Hecla Mining Company

Good morning. My name is Jeannie and I will be your conference operator today. I would like to welcome you to the Q4 2023 Hekla Mining Company Earnings Conference Call. 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 would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Anvita Patil. You may begin your conference.

Good morning, Jeannie, and thank you all for joining us for HECLA's fourth 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, Russell Lawler, HECLA's Senior Vice President and Chief Financial Officer, and Carlos Aguilar, HECLA's Vice President of Operations. Phil and Russell will make most of the presentation. Carlos, who's at Keno Hill, will make a couple of comments. All of them will be available to answer questions. 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-looking statements. Non-GAAP measures cited in this call and related slides are reconciled in the slides or 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. I will now pass the call to Phil.

Thanks, Indita. Good morning, everyone. Thanks for joining our call. I'm going to start on slide three. 2023 was a year that was marked by wins and face of challenges. Some of the challenges were expected, some not. So let me first start with the successes we achieved. We reported the second highest reserves in our history. Our silver reserves have increased almost 40% over the past 10 years, and we've accomplished this by not only replacing 130 million ounces of silver production, but adding 65 million ounces through the drill bit, primarily at the Lucky Friday in Greens Creek, and most recently by our acquisition of Keno Hill. We've also had a successful year in exploration with some spectacular results at Keno and Greens Creek. We recorded our second highest revenue in silver production, and this was achieved despite Lucky Friday not being in production for five months. Both Green Street and Lucky Friday recorded their lowest all-injury frequency rate of all time, and we continue to be rewarded for the innovative culture we've created at our long legacy of 132 years. We received a patent on the underhand closed-bench mining method. Now in terms of challenges, this year it was really marked by three events. The unexpected fire at the Lucky Friday, our decision to pivot to a surface only operation at CASA, and to prioritize safety over production at Keno, which has resulted in slower than expected ramp up of the mine. Now the Lucky Friday is already back in production and we expect to ramp up to full production by the end of the first quarter. Our decision in late August to transform CASA to a full open pit operation by mid-24 was a recognition that we needed radical change, and we prioritized margin over volume, and our execution of this strategy is already yielding results. At Keno Hill, exploration drilling has highlighted the potential and the opportunity at this mine. And while our ramp-up at Keno Hill has gone slower than expected, We firmly believe that by focusing on safety and the environment and getting the mine to HECTA standards is critical if we're going to be successful and provide that long-term value that Keno has the potential to provide. Now, we've navigated through the challenges of 2023 and we enter 2024 with four operating mines that will give us significant growth over the next three years. So I'm going to talk about expiration and operations after Russell talks about the financial and technical reports, and Carlos makes a few comments. Russell? Thanks, Phil.

I'll start on slide five. By several measures, 2023 was a very good year. We generated $720 million in revenue. Silver contributed 39% of our revenue, which is more than any other metal, demonstrating HECLA as a true silver company. We continue to have very strong margins from our silver operations, with a margin of 50% of the average realized price of silver for the year. As expected, and as we reported in the last quarterly call, we did see our net leverage ratio tick up from 2.2 times last quarter to 2.6 times this quarter. This is primarily due to Lucky Friday not being in production for the last five months of the year. Our goal remains to manage the net leverage ratio to be less than two times. I'll now turn to slide six to discuss the company's priorities with its free cash flow as well as liquidity. On the previous slide, I mentioned the strong margins we see at our silver operations. These margins equate to significant free cash flows. With 12 months of production at Greens Creek and six-plus months at Lucky Friday, these operations generated $155 million in free cash flow. With this cash flow and using our balance sheet, we've made some strategic investments for production growth. the $64 million investment at both Keno Hill and Casa Variety. In 2024, we anticipate seeing strong free cash flow generation from Lucky Friday and Greens Creek, relatively small investments at Keno and Casa, as well as we expect $50 million from the insurance on Lucky Friday Fire. Our priorities will be continued investment in the long-term production growth of our assets, which include development and exploration in all of our mines, but we'll also be prioritizing de-levering our revolver debt. We have full access to our revolver and can access the accordion if necessary. We expect to have adequate sources of cash flow to not only finance our production growth, but also reduce the revolver debt. Our belief is revolvers are meant to provide liquidity when needed, which ours has, but are best undrawn. As we turn to the next couple of slides, I'll walk through some of the highlights of the technical reports. On slide seven is the summary of the technical report for Keno Hill. This report confirms the value which we've had the opportunity to capture at Keno Hill. The mine projects to have 55 million ounces of silver in reserves at a reserve grade of more than 26 ounces per ton, with an expected reserve life of 11 years and an undiscounted cash flow of $420 million. After-tax cash flows discounted at 5% is just over $300 million at $22 silver. This report demonstrates the value of the reserves at Keno Hill, which is only partially why we made this strategic acquisition. Phil will speak to this later in the presentation, but the value that we expect to be added at Keno Hill through the drill bit and our exploration success confirms the significant exploration potential. Turning to slide eight, we've owned the Castle Brardy mine for more than a decade, and it's been a good mine over that time. However, when we acquired it back in 2013, we realized then that there was the potential for significant value in the open pits, which were anticipated to start production later in the mine life. We see that value crystallizing as we work through the 160 pit and move our way toward the west mine crown pillar and principal pits, where we anticipate seeing this mine generate substantial free cash flows. However, it's not all investment in the property until then. Based on this report, we anticipate seeing the cash flow from the property be slightly negative this year, turn positive next, and be significant in 2026, which should return a large portion of our investment of the past couple of years, prior to taking a production pause while accommodating a permitting time frame for the higher grade pit. In 2027, we expect to process the stockpile, followed by a production gap of three years when the higher-grade beds start production. The revised technical report anticipates a mine life of 14 years, returning an undiscounted cash flow of nearly $600 million and a discounted cash flow of almost $350 million, which demonstrates the value this mine brings to the HECLA portfolio. Turn to slide 9, and I'll turn the call to Carlos.

Thanks, Russell. I will make only a few comments since I'm outside and remote from Phil and Russell. First, on safety, we had a strong overall safety record, half of what the binds suspected by AMSHA have done. Grinch, Griggs, all injury frequency rate was 0.29 and Lucky Friday 0.66, both the lowest in their history. Casa Verde was not where it should be, but had lots of changes. Inert safety was unacceptable. For all the operations, we have started a safety program that is focusing more on leading indicators like near-misses, resistance, interactions, and inspections. We expect to make all our operations safer from this. Our four operations started this year strong. Lucky Friday, we started as planned in the first week of January. In Keno Hill, it's safer, and therefore, it's beginning to ramp up faster. Green Scrape got the weather events behind it, And Casa Verde continues the good performance of the last few months. What a difference we will have this year by having all four properties operational. With that, I will pass it on to Phil, starting on slide 10.

Thanks, Carlos. We've labeled Greens Creek on the slide the foundation of HECLA's future. Since as we go, Green's Creek will continue to be the foundation providing stability and consistency in our cash flow and production well into the future. And the mine reported a strong year, which could have been even better without the weather reducing 12 days of production in the fourth quarter. Now we expect the mine to have another consistent year in 2024 with production expected to be about 8.8 to 9.2 million ounces. So a little less silver, and also produce a little less gold due to mine sequencing where we're mining lower grades. But when we'll produce a bit higher zinc, the zinc grades are a bit higher. So the cost per ounce will be higher. We also are increasing the capital replacing some mobile and mill equipment as risk mitigation of operating at around 2,600 tons per day becomes particularly important. At this higher throughput, we really need everything to be more reliable. because there's not really an opportunity to catch up if we have an upset. And like we've done at Green Street for 30 years, we still see opportunities to have lower costs, these investments to allow us to have lower costs, and also increase recoveries with some of the investments. Slide 11 shows our Plan 24 surface and underground exploration programs, which will be testing multiple targets with significant potential to add resources. When Green Street started, the mine had a mine plan of seven years, and now 37 years later, the mine plan is 14 years. This past year's underground exploration had good success, and seven of the eight zones drilled with four of those zones in the fourth quarter. So we're very excited about this year's program that coordinates the drilling underground with the surface drilling in the east door, the upper plate, and Gallagher. We will also draw in the land package we recently acquired. That's the mammoth claims. We've had an interest in acquiring these claims for at least 20 years. And then at Cliff Creek, which has been known to be a very prospective area, but as it's called, Cliff Creek, it's almost inaccessible. We started mapping this past year but had logistical issues, but we know what we need to do and we have a contractor who we think is going to be able to do it. So our focus is not just on expanding high-grade mineralization, but it's also in making new discoveries, you know, new discoveries that click Creek potentially and land claims. Now, Greens Creek is a premier silver mine. It's actually the 11th largest in the world. And I just want to congratulate the team on delivering excellent and consistent results and giving it a great future, because this is truly a world-class asset. So let's turn to slide 12. And if Greens Creek is the foundation of HEPLA's future, Lucky Friday is the pillar of near-term growth. The value, consistency, culture, and leadership that Lucky Friday brings makes it our second cornerstone asset. If you put this together with Greens Creek, these two mines make us the largest silver producer in the United States. The mine restarted in early January, as Carlos mentioned. Production should be about 5 million ounces. Cost per ounce should be similar to Greens Creek. Capital will be about 15 million less this year than last year, and that's about the same as what we had in 2022. Despite a 19-year mine plan, we're focusing on the potential to expand the mine to the east at the current elevation. So we're doing drilling and exploration to the east. Now, there's lots of unknowns, but success could mean more production and lower costs. And with the mine already stabilized, we're starting to work on small improvements to allow higher throughput, like the five new cyclones that we're putting in at the mill, which will be installed in June. Now I'm going to move to slide 13. At Keno Hill, we're struck by two things. First, the ore body is growing with a similar or better quality. And I'm going to take a minute to talk about exploration that makes me say that. I'll do that in a couple of minutes. First, though, I want to talk about the second thing we're struck by, which is the safety and environmental performance that's not met our standards. Fixing them is not an overnight exercise, and given the long life that we see, we are laser-focused but patient on improving it. On safety, it means changing people's attitudes and habits and, where we can, engineering out risks. So we've taken many of our single senior people from our corporate technical team and also at the Lucky Friday and have them rotating site. Basically, what they're doing is mentoring the keynote team. And then an example of engineering out the risk, we budgeted a cemented tailings backfill plant for Birmingham to enable it to mine in an underhand mining, which would be safer than the way we're mining now. For the environmental issues we had at Kena, we're doing studies to make the site meet our standards. One of the things that's come out of these studies is putting in a new water filtration plant at Birmingham, which we'll build this year that will cost of maybe $3 to $5 million. Now at this point, we're not giving guidance as to when we'll be in production and reporting unit costs. We want to make sure that we have the safety and the environmental issues right without the pressure of having the combined production targets with costs. What I can say is, though, that we think we're going to produce about 3 million ounces of silver. We expect to spend about $15 to $17 million a quarter And then there'll be 30 to 34 million of capital. So 2024, at current prices, should be a small investment year that we do make at Keno. But given the exploration potential and the long-mind plan, now's the time to get it right, similar to what happened at Greens Creek almost 40 years ago. And so speaking of Greens Creek, what we've decided to do is to try to create more value by having Greens Creek and Keno try to implement as many synergies as possible. They're actually only two hours apart, and it's a seven-hour drive between the two sites once you get to Skagway, which is a short 40-minute flight. Now, many of the supplies for Keno actually go by Greens Creek to Skagway, and then they get trucked to Keno. So what we're going to do is we're going to promote Brian Erickson, who's our VP and GM at Greens Creek, and Kim Campbell, our Greens Creek controller, to provide leadership to both operations. Brian, in addition to having had the job as Greens Creek's GM over the last two decades, has led various departments. He's headed up mining. He's done surface ops. He's done maintenance. And Kim has led purchasing, warehousing, accounting, and a number of other functions. So we're... don't know exactly what the synergies will be or what their value will be, and we'll try to outline that over time. But given the maturity of the systems that we have at Greens Creek, this really should accelerate Keno into becoming a strong cash flow generating mine. So now let me go to the exploration at Keno, and this is on slide 14. Our drilling programs continue to provide quite remarkable mineralized drill hole intercepts from both underground definition and surface exploration drilling. And I'm only going to talk about Birmingham this morning, but realize that there are a series of other targets at Keno that some of which we will drill this next year that will actually get more drilling than or as much drilling as Birmingham will get from surface. If you look at the plan view that's in the middle of the slide and it's marked B, B prime in the upper corners, you'll see that the Birmingham deposit has a number of zones, the Etta, Arctic, Bear, Northeast, and Deep Northeast. And then the small image to the right shows B, B prime going through those zones. And then you can see A, A prime is a cross-section that actually goes through the Bear zones. And if you look at the leftmost image, that's the AA prime in the upper corners. And the bear zone has three veins, the main vein, the footwall vein, and the bear vein. And what I want to draw your attention to is the 54 ounce over 39 and a half feet that is the transverse vein between the main and the footwall vein. This is the widest, highest grade intercept that we're aware of. We had a similar grade intercept a quarter earlier just not quite as wide. Looking back at the BB prime image that's in the middle, there's a red star that is the high-grade mineralization that's more than a thousand feet deeper than in previous drilling. The long-standing view is that Keno's potential was only in the top three, four hundred feet from the surface. we now have evidence that the high-grade mineralization can be hosted the full depth of the one kilometer favorable basal quartzite host rock unit. And so these two holes I really think are emblematic of the potential of Keno. Now turning to slide 15, last year we concluded that we could not generate enough margin mining two separate underground deposits and open pit, like I said at the beginning of our remarks. We just had too many people. We actually had 1,100 people between employees and contractors. And there just wasn't enough value in the rock to operate the mine that way. So we made the decision to simplify the operations by shutting down the underground. And so our team has really very successfully implemented the change. 2024, we'll have about a half year of underground operations as we mine out the already developed scopes And then we'll have only surface tons coming out of the 160-pit. Then go to slide 16. And what this shows is our production costs and capital guidance. Our 2024 silver production guidance shows an increase of about 15% to 20% this year, 30% by 2026. Silver cost guidance is slightly higher than 23. Cash costs are at $3 to $3.75, ASIC between $13 and $14.50. So we still have substantial margin at current and even lower prices and proves that we're really the low-cost leader in the industry. Gold cost guidance is lower. Capital guidance is lower as well as we've completed and seen the benefits of the major projects such as the service hoist and the ore bunker at the Lucky Friday. Before I open the call to questions, I want to leave you with the increasing role that silver is playing in solar and the energy transition. And on slide 17, you'll see some of the key numbers that highlights this. 2023 was the 22nd year in a row that renewable capacity set a new record. So it's just continued to grow year after year. And 75% of this renewable capacity in 2023 The additions were solar. Just in the United States, solar capacity has expanded by 44% a year on average since 2009. Now it takes about a half a million ounces of silver per gigawatt of solar that's installed. So in 2023, silver demand in solar increased by about 50 million ounces to 190 million ounces. And that's a 12% growth rate in the last 10 years. So to put this 50 million ounces in context, that's the equivalent of five new green streets or 10 new lucky Fridays. So not likely to happen that we're going to have production that's going to increase at the same pace that this demand for silver for solar is growing at. So that means we're going to have to rely upon above ground silver. And in order to get that, I think you're going to need high prices. to meet that demand. So, with that, Jeannie, I'd like to open the call to questions. So, Jeannie, I'd like to open the call to questions.

Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your first question comes from the line of Lucas Pipes with B Reilly Securities. Your line is open.

Thank you, operator. Good morning, everyone. This is Nick Giles asking a question on behalf of Lucas. Really appreciate the update on Kino here. It sounds like you've already made some nice progress. Is there still any ongoing assessment, or is it now down to purely implementation?

Yeah, it's really execution. We're just working through getting people where they need to be when they need to be there. You know, certainly one of the things that we've seen is that we have a lot of young, relatively inexperienced people that come from all over Canada. And so that's why having this mentoring, we think, is so important. You know, it's had real effect. It's been remarkable, the improvements that we've seen over the course of the last few months. But having said that, we want to be cautious that we're not pushing the organization faster than it's really capable of moving safely.

Thanks for that. Nice to hear the synergies with Greens Creek as well. I can appreciate you're not.

Yeah, I'm really excited about the potential for the synergies. I mean, you know, one of the things is some back office things that Ken is responsible for. You know, Brian certainly brings, you know, a load of experience and, you know, the mining methods are similar. Equipment is a bit different because it's larger at Greens Creek. But one of the things we're even thinking about is doing rebuilds. We do them in Juneau for Green's Creek. Maybe we'll also do them for Keno in Juneau.

Got it. Got it. That's great to hear. I can appreciate you're not ready to give guidance like you outlined, but it's safe to say it's kind of a second-half event before we see anything or any color you could give around timing, just rough estimates.

Look, it will be as fast as we can do it safely and have a stabilized organization there. As we indicated when we made the change, we had fortunately no incidents that resulted in injury, major significant injury.

we have the potential for that and that we're not going to we're just not going to take a risk got it got it well i appreciate the color here i'll go ahead and jump back in the queue but uh continue best of luck thank you and your next question comes from the line of joseph rager with roth mkm your line is open hey phil and team uh thanks for taking my questions um

On Keno Hill, as you look at the guide you gave this year versus the guide that was given at the beginning of last year, what do you think is the biggest delta for why there isn't as big of an increase as we might have anticipated for the mine this year? Is it not getting enough workers to site? Is it still underground development, being behind schedule? Is it mine sequencing? How do you think about that? And then What do you guys think is the biggest things you need to do in the future to kind of get it to where you want it to be?

Yeah, I mean, look, I think there's an element of caution here, Joe, that we want to make sure, as I said, that we're not pushing the organization too fast. I think what we didn't appreciate was the ability of the organization to deal with in a systematic way with issues that arose, and we're getting those systems in place to be able to do that. I think it will take a little bit of time, but I'm highly confident that over the course of the coming year that we'll get there. Number one, We've taken our most senior experienced people in our organization and they're spending time, hence why Carlos is there at site. You know, with this reorganization with Brian heading up the activities at both of these operations, Greens Creek and Keno, you know, we'll have that leadership and the leadership will be close by. And so I think it puts us on a good path to see the improvements. Technically, it's not, you know, there's challenges, but technically they're all manageable sorts of challenges. Carlos, is there anything you would like to add?

Well, it's just the mentoring and the training and, you know, trying to hire the most adequate people, retain, you know, train, promote, and build the team in the proper way.

Okay. And then shifting over to CASA, looking at the long-term plan, do you guys have off the top of your head the after-tax IRR for that expansion project?

Yeah, when we put the technical report together, it'll be filed with our 10-K. We actually didn't calculate an IRR just because we're kind of mid-project here in terms of CASA. You know, CASA is interesting because we're going to, you know, put a little bit of investment in this year. We should see some nice cash flows over the next few years, then a pause, and then an investment. So we actually didn't calculate the IRR. But what we did do is calculate the discounted cash flows of it.

We're laughing, Joe, because one of our directors asked the same question.

Well, the reason I ask is, you know, general rule of thumb, like if it was not an operating asset, a capex that exceeds the NPV after tax would suggest the IRR is, you know, in the 25% or lower range. And I was just wondering if there's any risk at all that you guys decide that there's a better use of capital than that.

You know, I guess the first thing I'd say is that the investment that's going to end up happening there is really just the stripping from the pits that will happen in 28, 29 years. And so it's a relatively, and we'll have much of the equipment already in hand. So there is very little equipment that needs to be purchased relative to just the cost of moving the rock. We have a place to store that waste rock. So I think But certainly we can do the math to figure out what that would be. We have very good cash flow between now and that pause time when we're doing that stripping.

The other thing, you'll see this in the technical report, but the payback on those pits, the Prince Paul and the West Vine Crown Pillar pit comes very, very quickly in the early 2030s. So that investment period of 2028, 2029, And then a little bit into 2030 gets paid back quickly in 31, 32, et cetera. So, yeah, and that speaks to what Phil just said in terms of us already today, you know, we're investing in the surface fleet, et cetera, setting ourselves up for this mine for the long run. Okay.

And one final thing, if I could. I saw an article a couple weeks ago, Phil, I believe you made the comment, so you guys are looking at South America as an opportunity. to maybe expand the company and the production profile? Is this something that's like a long-term thought, or is there any potential to do M&A in the next year or two?

Well, there's always the potential, Joe, to do it. And what we have said consistently is we are prepared to go outside the United States of Canada for silver assets. We won't do that for gold or any other metal. but we will consider it for silver. Having said that, the ability to do those transactions are difficult. And so we don't have to push it. We're fortunate in that we have growth in the near term. We should get to close to 20 million ounces by 2026. We have in our portfolio, we actually have to include the operating properties, we have 20 properties in our portfolio, half of which are silver assets, half of which are gold assets. And, you know, we'd like to advance those. Some of them are sort of in the permitting process. Some we need to do more exploration on. But we do have the ability to do things within our portfolio. But having said that, you know, our long-term objective is to be – really the premier silver company, which means more production, as well as become, and this is a super long-term goal, but as well as become an S&P 500 company. And we think with more production and higher prices, which we're, as I indicated, why we think we'll see higher prices, we think that that's something that could be achieved in the long term.

Okay. Thanks for the color. I'll turn it over.

Sure thing.

Your next question comes from the line of Don DeMarco with National Bank Financial. Your line is open.

Thank you, operator. And good morning, Phil. My first question, maybe just building on the last caller's question about M&A. You know, we've seen with regard to pursuing silver assets, we've seen some of your peers challenged to add silver assets or diversifying into gold. I think I heard from you that you're still your priority silver. You wouldn't certainly go for gold outside of North America, but would you consider gold assets or are you still firmly focused in any M&A if it met all your hurdles, primarily focused on silver?

We're absolutely primarily focused on silver. We will, however, consider gold and maybe even other metals that um you know are in the jurisdictions you know in the places that we operate so you know we're in uh we're in you know in alaska we're in yukon we're in idaho we're in the abitibi in quebec and i would characterize just across the border you know geologically as being the same so would we consider things other than silver in those places the answer is yes Is it our first priority? No, but we certainly think, you know, we saw the ATAC transaction that we did in the Yukon. We think that it was a strategic acquisition that really sets up HEPA for very long-term potential of things that could be very, very meaningful. So we're prepared to consider those things.

Okay, yeah, it makes sense looking at potential jurisdiction synergies. Okay, looking at the production outlook, we see that silver production is increasing over the next three years. We see 20 million ounces at the high end of the range in a few years. Costs weren't included, we get that, but how should we think about costs over this time frame? Should we think about costs as increasing or flat or is there any just kind of for the sake of modeling what trends we should think about?

You know, I would generally say that, you know, you'll have some inflationary pressure, so you'll see costs increase as a result of that. I'm going to talk about it first in terms of the total quantum of costs rather than on a unit basis. You'll see, you know, some slight increases, but nothing, nothing, At Greens Creek and the Lucky Friday, I'm not anticipating any sort of significant sort of cost increase. And at Keno, it's in a transitional, it'll be in a transitional period. I think Keno will, the objective we will probably have long term, given the exploration results we have, is to see that property increase its throughput. We, in fact, in the in the technical report have an assumption that we get to, I think, 550 tons or 600 short tons per day in sort of three or four years from now. So as a result, you'll see more dollars needing to be spent at that location. But then when you look at it on a unit basis, for Greens Creek and the Lucky Friday, it's really going to be a function of the byproducts and the prices of those byproducts. To the extent we're at the similar sort of price levels that we are now, I wouldn't anticipate much of a change. For Keno, I think over time, we will be able to drive the cost down pretty substantially, but it's going to take more tons. And I think trying to get some of these synergies with Greens Creek, I think could be a benefit to both properties. Anything to add, Russell?

I agree with what you said. There's really nothing that we have coming at us, you know, that we would say we could point to that would say this is going to change our cost profile dramatically, especially at the Lucky Friday in the Greens Creek. And I'm thinking about it from the kind of just as-produced production costs, what the costs we're going to spend on a monthly or yearly basis. Keno Hill, you know, Keno Hill's cost structure has quite a bit of fixed costs within it. And so as we are able to scale that up and see more throughput, there will be additional variable costs, but we should see on a per-unit basis, you know, those should come off. And then, Phil, you know, mentioned the by-product credits, but we also have the treatment charges in there as well. Right now, I think the outlook for the treatment charges should be relatively stable, but we'll see. Those things can fluctuate and actually have an impact on our cost profile as well. Pretty dramatic treatment charges over time.

Okay. And just as a final question, Phil, you mentioned Keno Hill there ramping up to a throughput rate around 550 short tons per year. And it's... What should we think about? I see 2024 production at 2.7 to 3 million ounces silver. And what should we pair up in terms of the throughput rate for that? Rather, that's 550 tons per day, I would imagine. So what should we think about in terms of tons per day in 2024?

You know, that's certainly what we're still working through because we do have, you know, higher grade areas. But generally speaking, somewhere between 300 and 400 tons per day. But again, we're not going to push it. But if we're at the lower end of the range of ounces, then we're at the lower end of the tons per day. If we're at the higher end of the range, then it's just more tons that we've been able to process. So between 3 and 400 tons.

Okay. Thank you very much for your answers. That's all for me, and good luck with the rest of the quarter.

Thank you.

Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your next question comes from the line of John Tomazos with John Tomazos Very Independent Research. Your line is open.

Thank you. Was the $21 million inventory adjustment solely related to falling zinc prices and zinc concentrates in transit?

I think, John, I think the short answer to that is it's the lucky Friday.

So, John, you're looking at the cash flow statement, correct? The non-cash, the add-back?

Correct.

On the cash flow? Yeah, that's a couple of things. First, that's related to Casa Berardi, I would say, is the largest part of it. where, you know, the cost per ounce, especially when you take into account the non-cash charges, the depreciation that goes into the inventory, there was a net realizable value right down there. And that was accelerated because we, when we stopped development of some new resources or new reserves at the West Mine Underground, we accelerate the depreciation because we anticipate that we'll mine out mid-2024. So we see the non-cash charges at Casa Verde have gone up. And I think that detail, if you go into the 10K, you'll see that detail as the non-cash charges have gone up. So that's the biggest driver of that. There is then some changes as well at Greens Creek where you shift concentrate and you get, you know, you have to true up estimates of what, you know, the inventory is that you have in the concentrate barn. So those will flow through there as well, but it's primarily CASA. What I would say is, you know, you mentioned the change in the price of zinc and, you know, we have seen the change in the price of zinc has come off. A couple of things though, if you look at the realized price of zinc, it's actually pretty healthy because we had hedges in place that you know, caused us to not have to take that lower price, right? So it's above $1.30 for the quarter. But also, even at $1 or $1.10 zinc, both Green's Creek and Lucky Friday, you know, have strong positive margins. So there's really no, you know, NRV write-downs at either of those mines.

Second question, if I may. The $76 million in idle facilities costs, Does that largely disappear after the January restart at Lucky Friday and then, say, mid-year when Keno Hill starts to produce revenue?

Short answer is yes.

Yeah, that's correct. You know, in 2023, it was primarily driven by COVID. lucky friday and then and then also there's a chunk of it that was um keno hill as well right let's ramp up at keno hill where we we essentially have our cost of goods sold match our our revenue and then the rest of the cost go through that so as we see keno hill produce more that should shrink as well and a little bit yeah a little bit of casa and some of nevada's in there as well yeah remember remember cassie we had the uh we had the fire

in the in quebec that caused us to have to be shut down thank you very much thanks john your next question comes from the line of lucas pipes with b riley securities your line is open hey thanks operator uh this is nick giles again on behalf of lucas um

Could you provide any color around the cadence of insurance payments throughout the year? I know first proceeds were here in February. And then how should we think about timing as far as paying down the revolver? Is paying that down contingent upon receiving these payments?

Well, you know, Nick, this is an insurance company, so I'm not going to bring there a guess as to when they'll actually pay us, but we... They actually have been very good and they did make a payment just a couple of days ago. What they had said is that they would anticipate during the course of the year, so just sometime over the course. As far as paying down the revolver, it would be a function of both that and the cash flow from our operations. We will, as we build up cash position, we'll pay it down.

Got it. Got it. Okay. Well, fair enough. Appreciate the color. Best of luck. Thanks, Nick.

There are no further questions at this time. I will now turn the call back over to Phil Baker, CEO, for closing remarks.

Okay. Well, thanks everyone for participating in the call. I'll remind you that we have the opportunity, if you'd like to have a one-on-one meeting with us, you can schedule one with us in, you know, the next hour or two. And if that doesn't work, then please feel free to reach out to MBTA and, you know, we'll be happy to schedule you at a different time. Just appreciate the interest, and I definitely think that we're in a place with silver that we've not been before, and we're going to keep banging that drum to try to get people to realize what's happening in the silver space with the growth in solar. So thanks so much. Talk soon.

This concludes today's call. You may now disconnect.