Hecla Mining Company

Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Heckler Mining Company earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, press star 1 once again. Thank you. I'm Vita Patal. You may begin your conference.

Thank you, operator, and welcome, everyone. Thank you for joining us for HECLA's second quarter 2022 financial and operations results conference call. I'm Anvita Patil, HECLA's Vice President of Investor Relations and 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, HECLA's President and CEO, Lauren Roberts, HECLA's Senior Vice President and Chief Operating Officer, and Russell Lawler, Heckler 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 two and three and 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 of non-GAAP measures cited in this call and related slides are found in the slides or the news release. With that, I'll pass the call to Phil.

Thanks, Anvita. Good morning, everyone, and thank you for joining our call. I'm going to start on slide four. You know, I'm always a little bemused when someone says that we're in unusual times, but I do think this time it is fair to characterize these times as quite unusual. When we had our conference call three months ago, I spoke about the risks facing the world in HECLA, such as inflation, COVID, the impact of the Russian-Ukrainian war, rising interest rates, and supply chain disruptions. And none of those risks have gone away. And added to the list are increased China-Taiwan tensions and metals prices, which have declined. And for HECLA, our realized silver price is 12.5% lower this quarter than it was last quarter. And, of course, if we have a recession, that could go lower. When I look at margins and capital projects that are going on across our industry, there's a fair amount of stress for companies with these projects. And when we look at our gold mine, Casper, we see those margins are shrinking as costs rise and the gold price has declined. But for HECLA, when we look at the quality of our silver mines, you know, the strong production, low costs, the amount of capital we need to spend, the strength of our balance sheet, it's allowing us to focus on how we grow silver production. And I'm very confident that lower silver prices will lead to higher silver prices, significantly higher prices. So that's the context that we are looking at the quarter and the rest of the year. We are investing in our mines and acquiring new ones because we have the organization and the financial capability to grow production, earnings, and cash flow, and we believe shareholders are going to benefit from the growth of that investing in our three mines and acquiring Alexco. So what are the drivers of our growth? And there are three, increasing grade at the Lucky Friday, coupled with the new mining method, the underhand closed bench method, or as we call it, the UCB method, the pending Alexco acquisition, and increasing throughput at Greens Creek. So first, the Lucky Friday. I've been underground twice this past quarter. at the Lucky Friday, and I'm really struck by the opportunity that UCB has on a safer, more productive environment. And we still have not really started optimizing the method. All we have been doing for the last two years is implementing the new method. Because of its safety and productivity, we're trying to implement it as quickly as we can. So some of the things we're doing is we're investing in another hoisted surface a service hoist to move people and materials to the main hoist can haul rock to the surface. We're tearing down the old storage facility that stockpiles the ore before it goes to the mill. It was super small so that essentially when the mine was shut down, the mill was too. And that wasn't a problem in the past because the mill had so much more capacity than the mine could catch up. So we're building a new facility that allows material to be stored for a few days until the mill is able to process it. And this is great because it seems like it's not going to be that long before the mining rate will exceed the mill's ability to process it. We also have purchased new bigger equipment. When I was underground, I saw six yard loaders, which are physically about 50% bigger than what they were replacing. And we're on track with all these investments. We're yielding results. In fact, the mine times in the second quarter set a new record at the Lucky Friday. So the Lucky Friday is on a path to be a five million ounce producer next year. and close to 6 million a year after that. And yet we still have not optimized the new mining methods. So tonnage could continue to increase, which is going to require further optimization of hoisting and milling. So stay tuned for what's happening at this 80-year-old mine whose best production costs and cash flow is on the way. So this year, we are making a roughly $60 million investment of which $40 million is in the second half of the year. So we've spent $20 of the $60. The second driver of growth is Keno Hill, probably the highest grade multi-million ounce silver reserve in the world. And as part of that acquisition, we bought another 5% of the company for $4 million, which took our interest to 9.9%. And then we've loaned them $20 million in July. And we did this financing to Alexco to help them have a singular focus on development. And we've also shipped some equipment that we had available at Lucky Friday in Nevada so we wouldn't have to wait for that equipment from a third party down the line. So Lauren's going to outline our plan for when we take over to develop the mine. And then the third driver of silver growth is increasing Green Street throughput. And we're not talking about large increases, but incremental improvements of 5% to 10% over the next couple of years. And so we're really focused on this because these kinds of productivity gains really generate triple-digit-type returns because they're low-capital projects that are building upon a capital base that's been put in place over the last 35 years. So Lucky Friday, Keno Hill, and combined with the small increase at Greens Creek's productivity really could increase our silver production to a sustainable 17 to 20 million ounces of silver a year in the next few years. And this would, I think, make Heckler the fastest growing silver miner with about 30% growth in production and would make us one of the two or three largest silver mining companies. We're already the largest silver... producer in the United States, and I think we will likely become Canada's largest silver producer. So after Russell and Lauren speak, and before the questions, I'm going to talk about our capital cost guidance, but let me pass it on to Russell now. Thank you, Phil.