Record gold production, increased throughput
and higher base metals prices substantially reduced cash costs,
after by-product credits, per gold and silver ounce.
Hecla Mining Company (NYSE:HL) today announced third quarter
financial and operating results.
HIGHLIGHTS (Compared to Third Quarter of 2016)
- Net income applicable to common
stockholders of $1.3 million, or $0.00 per share.
- Adjusted net income applicable to
common stockholders of $16.0 million, or $0.04 per share.1
- Cost of sales and other direct
production costs and depreciation, depletion and amortization
("cost of sales") of $97.2 million.
- Silver cash cost, after by-product
credits, of negative $0.63 per ounce, the lowest in 7 years.2
- All in sustaining cost ("AISC"), after
by-product credits, of $6.65 per silver ounce, down 47%.3
- Gold production of 63,046 ounces, up
21% as a result of strongest performance of Casa Berardi since its
acquisition.
- Capital expenditures of $24.4 million,
a 44% decline.
- Cash and cash equivalents and
short-term investments of $205.9 million at September 30,
2017, up $4 million over the second quarter.
- Lowering estimates for annual cash
cost, after by-product credits, per silver ounce for Greens Creek
and San Sebastian.
- The strike by the union workers at
Lucky Friday continues.
"The third quarter continued Hecla's strong operating
performance, which coupled with higher zinc and lead prices,
resulted in silver cash costs, after by-product credits, of
negative $0.63 per ounce, the lowest in 7 years and allows us to
lower our cost guidance," said Phillips S. Baker Jr., President and
CEO. "Both Casa Berardi and Greens Creek set records for throughput
and San Sebastian had its strongest silver production of the year.
The operating performance combined with lower capital expenditure
allows Hecla to continue to generate positive cash flow and
strengthen our balance sheet."
FINANCIAL OVERVIEW
Third Quarter Ended
Nine Months Ended HIGHLIGHTS
September 30,2017
September 30,2016
September 30,2017
September 30,2016
FINANCIAL DATA
Sales (000)
$140,839 $179,393
$417,662
$481,712 Gross profit (000)
$43,637 $58,685
$109,760 $147,958 Income applicable to common shareholders
(000)
$1,274 $25,651
$3,816 $48,871 Basic and diluted
income per common share
$— $0.07
$0.01 $0.13 Net
income (000)
$1,412 $25,789
$4,230 $49,285 Cash
provided by operating activities (000)
$28,294 $86,976
$74,115 $173,114
Net income applicable to common shareholders for the third
quarter was $1.3 million, or $0.00 per share, compared to $25.7
million, or $0.07 per share, for the same period a year ago, the
result mainly due to the following items:
- Sales of $140.8 million impacted by the
ongoing strike at Lucky Friday and build-up of product inventory
during the quarter of approximately $12.9 million, primarily due to
the timing of concentrate shipments at Greens Creek.
- Lower realized silver and gold prices,
partially offset by higher zinc and lead prices.
- Mark to market loss on base metal
derivatives contracts of $11.2 million due to the higher zinc and
lead prices, compared to the third quarter of 2016 when there
wasn't an active hedging program.
- Net foreign exchange loss of $4.8
million versus a gain of $2.4 million in third quarter of 2016 due
to the strength of the Canadian dollar.
- Interest expense, net of amount
capitalized, of $9.4 million in the third quarter of 2017,
increased over the $5.6 million recognized in the third quarter of
2016, primarily due to interest being capitalized in the 2016
period related to construction of the #4 Shaft.
- An increase of $4.6 million in
exploration and pre-development expenditures over the third quarter
of 2016, particularly focused on San Sebastian and Casa
Berardi.
- Lucky Friday suspension costs of $3.7
million, along with $1.1 million in non-cash depreciation expense,
in the third quarter of 2017. Limited production and capital
improvements are being performed by salaried staff.
Operating cash flow was $28.3 million compared to $87.0 million
in the third quarter of 2016, with the decrease due to the timing
of concentrate shipments, primarily at Greens Creek and increased
payment of estimated income taxes in Mexico. These factors were
partially offset by an increase in gold production and higher base
metals prices.
Adjusted EBITDA was $60.8 million compared to $78.8 million in
the third quarter of 2016, with the decrease mainly due to lower
and no concentrate shipments at Greens Creek and Lucky Friday,
respectively, and lower precious metals prices, partially offset by
an increase in gold sales and higher base metals prices.4
Capital expenditures at the operations totaled $25.5 million for
the third quarter 2017 compared to $42.0 million in the third
quarter of 2016, with the decrease due to completion of the #4
Shaft, limited activity at Lucky Friday due to the ongoing strike,
and reduced capital spending at Greens Creek and Casa Berardi,
partially offset by costs related to underground development at San
Sebastian. Expenditures were $13.8 million at Casa Berardi, $8.2
million at Greens Creek, $3.4 million at San Sebastian and
$0.2 million at Lucky Friday.
Metals Prices
The average realized silver price in the third quarter was
$17.01 per ounce, 13% lower than the $19.53 price realized in the
third quarter of 2016. The average realized gold price in the third
quarter was $1,283 per ounce, 4% lower than the prior year period.
Realized lead and zinc prices increased by 27%, and 43%
respectively, from the third quarter of 2016.
OPERATIONS OVERVIEW
Overview
The following table provides the production summary on a
consolidated basis for the third quarter and nine months ended
September 30, 2017 and 2016:
Third Quarter
Ended Nine Months Ended
September 30, 2017 September 30,
2016
September 30, 2017
September 30, 2016
PRODUCTION SUMMARY
Silver - Ounces produced
3,323,157 4,316,663
9,500,058
13,200,765 Payable ounces sold
2,540,817 4,284,842
8,098,652 12,222,084 Gold - Ounces produced
63,046
52,126
171,720 170,779 Payable ounces sold
57,380
50,348
161,921 161,217 Lead - Tons produced
5,370
10,411
18,426 31,840 Payable tons sold
2,936 9,967
13,612 28,380 Zinc - Tons produced
14,497 14,825
43,000 50,321 Payable tons sold
8,444 13,596
29,269 37,948
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 third quarter and nine months ended
September 30, 2017:
Third Quarter End
Greens Creek Lucky
Friday Casa Berardi San
Sebastian September 30, 2017
Silver Gold Silver
Gold Silver
Gold Silver Silver
Gold Production (ounces) 3,323,157
63,046 2,344,315 12,563 88,298
44,141 9,659 880,885
6,342
Increase/(decrease) over 2016
(23 )% 21 %
(4 )% 5 % (90 )%
38 % 16 % (10 )%
(23 )%
Cost of sales and other direct
production costs and depreciation, depletion and amortization
(000)
$ 48,606 $ 48,595 $ 41,927 N/A $ — $ 48,595 N/A $ 6,680 N/A
Increase/(decrease) over 2016
(42 )% 34 % (28 )%
N/A N/A
34 % N/A 2 %
N/A
Cash costs, after by-product credits,
per silver or gold ounce 2,5
$ (0.63 ) $ 750 $ (0.15 ) N/A $ 11.60 $ 750 N/A $ (3.12 ) N/A
Increase/(decrease) over 2016
(117 )% (18 )%
(103 )% N/A
28 % (18 )% N/A
23 % N/A
AISC, after by-product credits, per
silver or gold ounce 3
$ 6.65 $ 1,091 $ 4.47 N/A $ 13.37 $ 1,091 N/A $ (0.83 ) N/A
Increase/(decrease) over 2016
(47 )% (24 )% (59 )%
N/A (34 )%
(24 )% N/A 65 %
N/A
Nine Months Ended
Greens Creek Lucky Friday
Casa Berardi San Sebastian September
30, 2017 Silver
Gold Silver Gold
Silver Gold
Silver Silver Gold
Production (ounces) 9,500,058 171,720 6,205,659 39,289
769,080 113,209 26,681 2,498,638 19,222
Increase/(decrease) over
2016 (28 )% 1
% (12 )% (1 )%
(72 )% 9 % 11 %
(27 )% (29 )%
Cost of sales and
other direct production costs and depreciation, depletion and
amortization (000) $ 173,160 $ 134,742 $ 140,241 N/A $ 14,542 $
134,742 N/A $ 18,377 N/A
Increase/(decrease) over 2016
(24 )% 26 %
(5 )% N/A
(74 )% 26 % N/A
(22 )% N/A
Cash costs, after by-product credits,
per silver or gold ounce 2,5
$ 0.16 $ 858 $ 0.73 N/A $ 6.58 $ 858 N/A $ (3.23 ) N/A
Increase/(decrease) over 2016
(95 )% 14 % (84 )%
N/A (30 )%
14 % N/A 5 %
N/A
AISC, after by-product credits, per silver or
gold ounce 3 $ 8.06 $ 1,226 $ 5.60 N/A $ 12.21 $ 1,226
N/A $ (0.14 ) N/A
Increase/(decrease) over 2016
(32 )% (1 )%
(45 )% N/A
(43 )% (1 )% N/A
94 % N/A
Greens Creek Mine - Alaska
At the Greens Creek mine, 2.3 million ounces of silver and
12,563 ounces of gold were produced in the third quarter, compared
to 2.4 million ounces and 11,988 ounces, respectively, in the third
quarter of 2016. Lower silver production resulted from lower grades
due to mine sequencing. The mill operated at an average of 2,391
tons per day (tpd) in the third quarter, a record and 9% higher
than the third quarter of 2016.
The cost of sales for the third quarter was $41.9 million, and
the cash cost, after by-product credits, per silver ounce, was
negative $0.15, compared to $58.4 million and $4.80, respectively,
for the third quarter of 2016.2 The AISC, after by-product credits,
was $4.47 per silver ounce for the third quarter compared to $11.02
in the third quarter of 2016.3 The per ounce silver costs were
lower primarily due to higher base metals prices and the number of
tons milled.
Lucky Friday Mine - Idaho
At the Lucky Friday mine, 88,298 ounces of silver were produced
in the third quarter, compared to 887,364 ounces in the third
quarter of 2016, with the decrease due to the ongoing strike by
unionized employees. Limited production and capital improvements
are being performed by salaried staff.
There was no cost of sales for the third quarter, as there were
no concentrate shipments during the quarter, and the cash cost,
after by-product credits, per silver ounce, was $11.60, compared to
$19.5 million and $9.07, respectively, for the third quarter of
2016.2 The AISC, after by-product credits, was $13.37 per silver
ounce for the third quarter compared to $20.22 in the third quarter
of 2016, with the decrease due to lower capital spending as a
result of completion of the #4 Shaft, partially offset by the costs
of the ongoing strike.3
Casa Berardi - Quebec
At the Casa Berardi mine, a record 44,141 ounces of gold were
produced in the third quarter, including 8,949 ounces from the East
Mine Crown Pillar (EMCP) pit, compared to 31,949 ounces in the
third quarter of 2016, with the increase primarily due to higher
ore throughput and gold grades. The mill operated at an average of
3,545 tpd in the third quarter, an increase of 26% over the third
quarter of 2016 due to ramp up of the EMCP pit, and set a monthly
throughput record of 3,913 tpd in September.
The cost of sales was $48.6 million for the third quarter and
the cash cost, after by-product credits, per gold ounce was $750,
compared to $36.3 million and $915, respectively, in the prior year
period.2,5 The decrease in cash cost, after by-product credits, per
gold ounce is due to the higher gold production and reduced
stripping at the EMCP pit. The AISC, after by-product credits, was
$1,091 per gold ounce for the third quarter compared to $1,442 in
the third quarter of 2016, primarily due to higher gold production,
reduced stripping, and lower capital spending.5
The higher gold grades and production are expected to continue
in the fourth quarter of 2017, combined with the reduced stripping
costs at the EMCP pit, the improved cash cost, after by-product
credits, and the AISC, after by-product credits, is anticipated to
continue in the fourth quarter.
Automation of the 985 drift, which is under construction, is on
track for commissioning by the end of the year, as are several
other innovations such as the control room.
San Sebastian - Mexico
At the San Sebastian mine, 880,885 ounces of silver and 6,342
ounces of gold were produced in the third quarter, compared to
975,610 ounces and 8,189 ounces, respectively, in the third quarter
of 2016. The lower silver and gold production was expected with
lower ore throughput and lower gold grades. The mill operated at an
average of 397 tpd in the third quarter.
The cost of sales was $6.7 million for the third quarter and the
cash cost, after by-product credits, was negative $3.12 per silver
ounce, compared to $6.5 million and negative $4.03, respectively,
in the third quarter of 2016.2 The AISC, after by-product credits,
was negative $0.83 per silver ounce for the third quarter compared
to negative $2.39 in the third quarter of 2016, principally due to
lower gold by-product credits and increased exploration and capital
spending.3
Work is underway to transition from open pit mining and
stockpile feeds to underground mining, which is expected to occur
in early 2018. Construction of the ramp to connect the new portal
to a ramp being driven from the existing workings continues, and
the construction should be completed by year end. The Company has
extended the mill agreement until the end of 2020.
EXPLORATION AND PRE-DEVELOPMENT
Expenditures
Exploration (including corporate development) expenses were $7.3
million, an increase of $3.4 million compared to the third quarter
of 2016. Full year exploration (including corporate development)
expenses are expected to be $20-$25 million, up from $14.7
million in 2016, in part reflecting more exploration at San
Sebastian, Casa Berardi and Greens Creek and drilling at Kinskuch
and Little Baldy.
A complete summary of exploration for the third quarter can be
found in the news release entitled "Hecla Reports Third Quarter
Drilling and Exploration Update" released on November 2, 2017.
PRE-DEVELOPMENT
Pre-development spending was $1.8 million for the quarter, for
permitting of Rock Creek and Montanore.
The US Forest Service issued its Final Supplemental
Environmental Impact Statement and its draft Record of Decision
("ROD") for Rock Creek in late June. That ROD was subject to a 45
day formal comment period, and the agency must consider any
comments it receives prior to issuing its final ROD. We anticipate
the final ROD in early 2018.
At the Montanore project, the Montana Federal
District Court remanded the ROD to the US Forest Service and
US Fish and Wildlife Service for further review. The Court's
decision allows the agencies to issue a ROD for just the initial
evaluation phase of the project, which has minimal environmental
effects.
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
September 30, 2017:
Pounds Under Contract
(in thousands) Average Price per Pound Zinc
Lead Zinc Lead
Contracts on forecasted sales 2017
settlements 441 2,866 $ 1.23 $ 1.05 2018 settlements 39,463 17,968
$ 1.27 $ 1.05 2019 settlements 14,330 8,267 $ 1.30 $ 1.07 2020
settlements 3,307 2,205 $ 1.27 $ 1.07
The contracts represent 26% of the forecasted payable zinc
production for the next three years at an average price of $1.27
per pound, and 33% of the forecasted payable lead production for
the next three years at an average price of $1.06 per pound.
Foreign Currency Forward Purchase Contracts
The following table summarizes the quantities of Canadian
dollars and Mexican pesos committed under financially settled
forward purchase contracts at September 30, 2017:
Currency Under Contract (in
thousands of CAD/MXN) Average Exchange Rate CAD
MXN CAD/USD
MXN/USD 2017 settlements 30,000 43,300 1.30
19.86 2018 settlements 76,500 — 1.29 — 2019
settlements 63,600 — 1.31 — 2020 settlements 30,000 — 1.29 —
2017 ESTIMATES7
The Company is providing updated annual estimates as
follows:
2017 Production Outlook
Silver
Production Gold Production
Silver Equivalent Gold Equivalent
(Moz) (Koz)
(Moz) (Koz) Greens
Creek 7.8-8.2 51-53
23.0-23.6 325-332
Lucky Friday
0.8-0.9 1.8-2.0
25-28
San Sebastian
3.0-3.4 24-25 4.7-5.2
66-73
Casa Berardi
155-157 11.1-11.2 155-157
Total
11.6-12.5 230-235
40.6-42.0 571-590
2017 Cost Outlook
Costs of Sales(million)
Cash cost, after by-product
credits, persilver/gold ounce4,6
AISC, after by-productcredits,
per producedsilver/gold ounce5
Greens Creek $201 $1.00
$7.00
Lucky Friday $15
$7.50 $13.00
San Sebastian
$24 $(2.00) $1.00
Total Silver $240 $1.00
$9.00
Casa Berardi $181
$800 $1,150
Total Gold
$181 $800 $1,150
2017 Capital and Exploration Outlook
2017E Capital expenditures
(excluding capitalized interest) $105-$110
million
2017E Exploration expenditures (includes Corporate
Development) $22-25 million
2017E
Pre-development expenditures $5 million
DIVIDENDS
The Board of Directors declared a quarterly cash dividend of
$0.0025 per share of common stock, payable on or about December 1,
2017, to stockholders of record on November 21, 2017. The
realized silver price was $17.01 in the third 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 on or about January 2, 2018 to shareholders of
record on December 15, 2017.
CONFERENCE CALL AND WEBCAST
A conference call and webcast will be held Tuesday, November 7,
at 11:00 a.m. Eastern Time to discuss these results. You may join
the conference call by dialing toll-free 1-855-760-8158 or for
international dialing 1-720-634-2922. The participant passcode is
HECLA. Hecla's live and archived webcast can be accessed at
www.hecla-mining.com under Investors
or via Thomson StreetEvents Network.
ABOUT HECLA
Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading
low-cost U.S. silver producer with operating mines in Alaska,
Idaho, and Mexico and is a gold producer with an operating mine in
Quebec, Canada. The Company also has exploration and
pre-development properties in seven world-class silver and gold
mining districts in the U.S., Canada and Mexico, and an exploration
office and investments in early-stage silver exploration projects
in Canada.
NOTES
Non-GAAP Financial Measures
Non-GAAP financial measures are intended to provide additional
information only and do not have any standard meaning prescribed by
generally accepted accounting principles (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 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 mines 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.
Other
(6) Expectations for 2017 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
$1.05/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) 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
2017 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 $1.05; USD/CAD assumed to be $0.78,
USD/MXN assumed to be $0.06) and the impact of the Lucky Friday
strike; and (iv) expectations regarding the development, growth
potential, financial performance and exploration potential of the
Company’s projects, including the EMCP pits in Quebec and San
Sebastian operations. Estimates or expectations of future events or
results are based upon certain assumptions, which may prove to be
incorrect. Such assumptions, include, but are not limited to: (i)
there being no significant change to current geotechnical,
metallurgical, hydrological and other physical conditions; (ii)
permitting, development, operations and expansion of the Company’s
projects being consistent with current expectations and mine plans;
(iii) political/regulatory developments in any jurisdiction in
which the Company operates being consistent with its current
expectations; (iv) the exchange rate for the Canadian dollar to the
U.S. dollar, being approximately consistent with current levels;
(v) certain price assumptions for gold, silver, lead and zinc; (vi)
prices for key supplies being approximately consistent with current
levels; (vii) the accuracy of our current mineral reserve and
mineral resource estimates; and (viii) the Company’s plans for
development and production will proceed as expected and will not
require revision as a result of risks or uncertainties, whether
known, unknown or unanticipated. Where the Company expresses or
implies an expectation or belief as to future events or results,
such expectation or belief is expressed in good faith and believed
to have a reasonable basis. However, such statements are subject to
risks, uncertainties and other factors, which could cause actual
results to differ materially from future results expressed,
projected or implied by the “forward-looking statements.” Such
risks include, but are not limited to gold, silver and other metals
price volatility, operating risks, currency fluctuations, increased
production costs and variances in ore grade or recovery rates from
those assumed in mining plans, community relations, conflict
resolution and outcome of projects or oppositions, litigation,
political, regulatory, labor and environmental risks, and
exploration risks and results, including that mineral resources are
not mineral reserves, they do not have demonstrated economic
viability and there is no certainty that they can be upgraded to
mineral reserves through continued exploration. For a more detailed
discussion of such risks and other factors, see the Company’s 2016
Form 10-K, filed on February 23, 2017, with the Securities and
Exchange Commission (SEC), as well as the Company’s other SEC
filings. The Company does not undertake any obligation to release
publicly revisions to any “forward-looking statement,” including,
without limitation, outlook, to reflect events or circumstances
after the date of this news release, or to reflect the occurrence
of unanticipated events, except as may be required under applicable
securities laws. Investors should not assume that any lack of
update to a previously issued “forward-looking statement”
constitutes a reaffirmation of that statement. Continued reliance
on “forward-looking statements” is at investors’ own risk.
Cautionary Statements to Investors on Reserves and
Resources
Reporting requirements in the United States for disclosure of
mineral properties are governed by the SEC and included in the
SEC's Securities Act Industry Guide 7, entitled “Description of
Property by Issuers Engaged or to be Engaged in Significant Mining
Operations” (Guide 7). However, the Company is also a “reporting
issuer” under Canadian securities laws, which require estimates of
mineral resources and reserves to be prepared in accordance with
Canadian National Instrument 43-101 (NI 43-101). NI 43-101 requires
all disclosure of estimates of potential mineral resources and
reserves to be disclosed in accordance with its requirements. Such
Canadian information is being included here to satisfy the
Company's “public disclosure” obligations under Regulation FD of
the SEC and to provide U.S. holders with ready access to
information publicly available in Canada.
Reporting requirements in the United States for disclosure of
mineral properties under Guide 7 and the requirements in Canada
under NI 43-101 standards are substantially different. This
document contains a summary of certain estimates of the Company,
not only of proven and probable reserves within the meaning of
Guide 7, which requires the preparation of a “final” or “bankable”
feasibility study demonstrating the economic feasibility of mining
and processing the mineralization using the three-year historical
average price for any reserve or cash flow analysis to designate
reserves and that the primary environmental analysis or report be
filed with the appropriate governmental authority, but also of
mineral resource and mineral reserve estimates estimated in
accordance with the definitional standards of the Canadian
Institute of Mining, Metallurgy and Petroleum referred to in NI
43-101. The terms “measured resources”, “indicated resources,” and
“inferred resources” are Canadian mining terms as defined in
accordance with NI 43-101. These terms are not defined under Guide
7 and are not normally permitted to be used in reports and
registration statements filed with the SEC in the United States,
except where required to be disclosed by foreign law. The term
“resource” does not equate to the term “reserve”. Under Guide 7,
the material described herein as “indicated resources” and
“measured resources” would be characterized as “mineralized
material” and is permitted to be disclosed in tonnage and grade
only, not ounces. The category of “inferred resources” is not
recognized by Guide 7. Investors are cautioned not to assume that
any part or all of the mineral deposits in such categories will
ever be converted into proven or probable reserves. “Resources”
have a great amount of uncertainty as to their existence, and great
uncertainty as to their economic and legal feasibility. It cannot
be assumed that all or any part of such a “resource” will ever be
upgraded to a higher category or will ever be economically
extracted. Investors are cautioned not to assume that all or any
part of a “resource” exists or is economically or legally mineable.
Investors are also especially cautioned that the mere fact that
such resources may be referred to in ounces of silver and/or gold,
rather than in tons of mineralization and grades of silver and/or
gold estimated per ton, is not an indication that such material
will ever result in mined ore which is processed into commercial
silver or gold.
Qualified Person (QP) Pursuant to
Canadian National Instrument 43-101
Dean McDonald, 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
three 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
(dollars and shares in thousands, except
per share amounts - unaudited)
Third Quarter Ended Nine
Months Ended
September 30,2017
September 30,2016
September 30,2017
September 30,2016
Sales of products
$ 140,839 $ 179,393
$ 417,662 $ 481,712 Cost of sales and
other direct production costs
68,358 90,529
224,537
249,162 Depreciation, depletion and amortization
28,844 30,179
83,365 84,592
97,202 120,708
307,902
333,754 Gross profit
43,637
58,685
109,760 147,958 Other
operating expenses: General and administrative
9,529 11,155
29,044 31,728 Exploration
7,255 3,859
17,622
10,171 Pre-development
1,757 550
4,061 1,475 Research
and development
1,130 —
2,125 — Other operating
expense
134 962
1,615 2,535 Gain on disposition of
properties, plants, equipment and mineral interests
(4,830
) (8 )
(4,924 ) (319 ) Provision or closed
operations and reclamation
2,940 2,162
5,044 4,779
Lucky Friday suspension-related costs
4,780 —
14,385
— Acquisition costs
— 1,765
—
2,167
22,695 20,445
68,972 52,536 Income from operations
20,942 38,240
40,788 95,422
Other income (expense): (Loss) gain on derivative contracts
(11,226 ) 7
(16,548 ) — Loss on
disposition of investments
— —
(167 ) —
Unrealized (loss) gain on investments
(124 ) 49
(73 ) 488 Foreign exchange (loss) gain
(4,764
) 2,375
(10,909 ) (7,713 ) Interest and other
income
541 145
1,185 346 Interest expense, net of
amount capitalized
(9,358 ) (5,574 )
(28,423 ) (16,655 )
(24,931 )
(2,998 )
(54,935 ) (23,534 ) (Loss) income before
income taxes
(3,989 ) 35,242
(14,147 )
71,888 Income tax benefit (provision)
5,401
(9,453 )
18,377 (22,603 ) Net income
1,412
25,789
4,230 49,285 Preferred stock dividends
(138 ) (138 )
(414 ) (414 ) Income
applicable to common shareholders
$ 1,274 $
25,651
$ 3,816 $ 48,871 Basic
income per common share after preferred dividends
$
0.00 $ 0.07
$ 0.01 $ 0.13
Diluted income per common share after preferred dividends
$ 0.00 $ 0.07
$ 0.01
$ 0.13 Weighted average number of common shares
outstanding - basic
398,848 387,578
396,809 383,458 Weighted average number of
common shares outstanding - diluted
401,258
389,918
400,176 386,318
HECLA MINING COMPANY
Condensed Consolidated Balance Sheets
(dollars and share in thousands -
unaudited)
September 30, 2017
December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents
$ 172,923 $ 169,777
Short-term investments and securities
32,973 29,117 Accounts
receivable: Trade
6,982 20,082 Other, net
19,413
9,967 Inventories
62,727 50,023 Other current assets
16,317 12,125 Total current assets
311,335 291,091 Non-current investments
7,098 5,002
Non-current restricted cash and investments
1,076 2,200
Properties, plants, equipment and mineral interests, net
2,025,607 2,032,685 Non-current deferred income taxes
44,683 35,815 Other non-current assets and deferred charges
6,384 4,884
Total assets
$ 2,396,183 $ 2,371,677
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities
$ 46,847 $
60,064 Accrued payroll and related benefits
29,085 36,515
Accrued taxes
5,081 9,061 Current portion of capital leases
5,852 5,653 Current portion of debt
— 470 Current
portion of accrued reclamation and closure costs
6,514 5,653
Other current liabilities
22,418 8,809
Total current liabilities
115,797 126,225 Capital
leases
7,436 5,838 Accrued reclamation and closure costs
80,758 79,927 Long-term debt
501,917 500,979
Non-current deferred tax liability
122,723 122,855
Non-current pension liability
43,451 44,491 Other
non-current liabilities
11,160 11,518
Total liabilities 883,242
891,833
SHAREHOLDERS’ EQUITY
Preferred stock
39 39 Common stock
100,886 99,806 Capital surplus
1,617,669 1,597,212
Accumulated deficit
(166,602 ) (167,437 ) Accumulated
other comprehensive loss
(20,884 ) (34,602 ) Treasury
stock
(18,167 ) (15,174 )
Total
shareholders’ equity 1,512,941
1,479,844
Total liabilities and shareholders’ equity
$ 2,396,183 $ 2,371,677 Common shares
outstanding
399,019
395,287
HECLA MINING COMPANY
Condensed Consolidated Statements of Cash
Flows
(dollars in thousands - unaudited)
Nine Months Ended
September 30,2017
September 30,2016
OPERATING ACTIVITIES
Net income
$ 4,230 $
49,285 Non-cash elements included in net income: Depreciation,
depletion and amortization
87,634 83,900 Loss on disposition
of investments
167 — Gain on disposition of properties,
plants, equipment and mineral interests
(4,924 ) (319
) Unrealized loss (gain) on investments
73 (488 ) Provision
for reclamation and closure costs
3,379 3,685 Acquisition
costs
— 1,048 Stock compensation
4,943 4,814 Deferred
income taxes
(24,280 ) 10,330 Amortization of loan
origination fees
1,415 1,397 Loss on derivative contracts
16,718 337 Foreign exchange loss
11,171 7,555 Other
non-cash items, net
(1 ) 5 Change in assets and
liabilities: Accounts receivable
4,903 5,776 Inventories
(9,611 ) (44 ) Other current and non-current assets
(2,685 ) (539 ) Accounts payable and accrued
liabilities
(7,759 ) 2,042 Accrued payroll and
related benefits
(913 ) 8,621 Accrued taxes
(4,469 ) (2,894 ) Accrued reclamation and closure
costs and other non-current liabilities
(5,876
) (1,397 )
Cash provided by
operating activities 74,115
173,114
INVESTING ACTIVITIES
Additions to properties, plants,
equipment and mineral interests
(70,390 ) (120,236 )
Acquisition of other companies, net of cash acquired
—
(3,931 ) Proceeds from disposition of properties, plants and
equipment
151 348 Insurance proceeds received for damaged
property
5,628 — Purchases of investments
(36,916
) (32,847 ) Maturities of short-term investments
31,169 7,240 Changes in restricted cash and investment
balances
1,124 (3,900 )
Net cash used in investing activities (69,234
) (153,326 )
FINANCING
ACTIVITIES
Proceeds from issue of stock, net of related costs
9,610
8,121 Acquisition of treasury shares
(2,993 ) (4,363
) Dividends paid to common shareholders
(2,978 )
(2,882 ) Dividends paid to preferred shareholders
(414
) (414 ) Debt origination fees
(476 ) (107 )
Repayments of debt
(470 ) (1,807 ) Payments on
capital leases
(5,065 )
(6,328 )
Net cash used in financing activities
(2,786 ) (7,780 )
Effect of exchange rates on cash
1,051
627 Net increase in cash and cash
equivalents
3,146 12,635 Cash and cash equivalents at
beginning of period
169,777
155,209 Cash and cash equivalents at end of period
$ 172,923 $ 167,844
HECLA MINING COMPANY
Production Data
Three Months Ended Nine
Months Ended
September 30,2017
September 30,2016
September 30,2017
September 30,2016
GREENS CREEK UNIT
Tons of ore milled
219,983 202,523
627,900
610,879 Mining cost per ton
$ 69.46 $
69.66
$ 69.64 $ 69.20 Milling cost per ton
$
31.01 $ 31.55
$ 32.38 $ 31.07 Ore grade milled
- Silver (oz./ton)
13.65 15.40
12.84 14.61 Ore grade
milled - Gold (oz./ton)
0.089 0.088
0.095 0.095 Ore
grade milled - Lead (%)
2.77 2.92
2.83 3.05 Ore grade
milled - Zinc (%)
7.47 6.86
7.49 7.90 Silver produced
(oz.)
2,344,315 2,445,328
6,205,659 7,020,688 Gold
produced (oz.)
12,563 11,988
39,289 39,497 Lead
produced (tons)
4,851 4,803
14,080 15,236 Zinc
produced (tons)
14,325 12,144
40,697 42,330 Cash
cost, after by-product credits, per silver ounce (1)
$
(0.15 ) $ 4.80
$ 0.73 $ 4.68 AISC,
after by-product credits, per silver ounce (1)
$ 4.47
$ 11.02
$ 5.60 $ 10.18 Capital additions (in
thousands)
$ 8,206
$ 14,163
$ 24,891
$ 35,200
LUCKY FRIDAY UNIT
Tons
of ore milled
7,302 74,397
64,371 216,247 Mining cost
per ton
$ 150.89 $ 99.13
$ 112.60 $
99.27 Milling cost per ton
$ 13.15 $ 25.99
$
22.93 $ 24.77 Ore grade milled - Silver (oz./ton)
12.87 12.40
12.45 13.05 Ore grade milled - Lead (%)
7.68 7.89
7.12 8.01 Ore grade milled - Zinc (%)
3.21 3.85
3.9 3.94 Silver produced (oz.)
88,298 887,364
769,080 2,721,991 Lead produced (tons)
519 5,608
4,346 16,604 Zinc produced (tons)
172 2,681
2,303 7,991 Cash cost, after by-product
credits, per silver ounce (1)
$ 11.60 $ 9.07
$
6.58 $ 9.34 AISC, after by-product credits, per silver ounce
(1)
$ 13.37 $ 20.22
$ 12.21 $ 21.35
Capital additions (in thousands)
$ 208 $ 9,725
$ 5,000 $ 32,218
Three Months Ended
Nine Months Ended
September 30,2017
September 30,2016
September 30,2017
September 30,2016
CASA BERARDI UNIT
Tons of ore milled
- underground
206,209 201,086
606,201
636,274 Tons of ore milled - surface pit
119,936 57,014
343,745 57,014 Tons of ore milled -
total
326,145 258,100
949,946 693,288 Surface tons
mined - ore and waste
2,010,524 1,217,526
6,427,067
1,217,526 Mining cost per ton of ore - underground
$
98.96 $ 86.22
$ 98.71 $ 88.85
Mining cost per ton of ore - combined
$ 82.95 $ 92.17
$ 81.95 $ 90.53 Mining
cost per ton of ore and waste - surface tons mined
$
3.42 $ 5.05
$ 2.84 $ 5.05 Milling cost per ton
$ 16.19 $ 18.07
$ 16.28 $ 18.88 Ore
grade milled - Gold (oz./ton) - underground
0.193 0.161
0.167 0.181 Ore grade milled - Gold (oz./ton) - surface pit
0.084 0.070
0.086 0.070 Ore grade milled - Gold
(oz./ton) - combined
0.153 0.141
0.137 0.172 Ore
grade milled - Silver (oz./ton)
0.03 0.04
0.03 0.04
Gold produced (oz.) - underground
35,192 28,437
87,622 100,770 Gold produced (oz.) - surface pit
8,949 3,512
25,587 3,512 Gold produced (oz.) - total
44,141 31,949
113,209 104,282 Cash cost, after
by-product credits, per gold ounce (1)
$ 750 $ 915
$ 858 $ 750 AISC, after by-product credits, per gold
ounce (1)
$ 1,091 $ 1,442
$ 1,226 $
1,243 Capital additions (in thousands)
$ 13,775 $ 17,603
$ 38,249 $ 50,385
SAN SEBASTIAN
Tons of ore milled
36,482 40,192
111,623 108,750 Mining cost per ton
$ 35.69 $ 59.49
$ 38.70 $ 83.31 Milling
cost per ton
$ 69.42 $ 66.88
$ 66.64 $
68.52 Ore grade milled - Silver (oz./ton)
25.48 25.77
23.71 33.70 Ore grade milled - Gold (oz./ton)
0.184
0.216
0.183 0.265 Silver produced (oz.)
880,885
975,610
2,498,638 3,434,052 Gold produced (oz.)
6,342
8,189
19,222 27,000 Cash cost, after by-product credits, per
silver ounce (1)
$ (3.12 ) $ (4.03 )
$
(3.23 ) $ (3.40 ) AISC, after by-product credits, per
silver ounce (1)
$ (0.83 ) $ (2.39 )
$
(0.14 ) $ (2.25 ) Capital additions (in thousands)
$ 3,350 $
530
$ 7,480
$ 1,223 (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
nine-month periods ended September 30, 2017 and 2016, and for
estimated amounts for the twelve months ended December 31,
2017.
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 September 30, 2017
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs
and depreciation, depletion and amortization $ 41,927 — $ 6,680 $
48,607 $ 48,595 $ 97,202 Depreciation, depletion and amortization
(12,607 ) — (641 ) (13,248 ) (15,596 ) (28,844 ) Treatment costs
12,067 440 422 12,929 682 13,611 Change in product inventory 7,675
1,960 (627 ) 9,008 (288 ) 8,720 Reclamation and other costs
(394 ) 18 (494 ) (870 ) (124 )
(994 ) Cash Cost, Before By-product Credits (1) 48,668 2,418 5,340
56,426 33,269 89,695 Reclamation and other costs 666 38 117 821 123
944 Exploration 1,944 (2 ) 1,495 477 3,914 1,161 5,075 Sustaining
capital 8,210 119 402 1,105 9,836 13,775 23,611 General and
administrative 9,529 9,529
9,529 AISC, Before By-product Credits (1)
59,488 2,573 7,354 80,526 48,328 128,854 By-product credits: Zinc
(27,046 ) (293 ) (27,339 ) (27,339 ) Gold (13,907 ) (8,088 )
(21,995 ) (21,995 ) Lead (8,067 ) (1,102 ) (9,169 ) (9,169 ) Silver
(161 ) (161 ) Total
By-product credits (49,020 ) (1,395 ) (8,088 )
(58,503 ) (161 ) (58,664 ) Cash Cost, After
By-product Credits $ (352 ) $ 1,023 $ (2,748 ) $ (2,077 ) $
33,108 $ 31,031 AISC, After By-product Credits $
10,468 $ 1,178 $ (734 ) $ 22,023 $ 48,167
$ 70,190 Divided by ounces produced 2,344 88 880
3,312 44 Cash Cost, Before By-product Credits, per Ounce $ 20.75 $
27.44 $ 6.07 $ 17.03 $ 753.70 By-product credits per ounce
(20.90 ) (15.84 ) (9.19 ) (17.66 ) (3.65 )
Cash Cost, After By-product Credits, per Ounce $ (0.15 ) $ 11.60
$ (3.12 ) $ (0.63 ) $ 750.05 AISC, Before By-product
Credits, per Ounce $ 25.37 $ 29.21 $ 8.36 $ 24.31 $ 1,094.86
By-product credits per ounce (20.90 ) (15.84 ) (9.19
) (17.66 ) (3.65 ) AISC, After By-product Credits,
per Ounce $ 4.47 $ 13.37 $ (0.83 ) $ 6.65 $
1,091.21 In thousands (except
per ounce amounts) Three Months Ended September 30, 2016
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs
and depreciation, depletion and amortization $ 58,397 $ 19,484 $
6,532 $ 84,413 $ 36,295 $ 120,708 Depreciation, depletion and
amortization (16,091 ) (2,946 ) (677 ) (19,714 ) (10,465 ) (30,179
) Treatment costs 15,114 5,211 348 20,673 218 20,891 Change in
product inventory (10,407 ) (46 ) 930 (9,523 ) 3,460 (6,063 )
Reclamation and other costs 2,273 (171 )
(140 ) 1,962 (115 ) 1,847
Cash Cost, Before By-product Credits (1) 49,286 21,532 6,993 77,811
29,393 107,204 Reclamation and other costs 682 165 42 889 117 1,006
Exploration 349 — 1,051 421 1,821 655 2,476 Sustaining capital
14,162 9,725 506 76 24,469 16,078 40,547 General and administrative
11,155 11,155
11,155 AISC, Before By-product Credits (1) 64,479 31,422
8,592 116,145 46,243 162,388 By-product credits: Zinc (17,152 )
(4,201 ) (21,353 ) (21,353 ) Gold (13,807 ) (10,922 ) (24,729 )
(24,729 ) Lead (6,577 ) (9,284 ) (15,861 ) (15,861 ) Silver
(162 ) (162 ) Total By-product
credits (37,536 ) (13,485 ) (10,922 )
(61,943 ) (162 ) (62,105 ) Cash Cost, After
By-product Credits $ 11,750 $ 8,047 $ (3,929 ) $
15,868 $ 29,231 $ 45,099 AISC, After
By-product Credits $ 26,943 $ 17,937 $ (2,330 ) $
54,202 $ 46,081 $ 100,283 Divided by ounces
produced 2,445 887 976 4,308 32 Cash Cost, Before By-product
Credits, per Ounce $ 20.15 $ 24.26 $ 7.16 $ 18.06 $ 920.00
By-product credits per ounce (15.35 ) (15.19 )
(11.19 ) (14.38 ) (5.07 ) Cash Cost, After By-product
Credits, per Ounce $ 4.80 $ 9.07 $ (4.03 ) $ 3.68
$ 914.93 AISC, Before By-product Credits, per Ounce $
26.37 $ 35.41 $ 8.80 $ 26.96 $ 1,447.40 By-product credits per
ounce (15.35 ) (15.19 ) (11.19 ) (14.38
) (5.07 ) AISC, After By-product Credits, per Ounce $ 11.02
$ 20.22 $ (2.39 ) $ 12.58 $ 1,442.33
In thousands (except per ounce amounts)
Nine Months Ended September 30, 2017
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs
and depreciation, depletion and amortization $ 140,241 $ 14,542 $
18,377 $ 173,160 $ 134,742 $ 307,902 Depreciation, depletion and
amortization (39,442 ) (2,433 ) (2,036 ) (43,911 ) (39,454 )
(83,365 ) Treatment costs 37,621 4,257 906 42,784 1,774 44,558
Change in product inventory 5,398 1,811 (192 ) 7,017 881 7,898
Reclamation and other costs (1,474 ) (163 )
(1,089 ) (2,726 ) (354 ) (3,080 ) Cash Cost,
Before By-product Credits (1) 142,344 18,014 15,966 176,324 97,589
273,913 Reclamation and other costs 1,999 217 351 2,567 353 2,920
Exploration 3,339 (1 ) 4,984 1,307 9,629 3,029 12,658 Sustaining
capital 24,895 4,109 2,379 2,275 33,658 38,245 71,903 General and
administrative 29,044 29,044
29,044 AISC, Before By-product Credits (1)
172,577 22,339 23,680 251,222 139,216 390,438 By-product credits:
Zinc (72,472 ) (4,353 ) (76,825 ) (76,825 ) Gold (42,675 ) (24,032
) (66,707 ) (66,707 ) Lead (22,696 ) (8,599 ) (31,295 ) (31,295 )
Silver (450 ) (450 )
Total By-product credits (137,843 ) (12,952 )
(24,032 ) (174,827 ) (450 ) (175,277 ) Cash
Cost, After By-product Credits $ 4,501 $ 5,062 $
(8,066 ) $ 1,497 $ 97,139 $ 98,636 AISC, After
By-product Credits $ 34,734 $ 9,387 $ (352 ) $ 76,395
$ 138,766 $ 215,161 Divided by ounces produced
6,206 769 2,498 9,473 113 Cash Cost, Before By-product Credits, per
Ounce $ 22.94 $ 23.42 $ 6.39 $ 18.62 $ 862.02 By-product credits
per ounce (22.21 ) (16.84 ) (9.62 )
(18.46 ) (3.97 ) Cash Cost, After By-product Credits, per
Ounce $ 0.73 $ 6.58 $ (3.23 ) $ 0.16 $ 858.05
AISC, Before By-product Credits, per Ounce $ 27.81 $ 29.05 $
9.48 $ 26.52 $ 1,229.72 By-product credits per ounce (22.21
) (16.84 ) (9.62 ) (18.46 ) (3.97 )
AISC, After By-product Credits, per Ounce $ 5.60 $ 12.21
$ (0.14 ) $ 8.06 $ 1,225.75
In thousands (except per ounce amounts) Nine Months
Ended September 30, 2016
GreensCreek
LuckyFriday(2)
SanSebastian
Corporate(3)
TotalSilver
CasaBerardi(Gold)
Total Cost of sales and other direct production costs
and depreciation, depletion and amortization $ 146,984 $ 56,696 $
23,435 $ 227,115 $ 106,639 $ 333,754 Depreciation, depletion and
amortization (40,746 ) (8,775 ) (2,508 ) (52,029 ) (32,563 )
(84,592 ) Treatment costs 46,069 15,323 1,193 62,585 627 63,212
Change in product inventory (6,083 ) (1,102 ) 1,743 (5,442 ) 4,212
(1,230 ) Reclamation and other costs 348 (556
) (1,583 ) (1,791 ) (344 ) (2,135 )
Cash Cost, Before By-product Credits (1) 146,572 61,586 22,280
230,438 78,571 309,009 Reclamation and other costs 2,045 495 126
2,666 345 3,011 Exploration 1,368 — 2,349 1,286 5,003 2,280 7,283
Sustaining capital 35,199 32,203 1,494 486 69,382 48,860 118,242
General and administrative 31,728
31,728 31,728 AISC, Before By-product
Credits (1) 185,184 94,284 26,249 339,217 130,056 469,273
By-product credits: Zinc (52,104 ) (10,685 ) (62,789 ) (62,789 )
Gold (42,017 ) (33,961 ) (75,978 ) (75,978 ) Lead (19,598 ) (25,485
) (45,083 ) (45,083 ) Silver
(409 ) (409 ) Total By-product credits (113,719 )
(36,170 ) (33,961 ) (183,850 ) (409 )
(184,259 ) Cash Cost, After By-product Credits $ 32,853
$ 25,416 $ (11,681 ) $ 46,588 $ 78,162
$ 124,750 AISC, After By-product Credits $ 71,465 $
58,114 $ (7,712 ) $ 155,367 $ 129,647 $
285,014 Divided by ounces produced 7,021 2,722 3,434 13,177
104 Cash Cost, Before By-product Credits, per Ounce $ 20.88 $ 22.63
$ 6.49 $ 17.49 $ 753.45 By-product credits per ounce (16.20
) (13.29 ) (9.89 ) (13.95 ) (3.92 )
Cash Cost, After By-product Credits, per Ounce $ 4.68 $ 9.34
$ (3.40 ) $ 3.54 $ 749.53 AISC, Before
By-product Credits, per Ounce $ 26.38 $ 34.64 $ 7.64 $ 25.74 $
1,247.15 By-product credits per ounce (16.20 ) (13.29
) (9.89 ) (13.95 ) (3.92 ) AISC, After
By-product Credits, per Ounce $ 10.18 $ 21.35 $ (2.25
) $ 11.79 $ 1,243.23 In
thousands (except per ounce amounts) Estimate for the 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 $ 201,000 $ 15,000 $
24,000 $ 240,000 $ 181,000 $ 421,000 Depreciation, depletion and
amortization (56,000 ) (3,000 ) (3,000 ) (62,000 ) (55,000 )
(117,000 ) Treatment costs 48,000 5,000 1,000 54,000 1,000 55,000
Change in product inventory (1,000 ) 3,000 2,000 4,000 (1,000 )
3,000 Reclamation and other costs (2,000 ) 1,000
1,000 — (1,000 )
(1,000 ) Cash Cost, Before By-product Credits (1) 190,000 21,000
25,000 236,000 125,000 361,000 Reclamation and other costs 2,000 —
1,000 3,000 1,000 4,000 Exploration 4,000 — 5,000 2,500 11,500
4,000 15,500 Sustaining capital 39,000 4,400 3,000 2,000 48,400
48,000 96,400 General and administrative
35,000 35,000 35,000 AISC,
Before By-product Credits (1) 235,000 25,400 34,000 333,900 178,000
511,900 By-product credits: Zinc (97,000 ) (5,000 ) (102,000 )
(102,000 ) Gold (56,000 ) (31,000 ) (87,000 ) (87,000 ) Lead
(30,000 ) (10,000 ) (40,000 ) (40,000 ) Silver
(1,000 ) (1,000 )
Total By-product credits
(183,000 ) (15,000 ) (31,000 ) (229,000
) (1,000 ) (230,000 ) Cash Cost, After By-product
Credits $ 7,000 $ 6,000 $ (6,000 ) $ 7,000 $
124,000 $ 131,000 AISC, After By-product Credits $
52,000 $ 10,400 $ 3,000 $ 104,900 $
177,000 $ 281,900 Divided by ounces produced 7,800
800 3,000 11,600 155 Cash Cost, Before By-product Credits, per
Ounce $ 24.36 $ 26.25 $ 8.33 $ 20.34 $ 806 By-product credits per
ounce (23.46 ) (18.75 ) (10.33 ) (19.74
) (6 ) Cash Cost, After By-product Credits, per Ounce $ 0.90
$ 7.50 $ (2.00 ) $ 0.60 $ 800 AISC,
Before By-product Credits, per Ounce $ 30.13 $ 31.75 $ 11.33 $
28.78 $ 1,148 By-product credits per ounce (23.46 )
(18.75 ) (10.33 ) (19.74 ) (6 ) AISC, After
By-product Credits, per Ounce $ 6.67 $ 13.00 $ 1.00
$ 9.04 $ 1,142 (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 Applicable to Common
Shareholders (GAAP) to Adjusted Net Income Applicable to Common
Stockholders (non-GAAP)
This release refers to a non-GAAP measure of adjusted net income
applicable to common stockholders and adjusted net income per
share, which are indicators of our performance. They exclude
certain impacts which are of a nature which we believe are not
reflective of our underlying performance. Management believes that
adjusted net income per common share provides investors with the
ability to better evaluate our underlying operating
performance.
Dollars are in thousands (except
per share amounts) Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2017 2016
2017 2016 Net income applicable
to common shareholders (GAAP)
$ 1,274 $
25,651
$ 3,816 $ 48,871 Adjusting items:
Losses (gains) on derivatives contracts
11,226 (7 )
16,548 — Provisional price (gains) losses
(1,244
) 1,141
(564 ) (376 ) Environmental accruals
— 689
— 1,351 Foreign exchange loss (gain)
4,764 (2,375 )
10,909 7,713 Lucky Friday
suspension-related costs
4,780 —
14,385 — Acquisition
costs
— 1,765
— 2,167 Bond offering costs
— —
887 — Gain on disposal of properties, plants, equipment and
mineral interests
(4,830 ) (8 )
(4,924
) (319 ) Nonrecurring deferred income tax adjustments
— —
(17,486 ) — Income tax effect of above
adjustments
— (1,432 )
— (1,129 ) Adjusted net income
applicable to common shareholders
$ 15,970
$ 25,424 $ 23,571
$ 58,278 Weighted average shares - basic
398,848 387,578
396,809 383,458 Weighted average
shares - diluted
401,258 389,918
400,176 386,318
Basic adjusted net income per common share
$ 0.04 $
0.07
$ 0.06 $ 0.15 Diluted adjusted net income per
common share
$ 0.04 $ 0.07
$ 0.06 $
0.15
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 Ended Nine Months Ended
Twelve Months Ended
September30, 2017
September30, 2016
September30, 2017
September30, 2016
September30, 2017
September30, 2016
Net income (loss)
$ 1,412 $ 25,789
$ 4,230 $ 49,285
$ 24,492
$ (13,678 ) Plus: Interest expense, net of amount
capitalized
9,358 5,574
28,423 16,655
33,564
22,694 Plus/(Less): Income taxes
(5,401 ) 9,453
(18,377 ) 22,603
(13,552 ) 83,106 Plus:
Depreciation, depletion and amortization
28,844 30,179
83,365 84,592
114,241 115,432 Plus: Exploration
expense
7,255 3,859
17,622 10,171
22,171
13,168 Plus: Pre-development expense
1,757 550
4,061
1,475
5,723 1,854 Plus: Acquisition costs
— 1,765
— 2,167
528 2,167 Plus: Lucky Friday
suspension-related costs
4,780 —
14,385 —
14,385 — Less: Gain on disposition of properties, plants,
equipment and mineral interests
(4,830 ) (8 )
(4,924 ) (319 )
(4,752 ) (90 ) Plus:
Stock-based compensation
2,120 1,347
4,951 4,561
6,322 5,950 Plus: Provision for closed operations and
environmental matters
1,132 1,680
3,379 3,685
4,507 4,693 Plus/(Less): Foreign exchange loss (gain)
4,764 (2,375 )
10,909 7,713
6,122 2,680
Plus/(Less): Losses (gains) on derivative contracts
11,226
(7 )
16,548 —
12,125 — (Less)/Plus: Provisional price
losses/(gains)
(1,244 ) 1,141
(564 )
(376 )
730 (449 ) (Less)/Plus: Other
(417
) (194 )
(945 ) (834 )
(441 ) (1,426 ) Adjusted EBITDA
$ 60,756 $ 78,753
$
163,063 $ 201,378
$ 226,165
$ 236,101 Total debt
$ 515,205 $
515,757 Less: Cash, cash equivalents and short-term investments
$ (205,896 ) $ (192,378 ) Net debt
$
309,309 $ 323,379 Net debt/LTM adjusted EBITDA
(non-GAAP)
1.4 1.4
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 Ended
September30, 2017
September30, 2016
Cash provided by operating activities $ 28,294 $ 86,976
Less: Additions to properties, plants equipment and mineral
interests (24,426 ) (43,276 ) Less: Troy reclamation insurance
settlement — (16,000 ) Free cash flow $ 3,868
$ 27,700
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171107005615/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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