Toggle SGML Header (+)


Section 1: 10-Q (FORM 10-Q)

hl20190630_10q.htm
0000719413falseHECLA MINING CO/DE/false--12-31Q22019falsefalsetruefalsenoAmounts reported as of and for the years ended December 31, 2017 and 2016 have been revised. See Note 2 for more information.EBITDA is calculated as defined in the credit agreement.5,000,0005,000,0000.250.25157,816157,816157,816157,8167,8917,8910.250.25750,000,000750,000,000488,870,345482,603,937488,870,345482,603,9375,941,4365,226,7910.00250.875362,0003,597,0002,384,000253,0001,079,0000.00250.875331,0000.00250.875745,0003,594,3802,384,000253,0001,079,0000.00250.875552,0001,237,36975,276,1763.2200007194132019-01-012019-06-300000719413hl:CommonStock1Member2019-01-012019-06-300000719413hl:SeriesBCumulativePreferredStockMember2019-01-012019-06-30xbrli:shares00007194132019-08-05iso4217:USD00007194132018-12-3100007194132019-06-3000007194132019-04-012019-06-3000007194132018-04-012018-06-3000007194132018-01-012018-06-30iso4217:USDxbrli:shares00007194132017-12-3100007194132018-06-300000719413us-gaap:PreferredStockMember2019-03-310000719413us-gaap:CommonStockMember2019-03-310000719413us-gaap:AdditionalPaidInCapitalMember2019-03-310000719413us-gaap:RetainedEarningsMember2019-03-310000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310000719413us-gaap:TreasuryStockMember2019-03-3100007194132019-03-310000719413us-gaap:RetainedEarningsMember2019-04-012019-06-300000719413us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300000719413us-gaap:CommonStockMember2019-04-012019-06-300000719413us-gaap:TreasuryStockMember2019-04-012019-06-300000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-300000719413us-gaap:PreferredStockMember2019-06-300000719413us-gaap:CommonStockMember2019-06-300000719413us-gaap:AdditionalPaidInCapitalMember2019-06-300000719413us-gaap:RetainedEarningsMember2019-06-300000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300000719413us-gaap:TreasuryStockMember2019-06-300000719413us-gaap:PreferredStockMember2018-03-310000719413us-gaap:CommonStockMember2018-03-310000719413us-gaap:AdditionalPaidInCapitalMember2018-03-310000719413us-gaap:RetainedEarningsMember2018-03-310000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-03-310000719413us-gaap:TreasuryStockMember2018-03-3100007194132018-03-310000719413us-gaap:RetainedEarningsMember2018-04-012018-06-300000719413us-gaap:AdditionalPaidInCapitalMember2018-04-012018-06-300000719413us-gaap:CommonStockMember2018-04-012018-06-300000719413us-gaap:TreasuryStockMember2018-04-012018-06-300000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-04-012018-06-300000719413us-gaap:PreferredStockMember2018-06-300000719413us-gaap:CommonStockMember2018-06-300000719413us-gaap:AdditionalPaidInCapitalMember2018-06-300000719413us-gaap:RetainedEarningsMember2018-06-300000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-06-300000719413us-gaap:TreasuryStockMember2018-06-300000719413us-gaap:PreferredStockMember2018-12-310000719413us-gaap:CommonStockMember2018-12-310000719413us-gaap:AdditionalPaidInCapitalMember2018-12-310000719413us-gaap:RetainedEarningsMember2018-12-310000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000719413us-gaap:TreasuryStockMember2018-12-310000719413us-gaap:RetainedEarningsMember2019-01-012019-06-300000719413us-gaap:AdditionalPaidInCapitalMember2019-01-012019-06-300000719413us-gaap:CommonStockMember2019-01-012019-06-300000719413us-gaap:TreasuryStockMember2019-01-012019-06-300000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-06-300000719413us-gaap:PreferredStockMember2017-12-310000719413us-gaap:CommonStockMember2017-12-310000719413us-gaap:AdditionalPaidInCapitalMember2017-12-310000719413us-gaap:RetainedEarningsMember2017-12-310000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-310000719413us-gaap:TreasuryStockMember2017-12-310000719413us-gaap:RetainedEarningsMember2018-01-012018-06-300000719413us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-06-300000719413us-gaap:AdditionalPaidInCapitalMember2018-01-012018-06-300000719413us-gaap:CommonStockMember2018-01-012018-06-300000719413us-gaap:TreasuryStockMember2018-01-012018-06-300000719413us-gaap:DomesticCountryMemberus-gaap:InternalRevenueServiceIRSMember2019-06-300000719413us-gaap:ForeignCountryMemberus-gaap:CanadaRevenueAgencyMember2019-06-300000719413us-gaap:ForeignCountryMemberus-gaap:MexicanTaxAuthorityMember2019-06-300000719413hl:KlondexMinesLtdMember2018-07-200000719413hl:KlondexMinesLtdMember2019-01-012019-06-300000719413hl:JohnnyMMineAreaNearSanMateoNewMexicoMember2012-08-012012-08-310000719413hl:JohnnyMMineAreaNearSanMateoNewMexicoMember2014-12-012014-12-310000719413hl:JohnnyMMineAreaNearSanMateoNewMexicoMembersrt:MinimumMember2014-12-012014-12-310000719413hl:JohnnyMMineAreaNearSanMateoNewMexicoMembersrt:MaximumMember2014-12-012014-12-310000719413hl:JohnnyMMineAreaNearSanMateoNewMexicoMember2014-10-012014-12-310000719413hl:JohnnyMMineAreaNearSanMateoNewMexicoMember2014-12-312014-12-310000719413hl:JohnnyMMineAreaNearSanMateoNewMexicoMember2018-07-012018-07-310000719413hl:CarpenterSnowCreekSuperfundSiteCascadeCountyMontanaMember2011-06-012011-06-300000719413hl:LawsuitInLincolnCountyMontanaCourtsForMontanoreProjectMembersrt:SubsidiariesMember2018-10-012018-10-310000719413hl:LawsuitInLincolnCountyMontanaCourtsForMontanoreProjectMember2019-06-30xbrli:pure0000719413hl:CanadianAssetsOfKlondexMember2018-07-310000719413hl:WatertonWarrantsMemberhl:LawsuitFiledInOntarioCanadaSuperiorCourtOfJusticeMember2018-07-012018-07-310000719413us-gaap:SeniorNotesMember2013-04-122013-04-120000719413us-gaap:SeniorNotesMember2014-01-012014-12-31iso4217:CAD0000719413hl:Series2018ASeniorNotesMember2018-03-050000719413hl:LuckyFridayMember2019-06-300000719413hl:CasaBerardiMember2019-06-300000719413hl:GreensCreekMember2019-06-300000719413hl:NevadaOperationsMember2019-06-300000719413hl:PerformanceObligationCommitmentsMember2019-06-300000719413hl:PerformanceObligationCommitmentsMemberus-gaap:SubsequentEventMember2019-08-070000719413us-gaap:RestrictedStockUnitsRSUMember2018-04-012019-06-300000719413us-gaap:RestrictedStockUnitsRSUMember2018-01-012019-06-300000719413hl:DeferredSharesMember2018-04-012018-06-300000719413hl:RestrictedStockUnitsMember2018-04-012018-06-300000719413hl:RestrictedStockUnitsMember2018-01-012018-06-300000719413hl:DeferredSharesMember2018-04-012018-06-300000719413hl:GreensCreekMember2019-04-012019-06-300000719413hl:GreensCreekMember2018-04-012018-06-300000719413hl:GreensCreekMember2019-01-012019-06-300000719413hl:GreensCreekMember2018-01-012018-06-300000719413hl:LuckyFridayMember2019-04-012019-06-300000719413hl:LuckyFridayMember2018-04-012018-06-300000719413hl:LuckyFridayMember2019-01-012019-06-300000719413hl:LuckyFridayMember2018-01-012018-06-300000719413hl:CasaBerardiMember2019-04-012019-06-300000719413hl:CasaBerardiMember2018-04-012018-06-300000719413hl:CasaBerardiMember2019-01-012019-06-300000719413hl:CasaBerardiMember2018-01-012018-06-300000719413hl:SanSebastianMember2019-04-012019-06-300000719413hl:SanSebastianMember2018-04-012018-06-300000719413hl:SanSebastianMember2019-01-012019-06-300000719413hl:SanSebastianMember2018-01-012018-06-300000719413hl:NevadaOperationsMember2019-04-012019-06-300000719413hl:NevadaOperationsMember2018-04-012018-06-300000719413hl:NevadaOperationsMember2019-01-012019-06-300000719413hl:NevadaOperationsMember2018-01-012018-06-300000719413us-gaap:AllOtherSegmentsMember2019-04-012019-06-300000719413us-gaap:AllOtherSegmentsMember2018-04-012018-06-300000719413us-gaap:AllOtherSegmentsMember2019-01-012019-06-300000719413us-gaap:AllOtherSegmentsMember2018-01-012018-06-300000719413hl:GreensCreekMember2018-12-310000719413hl:LuckyFridayMember2018-12-310000719413hl:CasaBerardiMember2018-12-310000719413hl:SanSebastianMember2019-06-300000719413hl:SanSebastianMember2018-12-310000719413hl:NevadaOperationsMember2018-12-310000719413us-gaap:AllOtherSegmentsMember2019-06-300000719413us-gaap:AllOtherSegmentsMember2018-12-31utr:oz0000719413hl:SilverContractsMember2019-06-300000719413us-gaap:GoldMember2019-06-30utr:T0000719413hl:ZincMember2019-06-300000719413hl:LeadMember2019-06-300000719413us-gaap:SalesRevenueNetMemberhl:GreensCreekMember2019-04-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:GreensCreekMember2018-04-012018-06-300000719413us-gaap:SalesRevenueNetMemberhl:GreensCreekMember2019-01-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:GreensCreekMember2018-01-012018-06-300000719413us-gaap:SalesRevenueNetMemberhl:LuckyFridayMember2019-04-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:LuckyFridayMember2018-04-012018-06-300000719413us-gaap:SalesRevenueNetMemberhl:LuckyFridayMember2019-01-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:LuckyFridayMember2018-01-012018-06-300000719413us-gaap:SalesRevenueNetMemberhl:CasaBerardiMember2019-04-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:CasaBerardiMember2018-04-012018-06-300000719413us-gaap:SalesRevenueNetMemberhl:CasaBerardiMember2019-01-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:CasaBerardiMember2018-01-012018-06-300000719413us-gaap:SalesRevenueNetMemberhl:SanSebastianMember2019-04-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:SanSebastianMember2018-04-012018-06-300000719413us-gaap:SalesRevenueNetMemberhl:SanSebastianMember2019-01-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:SanSebastianMember2018-01-012018-06-300000719413us-gaap:SalesRevenueNetMemberhl:NevadaOperationsMember2019-04-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:NevadaOperationsMember2018-04-012018-06-300000719413us-gaap:SalesRevenueNetMemberhl:NevadaOperationsMember2019-01-012019-06-300000719413us-gaap:SalesRevenueNetMemberhl:NevadaOperationsMember2018-01-012018-06-300000719413us-gaap:SalesRevenueNetMember2019-04-012019-06-300000719413us-gaap:SalesRevenueNetMember2018-04-012018-06-300000719413us-gaap:SalesRevenueNetMember2019-01-012019-06-300000719413us-gaap:SalesRevenueNetMember2018-01-012018-06-300000719413hl:SilverContractsMember2019-04-012019-06-300000719413hl:SilverContractsMember2018-04-012018-06-300000719413hl:SilverContractsMember2019-01-012019-06-300000719413hl:SilverContractsMember2018-01-012018-06-300000719413us-gaap:GoldMember2019-04-012019-06-300000719413us-gaap:GoldMember2018-04-012018-06-300000719413us-gaap:GoldMember2019-01-012019-06-300000719413us-gaap:GoldMember2018-01-012018-06-300000719413hl:LeadMember2019-04-012019-06-300000719413hl:LeadMember2018-04-012018-06-300000719413hl:LeadMember2019-01-012019-06-300000719413hl:LeadMember2018-01-012018-06-300000719413hl:ZincMember2019-04-012019-06-300000719413hl:ZincMember2018-04-012018-06-300000719413hl:ZincMember2019-01-012019-06-300000719413hl:ZincMember2018-01-012018-06-300000719413country:CA2019-04-012019-06-300000719413country:CA2018-04-012018-06-300000719413country:CA2019-01-012019-06-300000719413country:CA2018-01-012018-06-300000719413country:KR2019-04-012019-06-300000719413country:KR2018-04-012018-06-300000719413country:KR2019-01-012019-06-300000719413country:KR2018-01-012018-06-300000719413country:JP2019-04-012019-06-300000719413country:JP2018-04-012018-06-300000719413country:JP2019-01-012019-06-300000719413country:JP2018-01-012018-06-300000719413country:NL2019-04-012019-06-300000719413country:NL2018-04-012018-06-300000719413country:NL2019-01-012019-06-300000719413country:NL2018-01-012018-06-300000719413country:CN2019-04-012019-06-300000719413country:CN2018-04-012018-06-300000719413country:CN2019-01-012019-06-300000719413country:CN2018-01-012018-06-300000719413country:US2019-04-012019-06-300000719413country:US2018-04-012018-06-300000719413country:US2019-01-012019-06-300000719413country:US2018-01-012018-06-300000719413hl:DorAndMetalsFromDorMember2019-04-012019-06-300000719413hl:DorAndMetalsFromDorMember2018-04-012018-06-300000719413hl:DorAndMetalsFromDorMember2019-01-012019-06-300000719413hl:DorAndMetalsFromDorMember2018-01-012018-06-300000719413hl:LeadConcentrateMember2019-04-012019-06-300000719413hl:LeadConcentrateMember2018-04-012018-06-300000719413hl:LeadConcentrateMember2019-01-012019-06-300000719413hl:LeadConcentrateMember2018-01-012018-06-300000719413hl:ZincConcentrateMember2019-04-012019-06-300000719413hl:ZincConcentrateMember2018-04-012018-06-300000719413hl:ZincConcentrateMember2019-01-012019-06-300000719413hl:ZincConcentrateMember2018-01-012018-06-300000719413hl:BulkConcentrateMember2019-04-012019-06-300000719413hl:BulkConcentrateMember2018-04-012018-06-300000719413hl:BulkConcentrateMember2019-01-012019-06-300000719413hl:BulkConcentrateMember2018-01-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:CIBCMember2019-04-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:CIBCMember2018-04-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:CIBCMember2019-01-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:CIBCMember2018-01-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:ScotiaMember2019-04-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:ScotiaMember2018-04-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:ScotiaMember2019-01-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:ScotiaMember2018-01-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:KoreaZincMember2019-04-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:KoreaZincMember2018-04-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:KoreaZincMember2019-01-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:KoreaZincMember2018-01-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:TeckMetalsLtdMember2019-04-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:TeckMetalsLtdMember2018-04-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:TeckMetalsLtdMember2019-01-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:TeckMetalsLtdMember2018-01-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:OceanPartnersMember2019-04-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:OceanPartnersMember2018-04-012018-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:OceanPartnersMember2019-01-012019-06-300000719413us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberhl:OceanPartnersMember2018-01-012018-06-300000719413hl:SuspensionCostsMemberhl:LuckyFridayMember2019-01-012019-06-300000719413hl:SuspensionCostsMemberhl:LuckyFridayMember2018-01-012018-06-300000719413hl:NoncashDepreciationExpenseMemberhl:LuckyFridayMember2019-01-012019-06-300000719413hl:NoncashDepreciationExpenseMemberhl:LuckyFridayMember2018-01-012018-06-30utr:Y0000719413us-gaap:OtherNonoperatingIncomeExpenseMember2019-04-012019-06-300000719413us-gaap:OtherNonoperatingIncomeExpenseMember2019-01-012019-06-300000719413us-gaap:OtherNonoperatingIncomeExpenseMember2018-04-012018-06-300000719413us-gaap:OtherNonoperatingIncomeExpenseMember2018-01-012018-06-300000719413us-gaap:PensionPlansDefinedBenefitMember2019-05-012019-05-310000719413us-gaap:PensionPlansDefinedBenefitMember2019-06-300000719413us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2019-06-300000719413us-gaap:PerformanceSharesMember2019-04-012019-04-300000719413us-gaap:PerformanceSharesMember2019-01-012019-03-310000719413us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-06-300000719413us-gaap:RestrictedStockUnitsRSUMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2019-06-012019-06-300000719413us-gaap:RestrictedStockUnitsRSUMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2019-06-012019-06-300000719413us-gaap:RestrictedStockUnitsRSUMemberus-gaap:ShareBasedCompensationAwardTrancheThreeMember2019-06-012019-06-300000719413us-gaap:RestrictedStockUnitsRSUMemberhl:VestingIn2020Member2019-06-30utr:M0000719413us-gaap:RestrictedStockUnitsRSUMemberhl:VestingIn2020Member2019-01-012019-06-300000719413us-gaap:RestrictedStockUnitsRSUMemberhl:VestingIn2021Member2019-06-300000719413us-gaap:RestrictedStockUnitsRSUMemberhl:VestingIn2021Member2019-01-012019-06-300000719413us-gaap:RestrictedStockUnitsRSUMemberhl:VestingIn2022Member2019-06-300000719413us-gaap:RestrictedStockUnitsRSUMemberhl:VestingIn2022Member2019-01-012019-06-300000719413us-gaap:PerformanceSharesMembersrt:ExecutiveOfficerMember2019-06-012019-06-300000719413hl:RestrictedStockUnitsAndPerformanceSharesMember2019-01-012019-06-300000719413hl:RestrictedStockUnitsAndPerformanceSharesMember2018-01-012018-06-300000719413srt:MinimumMember2019-01-012019-03-310000719413hl:QuarterlyAverageRealizedPriceLevel1Member2019-01-012019-06-300000719413hl:QuarterlyAverageRealizedPriceLevel2Member2019-01-012019-06-300000719413hl:QuarterlyAverageRealizedPriceLevel3Member2019-01-012019-06-300000719413hl:QuarterlyAverageRealizedPriceLevel4Member2019-01-012019-06-300000719413hl:QuarterlyAverageRealizedPriceLevel5Member2019-01-012019-06-300000719413us-gaap:SubsequentEventMember2019-08-052019-08-050000719413srt:MaximumMember2016-02-2300007194132016-02-232019-06-300000719413hl:CommonStockRepurchaseProgramMember2012-05-080000719413hl:CommonStockRepurchaseProgramMember2019-06-300000719413hl:CommonStockRepurchaseProgramMember2019-01-012019-06-300000719413us-gaap:SeniorNotesMember2013-04-120000719413us-gaap:SeniorNotesMember2019-06-300000719413us-gaap:SeniorNotesMember2019-01-012019-06-300000719413us-gaap:SeniorNotesMember2019-05-012019-05-010000719413hl:Series2018ASeniorNotesMember2019-01-012019-06-300000719413hl:Series2018ASeniorNotesMember2019-06-300000719413us-gaap:RevolvingCreditFacilityMember2018-07-310000719413us-gaap:RevolvingCreditFacilityMember2016-05-310000719413hl:NewFacilityMembersrt:MinimumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2019-01-012019-06-300000719413hl:NewFacilityMembersrt:MaximumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2019-01-012019-06-300000719413hl:NewFacilityMembersrt:MinimumMemberus-gaap:BaseRateMember2019-01-012019-06-300000719413hl:NewFacilityMembersrt:MaximumMemberus-gaap:BaseRateMember2019-01-012019-06-300000719413hl:NewFacilityMember2019-01-012019-06-300000719413srt:MaximumMember2019-06-300000719413us-gaap:RevolvingCreditFacilityMembersrt:ScenarioForecastMember2019-09-300000719413us-gaap:RevolvingCreditFacilityMembersrt:ScenarioForecastMember2019-12-310000719413us-gaap:RevolvingCreditFacilityMembersrt:ScenarioForecastMember2020-03-310000719413us-gaap:RevolvingCreditFacilityMembersrt:ScenarioForecastMember2020-06-300000719413us-gaap:RevolvingCreditFacilityMembersrt:ScenarioForecastMember2020-09-300000719413us-gaap:RevolvingCreditFacilityMember2019-06-300000719413us-gaap:RevolvingCreditFacilityMemberhl:ScenarioElectionOneMember2019-06-300000719413us-gaap:RevolvingCreditFacilityMemberhl:ScenarioElectionTwoMember2019-06-300000719413us-gaap:RevolvingCreditFacilityMembersrt:MaximumMemberhl:ScenarioElectionTwoMember2019-06-300000719413us-gaap:LetterOfCreditMembersrt:MinimumMember2018-07-310000719413us-gaap:LetterOfCreditMembersrt:MaximumMember2018-07-310000719413us-gaap:LetterOfCreditMember2018-07-310000719413us-gaap:LetterOfCreditMemberus-gaap:SubsequentEventMember2019-07-012019-08-070000719413us-gaap:SubsequentEventMember2019-08-070000719413us-gaap:RevolvingCreditFacilityMember2019-01-012019-06-300000719413srt:MinimumMember2019-06-3000007194132019-01-010000719413us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMemberhl:CasaBerardiMember2019-06-300000719413us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMemberhl:SanSebastianMember2019-06-30iso4217:MXN0000719413us-gaap:ForeignExchangeContractMembersrt:MinimumMemberhl:CasaBerardiMember2019-06-300000719413us-gaap:ForeignExchangeContractMembersrt:MaximumMemberhl:CasaBerardiMember2019-06-300000719413us-gaap:ForeignExchangeContractMembersrt:MinimumMemberhl:SanSebastianMember2019-06-300000719413us-gaap:ForeignExchangeContractMembersrt:MaximumMemberhl:SanSebastianMember2019-06-300000719413us-gaap:OtherCurrentAssetsMemberus-gaap:ForeignExchangeContractMember2019-06-300000719413us-gaap:OtherNoncurrentAssetsMemberus-gaap:ForeignExchangeContractMember2019-06-300000719413us-gaap:OtherCurrentLiabilitiesMemberus-gaap:ForeignExchangeContractMember2019-06-300000719413us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:ForeignExchangeContractMember2019-06-30utr:lb0000719413hl:Zinc2019SettlementsForProvisionalSalesMember2019-01-012019-06-300000719413hl:Lead2019SettlementsForProvisionalSalesMember2019-01-012019-06-300000719413hl:Zinc2019SettlementsForForecastedSalesMember2019-01-012019-06-300000719413hl:Lead2019SettlementsForForecastedSalesMember2019-01-012019-06-300000719413hl:Zinc2020SettlementsForForecastedSalesMember2019-01-012019-06-300000719413hl:Lead2020SettlementsForForecastedSalesMember2019-01-012019-06-300000719413hl:Silver2019SettlementsForProvisionalSalesMember2018-01-012018-12-310000719413hl:Gold2019SettlementsForProvisionalSalesMember2018-01-012018-12-310000719413hl:Zinc2018SettlementsForProvisionalSalesMember2018-01-012018-12-310000719413hl:Lead2019SettlementsForProvisionalSalesMember2018-01-012018-12-310000719413hl:SilverSettlementsForForecastedMarketPricesMember2019-01-012019-06-300000719413hl:GoldSettlementsForForecastedMarketPricesMember2019-01-012019-06-300000719413hl:SilverContractsMemberus-gaap:SubsequentEventMember2019-07-012019-07-310000719413hl:GoldContractsMemberus-gaap:SubsequentEventMember2019-07-012019-07-31thunderdome:item0000719413hl:SilverContractsMemberus-gaap:SubsequentEventMember2019-07-310000719413hl:GoldContractsMemberus-gaap:SubsequentEventMember2019-07-310000719413us-gaap:CommodityContractMember2019-06-300000719413hl:UnsettledConcentrateSalesContractsMember2019-06-300000719413hl:ForecastedFutureConcentrateContractsMember2019-06-300000719413us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-06-300000719413us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2018-12-310000719413us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-06-300000719413us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2018-12-310000719413us-gaap:FairValueInputsLevel2Member2019-06-300000719413us-gaap:FairValueInputsLevel2Member2018-12-310000719413us-gaap:FairValueMeasurementsRecurringMember2019-06-300000719413us-gaap:FairValueMeasurementsRecurringMember2018-12-310000719413us-gaap:FairValueInputsLevel1Memberus-gaap:SeniorNotesMember2019-06-300000719413hl:KlondexMinesLtdMember2018-07-202018-07-200000719413hl:KlondexMinesLtdMembersrt:MaximumMember2018-07-202018-07-200000719413hl:KlondexMinesLtdMember2018-07-190000719413hl:KlondexMinesLtdMember2018-07-192018-07-190000719413hl:KlondexMinesLtdMember2018-07-200000719413hl:WarrantsInConnectionWithKlondexMinesAcquisitionMember2018-07-202018-07-200000719413hl:WarrantsInConnectionWithKlondexMinesAcquisitionMember2018-07-200000719413hl:WarrantsInConnectionWithKlondexMinesAcquisitionExpiringApril2032Member2018-07-200000719413hl:WarrantsInConnectionWithKlondexMinesAcquisitionExpiringFebruary2029Member2018-07-200000719413hl:KlondexMinesLtdMemberhl:HeclaWarrantsMember2018-07-202018-07-200000719413hl:KlondexMinesLtdMember2019-04-012019-06-300000719413hl:KlondexMinesLtdMember2018-07-240000719413hl:KlondexMinesLtdMember2019-06-300000719413hl:KlondexMinesLtdMemberhl:BeyondProvenAndProbableReservesMember2019-06-300000719413srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-06-300000719413srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-06-300000719413srt:NonGuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-06-300000719413srt:ConsolidationEliminationsMember2019-06-300000719413srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-12-310000719413srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2018-12-310000719413srt:NonGuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2018-12-310000719413srt:ConsolidationEliminationsMember2018-12-310000719413us-gaap:MaterialReconcilingItemsMember2018-12-310000719413srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-04-012019-06-300000719413srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-04-012019-06-300000719413srt:NonGuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-04-012019-06-300000719413srt:ConsolidationEliminationsMember2019-04-012019-06-300000719413srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-01-012019-06-300000719413srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-01-012019-06-300000719413srt:NonGuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-01-012019-06-300000719413srt:ConsolidationEliminationsMember2019-01-012019-06-300000719413srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-04-012018-06-300000719413srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2018-04-012018-06-300000719413srt:NonGuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2018-04-012018-06-300000719413srt:ConsolidationEliminationsMember2018-04-012018-06-300000719413srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-01-012018-06-300000719413srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2018-01-012018-06-300000719413srt:NonGuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2018-01-012018-06-300000719413srt:ConsolidationEliminationsMember2018-01-012018-06-300000719413srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2017-12-310000719413srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2017-12-310000719413srt:NonGuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2017-12-310000719413srt:ConsolidationEliminationsMember2017-12-310000719413srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-06-300000719413srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2018-06-300000719413srt:NonGuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2018-06-300000719413srt:ConsolidationEliminationsMember2018-06-30
 

 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

 

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

 

or

 

[  ]       TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

 

 

Commission file number

1-8491

 

HECLA MINING COMPANY

(Exact name of registrant as specified in its Charter)

 

 

Delaware

 

77-0664171

 
 

State or Other Jurisdiction of

 

I.R.S. Employer

 
 

Incorporation or Organization

 

Identification No.

 
         
 

6500 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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

 Name of each exchange

on which registered

Common Stock, par value $0.25 per share

HL

New York Stock Exchange

Series B Cumulative Convertible Preferred

Stock, par value $0.25 per share

HL-PB

New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes XX .    No      .

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes XX .    No___.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer   XX.             Accelerated filer     .  
Non-accelerated filer      .   Smaller reporting company     .  
    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.     .

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes      .    No XX.

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Shares Outstanding August 5, 2019

Common stock, par value

$0.25 per share

 

490,250,767

 

 

Table of Contents

 

 

Hecla Mining Company and Subsidiaries

 

Form 10-Q

 

For the Quarter Ended June 30, 2019

 

INDEX*

 

   

Page

PART I - Financial Information

 
     
 

Item 1 – Condensed Consolidated Financial Statements (Unaudited)

 
     
 

Condensed Consolidated Balance Sheets - June 30, 2019 and December 31, 2018

3
     
 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - Three Months Ended and Six Months Ended – June 30, 2019 and 2018

4
     
 

Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2019 and 2018

5
     
 

Condensed Consolidated Statements of Changes in Stockholders' Equity Three Months Ended and Six Months Ended – June 30, 2019 and 2018

6
     
 

Notes to Condensed Consolidated Financial Statements

8
     
 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

38
     
 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

69
     
 

Item 4. Controls and Procedures

72
     

PART II - Other Information

 
     
 

Item 1 – Legal Proceedings

73
     
 

Item 1A – Risk Factors

73
     
 

Item 4 – Mine Safety Disclosures

75
     
 

Item 6 – Exhibits

75
     
 

Signatures

77

 

*Items 2, 3 and 5 of Part II are omitted as they are not applicable.

 

2

Table of Contents

 

Part I - Financial Information

 

Item 1. Financial Statements

 

 

Hecla Mining Company and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except shares)

 

   

June 30, 2019

   

December 31, 2018

 
   

(Unaudited)

         

ASSETS

Current assets:

               

Cash and cash equivalents

  $ 9,434     $ 27,389  

Accounts receivable:

               

Trade

    6,877       4,184  

Taxes

    25,326       14,191  

Other, net

    7,367       7,443  

Inventories:

               

Concentrates, doré, and stockpiled ore

    45,285       53,172  

Materials and supplies

    35,317       34,361  

Prepaid taxes

    288       12,231  

Other current assets

    15,524       11,179  

Total current assets

    145,418       164,150  

Non-current investments

    5,815       6,583  

Non-current restricted cash and investments

    1,025       1,025  

Properties, plants, equipment and mineral interests, net

    2,485,869       2,520,004  

Operating lease right-of-use assets

    19,019        

Non-current deferred income taxes

    3,395       1,987  

Other non-current assets and deferred charges

    10,172       10,195  

Total assets

  $ 2,670,713     $ 2,703,944  

LIABILITIES

Current liabilities:

               

Accounts payable and accrued liabilities

  $ 69,336     $ 77,861  

Accrued payroll and related benefits

    21,357       30,034  

Accrued taxes

    1,434       7,727  

Current portion of finance leases

    5,392       5,264  

Current portion of operating leases

    6,628        

Accrued interest

    5,984       5,961  

Other current liabilities

    898       5,937  

Current portion of accrued reclamation and closure costs

    6,824       3,410  

Total current liabilities

    117,853       136,194  

Non-current finance leases

    8,013       7,871  

Non-current operating leases

    12,410        

Accrued reclamation and closure costs

    103,782       104,979  

Long-term debt

    586,667       532,799  

Non-current deferred tax liability

    148,338       173,537  

Non-current pension liability

    48,448       47,711  

Other non-current liabilities

    5,974       9,890  

Total liabilities

    1,031,485       1,012,981  

Commitments and contingencies (Notes 2, 4, 7, 9, and 11)

               

STOCKHOLDERS' EQUITY

Preferred stock, 5,000,000 shares authorized:

               

Series B preferred stock, $0.25 par value, 157,816 shares issued and outstanding, liquidation preference — $7,891

    39       39  

Common stock, $0.25 par value, 750,000,000 authorized shares; issued and outstanding 2019 — 488,870,345 shares and 2018 — 482,603,937 shares

    123,701       121,956  

Capital surplus

    1,895,617       1,880,481  

Accumulated deficit

    (323,079

)

    (248,308

)

Accumulated other comprehensive loss

    (34,670

)

    (42,469

)

Less treasury stock, at cost; 2019 — 5,941,436 shares and 2018 — 5,226,791 shares issued and held in treasury

    (22,380

)

    (20,736

)

Total stockholders’ equity

    1,639,228       1,690,963  

Total liabilities and stockholders’ equity

  $ 2,670,713     $ 2,703,944  

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

3

Table of Contents

 

 

Hecla Mining Company and Subsidiaries

 

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)

(Dollars and shares in thousands, except for per-share amounts)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30, 2019

   

June 30, 2018

   

June 30, 2019

   

June 30, 2018

 

Sales of products

  $ 134,172     $ 147,259     $ 286,789     $ 286,968  

Cost of sales and other direct production costs

    104,938       80,440       215,324       153,309  

Depreciation, depletion and amortization

    49,477       31,817       88,264       59,871  

Total cost of sales

    154,415       112,257       303,588       213,180  

Gross (loss) profit

    (20,243

)

    35,002       (16,799

)

    73,788  
Other operating expenses:                                

General and administrative

    8,918       9,787       18,877       17,522  

Exploration

    4,346       7,838       8,748       15,198  

Pre-development

    798       1,415       1,654       2,420  

Research and development

    158       2,337       561       3,773  

Other operating expense

    657       674       1,244       1,319  

Loss (gain) on disposition or impairment of properties, plants, equipment and mineral interests

    4,642       (36

)

    4,642       (166

)

Provision for closed operations and environmental matters

    1,052       1,420       1,622       2,682  

Suspension-related costs

    2,266       6,801       5,044       11,818  

Acquisition costs

    397       1,010       410       3,517  

Total other operating expenses

    23,234       31,246       42,802       58,083  

(Loss) income from operations

    (43,477

)

    3,756       (59,601

)

    15,705  

Other income (expense):

                               

Unrealized loss on investments

    (1,129

)

    (564

)

    (1,033

)

    (254

)

Gain on derivative contracts

    3,798       16,804       1,999       20,811  

Net foreign exchange gain (loss)

    (4,381

)

    2,476       (7,514

)

    5,068  

Other (expense) income

    (1,187

)

    108       (2,311

)

    52  

Interest expense

    (11,335

)

    (10,079

)

    (22,000

)

    (19,873

)

Total other (expense) income

    (14,234

)

    8,745       (30,859

)

    5,804  

(Loss) income before income taxes

    (57,711

)

    12,501       (90,460

)

    21,509  

Income tax benefit (provision)

    11,179       (427

)

    18,395       (1,195

)

Net (loss) income

    (46,532

)

    12,074       (72,065

)

    20,314  

Preferred stock dividends

    (138

)

    (138

)

    (276

)

    (276

)

(Loss) income applicable to common shareholders

  $ (46,670

)

  $ 11,936     $ (72,341

)

  $ 20,038  
Comprehensive (loss) income:                                

Net (loss) income

  $ (46,532

)

  $ 12,074     $ (72,065

)

  $ 20,314  

Change in fair value of derivative contracts designated as hedge transactions

    3,540       (5,203

)

    7,799       (7,276

)

Unrealized holding (losses) gains on investments

          41             10  

Comprehensive (loss) income

  $ (42,992

)

  $ 6,912     $ (64,266

)

  $ 13,048  

Basic (loss) income per common share after preferred dividends

  $ (0.10

)

  $ 0.03     $ (0.15

)

  $ 0.05  

Diluted (loss) income per common share after preferred dividends

  $ (0.10

)

  $ 0.03     $ (0.15

)

  $ 0.05  

Weighted average number of common shares outstanding - basic

    486,065       400,619       484,438       399,972  

Weighted average number of common shares outstanding - diluted

    486,065       403,610       484,438       402,873  

Cash dividends declared per common share

  $ 0.0025     $ 0.0025     $ 0.0050     $ 0.0050  

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

4

Table of Contents

 

 

Hecla Mining Company and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

   

Six Months Ended

 
   

June 30, 2019

   

June 30, 2018

 

Operating activities:

               

Net (loss) income

  $ (72,065

)

  $ 20,314  

Non-cash elements included in net (loss) income:

               

Depreciation, depletion and amortization

    90,821       62,852  

Adjustment of inventory to market value

    1,399        

Loss on investments

    1,033       254  

Loss (gain) on disposition or impairment of properties, plants, equipment, and mineral interests

    4,642       (166

)

Provision for reclamation and closure costs

    3,209       2,640  

Stock compensation

    3,552       2,441  

Deferred income taxes

    (22,585

)

    (2,977

)

Amortization of loan origination fees

    1,252       898  

Loss (gain) on derivative contracts

    (6,101

)

    (30,236

)

Foreign exchange loss (gain)

    12,217       (5,348

)

Other non-cash items, net

    3       (35

)

Change in assets and liabilities:

               

Accounts receivable

    (12,772

)

    2,471  

Inventories

    (147

)

    (6,865

)

Other current and non-current assets

    16,784       (2,507

)

Accounts payable and accrued liabilities

    (12,085

)

    8,701  

Accrued payroll and related benefits

    1,660       (337

)

Accrued taxes

    (6,452

)

    (672

)

Accrued reclamation and closure costs and other non-current liabilities

    4,348       (4,410

)

Cash provided by operating activities

    8,713       47,018  

Investing activities:

               

Additions to properties, plants, equipment and mineral interests

    (71,245

)

    (43,304

)

Proceeds from disposition of properties, plants and equipment

    25       463  

Purchases of investments

    (107

)

    (31,682

)

Maturities of investments

          59,336  

Net cash used in investing activities

    (71,327

)

    (15,187

)

Financing activities:

               

Acquisition of treasury shares

    (1,644

)

    (2,694

)

Dividends paid to common shareholders

    (2,430

)

    (2,000

)

Dividends paid to preferred shareholders

    (276

)

    (276

)

Credit availability and debt issuance fees paid

    (46

)

    (3

)

Borrowings on debt

    170,000       31,024  

Repayments of debt

    (118,000

)

     

Repayments of finance leases

    (3,377

)

    (3,762

)

Net cash provided by financing activities

    44,227       22,289  

Effect of exchange rates on cash

    432       (532

)

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

    (17,955

)

    53,588  

Cash, cash equivalents and restricted cash and cash equivalents at beginning of period

    28,414       187,139  

Cash, cash equivalents and restricted cash and cash equivalents at end of period

  $ 10,459     $ 240,727  

Significant non-cash investing and financing activities:

               

Addition of finance lease obligations

  $ 3,498     $ 7,008  

Recognition of operating lease liabilities and right-of-use assets

  $ 22,365     $  

Payment of accrued compensation in stock

  $ 8,274     $ 4,863  

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

5

Table of Contents

 

 

Hecla Mining Company and Subsidiaries

 

 Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(Dollars are in thousands, except for share and per share amounts)

 

   

Three Months Ended June 30, 2019

 
   

Series B

Preferred

Stock

   

Common

Stock

   

Additional

Paid-In

Capital

   

Accumulated

Deficit

   

Accumulated

Other

Comprehensive

Loss, net

   

Treasury

Stock

   

Total

 

Balances, April 1, 2019

  $ 39     $ 122,052     $ 1,882,613     $ (275,188

)

  $ (38,210

)

  $ (20,736

)

  $ 1,670,570  

Net loss

                            (46,532

)

                    (46,532

)

Restricted stock units granted

                    1,518                               1,518  

Common stock dividends declared ($0.0025 per common share)

                            (1,221

)

                    (1,221

)

Series B Preferred Stock dividends declared ($0.875 per share)

                            (138

)

                    (138

)

Common stock issued for 401(k) match (362,000 shares)

            90       716                               806  

Common stock issued for employee incentive compensation (3,597,000 shares)

            899       7,375                       (1,644

)

    6,630  

Common stock issued to pension plans (2,384,000 shares)

            597       3,003                               3,600  

Common stock issued to directors (253,000 shares)

            63       392                               455  

Other comprehensive income

                                    3,540               3,540  

Balances, June 30, 2019

  $ 39     $ 123,701     $ 1,895,617     $ (323,079

)

  $ (34,670

)

  $ (22,380

)

  $ 1,639,228  

 

 

 

   

Three Months Ended June 30, 2018

 
   

Series B

Preferred

Stock

   

Common

Stock

   

Additional

Paid-In

Capital

   

Accumulated

Deficit

   

Accumulated

Other

Comprehensive

Loss, net

   

Treasury

Stock

   

Total

 

Balances, April 1, 2018

  $ 39     $ 101,290     $ 1,626,298     $ (209,696

)

  $ (26,767

)

  $ (19,267

)

  $ 1,471,897  

Net income

                            12,074                       12,074  

Restricted stock units granted

                    1,315                               1,315  

Restricted stock unit distributions (1,079,000 shares)

            270       (270

)

                    (1,469

)

    (1,469

)

Common stock dividends declared ($0.0025 per common share)

                            (1,002

)

                    (1,002

)

Series B Preferred Stock dividends declared ($0.875 per share)

                            (138

)

                    (138

)

Common stock issued for 401(k) match (331,000 shares)

            83       1,097                               1,180  

Other comprehensive income

                                    (5,162

)

            (5,162

)

Balances, June 30, 2018

  $ 39     $ 101,643     $ 1,628,440     $ (198,762

)

  $ (31,929

)

  $ (20,736

)

  $ 1,478,695  

 

6

Table of Contents

 

   

Six Months Ended June 30, 2019

 
   

Series B

Preferred

Stock

   

Common

Stock

   

Additional

Paid-In

Capital

   

Accumulated

Deficit

   

Accumulated

Other

Comprehensive

Loss, net

   

Treasury

Stock

   

Total

 

Balances, January 1, 2019

  $ 39     $ 121,956     $ 1,880,481     $ (248,308

)

  $ (42,469

)

  $ (20,736

)

  $ 1,690,963  

Net loss

                            (72,065

)

                    (72,065

)

Restricted stock units granted

                    3,097                               3,097  

Common stock dividends declared ($0.0025 per common share)

                            (2,430

)

                    (2,430

)

Series B Preferred Stock dividends declared ($0.875 per share)

                            (276

)

                    (276

)

Common stock issued for 401(k) match (745,000 shares)

            186       1,594                               1,780  

Adjustment to fair value of warrants issued for purchase of another company

                    (325

)

                            (325

)

Common stock issued for employee incentive compensation (3,597,380 shares)

            899       7,375                       (1,644

)

    6,630  

Common stock issued to pension plans (2,384,000 shares)

          597       3,003                               3,600  

Common stock issued to directors (253,000 shares)

            63       392                               455  

Other comprehensive income

                                    7,799               7,799  

Balances, June 30, 2019

  $ 39     $ 123,701     $ 1,895,617     $ (323,079

)

  $ (34,670

)

  $ (22,380

)

  $ 1,639,228  

 

 

 

   

Six Months Ended June 30, 2018

 
   

Series B

Preferred

Stock

   

Common

Stock

   

Additional

Paid-In

Capital

   

Accumulated

Deficit

   

Accumulated

Other

Comprehensive

Loss, net

   

Treasury

Stock

   

Total

 

Balances, January 1, 2018

  $ 39     $ 100,926     $ 1,619,816     $ (218,089

)

  $ (23,373

)

  $ (18,042

)

  $ 1,461,277  

Net income

                            20,314                       20,314  

Change in accounting for marketable equity securities

                            1,289       (1,289

)

             

Restricted stock units granted

                    2,404                               2,404  

Restricted stock unit distributions (1,079,000 shares)

            270       (270

)

                    (1,469

)

    (1,469

)

Common stock dividends declared ($0.0025 per common share)

                            (2,000

)

                    (2,000

)

Series B Preferred Stock dividends declared ($0.875 per share)

                            (276

)

                    (276

)

Common stock issued for 401(k) match (552,000 shares)

            138       1,936                               2,074  

Common stock issued for employee incentive compensation 1,237,369 shares)

            309       4,554                       (1,225

)

    3,638  

Other comprehensive income

                                    (7,267

)

            (7,267

)

Balances, June 30, 2018

  $ 39     $ 101,643     $ 1,628,440     $ (198,762

)

  $ (31,929

)

  $ (20,736

)

  $ 1,478,695  

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

7

Table of Contents

 

 

Note 1.    Basis of Preparation of Financial Statements

 

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements and notes to the unaudited interim condensed consolidated financial statements contain all adjustments, consisting of normal recurring items and items which are nonrecurring, necessary to present fairly, in all material respects, the financial position of Hecla Mining Company and its consolidated subsidiaries (in this report, "Hecla" or "the Company" or “we” or “our” or “us” refers to Hecla Mining Company and our subsidiaries, unless the context requires otherwise).  These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related footnotes as set forth in our annual report filed on Form 10-K for the year ended December 31, 2018, as it may be amended from time to time.

 

The results of operations for the periods presented may not be indicative of those which may be expected for a full year.  The unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").  Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures are adequate for the information not to be misleading.

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting period and the disclosures of contingent liabilities.  Accordingly, ultimate results could differ materially from those estimates.     

 

 

 

Note 2.    Investments

 

At June 30, 2019 and December 31, 2018, the fair value of our non-current investments was $5.8 million and $6.6 million, respectively.  Our non-current investments consist of marketable equity securities which are carried at fair value.  The cost basis of our non-current investments was approximately $8.0 million and $7.7 million at June 30, 2019 and December 31, 2018, respectively. During the six months ended June 30, 2019, we recognized $1.0 million in net unrealized losses in current earnings. During the six months ended June 30, 2018, we recognized $0.3 million in net unrealized losses in current earnings.

 

 

 

Note 3.   Income Taxes

 

Major components of our income tax benefit (provision) for the three and six months ended June 30, 2019 and 2018 are as follows (in thousands):

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2019

   

2018

   

2019

   

2018

 

Current:

                               

Domestic

  $ (2

)

  $ (1

)

  $ (2

)

  $ (1

)

Foreign

    (1,716

)

    (2,965

)

    (2,793

)

    (4,171

)

Total current income tax benefit (provision)

    (1,718

)

    (2,966

)

    (2,795

)

    (4,172

)

                                 

Deferred:

                               

Domestic

    5,456             7,933        

Foreign

    7,441       2,539       13,257       2,977  

Total deferred income tax benefit (provision)

    12,897       2,539       21,190       2,977  

Total income tax benefit (provision)

  $ 11,179     $ (427

)

  $ 18,395     $ (1,195

)

 

8

Table of Contents

 

The current income tax benefits (provisions) for the three and six months ended June 30, 2019 and 2018 vary from the amounts that would have resulted from applying the statutory income tax rate to pre-tax income due primarily to the impact of taxation in foreign jurisdictions and a valuation allowance on the majority of U.S. deferred tax assets.

 

As of June 30, 2019, we have a net deferred tax liability in the U.S. of $45.4 million, a net deferred tax liability in Canada of $102.9 million, and a net deferred tax asset in Mexico of $3.4 million, for a consolidated worldwide net deferred tax liability of $144.9 million.

 

With the acquisition of Klondex Mines Ltd. ("Klondex") on July 20, 2018 (see Note 13), we acquired a U.S. consolidated tax group (the "Nevada U.S. Group") that did not join the existing consolidated U.S. tax group of Hecla Mining Company and subsidiaries (“Hecla U.S.”). Under acquisition accounting, we recorded a net deferred tax liability of $59.5 million. For the six months ended June 30, 2019, we recorded a tax benefit of $7.9 million in the Nevada U.S. Group. Net operating losses acquired as of the acquisition date are subject to limitation under Internal Revenue Code Section 382. However, the annual limitation is not expected to have a material impact on our ability to utilize the losses.

 

For Hecla U.S., we recorded a full valuation allowance in the U.S. in December 2017 as a result of U.S. tax reform. Our circumstances at June 30, 2019 continued to support a full valuation allowance in the U.S. for Hecla U.S.

 

 

 

Note 4.    Commitments, Contingencies and Obligations

 

General

 

We follow GAAP guidance in determining our accruals and disclosures with respect to loss contingencies, and evaluate such accruals and contingencies for each reporting period. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

 

Lucky Friday Water Permit Matters

 

In December 2013, the EPA issued to Hecla Limited a request for information under Section 308 of the Clean Water Act directing Hecla Limited to undertake a comprehensive groundwater investigation of Lucky Friday’s tailings pond no. 3 to evaluate whether the pond is causing the discharge of pollutants via seepage to groundwater that is discharging to surface water. We completed the investigation mandated by the EPA and submitted a draft report to the agency in December 2015. We are waiting for the EPA’s response and we cannot predict what further action, if any, the agency may take.

 

Johnny M Mine Area near San Mateo, McKinley County and San Mateo Creek Basin, New Mexico

 

In May 2011, the EPA made a formal request to Hecla Mining Company for information regarding the Johnny M Mine Area near San Mateo, McKinley County, New Mexico, and asserted that Hecla Mining Company may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") for environmental remediation and past costs the EPA has incurred at the site. Mining at the Johnny M Mine was conducted for a limited period of time by a predecessor of our subsidiary, Hecla Limited. In August 2012, Hecla Limited and the EPA entered into a Settlement Agreement and Administrative Order on Consent for Removal Action (“Consent Order”), pursuant to which Hecla Limited agreed to pay (i) $1.1 million to the EPA for its past response costs at the site and (ii) any future response costs at the site under the Consent Order, in exchange for a covenant not to sue by the EPA. Hecla Limited paid the $1.1 million to the EPA for its past response costs and in December 2014 submitted to EPA the Engineering Evaluation and Cost Analysis (“EE/CA”) for the site. The EE/CA evaluates three alternative response actions: 1) no action, 2) off-site disposal, and 3) on-site disposal. The range in estimated costs of these alternatives is $0 to $221 million. In the EE/CA, Hecla Limited recommended that EPA approve on-site disposal, which is currently estimated to cost $5.6 million, on the basis that it is the most appropriate response action under CERCLA. In June 2015, the EPA approved the EE/CA, with a few minor conditions. The EPA must still publish the EE/CA for public notice and comment, and the agency will not make a final decision on the appropriate response action until the public comment process is complete. It is anticipated that Hecla Limited will implement the response action selected by the EPA pursuant to an amendment to the Consent Order or a new order. Based on the foregoing, we believe it is probable that Hecla Limited will incur a liability for remediation at the site. In the fourth quarter of 2014, we accrued $5.6 million, which continues to be our best estimate of that liability as of the date of this report. There can be no assurance that Hecla Limited’s liability will not be more than $5.6 million, or that its ultimate liability will not have a material adverse effect on Hecla Limited’s or our results of operations or financial position.

 

9

Table of Contents

 

The Johnny M Mine is in an area known as the San Mateo Creek Basin (“SMCB”), which is an approximately 321 square mile area in New Mexico that contains numerous legacy uranium mines and mills. In addition to Johnny M, Hecla Limited's predecessor was involved at other mining sites within the SMCB. The EPA is considering listing the entire SMCB on CERCLA’s National Priorities List in order to address perceived groundwater issues within the SMCB. The EE/CA discussed above relates primarily to contaminated rock and soil, not groundwater. In the event that the SMCB is listed as a Superfund site, or for other reasons, it is possible that Hecla Limited’s liability at the Johnny M Site, and for any other mine site within the SMCB at which Hecla Limited's predecessor may have operated, will be greater than our current accrual of $5.6 million due to the increased scope of required remediation.

 

In July 2018, the EPA informed Hecla Limited that it and several other potentially responsible parties ("PRPs") may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA stated it has incurred approximately $9.6 million in response costs to date. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site, including the relative contributions of contamination by the various PRPs.

 

Carpenter Snow Creek and Barker-Hughesville Sites in Montana

 

In July 2010, the EPA made a formal request to Hecla Mining Company for information regarding the Carpenter Snow Creek Superfund site located in Cascade County, Montana. The Carpenter Snow Creek site is located in a historic mining district, and in the early 1980s Hecla Limited leased 6 mining claims and performed limited exploration activities at the site. Hecla Limited terminated the mining lease in 1988.

 

In June 2011, the EPA informed Hecla Limited that it believes Hecla Limited, among several other viable companies, may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA stated in the letter that it has incurred approximately $4.5 million in response costs and estimated that total remediation costs may exceed $100 million. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site, including the relative contributions of contamination by various other PRPs.

 

In February 2017, the EPA made a formal request to Hecla Mining Company for information regarding the Barker-Hughesville Mining District Superfund site located in Judith Basin and Cascade Counties, Montana. Hecla Limited submitted a response in April 2017. The Barker-Hughesville site is located in a historic mining district, and between approximately June and December 1983, Hecla Limited was party to an agreement with another mining company under which limited exploration activities occurred at or near the site.

 

In August 2018, the EPA informed Hecla Limited that it and several other PRPs may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA did not include an amount of its alleged response costs to date. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning past or anticipated future costs at the site and the relative contributions of contamination by various other PRPs.

 

Potential Claim for Indemnification Against CoCa Mines, Inc.

 

In 1991, Hecla Limited acquired CoCa Mines, Inc. (“CoCa”) and its subsidiary Creede Resources, Inc. (“CRI”). CoCa and CRI previously operated in the State of Colorado, but presently have limited assets and operations. Beginning in 2014, and most recently in January 2019, a third party has alleged that CoCa and CRI are required by a 1989 agreement to indemnify it for certain environmental costs and liabilities it may incur with respect to the Nelson Tunnel/Commodore Waste Rock Pile Superfund site in Creede, Colorado. To date, no claim for indemnification has been made against CoCa or CRI; however, in January 2019, the party alleged that it may soon reach a settlement with the EPA under CERCLA with respect to the site, at which point it would then seek reimbursement from CoCa and CRI of all amounts paid to the EPA, as well as attorneys’ fees and costs. Until any such claim is made, we cannot predict whether a liability will be incurred or the amount of any such liability; however, as noted above, both CoCa and CRI have limited assets with which to satisfy any claim.

 

10

Table of Contents

 

Montanore Project

 

In October 2018, a court in Lincoln County, Montana found that the adit (which is an underground tunnel) which we had intended to use to develop the Montanore project trespassed on certain unpatented mining claims we do not own, but through which the adit passes. In the case, which dates back to 2008, the jury delivered a verdict against certain of our subsidiaries for $3,325,000. The subsidiaries appealed the finding of trespass and the award of damages to the Montana Supreme Court, and we believe there are strong arguments for reversal. There can be no assurance that the appeal will succeed. Further, on May 6, 2019, one of the subsidiaries received a letter from the Montana Department of Environmental Quality ("DEQ") questioning the validity of its operating permit at Montanore in light of the trespass finding. Our subsidiary responded by explaining that we do not believe the two issues are related. There has been no response to date from DEQ. Finally, on July 24, 2019, a Montana state court issued an order vacating Montanore's water discharge permit, which was renewed effective as of May 1, 2014, and remanded the matter back to DEQ. As of June 30, 2019, we have accrued $1.1 million for estimated future reclamation costs at the Montanore project, and have surety bonding in place for that amount.

 

Litigation Related to Klondex Acquisition

 

Following the announcement of our proposed acquisition of Klondex, Klondex and members of the Klondex board of directors were named as defendants in several putative stockholder class actions brought by purported stockholders of Klondex challenging the proposed merger. The lawsuits were all filed in the United States District Court for the District of Nevada. On December 18, 2018, the remaining three cases were consolidated into a single case, Lawson v. Klondex Mines Ltd., et al., No. 3:18-cv-00284 (D. Nev. June 15, 2018).

 

The plaintiffs generally claim that Klondex issued a proxy statement that included misstatements or omissions, in violation of sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended. The plaintiffs seek, among other things, to obtain rescissory damages and recover attorneys’ fees and costs.

 

Although it is not possible to predict the outcome of litigation matters with certainty, each of Klondex and its directors believe that each of the lawsuits are without merit, and the parties intend to vigorously defend against all claims asserted.

 

On September 11, 2018, a lawsuit was filed in the Ontario (Canada) Superior Court of Justice by Waterton Nevada Splitter LLC against Hecla Mining Company, our subsidiary Klondex Mines Unlimited Liability Company and Havilah Mining Corporation, an entity that was formed to own the Canadian assets of Klondex that we did not acquire as part of the Klondex acquisition, and of which we own approximately 13%. The lawsuit alleges that Hecla and Havilah are in breach of contract in connection with the issuance to Waterton of warrants to purchase Hecla common stock and Havilah common shares to replace warrants to purchase Klondex common shares that Waterton owned prior to the July 2018 acquisition. The lawsuit claims Hecla and Havilah issued warrants to Waterton valued at $3.7 million but that Waterton was entitled to warrants valued at $8.9 million. We believe the lawsuit is without merit and will vigorously defend it.

 

On May 24, 2019, a purported Hecla stockholder filed a putative class action lawsuit in U.S. District Court for the Southern District of New York against Hecla and certain of our executive officers, one of whom is also a director. The complaint, purportedly brought on behalf of all purchasers of Hecla common stock from March 19, 2018, through and including May 8, 2019, asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks, among other things, damages and costs and expenses. Specifically, the complaint alleges that Hecla, under the authority and control of the individual defendants, made certain false and misleading statements and allegedly omitted certain material information regarding Hecla’s Nevada Operations unit. The complaint alleges that these actions artificially inflated the market price of Hecla common stock during the class period, thus purportedly harming investors. A second suit was filed on June 19, 2019, alleging virtually identical claims. We cannot predict the outcome of these lawsuits or estimate damages if plaintiffs were to prevail. We believe that these claims are without merit and intend to defend them vigorously.

 

Related to the above described class action lawsuits, Hecla has been named as a nominal defendant in two shareholder derivative lawsuits which name as defendants members of Hecla’s board of directors and certain officers. The cases were filed on July 12 and August 2, 2019, respectively, in the U.S. District Court for the District of Delaware. In general terms, the suits allege (i) violations of Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and (ii) breaches of fiduciary duties by the individual defendants and seek damages, purportedly on behalf of Hecla.

 

11

Table of Contents

 

Debt

 

As discussed in Note 9, on April 12, 2013, we completed an offering of $500 million aggregate principal amount of Senior Notes. The net proceeds from the offering of the Senior Notes were used to partially fund the acquisition of Aurizon Mines Ltd. ("Aurizon") and for general corporate purposes, including expenses related to the Aurizon acquisition. Through the acquisition of Aurizon, we acquired our Casa Berardi mine and other interests in Quebec, Canada. In 2014, we completed additional issuances of our Senior Notes in the aggregate principal amount of $6.5 million, which were contributed to one of our pension plans to satisfy the funding requirement for 2014. Interest on the Senior Notes is payable on May 1 and November 1 of each year, commencing November 1, 2013.

 

On March 5, 2018, we entered into a note purchase agreement pursuant to which we issued CAD$40 million (approximately USD$30.8 million at the time of the transaction) in aggregate principal amount of our Series 2018-A Senior Notes due May 1, 2021 (the “Notes”) to Ressources Québec, a subsidiary of Investissment Québec, a financing arm of the Québec government. The Notes were issued at a discount of 0.58%, and bear interest at a rate of 4.68% per year, payable on May 1 and November 1 of each year, commencing May 1, 2018. The Notes are senior and unsecured and are pari passu in all material respects with the Senior Notes, including with respect to guarantees of the Notes by certain of our subsidiaries. The net proceeds from the Notes are required to be used for development and expansion of our Casa Berardi mine.

 

See Note 9 for more information.

 

Other Commitments

 

Our contractual obligations as of June 30, 2019 included approximately $2.5 million for various costs. In addition, our open purchase orders at June 30, 2019 included approximately $1.6 million, $0.4 million, $4.4 million and $0.8 million for various capital and non-capital items at the Lucky Friday, Casa Berardi, Greens Creek and Nevada Operations units, respectively. We also have total commitments of approximately $14.3 million relating to scheduled payments on finance leases, including interest, primarily for equipment at our Greens Creek, Lucky Friday, Casa Berardi and Nevada Operations units and total commitments of approximately $19.2 million on operating leases (see Note 9 for more information). As part of our ongoing business and operations, we are required to provide surety bonds, bank letters of credit, and restricted deposits for various purposes, including financial support for environmental reclamation obligations and workers compensation programs. As of June 30, 2019, we had surety bonds totaling $191.8 million and letters of credit totaling $3.0 million in place as financial support for future reclamation and closure costs, self-insurance, and employee benefit plans. Subsequent to June 30, 2019, we increased our letters of credit to a total of $23.0 million as of the date of this report. The obligations associated with these instruments are generally related to performance requirements that we address through ongoing operations. As the requirements are met, the beneficiary of the associated instruments cancels or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure of the sites. We believe we are in compliance with all applicable bonding requirements and will be able to satisfy future bonding requirements as they arise.

 

Other Contingencies

 

We also have certain other contingencies resulting from litigation, claims, EPA investigations, and other commitments and are subject to a variety of environmental and safety laws and regulations incident to the ordinary course of business. We currently have no basis to conclude that any or all of such contingencies will materially affect our financial position, results of operations or cash flows. However, in the future, there may be changes to these contingencies, or additional contingencies may occur, any of which might result in an accrual or a change in current accruals recorded by us, and there can be no assurance that their ultimate disposition will not have a material adverse effect on our financial position, results of operations or cash flows.

 

 

 

Note 5.    (Loss) Earnings Per Common Share

 

We are authorized to issue 750,000,000 shares of common stock, $0.25 par value per share. At June 30, 2019, there were 488,870,345 shares of our common stock issued and 5,941,436 shares issued and held in treasury, for a net of 488,870,345 shares outstanding. Basic and diluted (loss) earnings per common share, after preferred dividends, was $(0.10) and $0.03 for the three-month periods ended June 30, 2019 and 2018, respectively. Basic and diluted (loss) earnings per common share, after preferred dividends, was $(0.15) and $0.05 for the six-month periods ended June 30, 2019 and 2018, respectively.

 

Diluted (loss) earnings per share for the three and six months ended June 30, 2019 and 2018 excludes the potential effects of outstanding shares of our convertible preferred stock, as their conversion would have no effect on the calculation of dilutive shares.

 

12

Table of Contents

 

For the three-month and six-month periods ended June 30, 2019, all restricted share units, deferred shares and warrants were excluded from the computation of diluted loss per share, as our reported loss for those periods would cause them to have no effect on the calculation of loss per share. For the three-month and six-month periods ended June 30, 2018, the calculation of diluted income per share included dilutive (i) restricted stock units that were unvested or which vested in the current period of 1,268,601 and 1,179,086, respectively, and (ii) deferred shares of 1,721,932 for each period. For the three-month and six-month periods ended June 30, 2018, there were unvested restricted stock units of 2,218,281 and 2,307,796, respectively, and deferred shares of 106,185 for each period, which were not dilutive. There were no warrants outstanding during the three-month and six-month periods ended June 30, 2018.

 

 

 

Note 6.    Business Segments and Sales of Products

 

We discover, acquire, develop, produce, and market concentrates and doré containing silver, gold, lead and zinc. We are currently organized and managed in five segments, which represent our operating units: the Greens Creek unit, the Lucky Friday unit, the Casa Berardi unit, the San Sebastian unit, and the Nevada Operations unit. The Nevada Operations unit was added as a result of our acquisition of Klondex in July 2018 (see Note 13 for more information).

 

General corporate activities not associated with operating units and their various exploration activities, as well as discontinued operations and idle properties, are presented as “other.”  Interest expense, interest income and income taxes are considered general corporate items, and are not allocated to our segments.

 

The following tables present information about reportable segments for the three and six months ended June 30, 2019 and 2018 (in thousands):

 

   

Three Months Ended
June 30,

   

Six Months Ended

June 30,

 
   

2019

   

2018

   

2019

   

2018

 

Net sales to unaffiliated customers:

                               

Greens Creek

  $ 55,398     $ 74,605     $ 135,527     $ 140,455  

Lucky Friday

    4,951       3,287       7,133       8,264  

Casa Berardi

    45,500       56,103       85,562       111,651  

San Sebastian

    10,993       13,264       23,593       26,598  

Nevada Operations

    17,330             34,974        
    $ 134,172     $ 147,259     $ 286,789     $ 286,968  

Income (loss) from operations:

                               

Greens Creek

  $ 9,141     $ 25,516     $ 34,574     $ 48,668  

Lucky Friday

    (2,271

)

    (5,261

)

    (5,052

)

    (9,407

)

Casa Berardi

    (15,363

)

    1,014       (25,882

)

    4,264  

San Sebastian

    (1,923

)

    (361

)

    (3,435

)

    4,656  

Nevada Operations

    (21,475

)

          (35,466

)

     

Other

    (11,586

)

    (17,152

)

    (24,340

)

    (32,476

)

    $ (43,477

)

  $ 3,756     $ (59,601

)

  $ 15,705  

 

The following table presents identifiable assets by reportable segment as of June 30, 2019 and December 31, 2018 (in thousands):

 

   

June 30, 2019

   

December 31, 2018

 

Identifiable assets:

               

Greens Creek

  $ 643,811     $ 637,386  

Lucky Friday

    438,362       437,499  

Casa Berardi

    722,882       754,248  

San Sebastian

    53,606       44,152  

Nevada Operations

    571,177       581,194  

Other

    240,875       249,465  
    $ 2,670,713     $ 2,703,944  

 

13

Table of Co
ntents

 

Our products consist of both metal concentrates, which we sell to custom smelters and brokers, and unrefined bullion bars (doré), which may be sold as doré or further refined before sale to precious metals traders. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer.

 

For sales of metals from refined doré, which we currently have at our Casa Berardi, San Sebastian and Nevada Operations units, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner. For sales of doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of title and control of the doré containing the agreed-upon metal quantities to the customer. Refining, selling and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred.

 

For concentrate sales, which we currently have at our Greens Creek and Lucky Friday units, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment. Concentrates sold at our Lucky Friday unit typically leave the mine and are received by the customer within the same day. However, there is a period of time between shipment of concentrates from our Greens Creek unit and their physical receipt by the customer, and judgment is required in determining when control has been transferred to the customer for those shipments. We have determined the performance obligation is met and title is transferred to the customer upon shipment of concentrate parcels from Greens Creek because, at that time, 1) legal title is transferred to the customer, 2) the customer has accepted the parcel and obtained the ability to realize all of the benefits from the product, 3) the concentrate content specifications are known, have been communicated to the customer, and the customer has the significant risks and rewards of ownership of it, 4) it is very unlikely a concentrate parcel from Greens Creek will be rejected by a customer upon physical receipt, and 5) we have the right to payment for the parcel.

 

Judgment is also required in identifying the performance obligations for our concentrate sales. Most of our concentrate sales involve “frame contracts” with smelters that can cover multiple years and specify certain terms under which individual parcels of concentrates are sold. However, some terms are not specified in the frame contracts and/or can be renegotiated as part of annual amendments to the frame contract. We have determined parcel shipments represent individual performance obligations satisfied at a point in time when control of the shipment is transferred to the customer.

 

The consideration we receive for our concentrate sales fluctuates due to changes in metals prices between the time of shipment and final settlement with the customer. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement with the customer. Also, it is unlikely a significant reversal of revenue for any one concentrate parcel will occur. As such, we use the expected value method to price the parcels until the final settlement date occurs, at which time the final transaction price is known. At June 30, 2019, metals contained in concentrates and exposed to future price changes totaled 1.7 million ounces of silver, 6,473 ounces of gold, 11,021 tons of zinc, and 3,142 tons of lead.  However, as discussed in Note 11, we seek to mitigate the risk of negative price adjustments by using financially-settled forward contracts for some of our sales.

 

Sales and accounts receivable for concentrate shipments are recorded net of charges for treatment, refining, smelting losses, and other charges negotiated by us with the customers, which represent components of the transaction price. Charges are estimated by us upon shipment of concentrates based on contractual terms, and actual charges typically do not vary materially from our estimates. Costs charged by customers include fixed treatment and refining costs per ton of concentrate and may include price escalators which allow the customers to participate in the increase of lead and zinc prices above a negotiated baseline. Costs for shipping concentrates to customers are recorded to cost of sales as incurred.

 

14

Table of Contents

 

Sales of metal concentrates and metal products are made principally to custom smelters, brokers and metals traders. The percentage of sales contributed by each segment is reflected in the following table:

 

   

Three Months Ended

June 30,

   

Six Months Ended

June 30,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Greens Creek

    41

%

    51

%

    48

%

    49

%

Lucky Friday

    4

%

    2

%

    2

%

    3

%

Casa Berardi

    34

%

    38

%

    30

%

    39

%

San Sebastian

    8

%

    9

%

    8

%

    9

%

Nevada Operations

    13

%

   

%

    12

%

   

%

      100

%

    100

%

    100

%

    100