Capital spending declines 43%; Secured San
Sebastian mill through 2020
Hecla Mining Company (NYSE:HL) today announced second quarter
2017 financial and operating results.
HIGHLIGHTS (Comparisons to Second Quarter of 2016)
- Secured the San Sebastian mill through
2020.
- Capital expenditures of $24.3 million,
a 43% decline.
- Significant improvements in treatment
and refining charges for lead, zinc and bulk concentrates in
2017.
- Net loss applicable to common
stockholders of $24.2 million, or $0.06 per share, which includes
an income tax provision of $16.1 million, reflecting that we have
non-deductible losses in the U.S.
- Adjusted net loss applicable to common
stockholders of $15.5 million, or $0.04 per share.1
- Sales of $134.3 million.
- Adjusted EBITDA of $48.5 million and
net debt/adjusted EBITDA (last 12 months) of 1.3x. 2,3
- Cost of sales and other direct
production costs and depreciation, depletion and amortization
("cost of sales") of $103.1 million.
- The ongoing strike at Lucky Friday has
lowered metal production but has improved silver cash cost, after
by-product credits, 93% to $0.26 per ounce, the lowest in 7 years.
4
- All in sustaining cost (AISC), after
by-product credits, of $9.97 per silver ounce, a 22% decrease.
5
- Cash and cash equivalents and
short-term investments of $202 million at June 30.
- Extended the $100 million senior
secured revolving credit facility to July 2020.
- Credit rating upgrade by S&P Global
Ratings to B from B- with a stable outlook.
"We maintained a strong financial position in the second
quarter, with 43% lower capital expenditures and solid operating
performance from Greens Creek and San Sebastian, with cash costs of
$0.26 and under $10 AISC, both after by-product credits per silver
ounce, offsetting Lucky Friday which remains idled due to the
strike," said Phillips S. Baker, Jr., President and CEO. "With the
significant exploration discoveries at San Sebastian, we are now
expecting to extend the life of that project through 2020.
Performance of the three mines continues as planned. Higher grade
and lower waste tons moved in the second half of 2017 at Casa
Berardi should significantly impact production and cost per
ounce."
FINANCIAL OVERVIEW
Second Quarter Ended Six Months Ended
HIGHLIGHTS June 30, 2017 June 30, 2016
June 30, 2017 June 30, 2016
FINANCIAL
DATA
Sales (000)
$ 134,279 $ 171,302
$
276,823 $ 302,319 Gross profit (000)
$
31,207 $ 58,452
$ 66,123 $ 89,274 Income
(loss) applicable to common stockholders (000)
$
(24,154 ) $ 23,978
$ 2,542 $ 23,222
Basic and diluted income (loss) per common share
$
(0.06 ) $ 0.06
$ 0.01 $ 0.06 Net income
(loss) (000)
$ (24,016 ) $ 24,116
$
2,818 $ 23,498 Cash provided by operating activities (000)
$ 7,536 $ 67,390
$ 45,821 $ 86,138
Net loss applicable to common stockholders for the second
quarter of 2017 was $24.2 million, or $0.06 per share,
compared to net income applicable to common stockholders of $24.0
million, or $0.06 per share, for the same period in 2016. The
result was mainly due to the following items:
- Income tax provision of $16.1 million,
despite reporting a net loss before taxes, primarily due to
estimated taxes related to operations in Mexico and reflecting that
we have non-deductible losses in the U.S.
- Interest expense, net of amount
capitalized, of $10.5 million in the second quarter of 2017,
increased over the $5.4 million recognized in the second quarter of
2016, primarily due to interest being capitalized in the 2016
period due to construction of the #4 Shaft.
- An increase of $3.0 million in
exploration and pre-development expenditures over the second
quarter of 2016, particularly focused on San Sebastian and Casa
Berardi.
- Lucky Friday suspension costs of $6.4
million, along with $1.6 million in non-cash depreciation expense,
in the second quarter of 2017 incurred during the strike.
- Net foreign exchange loss of $3.9
million versus a net loss of $1.9 million in the second quarter of
2016.
Operating cash flow was $7.5 million compared to $67.4 million
in the second quarter of 2016, with the decrease due to lower
metals production, as discussed below, and the timing of payment of
incentive compensation.
Adjusted EBITDA was $48.5 million compared to $78.0 million in
the second quarter of 2016, with the decrease mainly due to lower
metals production.
Capital expenditures (excluding capitalized interest and capital
leases) totaled $24.3 million for the second quarter compared
to $42.3 million, with the decrease due to completion of the #4
Shaft and the idling of Lucky Friday due to the ongoing strike.
Expenditures (excludes capital leases) at Casa Berardi, Greens
Creek, Lucky Friday and San Sebastian were $10.3 million, $10.4
million, $0.8 million, and $2.4 million, respectively.
Metals Prices
The average realized silver price in the second quarter was
$17.14 per ounce, within 1% of the $17.26 average realized silver
price in the second quarter of 2016. The average realized gold
price was $1,260 per ounce, compared to $1,254 in the second
quarter 2016. Realized lead prices of $0.95/lb were up 20% and
realized zinc prices of $1.14/lb were up 28% from the second
quarter of 2016.
OPERATIONS OVERVIEW
Overview
The following table provides the production summary on a
consolidated basis for the second quarter and six months ended
June 30, 2017 and 2016:
Second Quarter Ended Six Months
Ended June 30, 2017
June 30, 2016
June 30, 2017 June 30, 2016
PRODUCTION SUMMARY
Silver - Ounces produced
2,807,474 4,241,398
6,176,901 8,884,102 Payable ounces sold
2,688,721 4,141,427
5,557,835 7,937,242 Gold - Ounces
produced
52,561 62,965
108,674 118,653 Payable ounces
sold
53,170 64,609
104,541 110,869 Lead - Tons
produced
4,420 10,391
13,056 21,429 Payable tons sold
4,250 9,663
10,676 18,413 Zinc - Tons produced
12,966 18,132
28,503 35,496 Payable tons sold
8,978 10,010
20,825 24,352
The following tables provide a summary of the final production,
cost of sales, cash cost, after by-product credits, per silver and
gold ounce, and AISC, after by-product credits, per silver and gold
ounce for the second quarter and six months ended June 30,
2017:
Second Quarter Ended Greens
Creek Lucky Friday Casa Berardi
San Sebastian June 30, 2017 Silver
Gold Silver Gold
Silver Gold Silver Silver
Gold Production (ounces) 2,807,474 52,561
1,932,047 12,704 — 33,261 8,477 866,950
6,596
Increase/(decrease) over 2016 (34 )%
(17 )% (9 )% 10 % N/A (21 )% (2
)% (31 )% (30 )%
Cost of sales and other direct
production costs and depreciation, depletion and amortization
(000s)
$ 59,392 $ 43,680 $ 54,319 N/A $ N/A $ 43,680 N/A $ 5,074
N/A
Increase/(decrease) over 2016 (17 )% 6 %
24 % N/A N/A 6 % N/A (45 )%
N/A
Cash costs, after by-product credits,
per silver or gold ounce4,6
$ 0.26 $ 972 $ 1.86 N/A N/A $ 972 N/A $ (3.31 ) N/A
Increase/(decrease) over 2016 (93 )% 62 %
(65 )% N/A N/A 62 % N/A 9 %
N/A
AISC, after by-product credits, per
silver or gold ounce5
$ 9.97 $ 1,373 $ 8.71 N/A N/A $ 1,373 N/A $ 0.06 N/A
Increase/(decrease) over 2016
(22 )% 33 % (32 )% N/A N/A 33 %
N/A (103 )% N/A
Six Months Ended
Greens Creek Lucky Friday
Casa Berardi San Sebastian June 30,
2017 Silver Gold
Silver Gold Silver Gold
Silver Silver Gold
Production (ounces) 6,176,901 108,674 3,861,344
26,726 680,782 69,068 17,022 1,617,753
12,880
Increase/(decrease) over 2016 (30 )% (8
)% (16 )% (3 )% (63 )% (5 )% 9 %
(34 )% (32 )%
Cost of sales and other direct production
costs and depreciation, depletion and amortization (000s) $
124,553 $ 86,147 $ 98,314 N/A $ 14,542 $ 86,147 N/A $ 11,697
N/A
Increase/(decrease) over 2016 (13 )% 22 %
11 % N/A (61 )% 22 % N/A (31 )%
N/A
Cash costs, after by-product credits,
per silver or gold ounce4,6
$ 0.58 $ 927 $ 1.26 N/A $ 5.93 $ 927 N/A $ (3.29 ) N/A
Increase/(decrease) over 2016 (83 )% 37 %
(73 )% N/A (37 )% 37 % N/A 4 %
N/A
AISC, after by-product credits, per
silver or gold ounce5
$ 8.83 $ 1,312 $ 6.28 N/A $ 12.06 $ 1,312 N/A $ 0.24 N/A
Increase/(decrease) over 2016 (23 )% 14 %
(35 )% N/A (45 )% 14 % N/A (111
)% N/A
Greens Creek Mine - Alaska
At the Greens Creek mine, 1.9 million ounces of silver and
12,704 ounces of gold were produced in the second quarter, compared
to 2.1 million ounces and 11,528 ounces, respectively, in the
second quarter of 2016. Lower silver production was expected and
was principally due to lower grades than the second quarter of
2016. The mill operated at an average of 2,316 tons per day (tpd)
in the second quarter, which was 4% higher than the second quarter
of 2016.
The cost of sales for the second quarter was $54.3 million, and
the cash cost, after by-product credits, per silver ounce, was
$1.86, compared to $43.7 million and $5.38, respectively, for the
second quarter of 2016.4 The AISC, after by-product credits, was
$8.71 per silver ounce for the second quarter compared to $12.87 in
the second quarter of 2016.5 The per ounce silver costs were lower
primarily due to higher base metals prices.
In the second quarter of 2017, the first Woodgrove
staged-flotation-reactor was commissioned in the lead bulk
flotation circuit, and the unit is increasing the distribution of
metals to concentrates with higher payable terms, the full benefit
of which is expected to be seen starting in the fourth quarter.
Initial indications are that additional units can be deployed to
other circuits. In addition, a replacement underground truck
capable of operating autonomously has arrived at Greens Creek. A
study of autonomous operation during shift change is underway.
Due to tight worldwide supply of lead and zinc concentrates,
significant improvements in the treatment and refining charges (TC
and RC) have been realized for 2017 benchmark sales terms. The TC
and RC have decreased for lead, zinc and bulk concentrates by 38%,
20% and 18% per dry metric tonne, respectively, from 2016
levels.
Lucky Friday Mine - Idaho
Production at Lucky Friday has been suspended since March 13,
2017 due to the ongoing strike. Suspension costs of the mine during
the strike period are reported in a separate line item on our
condensed consolidated statement of operations, and are excluded
from the calculation of cost of sales, cash cost, after by-product
credits, per silver ounce and AISC, after by-product credits, per
silver ounce.
These costs included construction of a needed bypass ramp,
ongoing maintenance of #2 Shaft, and stope backfilling and limited
stope mining were conducted which should facilitate restart. Cash
suspension-related costs were $1.5 to $2 million per month. Limited
production or moving to care and maintenance should allow the cost
to be between $1 to $1.5 million per month.
Casa Berardi - Quebec
At the Casa Berardi mine, 33,261 ounces of gold were produced in
the second quarter, including 9,481 ounces from the East Mine Crown
Pillar (EMCP) pit, compared to 41,955 ounces in the prior year
period, with the decrease primarily due to expected lower grades
encountered as a result of mine sequencing. The mill operated at an
average of 3,628 tpd in the second quarter, an increase of 51% over
the second quarter of 2016 and a record for the mine, due to the
addition of the EMCP pit.
The cost of sales was $43.7 million for the second quarter and
the cash cost, after by-product credits, per gold ounce was $972,
compared to $41.2 million and $601, respectively, in the prior year
period.4,6 The increase in cash cost, after by-product credits, per
gold ounce is partly due to the expensing of stripping costs for
the new EMCP pit, as well as the stronger Canadian dollar and lower
gold production. The AISC, after by-product credits, was $1,373 per
gold ounce for the second quarter compared to $1,034 in the second
quarter of 2016, primarily due to lower gold production.5
Gold production is expected to increase in the second half of
2017 due to anticipated higher grades, which, along with expected
reduced amount of waste tons being moved at the EMCP pit, is
expected to improve the cash cost, after by-product credits, and
the AISC, after by-product credits. A site optimization study is
ongoing that involves modeling of the mill and open-pits, and
determination of the optimal open-pit/underground feed mix.
A project is underway to complete the 985 drift and then to
automate it with the goal of efficiently moving material from
deeper in the mine to the shaft and then hoist it to surface. The
project is proceeding well; all breakthroughs for the drift have
been completed, and chute installation and communications equipment
installation are underway. The project is on track for
commissioning by the end of the year and should ultimately reduce
the number of trucks and associated maintenance and personnel
costs. The first 40 tonne automated truck has arrived and is
expected to begin operating in this drift by the end of the year; a
second truck is expected to be operational in 2018.
San Sebastian - Mexico
At the San Sebastian mine, 866,950 ounces of silver and 6,596
ounces of gold were produced in the second quarter, compared to
1,258,103 ounces and 9,482 ounces in the prior year period. The
lower silver and gold production was expected as the mine moved
from East Francine to Middle and North vein pits, resulting in
lower grades. The mill operated at an average of 423 tpd in the
second quarter, which was 3% higher than the second quarter of
2016.
The cost of sales was $5.1 million for the second quarter and
the cash cost, after by-product credits, was negative $3.31 per
silver ounce, compared to $9.2 million and negative $3.05,
respectively, in the second quarter of 2016. The low cash cost,
after by-product credits, continues due to the silver grade,
despite it being lower than the prior period, as well as
significant gold production, which is considered a by-product
credit. The AISC, after by-product credits, was $0.06 per silver
ounce for the second quarter compared to negative $2.33 in the
second quarter of 2016, with the increase principally due to lower
gold by-product credits and increased exploration and capital
spending.
The mine is transitioning from open pit to underground mining,
which is expected by the end of 2017. Development of the ramp to
connect the new portal to a ramp being driven from the existing
workings continues, and should be completed in the Fall. Recent
definition drilling on the Middle Vein has shown better continuity
of high-grade within the reserve area and exploration drilling
continues to define new high-grade material near the proposed mine
development along the Middle and East Francine veins. It now
appears that sufficient material has been identified underground,
in open pits and in stockpiles to extend the life of the project
through 2020, and the Company has secured the mill for an
additional two years.
EXPLORATION
Expenditures
Exploration (including corporate development) expenses were $5.9
million, an increase of $2.5 million compared to the second quarter
2016. Full year exploration (including corporate development)
expenses are expected to be $20-25 million, up from $14.7
million in 2016, in part reflecting more aggressive exploration
programs at San Sebastian, Casa Berardi and Greens Creek, and
continued exploration at the Kinskuch, Little Baldy and
Opinaca-Wildcat projects.
A complete summary of exploration for the second quarter can be
found in the news release entitled "Hecla Reports Second Quarter
Drilling and Exploration Update" released on August 2, 2017.
PRE-DEVELOPMENT
Pre-development spending was $1.1 million for the quarter,
principally to advance the permitting of Rock Creek and Montanore.
Data exports have been provided for import into Vulcan (mine
planning software) for the generation of a mine plan for Rock
Creek. The mine plan for Montanore will also be updated with the
new 2016 block model.
At Rock Creek the US Forest Service issued its Final
Supplemental Environmental Impact Statement in late June and its
draft Record of Decision. That draft decision is subject to a
45-day formal comment period. The agency will consider any comments
and issue its final Record of Decision. We anticipate this final
decision in early 2018.
With respect to the Montanore project, the Montana Federal
District Court overturned previously granted environmental
approvals and remanded the Record of Decision and related documents
of the US Forest Service and US Fish and Wildlife Service for
further review by the agencies consistent with the Court's
opinions. In its decision, the Court advised the agencies they
could issue a new Record of Decision and related documents for just
the initial evaluation phase of the project, which has minimal
environmental effects, or reconsider the entire project once again.
It is anticipated that the next steps will be for the Forest
Service to prepare a new Record of Decision and the Fish and
Wildlife Service to prepare new Biological Opinions, in each case
to address the deficiencies in those documents identified by the
Court.
BASE METALS AND CURRENCY HEDGING
Base Metals Forward Sales Contracts
The following table summarizes the quantities of base metals
committed under financially settled forward sales contracts at
June 30, 2017:
Pounds Under Contract(in
thousands)
Average Price per Pound Zinc
Lead Zinc Lead Contracts on forecasted
sales 2017 settlements 6,834 6,504 $ 1.26 $ 1.05 2018
settlements 28,329 16,314 $ 1.23 $ 1.05 2019 settlements 1,102
1,102 $ 1.21 $ 1.06
The contracts represent 14% of the forecasted payable zinc
production for the three-year period 2017-2019 at an average price
of $1.23 per pound and 12% of the forecasted payable lead
production for the three-year period 2017-2019 at an average price
of $1.05 per pound.
Foreign Currency Forward Purchase Contracts
The following table summarizes the quantities of Canadian
dollars and Mexican pesos committed under financially settled
forward purchase contracts at June 30, 2017:
Currency Under Contract(in
thousands of CAD/MXN)
Average Exchange Rate CAD MXN
CAD/USD MXN/USD 2017 settlements 60,000
96,000 1.30 19.83 2018 settlements 76,500 — 1.29 — 2019
settlements 63,600 — 1.31 — 2020 settlements 30,000 — 1.29 —
DIVIDENDS
Common
The Board of Directors elected to declare a quarterly cash
dividend of $0.0025 per share of common stock, payable on or about
August 31, 2017, to stockholders of record on
August 23, 2017. The realized silver price was $17.14 in
the second quarter and therefore did not satisfy the criteria for a
larger dividend under the Company's dividend policy.
The Board of Directors also declared the regular quarterly
dividend of $0.875 per share on the 157,816 outstanding shares of
Series B Cumulative Convertible Preferred Stock. This represents a
total amount to be paid of approximately $138,000. The cash
dividend is payable October 2, 2017, to stockholders of record on
September 15, 2017.
CONFERENCE CALL AND WEBCAST
A conference call and webcast will be held Thursday, August 3,
at 10:00 a.m. Eastern Time to discuss these results. You may join
the conference call by dialing toll-free 1-855-760-8158 or for
international dialing 1-720-634-2922. The participant passcode is
HECLA. Hecla's live and archived webcast can be accessed at
www.hecla-mining.com under Investors or via Thomson StreetEvents
Network.
ABOUT HECLA
Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading
low-cost U.S. silver producer with operating mines in Alaska,
Idaho, and Mexico and is a gold producer with an operating mine in
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 in the United States.
Furthermore, there is no assurance that these non-GAAP measures
appearing in this release are calculated the same as other mining
companies that may use the same or similar terms (GAAP). These
measures should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with GAAP.
(1) Adjusted net income (loss) applicable to common stockholders
is a non-GAAP measurement, a reconciliation of which to net income
(loss) applicable to common stockholders, the most comparable GAAP
measure, can be found at the end of this release. Adjusted net
income (loss) is a measure used by management to evaluate the
Company's operating performance but should not be considered an
alternative to net income (loss), or cash provided by operating
activities as those terms are defined by GAAP, and does not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. In addition, the Company may use it when formulating
performance goals and targets under its incentive programs.
(2) Adjusted EBITDA is a non-GAAP measurement, a reconciliation
of which to net income (loss), the most comparable GAAP measure,
can be found at the end of this release. Adjusted EBITDA is a
measure used by management to evaluate the Company's operating
performance but should not be considered an alternative to net
income (loss), or cash provided by operating activities as those
terms are defined by GAAP, and does not necessarily indicate
whether cash flows will be sufficient to fund cash needs. In
addition, the Company may use it when formulating performance goals
and targets under its incentive programs.
(3) Net debt to adjusted EBITDA is a non-GAAP measurement, a
reconciliation of adjusted EBITDA and net debt to the closest GAAP
measurements of net income (loss) and debt can be found at the end
of this release. It is an important measure for management to
measure relative indebtedness and the ability to service the debt
relative to its peers. It is calculated as total debt outstanding
less total cash on hand divided by adjusted EBITDA.
(4) Cash cost, after by-product credits, per silver 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 this 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, 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 programs.
(5) All in sustaining cost (AISC), after by-product credits, is
a non-GAAP measurement, a reconciliation of which to cost of sales
and other direct production costs and depreciation, depletion and
amortization, the closest GAAP measurement, can be found in the end
of this 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 in the understanding of the
economics of our operations and performance compared to other
producers and in the investor's visibility by better defining the
total costs associated with production. Similarly, the statistic is
useful in identifying acquisition and investment opportunities as
it provides a common tool for measuring the financial performance
of other mines with varying geologic, metallurgical and operating
characteristics. In addition, the Company may use it when
formulating performance goals and targets under its incentive
programs.
(6) Cash cost, after by-product credits, per gold ounce is only
applicable to Casa Berardi production. Gold produced from Greens
Creek and San Sebastian is treated as a by-product credit against
the silver cash cost.
Cautionary Statements to Investors on Forward-Looking
Statements
This news release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbor
created by such sections and other applicable laws, including
Canadian securities laws. Such forward-looking statements may
include, without limitation: (i) estimates of future production and
sales; (ii) estimates of future costs including cash cost, after
by-product credits per ounce of silver/gold and AISC, after
by-product credits, per ounce of silver/gold and the potential
impact of the Lucky Friday strike; (iii) expectations regarding the
development, growth potential, financial performance and
exploration potential of the Company’s projects, including the EMCP
pits in Quebec and San Sebastian operations; (iv) the Company’s
mineral reserves and resources; (v) potential increases in
recoveries and payables relating to the installation of a Woodgrove
staged-flotation-reactor at Greens Creek; and (vi) ability to
optimize operations at Casa Berardi. Estimates or expectations of
future events or results are based upon certain assumptions, which
may prove to be incorrect. Such assumptions, include, but are not
limited to: (i) there being no significant change to current
geotechnical, metallurgical, hydrological and other physical
conditions; (ii) permitting, development, operations and expansion
of the Company’s projects being consistent with current
expectations and mine plans; (iii) political/regulatory
developments in any jurisdiction in which the Company operates
being consistent with its current expectations; (iv) the exchange
rate for the Canadian dollar to the U.S. dollar being approximately
consistent with current levels; (v) certain price assumptions for
gold, silver, lead and zinc; (vi) prices for key supplies being
approximately consistent with current levels; (vii) the accuracy of
our current mineral reserve and mineral resource estimates; and
(viii) the Company’s plans for development and production will
proceed as expected and will not require revision as a result of
risks or uncertainties, whether known, unknown or unanticipated.
Where the Company expresses or implies an expectation or belief as
to future events or results, such expectation or belief is
expressed in good faith and believed to have a reasonable basis.
However, such statements are subject to risks, uncertainties and
other factors, which could cause actual results to differ
materially from future results expressed, projected or implied by
the “forward-looking statements.” Such risks include, but are not
limited to gold, silver and other metals price volatility,
operating risks, currency fluctuations, increased production costs
and variances in ore grade or recovery rates from those assumed in
mining plans, community relations, conflict resolution and outcome
of projects or oppositions, litigation, political, regulatory,
labor and environmental risks, and exploration risks and results,
including that mineral resources are not mineral reserves, they do
not have demonstrated economic viability and there is no certainty
that they can be upgraded to mineral reserves through continued
exploration. For a more detailed discussion of such risks and other
factors, see the Company’s 2016 Form 10-K, filed on February 23,
2017, 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). 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 being included here 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, which requires the preparation of a “final” or “bankable”
feasibility study demonstrating the economic feasibility of mining
and processing the mineralization using the three-year historical
average price for any reserve or cash flow analysis to designate
reserves and that the primary environmental analysis or report be
filed with the appropriate governmental authority, 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. 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, Ph.D. 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
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. Copies of these technical reports are available
under Hecla's profile 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)
Second Quarter Ended Six Months Ended
June 30, 2017
June 30, 2016
June 30, 2017 June 30, 2016
Sales of products
$ 134,279 $ 171,302
$ 276,823 $ 302,319 Cost of sales and
other direct production costs
77,503 82,953
156,179
157,273 Depreciation, depletion and amortization
25,569
29,897
54,521 55,772
103,072 112,850
210,700 213,045
Gross profit
31,207 58,452
66,123 89,274 Other operating expenses:
General and administrative
10,309 10,359
19,515
20,573 Exploration
5,853 3,362
10,367 6,312
Pre-development
1,052 521
2,304 925 Research and
development
312 —
995 — Other operating expense
697 1,024
1,387 1,664 Provision for closed operations
and environmental matters
985 1,576
2,104 2,617 Lucky
Friday suspension-related costs
8,024 —
9,605 —
Acquisition costs
—
27,232 16,842
46,277 32,091
Income from operations
3,975 41,610
19,846 57,183 Other income (expense): Loss on
disposition of investments
— —
(167 ) —
Unrealized (loss) gain on investments
(276 ) 1,150
51 439 Gain (loss) on derivative contracts
2,487 (6 )
(5,322 ) (6 ) Interest and other income
319
113
644 201 Net foreign exchange loss
(3,883 )
(1,885 )
(6,145 ) (10,088 ) Interest expense, net of
amount capitalized
(10,543 ) (5,370 )
(19,065
) (11,081 )
(11,896 ) (5,998 )
(30,004
) (20,535 ) Loss (income) before income taxes
(7,921
) 35,612
(10,158 ) 36,648 Income tax
(provision) benefit
(16,095 ) (11,496 )
12,976
(13,150 ) Net (loss) income
(24,016 ) 24,116
2,818 23,498 Preferred stock dividends
(138 )
(138 )
(276 ) (276 )
(Loss) Income applicable to common
stockholders
$ (24,154 ) $ 23,978
$
2,542 $ 23,222 Basic and diluted (loss) income
per common share after preferred dividends
$ (0.06
) $ 0.06
$ 0.01 $ 0.06
Weighted average number of common shares outstanding - basic
396,178 383,790
395,774 381,389
Weighted average number of common shares outstanding -
diluted
396,178 387,512
399,236
384,685
HECLA MINING
COMPANY
Condensed Consolidated Balance Sheets
(dollars and shares in thousands -
unaudited)
June 30, 2017 December
31, 2016
ASSETS Current
assets: Cash and cash equivalents
$ 164,113 $ 169,777
Short-term investments and securities
37,816 29,117 Accounts
receivable: Trade
9,183 20,082 Other, net
23,288
9,967 Inventories
48,403 50,023 Other current assets
8,955 12,125 Total current assets
291,758 291,091 Non-current investments
4,729 5,002
Non-current restricted cash and investments
1,098 2,200
Properties, plants, equipment and mineral interests, net
2,033,506 2,032,685 Non-current deferred income taxes
44,628 35,815 Other non-current assets and deferred charges
3,437 4,884
Total assets $
2,379,156 $ 2,371,677
LIABILITIES
Current liabilities: Accounts payable and accrued
liabilities
$ 47,979 $ 60,064 Accrued payroll and
related benefits
25,919 36,515 Accrued taxes
14,205
9,061 Current portion of capital leases
5,885 5,653 Current
portion of debt
— 470 Other current liabilities
11,268 8,809 Current portion of accrued reclamation and
closure costs
8,532 5,653 Total current
liabilities
113,788 126,225 Capital leases
7,213
5,838 Accrued reclamation and closure costs
79,280 79,927
Long-term debt
501,604 500,979 Non-current deferred tax
liability
121,260 122,855 Non-current pension liability
47,211 44,491 Other non-current liabilities
6,414
11,518
Total liabilities 876,770
891,833
STOCKHOLDERS’ EQUITY
Preferred stock
39 39
Common stock
100,739 99,806 Capital surplus
1,614,651
1,597,212 Accumulated deficit
(166,875 ) (167,437 )
Accumulated other comprehensive loss
(28,520 )
(34,602 ) Treasury stock
(17,648 ) (15,174 )
Total stockholders’ equity
1,502,386 1,479,844
Total liabilities and stockholders’
equity
$ 2,379,156 $ 2,371,677 Common shares
outstanding
398,527 395,287
HECLA MINING COMPANY
Condensed Consolidated Statements of Cash
Flows
(dollars in thousands - unaudited)
Six Months Ended
June 30, 2017
June 30, 2016
OPERATING ACTIVITIES
Net income
$ 2,818 $ 23,498 Non-cash
elements included in net income: Depreciation, depletion and
amortization
56,908 56,968 Unrealized (gain) loss on
investments
117 (439) Gain on disposition of properties,
plants, equipment and mineral interests
(94 ) (311 )
Provision for reclamation and closure costs
2,247 2,005
Stock compensation
2,831 3,467 Deferred income taxes
(22,113 ) 10,652 Amortization of loan origination
fees
967 926 Loss on derivative contracts
5,386 5,419
Foreign exchange loss
5,201
9,721 Other non-cash charges, net
2 17 Change in assets and
liabilities: Accounts receivable
(1,150 ) (15,910 )
Inventories
1,594 (5,802 ) Other current and non-current
assets
3,896 268 Accounts payable and accrued liabilities
(10,937 ) (3,820 ) Accrued payroll and related
benefits
(4,901 ) 3,135 Accrued taxes
4,408
(4,591 ) Accrued reclamation and closure costs and other
non-current liabilities
(1,359 ) 935
Cash provided by operating activities
45,821
86,138
INVESTING ACTIVITIES
Additions to properties, plants, equipment and mineral interests
(45,964 ) (76,960 ) Proceeds from disposition of
properties, plants and equipment
142 317 Purchases of
investments
(23,280 ) (16,088 ) Maturities of
investments
14,356 840 Changes in restricted cash and
investment balances
1,102 (3,900 )
Net cash
used in investing activities (53,644 )
(95,791 )
FINANCING ACTIVITIES Proceeds
from issuance of stock, net of related costs
9,610 8,121
Acquisition of treasury shares
(2,474 ) (3,384 )
Dividends paid to common stockholders
(1,981 ) (1,914 )
Dividends paid to preferred
stockholders
(276 ) (276 ) Credit availability and debt issuance
fees paid
(91 ) (83 ) Repayments of debt
(470
) (1,339 ) Repayments of capital leases
(3,245
) (4,356 )
Net cash provided by (used in)
financing activities 1,073 (3,231
) Effect of exchange rates on cash
1,086
1,288 Net decrease in cash and cash equivalents
(5,664
) (11,596 ) Cash and cash equivalents at beginning of period
169,777 155,209 Cash and cash
equivalents at end of period
$ 164,113
$ 143,613
HECLA MINING
COMPANY
Production Data
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2016
June 30, 2017 June 30, 2016
GREENS CREEK UNIT
Tons
of ore milled
210,788 203,388
407,917 408,356
Mining cost per ton of ore
$ 68.17 $ 71.01
$
69.74 $ 68.98 Milling cost per ton of ore
$
32.56 $ 30.67
$ 33.12 $ 30.83 Ore grade milled
- Silver (oz./ton)
12.11 13.25
12.40 14.22 Ore grade
milled - Gold (oz./ton)
0.097 0.088
0.099 0.098 Ore
grade milled - Lead (%)
2.68 3.20
2.86 3.12 Ore grade
milled - Zinc (%)
7.20 8.70
7.50 8.42 Silver produced
(oz.)
1,932,047 2,117,084
3,861,344 4,575,360 Gold
produced (oz.)
12,704 11,528
26,726 27,509 Lead
produced (tons)
4,420 5,346
9,229 10,433 Zinc
produced (tons)
12,966 15,575
26,372 30,186 Cash
cost, after by-product credits, per silver ounce (1)
$
1.86 $ 5.38
$ 1.26 $ 4.61 AISC, after
by-product credits, per silver ounce (1)
$ 8.71 $
12.87
$ 6.28 $ 9.73 Capital additions (in thousands)
$ 11,451 $ 14,661
$ 16,685 $ 21,037
LUCKY FRIDAY UNIT
Tons
of ore milled
— 67,829
57,069 141,850 Mining cost per
ton of ore
$ — $ 100.77
$ 104.72 $
99.34 Milling cost per ton of ore
$ — $ 24.97
$ 27.16 $ 24.13 Ore grade milled - Silver (oz./ton)
— 13.09
12.39 13.39 Ore grade milled - Lead (%)
— 7.76
7.05 8.07 Ore grade milled - Zinc (%)
—
4.02
3.99 4 Silver produced (oz.)
— 857,543
680,782 1,834,627 Lead produced (tons)
— 5,045
3,827 10,996 Zinc produced (tons)
— 2,557
2,131 5,310 Cash cost, after by-product credits, per silver
ounce (1)
$ — $ 9.94
$ 5.93 9.47 AISC,
after by-product credits, per silver ounce (1)
$ — $
22.05
$ 12.06 $ 21.90 Capital additions (in
thousands)
$ 805 $ 10,227
$ 4,792 $
22,493 Three Months Ended
Six Months Ended
June 30, 2017 June 30,
2016
June 30, 2017 June 30, 2016
CASA BERARDI UNIT
Tons of ore milled - underground
195,039 218,226
399,992 435,188 Tons of
ore milled - surface pit
135,070 —
223,809 — Tons of
ore milled - total
330,109 218,226
623,801 435,188
Surface tons mined - ore and waste
2,106,308 —
4,416,543 — Mining cost per ton of ore - underground
$ 99.01 $ 91.56
$ 99.23 $ 89.55 Mining
cost per ton - combined
$ 76.83 $ 91.56
$
81.42 $ 89.55 Mining cost per ton of ore and waste - surface
tons mined
$ 2.53 $ —
$ 2.58 $ —
Milling cost per ton of ore
$ 15.50 $ 19.82
$
16.33 $ 19.36 Ore grade milled - Gold (oz./ton) -
underground
0.148 0.217
0.155 0.190 Ore grade milled
- Gold (oz./ton) - surface pit
0.078 —
0.082 — Ore
grade milled - Gold (oz./ton) - combined
0.119 0.217
0.129 0.190 Ore grade milled - Silver (oz./ton)
0.03
0.04
0.03 0.04 Gold produced (oz.) - underground
23,780 41,955
52,430 72,333 Gold produced (oz.) -
surface pit
9,481 —
16,638 — Gold produced (oz.) -
total
33,261 41,955
69,068 72,333 Silver produced
(oz.)
8,477 8,668
17,022 15,673 Cash cost, after
by-product credits, per gold ounce (1)
$ 972 $ 601
$ 927 $ 676 AISC, after by-product credits, per gold
ounce (1)
$ 1,373 $ 1,034
$ 1,312 $
1,155 Capital additions (in thousands)
$
12,063 $ 17,171
$
24,474 $ 32,782
SAN SEBASTIAN
Tons
of ore milled
38,478 37,400
75,141 68,558 Mining cost
per ton of ore
$ 41.63 $ 91.89
$ 40.16
$ 97.27 Milling cost per ton of ore
$ 66.97 $ 69.35
$ 65.29 $ 69.48 Ore grade milled - Silver (oz./ton)
23.87 35.83
22.85 38.3 Ore grade milled - Gold
(oz./ton)
0.182 0.269
0.182 0.294 Silver produced
(oz.)
866,950 1,258,103
1,617,753 2,458,442 Gold
produced (oz.)
6,596 9,482
12,880 18,811 Cash cost,
after by-product credits, per silver ounce (1)
$
(3.31 ) $ (3.05 )
$ (3.29 ) $
(3.15 ) AISC, after by-product credits, per silver ounce (1)
$ 0.06 $ (2.33 )
$ 0.24 $ (2.19 )
Capital additions (in thousands)
$ 2,423 $ 203
$ 4,130 $ 693 (1) Cash cost, after
by-product credits, per ounce and AISC, after by-product credits.
per ounce represent non-U.S. Generally Accepted Accounting
Principles (GAAP) measurements. A reconciliation of cost of sales
and other direct production costs and depreciation, depletion and
amortization (GAAP) to cash cost, after by-product credits can be
found in the cash cost per ounce reconciliation section of this
news release. Gold, lead and zinc produced have been treated as
by-product credits in calculating silver costs per ounce. The
primary metal produced at Casa Berardi is gold, with a by-product
credit for the value of silver production.
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 and
Casa Berardi units and for the Company for the three- and six-month
periods ended June 30, 2017 and 2016.
Cash Cost, After By-product Credits, per Ounce and AISC, After
By-product Credits, per Ounce are measures developed by precious
metals companies (including the Silver Institute and/or the World
Gold Council) 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 mining
company, we also use these statistics on an aggregate basis –
aggregating the Greens Creek, Lucky Friday and San Sebastian mines
– to compare our performance with that of other primary silver
mining companies. With regard to Casa Berardi, we use Cash Cost,
After By-product Credits, per Gold Ounce and AISC, After By-product
Credits, per Gold Ounce to compare its performance with other gold
mines. Similarly, these statistics are useful in identifying
acquisition and investment opportunities as they provide a common
tool for measuring the financial performance of other mines with
varying geologic, metallurgical and operating characteristics.
Cash Cost, Before By-product Credits and AISC, Before By-product
Credits include all direct and indirect operating cash costs
related directly to the physical activities of producing metals,
including mining, processing and other plant costs, third-party
refining expense, on-site general and administrative costs,
royalties and mining production taxes. AISC, Before By-product
Credits for each mine also includes on-site exploration,
reclamation, and sustaining capital costs. AISC, Before By-product
Credits for our consolidated silver properties also includes
corporate costs for general and administrative expense, 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 section below reports Cash Cost, After
By-product Credits, per Gold Ounce and AISC, After By-product
Credits, per Gold Ounce for the production of gold, its primary
product, and by-product revenues earned from silver, which is a
by-product at Casa Berardi. Only costs and ounces produced relating
to units with the same primary product are combined to represent
Cash Cost, After By-product Credits, per Ounce and AISC, After
By-product Credits, per Ounce. Thus, the gold produced at our Casa
Berardi unit is not included as a by-product credit when
calculating Cash Cost, After By-product Credits, per Silver Ounce
and AISC, After By-product Credits, per Silver Ounce for the total
of Greens Creek, Lucky Friday and San Sebastian, our combined
silver properties. Similarly, the silver produced at our other
three units is not included as a by-product credit when calculating
the gold metrics for Casa Berardi.
In thousands (except per ounce amounts) Three Months Ended
June 30, 2017
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 54,319 (1 ) $ 5,074 $
59,392 $ 43,680 $ 103,072 Depreciation, depletion and amortization
(13,503 ) — (722 ) (14,225 ) (11,344 ) (25,569 ) Treatment costs
11,423 — 259 11,682 554 12,236 Change in product inventory (5,542 )
— 815 (4,727 ) (212 ) (4,939 ) Reclamation and other costs (695 ) 1
(5 ) (699 ) (212 ) (911 ) Cash Cost, Before By-product
Credits (1) 46,002 — 5,421 51,423 32,466 83,889 Reclamation and
other costs 667 117 784 213 997 Exploration 1,117 1,957 452 3,526
1,071 4,597 Sustaining capital 11,451 845 256 12,552 12,059 24,611
General and administrative 10,309 10,309
10,309 AISC, Before By-product Credits (1)
59,237 — 8,340 78,594 45,809 124,403 By-product credits: Zinc
(21,647 ) — (21,647 ) (21,647 ) Gold (13,917 ) — (8,287 ) (22,204 )
(22,204 ) Lead (6,847 ) — (6,847 ) (6,847 ) Silver
(142 ) (142 ) Total By-product credits (42,411 ) —
(8,287 ) (50,698 ) (142 ) (50,840 ) Cash Cost, After
By-product Credits $ 3,591 $ — $ (2,866 ) $ 725
$ 32,324 $ 33,049 AISC, After By-product
Credits $ 16,826 $ — $ 53 $ 27,896 $
45,667 $ 73,563 Divided by ounces produced 1,932 —
867 2,799 33 Cash Cost, Before By-product Credits, per Ounce $
23.81 $ — $ 6.25 $ 18.37 $ 976.07 By-product credits per ounce
(21.95 ) — (9.56 ) (18.11 ) (4.25 ) Cash Cost, After
By-product Credits, per Ounce $ 1.86 $ — $ (3.31 ) $
0.26 $ 971.82 AISC, Before By-product Credits, per
Ounce $ 30.66 $ — $ 9.62 $ 28.08 $ 1,377.21 By-product credits per
ounce (21.95 ) — (9.56 ) (18.11 ) (4.25 ) AISC, After
By-product Credits, per Ounce $ 8.71 $ — $ 0.06
$ 9.97 $ 1,372.96 In thousands
(except per ounce amounts) Three Months Ended June 30, 2016
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 43,734 $ 18,708 $ 9,225
$ 71,667 $ 41,183 $ 112,850 Depreciation, depletion and
amortization (12,413 ) (2,825 ) (1,062 ) (16,300 ) (13,597 )
(29,897 ) Treatment costs 15,317 4,778 432 20,527 238 20,765 Change
in product inventory 2,684 (1,035 ) 473 2,122 (2,366 ) (244 )
Reclamation and other costs (169 ) (221 ) (979 ) (1,369 ) (116 )
(1,485 ) Cash Cost, Before By-product Credits (1) 49,153 19,405
8,089 76,647 25,342 101,989 Reclamation and other costs 682 165 42
889 117 1,006 Exploration 531 — 660 392 1,583 908 2,491 Sustaining
capital 14,661 10,228 203 320 25,412 17,171 42,583 General and
administrative 10,359 10,359
10,359 AISC, Before By-product Credits (1) 65,027 29,798
8,994 114,890 43,538 158,428 By-product credits: Zinc (19,266 )
(3,352 ) (22,618 ) (22,618 ) Gold (11,870 ) (11,924 ) (23,794 )
(23,794 ) Lead (6,636 ) (7,529 ) (14,165 ) (14,16 ) Silver
(144 ) (144 ) Total By-product credits (37,772
) (10,881 ) (11,924 ) (60,577 ) (144 ) (60,721 ) Cash Cost, After
By-product Credits $ 11,381 $ 8,524 $ (3,835 ) $
16,070 $ 25,198 $ 41,268 AISC, After
By-product Credits $ 27,255 $ 18,917 $ (2,930 ) $
54,313 $ 43,394 $ 97,707 Divided by ounces
produced 2,117 858 1,258 4,233 42 Cash Cost, Before By-product
Credits, per Ounce $ 23.22 $ 22.63 $ 6.43 $ 18.11 $ 604.01
By-product credits per ounce (17.84 ) (12.69 ) (9.48 ) (14.31 )
(3.41 ) Cash Cost, After By-product Credits, per Ounce $ 5.38
$ 9.94 $ (3.05 ) $ 3.80 $ 600.60 AISC,
Before By-product Credits, per Ounce $ 30.71 $ 34.74 $ 7.15 $ 27.14
$ 1,037.71 By-product credits per ounce (17.84 ) (12.69 ) (9.48 )
(14.31 ) (3.41 ) AISC, After By-product Credits, per Ounce $ 12.87
$ 22.05 $ (2.33 ) $ 12.83 $ 1,034.30
In thousands (except per ounce amounts) Six Months
Ended June 30, 2017
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 98,314 $ 14,542 $ 11,697
$ 124,553 $ 86,147 $ 210,700 Depreciation, depletion and
amortization (26,835 ) (2,433 ) (1,395 ) (30,663 ) (23,858 )
(54,521 ) Treatment costs 25,554 3,817 484 29,855 1,092 30,947
Change in product inventory (2,277 ) (149 ) 435 (1,991 ) 1,169 (822
) Reclamation and other costs (1,080 ) (181 ) (595 ) (1,856 ) (230
) (2,086 ) Cash Cost, Before By-product Credits (1) 93,676 15,596
10,626 119,898 64,320 184,218 Reclamation and other costs 1,333 179
234 1,746 230 1,976 Exploration 1,395 1 3,489 830 5,715 1,868 7,583
Sustaining capital 16,685 3,990 1,977 1,170 23,822 24,470 48,292
General and administrative 19,515 19,515
19,515 AISC, Before By-product Credits (1)
113,089 19,766 16,326 170,696 90,888 261,584 By-product credits:
Zinc (45,426 ) (4,060 ) (49,486 ) (49,486 ) Gold (28,769 ) (15,944
) (44,713 ) (44,713 ) Lead (14,629 ) (7,496 ) (22,125 ) (22,125 )
Silver (289 ) (289 ) Total By-product
credits (88,824 ) (11,556 ) (15,944 ) (116,324 ) (289 ) (116,613 )
Cash Cost, After By-product Credits $ 4,852 $ 4,040 $
(5,318 ) $ 3,574 $ 64,031 $ 67,605 AISC, After
By-product Credits $ 24,265 $ 8,210 $ 382 $
54,372 $ 90,599 $ 144,971 Divided by ounces
produced 3,861 681 1,618 6,160 69 Cash Cost, Before By-product
Credits, per Ounce $ 24.27 $ 22.90 $ 6.56 $ 19.46 $ 931.26
By-product credits per ounce (23.01 ) (16.97 ) (9.85 ) (18.88 )
(4.18 ) Cash Cost, After By-product Credits, per Ounce $ 1.26
$ 5.93 $ (3.29 ) $ 0.58 $ 927.08 AISC,
Before By-product Credits, per Ounce $ 29.29 $ 29.03 $ 10.09 $
27.71 $ 1,315.92 By-product credits per ounce (23.01 ) (16.97 )
(9.85 ) (18.88 ) (4.18 ) AISC, After By-product Credits, per Ounce
$ 6.28 $ 12.06 $ 0.24 $ 8.83 $ 1,311.74
In thousands (except per ounce amounts) Six
Months Ended June 30, 2016
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 88,587 $ 37,212 $ 16,903
$ 142,702 $ 70,343 $ 213,045 Depreciation, depletion and
amortization (26,014 ) (5,829 ) (1,831 ) (33,674 ) (22,098 )
(55,772 ) Treatment costs 30,955 10,112 845 41,912 409 42,321
Change in product inventory 4,324 (1,056 ) 813 4,081 752 4,833
Reclamation and other costs (566 ) (386 ) (1,443 ) (2,395 ) (228 )
(2,623 ) Cash Cost, Before By-product Credits (1) 97,286 40,053
15,287 152,626 49,178 201,804 Reclamation and other costs 1,363 330
84 1,777 228 2,005 Exploration 1,019 — 1,298 865 3,182 1,625 4,807
Sustaining capital 21,037 22,478 988 410 44,913 32,782 77,695
General and administrative 20,573 20,573
20,573 AISC, Before By-product Credits (1)
120,705 62,861 17,657 223,071 83,813 306,884 By-product credits:
Zinc (34,951 ) (6,484 ) (41,435 ) (41,435 ) Gold (28,210 ) (23,040
) (51,250 ) (51,250 ) Lead (13,020 ) (16,202 ) (29,222 ) (29,222 )
Silver (247 ) (247 ) Total By-product
credits (76,181 ) (22,686 ) (23,040 ) (121,907 ) (247 ) (122,154 )
Cash Cost, After By-product Credits $ 21,105 $ 17,367
$ (7,753 ) $ 30,719 $ 48,931 $ 79,650 AISC,
After By-product Credits $ 44,524 $ 40,175 $ (5,383 )
$ 101,164 $ 83,566 $ 184,730 Divided by ounces
produced 4,575 1,835 2,458 8,868 72 Cash Cost, Before By-product
Credits, per Ounce $ 21.26 $ 21.84 $ 6.22 $ 17.21 $ 679.38
By-product credits per ounce (16.65 ) (12.37 ) (9.37 ) (13.75 )
(3.41 ) Cash Cost, After By-product Credits, per Ounce $ 4.61
$ 9.47 $ (3.15 ) $ 3.46 $ 675.97 AISC,
Before By-product Credits, per Ounce $ 26.38 $ 34.27 $ 7.18 $ 25.16
$ 1,158.71 By-product credits per ounce (16.65 ) (12.37 ) (9.37 )
(13.75 ) (3.41 ) AISC, After By-product Credits, per Ounce $ 9.73
$ 21.90 $ (2.19 ) $ 11.41 $ 1,155.30
(1) Includes all direct and indirect operating costs
related to the physical activities of producing metals, including
mining, processing and other plant costs, third-party refining and
marketing expense, on-site general and administrative costs,
royalties and mining production taxes, before by-product revenues
earned from all metals other than the primary metal produced at
each unit. AISC, Before By-product Credits also includes on-site
exploration, reclamation, and sustaining capital costs. (2)
The unionized employees at Lucky Friday have been on strike since
March 13, 2017, and production at Lucky Friday has been suspended
since that time. For the first half of 2017, suspension costs
totaling $7.6 million, along with $2.0 million in non-cash
depreciation expense, have been excluded from the calculations of
cost of sales and other direct production costs and depreciation,
depletion and amortization, Cash Cost, Before By-product Credits,
Cash Cost, After By-product Credits, AISC, Before By-product
Credits, and AISC, After By-product Credits. (3) AISC,
Before By-product Credits for our consolidated silver properties
includes corporate costs for general and administrative expense,
exploration and sustaining capital.
Reconciliation of Net (Loss) Income Applicable to Common
Stockholders (GAAP) to Adjusted Net (Loss) Income Applicable to
Common Stockholders (non-GAAP)
This release refers to a non-GAAP measure of adjusted net (loss)
income applicable to common stockholders and adjusted net (loss)
income per share, which are indicators of our performance. They
exclude certain impacts which are of a nature which we believe are
not reflective of our underlying performance. Management believes
that adjusted net (loss) income per common share provides investors
with the ability to better evaluate our underlying operating
performance.
Dollars are in thousands (except per share
amounts) Three Months Ended June 30, Six Months Ended
June 30,
2017 2016
2017
2016
Net (loss) income applicable to common
stockholders (GAAP)
$ (24,154 ) $ 23,978
$
2,542 $ 23,222 Adjusting items: (Gains) losses on
derivatives contracts
(2,487 ) 6
5,322 6
Provisional price losses (gains)
1,308 (1,011 )
680
(1,517 ) Environmental accruals
— 662
— 662 Foreign
exchange loss
3,883 1,885
6,145 10,088 Lucky Friday
suspension-related costs
8,024 —
9,605 — Acquisition
costs
(2 ) 402
25 402 Bond offering costs
1,050 —
1,050 — Nonrecurring deferred income tax
adjustments
— —
(17,486 ) — Income tax effect
of above adjustments
(3,157 ) (24 )
(6,673
) 179
Adjusted net income (loss) applicable to
common stockholders
$ (15,535 ) $ 25,898
$
1,210 $ 33,042 Weighted average shares - basic
396,178 383,790
395,774 381,389 Weighted average
shares - diluted
396,178 387,512
399,236 384,685
Basic adjusted net income (loss) per common share
$
(0.04 ) $ 0.07
$ 0.00 $ 0.09 Diluted
adjusted net income (loss) per common share
$ (0.04
) $ 0.07
$ 0.00 $ 0.09
Reconciliation of Net (Loss) Income (GAAP) and Debt (GAAP) to
Adjusted EBITDA (non-GAAP) and Net Debt (non-GAAP)
This release refers to the non-GAAP measures of adjusted
earnings before interest, taxes, depreciation and amortization
("Adjusted EBITDA"), which is a measure of our operating
performance, and net debt to adjusted EBITDA for the last 12 months
(or "LTM adjusted EBITDA"), which is a measure of our ability to
service our debt. Adjusted EBITDA is calculated as net (loss)
income before the following items: interest expense, income tax
provision, depreciation, depletion, and amortization expense,
exploration expense, pre-development expense, acquisition costs,
foreign exchange gains and losses, gains and losses on derivative
contracts, Lucky Friday suspension-related costs, provisional price
gains and losses, stock-based compensation, unrealized gains on
investments, provisions for closed operations, and interest and
other income (expense). Net debt is calculated as total debt, which
consists of the liability balances for our Senior Notes, capital
leases, and other notes payable, less the total of our cash and
cash equivalents and short-term investments. Management believes
that, when presented in conjunction with comparable GAAP measures,
Adjusted EBITDA and net debt to LTM adjusted EBITDA are useful to
investors in evaluating our operating performance and ability to
meet our debt obligations. The following table reconciles net
(loss) income and debt to Adjusted EBITDA and net debt:
Dollars are in thousands
Three Months EndedJune 30,
Six Months EndedJune 30,
Twelve Months EndedJune 30,
2017 2016
2017 2016
2017
2016 Net (loss) income
$ (24,016 ) $ 24,116
$ 2,818 $ 23,498
$ 48,867 $ (49,355 )
Plus: Interest expense, net of amount capitalized
10,543
5,370
19,065 11,081
29,780 23,737 Plus/(Less): Income
taxes
16,095 11,496
(12,976 ) 13,150
1,302 68,153 Plus: Depreciation, depletion and amortization
25,569 29,897
54,521 55,772
114,217 114,841
Plus: Exploration expense
5,853 3,362
10,367 6,312
18,775 14,849 Plus: Pre-development expense
1,052 521
2,304 925
4,516 3,000 Plus/(Less): Foreign exchange
loss (gain)
3,883 1,885
6,145 10,088
(1,017
) (4,022 ) Plus: Lucky Friday suspension-related costs
8,024 —
9,605 —
9,605 — Plus: Acquisition
costs
(2 ) 402
25 402
2,318 417 Plus:
Stock-based compensation
1,482 2,042
2,831 3,214
5,549 6,378 Plus/(Less): (Gains) losses on derivative
contracts
(2,487 ) 6
5,322 6
893 (3,341
) Plus: Provisional price loss (gains)
1,308 (1,011 )
680 (1,517 )
3,115 (627 ) Plus: Provision for closed
operations and environmental matters
1,221 1,006
2,247 2,005
5,055 3,785 Plus/(Less): Unrealized loss
(gain) on investments
276 (1,150 )
(51 ) (439
)
565 (66 ) Other
(319 ) 53
(644
) (35 )
(1,116 ) (1,000 ) Adjusted EBITDA
$ 48,482 $ 77,995
$
102,259 $ 124,462
$ 242,424
$ 176,749 Total debt
$ 514,702 $
517,283 Less: Cash, cash equivalents and short-term investments
$ (201,929 ) $ (158,683 ) Net debt
$
312,773 $ 358,600 Net debt/LTM adjusted EBITDA
(non-GAAP)
1.3 2.0
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version on businesswire.com: http://www.businesswire.com/news/home/20170803005373/en/
Hecla Mining CompanyMike Westerlund, 800-HECLA91
(800-432-5291)Vice President - Investor
Relationshmc-info@hecla-mining.comwww.hecla-mining.com
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