Hecla Mining Company

Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2025 Hecla 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, again, press star and 1. I would now like to turn the call over to Mike Parkin, Vice President, Strategy and Investor Relations. You may begin.

Good morning and thank you all for joining us for HECLA's first quarter 2025 results conference call. I am Mike Parkin, Vice President, Strategy, Investor Relations. Earnings released that was issued yesterday along with today's presentation are available on our website. on the call today is rob kritschmerov president and chief executive officer officer russell waller senior vice president and chief financial officer carlos aguilar senior vice president and chief operations officer kurt allen vice president of exploration anvita patel Hekla's Vice President and Treasurer and my predecessor, as well as Matt Blateman, Vice President, Technical Services. At the conclusion of our prepared remarks, we will all be available to answer questions. Turning to slide two, 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 10Q 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 news release. I will now pass the call over to Rob.

Thank you, Mike, and good morning, everyone. Before we get started, I just want to take a moment to thank Anvita for her exceptional leadership and dedication over the last couple of years. Her willingness to shoulder the responsibilities of both Treasury and Investor Relations during a time of significant transition for the company has been nothing short of remarkable. Amita, as you now transition back to focusing on your role solely as Treasurer and help Mike assume his new Investor Relations responsibilities, I want you to know that your contributions haven't gone unnoticed. So thank you, Amita, from myself and on behalf of the senior management and the board. Turning to slide three, I've completed my first six months with the company and I've done visits to all of our operating mines and initiated a comprehensive review of our extensive exploration portfolio. And I have to say that with each passing month, as I deepen my understanding of both our mineral assets and our talented employees, my confidence in Heckler's promising future continues to strengthen. So let me now share our forward strategy built on four key pillars, all grounded in ESG leadership. First, we're intensely focused on operational excellence and reinvigorating a continuous improvement program and culture at each site. We're standardizing systems across all mines to ensure consistent performance. Our investments in analytics and semi-automation will improve real-time decision-making, and we're controlling costs aggressively while enhancing production through optimizing extraction methods, reduced dilution, and better ventilations. On the maintenance front, we're shifting to a more proactive approach with preventative programs that catch issues before they become costly problems. And we've identified critical parts that impact production and implemented a tracking system to ensure availability when needed. We're also investing in our workforce through targeted training and leadership development. Second, we're optimizing our portfolio for maximum returns. While our Casa Berardi assessment continues, We're evaluating our exploration assets to unlock hidden value. Keno Hill remains our top priority for organic growth, but we're also developing a disciplined acquisition strategy aligned with our core strengths. Third, we've implemented rigorous financial discipline with a structured capital allocation framework focused on free cash flow and clear return on investment targets. And this approach prioritises balance sheet strength, financial flexibility and reliable shareholder returns. Fourth, we remain committed to silver market leadership. As the largest producer in both the United States and Canada, we're uniquely positioned with long lived mines in top tier jurisdictions that provide regulatory stability and support responsible development. Underpinning everything is our commitment to environmental stewardship, community partnerships and strengthened relationships with First Nations and all stakeholders, ensuring that we lead in ESG practices across the mining sector. As we turn to slide four, let me highlight our achievements for the first quarter. Our operations delivered a strong quarter, producing 4.1 million ounces of silver and more than 34,000 ounces of gold, as well as robust volumes of lead and zinc and some copper, positioning us well against our annual guidance. I'll highlight two notable achievements. So Lucky Friday set a consecutive quarterly milling record, demonstrating the exceptional consistency that Lucky Friday brings to our portfolio. Meanwhile, Keno Hill produced nearly 800,000 ounces and delivered its first profitable quarter under Heckler's ownership. I'll discuss expiration later in the call, but I'm excited about the surface expiration programs we've initiated in Nevada. Additionally, our Libby expiration project in Montana recently secured placement on the Federal Permitting Improvement Steering Council's FAST 41 permitting dashboard. And that's a significant milestone that can streamline federal approvals and enhance coordination across agencies. Our exploration team has identified new geological concepts that warrant further investigation, and the FAST 41 designation really provides a structured framework for advancing these studies. As with all capital allocation decisions, we remain committed to our discipline investment criteria and will continue methodical assessment of this asset's potential to deliver value to our shareholders. From a financial perspective, we delivered record quarterly revenues and adjusted EBITDA exceeding $90 million. driven by high metal prices and solid contributions from all four operating mines. Our cornerstone assets, Greens Creek and Lucky Friday, continue to generate robust free cash flow of more than $40 million during the quarter. We're maintaining our production and capital investment guidance for the year with some adjustments to individual asset cost projections that Carlos will speak in detail in a little while. Importantly, our consolidated silver cash costs and all-in-sustaining cost guidance on a per-ounce basis remains unchanged, demonstrating the advantage of our diversified portfolio approach. And I will now hand the call to Russell for a detailed financial review.

Thank you, Rob. I'll start on slide six. We make our capital allocation decisions with a long-term view and strategy in mind. As I reflect on the financial position of the company one year ago, we reported a net leverage ratio of 2.7 times, and our net cash balance was negative $60 million. One year later, I'm happy to report that we've improved the net leverage ratio more than one turn down to 1.5 times and improved the cash position of the company substantially with an effective balance of approximately $20 million at the end of the quarter. I'll speak more about the details of the quarterly cash flow momentarily. This improvement came from many sources, including better prices for both gold and silver, production from Lucky Friday for the past 12 months, and other capital allocation decisions, such as eliminating the Silverlink dividend. During this time, we also continued our investment in the Keno Hill mine, as we see this as our future growth project, which meets our return on investment criteria. We've made progress on these initiatives, and as we look ahead, our plan is to implement strict return on capital criteria on our investments, ensuring stewardship of our investors' money with the intention of seeing improved consistency in our financial results and improved performance. Our plan remains to deliver the balance sheet, looking to improve both our net leverage ratio and also the outflow of interest expense. At Casa Berardi, we are still determining the best path forward there, where our strategic review options include the outright disposal, a joint venture to spin out, the potential of extending the underground or accelerating future cash flows to take advantage of the current record gold prices via prepayment or other financing arrangement, or some combination of these alternatives. And in any scenario, we continue to see potential opportunities to maximize the value of this asset. Looking at the graph on the right-hand side of slide six, we see Greens Creek and Lucky Friday continue their strong free cash flow generation of $42 million generated during the quarter. We're on a consolidated basis. Our free cash flow is negative $18 million. However, if you look closer at the details, you'll see an inventory build of $12 million and an increase in accounts receivable of $29 million. These negative working capital adjustments were due to a few factors, but generally because our production improved toward the end of the quarter, which did not allow us to either sell all the inventory on hand or collect some of the funds for those sales for the products sold. Additionally, we had working capital outflow of approximately $16 million for accounts payable and other current liabilities, which is primarily the interest on our notes, which we pay each February and August, along with incentive compensation payments and some other outflows for payables. Although we see negative working capital in the first quarter, I expect to see some of these items will turn in the next quarter as we sell the inventory that was built up for collector's receivables, setting us up for a strong Q2. Turning to slide seven, we generated record revenue of $261 million during the quarter with 45% of our revenue from silver, gold at 33%, as we benefited from the improved gold price and base metals coming in at around 22%. With silver prices increasing, our silver margins improved from 54% in 2024 to 65% this quarter. This record revenue and margin expansion in our silver operations also provided for record-adjusted EBITDA, which helped improve the net leverage ratio from 1.6 times at the end of last year to 1.5 times at the end of this quarter. I'll now pass the call to Carlos for a more detailed review of the performance of our operations.

Thank you, Russell. I'll start on slide nine. Greens Creek continued to demonstrate its consistency as a stable cash flow generator and producer. The mine produced 2 million ounces of silver in the first quarter, driven by 10% increase in the silver grade milk from the last quarter. The grade improved throughout the quarter to approximately 13 ounces per ton in March and remained strong entering the second quarter. Backfill and development activities also continued to improve throughout the quarter, which helped with the delivery of higher grade tons to the mill. Negative cash costs of $4.08 per ounce and negative all-in sustainable costs of $0.03 per ounce were significantly better than annual guidance. High-impact product credits reduced costs, partially upset by increased fuel purchases due to the need for more side power generation than planned in the quarter. Capital investment in Greens Creek totaled $10.8 million, which is expected to rise in the next two quarters due to the construction season ramping up activities, a common theme across our producing portfolio as well as our exploration assets. Production guidance for 2025 at Greens Creek is maintained at 8.1 to 8.8 million ounces of silver. We are lowering Greens Creek cost guidance significantly Primarily attributable to a strong goal by product credits in the first quarter, with cash cost guidance reduced to $0.25 to $0.75 per ounce from the prior $2 to $2.50 range. And AC guidance lowered to $6.50 to $7.25 from $8.75 to $9.50 per ounce. Capital investment guidance is unchanged at $48 to $51 million in sustaining capital and $10 to $12 million in growth capital. Moving to slide 12, Lucky Friday continues to demonstrate operational excellence, achieving a consecutive quarterly million record of almost 109,000 tons, surpassing our previous record in the full quarter of 2024. The mine delivered consistent silver production of 1.3 million ounces in the first quarter, maintaining its position as a core production asset. When production remains strong, we experienced cost pressures during the quarter, with cash costs at $9.37 per ounce and ASIC of $20.08 per ounce after byproduct credits, primarily due to higher labor costs, profit sharing, consumables, and contractor costs. In response, we implemented cost control initiatives aiming to reduce reliance on high-cost contractors. Free cash flow generation in the first quarter was 8.4 million, negatively impacted by working capital change and the higher operating costs versus the prior quarter. We are maintaining our 2025 production guidance of 4.7 to 5.1 million silver ounces while adjusting our cost projections to reflect current realities. Looking ahead, We anticipate capital investment to increase in the next two quarters as warmer weather supports our seasonal construction activities. Our focus remains on balancing operational consistency with disciplined cost management to maximize Lucky Friday long-term value contribution to our portfolio. Turning to slide 11, Enoch Hill produced over 770,000 ounces of silver. During the quarter, field throughput averaged 250 tons per day, remaining below the permitted limit of 440 tons per day. We noted in February our power supplier for Keenohill Yukon Energy Corporation suffered a failure in its power generation through the end of October of last year at the hydro power plant in Whitehurst, which is not scheduled to be repaired until August of this year. Despite this and other challenges, Keno Hill delivered its first profitable quarter under Hekla ownership with $1 million in gross profit, which resulted in not costs being transferred to run path and suspension costs. War continues to bring the asset into a state of sustainable, profitable production. When the mill has proven to be capable of operating on a permitting capacity of 440 tons per day, our mining rates have lacked improve our mining rates and put the mine on path towards achieving its current permitting capacity of 440 tons per day we must advance permits and successfully continue to improve development of the deposits and execute critical infrastructure projects which include dry stack tailings cementing tailings backfill plants and water treatment plant upgrades long term profitability, and conservative metal price assumptions will require drop-out rates of approximately 500 to 600 tons per day due to heat or hail high fixed costs. These will require new permits, regional infrastructure investment, and execution of significant capital in mine development. Beyond technical execution, our success also depends on continuing to strengthen our partnerships with First Nation and the Yukon government as a responsible long-term partner. In 2025, we are reiterating our guidance for Keenahill, expecting silver production of 2.7 to 3.1 million ounces and quarterly production costs of 15 to 17 million. Turning to slide 12, Casa Braga produced about 20,500 ounces of gold during the quarter. at a cash cost of $2,195.23 per ounce, respectively. In the second half of 2025, the 160-bit is expected to demonstrate improved economics and generate a stronger cash flow, a district ratio decrease, and reliance on contractors' eases, with improvement to be achieved late in the third quarter. Currently, there's no change to the Casa Verde production guidance of 76 to 82,000 ounces of gold production in 2025. Cash cost guidance and AC guidance isn't changed, despite the first quarter cash cost and AC coming in above the four-year guidance range. On a pro rata basis, they are in line with the company's expectation and surely improving the second half of the year. I now hand the call over to Rob to discuss exploration initiatives in Nevada that are ramping up this month.

Thank you, Carlos. As I deepen my understanding of our exploration portfolio, I'm particularly excited about our Nevada assets. We're investing over $3.3 million this year in a targeted exploration program at our high-grade properties with two drill rigs now deploying at MIDAS. Our Nevada strategy centers on a hub-and-spoke approach. leveraging existing infrastructure across high-grade historical districts. And Midas stands out with its impressive production history of 2.2 million ounces of gold and 27 million ounces of silver at exceptional grades. This 30,000-acre property features an extensive alteration footprint, suggesting significant potential for new vein discoveries supported by an existing mill and tailings facility that really could become our northern Nevada hub. Just 15 miles to the southeast, Hollister offers complementary potential as North America's third highest grade underground gold mine. With production grades averaging 0.8 ounces per tonne gold, the Hattagraben resource area already contains a gold and silver resource with geological evidence indicating a fully preserved epithermal system likely holding its best mineralisation at depth. And these strategic assets combined with our systematic exploration approach represents a compelling opportunity to create meaningful shareholder value through resource expansion and potential future production. Moving to slide 14, I'll close by reviewing our key deliverables for 2025. To position HECLA for sustainable growth and shareholder returns, we remain committed to our strategic priorities. At Keno Hill, we anticipate unlocking long-term value through discipline permitting processes and execution excellence and moving this high-grade asset down the path towards reaching its transformative potential. Concurrently, we're implementing a robust capital allocation framework that prioritizes high return investments while maintaining operational efficiency and our commitment to safety and environment. Our focus on generating strong free cash flow fits well with our deleveraging initiatives and offers opportunities to strengthen our balance sheet and enhance financial flexibility. Finally, we continue to look to optimize our portfolio through rationalization efforts at Casa Berardi and are actively evaluating strategic initiatives that align with our core competencies and value creation objectives. We expect that by coordinating these actions, we can maintain operational excellence and achieve financial strength and sustainable growth for years to come. And so with that operator, 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 and then the number one on your telephone keypad. We will take your first question from the line of Heiko Ehle with HC Wainwright. Your line is open.

Hey, it's Heiko from Wainwright. I assume you can hear me okay? We can. Perfect. Good morning. You have a pretty diverse operational asset base across borders. Just out of curiosity with all the recent talk about tariffs, I mean, you can't open a newspaper without reading about it and just international trade facing a variety of arguably self-cost headwinds.

have there been any components or inputs or parts or anything that has been delayed anything in particular where you've seen an outsized impact on pricing or availability anywhere across your mind uh thanks thanks for your question um i'll let uh russell answer that one but uh just bear in mind that roughly 50 of our costs are in labor um there will be some some minor impacts on consumables and other things

That's right. Excuse me. Thanks, Rob. Thanks for the question, Heiko. Yeah, as we think about the business, we've really got the items that we purchase and then the things that we sell, right? So as we think about the things that we purchase, we do anticipate seeing higher costs for things like rebar and steel and those types of things, just because the tariffs will hit that type of industry maybe more directly than others. We haven't necessarily seen any our lack of being able to get parts and things like that. Part of that is because we do try to look ahead and, you know, as tariffs were being announced and even talked about months ago, we tried to be proactive and make sure that we had things, you know, parts stocked. As I think more specifically about the parts that we do buy, most of the things we buy, we buy at each operation in that country. And so I think that any tariffs on that in that regard would be Patrick Corbett- kind of indirect where maybe you buy part from apart from a supplier that's manufactured in their. Patrick Corbett- plant in say Mexico or something like that, but you know currently right now, you know Mexico, Canada, United States parts sourced out of those are generally exempt so that's okay. Patrick Corbett- And, as I think about parts that we get from China there's not much. a few grinding balls and things like that. But frankly, we have a kind of long lead time supply on those. So we've got a lot of those in stock. We haven't been hit directly yet. On the other side of the equation is what we sell, which is our concentrates. We export all of our concentrates, essentially. Some of those concentrates get exported from the United States to Canada, and then some go either from Canada or the United States to Asia. And some of those concentrates, frankly, do go to China. The contracting strategy that we've had currently has really insulated us from any direct impact of those tariffs going into China. But I would expect in 2026, we may see the impact of tariffs. And what we'll see there, I think, is more, you know, we'll see the cost to place that at a Western smelter might go up versus in a smelter in China. But I don't expect any risk of us not being able to place concentrations. Does that, does that answer your question fully?

It does. I mean, I, yeah, it does. Yeah. I mean, I've been in this industry long enough to remember the days when, you know, it was impossible to get tires for trucks. So it, uh, this, this stuff still sits freshly on my mind, I guess. Um, completely different, uh, follow up question. You mentioned the Yukon energy corporation repair for the turbine failure. That's going to be happening in August. Obviously early for this question, but is this site going to be down altogether when that happens? And if so, how long do you think this will halt the operations? And again, any way you can quantify your best guess as to the financial impact as well?

The projection for the repairs of the turbine is expected to be in the month of August and it's going to last six days. We are planning to advance, yeah, six days, six days. And in our projections, we included that downtime, right? And we are on a schedule to advance some of the maintenance projects during that period of time with some restriction in the power source. But there are plenty of projects that can be, you know, advanced during that period of time. And, of course, the economic impact of those days right now are estimated at the late 90,000 ounces of silver, and, of course, with some labor costs associated with that.

So we're in regular dialogue with Yukon Power. We know it's coming. We've planned for it, and we're ready.

Perfect. That's good to hear. I'll get back in queue and give other people a chance. Thank you. Thank you.

Your next question comes from the line of Dalton Barreto with Canaccord. Your line is open.

Thanks, operator. Good morning, Rob and team. Thanks for taking my questions. I want to stay on Keno here. It seems to me that the language used in your outlook for Keno has gotten significantly more uncertain, let's call it. I'm just trying to get some context around it. I'm specifically trying to understand, like, if you got the permits tomorrow and you had community support, how much capital and time would it require to get that operation sustainably to 600 tons per day? And then on the flip side, what sort of metal prices would you need to see in order to sort of curtail production while you do these projects? Thank you.

Good morning, Dalton, and thanks for your question. Our messaging at Keynote is really about, it's an evolving work in progress. There's no doubt that we underestimated some things like costs and obviously we've had some unforeseen events like the neighbouring heat leach that basically put permitting on hold. But having said that, I think we've made some real progress there building on what we accomplished last year. So, you know, we fixed the crushing system that was really slowing us down. we got all the permits for expanding our tailings facility, which was crucial. And I think the big win for us was really running the mill for, you know, extended periods of time and consistently hitting about 400 tons per day. And that was over several months. So that really proves our processing works, our processing setup works. And that's kind of huge for our next steps. And going forwards, Really, we need to get our mining rate in sync with what our mill can handle, and we're going to do this by gradually ramping up both the Birmingham and Flamin' Moc deposits. We know we need permits for this, so we've recently welcomed a highly experienced sustainability executive, Patrick Malone, with decades of permitting experience, who's already begun building a specialised team. We're also strengthening our technical capabilities to make sure that we get those permit applications right, And I have to say our collaborative engagement with the First Nations has increased as well. So let me just recap. So we're focusing on expanding our water treatment plant, adding waste storage, enhancing our tailings facilities. We're also starting construction on tailings batch fill plant, and that's gonna improve both productivity and safety. The waste and tailings storage, that is going to reach capacity by 2028, so getting those permits It's really time-sensitive, and so we're also working on increasing our camp capacity to house more workers as we scale up. I should also mention that we've done a thorough assessment of what care and maintenance would look like. You know, that's just good planning. And, you know, we still believe that advancing Kino Hill makes strategic sense, even though I can't tell you exactly when it's going to hit our profitability targets. Reaching 600 tons per day, that is going to take a few years to get there. First, we need to sustainably mine at 400 tons per day. I'm talking metric tons here. And match that to the mills capacity. Anything you want to add, Carlos?

Yeah, this is still work in progress. You know, permitting, you mentioned entailings and capacity. And of course, we are really excited this year to start the construction of the backfield plant, which is going to change and it's going to improve safety and productivity in the near future.

And so our understanding of that ore body, it keeps improving and with each milestone, it brings us really closer to unlocking the real value of this silver district, which we're quite excited about. So it's still a work in progress.

Got it. Thank you for all that, Rob.

And I think, Dalton, you kind of mentioned cost as well. And I would say that, you know, we've invested quite a bit of capital in Keno Hill over the past few years. Obviously, we've all seen that. I think that, you know, you look at the performance that we've seen over the past few years, we have seen improved or more consistent performance. We need to improve that. We'll continue to make these investments. You know, Carlos and Rob both mentioned the tailings batch fill plants, and that should help us. you know, improve the rate that we can extract from the mine. Because right now, you know, in the past, frankly, it used to be that the mill wasn't able to keep up, and now the mine isn't able to keep up with the mill. So we just keep hitting those bottlenecks. And so if we think about that, we will see capital continue into the future over the next few years as we do those types of projects, these infrastructure projects, and improve the developed state of the mine. But we should see that tail off as we as we kind of get further out into the future. You know, and keep in mind as well, we do have investment criteria that we are looking at and evaluating, and Keno Hill continues to meet that, but we have to execute on these plans.

Understood. Thank you for that, Rajnik. My follow-up, Raj, if I can direct that one to you as well. I appreciate your comments in terms of placing the green screen concentrate and sort of finding an alternative to China. But in the March 20th executive order, one of the things that order talks about having the Commerce Department look into, in addition to export tariffs on critical minerals, is also an export tax. And I'm wondering if that goes into play, what options do you have for placing green screen concentrate?

Thanks. You know, frankly, Dalton, I'll have to get back to you on that one. You know, there's been various things that we've looked at, but I can't say that I have that on my radar, and I apologize for that.

Great. Thanks, guys. I'll jump back in queue.

Your next question comes from the line of Michael Ciperco with RBC Capital Markets. Your line is open.

Thanks very much, and thanks for taking my question. Maybe a couple on the growth outlook. And Rob, you talked about Nevada and what you're seeing there. I guess, can you give us a little bit more color about maybe how you see that in the context of the portfolio? I know it's early, and maybe what we should be expecting in terms of a timeline for either a study or an update on what you see in terms of the potential in Nevada?

Sure. Good morning, Michael. I'm going to hand you over to Kurt, but I have to say, like, I was out there about a month ago, and, you know, we have this permitted unused mill. We have tailing storage capacity, and so really our approach is this hub-and-spoke model. Right now, what we need to do is build up a critical amount of resources and then re-look at a path forward. Kurt, could you add some more color, please?

Yeah. Thanks, Michael. You know, the program that we have at MIDAS this year, we're going to have two drill rigs. We've got about seven targets, and these are all high-grade vein targets. You know, we're thinking that we've kind of figured out the structural regime on the east part of the property there. These are early stage drill holes. It's going to tell us a lot, but we're focused on trying to identify the high-grade portions of those veins. And I think it's going to be similar size, you know, our potential is similar size to what was mined in the past. Now, Aurora is another project that we're currently in the permitting process. So we're doing a five-year EA, an expiration EA there. We should have that by the end of the year. And that's going to open up the entire district there for exploration. So we're kind of waiting on that EA at Aurora. And then Hollister, you know, in my years of experience, it's probably one of the largest surface expressions of an epithermal system. And we've got several targets there. We're not going to drill there this year. We're hoping to be able to do that next year. But I think, you know, within a couple, two, three years, four years, depending on the results from this year and next year's programs, I think we'll be on to something and move those projects forward.

Thanks, Kurt. One of the most striking things when I was on site, to Kurt's point, what defines a mineral system or the limits of the mineral system is how altered the rocks are. That shows you that fluids have been going through it. When I was on site, you stand on really intense alteration that Kurt was talking about, and it's probably a couple of kilometers away from, uh, where all the, pretty much all the previous historic mining and development and exploration has been focused. So that playground it's huge. And so, uh, that's what's really got me excited. I think there's an opportunity in, in where all the work has previously been focused around existing operations and really not that much outside of it. Um, sorry, I cut you off, Michael, go ahead.

No, that, that, that's good color. So I suppose, uh, I'm looking to understand and maybe lost track a little bit of where exactly you were in the advancement in Nevada. Is it fair to say that in an optimistic scenario, we'd be talking about a potential production scenario, let's say, four or five years down the road? Is that the kind of timeframe that you might have in mind if everything works out?

That's certainly possible, just given that we have some permanent facilities. We obviously are under-invested in exploration at the moment, and As I said on the last call, that's not through lack of quality targets or opportunities. It's just basically our focus on financial discipline. And as our financial situation improves, I do see that we'll be investing a lot more in exploration. A lot of it will be focused at Nevada. I think there's some very good potential there. But to your point, four or five years, obviously we'll probably need some more permits. I don't know how long that's going to take, but it's not an unrealistic assumption.

Okay, and that's actually a perfect segue into my next question, if I could. In terms of your capital allocation priorities, you talked about deleveraging. You've talked about, you know, potential for additional CapEx at Keno and underfunded exploration, which presumably will go higher, as well as whatever other development activities. Can you kind of break that down for us? Like, how do you look at organic reinvestment in assets versus your deleveraging efforts?

Good morning, and thanks, Mike. This is Russell. I'll take that question. It's always a balancing act, right? And I'll say we're fortunate because we have assets that do generate a substantial amount of cash in Lucky Friday and Greens Creek. And as we look at the economics for Casa Berardi, we're going through this strategic review right now but we do anticipate the economics of that will improve and provide cash flow as well especially today's prices out later this year and into next and so as we think about that cash flow there's a balancing act between ensuring that you invest substantial capital into those operations that provide that cash flow so lucky friday greens creek etc the growth capital at keno hill because you know, for Keno Hill to hit those return on invested capital metrics that we've talked about, we need to invest in it. So we'll be doing those things while at the same time looking to de-lever, you know, reduce the interest expense that we're paying now. And as we do that, then we anticipate, you know, seeing further cash flows from that. And then frankly, you know, the last thing that I haven't talked about is the expiration. So, you know, it is a balancing act between making sure that we're taking care of all of those those items kind of all at the same time in a strategic way. But I would say, as we look out into the future, we anticipate those investments as we're thinking, as we're planning out our cash flows, right? So we're planning those cash flows as it relates to, or those investments as it relates to investment in our operating assets or our exploration portfolio.

Okay, great. That's good color. Thanks very much. I'll pass it on.

Your next question comes from the line of Andrew Doosan with National Bank. Your line is open.

Hi, Robin. Thanks for taking my question. Maybe just that lucky Friday. I know the labor costs there have been one of the main drivers of increasing costs over the last little while. Can you just give some more color on what's driving those labor costs higher? Is it just wage inflation? Is there labor tightness that you have to address? So just any color you can provide there.

I mean, there's two main things there. One is that we have been using contractors, and that's something that we've got our focus and attention on to try and minimize the use of high-cost contract labor. The other thing is the profit sharing, which is a good problem to have. That means that we're actually generating profits. Anything else, Ted?

You know, I'll jump in and just add on to what Rob had said. You know, the performance of Lucky Friday has been has been actually very strong. So the amount that we do pay under the profit sharing program, as well as the, and I'm going to miss the acronym exactly, but the production bonus, I'll say, or the bonus that we pay to the workers there, has actually paid out above target based on the performance of Lucky Friday. And that performance on that bonus is related to production, safety, environmental performance. And then there is a cost component there too. But when you take it all in balance, Lucky Friday has frankly outperformed. And as a result, we have seen those additional payments, which we welcome. Those are the good problems to have, like what Rob said. Got it. Thanks.

And then maybe shifting to CASA as well. So you left production and cash cost ASIC guidance unchanged, but there was an increase in cost of sale of a million. So just wondering, what are you seeing from the operation to offset that? increase in millions cost of sales with unchanged production and cash cost guidance?

It's a good question. Thanks. Thanks for asking, Andrew. So keep in mind that cost of sales number is both cash cost and non-cash cost, and it's a gap number. Whereas the and it's so, you know, as we present that number and we present non-gap numbers, we have to present the closest gap number to the non-gap number, which is cost of sales. And so that's the number that's presented there. So it's a combination of, it's a gap number. It's both non-cash and cash costs. But as we looked at Casa Berardi and we looked at the performance both in the first quarter and what we expect for the remainder of the year, and we updated our expectations and our models, we really, frankly, the model still predicts that we'll come out within our guidance. And so therefore, although we did see costs increase as we have seen the, you know, frankly, the stripping is a little bit behind where we expected to be at this point. We still anticipate coming in under guidance. It'll just cost a little bit more money.

Got it. Thanks for that, Keller. I'll jump back in the queue.

Your next question comes from the line of Nick Giles with B Reilly Securities. Your line is open.

Thank you, operator, and good morning, everyone. This is Henry Hurl on for Nick Giles. I wanted to start by asking if there are any updates on a potential sale of CASA and then have the higher gold prices change the way that you're approaching this. And then should we also think about any potential proceeds from the sale as earmarked for a debt pay down?

Thanks. Good morning, Henry. It's not a foregone conclusion that we're going to sell CASA. What we said was that we're looking at all strategic alternatives. And that includes an outright sale. It includes joint venturing, spinning out the asset, extending the underground mine, taking advantage of the current high gold prices, whatever. And so that's a work in progress. And what I said is that we'd provide an update sometime during Q2. Our work is still underway and we'll report by next quarter, if not sooner.

And as it relates to the proceeds, the way we would look at it is we would use proceeds to deliver or we would anticipate doing that. So, yeah, just to cover that off as well.

All right, yeah, thanks for that. And then, so how could the permitting timeline impact the strategic alternatives process? And then, would you feel that you could get the full value for the asset despite kind of the setback of the permitting?

I mean, there's no doubt that we have a permitting hiatus ahead of us. Last time we communicated this, we said it was going to take about five years. I don't know if it's going to exactly take five years. I don't know whether there's an opportunity to accelerate it or not. But it's certainly, you know, you're going to discount those future cash flows. There's no doubt about that. But again, you know, since we started our strategic review, the gold price has moved up significantly. And so, you know, we're looking at that through basically a fresh lens of a much higher gold price. Got it.

Yeah, that's right. You know, essentially what we're doing is just looking to see how best we can, you know, daylight as much value from Castleberry as possible. And the change in the gold price, you know, will play into that.

Got it. Thanks for the commentary and continue best of luck. Thank you, Henry.

Your next question comes from the line of Joseph Rieger with Ross Capital Markets. Your line is open.

Hey, Rob and team. Thanks for taking my questions. Backing up a bit to Kino, are you guys, I guess, sure that the mine can support a mining rate of 500 or 600 tons per day? I know it's always been a challenge there to get the mining rate up at the mine underground. So what's your level of confidence that even with the permits you could do that in the future?

I think with the investments that we've spoken about, getting to an increased mining rate, that is clear. I think we can achieve that. Whether it makes economic sense or not, that's another matter. Clearly, a key part of this is getting flame and moth production ramped up. We also, you know, a critical piece of increasing the production rate is really doing enough development. That's really what we have a focus on at the moment to make sure that all of our stoves are prepared and sequenced. I've got Matt with us. Matt, is there anything you want to add? Yes, and thanks for that, Rob.

One of the ones that I would be most focused on is we can ramp up. We can get things going, but at this point, we don't have permits to store all the waste, you know, by accelerating production right now. we then run out of space and put even more pressure on permitting. So it's a strategic choice at this point to not move things any faster than we've got it already going. So to answer the direct question, we're very confident we can get up to the 440 pretty easily and the 600 will come eventually, but there are other constraints that are limiting our ability to do that right now.

OK, fair enough and then. Looking at the cost revisions at CASA and Lucky Friday, obviously they're reflective of a variety of factors that occurred already in Q1. How confident are you guys that the revised number is now correct? And is there a portion of this revision that is related to profit sharing, which would, in the event gold and silver were to pull back, that the cost would also pull back with that?

Yeah, I would suggest that anytime that we put our guidance out, we're confident in those numbers. Unfortunately, sometimes we do have to revise them. So, you know, we put the numbers out and we're confident that we can achieve those or else, you know, we would put out the numbers that we believe we could achieve. You know, as it relates to profit sharing, yeah, you know, I think that if you did see it pull back, then you could – see, you know, lesser costs. I think more important than that would be U.S. continuing to execute on cost control and, you know, replacing contractors with employees and those types of things that's more meaningful to the company as a whole.

Okay. Thanks. My other questions were already touched on. I'll turn it over. Thank you.

Your next question comes from the line of Dalton Barreto with Canaccord. Your line is open.

Yeah, thanks for taking my follow-ups, guys. Rob, in your prepared remarks, one of the things you mentioned was a disciplined acquisition strategy. And I'm wondering if you can wrap some parameters around that for us, just anything around jurisdiction, commodity, asset size, stage, anything like that. Thank you.

Sure. When we think about M&A, we need to have some parameters, and this is something that's socialised with the board as well. And so we need to carefully look at our gold and silver mix. You know, we're aware that, you know, we're unique in our space in that we have a great proportion of our revenues come from silver. And so primarily we want to remain a silver company, and that's really what we're focused on. Do we have room for gold? Yes, we probably do. but really we'd be looking at it exactly the same as we would any other investment. I think the... Sorry, I lost my train of thought here. So with M&A, it's about not reacting to available opportunities and really doing proper and thorough due diligence. And then a key part of that is assessing what are the returns and how does that compete with internal growth projects as well. And so M&A is something that we're always looking at, but it'll become more of a focus as we de-lever and as we get into a position of strength.

Great. Thanks, Rob. And if I can just ask on Libby, which I think is a massively underappreciated part of your portfolio right now, and I don't think sediment-hosted high-grade copper deposits really exist anymore, so this thing's on fast track. You know, if permanent goes the way you hope, what's the approach? Are you going to go out at solo? Would you bring in a partner? How would you look at that?

I think, I mean, this is a material asset for us. You know, you're aware of the inferred resource of about 180 million ounces of silver and about 1.7 billion pounds of copper. So we recognize it's significant, but it's also going to come with a very significant capital cost. I don't know what it's going to be, but I imagine it's going to be closer to a billion dollars more than anything. And so, you know, I am interested in perhaps looking at partnering up with perhaps someone who has more of a focus on copper. Remember, this is about 0.7% copper grade, which is quite significant. And so if we could partner up with that, that would be something we'd certainly consider because I think the prize is large enough to share. And that would... that would mean that we could maintain our focus on our core business, which is basically precious metals.

Well, thanks, Rob. I don't think you'd find any shortage of interested parties. Thanks for taking my question. Sure.

And your final question will come from the line of John Tumazos with John Tumazos Very Independent Research. Your line is open.

Rob, thank you. Following up on... questions with Libby. How fast can HECLA move in sympathy of the FAST 41? What are the steps to get it to definitive fees besides the infill drilling of the inferred resource?

But let me just outline the next immediate step. So you know, we've obviously got the designation and that's going to, you know, enhance that long term potential and make sure that there's a bit more transparency on the process. At the moment we've got a plan of operations that's under an environmental assessment and that's being reviewed by the US Forestry Service and we expect a decision on that to be issued pretty soon now actually. If that's approved and they issue a FONSI, so that's a finding of no significant impact, there's going to be a 45-day objection period and then there's going to be a 30-day period that we could respond to that. And depending on the nature of any objections received by the Forestry Service, there might be an updated plan of operations and that could be approved in Q3 of 2025. Once that process is finished, we'll basically have the authority to dewater and rehabilitate an existing 14,000 foot adit. About half of it's underwater and we need to extend it by about 4,000 feet and do some lateral drifts so that we can do our exploration activities. So there's a ton of work that still needs to happen. We do need to reestablish and revalidate the resource and then ultimately produce some sort of an economic study. So it's going to take quite a few years and a considerable amount of effort, but we do recognize the value of this asset in our portfolio.

Rob, is this plan of operation for exploration as opposed to tons per day mining for production? What do you think is the target concept for tons per day production? 2,000, 10,000, 20,000 tons a day?

So it's a fairly flat-lying ore body, and it will likely be mined by room and pillar. And so, I don't know, Matt, could you comment what a... Potential conceptual?

The previous work that's been done has been targeted at 12,500 tons a day. So it's a relatively large production. It's relatively low grade. I mean, you've got to get the tons up. So you're in that 10 to 15,000 ton a day range for a room and pillar. And what really limits us from driving any farther is you just can't develop the headings fast enough to get more tons through it. But it's in that range. It's not a 2,000, 3,000 tons, and it's not 50,000 tons. It's somewhere in between.

Yeah, but I do want to emphasize that this is purely conceptual at this stage. All we have is hopefully the permission to conduct exploration activities. It doesn't imply any pathway to mining yet. We still have quite a few hoops to jump through.

One last point. Could you refresh me as to the tons per day when the Troy mine operated nearby? That was a similar flat-lying room and pillar.

Sorry, I'll add that. I think that predates just about everyone in the room, so we'd have to look that one up for you.

That's right, Ed. We'd have to go back and take a look.

I went there 42 years ago. I'm too old. Excuse me.

Well, thank you so much. I will now turn the call back over to Rob Krichmorov for closing remarks.

Okay, thank you everyone for joining us on the call and thank you all for your questions. We look forward to updating you next quarter, if not earlier. Have a good day, everyone.

Thanks, everyone. This does conclude today's conference call. You may now disconnect.