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Strong operating results and free cash flow generation; Lucky Friday reaches tentative agreement

For The Period Ended: September 30, 2019
For Release: November 7, 2019

COEUR D’ALENE, Idaho–(BUSINESS WIRE)– Hecla Mining Company (NYSE:HL) today announced third quarter financial and operating results including sales of $161.5 million, net loss applicable to shareholders of $19.7 million, or $0.04 per share, cash provided by operating activities of $54.9 million and silver cost of sales and other direct production costs and depreciation, depletion and amortization (“cost of sales”) of $57.3 million.

HIGHLIGHTS

  • Silver production of 3.3 million ounces and gold production of 77,311 ounces.
  • Adjusted net loss applicable to common shareholders of $11.8 million, or $0.02 per share.1
  • Adjusted EBITDA of $69.8 million.2
  • Approximately 40% lower cash cost per silver ounce and all in sustaining cost (“AISC”) per silver ounce, in each case net of by-product credits compared to the third quarter of 2018. 3,4
  • Free cash flow of $28.8 million generated.6
  • Cash and cash equivalents of $33.0 million, with a draw on the revolving line of credit of $50 million, at September 30, 2019.
  • A tentative labor agreement at Lucky Friday between the Company and the union negotiating committees which is subject to member ratification.
  • Lucky Friday Mine received the Sentinels of Safety award from the National Mining Association (NMA) for its stellar safety record in 2018 as well as the Pollution Prevention Champion award from the State of Idaho.
  • Reaffirmed annual estimates for production, cost and expenditure estimates.

“The third quarter performance, including our increased adjusted EBITDA results, demonstrates significant progress toward our twin financial goals of having no net revolver indebtedness at year end and refinancing our senior notes,” said Phillips S. Baker, Jr., President and CEO. “Our net revolver debt decreased by about $26 million, all from free cash flow, and our adjusted EBITDA of $70 million is about 50% more than the first and second quarter combined. We expect the fourth quarter adjusted EBITDA to be similar to the third quarter.”

Mr. Baker continued, “At the Lucky Friday, a tentative labor agreement has been reached with the union’s negotiating committee and is subject to member ratification. We expect the mine ramp-up to full production to take about a year’s time, which would be good for the workforce, shareholders and the community. Also, congratulations to the Lucky Friday for winning the Sentinels of Safety, the highest safety award for mining in the US, as well as Idaho’s Pollution Prevention Champion Award.”

FINANCIAL OVERVIEW

 Third Quarter Ended Nine Months Ended
HIGHLIGHTSSeptember 30,
2019
 September 30,
2018
 September 30,
2019
 September 30,
2018
FINANCIAL DATA       
Sales (000)$161,532  $143,649  $448,321  $430,617 
Gross profit (000)$14,880  $6,576  ($1,919) $80,364 
Loss applicable to common shareholders (000)($19,654) ($23,322) ($91,995) ($3,284)
Basic and diluted loss per common share($0.04) ($0.05) ($0.19) ($0.01)
Net loss (000)($19,516) ($23,184) ($91,581) ($2,870)
Cash provided by operating activities (000)$54,896  $28,192  $63,609  $75,210 
Free cash flow (000)$28,803  ($11,789) ($33,729) ($8,075)

Net loss applicable to common shareholders for the third quarter was $19.7 million, or $0.04 per share, compared to net loss of $23.3 million, or $0.05 per share, for the same period a year ago. The difference was mainly due to the following items:

  • Sales of $161.5 million were impacted by higher silver and gold production and higher realized silver and gold prices.
  • A decrease of $7.9 million in exploration and pre-development expenditures over the third quarter of 2018 under the Company’s austerity program.
  • Acquisition costs of $6.1 million in the third quarter 2018.
  • Lower suspension-related costs at Lucky Friday by $2.8 million due to increased production.

Operating cash flow was $54.9 million compared to $28.2 million in the third quarter of 2018, with the increase due to higher income, adjusted for non-cash items, and lower cash outflows for working capital changes.

Adjusted EBITDA was $69.8 million compared to $64.4 million in the third quarter of 2018.

Capital expenditures totaled $29.0 million for the third quarter 2019 compared to $40.7 million in the third quarter of 2018, with the decrease mainly due to reduced spending at Nevada, Greens Creek and Lucky Friday, partially offset by increased spending at Casa Berardi. Expenditures at the operations were $2.5 million at Hecla Nevada, $9.0 million at Greens Creek, $13.2 million at Casa Berardi (includes $6.3 million for expansion of tailings dam capacity), $2.7 million at Lucky Friday, and $1.5 million at San Sebastian.

Metals Prices

The average realized silver price in the third quarter 2019 was $18.18 per ounce, 24% higher than the $14.68 price realized in the third quarter of 2018. The average realized gold price in the third quarter was $1,475 per ounce, 22% higher than the prior year period. Realized lead and zinc prices decreased by 2% and 14%, respectively, from the third quarter of 2018.

Metals Forward Sales Contracts

The following table summarizes the quantities of metals committed under financially settled forward sales contracts at September 30, 2019:

 Ounces/Pounds Under Contract (in thousands) Average Price per Ounce/Pound
 SilverGoldZincLead SilverGoldZincLead
Contracts on forecasted sales         
Forward contracts         
2019 settlements   4,409     $0.95 
2020 settlements   4,960     $0.96 

The forward contracts represent 14% of the forecasted payable lead production for the 36-month period ended September 30, 2022 at an average price of $0.95 per pound.

Setting A Short-term Floor for Silver and Gold Prices

The Company purchased put option contracts in an amount approximating the expected silver and gold sales through the second quarter of 2020, setting an expected minimum average price of between $1,400 and $1,450 per gold ounce and between $15.00 and $16.00 per silver ounce. Put options set a floor on the price the Company expects to receive on substantially all of its projected near-term production while maintaining exposure to the upside, excluding the transaction costs. This gives the Company confidence in the minimum prices it expects to receive.

OPERATIONS OVERVIEW

The following table provides the production summary on a consolidated basis for the third quarter and nine months ended September 30, 2019 and 2018:

  Third Quarter Ended Nine Months Ended
  September 30, 2019September 30, 2018 September 30, 2019September 30, 2018
PRODUCTION SUMMARY    
Silver –Ounces produced3,251,350 2,523,691  9,193,246 7,654,118 
 Payable ounces sold2,232,691 2,588,478  7,549,360 6,993,695 
Gold –Ounces produced77,311 72,995  198,100 191,116 
 Payable ounces sold69,760 68,568  189,823 183,050 
Lead –Tons produced6,107 4,238  17,406 15,387 
 Payable tons sold3,817 3,986  12,628 12,599 
Zinc –Tons produced15,413 12,795  42,672 42,312 
 Payable tons sold7,878 9,282  27,234 30,072 

On a silver or gold equivalency basis, third quarter production equates to 12.5 million ounces of silver equivalent or 144,629 ounces of gold equivalent, and for nine months 34.6 million ounces of silver equivalent or 401,774 ounces of gold equivalent production.

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, 2019:

Third Quarter Ended    Greens Creek Lucky
Friday
 San Sebastian Casa Berardi Nevada Ops
Sept 30, 2019Silver Gold Silver Gold Silver Silver Gold Gold Silver Gold Silver
Production (ounces)3,251,350 77,311 2,544,018 13,684 115,682 541,636 4,699 36,547 6,637 22,381 43,377
Increase/ (decrease) over 2018727,659 4,316 667,601 2,125 84,043 19,705 1,033 (7,434) (2,922) 8,592 (40,768)
Cost of sales & other direct production costs and depreciation, depletion and amortization (000)$57,335 $89,317 $40,475  $4,018 $12,842  $53,006  $36,311 
Increase/ (decrease) over 2018$(9,152) $18,731 $(11,688)  $4,019 $(1,483)  $1,739  $16,992 
Cash costs, after by-prod credits, per silver or gold ounce 3,5$2.34 $909 $2.05   $3.70  $966  $817 
Increase/ (decrease) over 2018$(1.78) $106 $0.13   $(8.32)  $280  $(362) 
AISC, after by-prod credits, per silver or gold ounce 4$8.89 $1,213 $6.05   $7.21  $1,348  $992 
Increase/ (decrease) over 2018$(6.79) $70 $(3.15)   $(9.74)  $452  $(940) 
                      
Nine Months Ended    Greens Creek Lucky
Friday
 San Sebastian Casa Berardi Nevada Ops
Sept 30, 2019Silver Gold Silver Gold Silver Silver Gold Gold Silver Gold Silver
Production (ounces)9,193,246 198,100 7,149,035 41,269 416,456 1,446,450 11,776 99,616 21,041 45,439 160,264
Increase/ (decrease) over 20181,539,128 6,984 1,359,595 2,873 260,441 (147,320) (275) (27,264) (9,707) 31,650 76,119
Cost of sales and other direct production costs and depreciation, depletion and amortization (000)$187,724 $262,516 $140,237  $11,149 $36,338  $157,239  $105,277 
Increase/ (decrease) over 2018$8,940 $91,047 $(1,526)  $5,305 $5,161  $5,089  $85,958 
Cash costs, after by-prod credits, per silver or gold ounce 3,5$2.70 $1,089 $1.67   $7.77  $1,055  $1,165 
Increase/ (decrease) over 2018$2.65 $287 $3.89   $(0.51)  $295  $(14) 
AISC, after by-prod credits, per silver or gold ounce 4$9.70 $1,520 $5.28   $12.14  $1,373  $1,841 
Increase/ (decrease) over 2018$(1.01) $425 $0.57   $(1.20)  $369  $(91) 

Greens Creek Mine – Alaska

At the Greens Creek mine, 2.5 million ounces of silver and 13,684 ounces of gold were produced, compared to 1.9 million ounces and 11,559 ounces, respectively, in the third quarter of 2018. Higher silver production was a result of higher grades due to mine sequencing. The mill operated at an average of 2,321 tons per day (tpd) in the third quarter, a similar throughput as the third quarter of 2018.

The cost of sales for the third quarter was $40.5 million, and the cash cost, after by-product credits, per silver ounce, was $2.05, compared to $52.2 million and $1.92, respectively, for the third quarter of 2018.3 The AISC, after by-product credits, was $6.05 per silver ounce for the third quarter compared to $9.20 in the third quarter of 2018.4 The per ounce silver cash costs were higher primarily due to lower base metals prices, while AISC was lower due to lower capital spending.

In September 2019, the Company sold and received payment for two parcels of concentrate, but weather delayed the vessel departing until early October. A current deferred revenue liability of $20.1 million in proceeds was recognized.

Casa Berardi Mine – Quebec

At the Casa Berardi mine, 36,547 ounces of gold were produced, including 6,080 ounces from the East Mine Crown Pillar (EMCP) pit; compared to 43,981 ounces in the third quarter of 2018. The decrease is primarily due to lower ore grades and mill recovery. Gold production increased compared to the first two quarters of the year with a pre-crush system being used to process the stockpile left over from the lower throughput in the first half. Higher grades and a further increase in production are projected in the fourth quarter. The mill operated at an average of 3,667 tpd in the third quarter, a decrease of 5% over the third quarter of 2018.

The cost of sales was $53.0 million and the cash cost, after by-product credits, per gold ounce was $966, compared to $51.3 million and $686, respectively, in the prior year period.3,5 The increase in cash cost, after by-product credits, per gold ounce is due to lower gold production. The AISC, after by-product credits, was $1,348 per gold ounce compared to $896 in the third quarter of 2018, primarily due to the lower gold production and planned higher capital spending which included expansion of the tailings storage capacity.4

San Sebastian Mine – Mexico

At the San Sebastian mine, 541,636 ounces of silver and 4,699 ounces of gold were produced, compared to 521,931 ounces and 3,666 ounces, respectively, in the third quarter of 2018. The higher silver and gold production was expected as a result of increased throughput. The Velardeña mill operated at an average of 492 tpd, an increase of 14% over the third quarter of 2018.

The cost of sales was $12.8 million and the cash cost, after by-product credits, was $3.70 per silver ounce, compared to $14.3 million and $12.02, respectively, in the third quarter of 2018.3 The AISC, after by-product credits, was $7.21 per silver ounce for the third quarter compared to $16.95 in the third quarter of 2018, principally due to the higher silver and gold production and higher gold prices.4

A review of sulfide ore continues through 2019, including a bulk sample to test the capabilities of the third-party plant and the suitability of long-hole stoping for the ore body, with results expected early in 2020. To date, about 20,000 tons of the planned 26,000-ton sample have been mined and results from the long-hole stoping indicate better than modeled mining recovery and lower dilution. About 13,000 tons have been processed at a third-party mill and results suggest that mill recoveries are generally in line with expectations.

Nevada Operations

For the Nevada Operations, 22,381 ounces of gold and 43,377 ounces of silver were produced, as compared to 13,789 ounces of gold and 84,145 ounces of silver in the third quarter 2018. Hecla’s ownership of the operations commenced July 20, 2018.

The cost of sales was $36.3 million and the cash cost, after by-product credits, was $817 per gold ounce, compared to $19.3 million and $1,179, respectively, in the third quarter of 2018.3,5 The AISC, after by-product credits, was $992 per gold ounce compared to $1,932 in the third quarter of 2018, with the decrease due to higher gold production and lower capital and exploration spending.Mining was conducted on resources that have been exposed by previous development, and increased spending is not anticipated in the fourth quarter. Mining at Midas is expected to end in the fourth quarter. Some surface exploration drilling and hydrology studies have continued to provide information on the deposits to aid future development programs.

Third-party ore processing arrangements are also being pursued with the goal of reducing transportation and milling costs. This could include facilities that can process ore that is considered refractory.

Lucky Friday Mine – Idaho

At the Lucky Friday Mine, 115,682 ounces of silver were produced by salaried workers, compared to 31,639 ounces in the third quarter of 2018. The higher level of production helps defray costs associated with the strike at Lucky Friday. Cost of sales was $4.0 million, with no amount reported for the third quarter of 2018 as there were no concentrate shipments during that period.

The Remote Vein Miner (RVM) is fully fabricated, with testing at EPIROC’s test mine in Sweden underway and modifications ongoing. Delivery to Lucky Friday is expected in 2020.

A tentative agreement has been reached between the Company and the union negotiating committee which requires ratification by a majority of union members. A ramp-up to full production is expected to take about a year.

The mine earned the 2018 Sentinels of Safety award by the National Mining Association, the highest safety honor for a mine in the US, for the first time in its more than 60-year history of operations by Hecla.

In addition, Lucky Friday was recently showcased by the Idaho Department of Environmental Quality as an example of environmental leadership for its efforts creating waste treatment facilities that reduce the concentration of lead and zinc in the water released by over 95% and a water recycling program that reduces the average freshwater use by 95% in the concentrator plant.

EXPLORATION AND PRE-DEVELOPMENT

Exploration (including corporate development) expenses were $4.8 million, a decrease of $7.6 million compared to the third quarter of 2018.

Casa Berardi – Quebec

Up to nine drills (7 underground and 2 surface) operated in the East and West Mine areas with the goal of upgrading and expanding resources in several promising areas and potentially extending the underground mine production. Definition drilling was concentrated on the 148, 152 and EMCP zones in the East Mine Area and the 119, 123 and 124 zones in the Principal Area. Exploration drilling was focused on the western extension of the 118 Zone and the down-plunge extensions of the 128 Zone in the Principal Mine area as well as the down-plunge extensions of the 148 and the 152 zones in the East Mine. Two drills on surface completed definition and exploration drilling at the 128 Zone east of and at depth of the Principal Pit area, below the 160 Pit to define the 157 Zone resources, and along strike of the 160 Zone open pit.

The East Mine has a history of high-grade mine production and given that access has been re-established in the area, underground drilling confirmed and expanded a series of high-grade lenses from the 148 to 160 zones. Definition and exploration drilling results from the East Mine were previously reported in the press release “Hecla Expands High-Grade at Casa Berardi’s East Mine” dated November 5, 2019. Results from this drilling continue to show high grades over substantial widths. The most successful drilling included 0.45 oz/ton gold over 16.1 feet, 0.65 oz/ton gold over 22.3 feet including 1.05 oz/ton gold over 12.8 feet, 0.63 oz/ton gold over 26.6 feet including 1.12 oz/ton gold over 13.4 feet, 0.78 oz/ton gold over 15.2 feet and 1.03 oz/ton gold over 14.7 feet. Drilling also shows that the high-grade mineralization on the 148-08 lens extends both to the surface and west of the known EMCP pit lenses and includes intersections of 0.03 oz/ton gold over 64 feet and 0.06 oz/ton gold over 48.5 feet. Drilling continues at the East Mine and results show high-grades and the presence of visible gold in many of the drill holes with pending assays, and these high-grade lenses are open at depth down-plunge. Results received to date could have a significant positive impact on 2020 as we work to accelerate the modeling and mine planning of these high-grade zones.

West Mine definition drilling occurred in the 119, 123, 124 zones, and the West Mine Crown Pillar (WMCP) pit. In the lower part of the 123 Zone, in-fill and step-out drilling from the 1010 and 1030-levels to the west shows the continuity of high-grade mineralization down-plunge for over 400 feet and indicates the mineralization remains open to the west and to depth. Recent intersections include 0.33 oz/ton gold over 11.9 feet and 0.35 oz/ton gold over 32.0 feet. Higher in the mine, drilling of the 119 Zone from the 550-Level continues to define the eastern extension of the 119-01 lens south the Casa Berardi Fault. Recent assays include 0.14 oz/ton gold over 13.8 feet which extends the 119-01 lens over 160 feet to the east. Drilling in the 124 Zone shows the upward continuity of the 124-22 lens within the Principal Mine, with recent results including 0.37 oz/ton gold over 11.5 feet. Drilling results in the WMCP pit show that the high-grade mineralization extends to the surface and include intersections of 0.04 oz/ton gold over 42.6 feet and 0.03 oz/ton gold over 25.9 feet.

West Mine exploration drilling occurred in the 113, 118, and 128 zones during the quarter. Drilling in the 113 Zone from the 1010-level ramp in the West Mine has been completed and results indicate that there is potential for resource gains within the 113 Zone; further drilling will be required to better define these zones, especially on the North side of the Casa Berardi Fault. Exploration drilling in the 118 Zone, testing the connection between the 113 Zone and the 118 Zone, shows that the 118 Zone is open to the West with recent drill intersections including 0.13 oz/ton gold over 7.9 feet and 0.16 oz/ton gold over 13.1 feet. Drilling in the 128 Zone began in September and is focused on the South Domain south of the Casa Berardi Fault to test the eastern extension of the Upper Principal area mineralization.

A selection of third quarter assay results from Casa Berardi are listed in Table 1.

San Sebastian – Mexico

There were up to three core drills operating at San Sebastian focused on exploration definition drilling of the El Toro and El Toro Hanging Wall veins and definition drilling on the Middle Vein. This drilling added new mineralization and increased confidence to the El Toro veins, potentially adding oxide mine life to San Sebastian.

Discovered in late-2018, the El Toro Vein area is located approximately 1.2 miles southwest of the San Sebastian mine operation. Follow-up exploration drilling was conducted throughout most of 2019, and to date mineralization has been identified over 5,000 feet of strike length on the El Toro Vein and over 1,600 feet of strike length on the El Toro Hanging Wall Vein and up to 900 feet down-dip within both veins. Drilling results at El Toro and El Toro Hanging Wall Veins during the third quarter continued to return good grades over significant widths including 0.32 oz/ton gold and 33.0 oz/ton silver over 6.8 feet, 0.38 oz/ton gold and 21.2 oz/ton silver over 6.6 feet and 0.13 oz/ton gold and 8.5 oz/ton silver over 17.2 feet.

Two definition drill holes were completed in the 100 Zone of the Middle Vein and provided information for mine stope design in advance of mining. Results include 22.5 oz/ton silver and 0.08 oz/ton gold over 5.0 feet and 7.5 oz/ton silver and 0.13 oz/ton gold over 3.8 feet.

A selection of third quarter assay results from the El Toro, El Toro Hanging Wall, and Middle Veins are listed in Table 1.

Greens Creek – Alaska

At Greens Creek, drilling continues to upgrade the East, NWW, and 9A Ore zones resources. In the East Ore Zone, drill intersections targeted the central portion of the resource and confirmed mineralization. Strong assay results included 31.7 oz/ton silver, 0.35 oz/ton gold, 9.9% zinc and 4.0% lead over 10.6 feet and 114.4 oz/ton silver, 0.23 oz/ton gold, 4.9% zinc and 1.7% lead over 2.4 feet.

Drilling in the NWW Zone focused on testing the 600 feet of strike length. Recent assay results returned high-grade precious and base metal mineralization including 29.5 oz/ton silver, 0.21 oz/ton gold, 10.0% zinc and 5.7% lead over 32.2 feet and 42.8 oz/ton silver, 0.20 oz/ton gold, 30.3% zinc and 21.1% lead over 8.7 feet. Results received for the Northwest West Zone should upgrade the lower portion of model and extended a limb of mineralization at depth in the central portion of the zone.

Drilling in the 9A Zone targeted the northern and southern extents of the zone. Results included 17.5 oz/ton silver, 0.16 oz/ton gold, 18.2% zinc and 4.0% lead over 7.6 feet and 13.6 oz/ton silver, 0.03 oz/ton gold, 18.5% zinc and 10.1% lead over 3.6 feet. The 9A Zone is structurally complex and multiple drill holes intersected mineralization across several bands.

A selection of third quarter assay results from Greens Creek are listed in Table 1.

Nevada

Up to two drill rigs were used at Fire Creek to further evaluate the potential of areas of Spiral 2, Spiral 3 and Spiral 9for near-term production and one surface drill rig was used to complete two exploration drill holes in the Hatter Graben at Hollister.

At Fire Creek, drilling focused on: 1) the lower extension of Spiral 2 mineralization, 2) expanding Spiral 2 resources up-dip in the Karen and Joyce zones, 3) testing the southern portion of Spiral 9 mineralization, and 4) extensions of Vein 20 in Spiral 2. High-grade intersections in the Spiral 2 area include 4.65 oz/ton gold over 2.8 feet in the Joyce Splay, 1.06 oz/ton gold over 11.8 feet on the Vonnie vein, and 2.87 oz/ton gold over 1.2 feet on the Vonnie vein. Drilling in the upper part of Spiral 2 focused on expanding the resources up-dip in the Karen and Joyce zones. Assay results include 0.57 oz/ton gold over 6.3 feet and 0.43 oz/ton gold over 7.5 feet on Vein 31 and 1.07 oz/ton gold over 1.5 feet on Vein 20. Assay results from Spiral 4 drilling targeting mineralization down-dip of the northern part of Spiral 4 encountered the best results to date in that area with 2.37 oz/ton gold over 5.4 feet.

Two surface exploration drill holes were completed at the Hatter Graben to test the eastern strike potential of the veins, where they might have been offset to the north and along strike of an historic vein intersected in drill hole H7-246 grading 1.13 oz/ton gold and 0.42 oz/ton silver over 3.4 feet. Geology of these two drill holes show that the vein intersected in historic drill hole H7-246 is not the offset extension of the Hatter Graben vein system but rather a new and possibly parallel vein system within the footwall of the Northern Boundary Fault.

Drill hole HSC-00007 intersected two narrow vein zones. The first interval cut a weakly banded quartz vein yielding 0.45 oz/ton gold and 1.0 oz/ton silver over 0.7 feet. The second interval cut two parallel banded veins containing apparent cataclastic textures yielded 0.16 oz/ton gold and 0.8 oz/ton silver over 1.3 feet. These intervals are interpreted as being deeper in the epithermal system and that the higher-grade zones are likely located up-dip and/or along strike. Assays for HSC-00008 are pending.

A selection of third quarter assay results from the Nevada Operations are listed in Table 1.

PRE-DEVELOPMENT

Pre-development spending for permitting of Rock Creek and Montanore was $0.9 million for the quarter.

2019 ESTIMATES7

The Company is not changing any of its annual estimates provided in August.

2019 Production Outlook

 Silver Production
(Moz)
Gold Production
(Koz)
Silver Equivalent
(Moz)
Gold Equivalent
(Koz)
Greens Creek9.05227.0278
Lucky Friday0.5N/A1.3N/A
San Sebastian2.0143.040
Casa BerardiN/A14612.7146
Nevada Operations0.2625.564
Total11.727449.5528

2019 Cost Outlook

 Costs of Sales
(million)
Cash cost, after
by-product credits,
per silver/gold ounce1,4
AISC, after by-product
credits, per produced
silver/gold ounce2
Greens Creek$202$2.25$7.50
Lucky FridayN/AN/AN/A
San Sebastian$46$9.00$13.00
Total Silver$248$3.25$12.50
Casa Berardi$210$950$1,250
Nevada Operations$147$1,300$1,600
Total Gold$357$1,100$1,425

2019 Capital and Exploration Outlook

2019E Capital expenditures (excluding capitalized interest)$138 million
2019E Exploration expenditures (includes Corporate Development)$15 million
2019E Pre-development expenditures$2.5 million
2019E Research and Development expenditures$1 million

DIVIDENDS

TheBoard of Directors declared a quarterly cash dividend of $0.0025 per share of common stock, payable on or about December 3, 2019, to stockholders of record on November 22, 2019. The realized silver price was $17.98 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, 2020 to shareholders of record on December 13, 2019.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Thursday, November 7, at 10:00 a.m. Eastern Time to discuss these results. You may join the conference call by dialing toll-free 1-855-760-8158 or for international dialing 1-720-634-2922. The participant passcode is HECLA. Hecla’s live and archived webcast can be accessed at www.hecla-mining.com under Investors or via Thomson StreetEvents Network.

ABOUT HECLA

Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading low-cost U.S. silver producer with operating mines in Alaska, Idaho, and Mexico and is a growing gold producer with operating mines in Quebec, Canada and in Nevada. The Company also has exploration and pre-development properties in eight world-class silver and gold mining districts in the U.S., Canada and Mexico.

NOTES

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles in the United States (GAAP). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

(1) Adjusted net income (loss) applicable to common stockholders is a non-GAAP measurement, a reconciliation of which to net income (loss) applicable to common stockholders, the most comparable GAAP measure, can be found at the end of the release. Adjusted net income (loss) is a measure used by management to evaluate the Company’s operating performance but should not be considered an alternative to net income (loss), or cash provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

(2) Adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to net income, 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.

(3) Cash cost, after by-product credits, per silver or gold ounce is a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization (sometimes referred to as “cost of sales” in this release), can be found at the end of the release. It is an important operating statistic that management utilizes to measure each mine’s operating performance. It also allows the benchmarking of performance of each mine versus those of our competitors. As a primary silver mining company, management also uses the statistic on an aggregate basis – aggregating the Greens Creek, Lucky Friday and San Sebastian mines – to compare performance with that of other primary silver mining companies. With regard to Casa Berardi and the Nevada operations, management uses cash cost, after by-product credits, per gold ounce to compare its performance with other gold mines. Similarly, the statistic is useful in identifying acquisition and investment opportunities as it provides a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics. In addition, the Company may use it when formulating performance goals and targets under its incentive program. Cash cost, after by-product credits, per silver ounce is not presented for Lucky Friday for the third quarters and year to date of 2019 and 2018, as production was limited due to the strike and results are not comparable to those from prior periods and are not indicative of future operating results under full production. The estimated fair value of the stockpile acquired at Hollister has been removed from the cash cost, after by-product credits calculation.

(4) 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 mine sites, corporate exploration related to sustaining operations, and all site sustaining capital costs. AISC, after by-product credits, is calculated net of depreciation, depletion, and amortization and by-product credits. AISC, after by-product credits, per silver ounce is not presented for Lucky Friday for the third quarters and first nine months of 2019 and 2018, as production was limited due to the strike and results are not comparable to those from prior periods and are not indicative of future operating results under full production.

Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Management believes that all in sustaining costs is a non-GAAP measure that provides additional information to management, investors and analysts to help in the understanding of the economics of our operations and performance compared to other producers and in the investor’s visibility by better defining the total costs associated with production. Similarly, the statistic is useful in identifying acquisition and investment opportunities as it provides a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

(5) Cash cost, after by-product credits, per gold ounce is only applicable to Casa Berardi and Nevada production. Gold produced from Greens Creek and San Sebastian is treated as a by-product credit against the silver cash cost.

(6) Free cash flow is a non-GAAP measure used to evaluate our operating performance and is calculated as cash provided by operating activities (GAAP), less additions to properties, plants, equipment and mineral interests (GAAP). The calculation of free cash flow using these GAAP measures can be found at the end of the release.

Other

(7) Expectations for 2019 includes silver, gold, lead and zinc production from Greens Creek, San Sebastian, Casa Berardi, Nevada Operations and Lucky Friday converted using Au $1,400/oz, Ag $16.00/oz, Zn $1.10/lb, and Pb $0.90/lb.

Numbers may be rounded.

Cautionary Statements to Investors on Forward-Looking Statements

This 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. When a forward-looking statement 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. Forward-looking statements often address our expected future business and financial performance and financial condition and often contain words such as “anticipate,” “intend,” “plan,” “will,” “could,” “would,” “estimate,” “should,” “expect,” “believe,” “project,” “target,” “indicative,” “preliminary,” “potential” and similar expressions. Forward-looking statements in this news release may include, without limitation: (i) estimates of full-year 2019 silver and gold production, cost of sales, cash costs, after by-product credits, AISC, after by-product credits and cash flows as well as estimated spending on capital, exploration, pre-development and research and development; (ii) setting minimum expected prices on the Company’s projected silver and gold production through the second quarter of 2020(iii) the ability to have no net revolver indebtedness by year end(iv) impact of metals prices on costs and cash flows; (v) estimated adjusted EBITDA in the fourth quarter of 2019 being similar to the third quarter; (vi) ability to refinance senior notes before the end of the second quarter of 2020; (vii) exploration results from the East Mine at Casa Berardi mine could have significant impact on 2020 results; (viiii) ability to reduce trucking and processing costs in Nevada by securing third party milling agreements for refractory and non-refractory ore, (ix) ability to complete testing the RVM and deliver it to Lucky Friday in 2020, (x) ability to have the tentative labor agreement at Lucky Friday ratified by the union; (xi) ability to ramp up Lucky Friday to full production in about a year, and (xii) ability of the El Toro vein to extend the oxide mine life and the successful completion of the bulk sample test at San Sebastian. The material factors or assumptions used to develop such forward-looking statements or forward-looking information include that 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, to which the Company’s operations are subject.

Estimates or expectations of future events or results are based upon certain assumptions, which may prove to be incorrect, which could cause actual results to differ from forward-looking statements. 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 USD/CAD and USD/MXN, 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; (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; (ix) counterparties performing their obligations under hedging instruments and put option contracts; (x) sufficient workforce is available and trained to perform assigned tasks; (xi) weather patterns and rain/snowfall within normal seasonal ranges so as not to impact operations; (xii) relations with interested parties, including Native Americans, remain productive; (xiii) economic terms can be reached with third-party mill operators who have capacity to process our ore; (xiv) maintaining availability of water rights; (xv) factors do not arise that reduce available cash balances; (xvi) there being no material increases in our current requirements to post or maintain reclamation and performance bonds or collateral related thereto, and (xvii) the Company’s plans for refinancing its high yield notes proceeding as expected.

In addition, material risks that could cause actual results to differ from forward-looking statements include, but are not limited to: (i) gold, silver and other metals price volatility; (ii) operating risks; (iii) currency fluctuations; (iv) increased production costs and variances in ore grade or recovery rates from those assumed in mining plans; (v) community relations; (vi) conflict resolution and outcome of projects or oppositions; (vii) litigation, political, regulatory, labor and environmental risks; (viii) 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; (ix) the failure of counterparties to perform their obligations under hedging instruments, including put option contracts; (x) our plans for improvements at our Nevada operations, including at Fire Creek, are not successful; (xi) our estimates for the third and fourth quarter results are inaccurate; (xii) we take a material impairment charge on our Nevada operations; (xiii) we are unable to remain in compliance with all terms of the credit agreement in order to maintain continued access to the revolver, and (xiv) we are unable to refinance the maturing senior notes. For a more detailed discussion of such risks and other factors, see the Company’s 2018 Form 10-K, filed on February 22, 2019, and Form 10-Q filed on each of May 9, and August 7, 2019 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 presentation, 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). Although the SEC has recently issued new rules rescinding Guide 7, the new rules are not binding until January 1, 2021, and at this time the Company still reports in accordance with Guide 7. However, the Company is also a “reporting issuer” under Canadian securities laws, which require estimates of mineral resources and reserves to be prepared in accordance with Canadian National Instrument 43-101 (NI 43-101). NI 43-101 requires all disclosure of estimates of potential mineral resources and reserves to be disclosed in accordance with its requirements. Such Canadian information is included herein to satisfy the Company’s “public disclosure” obligations under Regulation FD of the SEC and to provide U.S. holders with ready access to information publicly available in Canada.

Reporting requirements in the United States for disclosure of mineral properties under Guide 7 and the requirements in Canada under NI 43-101 standards are substantially different. This document contains a summary of certain estimates of the Company, not only of proven and probable reserves within the meaning of Guide 7, but also of mineral resource and mineral reserve estimates estimated in accordance with the definitional standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Under Guide 7, the term “reserve” means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The term “economically”, as used in the definition of reserve, means that profitable extraction or production has been established or analytically demonstrated to be viable and justifiable under reasonable investment and market assumptions. The term “legally”, as used in the definition of reserve, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a reserve to exist, Hecla must have a justifiable expectation, based on applicable laws and regulations, that issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with Hecla’s current mine plans. The terms “measured resources”, “indicated resources,” and “inferred resources” are Canadian mining terms as defined in accordance with NI 43-101. These terms are not defined under Guide 7 and are not normally permitted to be used in reports and registration statements filed with the SEC in the United States, except where required to be disclosed by foreign law. The term “resource” does not equate to the term “reserve”. Under Guide 7, the material described herein as “indicated resources” and “measured resources” would be characterized as “mineralized material” and is permitted to be disclosed in tonnage and grade only, not ounces. The category of “inferred resources” is not recognized by Guide 7. Investors are cautioned not to assume that any part or all of the mineral deposits in such categories will ever be converted into proven or probable reserves. “Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of such a “resource” will ever be upgraded to a higher category or will ever be economically extracted. Investors are cautioned not to assume that all or any part of a “resource” exists or is economically or legally mineable. Investors are also especially cautioned that the mere fact that such resources may be referred to in ounces of silver and/or gold, rather than in tons of mineralization and grades of silver and/or gold estimated per ton, is not an indication that such material will ever result in mined ore which is processed into commercial silver or gold.

Qualified Person (QP) Pursuant to Canadian National Instrument 43-101

Kurt D. Allen, MSc., CPG, Director – Exploration of Hecla Limited and Keith Blair, MSc., CPG, Chief Geologist of Hecla Limited, who serve as a Qualified Person under National Instrument 43-101(“NI 43-101”), supervised the preparation of the scientific and technical information concerning Hecla’s mineral projects in this news release, including with respect to the newly acquired Nevada projects. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of analytical or testing procedures for the Greens Creek Mine are contained in a technical report titled “Technical Report for the Greens Creek Mine” effective date December 31, 2018, and for the Lucky Friday Mine are contained in a technical report titled “Technical Report for the Lucky Friday Mine Shoshone County, Idaho, USA” effective date April 2, 2014, for Casa Berardi are contained in a technical report titled “Technical Report on the mineral resource and mineral reserve estimate for Casa Berardi Mine, Northwestern Quebec, Canada” effective date December 31, 2018 (the “Casa Berardi Technical Report”), and for the San Sebastian Mine, Mexico, are contained in a technical report prepared for Hecla titled “Technical Report for the San Sebastian Ag-Au Property, Durango, Mexico” effective date September 8, 2015 . Also included in these four technical reports is a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors. 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 Fire Creek Mine are contained in a technical report prepared for Klondex Mines, dated March 31, 2018; the Hollister Mine dated May 31, 2017, amended August 9, 2017; and the Midas Mine dated August 31, 2014, amended April 2, 2015. Copies of these technical reports are available under Hecla’s and Klondex’s profiles on SEDAR at www.sedar.com. Mr. Allen and Mr. Blair reviewed and verified information regarding drill sampling, data verification of all digitally-collected data, drill surveys and specific gravity determinations relating to all the mines. 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 COMPANYCondensed Consolidated Statements of Loss(dollars and shares in thousands, except per share amounts – unaudited)
 
  Third Quarter Ended Nine Months Ended
  September 30,
2019
 September 30,
2018
 September 30,
2019
 September 30,
2018
Sales of products $161,532  $143,649  $448,321  $430,617 
Cost of sales and other direct production costs 95,878  93,609  311,202  246,918 
Depreciation, depletion and amortization 50,774  43,464  139,038  103,335 
  146,652  137,073  450,240  350,253 
Gross profit 14,880  6,576  (1,919) 80,364 
         
Other operating expenses:        
General and administrative 7,978  10,327  26,855  27,849 
Exploration 4,808  12,411  13,556  27,609 
Pre-development 881  1,195  2,535  3,615 
Research and development 53  1,269  614  5,042 
Other operating expense 437  448  1,681  1,767 
Gain on disposition of properties, plants, equipment and mineral interests 24  (3,208) 4,666  (3,374)
Provision or closed operations and reclamation 1,907  1,852  3,529  4,534 
Suspension-related costs 3,722  6,519  8,766  18,337 
Acquisition costs 183  6,139  593  9,656 
  19,993  36,952  62,795  95,035 
Income from operations (5,113) (30,376) (64,714) (14,671)
Other income (expense):        
(Loss) gain on derivative contracts (4,718) 19,460  (2,719) 40,271 
Gain (loss) on disposition of investments 927  (36) 927  (36)
Unrealized (loss) gain on investments (126) (2,207) (1,159) (2,461)
Foreign exchange gain (loss) 773  (2,212) (6,741) 2,856 
Other expense (1,096) (346) (3,407) (294)
Interest expense (11,777) (10,146) (33,777) (30,019)
  (16,017) 4,513  (46,876) 10,317 
Loss before income taxes (21,130) (25,863) (111,590) (4,354)
Income tax benefit 1,614  2,679  20,009  1,484 
Net loss (19,516) (23,184) (91,581) (2,870)
Preferred stock dividends (138) (138) (414) (414)
Loss applicable to common shareholders $(19,654) $(23,322) $(91,995) $(3,284)
Basic loss per common share after preferred dividends $(0.04) $(0.05) $(0.19) $(0.01)
Diluted loss per common share after preferred dividends $(0.04) $(0.05) $(0.19) $(0.01)
Weighted average number of common shares outstanding – basic 489,971  452,636  486,298  417,532 
Weighted average number of common shares outstanding – diluted 489,971  452,636  486,298  417,532 
 
 
HECLA MINING COMPANYCondensed Consolidated Balance Sheet(dollars and share in thousands – unaudited)
 
 September 30, 2019 December 31, 2018
ASSETS   
Current assets:   
Cash and cash equivalents$32,995  $27,389 
Accounts receivable:   
Trade6,222  4,184 
Taxes22,902  14,191 
Other, net8,056  7,443 
Inventories98,251  87,533 
Prepaid taxes100  12,231 
Other current assets10,400  11,179 
Total current assets178,926  164,150 
Non-current investments7,349  6,583 
Non-current restricted cash and investments1,025  1,025 
Properties, plants, equipment and mineral interests, net2,455,511  2,520,004 
Operating lease right-of-use assets17,313   
Non-current deferred income taxes3,701  1,987 
Other non-current assets and deferred charges9,353  10,195 
Total assets$2,673,178  $2,703,944 
    
LIABILITIES   
Current liabilities:   
Accounts payable and accrued liabilities$57,860  $77,861 
Accrued payroll and related benefits23,147  30,034 
Accrued taxes2,160  7,727 
Current portion of finance leases5,704  5,264 
Current portion of operating leases5,864   
Current portion of accrued reclamation and closure costs7,457  3,410 
Accrued interest15,039  5,961 
Deferred revenue20,084   
Other current liabilities8,528  5,937 
Total current liabilities145,843  136,194 
Finance leases8,569  7,871 
Operating leases11,466   
Accrued reclamation and closure costs103,821  104,979 
Long-term debt584,618  532,799 
Non-current deferred tax liability143,442  173,537 
Non-current pension liability50,662  47,711 
Other non-current liabilities8,113  9,890 
Total liabilities1,056,534  1,012,981 
    
SHAREHOLDERS’ EQUITY   
Preferred stock39  39 
Common stock124,133  121,956 
Capital surplus1,897,363  1,880,481 
Accumulated deficit(343,958) (248,308)
Accumulated other comprehensive loss(37,958) (42,469)
Treasury stock(22,975) (20,736)
Total shareholders’ equity1,616,644  1,690,963 
Total liabilities and shareholders’ equity$2,673,178  $2,703,944 
Common shares outstanding490,251  482,604 
 
 
HECLA MINING COMPANYCondensed Consolidated Statements of Cash Flows(dollars in thousands – unaudited)
 
 Nine Months Ended
 September 30,
2019
September 30,
2018
OPERATING ACTIVITIES  
Net loss$(91,581)$(2,870)
Non-cash elements included in net loss:  
Depreciation, depletion and amortization143,040 108,814 
Loss on disposition of investments(927) 
Loss (gain) on disposition of properties, plants, equipment and mineral interests4,666 (3,374)
Unrealized loss on investments1,159 2,461 
Adjustment of inventory to market value1,399 7,232 
Provision for reclamation and closure costs5,298 3,957 
Stock compensation4,758 4,672 
Deferred income taxes(26,616)(4,637)
Amortization of loan origination fees1,919 1,471 
Loss (gain) loss on derivative contracts5,824 (15,208)
Foreign exchange loss (gain)6,263 (2,032)
Other non-cash items, net (37)
Change in assets and liabilities:  
Accounts receivable(10,215)(4,424)
Inventories(6,501)(18,954)
Other current and non-current assets14,913 (5,569)
Accounts payable and accrued liabilities5,616 12,308 
Accrued payroll and related benefits4,506 (4,207)
Accrued taxes(5,733)845 
Accrued reclamation and closure costs and other non-current liabilities5,821 (5,238)
Cash provided by operating activities63,609 75,210 
   
INVESTING ACTIVITIES  
Additions to properties, plants, equipment and mineral interests(97,338)(83,285)
Acquisition of Klondex, net of cash and restricted cash acquired (139,326)
Proceeds from sale of investments1,760  
Proceeds from disposition of properties, plants and equipment86 722 
Insurance proceeds received for damaged property 4,377 
Purchases of investments(389)(31,971)
Maturities of short-term investments 64,895 
Net cash used in investing activities(95,881)(184,588)
   
FINANCING ACTIVITIES  
Proceeds from issue of stock, net of related costs 3,085 
Acquisition of treasury shares(2,239)(2,694)
Dividends paid to common shareholders(3,655)(3,193)
Dividends paid to preferred shareholders(414)(414)
Debt origination fees(587)(2,460)
Repayments of debt(195,000)(82,036)
Borrowings on debt245,000 78,024 
Payments on capital leases(5,484)(5,992)
Net cash provided by (used in) financing activities37,621 (15,680)
Effect of exchange rates on cash257 (215)
Net increase in cash, cash equivalents and restricted cash and cash equivalents5,606 (125,273)
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period28,414 187,139 
Cash, cash equivalents and restricted cash and cash equivalents at end of period$34,020 $61,866 
 
 
HECLA MINING COMPANYProduction Data
 
 Three Months EndedNine Months Ended
 September 30,
2019
September 30,
2018
September 30,
2019
September 30,
2018
GREENS CREEK UNIT    
Tons of ore milled213,557 213,037 629,752 632,876 
Mining cost per ton$81.16 $68.76 $80.15 $69.19 
Milling cost per ton$36.67 $31.97 $35.89 $32.73 
Ore grade milled – Silver (oz./ton)15.01 11.65 14.28 11.94 
Ore grade milled – Gold (oz./ton)0.095 0.087 0.095 0.094 
Ore grade milled – Lead (%)3.00%2.40%2.86%2.84%
Ore grade milled – Zinc (%)7.70%6.87%7.28%7.58%
Silver produced (oz.)2,544,018 1,876,417 7,149,035 5,789,440 
Gold produced (oz.)13,684 11,559 41,269 38,396 
Lead produced (tons)5,258 4,026 14,668 14,352 
Zinc produced (tons)15,073 12,695 41,330 41,673 
Cash cost, after by-product credits, per silver ounce (1)$2.05 $1.92 $1.67 $(2.22)
AISC, after by-product credits, per silver ounce (1)$6.05 $9.20 $5.28 $4.71 
Capital additions (in thousands)$8,966 $11,029 $22,943 $34,694 
LUCKY FRIDAY UNIT    
Tons of ore milled13,254 3,006 40,754 16,012 
Ore grade milled – Silver (oz./ton)9.33 11.41 10.95 11.06 
Ore grade milled – Lead (%)7.01%8.06%7.40%7.21%
Ore grade milled – Zinc (%)3.13%3.64%3.91%4.28%
Silver produced (oz.)115,682 31,639 416,456 156,015 
Lead produced (tons)849 212 2,738 1,035 
Zinc produced (tons)340 100 1,342 639 
Capital additions (in thousands)$2,739 $4,840 $5,946 $6,889 
SAN SEBASTIAN    
Tons of ore milled45,232 39,739 135,576 111,916 
Mining cost per ton$102.94 $171.87 $112.17 $157.21 
Milling cost per ton$62.85 $65.98 $62.16 $66.16 
Ore grade milled – Silver (oz./ton)13.36 14.16 11.78 15.36 
Ore grade milled – Gold (oz./ton)0.122 0.108 0.103 0.12 
Silver produced (oz.)541,636 521,931 1,446,450 1,593,770 
Gold produced (oz.)4,699 3,666 11,776 12,051 
Cash cost, after by-product credits, per silver ounce (1)$3.70 $12.02 $7.77 $8.28 
AISC, after by-product credits, per silver ounce (1)$7.21 $16.95 $12.14 $13.34 
Capital additions (in thousands)$1,513 $1,582 $5,493 $3,692 
CASA BERARDI UNIT    
Tons of ore milled – underground193,130 181,285 582,631 556,991 
Tons of ore milled – surface pit144,221 172,555 432,067 495,335 
Tons of ore milled – total337,351 353,840 1,014,698 1,052,326 
Surface tons mined – ore and waste3,509,638 1,492,041 7,532,163 5,129,646 
Mining cost per ton of ore – underground$98.29 $104.31 $99.53 $102.56 
Mining cost per ton of ore – combined$80.67 $65.97 $80.97 $72.15 
Mining cost per ton of ore and waste – surface tons mined$2.35 $4.10 $3.21 $3.66 
Milling cost per ton$18.39 $15.05 $17.50 $15.91 
Ore grade milled – Gold (oz./ton) – underground0.186 0.229 0.170 0.204 
Ore grade milled – Gold (oz./ton) – surface pit0.050 0.050 0.052 0.064 
Ore grade milled – Gold (oz./ton) – combined0.128 0.140 0.120 0.138 
Ore grade milled – Silver (oz./ton)0.02 0.03 0.03 0.03 
Gold produced (oz.) – underground30,467 36,367 80,315 99,632 
Gold produced (oz.) – surface pit6,080 7,614 19,301 27,248 
Gold produced (oz.) – total36,547 43,981 99,616 126,880 
Cash cost, after by-product credits, per gold ounce (1)$966 $686 $1,055 $760 
AISC, after by-product credits, per gold ounce (1)$1,348$896$1,373$1,004
Capital additions (in thousands)$13,239 $8,244 $28,360 $27,120 
Nevada Operations    
Tons of ore milled63,954 55,899 163,736 55,899 
Mining cost per ton$149.16 $186.12 $158.25 $186.12 
Milling cost per ton$67.66 $70.39 $81.73 $70.39 
Ore grade milled – Gold (oz./ton)0.389 0.288 0.320 0.288 
Silver produced (oz.)43,377 84,145 160,264 84,145 
Gold produced (oz.)22,381 13,789 45,439 13,789 
Cash cost, after by-product credits, per silver ounce(1)$817 $1,179 $1,165 $1,179 
AISC, after by-product credits, per silver ounce(1)$992 $1,932 $1,841 $1,932 
Capital additions (in thousands)$2,502 $14,998 $41,576 $14,998 
(1) Cash cost, after by-product credits, per ounce and AISC, after by-product credits. per ounce represent non-U.S. Generally Accepted Accounting Principles (GAAP) measurements. A reconciliation of cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) to cash cost, after by-product credits can be found in the cash cost per ounce reconciliation section of this news release. Gold, lead and zinc produced have been treated as by-product credits in calculating silver costs per ounce. The primary metal produced at Casa Berardi is gold, with a by-product credit for the value of silver production.

Non-GAAP Measures
(Unaudited)

Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP)

The tables below present reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion and amortization to the non-GAAP measures of Cash Cost, Before By-product Credits, Cash Cost, After By-product Credits, AISC, Before By-product Credits and AISC, After By-product Credits for our operations at the Greens Creek, Lucky Friday, San Sebastian, Casa Berardi and Nevada Operations units for the three- and nine-month periods ended September 30, 2019 and 2018.

Cash Cost, After By-product Credits, per Ounce is an important operating statistic that we utilize to measure each mine’s operating performance. AISC, After By-product Credits, per Ounce is an important operating statistic that we utilize as a measure of our mines’ net cash flow after costs for exploration, pre-development, reclamation, and sustaining capital. Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce also allow us to benchmark the performance of each of our mines versus those of our competitors. As a silver and gold 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 and aggregating Casa Berardi and Nevada Operations for comparison with other gold mining companies. Similarly, these statistics are useful in identifying acquisition and investment opportunities as they provide a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics.

Cash Cost, Before By-product Credits and AISC, Before By-product Credits include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs, royalties and mining production taxes. AISC, Before By-product Credits for each mine also includes on-site exploration, reclamation, and sustaining capital costs. AISC, Before By-product Credits for our consolidated silver properties also includes corporate costs for general and administrative expense, reclamation, exploration, and pre-development. By-product credits include revenues earned from all metals other than the primary metal produced at each unit. As depicted in the tables below, by-product credits comprise an essential element of our silver unit cost structure, distinguishing our silver operations due to the polymetallic nature of their orebodies. Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce provide management and investors an indication of operating cash flow, after consideration of the average price, received from production. We also use these measurements for the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective. Cash Cost, After By-product Credits, per Ounce is a measure developed by precious metals companies (including the Silver Institute) in an effort to provide a uniform standard for comparison purposes. There can be no assurance, however, that our reporting of these non-GAAP measures are the same as those reported by other mining companies.

The Casa Berardi and Nevada Operations sections below report Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce for the production of gold, their primary product, and by-product revenues earned from silver, which is a by-product at Casa Berardi and Nevada Operations. 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 and Nevada Operations units are not included as a by-product credit when calculating CashCost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the total of Greens Creek, Lucky Friday and San Sebastian, our combined silver properties.

In thousands (except per ounce amounts) Three Months Ended September 30, 2019
  Greens
Creek
 Lucky
Friday(2)
 San
Sebastian
 Corporate(3) Total Silver
Cost of sales and other direct production costs and depreciation, depletion and amortization $40,475  4,018  $12,842    $57,335 
Depreciation, depletion and amortization (9,008) (300) (3,326)   (12,634)
Treatment costs 13,003  500  63    13,566 
Change in product inventory 8,456  (134) (335)   7,987 
Reclamation and other costs (92)   (294)   (386)
Exclusion of Lucky Friday costs   (4,084)     (4,084)
Cash Cost, Before By-product Credits (1) 52,834    8,950    61,784 
Reclamation and other costs 737    123    860 
Exploration 465    1,252  167  1,884 
Sustaining capital 8,966    528    9,494 
General and administrative       7,978  7,978 
AISC, Before By-product Credits (1) 63,002    10,853    82,000 
By-product credits:          
Zinc (22,452)       (22,452)
Gold (17,517)   (6,946)   (24,463)
Lead (7,649)       (7,649)
Total By-product credits (47,618)   (6,946)   (54,564)
Cash Cost, After By-product Credits $5,216  $  $2,004    $7,220 
AISC, After By-product Credits $15,384  $  $3,907    $27,436 
Divided by silver ounces produced 2,544    541    3,085 
Cash Cost, Before By-product Credits, per Silver Ounce $20.77  $  $16.54    $20.03 
By-product credits per ounce (18.72)   (12.84)   (17.69)
Cash Cost, After By-product Credits, per Silver Ounce $2.05  $  $3.70    $2.34 
AISC, Before By-product Credits, per Silver Ounce $24.77  $  $20.05    $26.58 
By-product credits per ounce (18.72)   (12.84)   (17.69)
AISC, After By-product Credits, per Silver Ounce $6.05  $  $7.21    $8.89 
In thousands (except per ounce amounts) Three Months Ended September 30, 2019
  Casa Berardi Nevada Operations (4) Total Gold
Cost of sales and other direct production costs and depreciation, depletion and amortization $53,006  $36,311  $89,317 
Depreciation, depletion and amortization (19,090) (19,050) (38,140)
Treatment costs 561  45  606 
Change in product inventory 1,070  2,118  3,188 
Reclamation and other costs (129) (377) (506)
Cash Cost, Before By-product Credits (1) 35,418  19,047  54,465 
Reclamation and other costs 130  378  508 
Exploration 603  1,232  1,835 
Sustaining capital 13,237  2,305  15,542 
AISC, Before By-product Credits (1) 49,388  22,962  72,350 
By-product credits:      
Silver (111) (755) (866)
Total By-product credits (111) (755) (866)
Cash Cost, After By-product Credits $35,307  $18,292  $53,599 
AISC, After By-product Credits $49,277  $22,207  $71,484 
Divided by gold ounces produced 37  22  59 
Cash Cost, Before By-product Credits, per Gold Ounce $969  $851  $924 
By-product credits per ounce (3) (34) (15)
Cash Cost, After By-product Credits, per Gold Ounce $966  $817  $909 
AISC, Before By-product Credits, per Gold Ounce $1,351  $1,026  $1,228 
By-product credits per ounce (3) (34) (15)
AISC, After By-product Credits, per Gold Ounce $1,348  $992  $1,213 
In thousands (except per ounce amounts) Three Months Ended September 30, 2019
  Total Silver Total Gold Total
Cost of sales and other direct production costs and depreciation, depletion and amortization $57,335  89,317  $146,652 
Depreciation, depletion and amortization (12,634) (38,140) (50,774)
Treatment costs 13,566  606  14,172 
Change in product inventory 7,987  3,188  11,175 
Reclamation and other costs (386) (506) (892)
Exclusion of Lucky Friday costs (4,084)   (4,084)
Cash Cost, Before By-product Credits (1) 61,784  54,465  116,249 
Reclamation and other costs 860  508  1,368 
Exploration 1,884  1,835  3,719 
Sustaining capital 9,494  15,542  25,036 
General and administrative 7,978    7,978 
AISC, Before By-product Credits (1) 82,000  72,350  154,350 
By-product credits:      
Zinc (22,452)   (22,452)
Gold (24,463)   (24,463)
Lead (7,649)   (7,649)
Silver   (866) (866)
Total By-product credits (54,564) (866) (55,430)
Cash Cost, After By-product Credits $7,220  $53,599  $60,819 
AISC, After By-product Credits $27,436  $71,484  $98,920 
Divided by ounces produced 3,085  59   
Cash Cost, Before By-product Credits, per Ounce $20.03  $924   
By-product credits per ounce (17.69) (15)  
Cash Cost, After By-product Credits, per Ounce $2.34  $909   
AISC, Before By-product Credits, per Ounce $26.58  $1,228   
By-product credits per ounce (17.69) (15)  
AISC, After By-product Credits, per Ounce $8.89  $1,213   
In thousands (except per ounce amounts) Three Months Ended September 30, 2018
  Greens
Creek
 Lucky
Friday(2)
 San
Sebastian
 Corporate(3) Total Silver
Cost of sales and other direct production costs and depreciation, depletion and amortization $52,163  $(1) $14,325    $66,487 
Depreciation, depletion and amortization (12,428)   (1,795)   (14,223)
Treatment costs 8,267  134  205    8,606 
Change in product inventory (4,480)   (1,549)   (6,029)
Reclamation and other costs (965) 103  (458)   (1,320)
Exclusion of Lucky Friday costs   (236)     (236)
Cash Cost, Before By-product Credits (1) 42,557    10,728    53,285 
Reclamation and other costs 849    105    954 
Exploration 1,771    1,982  473  4,226 
Sustaining capital 11,029    486  704  12,219 
General and administrative       10,327  10,327 
AISC, Before By-product Credits (1) 56,206    13,301    81,011 
By-product credits:          
Zinc (20,674)       (20,674)
Gold (12,229)   (4,450)   (16,679)
Lead (6,041)       (6,041)
Total By-product credits (38,944)   (4,450)   (43,394)
Cash Cost, After By-product Credits $3,613  $  $6,278    $9,891 
AISC, After By-product Credits $17,262  $  $8,851    $37,617 
Divided by ounces produced 1,876    522    2,398 
Cash Cost, Before By-product Credits, per Ounce $22.67    $20.55    $22.22 
By-product credits per ounce (20.75)   (8.53)   (18.10)
Cash Cost, After By-product Credits, per Ounce $1.92  $  $12.02    $4.12 
AISC, Before By-product Credits, per Ounce $29.95    $25.48    $33.78 
By-product credits per ounce (20.75)   (8.53)   (18.10)
AISC, After By-product Credits, per Ounce $9.20  $  $16.95    $15.68 
In thousands (except per ounce amounts) Three Months Ended September 30, 2018
  Casa Berardi Nevada Operations (4) Total Gold
Cost of sales and other direct production costs and depreciation, depletion and amortization $51,267  $19,319  $70,586 
Depreciation, depletion and amortization (20,054) (9,187) (29,241)
Treatment costs 535  42  577 
Change in product inventory (1,303) 7,311  6,008 
Reclamation and other costs (140)   (140)
Cash Cost, Before By-product Credits (1) 30,305  17,485  47,790 
Reclamation and other costs 138    138 
Exploration 854  3,322  4,176 
Sustaining capital 8,244  7,061  15,305 
AISC, Before By-product Credits (1) 39,541  27,868  67,409 
By-product credits:      
Silver (142) (1,232) (1,374)
Total By-product credits (142) (1,232) (1,374)
Cash Cost, After By-product Credits $30,163  $16,253  $46,416 
AISC, After By-product Credits $39,399  $26,636  $66,035 
Divided by ounces produced 44  14  58 
Cash Cost, Before By-product Credits, per Ounce $689  $1,268  $827 
By-product credits per ounce (3) (89) (24)
Cash Cost, After By-product Credits, per Ounce $686  $1,179  $803 
AISC, Before By-product Credits, per Ounce $899  $2,021  $1,167 
By-product credits per ounce (3) (89) (24)
AISC, After By-product Credits, per Ounce $896  $1,932  $1,143 
In thousands (except per ounce amounts) Three Months Ended September 30, 2018
  Total Silver Total Gold Total
Cost of sales and other direct production costs and depreciation, depletion and amortization $66,487  70,586  $137,073 
Depreciation, depletion and amortization (14,223) (29,241) (43,464)
Treatment costs 8,606  577  9,183 
Change in product inventory (6,029) 6,008  (21)
Reclamation and other costs (1,320) (140) (1,460)
Exclusion of Lucky Friday costs (236)   (236)
Cash Cost, Before By-product Credits (1) 53,285  47,790  101,075 
Reclamation and other costs 954  138  1,092 
Exploration 4,226  4,176  8,402 
Sustaining capital 12,219  15,305  27,524 
General and administrative 10,327    10,327 
AISC, Before By-product Credits (1) 81,011  67,409  148,420 
By-product credits:      
Zinc (20,674)   (20,674)
Gold (16,679)   (16,679)
Lead (6,041)   (6,041)
Silver   (1,374) (1,374)
Total By-product credits (43,394) (1,374) (44,768)
Cash Cost, After By-product Credits $9,891  $46,416  $56,307 
AISC, After By-product Credits $37,617  $66,035  $103,652 
Divided by ounces produced 2,398  58   
Cash Cost, Before By-product Credits, per Ounce $22.22  $827   
By-product credits per ounce (18.10) (24)  
Cash Cost, After By-product Credits, per Ounce $4.12  $803   
AISC, Before By-product Credits, per Ounce $33.78  $1,167   
By-product credits per ounce (18.10) (24)  
AISC, After By-product Credits, per Ounce $15.68  $1,143   
In thousands (except per ounce amounts) Nine Months Ended September 30, 2019
  Greens
Creek
 Lucky
Friday(2)
 San
Sebastian
 Corporate(3) Total Silver
Cost of sales and other direct production costs and depreciation, depletion and amortization $140,237  $11,149  $36,338    $187,724 
Depreciation, depletion and amortization (32,228) (891) (6,934)   (40,053)
Treatment costs 34,319  1,834  432    36,585 
Change in product inventory 9,168  708  (1,378)   8,498 
Reclamation and other costs (1,439)   (1,030)   (2,469)
Exclusion of Lucky Friday costs   (12,800)     (12,800)
Cash Cost, Before By-product Credits (1) 150,057    27,428    177,485 
Reclamation and other costs 2,212    369    2,581 
Exploration 625    4,452  1,105  6,182 
Sustaining capital 22,943    1,496  73  24,512 
General and administrative       26,855  26,855 
AISC, Before By-product Credits (1) 175,837    33,745    237,615 
By-product credits:          
Zinc (67,957)       (67,957)
Gold (49,385)   (16,193)   (65,578)
Lead (20,764)       (20,764)
Total By-product credits (138,106)   (16,193)   (154,299)
Cash Cost, After By-product Credits $11,951  $  $11,235    $23,186 
AISC, After By-product Credits $37,731  $  $17,552    $83,316 
Divided by silver ounces produced 7,149    1,446    8,595 
Cash Cost, Before By-product Credits, per Silver Ounce $20.99  $  $18.97    $20.65 
By-product credits per ounce (19.32)   (11.20)   (17.95)
Cash Cost, After By-product Credits, per Silver Ounce $1.67  $  $7.77    $2.70 
AISC, Before By-product Credits, per Silver Ounce $24.60  $  $23.34    $27.65 
By-product credits per ounce (19.32)   (11.20)   (17.95)
AISC, After By-product Credits, per Silver Ounce $5.28  $  $12.14    $9.70 
In thousands (except per ounce amounts) Nine Months Ended September 30, 2019
  Casa Berardi Nevada
Operations (4)
 Total Gold
Cost of sales and other direct production costs and depreciation, depletion and amortization $157,239  $105,277  $262,516 
Depreciation, depletion and amortization (53,806) (45,179) (98,985)
Treatment costs 1,429  119  1,548 
Change in product inventory 971  (3,097) (2,126)
Reclamation and other costs (385) (1,641) (2,026)
Cash Cost, Before By-product Credits (1) 105,448  55,479  160,927 
Reclamation and other costs 386  1,134  1,520 
Exploration 2,890  2,048  4,938 
Sustaining capital 28,360  27,565  55,925 
AISC, Before By-product Credits (1) 137,084  86,226  223,310 
By-product credits:      
Silver (328) (2,551) (2,879)
Total By-product credits (328) (2,551) (2,879)
Cash Cost, After By-product Credits $105,120  $52,928  $158,048 
AISC, After By-product Credits $136,756  $83,675  $220,431 
Divided by gold ounces produced 100  45  145 
Cash Cost, Before By-product Credits, per Gold Ounce $1,058  $1,221  $1,109 
By-product credits per ounce (3) (56) (20)
Cash Cost, After By-product Credits, per Gold Ounce $1,055  $1,165  $1,089 
AISC, Before By-product Credits, per Gold Ounce $1,376  $1,897  $1,540 
By-product credits per ounce (3) (56) (20)
AISC, After By-product Credits, per Gold Ounce $1,373  $1,841  $1,520 
In thousands (except per ounce amounts) Nine Months Ended September 30, 2019
  Total Silver Total Gold Total
Cost of sales and other direct production costs and depreciation, depletion and amortization $187,724  262,516  $450,240 
Depreciation, depletion and amortization (40,053) (98,985) (139,038)
Treatment costs 36,585  1,548  38,133 
Change in product inventory 8,498  (2,126) 6,372 
Reclamation and other costs (2,469) (2,026) (4,495)
Exclusion of Lucky Friday costs (12,800)   (12,800)
Cash Cost, Before By-product Credits (1) 177,485  160,927  338,412 
Reclamation and other costs 2,581  1,520  4,101 
Exploration 6,182  4,938  11,120 
Sustaining capital 24,512  55,925  80,437 
General and administrative 26,855    26,855 
AISC, Before By-product Credits (1) 237,615  223,310  460,925 
By-product credits:      
Zinc (67,957)   (67,957)
Gold (65,578)   (65,578)
Lead (20,764)   (20,764)
Silver   (2,879) (2,879)
Total By-product credits (154,299) (2,879) (157,178)
Cash Cost, After By-product Credits $23,186  $158,048  $181,234 
AISC, After By-product Credits $83,316  $220,431  $303,747 
Divided by ounces produced 8,595  145   
Cash Cost, Before By-product Credits, per Ounce $20.65  $1,109   
By-product credits per ounce (17.95) (20)  
Cash Cost, After By-product Credits, per Ounce $2.70  $1,089   
AISC, Before By-product Credits, per Ounce $27.65  $1,540   
By-product credits per ounce (17.95) (20)  
AISC, After By-product Credits, per Ounce $9.70  $1,520   
In thousands (except per ounce amounts) Nine Months Ended September 30, 2018
  Greens
Creek
 Lucky
Friday(2)
 San
Sebastian
 Corporate(3) Total Silver
Cost of sales and other direct production costs and depreciation, depletion and amortization $141,763  $5,844  $31,177    $178,784 
Depreciation, depletion and amortization (34,880) (803) (3,586)   (39,269)
Treatment costs 29,136  761  627    30,524 
Change in product inventory 995  (2,182) 1,858    671 
Reclamation and other costs (2,323)   (1,374)   (3,697)
Exclusion of Lucky Friday costs   (3,620)     (3,620)
Cash Cost, Before By-product Credits (1) 134,691    28,702    163,393 
Reclamation and other costs 2,548    314    2,862 
Exploration 2,909    6,628  1,351  10,888 
Sustaining capital 34,694    1,119  1,338  37,151 
General and administrative       27,849  27,849 
AISC, Before By-product Credits (1) 174,842    36,763    242,143 
By-product credits:          
Zinc (80,308)       (80,308)
Gold (43,237)   (15,505)   (58,742)
Lead (24,037)       (24,037)
Total By-product credits (147,582)   (15,505)   (163,087)
Cash Cost, After By-product Credits $(12,891) $  $13,197    $306 
AISC, After By-product Credits $27,260  $  $21,258    $79,056 
Divided by ounces produced 5,789    1,594    7,383 
Cash Cost, Before By-product Credits, per Ounce $23.27  $  $18.01    $22.14 
By-product credits per ounce (25.49)   (9.73)   (22.09)
Cash Cost, After By-product Credits, per Ounce $(2.22) $  $8.28    $0.05 
AISC, Before By-product Credits, per Ounce $30.20    $23.07    $32.80 
By-product credits per ounce (25.49)   (9.73)   (22.09)
AISC, After By-product Credits, per Ounce $4.71  $  $13.34    $10.71 
In thousands (except per ounce amounts) Nine Months Ended September 30, 2018
  Casa Berardi Nevada
Operations (4)
 Total Gold
Cost of sales and other direct production costs and depreciation, depletion and amortization $152,150  $19,319  $171,469 
Depreciation, depletion and amortization (54,879) (9,187) (64,066)
Treatment costs 1,628  42  1,670 
Change in product inventory (1,482) 7,311  5,829 
Reclamation and other costs (421)   (421)
Cash Cost, Before By-product Credits (1) 96,996  17,485  114,481 
Reclamation and other costs 421    421 
Exploration 3,374  3,322  6,696 
Sustaining capital 27,120  7,061  34,181 
AISC, Before By-product Credits (1) 127,911  27,868  155,779 
By-product credits:      
Silver (491) (1,232) (1,723)
Total By-product credits (491) (1,232) (1,723)
Cash Cost, After By-product Credits $96,505  $16,253  $112,758 
AISC, After By-product Credits $127,420  $26,636  $154,056 
Divided by ounces produced 127  14  141 
Cash Cost, Before By-product Credits, per Ounce $764  $1,268  $814 
By-product credits per ounce (4) (89) (12)
Cash Cost, After By-product Credits, per Ounce $760  $1,179  $802 
AISC, Before By-product Credits, per Ounce $1,008  $2,021  $1,107 
By-product credits per ounce (4) (89) (12)
AISC, After By-product Credits, per Ounce $1,004  $1,932  $1,095 
In thousands (except per ounce amounts) Nine Months Ended September 30, 2018
  Total Silver Total Gold Total
Cost of sales and other direct production costs and depreciation, depletion and amortization $178,784  171,469  $350,253 
Depreciation, depletion and amortization (39,269) (64,066) (103,335)
Treatment costs 30,524  1,670  32,194 
Change in product inventory 671  5,829  6,500 
Reclamation and other costs (3,697) (421) (4,118)
Exclusion of Lucky Friday costs (3,620)   (3,620)
Cash Cost, Before By-product Credits (1) 163,393  114,481  277,874 
Reclamation and other costs 2,862  421  3,283 
Exploration 10,888  6,696  17,584 
Sustaining capital 37,151  34,181  71,332 
General and administrative 27,849    27,849 
AISC, Before By-product Credits (1) 242,143  155,779  397,922 
By-product credits:      
Zinc (80,308)   (80,308)
Gold (58,742)   (58,742)
Lead (24,037)   (24,037)
Silver   (1,723) (1,723)
Total By-product credits (163,087) (1,723) (164,810)
Cash Cost, After By-product Credits $306  $112,758  $113,064 
AISC, After By-product Credits $79,056  $154,056  $233,112 
Divided by ounces produced 7,383  141   
Cash Cost, Before By-product Credits, per Ounce $22.14  $814   
By-product credits per ounce (22.09) (12)  
Cash Cost, After By-product Credits, per Ounce $0.05  $802   
AISC, Before By-product Credits, per Ounce $32.80  $1,107   
By-product credits per ounce (22.09) (12)  
AISC, After By-product Credits, per Ounce $10.71  $1,095   
(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 2019, costs related to suspension of full production totaling approximately $5.7 million, along with $3.1 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.
 
 (4) Nevada operations acquired on July 20, 2018.

Reconciliation of Net Loss Income Applicable to Common Shareholders (GAAP) to Adjusted Net Loss Applicable to Common Stockholders (non-GAAP)

This release refers to a non-GAAP measure of adjusted net loss applicable to common stockholders and adjusted net loss per share, which are indicators of our performance. They exclude certain impacts which are of a nature which we believe are not reflective of our underlying performance. Management believes that adjusted net loss per common share provides investors with the ability to better evaluate our underlying operating performance.

Dollars are in thousands (except per share amounts) Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Net loss applicable to common shareholders (GAAP) $(19,654) $(23,322) $(91,995) $(3,284)
Adjusting items:        
Loss (gain) on derivatives contracts 4,718  (19,460) 2,719  (40,271)
Environmental accruals 472    472   
Foreign exchange (gain) loss (773) 2,212  6,741  (2,856)
Provisional price (gains) losses (619) 640  81  3,272 
Suspension-related costs 3,722  6,519  8,766  18,337 
Acquisition costs 183  6,139  593  9,656 
Loss (gain) on disposition or impairment of properties, plants, equipment and mineral interests 24  (3,208) 4,666  (3,374)
Unrealized loss on investments 126  2,207  1,159  2,461 
Adjusted net loss applicable to common shareholders $(11,801) $(28,273) $(66,798) $(16,059)
Weighted average shares – basic 489,971  452,636  486,298  417,532 
Weighted average shares – diluted 489,971  452,636  486,298  417,532 
Basic adjusted net loss per common share $(0.02) $(0.06) $(0.14) $(0.04)
Diluted adjusted net loss per common share $(0.02) $(0.06) $(0.14) $(0.04)

Reconciliation of Net 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 twelve months (or “LTM adjusted EBITDA”), which is a measure of our ability to service our debt. Adjusted EBITDA is calculated as net loss before the following items: interest expense, income tax provision, depreciation, depletion, and amortization expense, acquisition costs, foreign exchange gains and losses, unrealized 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, RQ Notes, revolving credit facility, finance leases, and other notes payable, less our cash and cash equivalents. Management believes that, when presented in conjunction with comparable GAAP measures, Adjusted EBITDA and net debt to LTM adjusted EBITDA are useful to investors in evaluating our operating performance and ability to meet our debt obligations. The following table reconciles net loss and debt to Adjusted EBITDA and net debt:

Dollars are in thousands Three Months Ended Nine Months Ended Twelve Months Ended
  Sept 30,
2019
 Sept 30,
2018
 Sept 30,
2019
 Sept 30,
2018
 Sept 30,
2019
 Sept 30,
2018
Net loss $(19,516) $(23,184) $(91,581) $(2,870) $(115,274) $(31,837)
Plus: Interest expense 11,777  10,146  33,777  30,019   44,702  39,608 
Plus/(Less): Income taxes (1,614) (2,679) (20,009) (1,484)  (25,226) 37,043 
Plus: Depreciation, depletion and amortization 50,774  43,464  139,038  103,335   169,747  136,948 
Plus: Acquisition costs 183  6,139  593  9,656   982  9,656 
Plus: Lucky Friday suspension-related costs 3,722  6,519  8,766  18,337   11,122  25,253 
Plus: Deferred revenue net of production costs 10,912    10,912     10,912   
Less: Loss (gain) on disposition of properties, plants, equipment and mineral interests 24  (3,208) 4,666  (3,374)  5,247  (4,492)
Plus: Stock-based compensation 1,206  2,232  4,758  4,636   6,364  6,016 
Plus: Provision for closed operations and environmental matters 2,089  1,317  5,298  3,957   7,431  5,086 
Plus/(Less): Foreign exchange (gain) loss (773) 2,212  6,741  (2,856)  (713) (3,434)
Plus/(Less): Unrealized losses (gains) on derivative contracts 11,326  18,253  8,924  (7,955)  8,943  (4,109)
(Less)/Plus: Provisional price (gains) losses (619) 640  81  3,272   612  3,094 
(Less)/Plus: Other 295  2,589  3,639  2,791   4,605  2,457 
Adjusted EBITDA $69,786  $64,440  $115,603  $157,464  $129,454  $221,289 
Total debt   $598,891  $548,774 
Less: Cash and cash equivalents   $(32,995) $(60,856)
Net debt   $565,896  $487,918 
Net debt/LTM adjusted EBITDA (non-GAAP)    4.4   2.2 

Reconciliation of Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)

This release refers to a non-GAAP measure of free cash flow, calculated as cash provided by operating activities, less additions to properties, plants, equipment and mineral interests. 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 Nine Months Ended
  Sept 30,
2019
 Sept 30,
2018
 Sept 30,
2019
 Sept 30,
2018
Cash provided by operating activities $54,896  $28,192  $63,609  $75,210 
Less: Additions to properties, plants equipment and mineral interests (26,093) (39,981) (97,338) (83,285)
         
Free cash flow $28,803  $(11,789) $(33,729) $(8,075)
       
Table 1 – Assay Results
       
Casa Berardi (Quebec)      
ZoneDrill Hole
Number
Drill Hole
Section
Drill Hole
Azm/Dip
Sample
From
(feet)
Sample
To
(feet)
True
Width
(feet)
Gold
(oz/ton)
Depth
From Mine
Surface
(feet)
Surface West Mine 105 AreaCBF-105-03910704360/-65472.3629.842.60.04525
105CBF-105-04010545360/-68460.5526.425.90.03482
105CBF-105-04110525360/-45324.7340.811.80.06259
105CBF-105-04210420360/-48329.3342.18.20.12273
105including331.0334.62.30.25271
105CBF-105-04210418360/-48472.3478.94.60.17374
105CBF-105-04210418360/-48511.7521.57.20.15403
Underground Principal Mine 119 AreaCBP-078011895200/42265.7280.413.80.141548
123CBP-080812253183/1246.0284.732.00.353328
123CBP-080812250183/1334.6359.224.30.143322
123CBP-084412275189/-16270.6300.128.60.101838
123CBP-084512265199/29310.3324.711.90.331622
Upper 124 AreaPTR-17041236548/40152.5177.813.80.15456
124including175.2177.82.00.76447
124PTR-170512422360/4998.4113.211.50.37467
124including103.3108.23.30.60467
East Mine 148 Area level 485-525CBE-017114750343/-341072.61090.616.10.452162
148including1084.41090.64.90.872165
148CBE-017214773346/-331036.21062.722.30.652120
148including1044.71059.812.81.052121
148CBE-017314769346/-391118.51151.326.60.632257
148including1130.91148.013.41.122260
148CBE-017414815355/-331044.41071.924.30.382107
148including1044.41048.03.00.672102
148including1065.71069.03.01.062112
148CBE-017514814355/-371087.61116.823.60.182188
148CBE-017614817355/-291021.71056.230.20.162074
148including1048.01052.94.60.472079
148CBE-017714755340/-24993.81011.915.20.782008
148CBE-017814758340/-291016.81034.514.71.032061
148CBE-0495-00214880304/-141425.91468.98.50.111729
148Including1442.01451.72.00.411729
148CBE-0525-0061481736/24204.5263.613.10.141687
148Including247.5263.63.30.341685
148CBE-0525-00914835360/-44.5136.7177.69.80.191750
148Including145.3161.43.60.411749
148CBE-018714820358/-273395.13443.613.10.182062
148Including3422.03432.82.60.372063
Surface East Mine 148 AreaCBF-148-07614534360/-46157.4250.964.00.03121
148including226.3236.27.20.14175
148CBF-148-0791458020/-53216.5236.210.80.06192
148including216.5221.42.60.21186
148CBF-148-0801459733/-48246.0314.948.50.06214
148including290.3305.08.50.15226
Explo Underground East Mine 148CBE-017914745334/-22993.81012.515.70.302002
148including1005.61012.55.20.792005
148CBE-018014785349/-301018.41036.513.80.222065
148including1018.41026.05.60.442063
148CBE-018114785349/-36998.81011.99.80.112126
148including1000.41005.63.90.232125
148CBE-018114783349/-361061.41096.828.90.142163
148including1079.11092.29.80.232167
Explo Underground West Mine 113CBW-114811436200/-35417.5427.15.60.153479
113CBW-114911453200/-16167.3176.18.50.133304
113CBW-114911439200/-16331.6342.410.50.113340
113CBW-114911436200/-16369.3373.94.30.263346
113CBW-114911432200/-16416.6417.91.20.133354
Explo Underground Lower 118CBP-0818116900/-15194.2196.87.90.133384
118CBP-0818116910/-15664.9678.613.10.163391
118including664.9669.13.60.483390
118CBP-0818116950/-15795.4800.34.80.143417
Surface East Mine 152 AreaCBS-19-92315313153/-55478.9482.22.30.21392
Explo Surface East Mine 160 AreaCBF-160-08715955360/-59681.9757.764.00.08625
160including681.9703.618.00.21602
160CBF-160-089159422/-65669.1744.632.80.08651
160including688.8713.111.20.15646
160CBF-160-09115944360/-78531.4701.942.60.04616
160including531.4539.61.60.22538
 
San Sebastian (Mexico)
ZoneDrill Hole
Number
Sample
From
(ft)
Sample To
(ft)
Width
(feet)
True Width
(feet)
Gold
(oz/ton)
Silver
(oz/ton)
Depth From Mine
Surface (feet)
Explo El Toro VeinSS-1827156.7170.613.813.20.108.195
El Toro VeinSS-1840209.9219.09.17.60.128.1163
El Toro VeinSS-1841297.9306.28.36.90.1614.6240
El Toro VeinSS-1842388.3411.122.817.20.138.5325
El Toro VeinSS-1843214.4222.48.06.60.3821.2168
El Toro VeinSS-1844303.3310.26.95.50.139.5245
El Toro VeinSS-1845392.9413.220.316.40.1110.0328
El Toro VeinSS-1846505.9509.13.22.30.2915.5420
El Toro VeinSS-1849132.0146.614.714.30.084.378
El Toro VeinSS-1850112.4115.32.92.80.1216.462
El Toro VeinSS-1852194.0198.94.93.70.1416.6151
El Toro VeinSS-1853277.9287.19.26.60.079.4225
El Toro VeinSS-1854348.1350.52.31.80.1310.0286
El Toro VeinSS-1855446.0454.68.66.40.1215.4374
El Toro VeinSS-1856417.0423.76.75.20.066.0345
El Toro VeinSS-1857505.8513.27.45.80.1219.0422
El Toro VeinSS-1859170.3176.15.84.80.048.1135
El Toro VeinSS-1860300.6305.04.53.70.054.9247
El Toro VeinSS-1863394.1402.98.86.80.3233.0329
El Toro VeinSS-186680.888.67.87.20.086.644
El Toro VeinSS-1867171.9179.27.35.40.096.8137
El Toro HW VeinSS-1828129.0135.76.86.50.055.182
Middle VeinSS-MV-100-071258.1263.55.45.00.0822.5553
Middle VeinSS-MV-100-072213.8217.84.03.80.137.5545
        
Greens Creek (Alaska)
ZoneDrill Hole
Number
Drillhole
Azm/Dip
Sample
From
Sample
To
True
Width
(feet)
Silver
(oz/ton)
Gold
(oz/ton)
Zinc
(%)
Lead
(%)
Depth From
Mine Portal
(feet)
Northwest West DefinitionGC525963/-36154.4182.327.711.70.066.63.7-826
 GC526663/-22179.0187.87.616.90.0317.99.5-783
 GC527063/-39163.5165.01.528.60.0822.711.1-820
 GC527463/-2248.5258.05.821.20.045.83.3-721
 GC527463/-2269.0279.05.720.80.0511.05.8-721
 GC527463/-2310.6332.618.013.30.044.83.0-720
 GC527463/-2471.8473.51.39.00.119.44.2-717
 GC527763/-1333.0366.532.229.50.2110.05.7-704
 GC527863/4309.0313.02.110.00.035.12.6-698
 GC527863/4330.0339.56.433.60.0511.76.3-697
 GC527863/4351.5356.53.512.30.182.01.0-691
 GC527863/4504.4507.02.520.20.3211.75.8-690
 GC528063/2340.2367.126.618.50.149.05.4-708
 GC528063/2484.7491.96.48.30.067.23.3-710
 GC528563/-1335.0338.02.622.20.361.00.5-709
 GC528563/-1353.0355.72.227.70.0810.25.2-708
 GC528563/-1541.1543.01.421.70.0312.08.9-695
 GC528863/32444.4446.01.610.40.0112.94.0-487
 GC528863/32452.0453.01.08.40.0110.93.7-483
 GC528863/32528.0545.010.07.20.059.33.2-441
 GC529263/40345.8347.01.111.40.019.23.1-483
 GC529363/-5314.1343.224.715.60.108.34.6-736
 GC529463/-20239.0252.08.742.80.2030.321.1-798
East DefinitionGC526463/-30325.9330.44.316.70.2016.54.0485
 GC526463/-30345.5347.21.714.50.1724.211.0482
 GC526563/-46286.7302.415.66.70.139.92.3424
 GC526863/-65328.9333.74.538.30.2610.62.1337
 GC527263/-55342.3345.52.172.10.235.12.9196
 GC527663/-77458.0469.310.631.70.359.94.0367
 GC529063/-50338.5341.02.4114.40.234.91.7399
 GC529163/-73414.0423.08.017.20.3012.44.6251
 GC530863/-71314.5317.02.316.10.159.31.8342
 GC530863/-71322.0323.01.012.80.0319.04.3337
 GC530863/-71325.5326.51.017.00.089.03.8333
 GC531863/-5405.3406.31.07.40.1611.94.5605
 GC531863/-5408.5409.51.07.30.0813.54.6605
 GC531963/4431.0432.00.918.90.5515.47.1678
 GC532063/-34322.6325.02.48.60.1410.85.2467
 GC532363/-44294.5298.53.96.90.2129.46.7432
9A DefinitionGC5299243/-2235.7239.53.613.60.0318.510.1-390
 GC530061/29268.0269.71.52.40.0421.59.1-176
 GC5304254/-2286.0292.01.113.80.0321.611.6-391
 GC531378/-6281.0293.07.617.50.1618.24.0-347
 GC531584/-6423.0424.00.921.50.1423.44.1-370
 GC530249/33295.0303.07.129.20.111.00.2-159
       
Fire Creek (Nevada)
ZoneDrill Hole
Number
Drill Hole
Azm/Dip
Sample
From (feet)
Sample To
(feet)
Width
(feet)
True Width
(feet)
Gold
(oz/ton)
Silver
(oz/ton)
Depth From
Mine Portal
(feet)
Spiral 2FCU-112045/9167.7168.91.21.10.320.3-663
Spiral 2FCU-112394/10123.3135.412.111.81.060.4-663
Spiral 2FCU-113465/00.03.03.02.90.510.3-626
Spiral 2FCU-113465/025.029.04.03.90.210.3-626
Spiral 2FCU-1135115/255.06.21.20.80.640.9-626
Spiral 2FCU-113675/01.92.91.01.00.290.3-628
Spiral 2FCU-113875/012.513.81.31.22.872.9-626
Spiral 2FCU-116753/010.729.218.513.60.230.3-726
Spiral 2including27.129.22.11.51.020.3-726
Spiral 2FCU-116753/063.764.71.00.80.730.3-726
Spiral 2FCU-116920/205.08.33.32.84.652.1-723
Spiral 2FCU-116920/2020.026.56.56.00.180.3-716
Spiral 2FCU-116920/2028.243.215.013.51.641.0-714
Spiral 2FCU-116920/2045.850.04.23.10.180.3-709
Spiral 2FCU-1157A45/0125.4126.71.31.10.700.3-71
Spiral 2FCU-115845/-2554.656.72.11.60.101.5-95
Spiral 2FCU-1160100/031.832.50.70.61.500.9-71
Spiral 2FCU-116274/-246.39.43.1unknown0.150.3154
Spiral 2FCU-116390/-27182.9197.414.57.50.430.471
Spiral 2FCU-116390/-27253.4255.42.01.51.070.742
Spiral 2FCU-116390/-27283.0286.73.72.50.280.328
Spiral 2FCU-116568/-20123.5125.01.5unknown0.590.3110
Spiral 2FCU-117142/-16243.0249.96.96.30.570.484
Spiral 2including245.0246.01.00.93.001.284
Spiral 3FCU-1149235/-1540.046.06.05.11.680.7-508
Spiral 3including40.044.04.03.42.450.9-508
Spiral 3FCU-1153225/3584.987.62.7unknown0.240.5-449
Spiral 3FCU-1153225/35167.1167.70.60.30.630.8-402
Spiral 3FCU-1154252/049.454.24.84.64.292.5-498
Spiral 3including49.451.62.22.18.494.5-498
Spiral 3including53.654.20.60.61.431.1-498
Spiral 3FCU-1155280/256.28.22.0unknown0.320.2-495
Spiral 3FCU-1155280/2560.762.92.2unknown4.573.4-472
Spiral 3FCU-1149235/-1540.046.06.05.11.680.7-508
Spiral 3including40.044.04.03.42.450.9-508
Spiral 3FCU-1150235/2062.363.71.4unknown0.390.3-475
Spiral 3FCU-1151257/038.642.03.40.30.360.6-457
Spiral 4FCU-111884/-16356.7358.01.31.10.270.3-610
Spiral 4FCU-111884/-16371.0374.03.0unknown0.200.3-610
Spiral 4FCU-111884/-16432.6438.66.05.42.371.4-631
Spiral 4including432.6433.50.90.813.727.6-631
Spiral 9FCU-1142290/-45329.0333.54.53.80.130.3-185
Spiral 9FCU-1148308/-38445.3453.78.47.20.190.4-228
Spiral 9FCU-1148308/-38684.8691.87.06.10.410.6-375
 
Hollister (Nevada) 
ZoneDrill Hole
Number
Drill Hole
Azm/Dip
Sample
From (feet)
Sample To
(feet)
Width
(feet)
True
Width
(feet)
Gold
(oz/ton)
Silver
(oz/ton)
Depth From
Mine Surface
(feet)
Hatter FootwallHUC-00007324/-492273.02273.70.70.50.451.0-1980
Hatter FootwallHUC-00007and2336.62337.91.31.00.160.8-2021

View source version on businesswire.comhttps://www.businesswire.com/news/home/20191107005355/en/

For further information, please contact:
Mike Westerlund
Vice President – Investor Relations
800-HECLA91 (800-432-5291)
Email: [email protected]
Website: www.hecla-mining.com

Source: Hecla Mining Company

Original Article: http://ir.hecla-mining.com/file/Index?KeyFile=400869899