Near-record revenues and cash cost, after
by-product credits, per silver ounce.
Hecla Mining Company (NYSE:HL) today announced fourth quarter
and year end 2017 financial and operating results.
2017 HIGHLIGHTS
- Revenues of $577.8 million, the second
highest in Company history after the record set in 2016.
- Net loss applicable to common
stockholders of $24.1 million ($0.06 per share).
- Tax provision of $19.9 million due in
part to changes in U.S. tax law.
- Adjusted net income applicable to
common stockholders of $38.8 million, $0.10 per share.1
- Cash flows from operations of $115.9
million.
- Cost of sales and other direct
production costs and depreciation, depletion and amortization
("cost of sales") of $420.8 million.
- Total cash cost, after by-product
credits, per silver ounce of ($0.01), the lowest in 7 years.2
- All in sustaining cost ("AISC"), after
by-product credits, per silver ounce of $7.86, down 33%.3
- Silver production of 12.5 million
ounces, the second highest in Company history.
- Gold production of 232,684 ounces, the
third highest in Company history.
- Silver equivalent production of 40.9
million ounces or gold equivalent of 554,843 ounces.8
- Record silver, gold and lead reserves
and highest zinc reserves in five years.
- Gold production at Casa Berardi of
156,653 ounces, the highest since its acquisition.
- Cash, cash equivalents and short-term
investments of approximately $220 million at year end, an increase
of about $21 million.
- 19% reduction in the All Injury
Frequency Rate across the four mines.
"Our focus of improving our long-lived operations led to
increased throughput and lower costs which, coupled with
significantly higher base metals prices, drove our increasing cash
balance and continued strong adjusted," said Phillips S. Baker,
Jr., President and CEO. "2018 should have further value creation at
all our mines as we advance low-cost, high-return technologies that
are focused on improving productivity. We are also taking a bulk
sample of San Sebastian's polymetallic zone which could further
extend its mine life. Exploration spending is increasing as we see
further opportunities for both discoveries and resource
growth."
_______________
1,2,3
Non-GAAP measures. See page 11 for more
information.
SILVER AND GOLD RESERVE SUMMARY
Proven and probable silver reserves are at 177 million ounces,
an increase of 3% over December 31, 2016 levels. Proven and
probable gold reserves are at 2.3 million ounces, an increase of
12% over December 31, 2016 levels. Proven and probable zinc and
lead reserves of 841,000 tons and 737,000 tons are increases of 15%
and 8%, respectively, over December 31, 2016 levels. The reserves
for silver, gold and lead as of December 31, 2017 are the highest
in our history. The price assumptions used for 2017 reserves of
$14.50 for silver, $1,200 for gold, $1.05 for zinc and $0.90 from
lead are unchanged from last year's assumptions, and the silver
price assumption is among the lowest in the industry.
Please refer to the reserves and resources tables at the end of
this press release, or to the press release entitled "Hecla Reports
Record Reserves For Silver, Gold and Lead" issued on February 7,
2018 for the breakdown between proven and probable reserve and
resource levels.
FINANCIAL OVERVIEW
Fourth Quarter Ended Twelve
Months Ended HIGHLIGHTS
December 31,2017
December 31,2016
December 31,2017
December 31,2016
FINANCIAL DATA
Sales (000)
$ 160,113 $ 164,245
$ 577,775 $ 645,957 Gross profit (000)
$ 47,226 $ 43,548
$ 156,986 $ 191,506
Income (loss) applicable to common stockholders (000)
$
(27,887 ) $ 20,124
$ (24,071 ) $
68,995 Basic and diluted income (loss) per common share
$
(0.07 ) $ 0.05
$ (0.06 ) $ 0.18
Net income (loss) (000)
$ (27,749 ) $ 20,262
$ (23,519 ) $ 69,547 Cash provided by
operating activities (000)
$ 41,763 $ 52,214
$
115,878 $ 225,328
Net loss applicable to common stockholders for the fourth
quarter and full year of 2017 was $27.9 million and $24.1
million, or $0.07 and $0.06 per basic share, respectively, compared
to net income applicable to common stockholders of $20.1 million
and $69.0 million, or $0.05 and $0.18 per basic share,
respectively, for the fourth quarter and full year of 2016. Among
items impacting the results for the 2017 periods compared to 2016
were the following:
- Sales for the fourth quarter and full
year were 3% and 11% lower, respectively, than the same periods in
2016, mainly due to lower silver, zinc and lead production due to
the ongoing strike at Lucky Friday, partly offset by higher
realized silver, gold, zinc and lead prices in 2017.
- Losses on base metal derivative
contracts of $4.7 million and $21.3 million were recorded in the
fourth quarter and full year 2017, respectively, as compared to a
gain of $4.4 million in the same periods of 2016, the result of
higher zinc and lead prices.
- A foreign exchange gain of $0.6 million
was recognized in the fourth quarter of 2017, compared to a $4.8
million foreign exchange gain in the prior year fourth quarter.
Annual foreign exchange losses of $10.3 million and $2.9 million
were recognized in 2017 and 2016, respectively. The variances were
primarily due to the strengthening of the Canadian dollar relative
to the U.S. dollar.
- Interest expense, net of amount
capitalized, was $9.6 million in the fourth quarter compared to
$5.1 million in the same period of 2016, and $38.0 million for
the full year of 2017 compared to $21.8 million in 2016. The
increase is due to interest capitalized in 2016 related to the #4
Shaft project, which was completed in January 2017.
- Exploration and pre-development expense
was $7.3 million for the fourth quarter and $29.0 million for the
full year of 2017 compared to $6.2 million for the fourth quarter
and $17.9 million for the full year of 2016 primarily due to
increased exploration activity at Greens Creek, San Sebastian, Casa
Berardi, the Kinskuch project in British Columbia, and the Little
Baldy project in northern Idaho, and the addition of the Montanore
pre-development project.
- Research and development expense was
$1.2 million for the fourth quarter and $3.3 million for the full
year of 2017, compared to $0.1 million for the fourth quarter and
$0.2 million for the full year of 2016, and is related to the
evaluation and development of new technologies, such as the Remote
Vein Miner project at Lucky Friday.
- Lucky Friday had suspension costs of
$5.6 million and $17.1 million, along with $1.3 million and $4.2
million in non-cash depreciation expense, for the fourth quarter
and full year of 2017, respectively.
- Income tax provisions for the fourth
quarters 2017 and 2016, were $38.3 million and $4.8 million,
respectively. Income tax provisions for the full year 2017 and 2016
were $19.9 million and $27.4 million, respectively. The tax
provisions resulted primarily from the changes in the U.S. Tax Cuts
and Jobs Act and the resulting revaluation of the deferred tax
asset, as well as current income and mining taxes in Mexico.
"The fourth quarter and full year tax provisions were impacted
by the recently enacted U.S. tax reform measures. While we were
required to record a non-cash charge for the year, we see
significant benefits to us in the future as a result of the
elimination of the Alternative Minimum Tax, the lower regular
income tax rate and our ability to repatriate earnings from our
mining operations outside the U.S.," said Mr. Baker.
Cash provided by operating activities of $41.8 million for the
fourth quarter 2017 was $10.5 million lower as compared to the
fourth quarter of 2016. For the full year of 2017, $115.9 million
in cash was provided by operating activities as compared to $225.3
million in 2016. The decreases were the result of lower production,
payment of estimated income taxes in Mexico, suspension costs at
Lucky Friday, and higher exploration, pre-development, and research
and development spending. The full year variance was also the
result of $16 million in proceeds in 2016 for settlement of a
reclamation insurance policy for the Troy mine.
A net loss was recorded of $27.7 million for the fourth quarter
and $23.5 million for the full year of 2017, compared to net income
of $20.3 million for the fourth quarter and $69.5 million for the
full year of 2016. Adjusted EBITDA was $72.0 million for the fourth
quarter of 2017 compared to $65.9 million for the same period of
2016, and $235.0 million for the full year of 2017 compared to
$265.1 million in 2016.4 The increase for the quarter was due to
higher base metal prices, partially offset by lower metals
production. The decrease for the year was due to lower metals
production.
Capital expenditures at the operations totaled $27.8 million for
the fourth quarter of 2017, of which expenditures were $12.4
million at Casa Berardi, $10.4 million at Greens Creek, $3.8
million at San Sebastian, and $1.3 million at Lucky Friday. Capital
expenditures during 2017 totaled $103.4 million at the
operations.
Metals Prices
Average realized silver prices in the fourth quarter and full
year 2017 were $16.87 and $17.23 per ounce, respectively, both
slightly higher than the same periods in 2016. Realized prices for
gold for the fourth quarter and full year 2017 were $1,278 and
$1,261 per ounce, respectively, 6% and 1% higher than the prior
periods. The average realized price for lead for the fourth quarter
of 2017 was 18% higher, and zinc was 27% higher, compared to the
same period of 2016. The average realized price for lead for the
full year of 2017 was 25% higher than the prior year, and zinc was
39% higher, as compared to 2016.
_______________
4
Non-GAAP measures. See page 12 for more
information.
OPERATIONS OVERVIEW
Overview
The following table provides the production summary on a
consolidated basis for the fourth quarter and twelve months ended
December 31, 2017 and 2016:
Fourth Quarter Ended
Twelve Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
PRODUCTION SUMMARY Silver
- Ounces produced
2,984,786 3,976,552
12,484,844 17,177,317 Payable ounces sold
3,210,306 3,775,003
11,308,958 15,997,087 Gold -
Ounces produced
60,964 63,150
232,684 233,929 Payable
ounces sold
58,008 60,888
219,929 222,105 Lead - Tons
produced
4,307 10,632
22,733 42,472 Payable tons sold
4,348 9,139
17,960 37,519 Zinc - Tons produced
12,107 18,195
55,107 68,516 Payable tons sold
10,066 11,854
39,335 49,802
The following table provides a summary of the final production,
cost of sales, cash cost, after by-product credits, per silver or
gold ounce, and AISC, after by-product credits, per silver and gold
ounce, for the fourth quarter and twelve months ended
December 31, 2017:
Fourth Quarter Ended
Greens Creek Lucky Friday
Casa Berardi San Sebastian December 31,
2017 Silver Gold
Silver Gold Silver
Gold Silver Silver
Gold Production (ounces) 2,984,786 60,964 2,146,223
11,565 69,578 43,444 9,885
759,100 5,955
Increase/(decrease) over 2016
(25 )% (3 )% (4 )% (20 )%
(92 )% (3 )% 3 %
(12 )% (15 )%
Cost of sales and other direct production
costs and depreciation, depletion and amortization (000) $
67,449 $ 45,438 $ 61,561 N/A $ 565 $ 45,438 N/A $ 5,323 N/A
Increase/(decrease) over 2016 (6 )%
(7 )% 39 % N/A (97
)% (7 )% N/A (32 )%
N/A
Cash costs, after by-product credits, per
silver or gold ounce2,5 $ (0.56 ) $ 719 $ 0.66 N/A $
(2.65 ) $ 719 N/A $ (3.80 ) N/A
Increase/(decrease) over
2016 (133 )% (10 )%
(45 )% N/A (135 )% (10 )%
N/A (22 )% N/A
AISC,
after by-product credits3 $ 7.23 $ 1,039 $ 6.23 N/A $
15.57 $ 1,039 N/A $ (0.64 ) N/A
Increase/(decrease) over
2016 (36 )% (17 )%
(11 )% N/A (16 )% (17 )%
N/A (34 )% N/A
Year Ended Greens Creek Lucky Friday
Casa Berardi San Sebastian December
31, 2017 Silver Gold
Silver Gold Silver
Gold Silver Silver
Gold Production (ounces) 12,484,844 232,684 8,351,882
50,854 838,658 156,653 36,566 3,257,738 25,177
Increase/(decrease) over 2016 (27 )%
(1 )% (10 )% (6 )% (77 )%
7 % 9 % (24 )% (26 )%
Cost of sales and other direct production costs and
depreciation, depletion and amortization (000) $ 240,610 $
180,179 $ 201,803 N/A $ 15,107 $ 180,179 N/A $ 23,700 N/A
Increase/(decrease) over 2016 (19 )%
16 % 5 % N/A (80
)% 16 % N/A (24 )%
N/A
Cash costs, after by-product credits, per silver or
gold ounce2,5 $ (0.01 ) $ 820 $ 0.71 N/A $ 5.81 $ 820
N/A $ (3.36 ) N/A
Increase/(decrease) over 2016
(100 )% 7 % (82 )% N/A
(35 )% 7 % N/A
— % N/A
AISC, after by-product
credits3 $ 7.86 $ 1,174 $ 5.76 N/A $ 12.48 $ 1,174 N/A $
(0.26 ) N/A
Increase/(decrease) over 2016 (33
)% (6 )% (39 )% N/A
(40 )% (6 )% N/A
(87 )% N/A
Greens Creek Mine - Alaska
For the fourth quarter, silver production was 2,146,223 ounces
and gold production was 11,565 ounces, a decrease of 3.9% and
19.8%, respectively, as compared to the prior year periods. Full
year 2017 silver production was 8,351,882 ounces, a decrease of
9.7% compared to the record silver production of 2016, and 2017
gold production was 50,854 ounces, a decrease of 5.7%. The decrease
in silver production resulted from lower grades, and gold
production was lower due to lower recoveries and slightly lower ore
grades. The mill operated at an average of 2,301 tons per day (tpd)
in the fourth quarter and 2,300 tpd for the full year. The annual
throughput was a record.
The cost of sales for the fourth quarter and full year 2017 was
$61.6 million and $201.8 million, respectively. The cash cost,
after by-product credits, per silver ounce, for the quarter and
full year was $0.66 and $0.71, respectively, a decrease from $1.19
and $3.84 for the fourth quarter and full year 2016.2 The AISC,
after by-product credits, was $6.23 per silver ounce for the fourth
quarter and $5.76 for 2017, down from $7.03 and $9.42 for the same
periods of 2016.3 The lower per silver ounce cash cost, after
by-product credits, was primarily due to higher base metal prices.
The lower AISC, after by-product credits, was also the result of
lower capital spending, partially offset by higher exploration
spending.
For the full year of 2017, Greens Creek generated cash provided
by operating activities of approximately $136.7 million and spent
$35.3 million on additions to properties, plants and equipment,
resulting in free cash flow of $101.4 million.6
Casa Berardi - Quebec
Gold production of 43,444 ounces during the fourth quarter 2017,
including 12,327 ounces from the East Mine Crown Pillar (EMCP) pit,
was 4% higher than the same period of 2016 due to higher ore
throughput and mill recoveries. Full-year 2017 gold production of
156,653 ounces, including 37,914 ounces from the EMCP pit, was
higher than the prior year period by 7% and the highest since
acquisition of the operation. The mill operated at an average of
3,764 tpd in the fourth quarter 2017 and 3,551 tpd for the year
which is 825 tpd more than 2016 and approximately 1,350 tpd greater
than the throughput at acquisition.
The cost of sales of $45.4 million and $180.2 million for the
fourth quarter and full year 2017, respectively, a decrease of 7%
for the quarter and an increase of 16% for the full year compared
to 2016. The cash cost, after by-product credits, per gold ounce of
$719 for the fourth quarter 2017 decreased 10% over the prior year
period, due to higher gold production and reduced stripping costs.7
For the full year 2017, the cash cost, after by-product credits,
per gold ounce increased to $820, from $764 for the prior year
period, due to the expensing of EMCP pit stripping costs during the
first half of the year.2,5 The AISC, after by-product credits, was
$1,039 per gold ounce for the fourth quarter and $1,174 for the
full year 2017 compared to $1,247 and $1,244 in the same periods of
2016, with the decrease due to higher gold production and lower
capital spending.3
For the full year of 2017, Casa Berardi generated cash provided
by operating activities of approximately $69.8 million and spent
$50.7 million on additions to properties, plants and equipment,
resulting in free cash flow of $19.1 million.6
San Sebastian - Mexico
Silver production was 759,100 ounces for the fourth quarter and
3,257,738 ounces for the full year of 2017 as compared to 860,071
and 4,294,123 ounces for the same periods of 2016. Gold production
was 5,955 ounces for the fourth quarter and 25,177 ounces for the
full year of 2017, compared to 7,042 and 34,042 ounces for the same
periods of 2016. The lower metal production was expected with lower
ore throughput and grades. The mill operated at an average of 354
tpd in the fourth quarter 2017 and 395 tpd for the year.
The cost of sales was $5.3 million and $23.7 million for the
fourth quarter and full year 2017, respectively, compared to $7.8
million and $31.2 million for the same periods in 2016. Cash cost,
after by-product credits, per silver ounce was ($3.80) in the
fourth quarter and ($3.36) for the full year of 2017, as compared
to ($3.12) and ($3.35) for the same periods of 2016.2 The strong
cash cost performance, after by-product credit, was due to the high
silver grades and strong gold production which is used as a
by-product credit. The AISC, after by-product credits, was ($0.64)
for the fourth quarter and ($0.26) for the full year of 2017
compared to ($0.97) and ($1.99) for the same periods of 2016, with
the increase due to higher capital and exploration spending.3
Open pit mining concluded in 2017 as planned, and the plant is
processing stockpiled and underground ore as the underground mine
ramps up in early 2018.
For the full year of 2017, San Sebastian generated cash provided
by operating activities of approximately $62.4 million and spent
$11.2 million on additions to properties, plants and equipment,
resulting in free cash flow of $51.2 million.6
_______________
2,3,5,6
Non-GAAP measure. See pages 11-12 for more
information.
Lucky Friday Mine - Idaho
Silver production was 69,578 ounces in the fourth quarter and
838,658 ounces for the full year 2017, a decrease from 874,019
ounces and 3,596,010 ounces in the fourth quarter and full year of
2016 due to the ongoing strike by unionized employees, which began
in March 2017. The Company continues to invest in the mine, with
limited production and capital improvements being performed by
salaried staff, as well as development in preparation for the
arrival of the new Remote Vein Miner machine scheduled to arrive in
late 2019.
Hecla has reached an agreement for binding third-party
arbitration with the United Steelworkers. The agreement to
arbitrate is subject to a ratification vote by the union membership
in March. The three arbitrators, in early May, will select as a
three-year contract either: 1) the contract the Company submitted
in December 2017 as its revised last, best and final offer or 2)
the agreement that expired in April 2016, as modified by certain
changes agreed to by the union and the Company.
The cost of sales for the fourth quarter and full year 2017 was
$0.6 million and $15.1 million, respectively, and the cash cost,
after by-product credits, per silver ounce was ($2.65) and $5.81
for the fourth quarter and full year 2017, respectively, a decrease
from $7.50 and $8.89 for the same periods of 2016 as a result of
higher base metals prices.2 AISC, after by-product credits, was
$15.57 and $12.48 per silver ounce, for the fourth quarter and full
year 2017, respectively, compared to $18.52 and $20.66 for the same
periods of 2016, with the decrease due to higher base metal prices,
and lower capital spending as a result of completion of the #4
Shaft project and the strike.3 Costs not directly related to mining
and processing ore have been classified as suspension costs during
the strike period and are excluded from the calculations of per
silver ounce costs. The per silver ounce costs for 2017 are not
indicative of future operating results at full production.
For the full year of 2017, Lucky Friday generated cash provided
by operating activities of approximately $7.8 million, incurred
$17.1 million for suspension costs, and spent $6.3 million on
additions to properties, plants and equipment, resulting in free
cash flow of negative $15.6 million.6
_______________
6
Non-GAAP measures. See page 12 for more
information.
EXPLORATION AND PRE-DEVELOPMENT
Expenditures
Exploration (including corporate development) expenses were $5.9
million, and $23.5 million for the fourth quarter and full year
2017, respectively. This represents an increase of 29% and 60% over
the fourth quarter and full year 2016. These increases were
primarily the result of more exploration at San Sebastian, Casa
Berardi and Greens Creek and drilling at Kinskuch and Little Baldy
projects.
A complete summary of exploration activities can be found in the
news release entitled "Hecla Reports Discoveries at San Sebastian,
Casa Berardi and Greens Creek" released on February 12, 2018.
Pre-development
Pre-development spending was $1.4 million in the fourth quarter
and $5.4 million for the full year 2017, principally to advance the
permitting at Rock Creek and Montanore.
Rock Creek
In June 2017, the U.S. Forest Service issued the Environmental
Impact Statement (EIS) and draft Record of Decision (ROD) for the
Rock Creek Project. The agency is incorporating comments made on
the draft ROD and it is anticipated that it will issue a Final ROD
and Final EIS in the first quarter of 2018 authorizing the
evaluation phase of the project.
Montanore
In June 2017, the Federal District court judge in Missoula,
Montana remanded back to the U.S. Forest Service and U.S. Fish and
Wildlife Service their approvals for the Montanore project. The
court advised that the agencies could proceed with the approval of
the evaluation phase of the project. The U.S. Forest Service
determined a focused supplemental EIS would be prepared focusing on
the evaluation phase and published its notice of intent to do so in
the Federal Register in December 2017. It is anticipated that the
agency will complete its assessment and issue a new ROD in late
2018 or early 2019. As a part of this permitting process, the U.S.
Fish and Wildlife Service is expected to prepare updated
terrestrial and aquatic biological opinions for the project.
Troy Reclamation
Reclamation of the former Troy Mine near Troy, Montana continued
as planned with the placement of cover soil on approximately
one-half of the 330-acre tailings facility. Some building
demolition work also was conducted in the mill site area.
Reclamation works are expected to continue in 2018.
Research and Development
The Research and Development activities of the Company consisted
primarily of work being conducted on the Remote Vein Miner project,
the focus of which is shifting towards fabrication of the unit,
with delivery expected late in 2019.
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
December 31, 2017:
Pounds Under Contract(in
thousands)
Average Price per Pound Zinc
Lead Zinc Lead Contracts on forecasted
sales 2018 settlements 32,187 16,645 $ 1.29 $ 1.06
2019 settlements 23,589 18,078 $ 1.33 $ 1.09 2020 settlements 3,307
2,866 $ 1.27 $ 1.08
The contracts represent 26% of the forecasted payable zinc
production for the next three years at an average price of $1.31
per pound, and 39% of the forecasted payable lead production for
the next three years at an average price of $1.08 per pound.
Foreign Currency Forward Purchase Contracts
The following table summarizes the Canadian dollars and Mexican
pesos the Company has committed to purchase under foreign exchange
forward contracts at December 31, 2017:
Currency Under Contract(in
thousands of CAD/MXN)
Average Exchange Rate CAD
MXN CAD/USD MXN/USD 2018 settlements
119,450 168,400 1.29 19.36 2019 settlements 63,600
109,800 1.31 20.40 2020 settlements 30,000 — 1.29 —
2018 ESTIMATES7
2018 Production Outlook
Silver Production(Moz)
Gold Production(Koz)
Silver Equivalent(Moz)
Gold Equivalent(Koz)
Greens Creek 7.5-8.0 50-55
21.0-22.5 300-313
Lucky Friday
San Sebastian
2.0-2.5 13-17 3.0-3.5 40-52
Casa Berardi 155-160
11.0-11.5 155-160
Total 9.5-10.5
218-232 35.0-37.5 495-525
2018 Cost Outlook
Costs of Sales(million)
Cash cost, after by-product
credits, persilver/gold ounce2,5
AISC, after by-productcredits,
per producedsilver/gold ounce3
Greens Creek $198 $0.50 $7.75
Lucky Friday
San Sebastian $44 $8.50
$12.50
Total Silver $242 $2.25
$12.75
Casa Berardi $185 $800
$1,100
Total Gold $185 $800
$1,100
2018 Capital and Exploration Outlook
2018E Capital expenditures (excluding capitalized interest)
$95-$105 million
2018E Exploration expenditures
(includes Corporate Development) $30-$37 million
2018E Pre-development expenditures $5 million
2018 Research and Development expenditures
$12-$16 million
DIVIDENDS
The Board of Directors declared a quarterly dividend of $0.0025
per share of common stock, payable on or about March 13, 2018, to
shareholders of record on March 6, 2018. The Company's realized
silver price was $16.87 in the fourth quarter and therefore did not
satisfy the criteria for a larger dividend under the Company's
dividend policy.
The Board of Directors also declared the regular quarterly
dividend of $0.875 per share on the 157,816 outstanding shares of
Series B Cumulative Convertible Preferred Stock. This represents a
total amount to be paid of approximately $138,000. The cash
dividend is payable April 2, 2018, to shareholders of record on
March 15, 2018.
_______________
2,3,5,7
Non-GAAP measures. See pages 11-12 for
more information.
CONFERENCE CALL AND WEBCAST
A conference call and webcast will be held today, Thursday,
February 15, at 10:00 a.m. Eastern Time to discuss these results.
You may join the conference call by dialing toll-free
1-855-760-8158 or for international by dialing 1-720-634-2922. The
participant passcode is HECLA. Hecla's live and archived webcast
can be accessed at www.hecla-mining.com under Investors or via
Thomson StreetEvents Network.
ABOUT HECLA
Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading
low-cost U.S. silver producer with operating mines in Alaska, Idaho
and Mexico, and is a growing gold producer with 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 (GAAP). These measures
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP. The
non-GAAP financial measures cited in this release and listed below
are reconciled to their most comparable GAAP measure at the end of
this release.
(1) Adjusted net income applicable to common stockholders is a
non-GAAP measurement, a reconciliation of which to net income
applicable to common stockholders, the most comparable GAAP
measure, can be found at the end of the release. Adjusted net
income is a measure used by management to evaluate the Company's
operating performance but should not be considered an alternative
to net income, or cash provided by operating activities as those
terms are defined by GAAP, and does not necessarily indicate
whether cash flows will be sufficient to fund cash needs. In
addition, the Company may use it when formulating performance goals
and targets under its incentive program.
(2) Cash cost, after by-product credits, per silver and gold
ounce is a non-GAAP measurement, a reconciliation of which to cost
of sales and other direct production costs and depreciation,
depletion and amortization (sometimes referred to as "cost of
sales" in this release), can be found at the end of the release. It
is an important operating statistic that management utilizes to
measure each mine's operating performance. It also allows the
benchmarking of performance of each mine versus those of our
competitors. As a primary silver mining company, management also
uses the statistic on an aggregate basis - aggregating the Greens
Creek, Lucky Friday and San Sebastian mines - to compare
performance with that of other primary silver mining companies.
With regard to Casa Berardi, management uses cash cost, after
by-product credits, per gold ounce to compare its performance with
other gold mines. Similarly, the statistic is useful in identifying
acquisition and investment opportunities as it provides a common
tool for measuring the financial performance of other mines with
varying geologic, metallurgical and operating characteristics. In
addition, the Company may use it when formulating performance goals
and targets under its incentive program.
(3) All in sustaining cost (AISC), after by-product credits, is
a non-GAAP measurement, a reconciliation of which to cost of sales
and other direct production costs and depreciation, depletion and
amortization, the closest GAAP measurement, can be found in the end
of the release. AISC, after by-product credits, includes cost of
sales and other direct production costs, expenses for reclamation
and exploration at the mines sites, corporate exploration related
to sustaining operations, and all site sustaining capital costs.
AISC, after by-product credits, is calculated net of depreciation,
depletion, and amortization and by-product credits.
Current GAAP measures used in the mining industry, such as cost
of goods sold, do not capture all the expenditures incurred to
discover, develop and sustain silver and gold production.
Management believes that all in sustaining costs is a non-GAAP
measure that provides additional information to management,
investors and analysts to help (i) in the understanding of the
economics of our operations and performance compared to other
producers and (ii) in the transparency by better defining the total
costs associated with production. Similarly, the statistic is
useful in identifying acquisition and investment opportunities as
it provides a common tool for measuring the financial performance
of other mines with varying geologic, metallurgical and operating
characteristics. In addition, the Company may use it when
formulating performance goals and targets under its incentive
program.
(4) Adjusted EBITDA is a non-GAAP measurement, a reconciliation
of which to net income, the most comparable GAAP measure, can be
found at the end of the release. Adjusted EBITDA is a measure used
by management to evaluate the Company's operating performance but
should not be considered an alternative to net income, or cash
provided by operating activities as those terms are defined by
GAAP, and does not necessarily indicate whether cash flows will be
sufficient to fund cash needs. In addition, the Company may use it
when formulating performance goals and targets under its incentive
program.
(5) 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.
(6) Free cash flow is a non-GAAP measure calculated as cash
provided by operating activities less additions to properties,
plants and equipment. Free cash flow for Lucky Friday also includes
a reduction for suspension costs incurred during the strike.
Other
(7) Expectations for 2018 includes silver, gold, lead and zinc
production from Greens Creek, San Sebastian and Casa Berardi
converted using Au $1,225/oz, Ag $17.25/oz, Zn $1.30/lb, and Pb
$1.00/lb. Lucky Friday expectations are currently suspended as
there is currently a strike. Numbers may be rounded.
(8) Silver or gold equivalent production includes silver, gold,
lead and zinc production from Lucky Friday, Greens Creek, San
Sebastian and Casa Berardi converted using average prices for the
year.
Cautionary Statement Regarding Forward
Looking Statements, Including 2018 Outlook
This news release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbor
created by such sections and other applicable laws, including
Canadian securities laws. Such forward-looking statements may
include, without limitation: (i) estimates of future production;
(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; (iii) estimates for
2018 for silver and gold production, silver equivalent production,
cash cost, after by-product credits, AISC, after by-product
credits, capital expenditures and exploration and pre-development
expenditures (which assumes metal prices of gold at $1,225/oz, Ag
$17.25/oz, Zn $1.30/lb, Pb $1.00/lb; USD/CAD assumed to be $0.79,
USD/MXN assumed to be $0.06; and (iv) the Company’s mineral
reserves and resources. Estimates or expectations of future events
or results are based upon certain assumptions, which may prove to
be incorrect. Such assumptions, include, but are not limited to:
(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 2017
Form 10-K, filed on February 15, 2018, with the Securities and
Exchange Commission (SEC), as well as the Company’s other SEC
filings. The Company does not undertake any obligation to 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 included herein to satisfy the Company's
“public disclosure” obligations under Regulation FD of the SEC and
to provide U.S. holders with ready access to information publicly
available in Canada.
Reporting requirements in the United States for disclosure of
mineral properties under Guide 7 and the requirements in Canada
under NI 43-101 standards are substantially different. This
document contains a summary of certain estimates of the Company,
not only of proven and probable reserves within the meaning of
Guide 7, but also of mineral resource and mineral reserve estimates
estimated in accordance with the definitional standards of the
Canadian Institute of Mining, Metallurgy and Petroleum referred to
in NI 43-101. Under Guide 7, the term "reserve" means that part of
a mineral deposit that can be economically and legally extracted or
produced at the time of the reserve determination. The term
"economically", as used in the definition of reserve, means that
profitable extraction or production has been established or
analytically demonstrated to be viable and justifiable under
reasonable investment and market assumptions. The term "legally",
as used in the definition of reserve, does not imply that all
permits needed for mining and processing have been obtained or that
other legal issues have been completely resolved. However, for a
reserve to exist, Hecla must have a justifiable expectation, based
on applicable laws and regulations, that issuance of permits or
resolution of legal issues necessary for mining and processing at a
particular deposit will be accomplished in the ordinary course and
in a timeframe consistent with Hecla's current mine plans. The
terms “measured resources”, “indicated resources,” and “inferred
resources” are Canadian mining terms as defined in accordance with
NI 43-101. These terms are not defined under Guide 7 and are not
normally permitted to be used in reports and registration
statements filed with the SEC in the United States, except where
required to be disclosed by foreign law. The term “resource” does
not equate to the term “reserve”. Under Guide 7, the material
described herein as “indicated resources” and “measured resources”
would be characterized as “mineralized material” and is permitted
to be disclosed in tonnage and grade only, not ounces. The category
of “inferred resources” is not recognized by Guide 7. Investors are
cautioned not to assume that any part or all of the mineral
deposits in such categories will ever be converted into proven or
probable reserves. “Resources” have a great amount of uncertainty
as to their existence, and great uncertainty as to their economic
and legal feasibility. It cannot be assumed that all or any part of
such a “resource” will ever be upgraded to a higher category or
will ever be economically extracted. Investors are cautioned not to
assume that all or any part of a “resource” exists or is
economically or legally mineable. Investors are also especially
cautioned that the mere fact that such resources may be referred to
in ounces of silver and/or gold, rather than in tons of
mineralization and grades of silver and/or gold estimated per ton,
is not an indication that such material will ever result in mined
ore which is processed into commercial silver or gold.
Qualified Person (QP) Pursuant to
Canadian National Instrument 43-101
Dean McDonald, PhD. P.Geo., Senior Vice President - Exploration
of Hecla Mining Company, who serves as a Qualified Person under
National Instrument 43-101, supervised the preparation of the
scientific and technical information concerning Hecla’s mineral
projects in this news release. Information regarding data
verification, surveys and investigations, quality assurance program
and quality control measures and a summary of sample, analytical or
testing procedures for the Greens Creek Mine are contained in a
technical report prepared for Hecla titled “Technical Report for
the Greens Creek Mine, Juneau, Alaska, USA” effective date March
28, 2013, and for the Lucky Friday Mine are contained in a
technical report prepared for Hecla titled “Technical Report on the
Lucky Friday Mine Shoshone County, Idaho, USA” effective date April
2, 2014, for the Casa Berardi Mine are contained in a technical
report prepared for Hecla titled "Technical Report on the Mineral
Resource and Mineral Reserve Estimate for the Casa Berardi Mine,
Northwestern Quebec, Canada" effective date March 31, 2014 (the
"Casa Berardi Technical Report"), and for the San Sebastian Mine
are contained in a technical report prepared for Hecla titled
"Technical Report for the San Sebastian Ag-Au Property, Durango,
Mexico" effective date September 8, 2015. Also included in these
four technical reports is a description of the key assumptions,
parameters and methods used to estimate mineral reserves and
resources and a general discussion of the extent to which the
estimates may be affected by any known environmental, permitting,
legal, title, taxation, socio-political, marketing or other
relevant factors. 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
Income (Loss)
(dollars and shares in thousands, except
per share amounts - unaudited)
Fourth Quarter Ended Twelve Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
Sales of products
$ 160,113 $ 164,245
$ 577,775 $ 645,957 Cost of sales and
other direct production costs
80,190 86,990
304,727
338,325 Depreciation, depletion and amortization
32,697
33,707
116,062 116,126 Total
cost of sales
112,887 120,697
420,789
454,451 Gross profit
47,226 43,548
156,986 191,506 Other operating
expenses: General and administrative
6,567 13,312
35,611 45,040 Exploration
5,888 4,549
23,510
14,720 Pre-development
1,387 1,662
5,448 3,137
Research and development
1,151 126
3,276 243 Other
operating expense
923 735
2,513 3,153 (Gain) loss on
disposition of property, plants, equipment and mineral interests
(1,118 ) 172
(6,042 ) (147 ) Lucky
Friday suspension-related costs
6,916 —
21,301 —
Acquisition costs
— 528
25 2,695 Provision for closed
operations and reclamation
1,657 942
6,701 5,721
23,371 22,026
92,343 74,562 Income from operations
23,855 21,522
64,643 116,944
Other income (expense): (Loss) gain on derivative contracts
(4,702 ) 4,423
(21,250 ) 4,423 Gain
(loss) on disposition of investments
1 —
(166
) — Unrealized loss on investments
(174 ) (665
)
(247 ) (177 ) Net foreign exchange gain (loss)
609 4,787
(10,300 ) (2,926 ) Interest and
other income
507 161
1,692 507 Interest expense
(9,589 ) (5,141 )
(38,012 ) (21,796 )
(13,348 ) 3,565
(68,283 )
(19,969 ) Income (loss) before income taxes
10,507 25,087
(3,640 ) 96,975 Income tax provision
(38,256
) (4,825 )
(19,879 ) (27,428 ) Net income
(loss)
(27,749 ) 20,262
(23,519 )
69,547 Preferred stock dividends
(138 ) (138 )
(552 ) (552 ) Income (loss) applicable to common
stockholders
$ (27,887 ) $ 20,124
$ (24,071 ) $ 68,995 Basic income
(loss) per common share after preferred dividends
$
(0.07 ) $ 0.05
$ (0.06 )
$ 0.18 Diluted income (loss) per common share after
preferred dividends
$ (0.07 ) $ 0.05
$ (0.06 ) $ 0.18 Weighted average
number of common shares outstanding basic
399,133
395,229
397,394 386,416 Weighted
average number of common shares outstanding diluted
399,133
397,717
397,394 389,322
HECLA MINING COMPANY
Condensed Consolidated Balance Sheets
(dollars and share in thousands -
unaudited)
December 31, 2017 December 31, 2016
ASSETS Current assets: Cash and
cash equivalents
$ 186,107 $ 169,777 Investments
33,758 29,117 Accounts receivable
32,190 30,049
Inventories
54,555 50,023 Other current assets
13,715
12,125 Total current assets
320,325 291,091
Non-current investments
7,561 5,002 Non-current restricted
cash and investments
1,032 2,200 Properties, plants,
equipment and mineral interests, net
2,020,021 2,032,685
Deferred income tax asset
1,509 35,815 Other non-current
assets and deferred charges
14,509 4,884
Total assets $ 2,364,957 $ 2,371,677
LIABILITIES
Current liabilities: Accounts payable and accrued
liabilities
$ 46,549 $ 60,064 Accrued payroll and
related benefits
31,259 36,515 Accrued taxes
5,919
9,061 Current portion of capital leases
5,608 5,653 Current
portion of accrued reclamation and closure costs
6,679 5,653
Current portion of debt
— 470 Accrued interest
5,745
5,745 Other current liabilities
10,371 3,064
Total current liabilities
112,130 126,225 Capital leases
6,193 5,838 Accrued reclamation and closure costs
79,366 79,927 Long-term debt
502,229 500,979 Deferred
income tax liability
121,546 122,855 Non-current pension
liability
46,628 44,491 Other non-current liabilities
12,983 11,518
Total liabilities
881,075 891,833
STOCKHOLDERS’ EQUITY Preferred stock
39 39 Common stock
100,926 99,806 Capital surplus
1,619,816 1,597,212 Accumulated deficit
(195,484
) (167,437 ) Accumulated other comprehensive loss
(23,373 ) (34,602 ) Treasury stock
(18,042
) (15,174 )
Total stockholders’ equity
1,483,882 1,479,844
Total liabilities and
stockholders’ equity $ 2,364,957 $
2,371,677 Common shares outstanding
399,176
395,287
HECLA MINING COMPANY
Condensed Consolidated Statements of Cash
Flows
(dollars in thousands - unaudited)
December 31,2017
December 31,2016
OPERATING ACTIVITIES Net income
(loss)
$ (23,519 ) $ 69,547
Non-cash elements included in net income (loss): Depreciation,
depletion and amortization
121,930 117,413 Loss on
disposition of investments
167 — Unrealized loss on
investments
251 177 Gain on disposition of properties,
plants, equipment and mineral interests
(6,042 ) (147
) Provision for reclamation and closure costs
4,508 4,813
Deferred income taxes
18,308 2,112 Stock compensation
6,323 6,184 Acquisition costs
— 1,048 Amortization of
loan origination fees
1,864 1,871 Loss (gain) on derivative
contracts
20,741 (5,494 ) Foreign exchange loss
10,828 4,649 Adjustment of inventory to market value
— 811 Other non-cash charges, net
51 (174 ) Change in
assets and liabilities: Accounts receivable
(2,414 )
4,233 Inventories
(3,744 ) (5,697 ) Other current and
non-current assets
(11,595 ) 14,422 Accounts payable
and accrued liabilities
(16,434 ) (6,539 ) Accrued
payroll and related benefits
2,092 17,705 Accrued taxes
(2,234 ) 263 Accrued reclamation and closure costs
and other non-current liabilities
(5,203 ) (1,869 )
Cash provided by operating activities 115,878
225,328
INVESTING
ACTIVITIES Additions to properties,
plants, equipment and mineral interests
(98,038 )
(164,788 ) Purchase of a business, net of cash acquired
—
(3,931 ) Proceeds from disposition of properties, plants and
equipment
374 348 Insurance proceeds received for damaged
property
7,745 — Change in restricted cash and investment
balances
1,168 — Purchases of investments
(56,613
) (48,943 ) Maturities of investments
49,969
18,649
Net cash used in investing activities
(95,395 ) (198,665 )
FINANCING ACTIVITIES
Acquisition of treasury shares
(2,868 ) (4,440 )
Proceeds from issuance of common stock and warrants, net of related
expense
9,610 8,121 Dividends paid to common stockholders
(3,976 ) (3,867 ) Dividends paid to preferred
stockholders
(552 ) (552 ) Payments on debt
(470 ) (2,721 ) Debt issuance and loan origination
fees paid
(476 ) (127 ) Repayments of capital leases
(6,516 ) (8,435 )
Net cash used in financing
activities (5,248 ) (12,021 ) Effect of exchange
rates on cash
1,095 (74 ) Net increase in cash and cash
equivalents
16,330 14,568 Cash and cash equivalents at
beginning of year
169,777 155,209 Cash and
cash equivalents at end of year
$ 186,107 $
169,777
HECLA MINING COMPANY
Metal Prices
Fourth Quarter Ended Twelve Months
Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
AVERAGE METAL PRICES
Silver - London PM Fix ($/oz)
$ 16.70 $
17.18
$ 17.05 $ 17.10 Realized price per ounce
$ 16.87 $ 16.59
$ 17.23 $ 17.16 Gold -
London PM Fix ($/oz)
$ 1,274 $ 1,218
$
1,257 $ 1,248 Realized price per ounce
$ 1,278
$ 1,202
$ 1,261 $ 1,245 Lead - LME Cash ($/pound)
$ 1.13 $ 0.98
$ 1.05 $ 0.85 Realized
price per pound
$ 1.14 $ 0.97
$ 1.06 $
0.85 Zinc - LME Cash ($/pound)
$ 1.47 $ 1.14
$
1.31 $ 0.95 Realized price per pound
$ 1.46 $
1.15
$ 1.32 $ 0.95
Production Data
Fourth Quarter Ended Twelve Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
GREENS CREEK UNIT
Tons of ore processed
211,689 204,760
839,589 815,639 Mining cost per ton
$
74.49 $ 70.33
$ 70.86 $ 69.48 Milling cost per
ton
$ 32.38 $ 34.73
$ 32.38 $ 31.99 Ore
grade milled - Silver (oz./ton)
13.02 14.38
12.88
14.55 Ore grade milled - Gold (oz./ton)
0.09 0.10
0.09 0.10 Ore grade milled - Lead (%)
2.41 3.27
2.72 3.11 Ore grade milled - Zinc (%)
6.53 8.61
7.25 8.08 Silver produced (oz.)
2,146,223 2,232,855
8,351,882 9,253,543 Gold produced (oz.)
11,565 14,415
50,854 53,912 Lead produced (tons)
3,916 5,360
17,996 20,596 Zinc produced (tons)
11,850 15,399
52,547 57,729 Total cash cost, after by-product credits, per
silver ounce (1)
$ 0.66 $ 1.19
$ 0.71 $
3.84 AISC, after by-product credits, per silver ounce (1)
$
6.23 $ 7.03
$ 5.76 $ 9.42 Capital additions
(in thousands)
$ 10,364 $ 11,846
$ 35,255 $ 47,046
LUCKY FRIDAY UNIT
Tons of ore processed
6,347 77,628
70,718 293,875 Mining cost per ton
$ 47.39 $
94.92
$ 106.75 $ 98.12 Milling cost per ton
$
9.35 $ 22.16
$ 21.71 $ 24.08 Ore grade milled
- Silver (oz./ton)
11.73 11.70
12.38 12.69 Ore grade
milled - Lead (%)
6.90 7.13
7.10 7.78 Ore grade
milled - Zinc (%)
5.06 3.84
4.01 3.92 Silver produced
(oz.)
69,578 874,019
838,658 3,596,010 Lead produced
(tons)
391 5,272
4,737 21,876 Zinc produced (tons)
257 2,796
2,560 10,787 Total cash cost, net of
by-product credits, per silver ounce (1)
$ (2.65
) $ 7.50
$ 5.81 $ 8.89 AISC, after by-product
credits, per silver ounce (1)
$ 15.57 $ 18.52
$ 12.48 $ 20.66 Capital additions (in thousands)
$ 1,268 $ 9,318
$
6,268 $ 41,536
CASA BERARDI UNIT
Tons of ore
processed - underground
198,846 214,407
805,047
850,688 Tons of ore processed - surface pit
147,432
89,887
491,177 146,900 Tons of ore
processed - total
346,278 304,294
1,296,224 997,588 Surface tons mined - ore and
waste
1,225,692 1,363,524
7,652,759 2,577,605 Mining
cost per ton - underground
$ 101.87 $ 89.45
$
99.49 $ 89.00 Mining cost per ton - combined
$
54.34 $ 86.35
$ 56.39 $ 89.25 Mining cost per
ton or ore and waste - surface tons mined
$ 3.84 $
5.23
$ 3.00 $ 5.15 Milling cost per ton
$
15.59 $ 18.08
$ 16.10 $ 18.64 Ore grade milled
- Gold (oz./ton) - underground
0.180 0.194
0.170
0.184 Ore grade milled - Gold (oz./ton) - surface pit
0.096
0.064
0.089 0.066 Ore grade milled - Gold (oz./ton) -
combined
0.144 0.156
0.139 0.167 Ore grade milled -
Silver (oz./ton)
0.03 0.04
0.03 0.04 Gold produced
(oz.) - underground
31,117 36,658
118,739 137,429
Gold produced (oz.) - surface pit
12,327 5,035
37,914 8,546 Gold produced (oz.) - total
43,444 41,693
156,653 145,975
Silver produced (oz.) - total
9,885 9,607
36,566 33,641 Total cash cost, net of
by-product credits, per gold ounce (1)
$ 719 $ 800
$ 820 $ 764 AISC, after by-product credits, per gold
ounce (1)
$ 1,039 $ 1,247
$ 1,174 $
1,244 Capital additions (in thousands)
$
12,419 $ 17,467
$ 50,668
$ 67,852
SAN SEBASTIAN UNIT
Tons of ore
processed
32,574 34,517
144,197 143,267 Mining cost
per ton
$ 30.18 $ 50.76
$ 36.77 $ 75.46
Milling cost per ton
$ 70.53 $ 71.01
$
67.52 $ 69.12 Ore grade milled - Silver (oz./ton)
24.58 26.40
23.91 31.94 Ore grade milled - Gold
(oz./ton)
0.193 0.218
0.185 0.254 Silver produced
(oz.)
759,100 860,071
3,257,738 4,294,123 Gold
produced (oz.)
5,955 7,042
25,177 34,042 Total cash
cost, net of by-product credits, per silver ounce (1)
$
(3.80 ) $ (3.12 )
$ (3.36 ) $
(3.35 ) AISC, after by-product credits, per silver ounce (1)
$ (0.64 ) $ (0.97 )
$ (0.26
) $ (1.99 ) Capital additions (in thousands)
$
3,751 $ 341
$ 11,231 $ 1,564 (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
twelve-month periods ended December 31, 2017 and 2016, and for
estimated amounts for the twelve months ended December 31,
2018.
Cash Cost, After By-product Credits, per Ounce is a measure
developed by precious metals companies (including the Silver
Institute) in an effort to provide a uniform standard for
comparison purposes. There can be no assurance, however, that these
non-GAAP measures as we report them are the same as those reported
by other mining companies.
Cash Cost, After By-product Credits, per Ounce is an important
operating statistic that we utilize to measure each mine's
operating performance. We have recently started reporting AISC,
After By-product Credits, per Ounce which we use as a measure of
our mines' net cash flow after costs for exploration,
pre-development, reclamation, and sustaining capital. This is
similar to the Cash Cost, After By-product Credits, per Ounce
non-GAAP measure we report, but also includes on-site exploration,
reclamation, and sustaining capital costs. Current GAAP measures
used in the mining industry, such as cost of goods sold, do not
capture all the expenditures incurred to discover, develop and
sustain silver and gold production. Cash Cost, After By-product
Credits, per Ounce and AISC, After By-product Credits, per Ounce
also allow us to benchmark the performance of each of our mines
versus those of our competitors. As a primary silver 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 similar gold metrics for Casa Berardi.
In thousands (except per ounce amounts) Three Months Ended
December 31, 2017
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 61,561 $ 565 $ 5,323 $
67,449 $ 45,438 $ 112,887 Depreciation, depletion and amortization
(16,886 ) (14 ) (657 ) (17,557 ) (15,140 ) (32,697 ) Treatment
costs 10,153 502 279 10,934 658 11,592 Change in product inventory
(7,645 ) 42 137 (7,466 ) 584 (6,882 ) Reclamation and other costs
(1,241 ) 48 (378 ) (1,571 ) (122 ) (1,693 ) Cash Cost,
Before By-product Credits (1) 45,942 1,143 4,704 51,789 31,418
83,207 Reclamation and other costs 667 — 117 784 122 906
Exploration 926 — 1,895 518 3,339 1,322 4,661 Sustaining capital
10,360 1,268 391 441 12,460 12,419 24,879 General and
administrative 6,567 6,567 6,567
AISC, Before By-product Credits (1) 57,895 2,411 7,107
74,939 45,281 120,220 By-product credits: Zinc (24,478 ) (561 )
(25,039 ) (25,039 ) Gold (13,019 ) (7,593 ) (20,612 ) (20,612 )
Lead (7,021 ) (768 ) (7,789 ) (7,789 ) Silver
(164 ) (164 ) Total By-product credits (44,518 ) (1,329 )
(7,593 ) (53,440 ) (164 ) (53,604 ) Cash Cost, After By-product
Credits $ 1,424 $ (186 ) $ (2,889 ) $ (1,651 ) $ 31,254
$ 29,603 AISC, After By-product Credits $ 13,377
$ 1,082 $ (486 ) $ 21,499 $ 45,117 $
66,616 Divided by ounces produced 2,146 70 760 2,976 43 Cash
Cost, Before By-product Credits, per Ounce $ 21.41 $ 16.34 $ 6.19 $
17.41 $ 723.19 By-product credits per ounce (20.75 ) (18.99 ) (9.99
) (17.96 ) (3.77 ) Cash Cost, After By-product Credits, per Ounce $
0.66 $ (2.65 ) $ (3.80 ) $ (0.55 ) $ 719.42 AISC,
Before By-product Credits, per Ounce $ 26.98 $ 34.56 $ 9.35 $ 25.19
$ 1,042.28 By-product credits per ounce (20.75 ) (18.99 ) (9.99 )
(17.96 ) (3.77 ) AISC, After By-product Credits, per Ounce $ 6.23
$ 15.57 $ (0.64 ) $ 7.23 $ 1,038.51
In thousands (except per ounce amounts) Three Months
Ended December 31, 2016
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 44,311 $ 19,514 $ 7,798
$ 71,623 $ 49,074 $ 120,697 Depreciation, depletion and
amortization (14,649 ) (3,036 ) (1,274 ) (18,959 ) (14,748 )
(33,707 ) Treatment costs 16,685 4,954 311 21,950 637 22,587 Change
in product inventory 4,875 (60 ) (144 ) 4,671 (1,323 ) 3,348
Reclamation and other costs (500 ) (265 ) (674 ) (1,439 ) (117 )
(1,556 ) Cash Cost, Before By-product Credits (1) 50,722 21,107
6,017 77,846 33,523 111,369 Reclamation and other costs 671 225 118
1,014 113 1,127 Exploration 524 76 1,694 372 2,666 1,051 3,717
Sustaining capital 11,847 9,333 46 107 21,333 17,466 38,799 General
and administrative 13,312 13,312
13,312 AISC, Before By-product Credits (1) 63,764 30,741
7,875 116,171 52,153 168,324 By-product credits: Zinc (24,606 )
(4,882 ) (29,488 ) (29,488 ) Gold (15,221 ) (8,706 ) (23,927 )
(23,927 ) Lead (8,235 ) (9,671 ) (17,906 ) (17,906 ) Silver
(163 ) (163 ) Total By-product credits (48,062
) (14,553 ) (8,706 ) (71,321 ) (163 ) (71,484 ) Cash Cost, After
By-product Credits $ 2,660 $ 6,554 $ (2,689 ) $ 6,525
$ 33,360 $ 39,885 AISC, After By-product
Credits $ 15,702 $ 16,188 $ (831 ) $ 44,850 $
51,990 $ 96,840 Divided by ounces produced 2,233 874
860 3,967 42 Cash Cost, Before By-product Credits, per Ounce $
22.71 $ 24.15 $ 7.00 $ 19.62 $ 804.05 By-product credits per ounce
(21.52 ) (16.65 ) (10.12 ) (17.98 ) (3.91 ) Cash Cost, After
By-product Credits, per Ounce $ 1.19 $ 7.50 $ (3.12 )
$ 1.64 $ 800.14 AISC, Before By-product Credits, per
Ounce $ 28.55 $ 35.17 $ 9.15 $ 29.29 $ 1,250.88 By-product credits
per ounce (21.52 ) (16.65 ) (10.12 ) (17.98 ) (3.91 ) AISC, After
By-product Credits, per Ounce $ 7.03 $ 18.52 $ (0.97
) $ 11.31 $ 1,246.97 In thousands (except per
ounce amounts) Twelve Months Ended December 31, 2017
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 201,803 $ 15,107 $
23,700 $ 240,610 $ 180,179 $ 420,789 Depreciation, depletion and
amortization (56,328 ) (2,447 ) (2,693 ) (61,468 ) (54,594 )
(116,062 ) Treatment costs 47,774 4,759 1,185 53,718 2,432 56,150
Change in product inventory (2,247 ) 1,853 (55 ) (449 ) 1,466 1,017
Reclamation and other costs (2,716 ) (115 ) (1,467 ) (4,298 ) (476
) (4,774 ) Cash Cost, Before By-product Credits (1) 188,286 19,157
20,670 228,113 129,007 357,120 Reclamation and other costs 2,666
217 468 3,351 475 3,826 Exploration 4,265 (1 ) 6,879 1,825 12,968
4,351 17,319 Sustaining capital 35,255 5,377 2,770 2,716 46,118
50,664 96,782 General and administrative
35,611 35,611 35,611 AISC, Before By-product
Credits (1) 230,472 24,750 30,787 326,161 184,497 510,658
By-product credits: Zinc (96,950 ) (4,914 ) (101,864 ) (101,864 )
Gold (55,694 ) (31,625 ) (87,319 ) (87,319 ) Lead (29,717 ) (9,367
) (39,084 ) (39,084 ) Silver (614 )
(614 ) Total By-product credits (182,361 ) (14,281 ) (31,625 )
(228,267 ) (614 ) (228,881 ) Cash Cost, After By-product Credits $
5,925 $ 4,876 $ (10,955 ) $ (154 ) $ 128,393 $
128,239 AISC, After By-product Credits $ 48,111 $
10,469 $ (838 ) $ 97,894 $ 183,883 $ 281,777
Divided by ounces produced 8,352 839 3,258 12,449 157 Cash
Cost, Before By-product Credits, per Ounce $ 22.54 $ 22.83 $ 6.35 $
18.33 $ 823.52 By-product credits per ounce (21.83 ) (17.02 ) (9.71
) (18.34 ) (3.92 ) Cash Cost, After By-product Credits, per Ounce $
0.71 $ 5.81 $ (3.36 ) $ (0.01 ) $ 819.60 AISC,
Before By-product Credits, per Ounce $ 27.59 $ 29.50 $ 9.45 $ 26.20
$ 1,177.74 By-product credits per ounce (21.83 ) (17.02 ) (9.71 )
(18.34 ) (3.92 ) AISC, After By-product Credits, per Ounce $ 5.76
$ 12.48 $ (0.26 ) $ 7.86 $ 1,173.82
In thousands (except per ounce amounts) Twelve Months
Ended December 31, 2016
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 191,297 $ 76,210 $
31,233 $ 298,740 $ 155,711 $ 454,451 Depreciation, depletion and
amortization (53,222 ) (11,810 ) (3,782 ) (68,814 ) (47,312 )
(116,126 ) Treatment costs 62,754 20,277 1,504 84,535 1,264 85,799
Change in product inventory (1,208 ) (1,162 ) 1,599 (771 ) 2,890
2,119 Reclamation and other costs (2,327 ) (822 ) (2,257 ) (5,406 )
(459 ) (5,865 ) Cash Cost, Before By-product Credits (1) 197,294
82,693 28,297 308,284 112,094 420,378 Reclamation and other costs
2,716 720 244 3,680 458 4,138 Exploration 1,892 76 4,043 1,658
7,669 3,331 11,000 Sustaining capital 47,046 41,536 1,540 593
90,715 66,326 157,041 General and administrative
45,040 45,040 45,040 AISC, Before
By-product Credits (1) 248,948 125,025 34,124 455,388 182,209
637,597 By-product credits: Zinc (76,710 ) (15,567 ) (92,277 )
(92,277 ) Gold (57,238 ) (42,667 ) (99,905 ) (99,905 ) Lead (27,833
) (35,156 ) (62,989 ) (62,989 ) Silver
(572 ) (572 ) Total By-product credits (161,781 ) (50,723 ) (42,667
) (255,171 ) (572 ) (255,743 ) Cash Cost, After By-product Credits
$ 35,513 $ 31,970 $ (14,370 ) $ 53,113 $
111,522 $ 164,635 AISC, After By-product Credits $
87,167 $ 74,302 $ (8,543 ) $ 200,217 $ 181,637
$ 381,854 Divided by ounces produced 9,254 3,596
4,294 17,144 146 Cash Cost, Before By-product Credits, per Ounce $
21.32 $ 23.00 $ 6.59 $ 17.98 $ 767.90 By-product credits per ounce
(17.48 ) (14.11 ) (9.94 ) (14.88 ) (3.92 ) Cash Cost, After
By-product Credits, per Ounce $ 3.84 $ 8.89 $ (3.35 )
$ 3.10 $ 763.98 AISC, Before By-product Credits, per
Ounce $ 26.90 $ 34.77 $ 7.95 $ 26.56 $ 1,248.22 By-product credits
per ounce (17.48 ) (14.11 ) (9.94 ) (14.88 ) (3.92 ) AISC, After
By-product Credits, per Ounce $ 9.42 $ 20.66 $ (1.99
) $ 11.68 $ 1,244.30 In thousands (except per
ounce amounts) Estimate for the Twelve Months Ended December
31, 2018
GreensCreek
LuckyFriday
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 198,000 $ — $ 44,000 $
242,000 $ 185,000 $ 427,000 Depreciation, depletion and
amortization (50,000 ) — (6,000 ) (56,000 ) (58,000 ) (114,000 )
Treatment costs 44,000 — 550 44,550 400 44,950 Change in product
inventory — — (1,000 ) (1,000 ) — (1,000 ) Reclamation and other
costs (2,900 ) — (500 ) (3,400 ) (800 ) (4,200 ) Cash Cost,
Before By-product Credits (1) 189,100 — 37,050 226,150 126,600
352,750 Reclamation and other costs 2,500 — 240 2,740 450 3,190
Exploration 3,500 — 4,800 2,500 10,800 5,000 15,800 Sustaining
capital 51,000 — 3,700 2,000 56,700 45,000 101,700 General and
administrative — 35,000 35,000 —
35,000 AISC, Before By-product Credits (1) 246,100 —
45,790 331,390 177,050 508,440
By-product credits (186,000 ) — (18,000 )
(204,000 ) (800 ) (204,800 ) Cash Cost, After By-product
Credits $ 3,100 $ — $ 19,050 $ 22,150 $
125,800 $ 147,950 AISC, After By-product Credits $
60,100 $ — $ 27,790 $ 127,390 $ 176,250
$ 303,640 Divided by ounces produced 7,750 — 2,250
10,000 158 Cash Cost, Before By-product Credits, per Ounce $ 24.40
$ 16.47 $ 22.62 $ 801 By-product credits per ounce (24.00 )
(8.00 ) (20.40 ) (5 ) Cash Cost, After By-product Credits, per
Ounce $ 0.40 $ — $ 8.47 $ 2.22 $ 796
AISC, Before By-product Credits, per Ounce $ 31.75 $ 20.35 $
33.14 $ 1,121 By-product credits per ounce (24.00 ) (8.00 )
(20.40 ) (5 ) AISC, After By-product Credits, per Ounce $ 7.75
$ — $ 12.35 $ 12.74 $ 1,116
(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 limited
since that time. For the first nine months of 2017, costs related
to suspension of full production totaling approximately $11.1
million, along with $3.3 million in non-cash depreciation expense
for that period, 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 Income (Loss) Applicable to Common
Shareholders (GAAP) to Adjusted Net Income (Loss) Applicable to
Common Shareholders (non-GAAP)
This release refers to a non-GAAP measure of adjusted net income
(loss) applicable to common stockholders and adjusted net income
(loss) 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 income (loss) per common share provides investors
with the ability to better evaluate our underlying operating
performance.
Dollars in thousands (except per share amounts)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016
2017 2016 Net income
applicable to common stockholders (GAAP)
$ (27,887
) $ 20,124
$ (24,071 )
$ 68,995 Adjusting items: Loss (gain) on derivatives
contracts
4,702 (4,423 )
21,250 (4,423 ) Provisional
price (gain) loss
(178 ) 1,294
(742 )
918 Lucky Friday suspension costs
6,916 —
21,301 —
Environmental accruals
— —
— 1,351 Foreign exchange
(gain) loss
(609 ) (4,787 )
10,300 2,926
Acquisition costs
— 528
25 2,695 Bond offering costs
— —
887 — (Gain) loss on disposition of properties,
plants, equipment and mineral interests
(1,118 ) 172
(6,042 ) (147 ) Change in deferred tax asset
valuation allowance
33,421 (2,618 )
15,935 (11,568 )
Income tax effect of above adjustments
— 1,040
— (216 ) Adjusted net income applicable to common
stockholders
$ 15,247 $ 11,330
$
38,843 $ 60,531 Weighted average shares -
basic
399,133 395,229
397,394 386,416 Weighted
average shares - diluted
401,606 397,717
397,394
389,322 Basic adjusted net income (loss) per common share
$
0.04 $ 0.03
$ 0.10 $ 0.16 Diluted adjusted net
income (loss) per common share
$ 0.04 $ 0.03
$
0.10 $ 0.16
Reconciliation of Net Income (Loss) (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 income
(loss) before the following items: interest expense, income tax
provision, depreciation, depletion, and amortization expense,
exploration expense, pre-development expense, acquisition costs,
interest and other income (expense), foreign exchange gains and
losses, gains and losses on derivative contracts, unrealized gains
on investments, provisions for environmental matters, stock-based
compensation, and provisional price gains and losses. 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 income (loss) and debt to
adjusted EBITDA and net debt:
Dollars are in thousands Three Months Ended Twelve
Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
Net income (loss)
$ (27,749 ) $ 20,262
$ (23,519 ) $ 69,547 Plus:
Interest expense, net of amount capitalized
9,589 5,141
38,012 21,796 Plus (Less): Income taxes
38,256 4,825
19,879 27,428 Plus: Depreciation, depletion and amortization
32,697 33,707
116,062 116,126 Plus: Exploration
expense
5,888 4,549
23,510 14,720 Plus:
Pre-development expense
1,387 1,662
5,448 3,137 Plus:
Acquisition costs
— 528
25 2,695 Plus: Lucky Friday
suspension-related costs
6,916 —
21,301 — Less: Gain
on disposition of properties, plants, equipment, and mineral
interests
(1,118 ) 172
(6,042 ) (147 )
Plus/(Less): Foreign exchange (gain) loss
(609 )
(4,787 )
10,300 2,926 Plus/(Less): (Gain) loss on derivative
contracts
4,702 (4,423 )
21,250 (4,423 ) Plus/(Less):
Provisional price (gain) loss
(178 ) 1,294
(742 ) 918 Plus: Provision for closed operations and
environmental matters
1,129 1,128
4,508 4,813 Plus:
Stock-based compensation
1,380 1,370
6,331 5,932
Plus: Unrealized loss on investments
174 665
247 177
Less: Other
(508 ) (161 )
(1,526 ) (507
) Adjusted EBITDA
$ 71,956 $ 65,932
$ 235,044 $ 265,138 Total debt
$
514,030 $ 512,940 Less: Cash, cash equivalents and
short-term investments
219,865 198,894 Net
debt
$ 294,165 $ 314,046 Net debt/LTM
adjusted EBITDA (non-GAAP)
1.3 1.2
Reconciliation of Cash Provided by Operating Activities
(GAAP) to Free Cash Flow (non-GAAP)
This release refers to a non-GAAP measure of free cash flow,
calculated as cash provided by operating activities, less additions
to properties, plants, equipment and mineral interests and a
one-time item for settlement of an insurance policy for reclamation
of the Troy Mine. Management believes that, when presented in
conjunction with comparable GAAP measures, free cash flow is useful
to investors in evaluating our operating performance. The following
table reconciles cash provided by operating activities to free cash
flow:
Hecla Consolidated
GreensCreek
CasaBerardi
SanSebastian
LuckyFriday 1
Dollars are in thousands Three Months Ended Twelve Months
Ended December 31, December 31,
2017 2016
2017 2016
Twelve Months Ended December 31, 2017 Cash provided (used)
by operating activities
$ 41,763 $ 52,214
$ 115,878 $ 225,328
$
136,654
$
69,793
$
62,378
$
(7,780
) Less: Additions to properties, plants equipment and
mineral interests
(27,648 ) (44,552 )
(98,038
) (164,788 )
(35,255 ) (50,668 )
(11,239 ) (6,268 )
Less: Care and maintenance related
costs
—
—
—
—
—
—
—
(17,082
)
Less: Troy reclamation insurance settlement
—
—
— (16,000 )
—
—
—
— Free cash flow
$ 14,115
$ 7,662
$ 17,840 $ 44,540
$
101,399
$
19,125
$
51,139
$
(15,570
) 1 Cash used by operating activities for
Lucky Friday includes $17.1 million for suspension costs incurred
during the strike.
Reserves – 12/31/17(1)
Proven Reserves Tons Silver Gold
Lead Zinc Copper Silver Gold
Lead Zinc Copper Asset (000)
(oz/ton) (oz/ton) % % % (000 oz)
(000 oz) Tons Tons Tons Greens Creek
(2) 7 12.2 0.09 2.4 6.1 -
89 1 170 440 - Lucky Friday (2)
4,246 15.4 - 9.6 4.1 -
65,448 - 407,520 175,400 - Casa
Berardi (3) 2,458 - 0.13 - -
- - 312 - - - San
Sebastian (2) 31 23.3 0.19 - -
- 712 6 - - - Total
6,742
66,249 319 407,690
175,840 -
Probable
Reserves Tons Silver Gold Lead Zinc Copper Silver Gold Lead
Zinc Copper Asset (000) (oz/ton) (oz/ton)
% % % (000 oz) (000 oz)
Tons Tons Tons Greens Creek (2) 7,543
11.9 0.10 3.0 8.1 - 90,130
725 224,880 614,390 - Lucky Friday (2)
1,387 11.4 - 7.6 3.7 -
15,815 - 104,720 50,640 - Casa
Berardi (3) 11,413 - 0.10 - -
- - 1,181 - - - San
Sebastian (2) 368 13.1 0.10 - -
- 4,809 37 - - - Total
20,709
110,754 1,943 329,600
665,030 -
Proven
and Probable Reserves Tons Silver Gold Lead Zinc Copper Silver
Gold Lead Zinc Copper Asset (000) (oz/ton)
(oz/ton) % % % (000 oz) (000 oz)
Tons Tons Tons Greens Creek (2) 7,550
11.9 0.10 3.0 8.1 -
90,219 725 225,050 614,840 - Lucky
Friday (2) 5,632 14.4 - 9.1 4.0
- 81,264 - 512,240 226,030
- Casa Berardi (3) 13,871 - 0.11
- - - - 1,494 - -
- San Sebastian (2) 398 13.9 0.11 -
- - 5,520 43 - - -
Total 27,451
177,003 2,262
737,290 840,870 -
(1) The term “reserve” means that part of
a mineral deposit that can be economically and legally extracted or
produced at the time of the reserve determination. The term
“economically,” as used in the definition of reserve, means that
profitable extraction or production has been established or
analytically demonstrated to be viable and justifiable under
reasonable investment and market assumptions. The term “legally,”
as used in the definition of reserve, does not imply that all
permits needed for mining and processing have been obtained or that
other legal issues have been completely resolved. However, for a
reserve to exist, Hecla must have a justifiable expectation, based
on applicable laws and regulations, that issuance of permits or
resolution of legal issues necessary for mining and processing at a
particular deposit will be accomplished in the ordinary course and
in a timeframe consistent with Hecla’s current mine plans.
(2) Mineral reserves are based on $1200
gold, $14.50 silver, $0.90 lead, $1.05 zinc, unless otherwise
stated.
(3) Mineral reserves are based on $1200
gold, and a US$/CAN$ exchange rate of 1:1.37. Reserve diluted to an
average of 34.7% to minimum width of 9.8 feet (3 m).
Reserves at Casa Berardi were determined by Jonathan
Archambault-Giroux, P. Geo., Que., Real Parent, P.Geo. Que.,
Sylvain Picard, P. Eng., Que. and Alain Quenneville, P. Eng., Que.
unless otherwise stated. Open pit mineral reserves of the Principal
Mine were estimated in February 2011 by BBA Inc. based on $950 gold
and a US$/CAN$ exchange rate of 1:1. Reserve diluted to 10%.
Technical Report on the Pre-Feasibility Study for the Casa Berardi
Principal Zone Open-Pit Project, La Sarre, Quebec, February 2011
Prepared by: Patrice Live, Eng. - BBA Inc.; Amanda Fitch, Jr. Eng.
- BBA Inc.; Andre Allaire, Eng., M. Eng., Ph.D. - BBA Open pit
mineral reserves of the 160 and 134 Zones were estimated in January
2018 by Hecla Quebec and Mine Development Associates based on $1225
gold and a US$/CAN$ exchange rate of 1.3. Hecla Mining, Casa
Berardi 160 and 134 Zones, Open Pit Mining Study - 2017 January 12,
2018, by Mine Development Associates, Thomas L. Dyer, P.E.
Resources – 12/31/17
Measured Resources Tons Silver Gold
Lead Zinc Copper Silver Gold
Lead Zinc Copper Asset (000)
(oz/ton) (oz/ton) % % % (000 oz)
(000 oz) Tons Tons Tons Greens Creek
(4) 341 9.1 0.09 2.4 8.3
- 3,086 30 8,090 28,420
Lucky Friday (4,5) 7,371 7.6 - 4.9
2.7 - 55,947 - 361,590
200,280 - Casa Berardi (6) 2,210 - 0.17
- - - - 319 - -
- San Sebastian (4,7) - - - -
- - - - - - - Heva
(8) 5,480 - 0.06 - - -
- 304 - - - Hosco (8)
33,070 - 0.04 - - - -
1,296 - - - Rio Grande Silver (9)
- - - - - - -
- - - - Star (4,10) - -
- - - - - - -
- - Total 48,471
59,032
1,948 369,680 228,700 -
Indicated Resources Tons Silver Gold Lead Zinc
Copper Silver Gold Lead Zinc Copper Asset (000)
(oz/ton) (oz/ton) % % % (000 oz)
(000 oz) Tons Tons Tons Greens Creek
(4) 2,464 11.4 0.09 2.9 7.6
- 28,211 229 72,120 187,060
- Lucky Friday (4,5) 2,344 8.2 -
5.3 2.5 - 19,202 - 123,120
58,160 - Casa Berardi (6) 11,037 -
0.10 - - - - 1,055
- - - San Sebastian (4,7) 1,506 5.8
0.07 2.9 3.8 1.7 8,796
103 15,520 20,350 9,020 Heva (8) 5,570
- 0.07 - - - - 369
- - - Hosco (8) 31,620 -
0.04 - - - - 1,151 -
- - Rio Grande Silver (9) 516 14.8
- 2.1 1.1 - 7,620 -
10,760 5,820 - Star (4,10) 1,126
2.9 - 6.2 7.4 - 3,301 -
69,900 83,410 - Total 56,182
67,128 2,907 291,420 354,800
9,020
Measured &
Indicated Resources Tons Silver Gold Lead
Zinc Copper Silver Gold Lead
Zinc Copper Asset (000) (oz/ton) (oz/ton)
% % % (000 oz) (000 oz)
Tons Tons Tons Greens Creek (4) 2,805
11.2 0.09 2.9 7.7 - 31,296
259 80,210 215,480 - Lucky Friday (4,5)
9,715 7.7 - 5.0 2.7 -
75,148 - 484,700 258,430 - Casa
Berardi (6) 13,246 - 0.10 - -
- - 1,373 - - - San
Sebastian (4,7) 1,506 5.8 0.07 2.9
3.8 1.7 8,796 103 15,520
20,350 9,020 Heva (8) 11,050 - 0.06
- - - - 672 - -
- Hosco (8) 64,690 - 0.04 -
- - - 2,447 - - -
Rio Grande Silver (9) 516 14.8 - 2.1
1.1 - 7,620 - 10,760
5,820 - Star (4,10) 1,126 2.9 -
6.2 7.4 - 3,301 - 69,900
83,410 - Total 104,653
126,161
4,854 661,090 583,490 9,020
Inferred Resources Tons Silver Gold
Lead Zinc Copper Silver Gold Lead Zinc Copper Asset (000)
(oz/ton) (oz/ton) % % %
(000 oz) (000 oz) Tons Tons Tons Greens
Creek (4) 2,708 12.1 0.08 2.7
6.9 - 32,711 222 73,350 185,660
- Lucky Friday (4,11) 2,820 8.7 -
6.3 2.7 - 24,646 -
178,970 75,270 - Casa Berardi (6) 6,980
- 0.10 - - - - 717
- - - San Sebastian (4,12) 2,915 5.5
0.03 1.8 2.5 1.5 15,978
95 23,660 33,770 19,520 Heva (8) 4,210
- 0.08 - - - - 350
- - - Hosco (8) 7,650 -
0.04 - - - - 314 -
- - Rio Grande Silver (13) 3,078 10.7
0.01 1.3 1.1 - 33,097 36
40,990 34,980 - Star (4,14) 3,157 2.9
- 5.6 5.5 - 9,432 -
178,670 174,450 - Monte Cristo (15) 913
0.3 0.14 - - - 271
131 - - - Rock Creek (16) 100,086
1.5 - - - 0.7 148,736
- - - 658,680 Montanore (17)
112,185 1.6 - - - 0.7
183,346 - - - 759,420 Total
246,701
448,217 1,865 495,640
504,130 1,437,620
Note: All estimates are in-situ
except for the proven reserves at Greens Creek and San Sebastian
which are in surface stockpiles. Resources are exclusive of
reserves.
(4) Mineral resources are based on $1350
gold, $21 silver, $0.95 lead, $1.10 zinc and $3.00 copper, unless
otherwise stated.
(5) Measured and indicated resources from
Gold Hunter and Lucky Friday vein systems are diluted and factored
for expected mining recovery.
(6) Measured, indicated and inferred resources are based on $1350
gold and a US$/CAN$ exchange rate of 1:1.37. Underground resources
are reported at a minimum mining width of 6.6 to 9.8 feet (2 m to 3
m). Resources at Casa Berardi were determined by Jonathan
Archambault-Giroux, P. Geo., Que., Real Parent, P.Geo. Que.,
Sylvain Picard, P. Eng., Que. and Alain Quenneville, P. Eng., Que.
unless otherwise stated. Open pit mineral resources of the
Principal Mine were estimated in February 2011 by BBA Inc. based on
$950 gold and a US$/CAN$ exchange rate of 1:1. Technical Report on
the Pre-Feasibility Study for the Casa Berardi Principal Zone
Open-Pit Project, La Sarre, Quebec, February 2011 Prepared by:
Patrice Live, Eng. - BBA Inc.; Amanda Fitch, Jr. Eng. - BBA Inc.;
Andre Allaire, Eng., M. Eng., Ph.D. - BBA (7) Indicated resources
reported at a minimum mining width of 6.6 feet (2 m) for Hugh Zone
and 4.9 feet (1.5 m) for Andrea Vein, Middle Vein, and North Vein.
East Francine resources reported at actual vein width. San
Sebastian lead, zinc and copper grades are for 531,900 tons of
indicated resource within the Middle Vein and the Hugh Zone of the
Francine Vein.
(8) Measured, indicated and inferred
resources were estimated in by Goldminds Geoservices Inc. with
effective date 12-July-2013, and are based on $1300 gold and a
US$/CAN$ exchange rate of 1:1.
The resources are in-situ without dilution and material loss.
NI43-101 Technical Report, Mineral Resource Update, Heva-Hosco Gold
Projects, Rouyn-Noranda, Quebec, Hecla Quebec, December 2013
Prepared by: Claude Duplessis, Eng. Project Manager - GoldMinds
Geoservices Inc.; Maxime Dupéré, P.Geo - SGS Canada Inc. (Geostat)
(9) Indicated resources reported at a
minimum mining width of 6.0 feet for Bulldog; resources based on
$26.5 Ag, $0.85 Pb, and $0.85 Zn.
(10) Indicated resources reported at a
minimum mining width of 4.3 feet.
(11) Inferred resources from Gold Hunter
and Lucky Friday vein systems are diluted and factored for expected
mining recovery.
(12) Inferred resources reported at a minimum mining width of 6.6
feet (2 m) for Hugh Zone and 4.9 feet (1.5 m) for Andrea Vein,
Middle Vein, and North Vein. East Francine resources reported at
actual vein width. San Sebastian lead, zinc and copper grades are
for 1,338,300 tons of inferred resource within the Middle Vein and
the Hugh Zone of the Francine Vein. (13) Inferred resources
reported at a minimum mining width of 6.0 feet for Bulldog, 5.0
feet for Equity & North Amethyst veins; resources based on
$1400 Au, $26.5 Ag, $0.85 Pb, and $0.85 Zn.
(14) Inferred resources reported at a
minimum mining width of 4.3 feet.
(15) Inferred resource reported at a minimum mining width of 5.0
feet; resources based on $1400 Au, $26.5 Ag. (16) Inferred resource
reported at a minimum thickness of 15 feet. Inferred resources at
Rock Creek adjusted given mining restrictions as defined by U.S.
Forest Service - Kootenai National Forest in the June 2003 'Record
of Decision, Rock Creek Project'.
(17) Inferred resource reported at a
minimum thickness of 15 feet.
Inferred resources at Montanore adjusted given mining restrictions
as defined by U.S. Forest Service, Kootenai National Forest,
Montana DEQ in the December 2015 'Joint Final EIS, Montanore
Project' and the February 2016 U.S. Forest Service - Kootenai
National Forest 'Record of Decision, Montanore Project'. *
Totals may not represent the sum of parts due to rounding
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180215005381/en/
Hecla Mining CompanyMike WesterlundVice President - Investor
Relations800-HECLA91 (800-432-5291)Investor RelationsEmail:
hmc-info@hecla-mining.comWebsite: http://www.hecla-mining.com
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