HECLA MINING CO/DE/ Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Rob Krcmarov began an intensive review of operations, visited most mines, and outlined key pillars of the operating portfolio: cornerstone operations Greens Creek and Lucky Friday delivering strong performance, Keno Hill as growth opportunity with a clear strategy, and evaluation of strategic alternatives for Casa Berardi.
• Key strategic pillars include achieving operational excellence, optimizing portfolio, intensifying financial discipline and shareholder returns, and focusing on silver production in U.S. and Canada with ESG leadership.
• Russell Lawlar discussed 2024 strategy delivered on strengthening balance sheet, reducing leverage, and growing production; elimination of silver-linked dividend to reinvest in organic growth; strong core assets generating free cash flow.
• Kurt Allen detailed each mine's production, reserves, and exploration results, including Greens Creek's consistent production, Lucky Friday's record year, Keno Hill's production and reserve increase, and Casa Berardi's production and strategic review.

Segment Performance

• Greens Creek: In the fourth quarter, produced 1.9 million ounces of silver, with a full-year production of 8.5 million ounces. Generated $147 million in free cash flow in 2024. Operates across six zones and 45 areas yielding five payable metals, maintaining consistent annual silver production of 8 million to 9 million ounces. For 2025, production is projected to be between 8.1 million and 8.8 million ounces.
• Lucky Friday: 2024 was a record-breaking operational year, producing 4.9 million ounces of silver. The all-in sustaining cost for the year was $16.50 per ounce. In 2025, expected to produce 4.7 million to 5.1 million ounces of silver, with all-in sustaining costs similar to 2024. Generated $82 million in free cash flow in 2024 including $50 million from insurance receipts.
• Keno Hill: 2024 production was 2.8 million ounces of silver, despite operational and social challenges. Reserves increased by 17% to 65 million ounces in 2024. For 2025, silver production is expected to be 2.7 million to 3.1 million ounces, with quarterly production costs of 15 million to 17 million.
• Casa Berardi: 2024 production was 87,000 ounces at an all-in sustaining cost of $1,990 per ounce. By mid-2025, will transition to a surface-only operation focused on the 160-pit. The company is evaluating strategic alternatives for the asset as announced previously.

Guidance

• 2025 silver production projected to be 15.5 million to 17 million ounces, with gold production anticipated to decrease. Modest increase in consolidated cost per ounce due to higher labor and power generation costs. Capital spend slightly increase to sustain core assets and advance growth initiatives at Keno Hills and Casa Berardi to bring future production growth.

Risks

• Permitting Challenges: For Keno Hill, permitting remains a significant risk to reaching 600 tons per day for profitable production.
• Infrastructure Needs: Keno Hill requires additional infrastructure investment and permits for growth.
• Power Constraints: Keno Hill faced power curtailments, expected to continue into first quarter 2025.
• Strategic Review of Casa Berardi: The company is evaluating all options for Casa Berardi, including potential divestment, with a long lead-time and uncertainty around future gold prices.

Question and Answer

• Q: Outline the strategic review process for Casa Berardi and targeted timeline, considerations for divestment vs stake sale? A: Rob Krcmarov - We're looking at all options including potential divestment. Anticipate a five-year hiatus between F160 Pit production end and Principal pit production start. At current gold prices, Principal pit has healthy cash flows. Expect a better view in second quarter.
• Q: Net leverage ratio decline and capital returns vs organic growth? A: Russell Lawlar - We've reached net leverage ratio ceiling, aim to be under 1 time. Balancing act between paying off revolver, building cash, and investing in business. Removed silver-linked dividend to invest in internal growth.
• Q: Timeline for hydropower utility maintenance and cost impact? A: Russell Lawlar - Sometime middle of 2025. Increased costs by about $5 million from as-produce basis.
• Q: Permitting timeline and infrastructure for Keno Hill? A: Rob Krcmarov - Met with Yukon Premier, encouraged by support. Permitting still a risk. Carlos Aguiar - Prioritizing projects to improve Phase 1 to 440 tons per day, reevaluate for 600 tons per day in next two years.
• Q: Costs at Keno Hill fixed vs variable proportion? A: Matt Blattman - Primarily fixed due to remote operation, charter, camp, and personnel costs. Higher throughput needed to overcome fixed costs.
• Q: Lucky Friday CapEx allocation for cooling project and normalized spend? A: Russell Lawlar - Mine development close to $20 million, surface cooling system $13 million. Completion will reduce future capital spend.
• Q: Montana projects permitting and outlook? A: Rob Krcmarov - Forestry Services Draft EIA for Libya exploration project in final week of public comment, next steps in Q3 2025.
• Q: Quebec permitting tailwind for Casa Berardi? A: Rob Krcmarov - Hiring a VP of Sustainability with permitting experience, will have better answer soon.
• Q: Exploration potential of American portfolio projects? A: Rob Krcmarov - Deliberate strategy on exploration spending, prioritizing capital allocation. Have robust pipeline of quality targets in Nevada, will evaluate projects as capital priorities evolve.