Hecla Reports First Quarter 2019 Results

Nevada operations under review

COEUR D’ALENE, Idaho–(BUSINESS WIRE)–Hecla Mining Company (NYSE:HL)
(Hecla or the Company) today announced first quarter financial and
operating results.

HIGHLIGHTS

  • Sales of $152.6 million.
  • Cash provided by operating activities of $20 million.
  • Net loss applicable to common stockholders of $25.7 million, or $0.05
    per basic share.
  • Adjusted net loss applicable to common stockholders of $18.5 million,
    or $0.04 per basic share.1
  • Cost of sales and other direct production costs and depreciation,
    depletion and amortization (“cost of sales”) of $149.2 million.
  • Gross profit of $3.4 million and adjusted EBITDA of $33.4 million. Net
    debt/adjusted EBITDA (last 12 months) of 2.8x.2,3
  • Silver cash cost, after by-product credits, of $2.26 per ounce.4
  • All in sustaining cost (AISC), after by-product credits, of $9.34 per
    silver ounce.5
  • Cash and cash equivalents and short-term investments of $11.8 million.
  • Maintain annual capital and exploration spending estimates on a
    Company-wide basis.
  • Suspending Nevada production and cost estimates pending results of
    comprehensive review.

“Because of Greens Creek’s exceptional performance, Hecla’s first
quarter was largely as expected, financially.” said Phillips S. Baker,
Jr., Hecla’s President and CEO. “Greens Creek exceeded expectations for
both gold and silver production due to higher grades and recoveries.
However, Casa Berardi and our Nevada operations both produced less cash
flow than expected.”

“Casa Berardi’s gold production was lower in part due to lower grades,
which were expected, and also due to the lower mill throughput resulting
from some temporary issues in the mill that have now been addressed, and
we expect results to improve over the rest of the year,” Mr. Baker
continued. “While Nevada operations had better development advance
rates, the operating metrics including cost, grade and negative cash
flow, were unacceptable. We are reviewing our Nevada operations to
determine the best path forward and expect the results of this review in
the second quarter. In the meantime, we are suspending our annual Nevada
estimates for production and cost. We are maintaining our annual
estimates for capital and exploration spending to maintain our liquidity
and balance sheet.”

FINANCIAL OVERVIEW

  First Quarter Ended
HIGHLIGHTS   March 31, 2019   March 31, 2018
FINANCIAL DATA        
Sales (000) $ 152,617   $ 139,709
Gross profit (000) $ 3,444 $ 38,786
(Loss) income applicable to common stockholders (000) $ (25,671 ) $ 8,102
Basic and diluted (loss) income per common share $ (0.05 ) $ 0.02
Net (loss) income (000) $ (25,533 ) $ 8,240
Cash provided by operating activities (000) $ 20,030 $ 16,383
 

Net loss for the first quarter of $25.5 million was primarily impacted
by losses from operations in Nevada of $13.8 million, due to higher
costs, as well as lower grades and recoveries, than anticipated. In
addition, gross profit was lower by $15.4 million at Casa Berardi as a
result of 11,000 less gold ounces sold, as compared to the first quarter
2018; about half was due to planned lower grades, and the balance due to
the mill maintenance activities.

Operating cash flow of $20.0 million increased 22% over the first
quarter of 2018, principally due to the timing of working capital
changes, offset by lower gross profit. Adjusted EBITDA of $33.4 million
decreased 40% over the first quarter of 2018, mainly due to lower
margins at Casa Berardi and negative margins at our Nevada operations.2

Capital expenditures totaled $36.4 million for the first quarter of 2019
compared to $20.0 million in the prior year period, with the increase
mainly due to the addition of the Nevada operations, as well as
increased expenditures at San Sebastian of $1.5 million and Lucky Friday
of $0.7 million, partly offset by decreased expenditures at Greens Creek
of $4.2 million and Casa Berardi of $3.4 million. Expenditures at Nevada
operations, Casa Berardi, Greens Creek, San Sebastian, and Lucky Friday
were $21.8 million, $5.7 million, $5.3 million, $1.9 million, and $1.7
million, respectively.

Metals Prices

The average realized silver price in the first quarter of 2019 was
$15.70 per ounce, 7% lower than the $16.84 price realized in the first
quarter of 2018. Realized gold, lead and zinc prices decreased 2%, 22%,
and 13%, respectively.

OPERATIONS OVERVIEW

The following table provides the production summary on a consolidated
basis for the quarters ended March 31, 2019 and 2018:

    First Quarter Ended
        March 31, 2019   March 31, 2018
PRODUCTION SUMMARY    
Silver – Ounces produced 2,923,131   2,534,095
Payable ounces sold 2,898,083 2,091,464
Gold – Ounces produced 60,021 57,808
Payable ounces sold 60,936 54,839
Lead – Tons produced 5,784 5,627
Payable tons sold 4,848 3,868
Zinc – Tons produced 13,944 15,211
Payable tons sold 9,533 10,104
 

The following table provides a summary of the production, cost of sales,
cash cost, after by-product credits, per silver or gold ounce, and AISC,
after by-product credits, per silver or gold ounce, for the quarters
ended March 31, 2019 and 2018.

First Quarter Ended March 31, 2019       Greens Creek  

Lucky
Friday

  San Sebastian   Casa Berardi   Nevada Operations
  Silver   Gold   Silver   Gold   Silver   Silver   Gold   Gold   Silver   Gold   Silver
Production (ounces)   2,923,131     60,021     2,232,747     14,328     173,627     441,079     3,530    

 

31,799

    8,240     10,364   67,438
Increase/(decrease)   15 %   4 %   17 %   9 %   74 %   (14 )%   (22 )%  

 

(21

)%   (7 )%   N/A   N/A
Cost of sales and other direct production costs and depreciation,
depletion and amortization (000)
  $ 68,645     $ 80,528     $ 54,113         $ 2,181     $ 12,351       $ 49,081         $ 31,447  
Increase/(decrease)   33 %   64 %   29 %   N/A     (47 )%   114 %   N/A  

 

%   N/A     N/A   N/A

Cash costs, after by-product credits, per silver or gold ounce 4,
6

  $ 2.26     $ 1,277     $ 0.49        

 

    $ 11.23       $ 1,113         $ 1,782  
Increase/(decrease)   167 %   54 %   110 %   N/A     N/A     300 %   N/A  

 

35

%   N/A     N/A   N/A
AISC, after by-product credits per silver or gold ounce5   $ 9.34     $ 1,760     $ 3.24             $ 16.55      

$

1,338

        $ 3,056  
Increase/(decrease)   65 %   62 %   449 %   N/A     N/A     98 %   N/A  

 

23

%   N/A     N/A   N/A
       

Greens Creek Mine – Alaska

At the Greens Creek mine, 2.2 million ounces of silver and 14,328 ounces
of gold were produced, compared to 1.9 million ounces and 13,118 ounces,
respectively, in the first quarter of 2018. The increase was the result
of higher silver and gold grades and recoveries, partially offset by
reduced ore throughput. The mill operated at an average of 2,298 tons
per day (tpd) in the first quarter compared to 2,349 the first quarter
of 2018.

The cost of sales for the first quarter was $54.1 million, and the cash
cost, after by-product credits, per silver ounce, was $0.49, compared to
$41.9 million and $(4.99), respectively, for the first quarter of 2018.4
The AISC, after by-product credits, was $3.24 per silver ounce compared
to $0.59 in the first quarter of 2018.5 The per ounce silver
costs were higher primarily due to lower by-product metals prices and
production as well as higher onsite power generation costs, partially
offset by higher silver production.

Casa Berardi Mine – Quebec

At the Casa Berardi mine, 31,799 ounces of gold were produced, including
6,535 ounces from the East Mine Crown Pillar (EMCP) pit, compared to
40,177 ounces in the first quarter of 2018. The decrease was expected
due to lower grades and to lower mill throughput and recovery as a
result of adjustments to mill components to accommodate a higher
throughput and the requirement for a new carbon in leach (CIL)
drivetrain, which is being installed in early May. The shortfall in
production in the first quarter is expected to be made up over the
remainder of the year. The mill operated at an average of 3,664 tpd in
the first quarter, a decrease of 5% compared to the first quarter of
2018.

The cost of sales was $49.1 million and the cash cost, after by-product
credits, per gold ounce was $1,113, compared to $49.2 million and $827,
respectively, in the first quarter of 2018.4,6 The increase
in cash cost, after by-product credits, per gold ounce is mainly due to
lower gold production. The lower production, partially offset by lower
capital spending, resulted in higher AISC, after by-product credits, of
$1,338 per gold ounce compared to $1,086 in the first quarter of 2018.5

San Sebastian Mine – Mexico

At the San Sebastian mine, 441,079 ounces of silver and 3,530 ounces of
gold were produced in the first quarter, compared to 512,192 silver
ounces and 4,513 gold ounces in the prior year period. The decreases
were due to lower grades, as expected, upon transitioning to increased
throughput coming from underground mine material, versus higher-grade
open pit. The mill operated at an average of 494 tpd in the first
quarter, a 29% increase over the first quarter of 2018.

The cost of sales was $12.4 million for the first quarter and the cash
cost, after by-product credits, was $11.23 per silver ounce, compared to
$5.8 million and $2.81, respectively, in the first quarter of 2018.4
The cash cost, after by-product credits, increased due to lower silver
production and lower by-product gold production. The AISC, after
by-product credits, was $16.55 per silver ounce compared to $8.37 in the
first quarter of 2018, principally due to the same factors along with
higher capital spending, partially offset by lower exploration costs.5

A review of the sulfide ore continues, including a bulk sample to test
the capabilities of the third-party plant and the suitability of
long-hole stoping for the ore body, with results expected by the fourth
quarter of 2019.

Nevada Operations – Nevada

For the Nevada operations, 10,364 ounces of gold and 67,438 ounces of
silver were produced. Advance rate increased 27% from the fourth quarter
of 2018 but milled tons declined 30%. Capital investment increased from
the fourth quarter by $4 million to $21.8 million. Of that amount, $15.8
million was for development at Fire Creek and Hollister, including $4.2
million for the Hatter Graben decline.

The Company is demobilizing the mining contractor, mining some
previously-developed remnant stopes at Midas and considering other
alternatives to reduce the cash spend and improve the cash flow at the
Nevada operations. Some of the possible alternatives include third party
processing, reducing development, and changing grade control procedures.
Pending the outcome of the review, the annual production and cost
estimates for Nevada are being suspended.

Lucky Friday Mine – Idaho

Silver production of 173,627 ounces increased 74% over the prior year
period mainly due to a shift in focus from development to production by
the salaried staff. Cost of sales for the first quarter was $2.2 million
compared to $4.1 million in the first quarter of 2018, with the decrease
resulting from lower sales volume due to the timing of concentrate
shipments.

The higher level of production is helping to defray more costs
associated with the strike at Lucky Friday than originally anticipated.
The mine recently celebrated two years of operations without a
Restricted Work Duty Injury (RWDI) or Lost Time Injury (LTI).

The construction of the Remote Vein Miner (RVM) continues in Sweden, and
delivery is expected in the first half of 2020.

EXPLORATION

Exploration (including Corporate Development) expenses were $4.4 million
in the first quarter of 2019, a decrease of $3.0 million compared to the
first quarter 2018.

A complete summary of exploration for the first quarter can be found in
the news release entitled “Hecla Reports Drilling Success at Casa
Berardi, San Sebastian, Greens Creek and Nevada” released on May 8, 2019.

PRE-DEVELOPMENT

Pre-development spending was $0.9 million for the quarter, principally
to advance the permitting of Rock Creek and Montanore.

2019 ESTIMATES7

The annual production and cost outlook have been suspended for Nevada
pending the results of the comprehensive review.

2019 Production Outlook

    Silver Production

(Moz)

  Gold Production

(Koz)

  Silver Equivalent

(Moz)

  Gold Equivalent

(Koz)

   

Original
(if revised)

  Current  

Original
(if revised)

  Current  

Original
(if revised)

  Current  

Original
(if revised)

  Current
Greens Creek   7.7   7.7   50   50   24.0   24.0   305   305
Lucky Friday   0.2   0.2   N/A   N/A   0.2   0.2   N/A   N/A
San Sebastian   2.0   2.0   14   14   3.0   3.0   40   40
Casa Berardi   N/A   N/A   150   150   11.7   11.7   150   150
Nevada Operations   0.1   Suspended   76   Suspended   6.1   Suspended   77   Suspended
Total8   10.0   9.9   290   N/A   45.0   N/A   572   N/A
               

2019 Cost Outlook

    Costs of Sales (million)   Cash cost, after by-product credits, per silver/gold ounce2,4   AISC, after by-product credits, per produced silver/gold ounce3
   

Original
(if revised)

  Current  

Original
(if revised)

  Current  

Original
(if revised)

  Current
Greens Creek   $202   $202   $0   $0   $5.50   $5.50
Lucky Friday   N/A   N/A   N/A   N/A   N/A   N/A
San Sebastian   $41   $41   $9.00   $9.00   $12.00   $12.00
Total Silver   $243   $243   $1.10   $1.10   $11.00   $11.00
Casa Berardi   $210   $210   $850   $850   $1,150   $1,150
Nevada Operations   $90   Suspended   $900   Suspended   $1,325   Suspended
Total Gold8   $300   N/A   $875   N/A   $1,250   N/A
           

2019 Capital and Exploration Outlook

   

Original
(if revised)

  Current
2019E Capital expenditures (excluding capitalized interest)   $150 million   $150 million
2019E Exploration expenditures (includes Corporate Development)   $25 million   $25 million
2019E Pre-development expenditures   $2.5 million   $2.5 million
2019E Research and Development expenditures   $3.5 million   $3.5 million
   

1,2,4,6 Non-GAAP measures. See pages 8-9 for more
information.

 

DIVIDENDS

Common

The Board of Directors elected to declare a quarterly cash
dividend of $0.0025 per share of common stock, payable on or about June
9, 2019, to stockholders of record on May 24, 2019. The realized silver
price was $15.70 in the first quarter and therefore did not satisfy the
criteria for a larger dividend under the Company’s dividend policy.

Preferred

The Board of Directors elected to declare a quarterly cash
dividend of $0.875 per share of preferred stock, payable on or about
July 1, 2019, to stockholders of record on June 14, 2019.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Thursday, May 9, at 10:00
a.m. Eastern Time to discuss these results. You may join the conference
call by dialing toll-free 1-855-760-8158 or for international dialing
1-720-634-2922. The participant passcode is HECLA. Hecla’s live and
archived webcast can be accessed at www.hecla-mining.com
under Investors or via Thomson StreetEvents Network.

ABOUT HECLA

Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading low-cost
U.S. silver producer with operating mines in Alaska, Idaho, and Mexico
and is a gold producer with operating mines in Quebec, Canada and
Nevada. The Company also has exploration and pre-development properties
in seven world-class silver and gold mining districts in the U.S.,
Canada and Mexico, and an exploration office and investments in
early-stage silver exploration projects in Canada.

NOTES

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional
information only and do not have any standard meaning prescribed by
generally accepted accounting principles in the United States (GAAP).
These measures should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with GAAP.

(1) Adjusted net income (loss) applicable to common
stockholders is a non-GAAP measurement, a reconciliation of which to net
income (loss) applicable to common stockholders, the most comparable
GAAP measure, can be found at the end of the release. Adjusted net
income (loss) is a measure used by management to evaluate the Company’s
operating performance but should not be considered an alternative to net
income (loss), or cash provided by operating activities as those terms
are defined by GAAP, and does not necessarily indicate whether cash
flows will be sufficient to fund cash needs. In addition, the Company
may use it when formulating performance goals and targets under its
incentive program.

(2) Adjusted EBITDA is a non-GAAP measurement, a
reconciliation of which to net income (loss), the most comparable GAAP
measure, can be found at the end of the release. Adjusted EBITDA is a
measure used by management to evaluate the Company’s operating
performance but should not be considered an alternative to net income
(loss), or cash provided by operating activities as those terms are
defined by GAAP, and does not necessarily indicate whether cash flows
will be sufficient to fund cash needs. In addition, the Company may use
it when formulating performance goals and targets under its incentive
program.

(3) Net debt to adjusted EBITDA is a non-GAAP measurement, a
reconciliation of adjusted EBITDA and net debt to the closest GAAP
measurements of net income (loss) and debt can be found at the end of
the release. It is an important measure for management to measure
relative indebtedness and the ability to service the debt relative to
its peers. It is calculated as total debt outstanding less total cash on
hand divided by adjusted EBITDA.

(4) Cash cost, after by-product credits, per silver or gold
ounce is a non-GAAP measurement, a reconciliation of which to cost of
sales and other direct production costs and depreciation, depletion and
amortization (sometimes referred to as “cost of sales” in this release),
can be found at the end of the release. It is an important operating
statistic that management utilizes to measure each mine’s operating
performance. It also allows the benchmarking of performance of each mine
versus those of our competitors. As a silver and gold mining company,
management also uses the statistic on an aggregate basis – aggregating
the Greens Creek, Lucky Friday and San Sebastian mines – to compare
performance with that of other silver mining companies, and aggregating
Casa Berardi and Nevada Operations to compare performance with other
gold companies. Similarly, the statistic is useful in identifying
acquisition and investment opportunities as it provides a common tool
for measuring the financial performance of other mines with varying
geologic, metallurgical and operating characteristics. In addition, the
Company may use it when formulating performance goals and targets under
its incentive program. Cash cost, after by-product credits, per silver
ounce is not presented for Lucky Friday for the first quarter of 2019
and 2018, as production was limited due to the strike and results are
not comparable to those from prior periods and are not indicative of
future operating results under full production.

(5) All in sustaining cost (AISC), after by-product credits,
is a non-GAAP measurement, a reconciliation of which to cost of sales
and other direct production costs and depreciation, depletion and
amortization, the closest GAAP measurement, can be found in the end of
the release. AISC, after by-product credits, includes cost of sales and
other direct production costs, expenses for reclamation and exploration
at the mine sites, corporate exploration related to sustaining
operations, and all site sustaining capital costs. AISC, after
by-product credits, is calculated net of depreciation, depletion, and
amortization and by-product credits. AISC, after by-product credits, per
silver ounce is not presented for Lucky Friday for the first quarter of
2019 and 2018, as production was limited due to the strike and results
are not comparable to those from prior periods and are not indicative of
future operating results under full production.

Current GAAP measures used in the mining industry, such as cost of goods
sold, do not capture all the expenditures incurred to discover, develop
and sustain silver and gold production. Management believes that all in
sustaining costs is a non-GAAP measure that provides additional
information to management, investors and analysts to help in the
understanding of the economics of our operations and performance
compared to other producers and in the investor’s visibility by better
defining the total costs associated with production. Similarly, the
statistic is useful in identifying acquisition and investment
opportunities as it provides a common tool for measuring the financial
performance of other mines with varying geologic, metallurgical and
operating characteristics. In addition, the Company may use it when
formulating performance goals and targets under its incentive program.

(6) Cash cost, after by-product credits, per gold ounce is
only applicable to Casa Berardi and Nevada Operations production. Gold
produced from Greens Creek and San Sebastian is treated as a by-product
credit against the silver cash cost.

Other

(7) Expectations for 2019 include silver, gold, lead and zinc
production from Greens Creek, San Sebastian, Casa Berardi and Nevada
Operations converted using Au $1,250/oz, Ag $16.00/oz, Zn $1.25/lb, and
Pb $1.00/lb. Lucky Friday expectations are currently suspended as there
is currently a strike. Numbers may be rounded.

(8) Estimates for 2019 Nevada production and costs, as well
as annual gold estimates, are suspended pending completion of the
comprehensive review of Nevada operations.

Cautionary Statements to Investors on Forward-Looking Statements

This news release contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the safe harbor created by such sections
and other applicable laws, including Canadian securities laws. Such
forward-looking statements may include, without limitation: (i)
estimates of future production and sales; (ii) successful integration of
our recently acquired Nevada operations unit and its impact on Hecla’s
operations and results; (iii) expectations regarding the development,
growth potential, financial performance of the Company’s projects; (iv)
the Company’s mineral reserves and resources; (v) ability to optimize
operations at Casa Berardi; (vi) ability to complete construction of the
remote vein miner and for it to operate successfully; (vii) impact of
the Lucky Friday strike on production and cash flow; (viii) ability to
generate value from innovations being introduced into the mines; (ix)
impact of metals prices on cash costs, after by-product credits; and (x)
estimates of future smelter demand. Estimates or expectations of future
events or results are based upon certain assumptions, which may prove to
be incorrect. Such assumptions, include, but are not limited to: (i)
there being no significant change to current geotechnical,
metallurgical, hydrological and other physical conditions; (ii)
permitting, development, operations and expansion of the Company’s
projects being consistent with current expectations and mine plans;
(iii) political/regulatory developments in any jurisdiction in which the
Company operates being consistent with its current expectations; (iv)
the exchange rate for the Canadian dollar to the U.

Contacts

Mike Westerlund
Vice President – Investor Relations
800-HECLA91
(800-432-5291)
Email: hmc-info@hecla-mining.com
Website:
www.hecla-mining.com

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