Hecla Mining Company (NYSE:HL) today announced second quarter
2018 financial and operating results.
HIGHLIGHTS
- Net income applicable to common
shareholders of $11.9 million, or $0.03 per share.
- Adjusted net income applicable to
common shareholders of $3.0 million, or $0.01 per share. 1
- Sales of $147.3 million.
- Adjusted EBITDA of $57.7 million and
net debt/adjusted EBITDA (last 12 months) of 1.2x. 2,3
- Operating cash flow of $30.6 million
compared to $7.5 million in the second quarter of 2017.
- Cost of sales and other direct
production costs and depreciation, depletion and amortization
("cost of sales") of $112.3 million.
- Cash cost, after by-product credits, of
$(0.57) per silver ounce, a 319% decrease compared to the second
quarter of 2017. 4
- All in sustaining cost (AISC), after
by-product credits, of $11.40 per silver ounce. 5
- Cash and cash equivalents and
short-term investments of $245 million at June 30.
- The acquisition of Klondex Mines Ltd.,
and its high-grade gold mines in Nevada, is now closed, and the
integration and optimization of the assets has now begun.
- Credit rating upgrade by S&P Global
to B+ from B, with a stable outlook.
"In the second quarter Hecla performed strongly, reflecting the
investments we are making in our mines and exploration programs,"
said Phillips S. Baker, Jr., President and CEO. "The significant
decline in our silver cash cost, after by-product credits per
ounce, is a function of strong base metals prices and improved
treatment charges. The decline in gold cash cost per ounce is due
to higher throughput at Casa Berardi. Additionally, our exploration
program continues to discover high-grade material at our operations
as well as advance our exploration properties."
"We have now closed the acquisition of the high-grade Nevada
mines, and are beginning their integration into Hecla," Mr. Baker
added. "Our plan is to operate the mines and mill as one unit,
allocating the workforce and capital to generate margins and focus
on profitability, not just on production for production's sake.
Fire Creek has the best margin of the 3 mines by a considerable
amount, so ramping it up is our priority. We are also focused on
the exceptional exploration opportunities in the 110 square mile
land package. "
FINANCIAL OVERVIEW
Second Quarter Ended Six Months Ended
HIGHLIGHTS June 30, 2018 June 30, 2017
June 30, 2018 June 30, 2017
FINANCIAL
DATA
Sales (000)
$ 147,259 $ 134,279
$
286,968 $ 276,823 Gross profit (000)
$
35,002 $ 31,207
$ 73,788 $ 66,123 Income
(loss) applicable to common shareholders (000)
$
11,936 $ (24,154 )
$ 20,038 $ 2,542 Basic and
diluted income (loss) per common share
$ 0.03 $ (0.06
)
$ 0.05 $ 0.01 Net income (loss) (000)
$
12,074 $ (24,016 )
$ 20,314 $ 2,818 Cash
provided by operating activities (000)
$ 30,635 $
7,536
$ 47,018 $ 45,821
Net income applicable to common shareholders for the second
quarter 2018 was $11.9 million, or $0.03 per share, compared to a
net loss applicable to common shareholders of $24.2 million, or
$0.06 per share, for the same period in 2017. The second quarter
result was mainly due to the following items:
- Gain on base metal derivative contracts
of $16.8 million compared to a gain of $2.5 million in the second
quarter of 2017.
- Net foreign exchange gain of $2.5
million recorded in the second quarter of 2018 compared to a loss
of $3.9 million in the same period of 2017.
- Income tax provision of $0.4 million
compared to $16.1 million in the second quarter of 2017, with the
variance due to impacts of U.S. tax reform and lower foreign
taxes.
Operating cash flow was $30.6 million compared to $7.5 million
in the second quarter of 2017, with the increase mainly due to
higher gold and base metals prices and production, partially offset
by higher research and development investment.
Adjusted EBITDA was $57.7 million compared to $48.5 million in
the second quarter of 2017, with the increase mainly due to higher
gold and base metals prices.
Capital expenditures (excluding capitalized interest) at the
operations totaled $26.8 million for the second quarter, similar to
2017. Greens Creek and Lucky Friday expenditures increased by $2.7
million and $0.3 million, respectively, offset by decreased
expenditures at Casa Berardi of $2.3 million and San Sebastian of
$0.7 million. Expenditures at Greens Creek, Casa Berardi, San
Sebastian and Lucky Friday were $14.2 million, $9.8 million, $1.7
million, and $1.1 million respectively.
Metals Prices
The average realized silver price in the second quarter was
$16.61 per ounce, 3% lower than the $17.14 average realized silver
price in the second quarter of 2017. Average realized gold, lead
and zinc prices increased 3%, 19% and 13%, respectively.
Base Metals Forward Sales Contracts
The following table summarizes the quantities of base metals
committed under financially settled forward sales contracts at
June 30, 2018:
Pounds Under Contract(in
thousands)
Average Price per Pound Zinc
Lead Zinc Lead Contracts on forecasted
sales 2018 settlements 9,039 5,787 $ 1.34 $ 1.09 2019
settlements 48,502 20,283 $ 1.40 $ 1.10 2020 settlements 42,329
19,401 $ 1.40 $ 1.13 2021 settlements — 4,409 N/A $ 1.07
The contracts represent 44% of the forecasted payable zinc
production for the 36-month period ended June 30, 2021 at an
average price of $1.39 per pound and 51% of the forecasted payable
lead production for the same period ended June 30, 2021 at an
average price of $1.11 per pound.
OPERATIONS OVERVIEW
Overview
The following table provides the production summary on a
consolidated basis for the second quarter and six months ended
June 30, 2018 and 2017:
Second Quarter Ended Six Months
Ended June 30, 2018
June 30, 2017
June 30, 2018 June 30, 2017
PRODUCTION SUMMARY
Silver - Ounces produced
2,596,423 2,807,474
5,130,518 6,176,901 Payable ounces sold
2,313,753 2,688,721
4,405,217 5,557,835 Gold - Ounces
produced
60,313 52,561
118,121 108,674 Payable ounces
sold
59,643 53,170
114,482 104,541 Lead - Tons
produced
5,522 4,420
11,149 13,056 Payable tons sold
4,745 4,250
8,613 10,676 Zinc - Tons produced
14,299 12,966
29,510 28,503 Payable tons sold
10,686 8,978
20,790 20,825
The following tables provide a summary of the final production,
cost of sales, cash cost, after by-product credits, per silver and
gold ounce, and AISC, after by-product credits, per silver and gold
ounce for the second quarter and six months ended June 30, 2018,
with comparisons to the prior year period:
Second Quarter Ended Greens
Creek Lucky Friday Casa Berardi
San Sebastian
Silver Gold Silver
Gold Silver Gold
Silver Silver Gold Production
(ounces) June 30, 2018 2,596,423
60,313 1,999,791
13,719 24,687 42,722
12,298 559,647
3,872
Increase/(decrease) (211,051 )
7,752 67,744 1,015 24,687
9,461 3,821 (307,303 )
(2,724
)
Cost of sales and other direct production costs and
depreciation, depletion and amortization (000) June
30, 2018 $ 60,562 $
51,695 $ 47,742
$ — $ 1,744 $
51,695 $ — $
11,076
$
— Increase/(decrease) $
1,170 $ 8,015 $ (6,576 ) $ —
$ 1,744 $ 8,015 $ — $ 6,002
$ —
Cash costs, after by-product credits,
per silver or gold ounce 4, 6
June 30, 2018 $ (0.57 )
$ 775 $ (3.47
) $ — $ —
$ 775 $ — $
9.79 $ —
Increase/(decrease) $ (0.83 ) $
(197 ) $ (5.33 ) $ — $ — $ (197 )
$ — $ 13.10 $ —
AISC, after
by-product credits per silver or gold ounce5
June 30, 2018 $ 11.40
$ 1,039 $ 4.43
$ — $ — $
1,039 $ — $
17.15 $ —
Increase/(decrease) $ 1.43
$ (334 ) $ (4.28 ) $ — $ — $
(334 ) $ — $ 17.09 $ —
Six Months Ended
Greens Creek Lucky Friday Casa
Berardi San Sebastian
Silver Gold Silver
Gold Silver Gold
Silver Silver Gold Production
(ounces) June 30, 2018 5,130,518
118,121 3,913,023
26,837 124,467
82,899 21,189 1,071,839
8,385 Increase/(decrease)
(1,046,383 ) 9,447 51,679
111 (556,315 ) 13,831 4,167
(545,914 ) (4,495 )
Cost of sales and other direct
production costs and depreciation, depletion and amortization
(000) June 30, 2018 $
112,298 $ 100,882
$ 89,602 $ —
$ 5,844 $ 100,882
$ — $ 16,852
$ — Increase/(decrease)
$ (12,255 ) $ 14,735 $ (8,712 )
$ — $ (8,698 ) $ 14,735 $ —
$ 5,155 $ —
Cash costs, after by-product credits,
per silver or gold ounce 4, 6
June 30, 2018 $ (1.92 )
$ 800 $ (4.22
) $ — $ —
$ 800 $ —
$ 6.46 $ —
Increase/(decrease) $ (2.50 ) $
(127 ) $ (5.48 ) $ — $ — $ (127
) $ — $ 9.75 $ —
AISC, after
by-product credits per silver or gold ounce5
June 30, 2018 $ 8.61
$ 1,062 $ 2.56
$ — $ —
$ 1,062 $ —
$ 12.95 $ —
Increase/(decrease) $ (0.22 ) $
(250 ) $ (3.72 ) $ — $ — $ (250
) $ — $ 12.71 $ —
Greens Creek Mine - Alaska
At the Greens Creek mine, 2.0 million ounces of silver and
13,719 ounces of gold were produced in the second quarter, compared
to 1.9 million ounces and 12,704 ounces, respectively, in the
second quarter of 2017. The increased silver production was due to
higher grades compared to the second quarter of 2017. The mill
operated at an average of 2,290 tons per day (tpd) in the second
quarter, which was slightly lower than the second quarter of
2017.
The cost of sales for the second quarter was $47.7 million, and
the cash cost, after by-product credits, per silver ounce, was
$(3.47), compared to $54.3 million and $1.86, respectively, for the
second quarter of 2017.4 The AISC, after by-product credits, was
$4.43 per silver ounce for the second quarter compared to $8.71 in
the second quarter of 2017.5 The per ounce silver costs were lower
primarily due to higher gold and base metals prices and production.
Approximately 5% of production is coming from automated headings.
Higher by-product credits in the second quarter 2018, along with
lower exploration expenditures, contributed to lower AISC,
partially offset by higher capital spending. Estimates for cash
cost, after by-product credits, per silver ounce have declined to
$(0.50) from $0.50, and AISC, after by-product credits, declined
per silver ounce to $7.00 from $7.75.
Lucky Friday Mine - Idaho
Preparations for the introduction of the Remote Vein Miner
(RVM), expected in late 2019, continued to be a major focus at
Lucky Friday in the second quarter. The RVM project is proceeding
as expected and has the potential to revolutionize how the Lucky
Friday is mined, making it a safer and more efficient operation. In
addition, limited production and capital improvements continue to
be performed by salaried staff.
Production has been limited since March 13, 2017 due to the
ongoing strike and now the focus is completing the development
necessary to accommodate the RVM in 2019. Costs related to
care-and-maintenance of the mine are reported in a separate line
item in our condensed consolidated statement of operations and are
excluded from the calculation of cost of sales, cash cost, after
by-product credits, per silver ounce and AISC, after by-product
credits, per silver ounce.
Casa Berardi - Quebec
At the Casa Berardi mine, 42,722 ounces of gold were produced in
the second quarter, including 8,979 ounces from the East Mine Crown
Pillar (EMCP) pit, compared to 33,261 ounces in the prior year
period, with the increase primarily due to higher grades. The mill
operated at an average of 3,845 tpd in the second quarter, an
increase of 6% over the second quarter of 2017.
The cost of sales was $51.7 million for the second quarter and
the cash cost, after by-product credits, per gold ounce was $775,
compared to $43.7 million and $972, respectively, in the prior year
period.4,6 The decrease in cash cost, after by-product credits, per
gold ounce is partly due to higher gold production and reduced
costs related to stripping of the EMCP pit. The AISC, after
by-product credits, was $1,039 per gold ounce for the second
quarter compared to $1,373 in the second quarter of 2017, with the
decrease primarily due to higher gold production and lower capital
spending.5
The automated 985 drift project is working well, with the
autonomous haul truck running better and with higher availability
than originally anticipated. The second 40-ton Sandvik autonomous
haul truck is expected to be delivered later this year. Operating
two autonomous trucks is expected to result in operating savings of
several million dollars a year.
San Sebastian - Mexico
At the San Sebastian mine, 559,647 ounces of silver and 3,872
ounces of gold were produced in the second quarter, compared to
866,950 ounces and 6,596 ounces, respectively, in the prior year
period. Although silver and gold production were lower compared to
the second quarter of 2017, both still exceeded our estimates for
the quarter due to the amount of higher-grade stockpile material
processed. The mill operated at an average of 415 tpd in the second
quarter, which was slightly lower than the second quarter of
2017.
The cost of sales was $11.1 million for the second quarter and
the cash cost, after by-product credits, was $9.79 per silver
ounce, compared to $5.1 million and $(3.31), respectively, in the
second quarter of 2017. The cash cost, after by-product credits,
increased as expected, due to lower silver production and higher
mining costs, resulting from the transition of production from the
high grade, shallow open pits to underground. The AISC, after
by-product credits, was $17.15 per silver ounce for the second
quarter compared to $0.06 in the second quarter of 2017,
principally due to the same factors, including increased investment
in development. A reduction in per ounce costs is expected in the
second half of the year as underground production continues to ramp
up.
The Company plans to collect a bulk sample of the Hugh Zone
material from the Francine Vein in the fourth quarter and plans to
process it to determine the viability of processing the material on
a larger scale.
Nevada Operations
Hecla took control of the Nevada assets previously belonging to
Klondex on July 20, 2018. Hecla is quickly moving forward with
multiple initiatives aimed at improving the operations.
Key focus for the integrated Nevada operations:
- All operations now report to a single
Vice President and General Manager, Kevin Shiell.
- Work is underway to create a unified
mine plan including Fire Creek, Midas, Hollister and Hatter Graben,
all feeding the Midas Mill.
- Priority will be given to ramping up
production at Fire Creek and beginning development of Hatter
Graben. Midas is being ramped down, with personnel and machines
moving to Hollister and Fire Creek.
Key focus for the Midas mill:
- Completion of the Carbon-In-Leach (CIL)
circuit to improve recoveries for processing Hollister ore.
- Installation of new sampling equipment
to better reconcile mill and mine reporting.
- Construction of the new tailings
facility.
Key focus for Fire Creek:
- Rehabilitating existing mine access,
increasing development to allow increased throughput from 350 tpd
to 550 tpd.
- Rehabilitation includes improving road
conditions with an engineered roadbase and introducing in-cycle
shotcreting to improve development and better manage ground
conditions.
- Improving mine to mill
reconciliation.
CAPITAL
Expectations for capital investment in 2018 have increased to
$140-$145 million from $95-$105 million, reflecting approximately
$20 million of investments to be made in the Nevada operations,
including $11 million for Fire Creek development and definition
drilling, $5 million for the new tailings facility at the Midas
mill, and $2 million for completion of the CIL plant. The remaining
change in capital estimates is due to the re-allocation of $10
million of costs relating to the RVM that is now being assembled in
Sweden and is no longer a Research and Development expense and an
additional $4 million of capital spending at each of Greens Creek
and San Sebastian.
EXPLORATION
Exploration (including corporate development) expenses for the
second quarter were $7.8 million, an increase of $2.0 million
compared to the prior year period. Full year exploration (including
corporate development) expenses are expected to be $34-37 million,
reflecting $10 million for the Nevada properties and more drilling
at San Sebastian.
A complete summary of exploration for the second quarter can be
found in the exploration news release entitled "Hecla Reports
Continued Discoveries at the Mines, Integrates Nevada, and Advances
Key Projects" issued on August 7, 2018.
PRE-DEVELOPMENT
Pre-development spending was $1.4 million for the quarter,
slightly higher than the $1.1 million for the prior year
period, principally to advance the permitting of Rock Creek and
Montanore.
RESEARCH AND DEVELOPMENT
Research and Development spending was $2.3 million for the
quarter, with completion of the design and procurement phase of the
RVM project. Fabrication of the machine started at the end of the
second quarter and is expected to be complete in the fourth quarter
of 2018, and a testing phase in Sweden during the first half of
2019 is planned. The machine is expected to be delivered to Lucky
Friday in late 2019. Expectations for 2018 Research and Development
spending have declined to $6-$10 million from $12-$16 million, as
investment in the RVM project are expected to be capitalized going
forwards.
2018 ESTIMATES7
The following revised estimates include the expected impact from
the addition of Nevada operations through the acquisition of
Klondex for the 5-month period from August 1 to December 31,
2018.
2018 Production Outlook
Silver Production
(Moz)
Gold Production
(Koz)
Silver Equivalent
(Moz)
Gold Equivalent
(Koz)
Original(if revised)
Current
Original(if revised)
Current
Original(if revised)
Current
Original(if revised)
Current Greens Creek 7.5-8.0
7.5-8.1 50-55 21.0-22.5
300-313 300-315
Lucky Friday
San Sebastian
2.0-2.5 13-17 15-17 3.0-3.5
2.9-3.7 40-52 41-52
Casa Berardi
155-160 157-162
11.0-11.5 155-160 157-162
Nevada
Operations 0.1-0.2
40-50 2.9-3.8 41-52
Total 9.5-10.5 9.6-10.8
218-232 262-284 35.0-37.5
37.8-41.5 495-525 539-581
2018 Cost Outlook
Costs of Sales (million) Cash
cost, after by-product credits, per silver/gold ounce2,5
AISC, after by-product credits, per produced silver/gold
ounce3
Original(if revised)
Current
Original(if revised)
Current
Original(if revised)
Current Greens Creek $198
$0.50 $(0.50) $7.75 $7.00
Lucky Friday
San
Sebastian $44 $8.50
$12.50
Total Silver $242
$2.25 $1.50 $12.75 $12.25
Casa Berardi $185 $800
$1,100
Nevada Operations
$68 $800
$1,100
Total Gold $253
$800 $1,100
2018 Capital and Exploration
Outlook
Original(if revised)
Current 2018E Capital expenditures (excluding
capitalized interest) $95-$105 million
$140-$145 million
2018E Exploration expenditures (includes Corporate
Development) $30-$37 million $34-$37 million
2018E Pre-development expenditures $5
million
2018E Research and Development expenditures
$12-$16 million
$6-$10 million
DIVIDENDS
Common
The Board of Directors elected to declare a quarterly cash
dividend of $0.0025 per share of common stock, payable on or about
August 31, 2018, to shareholders of record on
August 24, 2018. The realized silver price was $16.61 in
the second quarter and therefore did not satisfy the criteria for a
larger dividend under the Company's dividend policy.
The Board of Directors also declared the regular quarterly
dividend of $0.875 per share on the 157,816 outstanding shares of
Series B Cumulative Convertible Preferred Stock. This represents a
total amount to be paid of approximately $138,000. The cash
dividend is payable October 1, 2018, to shareholders of record on
September 14, 2018.
CONFERENCE CALL AND WEBCAST
A conference call and webcast will be held Thursday, August 9,
at 10:00 a.m. Eastern Time to discuss these results. You may join
the conference call by dialing toll-free 1-855-760-8158 or for
international dialing 1-720-634-2922. The participant passcode is
HECLA. Hecla's live and archived webcast can be accessed at
www.hecla-mining.com under Investors or via Thomson StreetEvents
Network.
ABOUT HECLA
Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading
low-cost U.S. silver producer with operating mines in Alaska,
Idaho, and Mexico and is a gold producer with operating mines in
Quebec, Canada and Nevada. The Company also has exploration and
pre-development properties in eight world-class silver and gold
mining districts in the U.S., Canada and Mexico.
NOTES
Non-GAAP Financial Measures
Non-GAAP financial measures are intended to provide additional
information only and do not have any standard meaning prescribed by
generally accepted accounting principles in the United States
(GAAP). These measures should not be considered in isolation or as
a substitute for measures of performance prepared in accordance
with GAAP.
(1) Adjusted net income (loss) applicable to common stockholders
is a non-GAAP measurement, a reconciliation of which to net income
(loss) applicable to common stockholders, the most comparable GAAP
measure, can be found at the end of the release. Adjusted net
income (loss) is a measure used by management to evaluate the
Company's operating performance but should not be considered an
alternative to net income (loss), or cash provided by operating
activities as those terms are defined by GAAP, and does not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. In addition, the Company may use it when formulating
performance goals and targets under its incentive program.
(2) Adjusted EBITDA is a non-GAAP measurement, a reconciliation
of which to net income (loss), the most comparable GAAP measure,
can be found at the end of the release. Adjusted EBITDA is a
measure used by management to evaluate the Company's operating
performance but should not be considered an alternative to net
income (loss), or cash provided by operating activities as those
terms are defined by GAAP, and does not necessarily indicate
whether cash flows will be sufficient to fund cash needs. In
addition, the Company may use it when formulating performance goals
and targets under its incentive program.
(3) Net debt to adjusted EBITDA is a non-GAAP measurement, a
reconciliation of which to debt and net income (loss), the most
comparable GAAP measurements, can be found at the end of the
release. It is an important measure for management to measure
relative indebtedness and the ability to service the debt relative
to its peers. It is calculated as total debt outstanding less total
cash on hand divided by adjusted EBITDA.
(4) Cash cost, after by-product credits, per silver or gold
ounce is a non-GAAP measurement, a reconciliation of which to cost
of sales and other direct production costs and depreciation,
depletion and amortization (sometimes referred to as "cost of
sales" in this release), can be found at the end of the release. It
is an important operating statistic that management utilizes to
measure each mine's operating performance. It also allows the
benchmarking of performance of each mine versus those of our
competitors. As a primary silver mining company, management also
uses the statistic on an aggregate basis - aggregating the Greens
Creek, Lucky Friday and San Sebastian mines - to compare
performance with that of other primary silver mining companies.
With regard to Casa Berardi and the Nevada operations, management
uses cash cost, after by-product credits, per gold ounce to compare
its performance with other gold mines. Similarly, the statistic is
useful in identifying acquisition and investment opportunities as
it provides a common tool for measuring the financial performance
of other mines with varying geologic, metallurgical and operating
characteristics. In addition, the Company may use it when
formulating performance goals and targets under its incentive
program. Cash cost, after by-product credits, per silver ounce is
not presented for Lucky Friday for the second quarters of 2018 and
2017 and the first half of 2018, as production was limited due to
the strike and results are not comparable to those from prior
periods and are not indicative of future operating results under
full production. The estimated fair value of the stockpile acquired
at Hollister has been removed from the cash cost, after by-product
credits calculation.
(5) All in sustaining cost (AISC), after by-product credits, is
a non-GAAP measurement, a reconciliation of which to cost of sales
and other direct production costs and depreciation, depletion and
amortization, the closest GAAP measurement, can be found in the end
of the release. AISC, after by-product credits, includes cost of
sales and other direct production costs, expenses for reclamation
and exploration at the mines sites, corporate exploration related
to sustaining operations, and all site sustaining capital costs.
AISC, after by-product credits, is calculated net of depreciation,
depletion, and amortization and by-product credits. AISC, after
by-product credits, per silver ounce is not presented for Lucky
Friday for the second quarters of 2018 and 2017 and the first half
of 2018, as production was limited due to the strike and results
are not comparable to those from prior periods and are not
indicative of future operating results under full production. 2018
AISC, after by-product credits, per gold ounce for the Nevada
operations excludes $5 million of capital as it distorts the AISC
estimates for the remainder part of the year. The estimated fair
value of the stockpile acquired at Hollister has been removed from
the AISC, after by-product credits calculation.
Current GAAP measures used in the mining industry, such as cost
of goods sold, do not capture all the expenditures incurred to
discover, develop and sustain silver and gold production.
Management believes that all in sustaining costs is a non-GAAP
measure that provides additional information to management,
investors and analysts to help in the understanding of the
economics of our operations and performance compared to other
producers and in the investor's visibility by better defining the
total costs associated with production. Similarly, the statistic is
useful in identifying acquisition and investment opportunities as
it provides a common tool for measuring the financial performance
of other mines with varying geologic, metallurgical and operating
characteristics. In addition, the Company may use it when
formulating performance goals and targets under its incentive
program.
(6) Cash cost, after by-product credits, per gold ounce is only
applicable to Casa Berardi production. Gold produced from Greens
Creek and San Sebastian is treated as a by-product credit against
the silver cash cost.
Other
(7) Expectations for 2018 includes silver, gold, lead and zinc
production from Greens Creek, San Sebastian, Casa Berardi and
Nevada operations converted using Au $1,225/oz, Ag $17.25/oz, Zn
$1.30/lb, and Pb $1.00/lb. Lucky Friday expectations are currently
suspended as there is currently a strike. Numbers may be
rounded.
Cautionary Statements to Investors on Forward-Looking
Statements
This news release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbor
created by such sections and other applicable laws, including
Canadian securities laws. Such forward-looking statements may
include, without limitation: (i) estimates of future production and
sales; (ii) the impact of the Klondex acquisition on Hecla's
operations and results; (iii) expectations regarding the
development, growth potential, financial performance of the
Company’s projects; (iv) ability to complete construction of the
remote vein miner and for it to operate successfully; (v) impact of
the Lucky Friday strike on production and cash flow; (vi) ability
to generate value from innovations being introduced into the mines;
and (vii) impact of metals prices on cash costs, after by-product
credits. Estimates or expectations of future events or results are
based upon certain assumptions, which may prove to be incorrect.
Such assumptions, include, but are not limited to: (i) there being
no significant change to current geotechnical, metallurgical,
hydrological and other physical conditions; (ii) permitting,
development, operations and expansion of the Company’s projects
being consistent with current expectations and mine plans; (iii)
political/regulatory developments in any jurisdiction in which the
Company operates being consistent with its current expectations;
(iv) the exchange rates for the Canadian dollar and Mexican peso to
the U.S. dollar, being approximately consistent with current
levels; (v) certain price assumptions for gold, silver, lead and
zinc; (vi) prices for key supplies being approximately consistent
with current levels; (vii) the accuracy of our current mineral
reserve and mineral resource estimates; and (viii) the Company’s
plans for development and production will proceed as expected and
will not require revision as a result of risks or uncertainties,
whether known, unknown or unanticipated. Where the Company
expresses or implies an expectation or belief as to future events
or results, such expectation or belief is expressed in good faith
and believed to have a reasonable basis. However, such statements
are subject to risks, uncertainties and other factors, which could
cause actual results to differ materially from future results
expressed, projected or implied by the “forward-looking
statements.” Such risks include, but are not limited to gold,
silver and other metals price volatility, operating risks, currency
fluctuations, increased production costs and variances in ore grade
or recovery rates from those assumed in mining plans, community
relations, conflict resolution and outcome of projects or
oppositions, litigation, political, regulatory, labor and
environmental risks, and exploration risks and results, including
that mineral resources are not mineral reserves, they do not have
demonstrated economic viability and there is no certainty that they
can be upgraded to mineral reserves through continued exploration.
For a more detailed discussion of such risks and other factors, see
the Company’s 2017 Form 10-K, filed on February 15, 2018, and Forms
10-Q filed on May 10, 2018 and August 9, 2018, with the Securities
and Exchange Commission (SEC), as well as the Company’s other SEC
filings. The Company does not undertake any obligation to publicly
release revisions to any “forward-looking statement,” including,
without limitation, outlook, to reflect events or circumstances
after the date of this news release, or to reflect the occurrence
of unanticipated events, except as may be required under applicable
securities laws. Investors should not assume that any lack of
update to a previously issued “forward-looking statement”
constitutes a reaffirmation of that statement. Continued reliance
on “forward-looking statements” is at investors’ own risk.
HECLA MINING COMPANY
Condensed Consolidated Statements of
Income (Loss)
(dollars and shares in thousands, except
per share amounts - unaudited)
Second Quarter Ended Six Months Ended
June
30, 2018 June 30, 2017
June 30, 2018 June
30, 2017 Sales of products
$ 147,259 $ 134,279
$ 286,968 $ 276,823 Cost of
sales and other direct production costs
80,440 77,503
153,309 156,179 Depreciation, depletion and amortization
31,817 25,569
59,871 54,521
112,257 103,072
213,180
210,700 Gross profit
35,002 31,207
73,788 66,123 Other operating expenses:
General and administrative
9,787 10,309
17,522 19,515
Exploration
7,838 5,853
15,198 10,367 Pre-development
1,415 1,052
2,420 2,304 Research and development
2,337 312
3,773 995 Other operating expense
638 699
1,153 1,362 Provision for closed operations
and environmental matters
1,420 985
2,682 2,104 Lucky
Friday suspension-related costs
6,801 8,024
11,818
9,605 Acquisition costs
1,010 (2 )
3,517
25
31,246 27,232
58,083
46,277 Income from operations
3,756
3,975
15,705 19,846 Other income
(expense): Loss on disposition of investments
— —
—
(167 ) Unrealized (loss) gain on investments
(564 )
(276 )
(254 ) 51 Gain (loss) on derivative contracts
16,804 2,487
20,811 (5,322 ) Interest and other
income
108 319
52 644 Net foreign exchange gain
(loss)
2,476 (3,883 )
5,068 (6,145 ) Interest
expense, net of amount capitalized
(10,079 ) (10,543
)
(19,873 ) (19,065 )
8,745 (11,896 )
5,804 (30,004 ) Income (loss) before income taxes
12,501 (7,921 )
21,509 (10,158 ) Income tax
(provision) benefit
(427 ) (16,095 )
(1,195
) 12,976 Net income (loss)
12,074 (24,016 )
20,314 2,818 Preferred stock dividends
(138 )
(138 )
(276 ) (276 ) Income (loss) applicable to
common shareholders
$ 11,936 $ (24,154 )
$ 20,038 $ 2,542 Basic and diluted
income (loss) per common share after preferred dividends
$
0.03 $ (0.06 )
$ 0.05 $ 0.01
Weighted average number of common shares outstanding - basic
400,619 396,178
399,972 395,774
Weighted average number of common shares outstanding -
diluted
403,610 396,178
402,873
399,236
HECLA MINING COMPANY
Condensed Consolidated Balance Sheets
(dollars and shares in thousands -
unaudited)
June 30, 2018 December 31, 2017
ASSETS Current assets:
Cash and cash equivalents
$ 239,722 $ 186,107
Short-term investments and securities
5,556 33,758 Accounts
receivable: Trade
9,717 14,805 Other, net
19,307
17,385 Inventories
61,054 54,555 Other current assets
17,006 13,715 Total current assets
352,362 320,325 Non-current investments
7,449 7,561
Non-current restricted cash and investments
1,005 1,032
Properties, plants, equipment and mineral interests, net
2,006,592 2,020,021 Non-current deferred income taxes
1,179 1,509 Other non-current assets and deferred charges
24,007 14,509
Total assets $
2,392,594 $ 2,364,957
LIABILITIES
Current liabilities: Accounts payable and accrued liabilities
$ 53,835 $ 46,549 Accrued payroll and related
benefits
23,661 31,259 Accrued taxes
6,143 5,919
Current portion of capital leases
6,015 5,608 Current
portion of debt
— — Other current liabilities
7,364
16,116 Current portion of accrued reclamation and closure costs
8,315 6,679 Total current liabilities
105,333 112,130 Capital leases
8,757 6,193 Accrued
reclamation and closure costs
78,102 79,366 Long-term debt
533,230 502,229 Non-current deferred tax liability
112,462 121,546 Non-current pension liability
48,973
46,628 Other non-current liabilities
4,438 12,983
Total liabilities 891,295 881,075
SHAREHOLDERS’
EQUITY Preferred stock
39 39
Common stock
101,643 100,926 Capital surplus
1,628,440 1,619,816 Accumulated deficit
(176,158
) (195,484 ) Accumulated other comprehensive loss
(31,929 ) (23,373 ) Treasury stock
(20,736
) (18,042 )
Total shareholders’ equity
1,501,299 1,483,882
Total liabilities and
shareholders’ equity $ 2,392,594 $
2,364,957 Common shares outstanding
401,322
399,176
HECLA MINING COMPANY
Condensed Consolidated Statements of Cash
Flows
(dollars in thousands - unaudited)
Six Months Ended
June 30, 2018
June 30, 2017
OPERATING ACTIVITIES
Net income
$ 20,314 $ 2,818
Non-cash elements included in net income: Depreciation, depletion
and amortization
62,852 56,908 Unrealized loss on
investments
254 117 Gain on disposition of properties,
plants, equipment and mineral interests
(166 ) (94 )
Provision for reclamation and closure costs
2,640 2,247
Stock compensation
2,441 2,831 Deferred income taxes
(2,977 ) (22,113 ) Amortization of loan origination
fees
898 967 (Gain) loss on derivative contracts
(30,236 ) 5,386 Foreign exchange (gain) loss
(5,348 ) 5,201 Other non-cash items, net
(35
) 2 Change in assets and liabilities: Accounts receivable
2,471 (1,150 ) Inventories
(6,865 ) 1,594
Other current and non-current assets
(2,507 ) 3,896
Accounts payable and accrued liabilities
8,701 (10,937 )
Accrued payroll and related benefits
(337 ) (4,901 )
Accrued taxes
(672 ) 4,408 Accrued reclamation and
closure costs and other non-current liabilities
(4,410
) (1,359 )
Cash provided by operating
activities 47,018 45,821
INVESTING ACTIVITIES
Additions to properties, plants,
equipment and mineral interests
(43,304 ) (45,964 )
Proceeds from disposition of properties, plants and equipment
463 142 Purchases of investments
(31,682 )
(23,280 ) Maturities of investments
59,336
14,356
Net cash used in investing activities
(15,187 ) (54,746 )
FINANCING ACTIVITIES
Proceeds from issuance of stock, net of
related costs
— 9,610 Acquisition of treasury shares
(2,694 ) (2,474 ) Dividends paid to common
shareholders
(2,000 ) (1,981 ) Dividends paid to
preferred shareholders
(276 ) (276 ) Credit
availability and debt issuance fees paid
(3 ) (91 )
Repayments of debt
— (470 ) Issuance of debt
31,024 —
Repayments of capital leases
(3,762 ) (3,245 )
Net cash provided by financing activities 22,289
1,073 Effect of exchange rates on cash
(532 ) 1,086 Net increase (decrease) in cash, cash
equivalents and restricted cash
53,588 (6,766 ) Cash, cash
equivalents and restricted cash at beginning of period
187,139 171,977 Cash, cash equivalents
and restricted cash at end of period
$ 240,727
$ 165,211
HECLA MINING COMPANY
Production Data
Three Months Ended Six Months Ended
June 30, 2018 June 30, 2017
June 30,
2018 June 30, 2017
GREENS CREEK UNIT
Tons of ore milled
208,409 210,788
419,839 407,917
Mining cost per ton of ore
$ 69.83 $ 68.17
$
69.41 $ 69.74 Milling cost per ton of ore
$
33.59 $ 32.56
$ 33.11 $ 33.12 Ore grade milled
- Silver (oz./ton)
12.46 12.11
12.08 12.40 Ore grade
milled - Gold (oz./ton)
0.100 0.097
0.097 0.099 Ore
grade milled - Lead (%)
3.17 2.68
3.06 2.86 Ore grade
milled - Zinc (%)
7.84 7.20
7.95 7.50 Silver produced
(oz.)
1,999,791 1,932,047
3,913,023 3,861,344 Gold
produced (oz.)
13,719 12,704
26,837 26,726 Lead
produced (tons)
5,305 4,420
10,326 9,229 Zinc
produced (tons)
14,179 12,966
28,978 26,372 Cash
cost, after by-product credits, per silver ounce (1)
$
(3.47 ) $ 1.86
$ (4.22 ) $ 1.26
AISC, after by-product credits, per silver ounce (1)
$
4.43 $ 8.71
$ 2.56 $ 6.28 Capital additions
(in thousands)
$ 14,183 $ 11,451
$ 23,665 $ 16,685
LUCKY FRIDAY UNIT
Tons of ore milled
3,447 —
13,006
57,069 Mining cost per ton of ore
$ 89.54 $ —
$ 108.08 $ 104.72 Milling cost per ton of ore
$ 6.15 $ —
$ 17.56 $ 27.16 Ore grade
milled - Silver (oz./ton)
10.63 —
10.98 12.39 Ore
grade milled - Lead (%)
7.28 —
7.01 7.05 Ore grade
milled - Zinc (%)
3.43 —
4.43 3.99 Silver produced
(oz.)
24,687 —
124,467 680,782 Lead produced (tons)
217 —
823 3,827 Zinc produced (tons)
120 —
532 2,131 Cash cost, after by-product credits, per silver
ounce (1)
$ — $ —
$ — 5.93 AISC, after
by-product credits, per silver ounce (1)
$ — $ —
$ — $ 12.06 Capital additions (in thousands)
$
1,061 $ 805
$ 2,049 $ 4,792
Three Months Ended Six Months Ended
June
30, 2018 June 30, 2017
June 30, 2018
June 30, 2017
CASA BERARDI UNIT
Tons of ore milled - underground
184,373 195,039
375,706 399,992
Tons of ore milled - surface pit
165,564 135,070
322,780 223,809 Tons of ore milled - total
349,937
330,109
698,486 623,801 Surface tons mined - ore and waste
1,961,171 2,106,308
3,637,605 4,416,543 Mining cost
per ton of ore - underground
$ 106.75 $ 99.01
$ 106.28 $ 99.23 Mining cost per ton - combined
$ 73.61 $ 76.83
$ 75.28 $ 81.42 Mining
cost per ton of ore and waste - surface tons mined
$
3.10 $ 2.53
$ 3.48 $ 2.58 Milling cost per ton
of ore
$ 16.71 $ 15.50
$ 16.34 $ 16.33
Ore grade milled - Gold (oz./ton) - underground
0.209 0.148
0.195 0.155 Ore grade milled - Gold (oz./ton) - surface pit
0.062 0.078
0.070 0.082 Ore grade milled - Gold
(oz./ton) - combined
0.140 0.119
0.137 0.129 Ore
grade milled - Silver (oz./ton)
0.04 0.03
0.03 0.03
Gold produced (oz.) - underground
33,743 23,780
63,265 52,430 Gold produced (oz.) - surface pit
8,979
9,481
19,634 16,638 Gold produced (oz.) - total
42,722 33,261
82,899 69,068 Silver produced (oz.)
12,298 8,477
21,189 17,022 Cash cost, after
by-product credits, per gold ounce (1)
$ 775 $ 972
$ 800 $ 927 AISC, after by-product credits, per gold
ounce (1)
$ 1,039 $ 1,373
$ 1,062 $
1,312 Capital additions (in thousands)
$ 9,809
$ 12,063
$ 18,876
$ 24,474
SAN SEBASTIAN
Tons of ore milled
37,780
38,478
72,177 75,141 Mining cost per ton of ore
$
180.12 $ 41.63
$ 149.14 $ 40.16 Milling cost
per ton of ore
$ 65.46 $ 66.97
$ 66.25
$ 65.29 Ore grade milled - Silver (oz./ton)
15.93 23.87
16.01 22.85 Ore grade milled - Gold (oz./ton)
0.115
0.182
0.127 0.182 Silver produced (oz.)
559,647
866,950
1,071,839 1,617,753 Gold produced (oz.)
3,872
6,596
8,385 12,880 Cash cost, after by-product credits, per
silver ounce (1)
$ 9.79 $ (3.31 )
$
6.46 $ (3.29 ) AISC, after by-product credits, per silver
ounce (1)
$ 17.15 $ 0.06
$ 12.95 $ 0.24
Capital additions (in thousands)
$ 1,680
$ 2,423
$ 2,110
$ 4,130 (1) Cash cost, after by-product
credits, per ounce and AISC, after by-product credits. per ounce
represent non-U.S. Generally Accepted Accounting Principles (GAAP)
measurements. A reconciliation of cost of sales and other direct
production costs and depreciation, depletion and amortization
(GAAP) to cash cost, after by-product credits can be found in the
cash cost per ounce reconciliation section of this news release.
Gold, lead and zinc produced have been treated as by-product
credits in calculating silver costs per ounce. The primary metal
produced at Casa Berardi is gold, with a by-product credit for the
value of silver production.
Non-GAAP Measures(Unaudited)
Reconciliation of Cost of Sales and Other Direct Production
Costs and Depreciation, Depletion and Amortization (GAAP) to Cash
Cost, Before By-product Credits and Cash Cost, After By-product
Credits (non-GAAP) and All-In Sustaining Cost, Before By-product
Credits and All-In Sustaining Cost, After By-product Credits
(non-GAAP)
The tables below present reconciliations between the most
comparable GAAP measure of cost of sales and other direct
production costs and depreciation, depletion and amortization to
the non-GAAP measures of Cash Cost, Before By-product Credits, Cash
Cost, After By-product Credits, AISC, Before By-product Credits and
AISC, After By-product Credits for our operations at the Greens
Creek, Lucky Friday, San Sebastian and Casa Berardi units for the
three- and six-month periods ended June 30, 2018 and 2017 and
for estimated result for the full-year of 2018.
Cash Cost, After By-product Credits, per Ounce is an important
operating statistic that we utilize to measure each mine's
operating performance. AISC, After By-product Credits, per Ounce is
an important operating statistic that we utilize as a measures of
our mines' net cash flow after costs for exploration,
pre-development, reclamation, and sustaining capital. Current GAAP
measures used in the mining industry, such as cost of goods sold,
do not capture all the expenditures incurred to discover, develop
and sustain silver and gold production. Cash Cost, After By-product
Credits, per Ounce and AISC, After By-product Credits, per Ounce
also allow us to benchmark the performance of each of our mines
versus those of our competitors. As a primary silver mining
company, we also use these statistics on an aggregate basis -
aggregating the Greens Creek, Lucky Friday and San Sebastian mines
- to compare our performance with that of other primary silver
mining companies. With regard to Casa Berardi, we use Cash Cost,
After By-product Credits, per Gold Ounce AISC, After By-product
Credits, per Gold Ounce to compare its performance with other gold
mines. Similarly, these statistics are useful in identifying
acquisition and investment opportunities as they provide a common
tool for measuring the financial performance of other mines with
varying geologic, metallurgical and operating characteristics.
Cash Cost, Before By-product Credits and AISC, Before By-product
Credits include all direct and indirect operating cash costs
related directly to the physical activities of producing metals,
including mining, processing and other plant costs, third-party
refining expense, on-site general and administrative costs,
royalties and mining production taxes. AISC, Before By-product
Credits for each mine also includes on-site exploration,
reclamation, and sustaining capital costs. AISC, Before By-product
Credits for our consolidated silver properties also includes
corporate costs for general and administrative expense,
reclamation, exploration, and pre-development. By-product credits
include revenues earned from all metals other than the primary
metal produced at each unit. As depicted in the tables below,
by-product credits comprise an essential element of our silver unit
cost structure, distinguishing our silver operations due to the
polymetallic nature of their orebodies. Cash Cost, After By-product
Credits, per Ounce and AISC, After By-product Credits, per Ounce
provide management and investors an indication of operating cash
flow, after consideration of the average price, received from
production. We also use these measurements for the comparative
monitoring of performance of our mining operations period-to-period
from a cash flow perspective. Cash Cost, After By-product Credits,
per Ounce is a measure developed by precious metals companies
(including the Silver Institute) in an effort to provide a uniform
standard for comparison purposes. There can be no assurance,
however, that our reporting of these non-GAAP measures are the same
as those reported by other mining companies.
The Casa Berardi section below reports Cash Cost, After
By-product Credits, per Gold Ounce and AISC, After By-product
Credits, per Gold Ounce for the production of gold, its primary
product, and by-product revenues earned from silver, which is a
by-product at Casa Berardi. Only costs and ounces produced relating
to units with the same primary product are combined to represent
Cash Cost, After By-product Credits, per Ounce and AISC, After
By-product Credits, per Ounce. Thus, the gold produced at our Casa
Berardi unit is not included as a by-product credit when
calculating Cash Cost, After By-product Credits, per Silver Ounce
and AISC, After By-product Credits, per Silver Ounce for the total
of Greens Creek, Lucky Friday and San Sebastian, our combined
silver properties.
In thousands (except per ounce amounts) Three Months Ended
June 30, 2018 Greens Creek Lucky Friday(2) San
Sebastian Corporate(3) Total Silver Casa
Berardi (Gold) Total Cost of sales and other direct
production costs and depreciation, depletion and amortization $
47,742 1,744 $ 11,076 $ 60,562 $ 51,695 $ 112,257 Depreciation,
depletion and amortization (11,813 ) (182 ) (1,107 ) (13,102 )
(18,715 ) (31,817 ) Treatment costs 9,481 55 116 9,652 559 10,211
Change in product inventory 321 (1,160 ) 769 (70 ) (78 ) (148 )
Reclamation and other costs (449 ) (58 ) (319 ) (826 ) (139 ) (965
) Exclusion of Lucky Friday cash costs — (399 ) —
(399 ) — (399 ) Cash Cost, Before By-product Credits (1)
45,282 — 10,535 55,817 33,322 89,139 Reclamation and other costs
850 103 953 140 1,093 Exploration 778 2,334 434 3,546 1,330 4,876
Sustaining capital 14,183 1,680 517 16,380 9,809 26,189 General and
administrative 9,787 9,787 9,787
AISC, Before By-product Credits (1) 61,093 — 14,652 86,483
44,601 131,084 By-product credits: Zinc (27,492 ) — (27,492 )
(27,492 ) Gold (15,716 ) — (5,057 ) (20,773 ) (20,773 ) Lead (9,022
) — (9,022 ) (9,022 ) Silver (201 )
(201 ) Total By-product credits (52,230 ) — (5,057 ) (57,287
) (201 ) (57,488 ) Cash Cost, After By-product Credits $ (6,948 ) $
— $ 5,478 $ (1,470 ) $ 33,121 $ 31,651
AISC, After By-product Credits $ 8,863 $ — $ 9,595
$ 29,196 $ 44,400 $ 73,596 Divided by
ounces produced 2,000 — 560 2,560 43 Cash Cost, Before By-product
Credits, per Ounce $ 22.65 $ — $ 18.82 $ 21.81 $ 779.96 By-product
credits per ounce (26.12 ) — (9.03 ) (22.38 ) (4.70 ) Cash
Cost, After By-product Credits, per Ounce $ (3.47 ) $ — $
9.79 $ (0.57 ) $ 775.26 AISC, Before By-product
Credits, per Ounce $ 30.55 $ — $ 26.18 $ 33.78 $ 1,043.97
By-product credits per ounce (26.12 ) — (9.03 ) (22.38 )
(4.70 ) AISC, After By-product Credits, per Ounce $ 4.43 $ —
$ 17.15 $ 11.40 $ 1,039.27 In
thousands (except per ounce amounts) Three Months Ended June
30, 2017 Greens Creek Lucky Friday(2) San Sebastian
Corporate(3) Total Silver Casa Berardi (Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 54,318 $ — $ 5,074 $
59,392 $ 43,680 $ 103,072 Depreciation, depletion and amortization
(13,503 ) — (722 ) (14,225 ) (11,344 ) (25,569 ) Treatment costs
11,423 — 259 11,682 554 12,236 Change in product inventory (5,542 )
— 815 (4,727 ) (212 ) (4,939 ) Reclamation and other costs (694 ) —
(5 ) (699 ) (212 ) (911 ) Cash Cost, Before By-product
Credits (1) 46,002 — 5,421 51,423 32,466 83,889 Reclamation and
other costs 667 — 117 784 213 997 Exploration 1,117 — 1,957 452
3,526 1,071 4,597 Sustaining capital 11,451 — 845 256 12,552 12,059
24,611 General and administrative 10,309
10,309 10,309 AISC, Before By-product Credits
(1) 59,237 — 8,340 78,594 45,809 124,403 By-product credits: Zinc
(21,647 ) — (21,647 ) (21,647 ) Gold (13,917 ) (8,287 ) (22,204 )
(22,204 ) Lead (6,847 ) — (6,847 ) (6,847 ) Silver
(142 ) (142 ) Total By-product credits (42,411 ) —
(8,287 ) (50,698 ) (142 ) (50,840 ) Cash Cost, After
By-product Credits $ 3,591 $ — $ (2,866 ) $ 725
$ 32,324 $ 33,049 AISC, After By-product
Credits $ 16,826 $ — $ 53 $ 27,896 $
45,667 $ 73,563 Divided by ounces produced 1,932 —
867 2,799 33 Cash Cost, Before By-product Credits, per Ounce $
23.81 $ — $ 6.25 $ 18.37 $ 976.07 By-product credits per ounce
(21.95 ) — (9.56 ) (18.11 ) (4.25 ) Cash Cost, After
By-product Credits, per Ounce $ 1.86 $ — $ (3.31 ) $
0.26 $ 971.82 AISC, Before By-product Credits, per
Ounce $ 30.66 $ — $ 9.62 $ 28.08 $ 1,377.21 By-product credits per
ounce (21.95 ) — (9.56 ) (18.11 ) (4.25 ) AISC, After
By-product Credits, per Ounce $ 8.71 $ — $ 0.06
$ 9.97 $ 1,372.96 In thousands (except
per ounce amounts) Six Months Ended June 30, 2018 Greens
Creek Lucky Friday(2) San Sebastian
Corporate(3) Total Silver Casa Berardi (Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 89,602 $ 5,844 $ 16,852
$ 112,298 $ 100,882 $ 213,180 Depreciation, depletion and
amortization (22,452 ) (803 ) (1,791 ) (25,046 ) (34,825 ) (59,871
) Treatment costs 20,869 627 320 21,816 1,094 22,910 Change in
product inventory 5,475 (2,182 ) 3,407 6,700 (179 ) 6,521
Reclamation and other costs (1,360 ) (103 ) (814 ) (2,277 ) (281 )
(2,558 ) Exclusion of Lucky Friday cash costs — (3,383 ) —
(3,383 ) — (3,383 ) Cash Cost, Before By-product
Credits (1) 92,134 — 17,974 110,108 66,691 176,799 Reclamation and
other costs 1,699 — 209 1,908 283 2,191 Exploration 1,138 — 4,646
878 6,662 2,520 9,182 Sustaining capital 23,665 — 2,110 634 26,409
18,876 45,285 General and administrative
17,522 17,522 17,522 AISC, Before By-product
Credits (1) 118,636 — 24,939 162,609 88,370 250,979 By-product
credits: Zinc (59,634 ) — (59,634 ) (59,634 ) Gold (31,008 )
(11,055 ) (42,063 ) (42,063 ) Lead (17,996 ) — (17,996 ) (17,996 )
Silver (349 ) (349 ) Total By-product
credits (108,638 ) — (11,055 ) (119,693 ) (349 ) (120,042 )
Cash Cost, After By-product Credits $ (16,504 ) $ — $ 6,919
$ (9,585 ) $ 66,342 $ 56,757 AISC, After
By-product Credits $ 9,998 $ — $ 13,884 $
42,916 $ 88,021 $ 130,937 Divided by ounces
produced 3,913 — 1,072 4,985 83 Cash Cost, Before By-product
Credits, per Ounce $ 23.54 $ — $ 16.77 $ 22.09 $ 804.44 By-product
credits per ounce (27.76 ) — (10.31 ) (24.01 ) (4.17 ) Cash
Cost, After By-product Credits, per Ounce $ (4.22 ) $ — $
6.46 $ (1.92 ) $ 800.27 AISC, Before By-product
Credits, per Ounce $ 30.32 $ — $ 23.26 $ 32.62 $ 1,065.95
By-product credits per ounce (27.76 ) — (10.31 ) (24.01 )
(4.17 ) AISC, After By-product Credits, per Ounce $ 2.56 $ —
$ 12.95 $ 8.61 $ 1,061.78 In
thousands (except per ounce amounts) Six Months Ended June
30, 2017 Greens Creek Lucky Friday(2) San Sebastian
Corporate(3) Total Silver Casa Berardi (Gold)
Total Cost of sales and other direct production costs and
depreciation, depletion and amortization $ 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) Current
Estimate for Twelve Months Ended December 31, 2018
Greens
Creek
Lucky
Friday(2)
San
Sebastian
Corporate(3)
Total
Silver
Casa
Berardi
Nevada(4)
Total
Gold
Cost of sales and other direct production costs and depreciation,
depletion and amortization $ 198,000 $ 44,000 $ 242,000 $ 185,000 $
68,000 $ 253,000 Depreciation, depletion and amortization
(50,000 ) (6,000 ) (56,000 ) (58,000 ) (16,000 ) (74,000 )
Treatment costs 44,000 550 44,550 400 — 400 Adjustment for
inventory acquired (14,000 ) Change in product inventory — (1,000 )
(1,000 ) — — — Reclamation and other costs (2,900 ) (500 )
(3,400 ) (800 ) — (800 ) Cash Cost, Before By-product
Credits (1) 189,100 37,050 226,150 126,600 38,000 178,600
Reclamation and other costs 2,500 240 2,740 450 — 450 Exploration
3,500 4,800 2,500 10,800 5,000 5,000 10,000 Sustaining capital
51,000 3,700 2,000 56,700 45,000 18,000 63,000 General and
administrative 35,000 35,000
AISC, Before By-product Credits (1) 246,100
45,790 331,390 177,050 61,000
252,050 By-product credits (193,000 ) (18,000 ) (211,000 )
(800 ) (3,000 ) (3,800 ) Cash Cost, After By-product Credits $
(3,900 ) $ 19,050 $ 15,150 $ 125,800 $
35,000 $ 174,800 AISC, After By-product
Credits $ 53,100 $ 27,790 $ 120,390 $
176,250 $ 58,000 $ 248,250 Divided by
ounces produced 7,800 2,250 10,050 160 50 210 Cash Cost, Before
By-product Credits, per Ounce $ 24.24 $ 16.47 $ 22.50 $ 791 $ 760 $
850 By-product credits per ounce (24.74 ) (8.00 ) (21.00 )
(5 ) (60 ) (18 ) Cash Cost, After By-product Credits, per Ounce $
(0.50 ) $ 8.47 $ 1.50 $ 786 $ 700
$ 832 AISC, Before By-product Credits, per Ounce $
31.55 $ 20.35 $ 32.97 $ 1,107 $ 1,220 $ 1,200 By-product credits
per ounce (24.74 ) (8.00 ) (21.00 ) (5 ) (60 ) (18 ) AISC,
After By-product Credits, per Ounce $ 6.81 $ 12.35
$ 11.97 $ 1,102 $ 1,160 $ 1,182
In thousands (except per ounce amounts) Original Estimate
for Twelve Months Ended December 31, 2018
Greens
Creek
San
Sebastian
Corporate(3)
Total
Silver
Casa
Berardi
Cost of sales and other direct production costs and depreciation,
depletion and amortization $ 198,000 $ 44,000 $ 242,000 $ 185,000
Depreciation, depletion and amortization (50,000 ) (6,000 ) (56,000
) (58,000 ) Treatment costs 44,000 550 44,550 400 Change in product
inventory — (1,000 ) (1,000 ) — Reclamation and other costs (2,900
) (500 ) (3,400 ) (800 ) Cash Cost, Before By-product Credits (1)
189,100 37,050 226,150 126,600 Reclamation and other costs 2,500
240 2,740 450 Exploration 3,500 4,800 2,500 10,800 5,000 Sustaining
capital 51,000 3,700 2,000 56,700 45,000 General and administrative
35,000 35,000 — AISC, Before By-product
Credits (1) 246,100 45,790 331,390 177,050
By-product credits (186,000 ) (18,000 ) (204,000 ) (800 )
Cash Cost, After By-product Credits $ 3,100 $ 19,050
$ 22,150 $ 125,800 AISC, After By-product Credits $
60,100 $ 27,790 $ 127,390 $ 176,250
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. As a result, for the first quarter of
2018 and 2017 and the first half of 2018 Cash Cost, Before
By-product Credits, Cash Cost, After By-product Credits, AISC,
Before By-product Credits, and AISC, After By-product Credits are
not presented for Lucky Friday, and costs related to the limited
production at Lucky Friday are excluded from the calculation of
Cash Cost, Before By-product Credits, Cash Cost, After By-product
Credits, AISC, Before By-product Credits, and AISC, After
By-product Credits for our combined silver operations. (3)
AISC, Before By-product Credits for our consolidated silver
properties includes corporate costs for general and administrative
expense, exploration and sustaining capital.
(4)
Nevada 2018 estimate is for the time
period July 20 to December 31, 2018.
Reconciliation of Net Income (Loss) Applicable to Common
Shareholders (GAAP) to Adjusted Net Income (Loss) Applicable to
Common Stockholders (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 are in thousands (except per share amounts) Three
Months Ended June 30, Six Months Ended June 30,
2018
2017
2018 2017 Net income (loss)
applicable to common shareholders (GAAP)
$ 11,936
$ (24,154 )
$ 20,038 $ 2,542
Adjusting items: (Gains) losses on derivatives contracts
(16,804 ) (2,487 )
(20,811 ) 5,322
Provisional price losses
2,517 1,308
2,582 680
Foreign exchange (gain) loss
(2,476 ) 3,883
(5,068 ) 6,145 Lucky Friday suspension-related costs
6,801 8,024
11,818 9,605 Acquisition costs
1,010 (2 )
3,517 25 Bond offering costs
—
1,050
— 1,050 Nonrecurring deferred income tax adjustments
— —
— (17,486 ) Adjusted net
income (loss) applicable to common shareholders
$
2,984 $ (12,378 )
$ 12,076 $
7,883 Weighted average shares - basic
400,619 396,178
399,972 395,774 Weighted average shares - diluted
403,610 396,178
402,873 399,236 Basic adjusted net
income (loss) per common share
$ 0.01 $ (0.03 )
$ 0.03 $ 0.02 Diluted adjusted net income (loss) per
common share
$ 0.01 $ (0.03 )
$ 0.03 $
0.02
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,
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
income (loss) and debt to Adjusted EBITDA and net debt:
Dollars are in thousands
Three Months EndedJune 30,
Six Months EndedJune 30,
Twelve Months EndedJune 30,
2018 2017
2018 2017
2018
2017 Net income (loss)
$ 12,074 $ (24,016 )
$
20,314 $ 2,818
$ (6,023 ) $ 48,867
Plus: Interest expense, net of amount capitalized
10,079
10,543
19,873 19,065
38,820 29,780 Plus/(Less):
Income taxes
427 16,095
1,195 (12,976 )
34,050
1,302 Plus: Depreciation, depletion and amortization
31,817
25,569
59,871 54,521
121,412 114,217 Plus:
Exploration expense
7,838 5,853
15,198 10,367
28,341 18,775 Plus: Pre-development expense
1,415
1,052
2,420 2,304
5,564 4,516 Plus/(Less): Foreign
exchange (gain) loss
(2,476 ) 3,883
(5,068
) 6,145
(913 ) (1,017 ) Plus: Lucky Friday
suspension-related costs
6,801 8,024
11,818 9,605
23,514 9,605 Plus/(Less): (Gains) losses on disposition of
properties, plants, equipment and mineral interests
(36
) —
(166 ) —
— — Plus: Acquisition
costs
1,010 (2 )
3,517 25
3,517 2,318 Plus:
Stock-based compensation
1,314 1,482
2,404 2,831
5,904 5,549 Plus/(Less): (Gains) losses on derivative
contracts
(16,804 ) (2,487 )
(20,811 )
5,322
(4,883 ) 893 Plus: Provisional price loss
2,517 1,308
2,582 680
1,160 3,115 Plus:
Provision for closed operations and environmental matters
1,317 1,221
2,640 2,247
4,901 5,055
Plus/(Less): Unrealized loss (gain) on investments
564 276
254 (51 )
552 565 Other
(108 ) (319 )
(52 ) (644 )
(934 ) (1,116 ) Adjusted
EBITDA
$ 57,749 $ 48,482
$
115,989 $ 102,259
$ 254,982
$ 242,424 Total debt
$ 548,002 $
514,702 Less: Cash, cash equivalents and short-term investments
$ (245,278 ) $ (201,929 ) Net debt
$
302,724 $ 312,773 Net debt/LTM adjusted EBITDA
(non-GAAP)
1.2 1.3
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. 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:
Dollars are in thousands
Three Months EndedJune 30,
2018 2017 Cash provided by operating activities
$ 30,635 $ 7,536 Less: Additions to properties,
plants equipment and mineral interests
(25,669 )
(24,306 ) Free cash flow
$ 4,966 $ (16,770 )
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180809005207/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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