Hecla Mining Company

Hello, everyone. Thank you for joining us and welcome to the Q2 2026 Hekla Mining Company earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question. Please press star 1 to raise your hand. To withdraw your question, please press star 1 again. I will now hand the conference over to Mike Parkin, Vice President of Strategy and Investor Relations. Mike, please go ahead.

Thanks, Hillary. Good morning, and thank you all for joining us for HECLA's second quarter 2026 results conference call. I'm Mike Parkin, Vice President of Strategy and Investor Relations. Our earnings release that was issued yesterday along with today's presentation are available on our website. On the call with us today is Rob Krcmarov, President and Chief Executive Officer, Russell Lawler, Senior Vice President and Chief Financial Officer, Carlos Aguiar, Senior Vice President and Chief Operations Officer, Brian Erickson, Vice President of Operations, Kurt Allen, Vice President of Exploration, along with other members of our management team. At the conclusion of our prepared remarks, we will be available to answer any questions you might have. 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 this slide in our earnings release and in our 10-Q filing 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. Please note, as we discuss financial figures and projections throughout this presentation and in the earnings release, we are referring to our continuing operations. I will now pass the call over to Rob.

Thank you, Mike, and good morning, everyone. Turning to slide three. ECLA enters the third quarter of 2026 from a position of real strength. and I'm speaking to financial strength, a position today that marks the strongest balance sheet in the company's very long history. And the attributes shown on this slide that define us as North America's premier silver producer, they haven't changed. What has changed though is that we have confidence with which we can now invest in what comes next. So I'm eager to have our teams discuss some remarkable developments that are coming out of our substantial project pipeline, which further solidifies our market positioning. More on that in a minute. Turning to slide four. This was another very strong quarter for Heckler, even though a couple of headline numbers moved in a different direction than last quarter. And I want to spend a moment walking through why, because I think the underlying story here is a good one. Revenue from continuing operations was $334 million compared to the record $411 million we reported in the first quarter. Two things are driving that change and it's worth being clear about both because neither of them is a production problem. First, metal prices pulled back from the highs we saw earlier in the year, although I do remain confident in the outlook for silver and gold prices. And second, part of the gap was simply timing. A meaningful amount of silver concentrate, mostly at Greens Creek, was produced but not yet sold as of quarter end. Had that concentrate shipped within the quarter, revenue would have been noticeably higher on top of an already strong quarter. That inventory shipped in early August and you're going to see it show up in our third quarter results. Those of you who have followed us for some time know the lumpy sales pattern at Greens Creek. The adjusted EBITDA from continuing operations was $199 million. More than double the $94 million we generated a year ago. Operating cash flow was $175 million and free cash flow was $136 million. Our second best quarter on record and very close to the record $144 million we posted last quarter. Every single one of our mines generated free cash flow again this quarter with Greens Creek and Lucky Friday each setting new site level quarterly free cash flow records at $130 million and $88 million respectively. Our balance sheet is simply the best it's been in our long history. We ended the quarter with $483 million in cash, no long-term debt outside of capital leases, and an essentially fully undrawn $225 million revolving credit facility with a $75 million accordion. A balance sheet this strong gives us real optionality, the flexibility to keep investing in the projects and the assets that make the most sense for this business on our own timeline rather than being dictated to by our balance sheet. On the operating side, we produced 4.2 million ounces of silver, up 8% from the prior quarter, and Lucky Friday delivered new quarterly production record of 1.5 million ounces of silver. And I'm especially pleased with our safety performance. Our Consolidated Total Recordable Injury Frequency Rate, or TRIFA for short, improved to 1.57, and that's a meaningful improvement from the 2.07 reported for the first quarter. That's the kind of improvement that reflects real deliberate commitment by our teams. And frankly, it matters more to me than any financial metric on this slide. We also conducted our annual safety day in early June with senior leadership visiting every site to reinforce safe working practices. So turning to slide five. A medium term pathway to 20 plus million ounce silver producer is advancing and it's anchored by the Keno Hill ramp up and a potential Midas restart. with further potential upside from Keno Hill expansion and from Aurora and Hollister in later years. And near return, we've got two organic opportunities at Greens Creek that I'm really excited to give you more detail on today. Both are the kind of high return, low capital intensity projects that we look for. Our bar for any of these organic investments is a return on invested capital that clears our cost of capital by a healthy margin and early work on both suggests that they can. I'll turn it over to Brian now to walk you through those. Brian, over to you.

Thanks, Rob. Good morning, everyone. Turning to slide six. I'll start with the Green's Creek Pyrite Concentrate Circuit. It's a project we're going to share considerably more detail about today. To summarize, we're advancing engineering and metallurgical studies on a new processing circuit at the Greens Creek Mill that, if the studies pan out, would produce marketable pyrite concentrate stream from mill tailings that currently goes to the dry stack tailings facility. Still pretty early stage work, but I want to be clear about our conviction. The relative simplicity of the project combined with the potential returns we're seeing at this stage of the study give us confidence that this moves towards execution, not an evaluation for its own sake. Once fully ramped up, we expect the new circuit could add approximately 1 to 1.2 million ounces of silver and 10 to 15,000 ounces of gold in additional annual production. This is on top of Green Streak's existing output, while also reducing the volume we're adding to the tailings facility. Early engineering and metallurgical work points to the potential robust return on capital that would meet our investment thresholds. It's expected to be a low capital intensity project with capex currently estimated at about 40 to 60 million. Anticipated mostly for mill components, storage building, sizing upgrades, and some shiploader work to support the additional tonnage. Additional operating costs around the new circuit are also expected to be relatively low in terms of the overall increase to our annual spend, and are currently estimated at an incremental $10 to $15 million per annum. When you put all this together, you can see the potential for impressive MPV upside at current metals prices. Currently, we're targeting first quarter or first production between the fourth quarter of 2027 and the first half of 2028 with a ramp up period of roughly a year. We'll continue to firm up the economics as engineering advances and we'll keep you updated. I want to stress these numbers are subject to change as we advance through more engineering studies. But we're very excited about the potential for this project in terms of production, but more importantly, in potential future cash flows. Second, I'll discuss the Greens Creek Tailings Reprocessing Project. This remains one of the more compelling opportunities in the portfolio. Dry stack tailings facility over 600,000 ounces of gold as well. At June 30th, 2026, metals prices. This represents an in situ value of roughly $6.1 billion. That must emphasize the reporting recovery processing capital costs. We're working with a vendor that specializes in the technology that commits phase three metallurgical test work this month, which we expect to complete in the quarter. That work, together with confirming a suitable processing facility, is expected to determine how we move forward. If this project proves viable, we would expect it to be an additional low-cost intensity project that dovetails well with the pyrite concentrate project. Finally, the MIDAS Restart Project in Nevada also continues to advance. We're continuing to evaluate the hub and spoke model that would bring ore from Midas and potentially Hollister or other regional sources through the existing permitted mill. We're also evaluating remaining mineralization in the old mine under the existing mill as a potential additional ore source. Kurt will touch on the latest Midas exploration results in a few minutes. I'll now turn the call over to Carlos for an operations review.

Thank you, Brian. Turning to slide A. Green's Creek produced 2.1 million ounces of silver and over 14,000 ounces of gold in the second quarter in line with our expectations. Costs applicable to sales were $50 million with cash costs of negative $17.11 per ounce and basic of negative $10.71 per ounce bought after by product trends. Exceptional results this quarter driven by very strong by product revenue. Cash flow from operation was $139 million, and free cash flow was a new site-level record of $130 million. As Rob mentioned, a portion of the concentrate produced this quarter hadn't yet been sold at the end of the last quarter, which is what drove the gap between our strong production and the revenue we recognized. That inventory were shipped in early August, and we were reflected in the third quarter financials. For the full year, we now expect Greenscreen to produce 8 to 8.3 million ounces of silver, an improvement over prior guidance, and 51 to 55,000 ounces of gold, a cost applicable to sales of 240 million, with cash costs of negative 12.15 to negative 12 per ounce, and ASIC of negative 4.25 to negative 3.75 per ounce, both after byproduct credits and both an improvement to prior guidance. Turning to slide nine, Lucky Friday had an outstanding quarter, producing a record 1.5 million ounces of silver on higher mill grade. Costs applicable to sales were 35 million, with cash costs of $3.95 per ounce and $17.8 per ounce, both after byproduct credits. Cash flow from operation was $104 million, and free cash flow was a new site-level record of $88 million. The surface cooling project is on track for completion by September. For the full year, we have tightened out our silver production guidance to 4.9 to 5.2 million ounces, with costs applicable to sales of 140 million. Cash costs are now expected to be lowered at 9 to 9.75 per ounce, and ASIC expected to be modestly higher at 20.50 to 26 per ounce, reflecting higher planning sustaining capital investments. Turning to slide 10, at Keno Hill, we produced 625,000 ounces of silver in the second quarter, up from half a million ounces in the first quarter. Cash flow from operation was 18 million, and free cash flow was nearly 15 million, the fifth consecutive quarter of positive free cash flow at Keno. We are taking a deliberate approach at Keno Hill. Rather than push for tonnage growth ahead of the site development and permitting work that needs to happen first, we are running the mine at a sustained lower rate while we focus our efforts there and continue to generate cautiously pre-controlled work that we believe supports a ramp to meaningfully higher tonnage rates in later years. Our updated full-year guidance is 2.2 to 2.6 million ounces of silver reflecting our focus on permitting and site build-out in the near term. I do want to highlight some good news on the permitting front. We received the permit to expand our tailings storage facility at Keno Hill this quarter. That approval reflects the strong working relationships we have built with both the UConn government and our First Nation partners, the MND. and it's an important piece of the foundation supporting our longer-term plans for the site. I now turn the call over to Russell for the finance update.

Thank you, Carlos.

Turning to slide 12, let me... Sorry, Russell, if I could just... Russell, if I could just jump in. I'm aware that Brian dropped out. He's been dialing in from UConn, so I just want to repeat a part that might be important that was missed. At the time, Brian was talking about the 51 million ounces of silver and the 600,000 ounces of gold and the many other metals that are locked in. I just want to point out that we are working with a vendor who specialises in this technology and they're set to commence phase three metallurgical test work this month, which we expect to complete in the quarter. So that work together with confirming a suitable processing facility is expected to determine how we move forward. So I just wanted to complete the record on that because I'm aware that it was lost in transmission. So over to you, Russell. Thanks.

Thanks, Rob. I'm going to start on slide 12. As Mike noted, everything I'll cover here reflects the results from our continuing operations. Mine revenue during the quarter was $323 million, with silver accounting for 68% of that total, while gold was 14% in the remaining from our base metal byproducts. Net income from continuing operations was $118 million, or 18 cents per share, and adjusted EBITDA was $199 million. Our margins remain exceptional. We realized 90% of the realized silver price as margin during the quarter. Consolidated free cash flow was $136 million, nearly matching last quarter's record of $144 million, with all three mines contributing. Turning to the balance sheet, we ended the quarter with $483 million in cash, no long-term debt outstanding outside of capital leases, and essentially a fully undrawn credit facility. We've moved from a net debt position of nearly $270 million a year ago to net cash position of roughly $472 million today, the strongest balance sheet in HECLA's history. Turning to slide 13, we've all watched oil prices and fuel prices climb on the back of current world events, and I want to spend a moment on why this is far less impactful for HECLA than it is much of our peer group. The starting point is the nature of our overbodies. Our mines are high-grade underground mines. Because the grade is high, we process far fewer tons to produce each ounce. We don't run large diesel haul truck fleets that define low-grade open pit operations, so our diesel consumption per ounce is structurally low. That is the primary reason fuel is only about 3% of our consolidated cost structure this quarter. It's a function of these operations, The second piece is where our electricity comes from. Power is our largest energy input, and we source it from local utilities, primarily from renewable hydropower. Hydropower isn't priced off crude oil or natural gas, so when fuel markets spike on geopolitical shocks, the cost of that energy actually runs our mines and mills don't move with them. Put those two things together, hydrate ore that keeps our fuel intensity low and a power base anchored in hydro that is decoupled from volatile fuel markets, and you get a cost structure that is far more predictable and far more insulated from energy price swings than most of our peers can claim. In an environment of rising and uncertain fuel prices, that translates directly into more resilient margins and it carries the added benefit of a lower carbon footprint for the metals we produce. As we turn to slide 14, you'll see this slide has been updated for our Q2 results and outlook changes and projects our 2026 after-tax free cash flow across a range of metal prices. At $50 silver and $3,500 gold, we project about $500 million of consolidated free cash flow for the full year, with these prices below current spot prices. At elevated prices of $75 silver and $4,500 gold, above current prices, we see the potential to generate nearly $700 million in free cash flow. At the top end of the range we're showing today, $100 per ounce silver and $5,500 gold, we'd see the potential to generate nearly $800 million of annual free cash flow. That's obviously a bullish scenario, but it shows the kind of operating leverage our platform has across a wide range of prices. This shows how our business has the ability to produce substantial cash flow across a wide range of price environments. I'll now pass the call to Kurt to go through explorations.

Thank you, Russell. Turning to slide 16. Our 2026 exploration and pre-development budget of $55 million remains at an all-time record for the company, representing about 4.5% of projected revenue. We've structured that across three priority areas, $24 million at our near-mine programs, which carry the lowest risk and highest return, and are targeting adding one to two years' worth of resources for conversion to reserves. 16 million in Nevada across Midas, Aurora, and Hollister targeting a resource of a half a million to 1.5 million ounces of gold equivalent aimed at forming the basis for a potential Midas restart and 10 million dollars in early stage and generative exploration. I'm pleased to share some exciting results from our recent exploration release which came out last week on the 29th of July and is available on our website. Turning to slide 17. At Keno Hill, we've extended a high-grade silver trend to 800 feet of strike length, and it remains open in both directions. The extension brings us closer to the historic Hector Calumet mine, which produced over 96 million ounces of silver during its operating life. You can see the old workings on the right side of this image. Recent exploration highlights include 10.2 feet at 62.7 ounce per tonne silver or nearly 2 kilograms per metric tonne. 10.1 feet at 44.6 ounce per tonne silver and 8 feet at 22.4 ounce per tonne silver. These exceptional results support our long-term vision for Keno Hill as an asset with the potential for generating for generational mining. We are following up on these results and are planning to have a further update later this year. Turning to slide 18. In Nevada, our drilling around the Pogo Center gap at Midas has identified two new Midas style high grade gold silver mains and the system remains open. This adds to the picture Brian described earlier around a broader Midas hub and spoke opportunity. The new veins discovered are very similar in style to what was mined very successfully previously at Midas. Beyond these results, I want to flag that two additional exploration programs are ramping up this quarter. Drilling at Hollister has been underway for several weeks, and at Aurora, my favorite project, we're on track to begin drilling in mid-August. Aurora is a past producer of extremely high-grade mineralization, with historic results grading above two ounce per ton gold, which is equivalent to more than 60 grams per ton. Like MIDAS, it has a permitted mill at the site. There would be investment needed to make this a viable operating site again, but we'll focus on that depending on what the drill bit tells us before we get there. This could prove to be a major value servicing opportunity for the company and I really look forward to the results from the initial holes, which we could have this fall, so stay tuned. I'll now turn the call back to Rob for closing remarks. Thank you, Kurt. So turning to slide 19.

Let me leave you with a few thoughts before we open the line for questions. This was a quarter of continued strong financial results, building on a track record that has helped us de-lever and move into a position of real financial strength. the kind that lets us keep investing in our robust project pipeline for years to come and surface value for our shareholders. The underlying business has never been stronger. We're making disciplined investments in our asset base to set it up for continued success. Our safety performance improved meaningfully this quarter and as I said at the top of the call, our balance sheet is without question the strongest it's been in this company's history. We believe in a robust precious metals market and we think Silver has a very bright future. At today's prices, we're already generating substantial free cash flow. And as Russell just said, at the top end of the price scenario we showed you today, this platform can generate nearly $800 million in annual free cash flow. So that's the kind of operating leverage we have now, and we're working hard to capture it for our shareholders. I really do hope that you share the enthusiasm that we have for our project pipeline and the excitement it's bringing as it advances. and we believe HECLA remains the most compelling way to gain exposure to silver in this sector and we look forward to continuing to execute and to keeping you updated throughout the year. I'll now ask the operator to open the line for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Heiko Ehle from HC Wainwright. Your line is now open. Please go ahead.

Hello, Rob and team, and congratulations on a good quarter. Thanks for taking my questions. Thank you. Obviously, metal prices have gone down a little bit, and I assume there is some sort of bonus structure for staff by asset related to metal pricing. I just want to see, is there any way for us to extrapolate this into cost per ounce or cost per gun by a dollar change in the underlying silver price? Or how do you guys model this out?

I'll hand that one over to Russell. Yeah, no problem, Heiko. I would say the most direct tie to silver price is the profit share at Lucky Friday. And if you go back late last year, you'll see as we guided, we had had our prices in lower prices because the guidance obviously came out lower in the year. As prices went up, you saw our prices escalate. This year, we intentionally built higher prices. When we came into January, February, we were at high price, high silver prices. And so we intentionally built high prices into that profit share. As the year has come down, we have seen that cost abate. And so in the guidance that we've issued now, we've used robust prices, but not say the $90 silver that we used at the beginning of the year. I'm thinking, trying to figure out a way to convey directly how much that would be per ounce. And frankly, I would have to kind of get back to you on that. I don't have a direct number for you right now, but I think it's generally isolated to lucky Friday. and you can see it as you look at the cost performance of Lucky Friday over the past kind of year or so.

Yeah, I think if you guys come up with some sort of, I don't want to say formula, but yeah, almost like a formula for the analyst community, I think that might be quite helpful. Completely different question. Yeah, of course. Longer term capital investment. Any color on what we should model for a longer-term capital? And maybe you can't really answer that question, but I'll try differently if you can. Are there any large-scale investments at any of the other assets coming on 2027 and 2028 that may not be obvious for us? Yeah, I can continue to answer the question.

Go ahead, Rob.

Okay, go ahead, Russell. Sorry, this is awkward because we're in separate offices. I'll just start, Russell. Maybe you can fill in the gaps if you don't mind. In terms of capex, we don't really have any huge expansions going on in the near future. What we do have is a Nevada restart. We estimate that's going to be pretty low capex given that we already own the mill. The capex for the pyrite concentrate project, that's really quite low, particularly in the context of the phenomenal returns that it's expected to generate. The cooling project at Lucky Friday, that's almost finished. And so I would say nothing really major coming up.

The only thing I'll add to that, Rob, is that we're building... Yeah, a little bit to add to that. The only thing that I'll add is that we're building tails at Greens Creek Lucky Friday over the next couple of years. And then, you know, Keno Hill, there's tailings that we'll be building in the near term and then kind of more intermediate term. But also, you know, Keno Hill will continue to invest in the infrastructure to bring that mine production up.

Cool. Thank you both. And I'll get back in queue. And again, good quarter. I appreciate it.

Thank you for your question. Your next question comes from the line of Cosmo Chu from CIBC. Your line is now open.

Thanks, Rob and team. And congrats on hitting asset level record free cash flows at Greens Creek and Lucky Friday. But I guess my question is, I'm looking at the asset level, and as Russell mentioned, $130 million from Greens Creek, $88 million from Lucky Friday, and an additional $14-ish from Keno Hill. But I cannot seem to reconcile that down to your corporate-level free cash flow of $136 million. So when I compare it to, say, Q1 last quarter, Greens Creek was actually lower. Lucky Friday was actually lower as well. But corporate level was higher. So I guess if you can help me reconcile how I can come up with corporate level, and then that will help me in terms of trying to figure out how to better utilize or best utilize the asset level free cash flow numbers.

And I can jump in on that one, Rob. Yeah, I was looking at this as well. So it's a good question, Cosmos. If you think about our, the way we think about our mine site free cash flow, we actually look at the, I'm looking at page three of our earnings release where we reconcile free cash flow to cash flow from the operations. And what we do for mine site is we actually add back the exploration expense that was incurred at that site because exploration expense is an expense that we allocate from a corporate perspective and it's not not really related to the core of the operation in the current period. And so as you think about free cash flow at the corporate level in Q1 versus Q2, what you'll see is the expiration expense did go up Q1 over Q2, and that is included in our corporate consolidated free cash flow number. That's one. And then the other is just corporate expenses that are not included in those Q1. or corporate cash outflows, I'll say, that's not included in Q1. So it's essentially timing. It's working capital timing.

Okay. Okay. Maybe switching gears a little bit here in terms of Keno Hill. As you mentioned, Q2 production was about 600,000 silver ounces. And as you mentioned, the MD&A, you're working through a lower grade zone. I guess my question is you know looking at your revised guidance for the year 2.2 to 2.6 million midpoints about 2.4 so that's about 600,000 ounces annualized times four so I'm just trying to figure it out you know you're working through a lower grade portion in Q2 if you're getting out of it I would have thought that guidance at least a midpoint could be higher than what's annualized for Q2 that's number one And I guess number two is the 600,000 ounces like a sustainable level? Is that what we're looking at? Again, I'm just trying to wrap my head around it.

Well, we are projecting the third quarter being a really similar one. Yeah, Rob, go ahead.

No, no, go ahead, please, Carlos.

Okay, we are projecting to be the third quarter really similar to the second quarter. Definitely we are, you know, in the new zones. We are in development of the new zones, you know, here. And that's a projection that we can report today. It's going to be really similar to the second quarter for the remainder of the year.

Yeah, I guess my question is... You know, the key thing...

Rob, sorry, Rob. Yeah, as Carlos said, look at Q3 looking very similar to Q2. The key point is that we expect to meet our revised guidance at the end of this year. And so what happens in between, we just don't have that level of detail disclosed yet. Go ahead, please, expand on your question.

Yeah, no, I'm just trying to, you know, I wrap my head around the sustainable rate, but I think you've answered my question in terms of the new guidance, Rob. And then I guess my other question on Keno Hill is with the lowered guidance for the year, does that impact potential timing of commercial production or does it really matter?

So, you know, we've outlined our five criteria for commercial production. We've only met one, which is the silver recovery. You know, what we're focused on right now is getting the permits that we need and investing in the infrastructure and working our way through that. I would say that if we can receive those permits, the critical ones, by mid-2029, and we can... execute on the key infrastructure projects over the next two or three years. And the tailings expansion could be advanced far enough in 2029 to permit the mill to resume normal production levels. We expect to begin ramping up to higher production levels by the end of roughly 2029. So this is a ramp up that's been taking a little bit longer than what was initially thought. But we understand what permits we need. We understand the infrastructure that we need to invest in. and we're working to resolve the permits and complete those investments. We are buoyed by the fact that, you know, the exploration results that Kurt talked about, you know, you saw the 96 million ounces adjacent at the Hector Calumet. You see the expansion as we've continued to get high-grade extensions to Burn Deep. As Kurt said, this is a generational mine. It's going to be hopefully in production for a very, very long time. And we just need to get it through this permitting and investment phase. And it is very cash flow positive today, and it has been for the last several quarters. That's great to hear.

And maybe one last question, Rob. Sounds great in terms of the different growth projects that you have in the pipeline. I want to focus on the pyrite concentrate circuit. I guess as you've mentioned, 1 to 1.2 million ounces of silver per year, 10 to 15,000 ounces of gold per year. Is that before or after sort of payability? And if it's before, what's the market like for your particular type of pyrite concentrate and is it fairly clean? If I want to just model out what this could mean in terms of value, because you've given me the other parameters. 40 to 50 million capex, if I had it correct. You gave me some operating numbers as well, but I'm just trying to figure out the production numbers.

The quality is very high. In fact, we've had extremely high demand from multiple inquiries, I guess. I'll hand it over to Russell. Maybe he can give you a little bit more color on that.

Thank you. Thanks, Rob. As we think about the power and concentrate, One thing I do want to point out is, you know, I think Brian laid it out well. Unfortunately, he kind of was, you know, his line was interrupted during that. And I think, you know, Rob came in and kind of cleared some of that up. But we're still working on this project. It's incredibly, I'll say, prospective. We're very high on it. We think it's going to be a very good project. But we're still working on some of the engineering, and we're still nailing down some of the costs. What I don't want to do is put out a return on invested capital number now while we're still in those stages, while we're putting those numbers together. What I would say is that we have a return on capital criteria which we presented our investors in our investor day earlier this year of 12 to 15% on return on invested capital. This project we would expect would exceed that substantially. and you know if you go back and you look and I think it's in our earnings release or our Q or maybe both you know we expect that we would get roughly maybe a million ounces of silver a year from this project. Yes that would increase our recoveries and we would reduce the amount that goes to the tails which is also a cost savings and the investment would be relatively modest along with from a capital perspective and the fact is were already producing three concentrates at this mine. So as a result, the operating costs we don't expect would go up substantially either. And so from a return on expected capital, we think it's going to be very, very robust.

Is that enough flavor for you? Yeah, but I guess going back to my first question, the 1 to 1.2 million ounces that you outlined, that's before payability factors, right? So if I want to guesstimate some kind of model on my own, I would have to kind of, you know, again, I can do it on my own, guesstimate some kind of payability factor to apply to the 1 to 1.2 million ounces.

I would say, yeah, I mean, go ahead and apply payability because, again, like I said, kind of on the front end of this, we're still working through that, some of these details.

Okay, cool. Great. Thanks, Rob and Russell and team and Carlos for answering all my questions. That's all I have. Thank you. Thank you, Cosmos.

Your next question comes from the line of Josh Wolfson from RBC Capital Markets. Your line is now open.

Thanks very much. Just looking at Lucky Friday and the great performance, I think the company had noted this was in the plan. You know, I'm wondering you know what was sort of the driver of these high grades and I guess the commentary that it was not expected to be sustained just going you know looking at the outlook for the second half of the year. Thank you.

I'll hand it over to Carlos in a minute but basically Josh This was scheduled high grade. It's just a matter of timing. We just went through a high grade zone this quarter. And again, we don't expect to maintain those high grades. It will probably revert back to the mean.

Yeah, it's correct. It was part of the timing. Even we were expecting to have a fraction of that high grade at the end of the second quarter. And so at the end of the first quarter, sorry, So we had the most significant portion of the high grade in the second quarter, and that was the reason, right, which was planet. And of course, we are not expecting to keep that kind of level for the remainder of the year, but definitely it was planet. It was just a matter of timing.

Thank you. Just looking at the cooling project in September, is there anything we should be thinking about in terms of what that means for a tie-in, if that will impact productivity or throughput? And then similarly, once the project is completed, how should we be thinking about the outlook for the mine?

This project was really designed to... Go ahead. Yeah, keep going, Rob. This project was really primarily designed to set up a long-term future as we get into deeper levels and set ourselves up. We already have a long reserve life ahead of us. It's very difficult to quantify productivity improvements, but it just stands to reason that when you're working in a fairly hot mine you're going to be less productive when the conditions are not great compared to when the workers are comfortable. I can't really quantify that, but you just know inherently that logically it makes sense that there should be better productivity.

Got it, great. And then maybe just last question, the commentary on Kino and looking at sustaining profitability you know similar kind of outlook there should we be expecting more stable grades and throughput levels to what was achieved in the first half or you know is there is there still going to be some degree of improvement ahead of this uh the 2029 permitting milestone thank you well just related to the grades um go ahead

Well, we are projecting a similar rate on truck within the third quarter, and we have the potential to add some benefit in the last quarter, but it's going to be mostly second half of the year. It's going to be slightly better than the first half.

Okay, and the driver for that was going to be which of the factors?

It's going to be probably very great.

Great. Okay. Those are all my questions. Thank you.

Your next question comes from the line of Kevin O'Halloran from BMO Capital Market. Your line is now open.

Hey, Rob and team. Thanks for taking my questions. Just digging into the guidance updates, it was great to see the ASIC guidance come down. Can you give us a sense of the drivers of that? Was it higher silver production from Greens Creek and Lucky Friday, larger byproduct contribution, better unit costs, and then maybe any broader thoughts on any cost pressures that you're seeing?

Go ahead, Russell.

Yeah, no problem. Thanks, Kevin. Yeah, as we think about, yeah, I would say from an ASIC perspective, Greens Creek, it really shows the value of that ore that comes out of Greens Creek, right? So two or three things on Greens Creek specifically. First, they had a great first half of the year, right, in terms of their silver production. So silver ounces were very, very strong. The gold byproduct is huge. And I made a comment in a different question. I think it was to Heiko earlier on the prices that we used in our guidance for Lucky Friday cost. Well, in a similar sense, we have to make an estimate as it relates to the prices that we use for byproducts at the beginning of the year, what would be realized versus what we estimate. And so we tend to be a little bit conservative on that. I'd have to go back, frankly, and look at to see exactly what those were there in our year end release. and so we've outperformed on the gold for sure. Zinc has been a very strong, you know, the price of zinc has been very strong and one of the things that people do sometimes oversee is the fact that Greens Creek has an incredible zinc byproduct as well. So that's Greens Creek. As-produced costs are essentially online. They're doing well. And then from Lucky Friday's perspective, we've seen a better cost, I'll say better cost control in general for the mine as a whole. We have seen that profit share that I highlighted earlier come off a little bit just because the price of silver has come off. But again, they had a fantastic first half of the year from a production perspective. So you kind of wrap all of that up, and that's the reason the ASIC guidance is better. I would highlight that we do expect capital spend in the last half of the year to be more than we did in the first half of the year. That's a couple of reasons. The third quarter, Tends to be, you know, kind of a full quarter of better weather, you know, as we relate to construction. Construction projects are underway, that kind of thing. And then we just tend to see more equipment deliveries. You know, we order equipment seems to be earlier in the year and it kind of comes in later in the year. So I would expect the third and the fourth quarter to have more capital spend. And you can see that if you look at our capital spend in the first six months versus our guidance.

Great. Yeah, that's helpful. Maybe another one for you, Russell. Could you remind us of the tax losses that you have in the US and Canada and how should we be thinking about the effective tax rate going forward?

I can. So our effective tax rate, one of the things that I would like to highlight as it relates to taxes is our operations are in the United States and Canada. and as a result just because and I'm going to highlight the United States as a result of the frankly the tax regime in the United States it's lower than most of the other jurisdictions around the world and so you should see less cash taxes paid from HECLA than many of our peers. Number two during the quarter and you'll see this we highlighted it in our Earnings Release. During the quarter, we did a little bit of tax work to combine our Nevada U.S. group with our kind of main U.S. group that includes Lucky Friday and Greens Creek. And as a result of that, we actually can utilize the expenses in Nevada against the income that's being generated from Greens Creek and Lucky Friday. So you actually see a little bit lower tax rate as a result of that. And we will see obviously less cash taxes paid We expect to utilize our NOLs both on a state and a federal basis for the year, and so therefore we did make a cash tax payment in the first quarter. I was just trying to look that up, and I frankly don't have it in front of me. But you would see that at this point that would be the taxes that we would expect to pay. Okay.

Okay, that's great, thanks. And then maybe shifting gears back to the pyrite circuit at Greens Creek, are there any permitting requirements that you'd have to secure for that and any space constraints on surface at the plant there that you'd have to work around? And then maybe as a follow-up, as you're doing the technical and the costing work, when should we expect to see some of those details announced and should we be be expecting any changes to the resource of the reserve with the higher recoveries from the circuit?

In terms of permitting, I don't really know the answer to that question. It's basically simply an extension to the existing circuit, so I imagine permitting would be minimal, maybe something at the loadout bay. I don't really know. Carlos or Matt, could you add any color on that?

Yeah, you are right. For the PIDECON, there's minimum permitting required. And we are not expecting any significant delays . For that project, I don't see any issues. But there's some permitting required.

Yeah. And in terms of reserves, it's an interesting question because there's almost certainly some material that was in resources, and now that we have the means to process pyritic ore at a profit, I would expect that there may be some of that converting into reserves, but I can't quantify that right now.

Okay, great. We'll keep an eye out for that. That's all from me. Thanks for taking my questions. Thanks, Gary.

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

Thanks. Good morning, Rob and team. Rob, I'm sure you've seen that the trail smelter in BC is undergoing an $800 million upgrade to process germanium and gallium. And I'm just wondering, has Green's Creek ever been assayed for germanium and gallium? Is that something you're looking at? And is there a plan to monetize those if it does exist?

I think there could well be some germanium or gallium actually in the tailings project. I don't really know. I'll defer to Brian. Brian, if you're still on the call, could you answer that, please?

Yeah, I'm on. Can you guys hear me?

Yep.

Okay. Yeah, there is, and we've looked at that as part of both reproduction and the tailings reprocessing and pyrite concentrate. Pretty minor, but certainly that's a conversation we need to have with smelters on what the recoveries could be on that and the payability.

Great, thanks. And then just sort of a similar question, I guess, on Lucky Friday. A couple of its neighbors down in the Silver Valley there are banging the drum on antimony and downstream processing there. Is that something you guys are looking at as well? Could you be part of that if there was a central antimony plant?

Our wool at Luckin Friday doesn't really have any significant antimony compared to our neighbors, so we have looked at that.

Great, thanks. And there's just a final one on that sort of Silver Valley thematic there. There's lots of these single asset guys there now that are either up and running or moving towards first production, and there's probably a case to be made for consolidation there. Is that something that Heckler would be interested in or look at at all?

We're primarily excited by the inherent upside in our own assets, so at Lucky Friday in particular, there hasn't been any meaningful expiration there since about 2011, and so that's something that we're kicking off at present. We continue to monitor all of our neighbours, I guess, and if there's a compelling value proposition, we will consider it, but we're more excited about the potential on what we already own and understand, and where we already have our own infrastructure. which is in top shape.

Great. Thanks for that, Rob.

Thanks, Dalton.

Your next question comes from the line of Eric Windmill from Scotiabank. Your line is now open.

Oh, hi, Rob and team. Thanks for taking my question. A lot of mine have been answered, but just a quick question on Aurora. I know it's still early days, but there's a mill on site there. Do you think it makes the most sense if you find a resource to process it on site, or would it be part of maybe kind of hub and spoke system here at MIDAS? And if you do it at Aurora, any cost to refurb the mill there? Thanks.

Do you want to do it, or should I? Go ahead. At Aurora, thanks for your question, Eric. At Aurora, it's too far by road. We had processed some loaded carbon previously, but to take ore from Aurora to MIDAS, it's probably not going to happen. We do have about a 600 tonne per day mill that's on site. It's actually, it's not in great condition, I have to say. Certainly not as good as Midas. And so that's either going to require reinvestment or potentially a new mill. That remains to be determined. Really, let the drill bit do the talking. As Kurt said, he's very excited about this. I went out to this project in the late spring and I actually understand why he's excited. There's and others. There's legacy open pits, there's legacy underground production workings and edits, and then the best target that Kurt's focused on hasn't had a single drill hole on it and you can actually see it from the side of the hill. So I'm very excited to see what he's got going to yield.

Okay, fantastic. Thank you. That's very helpful. One more, if you don't mind, just on MIDAS and what you're seeing here in the center offset. Presumably that's on the south side of the main fault there, right? But it looks like some sort of an offset. Is it, you know, very similar to what you're seeing in the main MIDAS mine or any additional commentary be helpful? Thanks.

Yeah, it's similar to the MIDAS mine. It's more broken up than what we see at MIDAS. You know, MIDAS had very narrow, really high grade veins within a six, seven foot, eight foot wide zone. and so it's similar to that in that respect. The offset is very similar to the center discovery that we had in 2021.

Okay, great. Thank you. Really appreciate that. Yeah, it sounds good. I'll hop back in the queue. Cheers.

Thanks, Eric.

Your next question comes from the line of Alex Tarantew from National Bank. Your line is now open.

Yeah, good morning, guys. A lot of good questions asked here, and most of them I haven't taken, but I've got a couple of follow-ups here. So first, maybe just on my desk, I mean, obviously, there's a lot of some exciting exploration there. You guys have talked quite a bit about a lot of existing infrastructure that you can quickly turn back on. Can you just remind me, maybe kind of walk me through the process of what we should expect over the next one or two years? I'm just trying to get a better sense of when we could see MIDAS become a formal project, go ahead, that you're going to make a production decision there and we could see that first goal from that.

I'll hand that one over to Matt.

Thanks, Rob. So to answer your question, Alex, we're actively studying. Obviously, Curt is drilling and identifying the resource, and we get that all firmed up. And my worst nightmare is that Curt finds that resource and he turns to me and says, let's put it into production tomorrow, and I don't have that ready. So we've already started a geotechnical assessment of the rock. We've started on a hydrogeologic assessment of inflows and geochemistry. We've also started on some of the mine design and what it would take to refurbish the mill. So those numbers are all ongoing, but obviously we're not going to invest in any of that until we've decided we've been able to firm up within the ground. So the timing will be very related on exploration success, but we're being prepared now to have that information ready if he gets that or assuming the drill identifies the resource that we're really looking for.

Does that help? Okay. Yeah, yeah. No, I guess that helped. I mean, I mean, even if the resource, you know, proves itself to, you know, to support a restart, I would expect and still this is a, you know, best case call it, you know, two, three years away from first or is that kind of makes sense still? Best case scenario?

It's probably in that range. But again, you know, it's a lot of unknowns out there. But yeah, that's probably a reasonable thought.

Okay, any permitting constraints? Sorry, go ahead. Permitting constraints.

Okay, so in terms of permitting constraints, we're in the process of reviewing what we have available. In general, we have a lot of those permits in hand. Some will require modifications, some will require some updates, but that's, you know, in general we're in a much better spot than we would be if it was just a greenfield site.

Okay, great. And then just one last question.

Alex, when you think about project... Sorry, Alex. When you think about project development, you know, the normal course is you define a resource, you do your studies and stuff like that. but we're in a unique situation in that we already own some of the key infrastructure and so what we're trying to do is be agile here and run parallel streams. So Kurt's obviously trying to define the critical masses of resources that we need to get this into production. Matt's trying to work on all the background engineering study work that needs to happen. So it's really about being agile. In terms of two or three years, I would suggest it would probably be a little bit longer than that in terms of key permits. If, for example, conceptually we want to put a portal to access the new discoveries that Courtney's team has made. That's probably almost certainly going to require a new permit. But the mill, the tailing facility, all the key ones, we already have them in hand.

Yeah, that makes a lot of sense, Rob. I guess we're just going to look at these projects and see all the infrastructure. And I think that these things can be turned on relatively fast. But I always forget that there's quite a bit of more work behind the scenes that has to get done. and just got one more question just on Keno Hill. I mean, obviously this mine's been running for a few years. You're talking about, you know, certain permits, but hopefully by mid-2029. I just want maybe a bit more color on the work that's being done there or what's needed for these permits. Is some of this more of a, you know, time series data collection that is just, frankly, no matter what you do, it's just going to take some time to prove things up for whether it's environmental or water, you know, purposes or I'm just trying to see if there's Anything that can be done to expedite that process?

Not really. I mean, permitting takes its course. It's up to us to provide the engineering and the design criteria that basically informs the permit. And then the regulators take as long as they need. They obviously need to consult with the First Nations group as well. But we do know the sequence and really it is, as we've said previously, it is focused on making sure that we have sufficient water treatment capacity, that we have sufficient tailings capacity and waste dump capacity as well. We understand the sequence, but in terms of the timing, it's very hard to pin down. We're going as fast as we can, but it's not entirely in our hands.

I appreciate it. Thank you. That's it for me.

This concludes the time allocated for questions. If you have any additional questions, please reach out to Mike Parkin via the Contact Us link on the website. I will now turn the call back to Rob Krcmarov, President and CEO, for closing remarks.

Well, thank you all for the thoughtful questions today and thanks for joining us this morning. I'll just leave you with this. We are in the strongest position this company's ever been in, and we're putting that strength to work in the right places for our shareholders and for the long-term value of this business. We do look forward to updating you again next quarter. So thanks, everyone, and have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.