Location

Record gold production, increased throughput and higher base metals prices substantially reduced cash costs, after by-product credits, per gold and silver ounce.

COEUR D'ALENE, Idaho–(BUSINESS WIRE)– 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, per
silver/gold ounce4,6

  

AISC, after by-product
credits, per produced
silver/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
    

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   $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
    

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   $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
    

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   $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
    

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   $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
    

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   $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 Ended
September 30,
  Nine Months Ended
September 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
    

September
30, 2017

  

September
30, 2016

  

September
30, 2017

  

September
30, 2016

  

September
30, 2017

  

September
30, 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
    

September
30, 2017

  

September
30, 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 Company
Mike Westerlund, 800-HECLA91 (800-432-5291)
Vice President – Investor Relations
[email protected]
www.hecla-mining.com

 

Source: Hecla Mining Company

Original Article: http://ir.hecla-mining.com/file/Index?KeyFile=390970825

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