Hecla Mining Company

Good morning, Mandeep, and thank you all for joining us for HECLA's third quarter 2023 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 yesterday, along with today's presentation, are available on HECLA's website. On today's call, we have Phil Baker, HECLA's President and Chief Executive Officer, Lauren Roberts, HECLR's Senior Vice President and Chief Operating Officer, Russell Lawlor, HECLR's Senior Vice President and Chief Financial Officer, and Carlos Aguar, HECLR's Vice President of Operations. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on slide two 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 living statements. Non-GAAP measures cited in this call and related slides are reconciled in the slides of the news release. I want to remind you, if you would like to have a call with the management, you can do so by using the link under the section Virtual Investor Event in our earnings release that was issued yesterday. With that, I'll pass the call to Phil.

Thanks, Sandita. Good morning, everyone. Thanks for joining the call. Before I get to the slides, I want to just remind you that Loren's going to be retiring at the end of the year. And I just want to thank Loren for his tenure at HECLA. During his time, there's been a lot of accomplishments that the company has done and that he has led. But what really stands out to me is that when he arrived at HECLA, we were still at the lucky Friday, focused on cutting the rock using mechanical mining. But we began the steps that led to the new mining method at Lucky Friday. And without his support, knowledge, leadership, I doubt the UCB would have been developed. We wouldn't have a patent for a new mining method. So thanks, Lauren, for all that you've done. I'd also like to introduce Carlos Aguiar. He's our vice president of operations. And Carlos is from Mexico. And he became a US citizen two years ago and has Been with the company a total of 27 years. 17 of those years has been working for us in Latin America, in both Mexico and Venezuela. He has nine years of experience as a GM for us at both San Sebastian and Lucky Friday Mines. And he also knows Casa Berardi. He really started the mill modifications. And I've known Carlos now for about 20 years. I first met him on a tour of the mill in Venezuela. And his leadership abilities and commitment to operational excellence has really been reflected in the consistent improving and results that he's achieved everywhere that he's worked. Every operation has seen significant improvement with him at the helm. So you're going to enjoy getting to know him. And with that interaction, I'll start with slide three. I want to take a moment to just step back and discuss our performance from a longer-term perspective. We typically do this. It's the way we look at the business is on a long-term basis. And over the past five years, you've seen our revenues grow 27%, silver reserves 79%. Silver production, 37%. And as we work toward producing up to 20 million ounces by 2025, it means that we will close to double our silver production since 2018. And maybe more impressively is that next number, the $767 million of free cash flow that our three operating mines generated. And this, of course, has resulted in the strong share performance. And it's the quality of our assets. These are assets that have long reserve lives, high grades, low costs, consistent performance, and significant expiration potential, which allows you to have this performance over time. And I'll suggest to you that Green Street checks all five of those boxes, you know, long reserve life, high grade, low costs, consistent performance, and significant expiration potential. Lucky Friday at this point checks four of the five. CASA and Kino checks three of them. But all the minds check the long lives. So we are focusing on setting up the minds for the long term, pushing for continuous improvement, and allowing innovation to fundamentally improve them. So they all end up, you know, I'm convinced all of them will end up checking all five of the boxes. So with that context for the quarter, let me move to slide four. I'll start with the Lucky Friday, which will not have production until early 2024 as we block off the lower part of the two shaft and build a new secondary escapeway and ventilation brace. And this three-month project's going well. At the same time, we are still advancing other projects and completing our equipment purchases. We actually have 10 pieces of equipment on surface that are ready to go underground. And we expect to ramp back up to full production in Q1 and see the Lucky Friday continue in 2024 to production growth and the free cash flow that we saw before the fire. Now at Keno Hill, production has been slowed due to the delay in the Shot Creek plant commissioning just yesterday and the cement rock fill plant scheduled to be completed later this month. Their completion puts us in a position to advance development and production faster. And the grade of the ore, has even been better than what our block model had predicted. However, we're concerned with the safety culture at Keno. Our all injury frequency rate at Keno is around four, which is not acceptable. If you look at Green's Creek and the Lucky Fray, they're both less than one. In the last two months and more recently in the last two weeks, we've had some near misses that didn't result in an injury or damage to equipment, but they could have. And that's not acceptable to us. As a result, I've tasked Carlos and his team to methodically review all our process and procedures to get safety right. Because we know that excellent safety not only prevents injury, but also standardizes activities which increases predictability and production. And so the safety review at Kena will likely lead to changes in our processes, schedules, equipment, and the way we mine. And to make the mine safer, we will re-engineer certain processes. With the mine just starting up and with its expected long mine life, we must get off on the right foot on safety. So we're going to take whatever time is needed to do that. Greens Creek had another consistent and strong operational quarter, and we're increasing silver production guidance at the mine. Greens Creek has already generated over $100 million of free cash flow for the year. Now, Casa Berardi had a very good quarter, progressing on the transition that we're making for becoming only an open pit mine, reporting cash costs and all unsustaining costs that are well within guidance, and building infrastructure that sets the mine up for success in the next decade. Earlier this year, we saw the need to make the fundamental changes, which we began implementing just this past quarter, and we're already seeing the benefits of that. As a company, silver production guidance is only slightly lower. Midpoint of guidance is just 400,000 ounces less silver. Silver costs are unchanged. Gold is unchanged other than a little lower cash costs. And finally, the safety performance at our mines, with the exception of Keno Hill, has been one of the best in the industry with an all-in performance. all injury frequency rate consistently lower than the U.S. national average. So with that, I'll pass the call on to Russ.

Thanks, Bill. I'll start on slide six. As we think about the year so far, even with Lucky Friday down for most of the third quarter, silver accounted for 38% of revenues, with silver operations generating more than $120 million of free cash flow. With strong gold production of 39,000 ounces, gold accounted for 36% of revenues, and base metals contributed 25%. We are on a path of more than half of our revenues coming from silver. The strong balance sheet and financial flexibility have always been key priorities with the goal of maintaining a leverage ratio of less than two times and maintaining significant liquidity. In the third quarter, we saw our leverage ratio increase to 2.2 times due to the Lucky Friday suspension of production and our continued investment at Keno Hill. Although we expect our leverage ratio will remain elevated next quarter, We see this increase is temporary. Our liquidity is adequate at $165 million. However, I expect our leverage ratio will be less than two times, and our liquidity will grow substantially once the Lucky Friday is back into production and Keno Hill matures. Now I'll turn to slide seven to highlight some of the key attributes of our silver mines, especially now that we're going through a period of investment. Our silver mines have consistently provided strong margins. This is shown in the graph on the left, where over the past four years, this margin has been near or above 50% and has translated into consistent free cash flows. The chart on the right highlights just how strong this free cash flow generation is from our silver mines, where since 2020, Lucky Friday and Greens Creek have generated more than $800 million of cash flow from operations, and even more impressive is the nearly $600 million of free cash flow. These strong margins in the resulting free cash flow generation allow us to invest both capital and exploration at these mines, as well as in our broad exploration portfolio, in addition to returning capital to our shareholders in the form of dividends. And now I'll turn the call to Lawrence.