Hecla Mining Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2023

There are 10 speakers on the call.

Operator

Welcome to

Speaker 1

the Q3 2023 Hecla Mining Company Earnings Conference Call. I would now like to welcome Anvita Patel, VP, Investor Relations and Treasurer to begin the call. Anvita, over to you.

Speaker 2

Good morning, Mandeep, and thank you all for joining us for Hecla's Q3 2023 Financial and Operations Results Conference Call. I'm Anvita Patil, Hecla's Vice President of Investor Relations and Treasurer. Our financial results news release that was issued yesterday along with today's presentation are available on HETLAR's website. On today's call, we have Phil Baker, HETLAR's President and Chief Executive Officer Lauren Roberts, HETLAR's Senior Vice President and Chief Operating Officer Russell Lawler, HETLAR's Senior Vice President and Chief Financial Officer and Carlos Agouar, HETLA's Vice President of Operations. 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 2 in our earnings release and in our 10 ks and 10 Q filings with the SEC.

Speaker 2

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 of the news release. I want to remind you, If you would like to have a call with the management, you can do so by using the link under the section Virtual Investor Event in our earnings release that was issued yesterday. With that, I'll pass the call to Phil.

Speaker 3

Thanks, Anvita. Good morning, everyone. Thanks for joining the call. Before I get to the slides, I want to just Remind you that Lorne is going to be retiring at the end of the year, and I just want to thank Lorne for his tenure at Hecla. During his time, there's been a lot of Accomplishments that he has the company has done and that he has led.

Speaker 3

But what really stands out to me is that when he arrived at Hecla, We were still at the Lucky Friday focused on cutting the rock using a mechanical mining, But we began the steps that led to the new mining method at the Lucky Friday. And without his support, Knowledge leadership, I doubt the UCB would have been developed. We wouldn't have a patent for a new mining method. So thanks, Lauren, I'd also like to introduce Carlos Aguilar. He's our Vice President of Operations.

Speaker 3

And Carlos is from Mexico when he became a U. S. Citizen 2 years ago and has been with the company a total of 27 years. 17 of those years has been working for us in Latin America in both Mexico and Venezuela. He has 9 years of experience as a GM for us at both San Sebastian Lucky Friday Mines and he also knows Casa Berardi.

Speaker 3

He Really started the mill modifications. And I've known Carlos now for about 20 years. I first met him on a tour of the mill in Venezuela, and his leadership abilities and commitment to operational excellence He's really been reflected in the consistent improving results that he's achieved everywhere that he's worked. Every operation has seen Significant improvement with him at the helm. So you're going to enjoy getting to know him.

Speaker 3

And with that interaction, I'll start with Slide 3. I want to take a moment to just step back and discuss our performance from a longer term perspective. We typically do this. We It's the way we look at the business is on a long term basis. And over the past 5 years, you've seen our revenues grow 27%, Silver reserves 79%, silver production 37%.

Speaker 3

And as we work toward producing up to 20,000,000 ounces By 2025, it means that we will close to double our silver production since 2018. And maybe more impressively is that next number, the $767,000,000 of free cash flow that our 3 operating mines generate. And this of course has resulted in the strong share performance. And it's the quality of our assets. These are assets that have long reserve lives, High grades, low cost, consistent performance and significant exploration potential, which allows you to have this performance over time.

Speaker 3

And I'll suggest to you that Green Street checks all 5 of those boxes, long reserve life, high grade, low cost, consistent Looking forward to significant exploration potential. Lucky Friday at this point checks 4 of the 5, Casa and Keno checks 3 of them, But all the mines check the long lives. So we are focusing on setting up the mines for the long term, pushing for continuous improvement and allowing innovation to fundamentally improve them. So they all end up I'm convinced all of them will end up checking All 5 of the boxes. So with that context for the quarter, let me move to Slide 4.

Speaker 3

And I'll start with the Lucky Friday, which We'll not have production until early 2024 as we block off the lower part of the 2 shaft and build a new secondary escape way and ventilation braze. And this 3 month project is going well. At the same time, we are still advancing other projects and completing our equipment purchases. We actually have 10 pieces of equipment on service that are ready to go underground. And we expect to ramp back up Full production in Q1 and see the Lucky Friday continue in 2024, the production growth and the free cash flow that we saw before the fire.

Speaker 3

At Keno Hill, production has been slowed due to the delay in the Shot Creek plant commissioning just yesterday and the cement rock Bill plant scheduled to be completed later this month. Their completion puts us in a position to advance development and production faster and the grade of the ore has even better than what our block model had predicted. However, we're concerned with the safety culture at Keno. Our all injury frequency rate at Keno is around 4, which is not acceptable. If you look at Greens Creek and Lucky Friday, they're both less than 1.

Speaker 3

In the last 2 months and more recently in the last 2 weeks, we've had some near misses that didn't result in an injury or damage to equipment, but they could have. And that's not acceptable to us. As a result, I've tasked Carlos and his team to methodically review all our process and procedures to get safety right, Because we know that excellent safety not only prevents injury, but also standardizes activities, which increases predictability and production. And so the safety review at Kena will likely lead to changes in our processes, schedules, equipment and the way we mine. And to make the mine safer, we will reengineer With the mine just starting up and with its expected long mine life, we must get off on the right foot on safety.

Speaker 3

So we're going to take whatever time is needed to do that. Greens Creek had another consistent and strong operational quarter and we are increasing silver production guidance Green Creek has already generated over $100,000,000 of free cash flow for the year. Now Casa Berardi had a very good quarter, Progressing on the transition that we're making for becoming only an open pit mine, reporting cash costs and all in sustaining costs that are well within guidance and building infrastructure that sets the mine up for success in the next decade. Earlier this year, we saw the need to make the fundamental changes, which we began implementing just this past quarter and we're already seeing the benefits of that. As a company, silken production guidance It is only slightly lower.

Speaker 3

Midpoint of guidance is just 400,000 ounces less silver. Silver costs are unchanged, gold is unchanged other than a little lower cash cost. And finally, the safety performance at our mines with the exception of Keno Hill has been one of the best in the industry with an all injury frequency rate consistently lower than the U. S. National average.

Speaker 3

So with that, I'll pass the call on to Russ.

Speaker 4

Thanks, Bill. I'll start on Slide 6. As we think about the year so far, even with Lucky Friday down for most of the 3rd quarter, Silver accounted for 38 percent of revenues with silver operations generating more than $120,000,000 of free cash flow. With strong gold production of 39,000 ounces, gold accounted for 36% of revenues and base metals contributed 25%. We are on a path of more than half of our revenues coming from Silver.

Speaker 4

The strong balance sheet and financial flexibility have always been key priorities with the goal of maintaining a leverage ratio of less than 2 times and maintaining significant liquidity. In the Q3, we saw our leverage ratio increase to 2.2 times due to the Lucky Friday suspension of production and our continued investment at Keno Hill. Although we expect our leverage ratio will remain elevated next Quarter, we see this increase is temporary. Our liquidity is adequate at $165,000,000 However, I expect our leverage ratio will be less than 2 times And our liquidity will grow substantially once the Lucky Friday is back into production and Keno Hill matures. Now I'll turn to Slide 7 to highlight some of the key attributes of our silver mines, especially now that we're going through a period of investment.

Speaker 4

Our silver mines have consistently provided strong margins. This is shown in the graph on the left where over the past 4 years this margin has been near or above 50% and has translated into consistent free cash flows. The chart on the right highlights just how strong this Free cash flow generation is from our silver mines, where since 2020 Lucky Friday and Greens Creek have generated more than $800,000,000 of cash flow from operations And even more impressive is the nearly $600,000,000 of free cash flow. These strong margins and the resulting free cash flow generation allow us to invest both capital and to exploration at these mines as well as in our broad exploration portfolio in addition to returning capital to our shareholders in the form of dividends. And now I'll turn the call to Lorne.

Speaker 4

Thanks, Russell.

Speaker 5

I'd like to just make a few comments on my time with Hecla. I began with Hecla as a summer intern in 1988 and became a full time employee in 1989. I spent a little under 8 years with Hecla and could not have asked for a better start to my career. So when the opportunity to rejoin Hecla presented itself some 2 decades later, it was a very easy decision for me to return home. The chance to give something back was very important to me and it's been a really rewarding 4 years.

Speaker 5

So I'd just like to thank the Hecla family for that. With that, I'll start on Slide 9. Greens Creek, our flagship mine, turned in another strong and consistent quarter, producing 2,300,000 ounces of silver in line with the prior quarter's 2,400,000 ounces. The mine has already produced 7,500,000 ounces in the 1st 3 quarters of the year and remains on track to achieve its throughput target of 2,600 tons per day by the end of the year. Cash costs and all in sustaining costs per silver ounce were $3.04 $8.18 respectively and were higher than the 2nd quarter because of lower gold production and lower gold prices.

Speaker 5

Capital spend for the quarter was $12,000,000 higher than the previous quarter and as planned due to equipment purchases and seasonal surface projects. The mine generated $28,000,000 in free cash flow in the quarter and has already generated more than $100,000,000 in free cash flow this year. We're increasing silver production guidance to 9,800,000 to 10,000,000 ounces for the year. Due to mine sequencing, zinc production is It's expected to be somewhat lower, increasing our cash costs and all in sustaining costs per ounce guidance due to lower expected byproduct credits. Capital guidance is unchanged at $47,000,000 to $50,000,000 Greens Creek truly is a premier silver mine, the 11th largest in the world I want to congratulate the team on delivering excellent and consistent results at this truly world class asset.

Speaker 5

Turning to Slide 10, I'm excited to report that we've been executing well on our plan to transition Casa Berardi to a fully open pit operation by mid-twenty 24. The mine produced approximately 24,000 ounces of gold at a cash cost of $14.75 and an all in sustaining cost of to $16.95 Mill throughput was lower than the previous quarter due to a planned upgrade to the gravity circuit. We're optimizing that circuit now and expect it to enhance overall plant recovery. The first phase of the in house Open pit fleet was commissioned this quarter, resulting in record tons moved. With the execution of our plans on track A good performance on cost control, we are lowering our cash cost guidance to $1600 to $1800 per ounce.

Speaker 5

The mine remains on track to achieve its production and all in sustaining cost guidance. Carlos was General Manager of Lucky Friday Mine until just a few months ago when he was promoted to Vice President of Operations. The progress and consistency we've seen from the Lucky Friday over the past few years It was largely a result of Carlos and his team. And as I will retiring at the end of the quarter, I'll hand him the reins to discuss the remainder of the operations.

Operator

Thanks, Lauren, and good morning, everyone. I will start on Slide 11. However, before we discuss the progress made on Lucky Friday, I want to congratulate our team on Lucky Friday for receiving the 2023 NIOSH Mine Safety and Health Technology Metal Section Innovation Award for the UCD Mining method. In addition, we also received the U. S.

Operator

Patent in the 3rd quarter. In August, we report a fire of the Lucky Friday in the number 2 shot, which is also the secondary address. The fire was extinguished in September. However, the operations of the mine are suspended for the remaining of the year until the secondary egress is established. Our mitigation plans include driving a ramp, vertical skateway and a vent race to bypass the damaged portion of the shaft.

Operator

The ramp and the lateral vein race will serve as a secondary egress with the vein race serving as a bypass for ventilation. To explain our mitigation plans in more detail, I will turn to Slide 12. I will start with the graphic on the left. First, I want to highlight that the Lucky Friday has 2 shafts that start at the surface. The silver shaft, which in the left graphic is the left of the 2 shafts and the number 2 shaft.

Operator

Silvershaft is our main production shaft. It is a circular concrete lined shaft. It moves people, equipment, materials and is critical for our operations on Lucky This is the shaft where the service hoist was installed early this year and is unaffected by the fire. To the right of the silver shaft is the graphic is the number 2 shaft, where the fire occurred about halfway down. This shaft provides ventilation and in emergency an alternative way to leave the mine.

Operator

Between the two shafts is the new 850 foot vent race we are driving for ventilation show in future. The graphic on the right shows the plans in future to reestablish the secondary address. The plans comprise an extension of 1600 foot rig for ramp and from this ramp we will install a 290 foot vertical escape race, basically a ladder with landing. Once complete, this infrastructure will allow for the mine to resume production. This gateway is the critical path to production and is on schedule with 35% of the ramp and 10% of the race completed.

Operator

The ventilation race war has just begun. These mitigation plans are expected to cost about $10,000,000 And we expect the mine to restart production in January of next year. We have properties and business interruption insurance with an underground sublimit up to $50,000,000 I will now move to Slide 13. As Phil mentioned earlier, the safety performance of Keno Hill has not been to Hecla's standards. So I am on my way with my team to assess what needs to be done to get safely where it needs to be.

Operator

With the mind just starting, this is a critical time to establish the culture we want at Keno Hill, easier now than later. Eno has produced almost 900,000 ounces a year, 700,000 in the 3rd quarter. I expect in the Q4, we will produce between 800,000 1,000,000 ounces. We have the Shaw Creek plant commissioned, office in Eldray at the portal, expanded CAM facilities, 8,000 feet of development, 10 hour headings and the modified secondary crusher. We are in a good position for a strong 24 if we can get the safety right.

Operator

Slide 14 shows 2 of our critical projects, the secondary crusher on the left and the shock grid plan on the right. With that, I will pass the call back to Phil.

Speaker 3

Thanks, Carlos. So on Slide 15, Just a little bit on the exploration at Keno. With the tons we mined, we've been really pleased with Keno's grade at 33 Ounces per ton, the rock has an NSR value in excess of $700 And our exploration team is finding more in a number of deposits, but we'll just talk about Birmingham. So let me orient you on this slide. Birmingham has a number of zones, Bear, Arctic, Northeast Deep.

Speaker 3

And we're going to be mining here for a long time. The images that you see are only at the Behr and the image on the left It's the bare vein and on the right is the footwall vein. And there's a 3rd vein that

Speaker 6

is not

Speaker 3

shown called the main vein. I've got to think about names of veins, It's a little bit confusing, but so you got the bare zone with the bare vein, the footwall vein and the main vein. So looking at the image on the left to the Northeast outside the current design stopes, we are identifying another mineralized shoot Great appears high enough to have the potential to add to our resource. The best hole He's about 163 ounces over 7 feet. So if you look at the right image and this is the footwall vein, this is within the currently planned stopes and we have 36 feet of 36 ounces and 17 feet of 56 ounces.

Speaker 3

And we don't yet have the results on the Main vein drilling. Point is, there is the likelihood to continue to grow High Grade Resources at Keno. We could not be more excited about the exploration results that we're having and the potential that we have in the future. So Slide 16 summarizes our production cost guidance for the year and we are reiterating our consolidated cost guidance for silver, but Lowering the silver production guidance slightly as I previously mentioned, gold cash costs are lower, capital is unchanged. Also on this slide, you can see the ramp up costs for Keno and Lucky Friday's suspension costs for the year.

Speaker 3

Exploration is unchanged. And as we look ahead to 2025, we think we're still on track to produce up to 20,000,000 ounces. So if you go to Slide 17 and before I open the call for questions, I want to end our prepared remarks focusing on the expected increase in solar energy. Last year, globally, 269 gigawatts of solar was installed. And the International Energy Agency estimates that in 7 years, the world's going to install about twice as many solar panels this year about 500 gigawatts.

Speaker 3

And that's not an unreasonable estimate. It's a 9% growth rate And that actually compares to a 12% growth rate that we've had over the last 10 years. Now it takes 500,000 ounces of Silver for every gigawatt installed. So last year that was 140,000,000 ounces or 12% of the total demand for silver. In 2,030, with 4 98 gigawatts solar, we're going to use 100,000,000 ounces more or almost 250,000,000 ounces, which would be 21% of the demand if overall demand doesn't grow.

Speaker 3

And that's not likely. There's Other uses for silver that we'll see increased demand. Now to put the 100,000,000 ounces of demand in context, the production for every year 2 more is 2 more of the largest mines in the world that produce silver. They're actually not silver mines. It's not a silver mine, but it produces about 50,000,000 ounces or it's 10 Greens Creek's, which is the 11th largest silver mine.

Speaker 3

Clearly, the additional demand for silver that we have over the next 7 years is not going to be met by more mine production. Even if there's discoveries of silver, you're not going to be able to get a permit or constructed in that 7 year timeframe. So that's going to come from the to meet that demand, it's got to come from aboveground supply, which is going to require substantially higher prices to be mobilized. Finally, I'm going to be the Chairman of the Silver Institute for the next two and a half years. And as a result of that, I was invited to speak at the LBMA conference 3 weeks ago.

Speaker 3

And what I was struck by from that conference is that very well respected Knowledgeable market participants are thinking about silver in the same way they have for the past 4 years, primarily as torqued gold. And I would just encourage you to think about silver differently, because the demand for silver is so tied to changing our energy sources. It's not going to behave as it has in the past. So while gold goes up, I'm sure silver will and while copper goes up, I'm sure silver will. But if solar demand is as I have outlined, then higher silver price regardless of what gold and copper do is inevitable.

Speaker 3

And with that, what I'd like to do is, Envita, you said you got a question from one of the analysts He's traveling and why don't you tell me what that question is?

Speaker 2

That's right, Phil. So we have a question from Mike Parkland of National Bank. He is in transit. So, send along this question. The question is what are management's thoughts on potential timeline to get Keno Hill operating to headless standards of practice?

Speaker 3

Well, I think the I'll make some comments and then I'll turn it to Lorne and Carlos. But I think Fundamentally, we will never reach our standard of practice. It's a continuous improvement effort And so it will take some time, but to get to you'll never get there basically. But we're going to send Carlos and his team is going to go there and they're just going to make sure that we are You have all the processes in place, all the procedures. We're going to make sure that there's an understanding at the site of the importance of safety and to follow the practices and procedures.

Speaker 3

That's that really is the starting point. And then it's how do you engineer out risks. Fortunately, with the infrastructure that we're putting in, we're in a very good place to see that happen. But with that, I'll turn it over to the 2 of you. Lauren, anything to add?

Speaker 5

Sure. I'll start and then I'll pass it to Carlos. I think the way to think about Keno is in the past year, we've been very focused on the initial mine development and building out the infrastructure. And that phase is essentially coming to a close now. And as Phil suggests, there was an evolution of our process even within that phase of the work.

Speaker 5

And now we need to turn our focus to our operational practices and delivering against our operational Commitments and to that end Carlos and a group of people from our corporate tech services team are heading up there this week to begin that process. Carlos, can you go into details?

Operator

Yes. We are getting close and we are making progress. But set is our priority and we are Making sure that we have the right people at the right time in the right place with all the materials and equipment in place. So it's going to take some time. We still don't know.

Operator

We are going to we are expecting to complete the initial assessment before the end of the year and then after that we are going to execute the plan.

Speaker 3

So we'll I guess what I will suggest to you is we will have substantial production from Keno in 2024. We will give you exactly what we think we'll have when we give the guidance for 2024 Early in the New Year. So any other questions, Anvita, before we take it from the operator? That's all. Okay.

Speaker 3

Operator, you can open the call for questions.

Speaker 1

We'll pause for just a moment to compile any questions. Our first question comes from the line of Heiko Ihle with H. C. Wainwright. Please go ahead.

Speaker 7

Hey, Derek. Thanks for taking my questions. And I'll also join Phil in thanking Lauren for all he's done for the firm. Didn't realize you were at the firm since you were a summer intern.

Speaker 5

Yes, started a long time ago, Heiko.

Speaker 7

Well, This builds a little bit on the emailed in question, but I mean there's been some mine infrastructure delays at Keno Hill. We're not concerned about it, especially since it seems like drilling at site continues to go quite well. But can you provide some color on what exactly you're Seeing and then also the timelines and anticipated costs to remediate the issues that you're still being faced with?

Speaker 3

Look, I think the short answer is it's a variety of things. It's not just one thing. And so that goes to the culture that's developing at the site. And we're just in the if you think about it, we've only been operating for about 5 months. And so as a result, And you have people that are coming from all over Canada, from different minds, they've had different set of expectations, different set of practices.

Speaker 3

They will describe the same thing, use different words describing the same thing. And so it becomes a communication issue. So it is not there's not a sort of a one thing that we need to do, it is really about the culture. Can you guys add to that?

Speaker 5

Yes, I agree, Phil. Keno is rather unique in the sense that it's effectively a melting pot of the Canadian mining districts from east to west. So there's really no critical mass of minors or supervision from any one area. And as a consequence, we need to build The culture from scratch, the way we as Hecla want the culture to be and that's going to take us a little bit of time, but The production will come along with that evolution in the culture and as the culture comes together, the production will improve. So it's Normal process actually at the beginning of a mine, a bit unique at Keno given the diversity of people there.

Speaker 3

But it's behaviors and it's behaviors from the miners and their supervisors and throughout the organization and it's changing The attitude said that the behaviors change.

Speaker 7

No, that makes sense. Completely different one, you maintained your capital guidance. Can you provide some color on what you're seeing in regards to inflationary expenses? As in where are we compared to what you were expecting? And just in general, what you're seeing in regards to cost Which line items are better, which may be a little bit worse than you had expected?

Speaker 7

And on that same token, any bottlenecks for availability, if anything?

Speaker 3

I will turn it over to Lauren and Russell and Carlos. I mean, from my perspective, the inflationary pressure has reduced. I have no there's no doubt that there's probably Some items within the capital and operating costs that are feeling inflationary pressure, but It's not like what we had previously.

Speaker 5

For sure, it's just inflation tends to be a sticky thing, Heiko. So it comes quickly and it abates slowly. But we're not seeing the big increases that we did. I would say things are relatively flat. Fuel is starting to moderate.

Speaker 5

So We're not seeing any big changes now. I would guess in terms of supply, we are able to get the equipment we need and the materials that we need. Some items are longer lead than they were pre COVID. Things like transformers are Very slow, very long lead, but even those items are beginning to shorten in terms of lead time. Probably the most challenging aspect is Skilled Trades and I think everybody in the industry is facing that same challenge.

Speaker 5

And it's a bit of a generational thing. We are seeing the Older guys starting to retire and fewer folks coming in. So we're hiring relatively inexperienced people and training. We've seen this before, probably a couple of decades back, but we're experiencing that.

Speaker 7

That's it for me. I'll get back in queue. Thank you.

Speaker 4

Thanks Heiko.

Speaker 1

Our next question comes from the line of Michael Cypherko with RBC Capital Markets. Please go ahead.

Speaker 8

Thanks very much all for taking my question. Maybe shifting gears to Lucky Friday. So you've outlined the 3 key items that or it sounds like the 3 key items that you need to complete to bring the mine back into production. Based on the commentary though, it looks like maybe you're about 15% done on the work that you need to do across those three items. Is that fair?

Speaker 8

Or how should we look at the timing and effort required to get that rehab

Speaker 3

Amit, the short answer is, we will be done very early in January Unless we have some major surprise, Carlos?

Operator

Yes. As today, we are between 35% 40% of the Project completed. And as you say, we are expecting to restart the mine starting in early 2024.

Speaker 5

And in fact Carlos and I were underground yesterday, looking at the progress and We are slightly ahead of schedule in some areas. So we were pleased with what we saw.

Speaker 8

Okay. So has Event Bypass been the raise been started yet? Just based on the commentary, it's not exactly

Speaker 5

Yes. Both raises have started and the ramp is what percent, almost 35% complete. So yes, they're both going. It's Gordy.

Speaker 8

Okay. Okay. And then It's a

Speaker 3

contractor, Michael. It's a contractor that has Come on, that was mobilized on the better part of a month ago and mobilized on The Escape Way First and has more recently been mobilized on the ventilation. Realize the ventilation Raise doesn't have to be done to go back into production. It's the critical path is the escape way. We have enough ventilation Without the ventilation raise for a period of time.

Speaker 8

Okay. That was going to be my follow-up question on that. So the escape way is the critical path And you're comfortable with, say, I suppose we have, what, 2 months or so to get that done and to get Lucky back into production by say February.

Speaker 3

Is that a fair way to look at it? January.

Speaker 6

If it's February,

Speaker 3

something unexpected has happened.

Speaker 8

Understood. Okay. And then just on the insurance, can you share if or when you think you'll have visibility into What will be covered? Do you anticipate that entire $25,000,000 you outlined in terms of costs at Lucky being covered plus Business continuity, is that the right way to look at it?

Speaker 3

Well, what we'll say is it will certainly be no more than $50,000,000 And Like any time you have a claim with an insurance company, there's a process that you do and we're in that process. And what the outcome is going to be, I'm not able to predict, but we're very confident that We will get a large portion of costs and business interruption up to $50,000,000 Russell, anything to add?

Speaker 4

Yes, it's a work in progress. Obviously, as we work through Getting Lucky Friday back in, we're engaged with the insurance company and we're just working through the process at the moment. As more info comes to light or as that comes Clear then we can tell the market.

Speaker 8

Should we be thinking about this as a 6 month Process or would this be something that would be wrapped up sort of in line with when Lucky comes back into production?

Speaker 3

It depends on who you ask within Hecla as to the answer to that question. Look, I think Michael, just to be Safe, I think more in terms of 6 months than immediately, but I think they should pay us immediately.

Speaker 4

I would agree with that. I think that you from a conservativity standpoint should push it out into the future a little bit, but That could change at any time, right, as we're working through the process.

Speaker 8

Okay, understood. Thanks very much. I'll pass it on.

Speaker 7

Thanks.

Speaker 1

Our next question comes from the line of Lucas Pipes with B. Riley Securities. Please go ahead.

Speaker 9

Thank you very much, operator. Lauren, I would like to add my congratulations. I wanted to start my Questions with, Phil, what you mentioned there on the silver solar side. What would be a substitute for silver in a PV solar panel.

Speaker 3

Ultimately, it would be copper is the substitute for it. The problem is the processes for building the solar You got to use our buildings, yes, silver, you got to use silver for given those processes. And then secondly, the performance and the durability of the solar panels is substantially less with copper. So is there a price in which the industry would change? Yes, I'm sure there is.

Speaker 3

But at the same time, you're seeing copper prices increase and the availability of copper. So Certainly nothing that anyone is projecting to occur in the next decade. The other thing to mention is that There are new processes on the new plants that are being built. They're all being built with processes that require even more silver. And they require that because it's not only cheaper to build, but it's also has greater efficiency.

Speaker 3

And realize these solar panels are somewhere around 25% to 30% efficiency using Silger. And so with these new processes, it gets to the upper end of that.

Speaker 9

That's helpful. Phil, from your vantage point as a silver supplier, does it make any difference to you whether these solar panels are built In Asia or near shore to the U. S. For example?

Speaker 3

I guess practically speaking, it doesn't matter from just Thinking about supply chain, it would be great to see it built in U. S. Or countries friendly to the U. S, friendlier maybe is a better way of saying that. Without the potential disruption in sales coming from China, Because China does, I don't know, 80%, 90% of all the solar panels.

Speaker 9

Yes. Would you have Conversations about offtake agreements or supply agreements with potential customers?

Speaker 3

Yes. Remember, what we produce is a concentrate that goes to the smelters. And unfortunately, There are no smelters that can well, there are not very many smelters in the U. S. And there's none that can really process our material.

Speaker 3

There's in Canada, there's a few smelters that can process it. But frankly, we have to ship the material really to Korea and Japan to get it Process. And so we're a step away from that ultimate customer. It goes into the smelter. We don't receive the metal back.

Speaker 3

We pay a fee treatment charge for processing that material.

Speaker 9

Yes. Okay. No, that's helpful. Certainly keep my eyes on that. To go back to Keno.

Speaker 9

Can you remind us what exactly caused the slowdown in the infrastructure developments?

Speaker 3

I mean, I think the cause of the slowdown is, in part, where we're located In Yukon getting people and materials there, that's probably been the biggest challenge that we've had. Having camp space, getting you got to get things sort of aligned where you got the camp space Expanded, so you now have the room to bring the people in to do the work. Lauren? And Carlos?

Operator

Well, we bring the contractors in almost 25% of our total workforce at the same time. So that captures some delays on the execution of the projects.

Speaker 3

But the good news, Lucas, is we're Essentially done with those infrastructure projects. There's some cleanup that we'll be doing during the course of November on some of the projects, the Rockville plant will be completed at the end of this month. We're done with the crusher with the exception of some work that will happen during the course of November. So all of that is behind us. And when we look at capital for next year, It's substantially less than what we have.

Speaker 3

And while we're not done with the budget and we're not prepared to Give guidance as to what capital will be. It is a lot less.

Speaker 9

That's helpful. When would you expect to demobilize some of the contractors and

Speaker 3

Some of it's happening as we speak, but primarily in December.

Speaker 8

Okay.

Speaker 9

That's helpful. Really appreciate the color. Thank you and best of luck.

Operator

Thanks a lot.

Speaker 1

Our next question comes from the line of Stephen Green with TD Securities. Please go ahead.

Speaker 6

Good morning, everyone. Just a quick one on Greens Creek. You upped the guidance a bit this year. You also Beat guidance a bit last year. It appears to be grade driven.

Speaker 6

Can you confirm that? And Is this positive rain reconciliation you're getting or just in some higher grade stopes?

Speaker 3

It is grade driven and it is Slightly higher, realize it doesn't take much additional grade to have a pretty material impact. Gold, in particular, has The great reconciliation has been higher and that's something that we have had to deal with for the life of the mine. It's a fairly nuggety gold distribution and of course, we've had lower grade base metals. And so as a result of that, we've had lower it's kind of an odd thing. You produce more gold produce more silver, But because you have less lead and zinc per ounce and gold per ounce, you end up having higher cost per ounce.

Speaker 3

So but because you got more ounces for it to be applied against. So Yes, it is a slightly positive great reconciliation. Anything to add, Warren?

Speaker 5

No, that's accurate.

Speaker 6

Okay. We're a couple of months away from 2024 now. And I think your Previous time long term guidance suggested slightly lower grades, silver grades at least in 2024. How is that looking now? And in this recent outperformance, do you expect that to bleed into next year as well?

Speaker 3

Yes. Look, I think generally speaking, you will see over the course of the next decade slightly decreased Graves at Greens Creek, and it's just a function of trying to maximize the NPV of the asset. So yes, expect lower grades. Part of the way we're trying to offset that is increased throughput. And so that's why you've seen us move to try to get to this 2,600 tons To put that in context, when we took over operatorship of Green Street, when we purchased the portion we didn't own In 2008, the throughput was roughly 2,100 maybe a little less tons per day.

Speaker 3

So we're now at 2,600 and we've gone from maybe

Speaker 4

a quarter

Speaker 3

of the tons being long hold to Very, very little of it. So it is a huge accomplishment within the mine. And then in the mill, It's much more than anyone ever thought that mill would be able to do. So it's been quite an accomplishment that these guys have Done it at Greens Creek. I would they're always looking for a way to improve the operation.

Speaker 3

And so I wouldn't be surprised if they don't find ways for improvement. But generally speaking, We should see somewhat lower production as the grade declines. Okay, Frank. Just remember on recoveries, recoveries have gone up Dramatically, it's I'm trying to remember the numbers, but it's 5%, 6% of the point.

Speaker 5

Yes, it's a lot. And Even the move from 2,300 to 2,600 tons a day, we did we saw no meaningful degradation in recovery.

Speaker 3

And so just don't get too enthusiastic over what these guys can do. Let's start with what the grade and the numbers would suggest. But This is a great team that works up at Greens Creek.

Speaker 6

Okay, fair enough. That's helpful. Thanks.

Speaker 1

There are no further questions at this time. I would now like to turn the call over to Phil Baker for closing remarks.

Speaker 3

Okay. Well, thanks for the questions. We really enjoy the engagement that we have with you. And so I'll remind you that we have The opportunity, if anybody wants to have a 1 on 1 call with one of us, we have time set up to do that. So please take advantage of that.

Speaker 3

I also want to just thank the teams, the people that Hecla has that's really made Hecla a unique silver producer. And again, I want to thank Loren for his service to us. And with that, have a great day.

Speaker 1

I would like to thank our speakers for today's presentation and thank you all for joining us. This now concludes today's call and you may now disconnect.

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Earnings Conference Call
Hecla Mining Q3 2023
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