Hecla Mining Company

Good day and thank you for standing by. Welcome to the Q4 and year-end 2021 Hekla Mining Company Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 1 on your telephone. And if you require any further assistance, please press star 0. And now, it is my pleasure to hand the conference over to your first

Thank you, Operator, and welcome, everyone. Thank you for joining us for HECLA's fourth quarter and full year 2021 Financial and Operations Results Conference Call. I'm Anvita Patil, HECLA's Assistant Treasurer. Our financial results news release that was issued this morning along with today's presentation are available on HECLA's website. On today's call, we have Phil Baker, HETLA's President and CEO, Lauren Roberts, HETLA's Senior Vice President and Chief Operating Officer, and Russell Lawler, HETLA's Senior Vice President and Chief Financial Officer. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on Slides 2 and 3 in our earnings release and in our 10-K and 10-Q filings with the SEC. These and other risks could cause results to differ from those projected in the forward-looking statements. Reconciliations with non-GAAP measures cited in this call and related slides are found in the slides or news release. With that, I will pass the call to Phil.

Thanks, Invita. Good morning, everyone, and thanks for joining our call. We're going to start with slide four, where you'll see there's four key messages that we're trying to communicate. First, silver is fundamental to the transition to the lower carbon energy market. with solar power being a key renewable to make it happen. Silver demand to be used for energy has increased and is continuing to increase. The United States Energy Information Agency projects that silver demand for solar will be half a billion ounces annually. Realize the current silver market is only a little more than a billion ounces. So that's a huge increase in the demand for silver for energy use. Second, message. For the transition to solar power to happen, you really have to have a reliable supply chain. And so to do that, you need silver mined in reliable countries. And most silver is mined in China, Peru, and Mexico. HECLA has the United States largest reserve of any mining company and produces more than 40% of all the silver mined here. We are the most reliable silver producer. Our third message is that on the ESG front, HECLA stands out with a safety record of our employees that is 40% below the national average. And we are also net neutral on greenhouse gas emissions for Scope 1 and 2 because we have among the smallest emissions in our industry, and that small amount allows us to use offset credits at a very, very low cost to get net neutral. And then the final message, and really what we'll spend the bulk of this webinar conference call on is what a great year HECLA had operationally as well as financially. Aside from our safety and environmental performance, our most significant achievement, though, was the implementation of the new underhand closed bench or the UCB mining method at the Lucky Friday. Now, we mined 86% of our tons last year with the UCB method, but we didn't speak about this until almost the end of the year because we wanted to make sure we understood how the cycle worked, confirmed how it would improve our seismicity management, determine how we manage dilution, and consider the impacts on the workforce. We wanted to put ourselves in a place where we are now, which is where we're focusing on optimizing the method, not whether the method works or not. And it clearly works. With the UCB method contributing to the 75% increase in the Lucky Friday silver production, Over 2020 and 2022 silver production is expected to be 20% increase over 2021 and we'll have even more growth in 23 as the mind becomes a consistent 5 million ounce producer. Now the lucky Friday has been around for for 80 years, but this new mining method fundamentally changes this this long standing mind Oh, if you look at the history of the mind. Lucky Friday has never had sustained production above 2.5 million ounces. So with the higher grade that we get as we go deeper and this new mining method, that production doubles and the costs stay relatively flat. And so what happens is the Lucky Friday generates two or three times or more free cash flow than what we've done in the past. And so it's because of the innovation of this new mining method and our determination to make the mine safer, to mine it better, that the Lucky Friday provides this growth exposure to silver without the risk of large capital investment. And in this inflationary time, having growth with low capital is very unusual, and you have so much less risk to get that growth. Now, Lauren's going to talk about the method more in detail, and I also encourage you to consider our technical report that was filed as an exhibit to the 10-K report, that describes the method and gives a lot of visibility into the Lucky Friday's strong economics. Now, adding a strong Lucky Friday in 2021 led to a record financial year with revenues of $807 million and adjusted EBITDA of $279 million. Cash flow from operations was $221 million and free cash flow was $111 million, and those were the second highest in our history. This and last year's performance has allowed HECLA to generate in excess of $200 million in free cash flow over the past two years and further enhance our common stock dividend policy by lowering the realized silver price threshold to $20 per ounce. So as a result of this, about 20% of our free cash flow went to shareholders last year. Now, if you turn to slide five, I want to take a moment to highlight the achievements of our exploration program. We spent A little less than $50 million. As drilling, we were able to resume our drilling at our operations and sites after the slowdown that we had in 2020 due to COVID-19. So as a result of that, our silver reserves increased 6% over last year, and they're now the second highest in our history at 200 million ounces, with Greens Creek's reserves at 125 million ounces, and that's its highest since 2002. And it's an increase of about 12% over 2020. The chart on the left shows not only that we replaced mining depletion, but also converted 26 million ounces of resources to reserves. Now, our gold reserves at the end of 2021 were 2.7 million ounces, the second highest in our history, and that's shown in the graph on the right. Our company-wide measured and indicated resources declined largely due to reserve conversions. However, we did increase our silver-inferred resources by 8% to 490 million ounces with increases at Greens Creek, Lucky Friday, and San Sebastian. And we expect to continue to see increases in reserves and resources that should allow us to maintain our reserve lives the 14-plus years that we have. I mentioned the technical report on the Lucky Friday. We also filed reports for Greens Creek and Casa Berardi to give support for the reserves. And in those reports, there's an economic analysis that's in Section 19 that shows very strong economics of the reserves. And what it does is it assumes that the inferred resources that we mine, which is about 5% to 15% of what we typically mine at those two mines, that that was waste. And so what we've also done is we've included in Section 21 the summarized information, the supplemental information that gives our long-term plans that includes this inferred materials at their expected grade given our long history of the two mines, we have a pretty good idea what the mine will look like when you include the inferred material. So that gives you a sense of what that looks like. And so I'd encourage you to look at Section 21 as well as Section 19. With that, I'd like to pass the call over to Russell. Thank you, Phil.