) (5,203 )
Cash provided by operating activities 94,221   115,878  
                             
INVESTING ACTIVITIES                            
Additions to properties, plants, equipment and mineral interests (136,933 ) (98,038 )
Purchase of other companies, net of cash and restricted cash acquired (139,326 )
Proceeds from disposition of properties, plants and equipment 2,411 374
Insurance proceeds received for damaged property 4,377 7,745
Purchases of investments (31,971 ) (56,613 )
Maturities of investments 64,895   49,969  
Net cash used in investing activities (236,547 ) (96,563 )
                             
FINANCING ACTIVITIES                            
Acquisition of treasury shares (2,694 ) (2,868 )
Proceeds from issuance of common stock and warrants, net of related expense 6,744 9,610
Dividends paid to common stockholders (4,393 ) (3,976 )
Dividends paid to preferred stockholders (552 ) (552 )
Borrowings on debt 102,024
Payments on debt (106,036 ) (470 )
Debt issuance and loan origination fees paid (2,638 ) (476 )
Repayments of capital leases (7,339 ) (6,516 )
Net cash used in financing activities (14,884 ) (5,248 )
Effect of exchange rates on cash (1,515 ) 1,095
Net increase in cash, cash equivalents and restricted cash and cash equivalents (158,725 ) 15,162
Cash, cash equivalents and restricted cash and cash equivalents at beginning of year 187,139   171,977  
Cash, cash equivalents and restricted cash and cash equivalents at end of year $ 28,414   $ 187,139  
 
 

               

HECLA MINING COMPANY

Metal Prices

 
Fourth Quarter Ended Twelve Months Ended
             

December 31,

2018

     

December 31,

2017

December 31,

2018

     

December 31,

2017

AVERAGE METAL PRICES                          
Silver - London PM Fix ($/oz) $ 14.55       $ 16.70 $ 15.71       $ 17.05
Realized price per ounce $ 14.58 $ 16.87 $ 15.63 $ 17.23
Gold - London PM Fix ($/oz) $ 1,228 $ 1,274 $ 1,269 $ 1,257
Realized price per ounce $ 1,237 $ 1,278 $ 1,265 $ 1,261
Lead - LME Cash ($/pound) $ 0.89 $ 1.13 $ 1.02 $ 1.05
Realized price per pound $ 0.88 $ 1.14 $ 1.04 $ 1.06
Zinc - LME Cash ($/pound) $ 1.19 $ 1.47 $ 1.33 $ 1.31
Realized price per pound $ 1.15 $ 1.46 $ 1.27 $ 1.32
 

           

Production Data

 
Fourth Quarter Ended Twelve Months Ended
       

December 31,

2018

     

December 31,

2017

     

December 31,

2018

     

December 31,

2017

GREENS CREEK UNIT                                            
Tons of ore processed 212,522         211,689 845,398       839,589
Mining cost per ton $ 77.87 $ 74.49 $ 71.37 $ 70.86
Milling cost per ton $ 35.93 $ 32.38 $ 33.53 $ 32.38
Ore grade milled - Silver (oz./ton) 12.81 13.02 12.16 12.88
Ore grade milled - Gold (oz./ton) 0.09 0.09 0.09 0.09
Ore grade milled - Lead (%) 2.67 2.41 2.80 2.72
Ore grade milled - Zinc (%) 7.12 6.53 7.47 7.25
Silver produced (oz.) 2,163,563 2,146,223 7,953,003 8,351,882
Gold produced (oz.) 13,097 11,565 51,493 50,854
Lead produced (tons) 4,608 3,916 18,960 17,996
Zinc produced (tons) 13,677 11,850 55,350 52,547
Total cash cost, after by-product credits, per silver ounce (1) $ 1.79 $ 0.66 $ (1.13 ) $ 0.71
AISC, after by-product credits, per silver ounce (1) $ 7.92 $ 6.23 $ 5.58 $ 5.76
Capital additions (in thousands)       $ 12,170           $ 10,364         $ 46,864           $ 35,255  
LUCKY FRIDAY UNIT                                            
Tons of ore processed 1,297 6,347 17,309 70,718
Mining cost per ton $ 67.91 $ 47.39 $ 86.30 $ 106.75
Milling cost per ton $ 22.32 $ 9.35 $ 14.86 $ 21.71
Ore grade milled - Silver (oz./ton) 7.33 11.73 10.78 12.38
Ore grade milled - Lead (%) 6.89 6.90 7.19 7.10
Ore grade milled - Zinc (%) 3.13 5.06 4.20 4.01
Silver produced (oz.) 13,026 69,578 169,041 838,658
Lead produced (tons) 96 391 1,131 4,737
Zinc produced (tons) 34 257 673 2,560
Total cash cost, net of by-product credits, per silver ounce (1) N/A $ (2.65 ) N/A $ 5.81
AISC, after by-product credits, per silver ounce (1) N/A $ 15.57 N/A $ 12.48
Capital additions (in thousands)       $ 7,347           $ 1,268         $ 14,236           $ 6,268  
SAN SEBASTIAN UNIT                                            
Tons of ore processed 44,817 32,574 156,733 144,197
Mining cost per ton $ 131.16 $ 30.18 $ 149.77 $ 36.77
Milling cost per ton $ 64.03 $ 70.53 $ 65.55 $ 67.52
Ore grade milled - Silver (oz./ton) 10.85 24.58 14.07 23.91
Ore grade milled - Gold (oz./ton) 0.082 0.193 0.11 0.185
Silver produced (oz.) 443,302 759,100 2,037,072 3,257,738
Gold produced (oz.) 2,928 5,955 14,979 25,177
Total cash cost, net of by-product credits, per silver ounce (1) $ 14.78 $ (3.80 ) $ 9.69 $ (3.36 )
AISC, after by-product credits, per silver ounce (1) $ 19.51 $ (0.64 ) $ 14.68 $ (0.26 )
Capital additions (in thousands)       $ 2,527           $ 3,751         $ 6,219           $ 11,231  
CASA BERARDI UNIT                                            
Tons of ore processed - underground 187,956 198,846 744,947 805.047
Tons of ore processed - surface pit 135,436   147,432   630,771   491.177  
Tons of ore processed - total 323,392   346.278   1,375,718   1,296.224  
Surface tons mined - ore and waste 1,773,114 1,225,692 6,902,760 7,652,759
Mining cost per ton - underground $ 106.75 $ 101.87 $ 105.78 $ 99.49
Mining cost per ton - combined $ 81.92 $ 54.34 $ 74.44 $ 79.49
Mining cost per ton or ore and waste - surface tons mined $ 3.10 $ 3.84 $ 3.56 $ 3.00
Milling cost per ton $ 15.61 $ 15.59 $ 15.84 $ 16.10
Ore grade milled - Gold (oz./ton) - underground 0.189 0.180 0.203 0.170
Ore grade milled - Gold (oz./ton) - surface pit 0.041 0.096 0.059 0.089
Ore grade milled - Gold (oz./ton) - combined 0.129 0.144 0.136 0.139
Ore grade milled - Silver (oz./ton) 0.03 0.03 0.03 0.03
Gold produced (oz.) - underground 31,015 31,117 130,647 118,739
Gold produced (oz.) - surface pit 4,849   12,327   32,097   37,914  
Gold produced (oz.) - total 35,864   43,444   162,744   156,653  
Silver produced (oz.) - total 7,338   9,885   38,086   36,566  
Total cash cost, net of by-product credits, per gold ounce (1) $ 940 $ 719 $ 800 $ 820
AISC, after by-product credits, per gold ounce (1) $ 1,348 $ 1,039 $ 1,080 $ 1,174
Capital additions (in thousands)       $ 13,590           $ 12,419         $ 40,710           $ 50,668  
NEVADA OPERATIONS                                            
Tons of ore processed 60,484 N/A 116,383 N/A
Mining cost per ton $ 245.15 N/A $ 216.80 N/A
Milling cost per ton $ 79.09 N/A $ 74.91 N/A
Ore grade milled - Gold (oz./ton) 0.365 N/A 0.328 N/A
Silver produced (oz.) 88,156 N/A 172,301 N/A
Gold produced (oz.) 19,098 N/A 32,887 N/A
Total cash cost, net of by-product credits, per silver ounce (1) $ 1,251 N/A $ 1,221 N/A
AISC, after by-product credits, per silver ounce (1) $ 2,020 N/A $ 1,950 N/A
Capital additions (in thousands) $ 17,589 N/A $ 32,587 N/A
 
(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 and Nevada Operations is gold, with a by-product credit for the value of silver production.
 

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 (i) Cash Cost, Before By-product Credits, (ii) Cash Cost, After By-product Credits, (iii) AISC, Before By-product Credits and (iv) AISC, After By-product Credits for our operations at the Greens Creek, Lucky Friday, San Sebastian, Casa Berardi and Nevada Operations units and for the Company for the three- and twelve-month periods ended December 31, 2018 and 2017, and for estimated amounts for the twelve months ended December 31, 2019.

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 these non-GAAP measures as we report them are the same as those reported by other mining companies.

Cash Cost, After By-product Credits, per Ounce is an important operating statistic that we utilize to measure each mine's operating performance. We have recently started reporting AISC, After By-product Credits, per Ounce which we use as a measure of our mines' net cash flow after costs for exploration, pre-development, reclamation, and sustaining capital. This is similar to the Cash Cost, After By-product Credits, per Ounce non-GAAP measure we report, but also includes on-site exploration, reclamation, and sustaining capital costs. 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 and gold mining company, we also use these statistics on an aggregate basis. We aggregate the Greens Creek, Lucky Friday and San Sebastian mines to compare our performance with that of other primary silver mining companies and aggregate the Casa Berardi and Nevada Operations units to compare our performance with that of other primary gold mining companies. 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, exploration and sustaining capital projects. 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.

In addition to the uses described above, 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.


The Casa Berardi and Nevada Operations sections below report Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce for the production of gold, their primary product, and by-product revenues earned from silver, which is a by-product at Casa Berardi and Nevada Operations. 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 and Nevada Operations units 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. Similarly, the silver produced at our other three units is not included as a by-product credit when calculating the similar gold metrics for Casa Berardi.

In thousands (except per ounce amounts)       Three Months Ended December 31, 2018

Greens

Creek

     

Lucky

Friday(2)

     

San

Sebastian

      Corporate(3)      

Total

Silver

Cost of sales and other direct production costs and depreciation, depletion and amortization $ 48,302 $ 3,906 $ 10,638 $ 62,846
Depreciation, depletion and amortization (11,631 ) (209 ) (1,016 ) (12,856 )
Treatment costs 9,038 78 180 9,296
Change in product inventory 2,092 (148 ) 527 2,471
Reclamation and other costs (587 ) (185 ) (772 )
Exclusion of Lucky Friday costs   (3,627 )   (3,627 )
Cash Cost, Before By-product Credits (1) 47,214 10,144 57,358
Reclamation and other costs 849 105 954
Exploration 242 1,164 608 2,014
Sustaining capital 12,170 828 157 13,155
General and administrative       8,693 8,693  
AISC, Before By-product Credits (1) 60,475 12,241 82,174
By-product credits:
Zinc (22,788 ) (22,788 )
Gold (14,079 ) (3,595 ) (17,674 )
Lead (6,475 )     (6,475 )
Total By-product credits (43,342 )   (3,595 ) (46,937 )
Cash Cost, After By-product Credits $ 3,872   $   $ 6,549   $ 10,421  
AISC, After By-product Credits $ 17,133   $   $ 8,646   $ 35,237  
Divided by ounces produced 2,164 443 2,607
Cash Cost, Before By-product Credits, per Silver Ounce $ 21.83 $ $ 22.90 $ 22.01
By-product credits per ounce (20.04 )   (8.12 ) (18.00 )
Cash Cost, After By-product Credits, per Silver Ounce $ 1.79   $   $ 14.78   $ 4.01  
AISC, Before By-product Credits, per Silver Ounce $ 27.96 $ $ 27.63 $ 31.53
By-product credits per ounce (20.04 )   (8.12 ) (18.00 )
AISC, After By-product Credits, per Silver Ounce $ 7.92   $   $ 19.51   $ 13.53  
 

In thousands (except per ounce amounts)       Three Months Ended December 31, 2018

Casa

Berardi

     

Nevada

Operations

      Total Gold
Cost of sales and other direct production costs and depreciation, depletion and amortization $ 47,253 $ 27,686 $ 74,939
Depreciation, depletion and amortization (16,423 ) (6,314 ) (22,737 )
Treatment costs 440 48 488
Change in product inventory 2,686 4,711 7,397
Reclamation and other costs (137 ) (954 ) (1,091 )
Cash Cost, Before By-product Credits (1) 33,819 25,177 58,996
Reclamation and other costs 137 567 704
Exploration 903 4,101 5,004
Sustaining capital 13,591   10,018   23,609  
AISC, Before By-product Credits (1) 48,450 39,863 88,313
By-product credits:
Silver (106 ) (1,280 ) (1,386 )
Total By-product credits (106 ) (1,280 ) (1,386 )
Cash Cost, After By-product Credits $ 33,713   $ 23,897   $ 57,610  
AISC, After By-product Credits $ 48,344   $ 38,583   $ 86,927  
Divided by gold ounces produced 36 19 55
Cash Cost, Before By-product Credits, per Gold Ounce $ 943 $ 1,318 $ 1,073
By-product credits per ounce (3 ) (67 ) (25 )
Cash Cost, After By-product Credits, per Gold Ounce $ 940   $ 1,251   $ 1,048  
AISC, Before By-product Credits, per Gold Ounce $ 1,351 $ 2,087 $ 1,607
By-product credits per ounce (3 ) (67 ) (25 )
AISC, After By-product Credits, per Gold Ounce $ 1,348   $ 2,020   $ 1,582  
 

In thousands (except per ounce amounts)       Three Months Ended December 31, 2018

Total

Silver

     

Total

Gold

      Total
Cost of sales and other direct production costs and depreciation, depletion and amortization $ 62,846 $ 74,939 $ 137,785
Depreciation, depletion and amortization (12,856 ) (22,737 ) (35,593 )
Treatment costs 9,296 488 9,784
Change in product inventory 2,471 7,397 9,868
Reclamation and other costs (772 ) (1,091 ) (1,863 )
Exclusion of Lucky Friday costs (3,627 )   (3,627 )
Cash Cost, Before By-product Credits (1) 57,358 58,996 116,354
Reclamation and other costs 954 704 1,658
Exploration 2,014 5,004 7,018
Sustaining capital 13,155 23,609 36,764
General and administrative 8,693     8,693  
AISC, Before By-product Credits (1) 82,174 88,313 170,487
By-product credits:
Zinc (22,788 ) (22,788 )
Gold (17,674 ) (17,674 )
Lead (6,475 ) (6,475 )
Silver   (1,386 ) (1,386 )
Total By-product credits (46,937 ) (1,386 ) (48,323 )
Cash Cost, After By-product Credits $ 10,421   $ 57,610   $ 68,031  
AISC, After By-product Credits $ 35,237   $ 86,927   $ 122,164  
Divided by ounces produced 2,607 55
Cash Cost, Before By-product Credits, per Ounce $ 22.01 $ 1,073
By-product credits per ounce (18.00 ) (25 )
Cash Cost, After By-product Credits, per Ounce $ 4.01   $ 1,048  
AISC, Before By-product Credits, per Ounce $ 31.53 $ 1,607
By-product credits per ounce (18.00 ) (25 )
AISC, After By-product Credits, per Ounce $ 13.53   $ 1,582  
 

In thousands (except per ounce amounts)       Three Months Ended December 31, 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 $ 61,561 $ 565 $ 5,323 $ 67,449 $ 46,354 $ 113,803
Depreciation, depletion and amortization (16,886 ) (14 ) (657 ) (17,557 ) (16,056 ) (33,613 )
Treatment costs 10,153 502 279 10,934 658 11,592
Change in product inventory (7,645 ) 42 137 (7,466 ) 584 (6,882 )
Reclamation and other costs (1,241 ) 48   (378 ) (1,571 ) (122 ) (1,693 )
Cash Cost, Before By-product Credits (1) 45,942 1,143 4,704 51,789 31,418 83,207
Reclamation and other costs 667 117 784 122 906
Exploration 926 1,895 518 3,339 1,322 4,661
Sustaining capital 10,360 1,268 391 441 12,460 12,419 24,879
General and administrative       6,567 6,567     6,567  
AISC, Before By-product Credits (1) 57,895 2,411 7,107 74,939 45,281 120,220
By-product credits:
Zinc (24,478 ) (561 ) (25,039 ) (25,039 )
Gold (13,019 ) (7,593 ) (20,612 ) (20,612 )
Lead (7,021 ) (768 ) (7,789 ) (7,789 )
Silver         (164 ) (164 )
Total By-product credits (44,518 ) (1,329 ) (7,593 ) (53,440 ) (164 ) (53,604 )
Cash Cost, After By-product Credits $ 1,424   $ (186 ) $ (2,889 ) $ (1,651 ) $ 31,254   $ 29,603  
AISC, After By-product Credits $ 13,377   $ 1,082   $ (486 ) $ 21,499   $ 45,117   $ 66,616  
Divided by ounces produced 2,146 70 760 2,976 43
Cash Cost, Before By-product Credits, per Ounce $ 21.41 $ 16.34 $ 6.19 $ 17.41 $ 723
By-product credits per ounce (20.75 ) (18.99 ) (9.99 ) (17.96 ) (4 )
Cash Cost, After By-product Credits, per Ounce $ 0.66   $ (2.65 ) $ (3.80 ) $ (0.55 ) $ 719  
AISC, Before By-product Credits, per Ounce $ 26.98 $ 34.56 $ 9.35 $ 25.19 $ 1,043
By-product credits per ounce (20.75 ) (18.99 ) (9.99 ) (17.96 ) (4 )
AISC, After By-product Credits, per Ounce $ 6.23   $ 15.57   $ (0.64 ) $ 7.23   $ 1,039  
 

In thousands (except per ounce amounts)       Twelve Months Ended December 31, 2018

Greens

Creek

     

Lucky

Friday(2)

     

San

Sebastian

      Corporate(3)      

Total

Silver

Cost of sales and other direct production costs and depreciation, depletion and amortization $ 190,066 $ 9,750 $ 41,815 $ 241,631
Depreciation, depletion and amortization (46,511 ) (1,012 ) (4,602 ) (52,125 )
Treatment costs 38,174 839 807 39,820
Change in product inventory 3,087 (2,330 ) 2,385 3,142
Reclamation and other costs (2,911 ) (1,559 ) (4,470 )
Exclusion of Lucky Friday costs   (7,247 )   (7,247 )
Cash Cost, Before By-product Credits (1) 181,905 38,846 220,751
Reclamation and other costs 3,397 419 3,816
Exploration 3,151 7,792 1,959 12,902
Sustaining capital 46,864 1,947 1,495 50,306
General and administrative       36,542 36,542  
AISC, Before By-product Credits (1) 235,317 49,004 324,317
By-product credits:
Zinc (103,096 ) (103,096 )
Gold (57,316 ) (19,100 ) (76,416 )
Lead (30,512 )     (30,512 )
Total By-product credits (190,924 )   (19,100 ) (210,024 )
Cash Cost, After By-product Credits $ (9,019 ) $   $ 19,746   $ 10,727  
AISC, After By-product Credits $ 44,393   $   $ 29,904   $ 114,293  
Divided by silver ounces produced 7,953 2,037 9,990
Cash Cost, Before By-product Credits, per Silver Ounce $ 22.88 $ $ 19.07 $ 22.10
By-product credits per ounce (24.01 )   (9.38 ) (21.02 )
Cash Cost, After By-product Credits, per Silver Ounce $ (1.13 ) $   $ 9.69   $ 1.08  
AISC, Before By-product Credits, per Silver Ounce $ 29.59 $ $ 24.06 $ 32.46
By-product credits per ounce (24.01 )   (9.38 ) (21.02 )
AISC, After By-product Credits, per Silver Ounce $ 5.58   $   $ 14.68   $ 11.44  
 

In thousands (except per ounce amounts)       Twelve Months Ended December 31, 2018

Casa

Berardi

     

Nevada

Operations

      Total Gold
Cost of sales and other direct production costs and depreciation, depletion and amortization $ 199,402 $ 47,005 $ 246,407
Depreciation, depletion and amortization (71,302 ) (10,617 ) (81,919 )
Treatment costs 2,068 90 2,158
Change in product inventory 1,205 7,138 8,343
Reclamation and other costs (558 ) (954 ) (1,512 )
Cash Cost, Before By-product Credits (1) 130,815 42,662 173,477
Reclamation and other costs 558 567 1,125
Exploration 4,277 6,345 10,622
Sustaining capital 40,711   17,079   57,790  
AISC, Before By-product Credits (1) 176,361 66,653 243,014
By-product credits:
Silver (597 ) (2,512 ) (3,109 )
Total By-product credits (597 ) (2,512 ) (3,109 )
Cash Cost, After By-product Credits $ 130,218   $ 40,150   $ 170,368  
AISC, After By-product Credits $ 175,764   $ 64,141   $ 239,905  
Divided by gold ounces produced 163 33 196
Cash Cost, Before By-product Credits, per Gold Ounce $ 804 $ 1,297 $ 887
By-product credits per ounce (4 ) (76 ) (16 )
Cash Cost, After By-product Credits, per Gold Ounce $ 800   $ 1,221   $ 871  
AISC, Before By-product Credits, per Gold Ounce $ 1,084 $ 2,026 $ 1,242
By-product credits per ounce (4 ) (76 ) (16 )
AISC, After By-product Credits, per Gold Ounce $ 1,080   $ 1,950   $ 1,226  
 

In thousands (except per ounce amounts)       Twelve Months Ended December 31, 2018
Total Silver       Total Gold       Total
Cost of sales and other direct production costs and depreciation, depletion and amortization $ 241,631 $ 246,407 $ 488,038
Depreciation, depletion and amortization (52,125 ) (81,919 ) (134,044 )
Treatment costs 39,820 2,158 41,978
Change in product inventory 3,142 8,343