Hecla Mining Company

Thank you for standing by. My name is Kate and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2024 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 this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Anvita Patel, VP, Investor Relations and Treasurer. Please go ahead.

Good morning, Kate, and thank you all for joining us for HETLA's fourth quarter 2024 results conference calls. I'm Anvita Patel, Vice President of Investor Relations and Treasurer. And our earnings release that was issued yesterday, along with our today's presentation, are available on our website. On this call today, we have Rob Krichmarov, President and Chief Executive Officer, Russell Lawler, Senior Vice President and Chief Financial Officer, Carlos Aguar, Senior Vice President and Chief Operating Officer, Kurt Allen, Vice President of Exploration, and Matt Blattman, Vice President of Technical Services. At the conclusion of our prepared remarks, We will all 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 management, you can do so by using the link under the section Virtual Investor Event in our earnings release that was issued yesterday. I'll now pass the call to Rob.

Thank you, Anvita, and good morning, everyone. You know, when I joined HECLA about three months ago, I began an intensive review of our operations and strategy. I've now visited all but one of our mines. Actually, a winter storm delayed my trip to Keno Hill, which I'll visit in the next couple of weeks. And throughout these visits and my extensive engagement with employees and stakeholders, I've developed a clearer vision for Heckler's future and some of the opportunities that are available to us. I guess what initially drew me to Heckler was its extraordinary legacy, 134 years as a leader in the silver industry with high-quality long-life mines in premier jurisdictions. Now, having seen our operations firsthand, I'm even more convinced of the company's potential. Our high-quality long-life mines in premier jurisdictions provide an exceptional foundation, and I have to say the calibre of our management team has really impressed me. Our operating portfolio stands on three key pillars. Our cornerstone operations, Greens Creek and Lucky Friday, continue to deliver strong performance and robust cash flow. Keen O'Hill represents our primary growth opportunity, although its ramp-up has been more challenging than I had initially thought. However, we have a clear strategy for achieving sustained profitable production there, but it will require time and strategic investment. At Casa Berardi, we've recognised that the mine hasn't yet realised the potential envisaged during its acquisition. So while it has future potential, its capital requirements and management bandwidth consumption have really led me to direct our team to evaluate all strategic alternatives to maximise shareholder value from this asset. Looking ahead, focusing on four key strategic pillars, and they're all underpinned by our commitment to ESG leadership. First, we're committed to achieving operational excellence through relentless improvement, through implementing standard operating systems across all of the sites, investing in automation and advanced analytics, driving continuous improvement in cost control, and building real-time decision-making capabilities. Second, we're optimizing our portfolio to maximize value. We've begun this with our strategic review of Casa Berardi, and we're evaluating an extensive portfolio of exploration assets, and investments to unlock value. So while organic growth at Keno Hill remains our primary focus, we're developing a strategic and disciplined M&A framework that leverages our core competencies to create substantial value. Third, we're intensifying our focus on financial discipline and shareholder returns. We're implementing a rigorous capital allocation framework centered on free cash flow generation and return on investment metrics. with clear hurdle rates. This disciplined approach should strengthen our balance sheet and build financial flexibility and deliver consistent returns to our shareholders. Fourth, our strategic focus on silver production in the US and Canada continues to deliver exceptional value. With the largest silver reserve base in North America and operations concentrated in tier one jurisdictions, we're strongly positioned to meet growing demand from green technology and renewable energy sectors. Our expanding footprint in these stable regions, combined with our industry-leading cost structure, gives Heckler unmatched advantages in capturing new opportunities. And while providing investors unparalleled security of assets, I think this distinctive market position really sets Heckler apart and warrants a premium valuation, particularly in today's complex and dynamic global environment. Of course... These pillars is our unwavering commitment to ESG leadership in the mining industry and our success depends on responsible environmental stewardship, strong community partnerships and deepening relationships with First Nations and in fact all stakeholders. So let me highlight our achievements in 2024, which is detailed on slide four. We delivered strong operational performance, meeting our consolidated silver production and cost guidance while exceeding our gold production targets. Our strategic exploration program successfully maintained our silver reserve position, the second highest in the company's history, with particularly strong results at Keno Hill, where reserves increased by 17%. We achieved record revenues in 2024, driven by higher metal prices and solid contributions from all four operating mines. Most notably, our cornerstone assets, Greens Creek and Lucky Friday, generated $228 million in free cash flow. And I think this robust performance enabled us to advance strategic investments in Keno Hills development while implementing targeted improvements at Casa Berardi. And Russell will walk through the financial details in a moment. We've also evolved our approach to shareholder returns. After careful consideration, we're maintaining our base annual dividend of one and a half cents while supporting key priorities, and that's investing in organic growth, strengthening our balance sheet, and delivering reliable and sustainable shareholder returns. I'll now hand the call over to Russell for a detailed financial review.

Thank you, Rob. I'll start on slide six. Our 2024 strategy delivered on three key objectives, strengthening our balance sheet, reducing leverage, and growing production. We achieved these goals despite operational challenges, which Carlos will detail later. Looking ahead to 2025, we're taking decisive steps to enhance our financial flexibility. The key strategic decision was the elimination of our silver link dividends. While this wasn't an easy choice, we believe reinvesting in our organic growth opportunities will create substantially more shareholder value than dividend distributions. These freed up cash flows will also accelerate our deleveraging initiatives. The strength of our core assets is evident in the $228 million of free cash flow generated by Greens Creek and Lucky Friday during the year. This performance continues their remarkable track record, having delivered over $800 million in free cash flows in 2012. This robust cash generation and associated EBITDA enabled us to significantly improve our net leverage ratio from 2.7 to 1.6 times, while simultaneously investing $215 million of capital across our portfolio. Turning to slide seven, as Rob mentioned, we achieved record revenues of over $900 million during the year, with 44% of that revenue coming from silver, 34% from gold, and the remaining from base metals. Additionally, we received a small amount of revenue from copper during the year, the first time Hekla has received revenue from copper in decades. We also saw our realized price of silver appreciate nearly 23%, while our outstanding cost per ounce only increased 11%, helping our margin per silver ounce to have expanded from 50% in 2023 to 54% in 2024. This additional silver margin and higher revenue generated record-adjusted unit, which continued to improve our net leverage ratio. As noted on this slide, we've made significant progress on strengthening our balance sheet and leveraging the company. However, we're not satisfied with the progress made. Over time, we expect to deliver fully from the revolver while also adding cash to our balance sheet with the intention of bringing our net leverage ratio to less times. And over a longer horizon, we expect to continue to reduce our debt on a gross basis to further free up cash flows to invest in organic growth within our operating portfolio. With our strong asset base and the growing silver demand, I'm confident that 2025 will prove to be another successful year in our strategy of strengthening our balance sheet, investing in our assets, and generating free cash flow. I'll now pass the call to Kurt.

Thank you, Russell. On slide nine, Greenscreek's cornerstone mine foundation of our future. Greenscreek provides the stability and consistency in our cash flows and production. The mine produced 1.9 million ounces of silver in the fourth quarter and 8.5 million ounces of silver for the year. Fourth quarter production was impacted by equipment issues and limited access to high grade areas. But improvements in equipment and backfill rates in fourth quarter are expected to improve silver grades in early 2025. The mine operates across six zones and 45 areas yielding five payable metals and maintaining consistent annual silver production of 8 to 9 million ounces. For 2025, production is projected to be between 8.1 and 8.8 billion ounces, driven by planned main mine sequencing with lower precious metal grades and higher zinc content. Cost per ounce is expected to increase as it is impacted by the higher labor costs, which is a trend we are seeing across all our operations and industry-wide. And higher power costs as the hydropower utility that provides power to the mine undergoes maintenance and lower snowpack and precipitation levels, providing the use of diesel power for tons. We are also increasing the capital guidance as we commence engineering and construction for the next dry stack tail expansion to extend capacity through 2040. Our exploration program has sustained the mine's 12-year reserve life. The mine generated $147 million in free cash flow in 2024, contributed to its impressive $2 billion in free cash flow since production began in 1986. With over 30 years of operational success and substantial reserves ahead, the future of Green's Creek looks strong for continued growth. Moving to slide 10, Lucky Friday had a record-breaking operational year in 2024. with the highest ton mine and mill the most seen produced in its 80-year history and the highest silver and lead production since 2000. Notably, these achievements were made while maintaining the best safety or injury frequency rate of 1.4 for a full production year. The mine produced 4.9 million ounces of silver in 2024 with four delivering strong results of 1.3 million ounces of silver produced at 1,180 tons per day due to favorable mining sequence and higher grades. The all-in sustaining cost for the year was 16.50 per ounce, higher than guidance due to increased labor costs and contractor use. Contractor costs are expected to decrease in 2025 as positions continue to be filled. Free cash flow generation in 2024 was 82 million, including 50 million from insurance receipts. As we look to 2025, we expect the mine to produce 4.7 to 5.1 million ounces of silver, with all-in sustaining costs similar to 2024. The company is increasing plant capital investment to enhance the mine's surface cooling infrastructure, a key project to support consistent throughput as mining advances deeper into the ore body over our 17-year reserve life and to help with the mine's zero-discharge goal. The mine's record-setting performance after the 2023 secondary escapeway fire highlights the strong management team and their ability to navigate challenges. As our second cornerstone operation, the mine is well-positioned for another solid year in 2025 with robust fresh cash flow, stable production, and ongoing improvements. This strategy, combined with smart capital investment in a favorable geology, positions the mine for long-term success. Turning to slide 11, Hena Hill met its 2024 production guidance, producing 2.8 million ounces of silver despite facing operational and social challenges. In four quarters, mill trough would average 250 short tons per day. but production was impacted by a 25-day meal shutdown related to the dry stack tailings facility permitting and 10 days of power curtailments from Yukon Energy Corporation. Power constraints are expected to continue into first quarter and resolve mid-2025 when repairs to the hydroelectric turbine are scheduled for completion. We have developed a clear two-phase strategy to achieve sustained and profitable production at Keno Hill. The phase one focuses on reaching and maintaining 440 short tones per day throughput by advancing critical infrastructure projects, including the cemented tailings backfill plant, water treatment facilities, dry stack tails, and mine development. Despite permanent delays, these investments are key to future production growth. The phase two targets increasing the throughput to approximately 600 short tons per day, which is crucial for profitability at this remote operation due to the mine's high fixed cost. This phase requires additional infrastructure investment and new permits. Beyond technical execution, Our success depends on continuing to strengthen our partnership with First Nations in the Yukon government as a responsible long-term partner. We are encouraged by the Yukon Premier's commitment to create efficiencies in the permitting process and support established mining partners. We are seeing positive momentum in our partnership with Yukon government. The Premier has demonstrated strong support through working on allocating resources to address power infrastructure needs, working on developing a charter with Mayor Mines Department, collaborative approach to operational solutions. While challenges remain, including permitting for the phase two expansion, positive momentum is building. For 2025, Keno Hill expects silver production of 2.7 to 3.1 million ounces and quarterly production costs of 15 to 17 million. Production growth is anticipated in 2026 as we approach phase one target of 440 tons per day. A significant milestone in 2024 was an increase of 17% in reserves to 65 million ounces. highlighting the district's exceptional potential. Kurt will elaborate on this exploration research shortly. While we face short-term challenges, our systematic approach to infrastructure development, strong stakeholder relationships, and growing resource base are building a solid foundation for Kena Hills' long-term success. Turning to slide 12, Casa Verde produced 87,000 ounces in 2024 at an all-in sustaining cost of $1,990 per ounce. By mid-2025, the mine will complete the transition to a surface-only operation focused on the 160-pitch which is expected to improve economics and generate stronger free cash flow as the strip ratio decreases. Looking ahead, Casa Berardi's current production plan extends through 2027, followed by a planned five-year development period focusing on permitting, infrastructure, dewatering, and pre-stripping to develop two new open pits. the principal, and the west mine crown pillar. While these future PITs have significant free cash flow potential, the extended production gap has prompted the company to evaluate strategic alternatives for the asset, as announced previously in November last year. The review process is ongoing, and an update will be provided later this year. I will hand the call over to Kurt to discuss our exploration results.

Thank you, Carlos. As you can see on slide 13, since 2018, we have produced 99 million silver ounces and increased our silver reserves by 49 million ounces to 240 million, the second highest silver reserve in our 134-year history. As we mine more ounces every year, we are able to build a silver reserve base through focused drilling. During the year, Keno Hill increased reserves by 17%, Greens Creek nearly replaced mining depletion, and Castle Barardi replaced production plus a small increase. Moving to slide 14, our exploration efforts at Keno Hill continue to demonstrate significant potential through both underground and surface drilling campaigns. At the Birmingham deep target, we intercepted the widest silver bearing zone to date below the Northeast ore zone. Evidence suggests proximity to a newly identified ore chute where the structure appears to be controlled by an interpreted vein intersection. I'm really quite excited by these results. At the Inka vein, we delineated over 800 feet of mineralized strike length. Outstanding drill hole intercept results include 26.1 ounce per ton silver, 20.9% zinc, and significant indium credits, all over an impressive 14.3 feet width. These results further validate our exploration model and continue to demonstrate the district's exceptional mineral potential. Slide 15 presents compelling evidence of our latest discovery at depth in the Birmingham system. The slide shows two key views, a cross-section of the bare vein system and a longitudinal section of the footwall vein. Both sections are contoured to show silver grade times thickness values, highlighting the robust nature of the mineralization. At the Birmingham footwall vein, we've identified a significant new mineralized chute that extends down plunge from high-grade zones in the upper part of the vein, runs parallel to the Arctic fault, and dramatically exceeds previous expectations for the area. Intercepts received during the quarter show significant silver grades and widths in areas that were previously intended as containing lower grade stringer mineralization and include up to 53.8 ounce per ton silver over 15.3 feet. Our latest drill hole located 140 feet further to depth and a long plunge intercepted a wide zone of stringer mineralization over 55 feet. that contains two strong veins with galena, sphalerite, and variable amounts of tetrahedrite. While assays are pending for our latest intercept, the observed mineralization suggests further extension of the high-grade chute at depth, the structure remains open for expansion, and significant potential for resource growth. These results continue to enhance our geologic understanding of the district and reinforce our confidence in its substantial mineral potential. Each new intercept not only adds to our resource base, but also improves our structural interpretation of this incredibly well endowed district. And with that, I will pass the call back to Rob.

Thanks, Kurt. As we look ahead to 2025 and our guidance in slide 16, we anticipate our silver production profile to remain generally consistent with 2024 with production of 15.5 to 17 million ounces. while gold production is anticipated to decrease as Casa Berardi transitions to only open pit mining. We anticipate a modest increase in consolidated cost per ounce, driven by higher labour costs, both at Lucky Friday and Greens Creek, and power generation costs for a couple of months. Finally, our capital investments position us to maintain stable production at our core assets while advancing our growth initiatives. Our capital spend should slightly increase compared to 2024, and that's largely to sustain our production profile at Greens Creek and Lucky Friday. Although Keno Hill and Casa Barati, our investments are anticipated to bring future growth in production and flows. So with that, Kate, I'd like to open the call to questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Nick Giles with B Riley Securities. Please go ahead.

Thank you, operator, and good morning, everyone. Guys, congratulations on the nice progress here in Q4. My first question was at CASA. Obviously, we're looking towards lower strip ratios and some stronger free cash flow in the second half. So I'm wondering if you could outline the strategic review process and is there a targeted timeline in place? Would you look to an outright sale versus a stake sale? What are their considerations? Thank you. Thank you very much.

Well, thanks for your question, Nick. We're looking at all options, and that does include a potential divestment in whatever shape or form. We're also really looking at improving our operating plans. As you're aware, right now we're anticipating about a five-year hiatus between the completion of production from the F160 pit and the commencement of production at the Principal pit. That is a long lead time. And we don't really know what the gold prices are going to look like in five years out. But at current gold prices, the principal actually produces some very, very healthy cash flows. So it's really a tradeoff between bringing value forwards through a potential divestment or, you know, waiting it out, improving our operating plans and looking at harvesting cash flows a little bit further down the road. I expect we'll... have a better, more coherent view in the second quarter.

Robert, I appreciate all that color. My next question was just the net leverage ratio has declined pretty dramatically, you know, on the back of some stronger earnings. And I think I heard you reference a new target, but I just didn't quite catch it. So assuming, you know, metal prices continue to be robust and you're able to pay on the revolver, how should we think about, you know, the chances of increased capital returns versus maybe building some additional dry powder for some of the organic growth opportunities you mentioned?

Yeah, yeah, good morning, Nick. So this is Russell. Yeah, as it relates to the new target, what we've said in the past is that we have a ceiling essentially two times the net leverage ratio. We breached that ceiling, you know, We've been able to bring ourselves back in line where we're below that now, and we've made significant progress on that, the leveraging. We've always wanted to be under kind of a target of less than one time, so I don't think there's anything new there necessarily. I think we're just approaching our target. As it relates to cash generation, clearly getting off of the revolver, building some cash on the balance sheet will be one of our strategic priorities. But we also need to continue to invest in our business, both the capital, and you see that in the guidance that we put out yesterday, as well as the exploration, because that is the future of our company. So there's a bit of a balancing act between paying off the revolver, building cash, as well as investing in our business. But I would suggest we would build up a cash balance while we're making those investments. And you saw us, we removed that Silver Lake dividend because we do think that we have better opportunities internally than with the cash that we generate than we would .

Russell, thank you so much for all that detail. One more if I could. What's the timeline for the maintenance of the hydropower utility? How much did this change your cost guidance?

In general, in terms of timing, it'll be sometime in the middle of this year, but we also see currently You know, we actually are on our generated power at Greens Creek earlier this year and even currently now. So as a total, it's increased our cost about $5 million from an as-produced basis, just to give you kind of a sense of scale.

Got it. Got it. Well, Russell, Rob, and the entire team, continue best of luck. Thank you.

Your next question comes from the line of Joseph Fricker with Ross Capital Partners. Please go ahead.

Hey, guys. Thanks for taking the questions. And it's a rather fresh air to hear words like return on capital investment instead of growth. So on that note, the talk around CASA, is there an outcome that you would prefer to You know, you're talking about possibilities, but is there a preferred outcome? You know, is an outright sale more favored because it's helping to deliver the balance sheet, or is it something where if you were to sell it, that kind of, you know, hurts production in the future, so you prefer to keep it?

If we were presented with a compelling offer for an outright sale, we would use the proceeds to continue to deliver. That is important to us. you know, the forecasting future cash flows, as I said, that's potentially more than five or seven years out. And while that's attractive right now, you know, we'd be gambling on what the gold price would look like out then.

Yeah, fair enough. And on that five-year gap, I think it used to be more like a three-year gap. Is that just permitting that's pushed it back another two?

Correct, yeah.

Yeah, some color. Yeah, it's permitting. Permitting has been more challenging than our previous assumptions, and we are planning to go back on track, but that's the main reason is the permitting.

Okay, fair enough. And then over on Kino, with the power challenges to start the year, and I know, Rob, you haven't been there yet, but, you know, it's on the to-do list, you know, Any thoughts about what needs to change there to get the asset to be cash flow positive? Are there any really big things you've already identified?

Yeah, so the main thing is to continue our investments in the infrastructure. Right now, we have a permit limit that's capped at 440 tons per day, but that's not really the end game. We need to get to 600 tons per day. which, and that's largely because of the high fixed cost that Carlos was talking about. It's a remote location. The costs are higher than we anticipated. So really the ultimate goal is 600 tonnes per day, but to get to there, we need to make the additional infrastructure investments. So that's in the mill, water treatment plant, tailings, power, camp space, all that sort of stuff. And they all rely on new permits. And so permitting has been a bit of a constraint, but we do see a pathway to getting to 600 tonnes per day.

Okay, and have you guys kind of run an internal trade-off of potentially shutting it down temporarily until you get those permits versus continuing to operate it?

Yep. I mean, we're always evaluating our investments, and if it makes sense to put it on care and maintenance and pick up the ball on another day, we'll certainly consider that. But right now, we've been encouraged by some of the discussions we've had with the Yukon government And, you know, again, if we expect to see continued delay in permitting, we'll re-evaluate our position. Okay. Thanks. I'll turn it over. But I have to say, yeah, I have been encouraged by some of the discussions we've had and the re-engagement we've had with the Yukon government, not just the Premier, but the Mining Minister, Yukon Power. They all understand that we cannot be waiting indefinitely for permits. Okay. Thank you. Thanks, Jesse.

Your next question comes from the line of Kevin O'Halloran with BMO Capital Market. Please go ahead.

Hey, Rob and team. Thanks for taking my questions. Maybe just picking up at Keanu, kind of similar to the last one, but on the permits, what's right now your expected timing of receiving those permits and then Maybe once you do have those permits, what is the timing to get those infrastructure items built, like the water treatment and the backfill facilities?

Let me just start out by talking about the permits, and then I'll defer to Carlos about the infrastructure. So I'm going to back up a bit here, Kevin. We've made progress on the permitting, but the challenges do remain. We met with the Premier and his team in January and the Yukon government has acknowledged the need to keep the permitting on track and have responsible companies like Heckler. You know, he understands that we've been in business for 134 years and he understands that we've got a fantastic environmental record over at Greens Creek and that we have the social licence to be, you know, serious producers in the Yukon. And so, you know, that commitment's been demonstrated through several key initiatives. And so he's undertaken that will develop a charter with the major mines department. There will be an allocation of resources to address those power infrastructure needs. And really he instructed his department to have a more collaborative approach to finding some operational solutions and really try and create efficiencies in the permitting process for established operators. Now, obviously things had caused last year because of the heat bleach failure at the at the Eagle gold mine, which we obviously don't own. And so while we're encouraged by this positive momentum and the partnership with the Yukon government, we're going to continue to engage with the First Nations. And so permitting still remains a significant risk in getting to that 600 tonnes per day that I spoke about, which is the critical threshold to getting to profitable production. But with the Premier's demonstrated support and his encouraging words and the actions that he'll be about to take, you know, we believe that we should be making some steady progress towards our goals this year.

So related with projects, we are prioritizing the execution of projects in the next two years, which is which are going to improve and sustain the phase one, which is the 440 tons per day. After that, of course, we are going to re-evaluate which probably is going to take another two years to go up to the 600 tons per day mark.

Okay, thanks. Appreciate the color there. And maybe just on the costs at Keno, can you give us a sense of the proportion of fixed costs, like of the costs you reported this quarter? What percentage, roughly speaking, do you consider fixed versus variable?

Yeah, to give a specific percentage, it would be a challenging thing. But, you know, they are primarily fixed because if you think about the site itself, with it being a remote operation, you've got a charter, you've got a camp, you've got people rotating in and out, those types of things. And as a result, you will see higher fixed costs because of those things. And as Rob had mentioned, you know, the way for us to overcome those will be higher throughput.

Okay, that makes sense. And then final one for me on the Lucky Friday CapEx, about how much of that is being allocated to the cooling project? Is that all the growth CapEx? And then maybe as a follow-on, how much of that is the mine development, just in terms of trying to get a sense of what the normalized capital spend would be on future years?

So the mine development of the Lucky Friday is close to 20 million, and the surface cooling system is like 13 million for the next year. So once we complete this project in the next coming years, it's going to be a reduction in the capital for Lucky Friday.

Okay, sounds good. Thanks for taking my questions. I'll pass it on to the next caller. Thank you, Kevin.

Your next question comes from the line of Heiko Aue with HSE Wainwright. Please go ahead.

Hey, Rob and team. Thanks for taking my questions. Lucky Friday seems to be running pretty well on all cylinders here, but I mean, ignoring the numbers for a second, can you maybe provide a bit of color on what changes you expect to have at site in this quarter and beyond? that could further improve efficiencies and production, and maybe even quantify how much you expect those individual factors to impact your production? I mean, we're essentially halfway through Q1 at this point.

So, Heiko, we're having a hard time hearing you on this end, but I think let me restate your question. You can tell me if I've got it right. Lucky Friday, you're right. Lucky Friday had a very good 2024, especially coming out of the fire we had. Yeah, and I, you know, we've mentioned on the call here that my group, I'll, you know, highlight is as a very good qualified group. So we do expect Lucky Friday to continue to be successful out in the future, kind of a base and consistency out in the future. I guess where I'm a little bit, I was struggling to pick up what your question was as it relates to what do we expect, you know, kind of in the near term of Lucky Friday?

modify some of the efficiencies and production changes that we should expect to see in Q1 and maybe even beyond, if you can. In other words, what is getting done and what has been getting done the last six weeks since the beginning of the year that may have not been impacted in the Q4 numbers?

Hi, Heiko. This is Matt Blattman. That's going to be a challenging one, as you know, as we go deeper And farther and farther away from our primary access, it's going to be harder and harder to find efficiencies and improve costs. It's not to say they won't be there, but I don't think you're going to see quantum level changes. This is going to be continuous improvement, slow, steady. Let's make sure we see improvements from every change. And also remember, Linky Friday hit record production this last year. It's going to be trying to beat your own record every year gets harder and harder.

Fair enough. In your press release, it states that the costs at Casa or the second half are going to be a little bit lower, but maybe just a bit of color where you expect to see us on a quarterly basis. And by then, by that, I mean, you know, sort of worship the analyst community model Q1, I guess we'll be halfway through the quarter effectively tomorrow. and maybe even Q2 versus the remainder of the year in, you know, numeric terms and in quantifiable terms.

Yeah, I'll start, and Carlos can jump in and supplement where necessary. But, you know, clearly Casa Berardi right now is both an underground operation and a surface operation, right? And so, mid-year, what we expect is for that underground to uh come to a completion because at that point what we expect is that the surface of mine will be able to fill the mill and when that happens we'll remove the cost from the underground and uh and then the cert from the surface perspective the stripping ratio will we're expecting that for that to come down as well so as such we should see less um expenses from the surface What I would say is that we, you know, we don't give quarterly guidance and we don't do that, you know, intentionally because as we do move through 2025, just like through 2024, things change and we'll, you know, we'll manage those as they come. And so as a result, I would say, you know, from a quantification standpoint, you know, we wouldn't be able to give you any quarterly numbers necessarily, just that we would expect for the cost to come down in the second half of the year as we see that underground come off and as we see the surface, you know, expenses also be reduced as we see the strip ratio and the waste solids come off. And frankly, those activities will be focused on the ore mine. Is there anything you'd like to add?

Yeah, that's exactly right. The two conditions we need to meet in the second half of the year, which is the most significant is that the open pit is going to be capable to feed along the mill and maximum traffic.

I'll try to question a touch differently then. If one goes to an open pit only operation, how many quarters of impact do you think it has for the cost savings to be fully reflected in the numbers?

So I would suggest, you know, as we see the underground come off, if we see the underground come off in the middle of the year, there will be some, you know, carry-on expenses where we're, you know, determining how to go forward with the underground, and that would be continuing to keep it open for exploration, et cetera. Those decisions will continue to make. So I would say you'll probably see a fourth quarter that should be better than a third if you look at it from that perspective, because there will likely be a few carry-on costs as it relates to the transition in the third quarter.

Yeah, you got exactly where I was going with this. Thank you very much. Thank you.

Your next question comes from the line of John Temezos with John Temezos Independent Research. Please go ahead.

Hey, Rob. Good to see you on board.

Thank you.

As you're aware, the state of Montana passed a special purpose law related to your predecessor trying to delay the progression of Montenor and Rock Creek. Have you had a chance to meet with the Montana officials, and what's the outlook for expediting those two projects? I've been admiring them my entire adult life.

Well, good question, and you're right to admire them. You know, I was immediately drawn to the phenomenal mineral endowment, you know, 300 million pounds of silver 3 billion pounds of copper at 0.7%. So the size of the prize has really got my attention for sure. In terms of the updates, we're basically going through a permitting strategy at the moment. So the Forestry Services draft EIA for the Libby exploration project, that's in the final week of public comment. And there's been about 1,500 comments received. And really the next steps, there's going to be 30 days for the Forest Service to respond to the comments. then there's going to be a decision on the final EA issuance. And if it's approved, then a FONSI will be issued and that'll be followed by a 45-day objection period and a 30-day objection response period. And depending on the nature of any objections received by the Forestry Service, the updated plan of operations for the project, it could be approved in Q3 2025. I haven't met with them personally, but obviously we've had our team meeting with the regulators frequently. So we're in that comment period at the moment, John.

Concerning Casa Berardi, there's a great deal of exploration activity, as you know, on the east-west trend, maybe extending from Cochrane and Detour Mine in Ontario all the way toward fennel and wall bridge other companies maple gold mines the straws different projects do you think in our lifetimes there might be a major east west highway from cochrane through the trend or north south highway to improve access which would lower the cost of operation at Casa Berardi. Is it worth maybe idling the mine to wait for the better times when the neighbors catch up and it becomes a more thriving mining district?

It's an interesting concept and if we continue to To hold Casa Berardi, we'd certainly welcome that outcome. I don't really know, John. I don't know whether there'd be an infrastructure investment and who would do it and what the timing would be, but I certainly like the way you're thinking about it.

If I could ask one more, and I'm not trying to take a swipe at the planning a year or two ago, but the camp and the fixed costs at... in the yukon were well known before the alexco buyout and the wheat and precious metals buyout of the stream are the camp costs and the mining costs twice as much as expected also the silver price is better obviously like ten dollars an ounce so it surprises me that we need 600 tons a day and that uh 400 tons today can't do the job.

John, you know, again, I'll jump in and, you know, Carlos can supplement as well. But, you know, as we looked at the project, you know, we knew that it would be a high fixed cost. You know, I think that, you know, Robbie had made the comment, too, that, you know, the ramp up has been more challenging than we expected. The infrastructure investment that we've we've made and continue to make you know frankly there's been some things that we uh that we were doing that we didn't realize that we needed to do so i think from the cost perspective yeah that is one of the things that we could have dialed in a bit better so the ten dollars an ounce good surprise on the silver prices and Well, keep in mind, we're still currently in that ramp-up phase, right? So we're still currently building our infrastructure, putting those types of things in. You know, certainly the increase in the silver price is helpful. But, you know, right now we're not even at that 400 ton today. We have to get things in place for us to get there.

Okay. Okay.

Your next question comes from the line of Mike Parkin with National Bank. Please go ahead.

Thanks for taking my questions. We kind of touched on it with the Rock Creek in terms of the huge mineral endowment. Rob, are you thinking you want to kind of get your feet a little bit more wet on the exploration potential of the American portfolio of exploration projects before you kind of review you know, any potential sale there? It just seems you've got a plethora of projects and potentially a phenomenal market to be selling into. Just your initial thoughts as you're, you know, a few months into the new role.

Yeah, thanks for the question, Mike. We're definitely not going to be throwing the baby out with the bathwater here. I do intend spending some time down in Nevada in the spring and summer when the rocks are exposed and stuff like that. And so I am excited by some of the opportunities. Our exploration budget for this year, it is going to be constrained. And let me just explain that a little bit. We've basically intentionally maintained our exploration spending below what I think are the industry averages for companies of our size. And this is really a deliberate strategy, and it's not a limitation. We've got a pretty robust pipeline of quality targets across our portfolio, and many of them are in Nevada, as you point out. But we're taking a fairly measured approach to exploration investment, and it really comes down to strategic capital allocation. You're aware that our mines have got really substantial existing mine lives, and that gives us the flexibility to time our exploration programs. So given our current financial parameters, I guess, we've prioritized the capital for other critical investments like Aquino Hill, but this doesn't diminish the quality of our exploration targets. I think that the key point is that our exploration and drilling levels they reflect careful capital allocation rather than any constraints on the opportunities. And so, as I said, we've got numerous high potential targets and we'll systematically evaluate them as our capital priorities evolve. But it's really a simple matter of optimising our resource deployment in the current environment. And I think that when we start generating more free cash flow, I think there's going to be a compelling argument for increasing our exploration investments. and really advancing our best projects through stage gates and key decision points. So yeah, I'm quite excited about some of the projects in our portfolio. There are others that we've already identified that we probably won't be keeping. But really, the game, as you know, is to constantly upgrade the portfolio and not just have a cupboard full of dormant projects.

Great. And then just recently, we've seen BC announced like a fast track permitting process. Are you getting any Kind of indications that Quebec might adopt kind of something similar through their government that could possibly be a tailwind for CAAT. So with respect to the timeline there, the future of this plan.

I don't know the answer to that question, Mike. We are actually in the processing process of hiring a VP of sustainability. and that person has extensive permitting experience, and so we'll have a better answer for you fairly soon.

Great.

That's it for me, guys. Thanks very much. Thanks, Mike.

I will now turn the call back to Rob for closing remarks.

Well, thanks, everyone, for joining us on this call, and we look forward to keeping you updated with our story as it evolves next quarter. Thanks, and have a good day.

Ladies and gentlemen, that concludes today's call. Thank you and have a great day.