Hecla Mining Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2023

There are 10 speakers on the call.

Operator

Thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Hecla Mining Company Second Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Star then the number one on your telephone keypad. I would now like to turn the conference over to Anvita Patel, Vice President, Investor Relations and Treasurer. Please go ahead.

Speaker 1

Good morning, Regina, and thank you all for joining us for Hecla's Q2 2023 Financial and Operations Results Conference Call. I'm Anvita Pathe, Hecla's Vice President of Investor to the Investor Relations and Treasurer. Our financial results news release that was issued yesterday along with today's presentation are available on Hecla's website. On today's call, we have Phil Baker, Hecla's President and CEO Lauren Roberts, Hecla's Senior Vice President and Chief Operating Officer to Russell Lawler, Hecla Senior Vice President and Chief Financial Officer. Any forward looking statements made today by the management team come under the Private Securities Litigation in the prepared remarks and involve risks as shown on Slides 23, in our earnings release and in our 10 Q and 10 Q filings with the SEC.

Speaker 1

To the operator. 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 all in each release. I'd like to remind you if you would like to have a call with the management, to the operator. You can do so by using the link under the section Virtual Investor Event in our earnings release that was issued yesterday.

Speaker 1

With that, I will pass the call to Phil.

Speaker 2

Thanks, Anita. Good morning, everyone. Thanks for joining our call. The second quarter was a good quarter for safety, production, cash flow and starting changes at Casa, but maybe the most significant event of the quarter is the restart of the Keno Mill. Because when you combine that with what is happening at Greens Creek and Lucky Friday, I think that Hecla is now in another period of substantial growth in silver production reserves and maybe even faster than what we had over the last 5 years.

Speaker 2

And if you look at Slide 4, you can see why I'm saying that because what that shows is what we've done over the last 5 years. And those the numbers for those 5 years is pretty remarkable. 27% growth in revenue, 79% growth in silver reserves, 37% growth in production, to $250,000,000 of free cash flow from our 3 mines. And it's no longer a question that Greens Creek Mill can operate at 2,000 to 600 tons per day or maybe even 2,800 tons per day. It's now more of a question of whether we can maintain mining at that rate or even higher.

Speaker 2

And the Lucky Friday without the service hoist in the bunker, which is in operation this month and the Q4 respectively, Is already producing about 20% more ore than 18 months ago and is at a 5,000,000 ounce run rate. At the restart of Keno, We have we'll have our teething problems, but if you look, we have an exceptional district given the grade of the ore, to the recoveries that we're experiencing and the remarkable exploration success with continuous discovery of mineralization. So over the last 5 years, we had that 37% growth in production and we expect 40% over the next 3 years and close to 20% growth just this year. You probably will also see growth in our reserves, more free cash flow generation, and I think all of this should result in share performance, to positive share performance. Hecla is a silver company with gold exposure, and we believe gold exposure will always be important to our portfolio for many reasons.

Speaker 2

It This is diversification from the concentrate market. It hedges against Silver's higher volatility, especially during recessions. It gives us to scale to grow. And these are the reasons Casa Berardi is important to our portfolio. As we've indicated For the last year and a half, Casa has been impacted more than our other sites by inflation causing underground mining costs per ton to double.

Speaker 2

Underground grades have declined as we expected, and tailings construction costs are higher because it requires more buttressing. So while we're permitting the higher grade pits, we are moving quickly to mine only the 160 pit. Lauren is going to talk more about cats in a moment. So now what I'd like to do is move to Slide 5 for a few comments specifically on the quarter. I think it was a Great second quarter, and I think the first half silver production is evidence of the point I started with, and that's that our silver production is growing even faster now.

Speaker 2

With this quarter, Lucky Friday produced 1,300,000 ounces and 4 out of the last 5 quarters, We've produced more than 1,200,000 ounces. And at that rate, Lucky Friday is close to being the 30th largest silver mine in the world. And just to put that in a context, in 2021, Lucky Friday was producing about 40% less than what it's doing now. And as I mentioned, we restarted the mill at Keno Hill and the improvements we completed leading up to the restart are performing well. The secondary crushing circuit modifications are proceeding on schedule, the grades better than modeled and we anticipate being at full production by year end.

Speaker 2

And of course, all this performance was underpinned by Greens Creek's consistent 2,400,000 ounces of production and $36,000,000 of free cash flow. Our all in injury frequency rate

Speaker 3

was the lowest in

Speaker 2

the history of the company at 1.18, An accomplishment that reflects our focus on changing behavior and engineering out risk. And I think the best example of engineering At risk is the UCB mining method, which puts miners in places that are safer doing safer tasks. Who will be focused on how low the injury frequency rate can go at the Lucky Friday. And Lauren, who's going to retire at the end of the year, will talk more about each to property. And silver revenues are growing relative to gold.

Speaker 2

We're almost 45% for the quarter, and I think we'll likely have more than 55% of our revenues to Silver by the end of the year. The Silver operations have good cash flow generation and if prices can strengthen a little bit, the second half should be even better and Russell will have more on this. We maintained our consolidated silver production cost guidance, but we have adjusted the production cost guidance for Casa Berardi and the production based on the impact of the wildfires and the fact that we're moving quickly to open pit only operations. And now I'll pass the call to Russell.

Speaker 3

Thanks, Bill. I'll start on Slide 7. Hepla has long been known as a leader among the silver miners and the largest U. S. Silver producer.

Speaker 3

As we look at this slide, it is easy to see why where over the past 6 months, the margin at our silver mines was 56% And they've already produced more than $105,000,000 of free cash flow this year, and we're excited to see what Keno Hill will add to this profile. Over the past 3.5 years, the Greens Creek and Lucky Friday mines have generated more than $560,000,000 of free cash flow. This has allowed us to invest in exploration to grow our production in Silver Reserves as well as acquire and invest in Keno Hill, which We anticipate we'll both add to our production profile and improve our balance sheet and debt metrics. This leads me to Slide 8, where I'll discuss our Q1 revenue profile and balance sheet. Silver accounted for 40% of our revenues in the first half of the year, which continues to show the strength and consistency in our silver mines with approximately 34% of our revenue coming from gold and 26% from base metals.

Speaker 3

We ended the quarter with $107,000,000 of cash on our balance sheet and have liquidity of $219,000,000 We also monetized our zinc hedges for approximately $7,600,000 as the zinc price declined to its lowest point in the Q2 since April 2020. The strength of our balance sheet and financial flexibility with a net to leverage ratio of less than 2 times remains one of our most important objectives. As of the end of the quarter, we were slightly higher than our goal. This is primarily due the suspension of mining operations in June at our Casa Berardi mine due to Canadian wildfires

Speaker 4

as well as

Speaker 3

our continued investment in Keno Hill. I expect that as we come into the Q3, this will revert to being less than 2 times due to the production of both of these mines during the quarter. I'll now turn the call over to Mark.

Speaker 4

Thanks, Russell. Let me start by saying it's very satisfying that our Succession and Development Planning have put us in a position to fill the VP Ops role and to backfill that vacancy internally. Carlos and Chris have steady hands and will do a great job. As for me, I haven't hung up my spurs just yet. There's a lot to accomplish in the next 5 months.

Speaker 4

And with that, I'd like to turn to Slide 10. Greens Creek, our cornerstone asset turned in another solid quarter with production to 2,400,000 ounces of silver and free cash flow of $36,000,000 for a total of more than $73,000,000 in free cash flow for the first half of twenty twenty three. Oil production remained strong at 16,000 ounces due to better grades than planned and improved performance in the gravity circuit. Cash cost for the quarter was $1.33 per ounce and AISC per ounce was $5.34 Both metrics are slightly higher than the previous quarter, primarily due to a lower zinc byproduct credit due to lower zinc price. Capital spending was $8,800,000 in the quarter for a total of $15,000,000 for the year.

Speaker 4

Our expected capital spend at Green Creek is now between $49,000,000 52,000,000 to the year, which is a slight decrease over the previous guidance. We are increasing our gold guidance for Greens Creek and lowering our ASIC guidance because of the lower sustaining capital to plan for the year. Moving to Slide 11, Lucky Friday produced 1,300,000 ounces of silver at an AISC of $14.24 to. This quarter marked 5th consecutive quarter of silver production exceeding 1,000,000 ounces, the highest quarterly production in the past 23 years and a new safety record within all injury frequency rate of 0 to $0.52 at the end of June, a remarkable achievement. Capital spending at the mine was $16,300,000 as we focused on 2 key projects, to the service hoist, which was completed earlier this month and the coarse ore bunker, which we anticipate completing by the Q4.

Speaker 4

The service hoist is expected to be debottleneck our production hoisting capacity, while the core Sorebunker will decouple the mine and the mill by adding the capacity to stockpile ore for multiple days. Both projects are critical to achieving our production goal of 425,000 ore tons per year, to the rate we expect to achieve by year end. Free cash flow generation for the first half of the year was $34,000,000 reflecting the mine's strong performance during the year. We are reiterating the production guidance, but increasing the cash cost guidance to $4 to $4.70 per silver ounce and all in sustaining cost of $11.50 to $13 per ounce. This increase in cost guidance is due to higher labor costs of $2,500,000 related to the wage increases in the new collective bargaining agreement, Lower zinc byproduct credits because of lower zinc production and prices, higher sustaining capital related to the timing of mobile equipment deliveries and increase development to achieve our throughput target.

Speaker 4

We're increasing the capital guidance to include higher sustaining and growth capital spend, which is primarily related to our 2 major debottlenecking projects. Moving now to Slide 12. At Keno Hill, we remain on track to achieve full production in the 4th quarter. We restarted the mill in the Q2 using lower grade stockpile door for the start up. The mill produced 184,000 ounces in the quarter while operating with to temporary portable crusher.

Speaker 4

The next milestone in the mill is to complete the secondary crusher improvements, which we anticipate in the 3rd quarter. We expect capital spend at the mine to be $47,000,000 to $49,000,000 for the year, slightly higher than our initial guidance due to increased development and mill improvements. I'm encouraged by our progress at Keeneau Hill. While we have a limited sample size, the resource model is performing well through the second quarter. The mill to model reconciliation is showing slightly fewer tons at better grades for the same silver and lead content and more zinc.

Speaker 4

The improvements we made in the mill prior to restart, including advancing the level of process control are performing as expected. So we're recovering that then exceeded our target of 94% and the concentrate quality is very good. We're looking forward to commissioning the upgraded secondary crushing circuit in to Q3 and expect it to improve the reliability and efficiency of that circuit. In the mine, we're going through the typical ramp up learning curve. We've learned how to manage the ground in the primary development headings and are now working through the process in the ore headings.

Speaker 4

The Barrow zone is requiring more shock rate than And that is being incorporated into the mining cycle. Our key underground infrastructure projects should be completed in the Q3 and we look forward to a strong finish for the year. We are reiterating our production cost guidance at more than 2,500,000 ounces and an all in sustaining cost between to $12.25 $14.75 per ounce. I'm excited about the future Keno and expect the mine can produce up to 4,000,000 ounces in 2024. On Slide 13, the left hand photo shows an excellent example of very high grades we're encountering in the Bear vein.

Speaker 4

The photo is a little difficult to discern in the presentation, but you can see a lot of galena in there and that 160 ounce space, which Pretty impressive. The right hand slide shows our progress on the secondary crusher circuit where we're replacing most of the components except the crusher itself. Turning to Slide 14. Casa Berardi produced approximately 19,000 ounces of gold for the quarter at an all in sustaining to $2,286 per ounce. Production was lower due to wildfires and the activity, which caused access road closures for the majority of June.

Speaker 4

As Phil said in his comments, Casa Berardi has experienced declining head grades and increasing cost pressure over the past several years. To. As noted in our technical report, Casa becomes an open pit only operation in the future. After careful evaluation, we decided to make some changes now to better prepare for that future. We conducted a scope by scope margin analysis of the remaining underground reserves and resources during the quarter.

Speaker 4

We concluded that the East Mine did not yield attractive economics and closed it. For the West Mine, the analysis showed attractive economics until about mid-twenty 24. These changes put more production pressure on the 160 open pit, and we made the decision to begin the process of in sourcing the mining there. We authorized the purchase of $16,000,000 in Surface Mobile equipment, about $12,000,000 of which has been delivered, and we are busy assembling it and training our operators. To the operator.

Speaker 4

As our crews ramp up and the balance of the equipment is received, we expect to take over all of the open pit mining by the end of 2024. Much of the waste rock being produced by the stripping is being directed to the construction of tailing cell 7 this year and through calendar year 2026. We're adjusting our production cost guidance to reflect these changes. Previously, our plants modeled at the 160 pit combined with the underground production Would act as a bridge until we get the permits to mine the higher grade open pits. With the changes I just described, it will not be possible to avoid a production gap, Which we estimated about 2 years between 2028 and 2,030.

Speaker 4

Once 160 is fully mined, we anticipate permeating it as our long term tailing storage to the higher grade pits. Until then, we will build multiple raises on our existing Cell 7 tailings facility. In consultation with our engineer of record and independent review panel, we've determined that increasing the height of the facility will require us to build a substantial buttress for it. To that capital has been reflected in our ongoing plans. I think the way that I think about CASA is in 3 phases.

Speaker 4

Over the next 4 years, we'll make some modest investments that are returned in the period to produce the remaining permitted reserves and resources. Then there will be a period of investment while we complete the permitting of the higher grade pits, invest in the infrastructure and equipment necessary to complete the transition to a fully surface operation and to expose the first ore. Once the first ore comes and that's expected in 2,030, positive free cash to load generation falls quickly and then builds over the coming years. Before I pass the call back to Phil, I want to emphasize Capso's long reserve life and the significant to the next question. We're making the right decisions today to put Casa back on the path of free cash flow generation and a brighter future.

Speaker 4

With that, I'll pass the call back to Phil.

Speaker 2

Thanks, Lauren. Turning to Slide 15, we're reiterating our silver production and consolidated ASIC guidance. With our changes at Casa, we're revising our 3 year gold production and cost guidance for the year. Capital guidance is increasing to 220 to $235,000,000 mostly due to the increase at the Lucky Friday and at Casa Berardi for the reasons that Lauren has explained. So I'd like to go to Slide 16.

Speaker 2

And before I end my remarks, I want to emphasize the critical role that to. Silver demand in photovoltaics was about 140,000,000 ounces in 2022, and that's about 12% of total silver demand. In 2023, some technologies that are known as Top And these two technologies use 30% 120% more silver respectively than the currently widely used PERC technology. So, silver demand in solar is set to grow further as the transition to clean energy accelerates. And I'm not going to be surprised if 30%, maybe even 40% increase in demand in silver for solar happens this year or next, Raising solar to more than 15% of total silver demand.

Speaker 2

And if the economy slows, I'm confident that the commitment that's been made to renewable Energy will cause the growth of silver and solar to continue. And so it seems inevitable that solar is going to swamp other solar demand categories with maybe the exception of investment demand. With that, Regina, I'd like to open the call to questions.

Operator

Our first question will come from the line of Lucas Pammatot with Canaccord Genuity. Please go ahead.

Speaker 5

Hey, Phil and team. Good morning and thanks for taking my question. Just wondering about Casa Berardi. Could you provide more color on how much you expect to invest in those 3 years that the mine is closed down and over the next 18 months, because I think you had previously said it would cost $100,000,000 to $120,000,000 to transition to open pit mining. Just wondering if that number is still valid and if so, how much of that is baked into the Surbaya's CapEx guidance?

Speaker 2

Yes. The short answer is that number is still valid and that was without stripping and if you add the stripping costs and its Order of magnitude $200,000,000 $250,000,000 this is out in 20 8, 20 9, maybe a little bit in 30. And so it's not anything that's an immediate capital outlay. We are making some relatively small the free cash flow of CASA does not cover All of the capital costs that we'll make in this year and next year, but it's a relatively small amount. I think each year it's to $40,000,000 And then the following years, it's free cash flow positive.

Speaker 2

And we'll to return that capital that we're investing in 'twenty three and 'twenty four over the 'twenty five, 'twenty six, 'twenty seven timeframe, Yes, those 3 years.

Speaker 5

Got it. Thanks. And just one more for me. You had talked in the past about How you're hesitant to shut down the mine just because of due to the sort of demand for labor in that area. What are you planning on doing with those employees or how you're planning on retaining them, I guess?

Speaker 2

Well, the Need to retain employees is certainly something we want to do and something we want to we're the largest to private employer in the region. But the reality is that the mine has to be economic. And so We went through and looked very carefully at what stopes we could mine, made the determination of the need to shut down the East Mine. And in one mind, the West Mine stopes that are economic, and we'll have that workforce through to that period of time, and then we'll move to open pit, only open pit mine. And so we'll have Certainly some of those people that will transition into those roles.

Speaker 2

Blayne, what would you like to add to that?

Speaker 4

So we've already begun that process of transitioning some of the underground workforce into the open pit roles. So a significant number of People that were displaced from the East Mine are going into the new fleet that we purchased to operate the new fleet.

Speaker 5

Got it. Thanks, guys. I'll get back in the queue.

Operator

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

Speaker 6

Thank you very much, operator. Good morning, everyone.

Speaker 3

Hi,

Speaker 6

Lucas. My first question is also on Casa and kind of thinking through the transition there. It was touched on a little bit in the prior question in terms of transitioning labor. Can you frame up what the net impact would be over the coming years and how you would manage that? And then Is there kind of idle mine cost for the underground works following to the exit from underground operations.

Speaker 6

Just trying to understand if there's anything we need to model longer term as it relates to the underground workings. Thank you very much for that.

Speaker 2

So Lucas, before you can you repeat your second question? I'm not sure I understood.

Speaker 6

No. So Essentially, when you abandon the underground section of Casa, is it do you just pull the plug and walk away from the underground workings? Or do you have Remaining costs, maintenance costs for the underground works, even as you don't actively produce underground anymore.

Speaker 2

We it does not sterilize the underground and we will have to make a determinant in the future as to to what level of maintenance do we do on the underground. So stay tuned. We'll see where we come out on that. But Certainly, we will what we will do, we'll attempt to maintain the ability to go back into that mine, underground, different price conditions, different cost environment. The underground to the revised plus exploration.

Speaker 2

We're continuing to drive the exploration drift to do further drilling to the west of where we're currently operating in the west mine. So Stay tuned for that and that will occur over the course of the coming year. With respect to the employees, The fact that we are such a large employer, the issue is not going to be having enough employees. It's the fact that we're having to reduce that number, but that will occur over the course of the coming year. And I think ultimately, we end up with Roughly half the you have it, Lauren, go ahead.

Speaker 4

Yes. So in terms of company employees, we started the year At about 650 company employees and over we're now down to about 522 just to put things in And over the course of the year, there aren't many more changes, honestly, normal attrition. Next change will come with a closure of the West

Speaker 6

Mine. Thank you very much for the detailed responses. For my second question, I do want to stay on the labor topic. So in the past, you had mentioned labor constraints, especially on the skilled side. And I wondered if you could give us an update from Queens Creek, Lucky Friday, Keno, how things are going on the labor front, And I'll leave it there for now.

Speaker 6

Thank you very much.

Speaker 3

Sure, Lucas.

Speaker 2

We can talk about, I guess, In general, and then maybe, Lauren, you can add if there's anything specifically. But in general, we've done a very good job of attracting The people that we need at the mines, I think there's been a the turnover rate at the Lucky Friday, for example, has fallen to the sort of levels that we've seen in the distant past, 10% or less sort of turnover rate. Frankly, the biggest issue we have is with The technical people, engineers, geologists, that's more of a challenge at the moment. You're always going to have difficulties with mechanics, very skilled miners, but we've done a pretty good job there. To Where we have some vacancies is really in the technical areas.

Speaker 2

Lauren?

Speaker 4

Yes, broadly, I would say that what we're seeing It'd be less difficult to fill those roles over the past year than it was, say, the prior 2. Not to say that there isn't still competition, but we're Pretty much at staffing levels everywhere, and we're able to find folks and we supplement, in terms of the skilled trades on contract We need to, but it hasn't been a material impact to the business at this point.

Speaker 2

We need more we need Schools to fill up more engineers and geologists, right?

Speaker 4

That's exactly right. Yes. That's where the skill gap really is on the technical side. We just did a bunch of gray hairs in Hecla, so we're doing all right with that.

Speaker 6

I appreciate the color. And I think I'd mentioned before, I know what degree I will recommend to my children. So thanks again and best Good luck.

Speaker 3

I hope they like to take us.

Operator

Your next question will come from the line of Joseph Brager with ROTH MKM. Please go

Speaker 7

ahead. Hey guys, thanks for taking the questions. Kind of following on a little bit of that the labor question. With the shutdown of the East Mine, will there be any Changes in the labor force at Casa in Q3 and also on that on the East Mine, will there be any charges taken for the closure of that?

Speaker 2

The answer is no to both questions. We don't anticipate Any additional steps labor wise nor is there any impairment charge.

Speaker 7

Okay. And then compared to the February, I think, 2022 Technical report you guys put out

Speaker 8

on Casa.

Speaker 7

How different will the mining rates be as you switch to fully open pit in 20 24 compared to what was in that document.

Speaker 2

Fundamentally, there's really just two changes to the document. 1 is the underground production that's shown in there Will not occur past 2024. And then and that was, I think, originally going to about 2,030. And then there's additional capital that will be reflected. Otherwise, It's the plan that we have always had.

Speaker 2

Boeing, anything to add, Russell, anything?

Speaker 4

Let's say in terms of the immediate changes with the shortening of the underground, we are accelerating the to 1 60 bps, which is why we purchased the equipment. And so for context, the acceleration is not massive. We go from circa 12,000,000 tons moved this year to a little under 20,000,000 next year. So that's not a huge change. And then the following couple of years, the rate drops off and will be fully in sourced at that point in time.

Speaker 7

Okay. All right. Thanks for the help there. And then on Keno, obviously, great to see it started up early. I think you guys were originally targeting Q3, but how confident are you guys in the full year guidance?

Speaker 7

Since you started early, is there any chance for upside to it? And are things going smoothly start this quarter to achieve it?

Speaker 2

We're confident in the guidance at this point, but it is a start up. And so it will be a function of what we see The ability to put the tons in the mill and what the grade is going to be and the recoveries. We certainly are learning as we go. But yes, there isn't anything that would cause us to say let's change something at the moment, Lauren.

Speaker 4

No, nothing to add, Phil. That's correct.

Speaker 7

Okay. Thanks, guys. I'll turn it over.

Operator

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

Speaker 9

Hi, guys. Sorry to beat a dead horse, but I Got a couple of questions on CAS as well. You've kind of indicated where you started the year on employment where you are now. Can you give us a sense As of like say 2025 ish, how many employees you'd expect to have? Is it still around just over 500 or would it be even lower?

Speaker 2

It's sort of in that range that we would have because remember, we're in sourcing the mining. So work that's done by contractors will be done by Hecla employees.

Speaker 4

Okay.

Speaker 9

Okay. And then with respect to your reserves and resources now, is there going to be any Reclassification of any of the ounces that fit in the underground categories into potentially open pit?

Speaker 2

We'll not be we're not going to open pit, but there will be a reclassification of reserves to resources that from the underground. And it's relatively small. My recollection is it's 10% or 15% of the total. It's a

Speaker 4

small, 4.7000000 tons, it's a big number.

Speaker 9

Okay. And in terms of what you're planning to mine with the future Open pit, is that what we're seeing in the inferred resources right now?

Speaker 2

Yes. It's in the reserve and it's sitting in, what, 3 gram material. So the current 160 pit is to 1.7 grams, 1.8 grams, something like that. And so when we go into the principal and the West Minecrompeller pits, Significantly higher grade and the strip ratio is particularly on the principal pit is quite attractive.

Speaker 9

That was actually going to be one of my questions. Historically, you've had quite an elevated strip ratio. Can you give us just a general sense of what the life of mine Average would be?

Speaker 2

I don't remember that, but Principal is about 7 to 1 and to the Westmountain Crown pillar is a multiple of that, I don't remember what it is, 22 to 1. And that's in the technical report. Nothing has changed with respect to The timing of those pits are as described in the technical report. Really, the big change in the technical report is The underground being shortened and the 160 pit being advanced and more capital for the Cell 7. I bet you're saying it's Cell 7.

Speaker 9

Okay. And the decision to move ahead with this, Is there like a minimum IRR threshold that you're using to justify it? And at what silver price would that be done at?

Speaker 2

Well, it's a gold asset. Yes. So the real decision in terms of the Big capital outlay, I believe that mapping until 2027, 2028. Now, Because between now and then, it is cash flow positive. So you just end up having those to 2 years where you've got to make a capital outlay.

Speaker 2

And so, while we expect that this to go forward. Certainly, a different decision that conditions are different at that time could be made. But And the reason we expect to go forward is that's very high trade open pit material. It's very economic. It's It's generating according to the technical report, I want to say $1,000,000,000 Plus or minus free cash flow over the inclusive of the capital.

Speaker 2

So It's a very economic set of pits. The decision The ultimate decision is made in 20 7, 20 8.

Operator

Okay. To questions. And our next question will come from the line of Heiko Ihle with H. C. Wainwright.

Operator

Please go ahead.

Speaker 8

Hello, everyone. Sorry for in case I ask something that's been asked before, I got on a little bit later. I was on another call, so sincere apologies if that wasn't happening here.

Speaker 2

Can you provide some color?

Speaker 4

First time that happened to me

Speaker 9

on your call. Can you provide some color

Speaker 8

on the cost of labor, parts and so on for your new mining operation in the Yukon? I mean, I think by now you'll have a pretty decent sample size for what actually transpired versus what you have modeled with output costs. Anything else that you think would be good to pass on to the analyst community with starting up operations that you maybe didn't I don't know, availability of labor, bottleneck for parts, that kind of stuff.

Speaker 3

Well, I guess the first

Speaker 2

thing I'll say, Heiko, is that we've been fortunate And that we've not had a huge turnover at Keno. There was a cadre of people there and they wanted to be there and it's Pretty cool place and they recognize the sort of grades. So it's We've been fortunate in that the turnover rate has not been that high, and we have been able to attract Technical people to the site. Certainly, the issue is it's a rotational schedule, so you got to have basically twice as many people As you would need for an operation that does not have that relation. And it's certainly in the Yukon, but Comp wise, I think we're competitive.

Speaker 2

I don't off the top of my head can't tell you where It stands in. Do you have any color, Lauren?

Speaker 4

No, not from that perspective. I would say that We've really not had trouble staffing, either miners or technical people.

Speaker 2

The other thing is there's been some other operations that have to closed down and that actually has given us a supplement of quite a few folks, to the Minto operation.

Speaker 8

That's quite helpful. Thank you. Moving on from that, I know everyone else was focused on Casa, at least on the questions that I heard. But Can you walk us through your exploration plans for the bare zone versus the town side zone for the remainder of the year, just when it comes So maybe meters and holes and even money spent.

Speaker 2

So I'm sorry, which it was muffled, which zones?

Speaker 8

The bare zone versus the town site zone?

Speaker 2

Okay. Well, Look, we have so many targets that it's a challenge. And so there actually will be A drill has now moved from those two zones to the Chance vein, Which is off the is a little bit further afield. But We're getting great results. One of the things we're going to try to figure out is how we might drill in the winter.

Speaker 2

Should we be drilling in the winter. So I guess stay tuned for that. Our total spend in exploration for Keno Hill is 3,700,000 So we don't have a huge budget there, but it will expand if we We're waiting to get access to, but we'll be getting access to those fairly quickly. So you'll see a little bit of drilling in the Q4 from the underground that we have more drilling as a result of those underground platforms.

Speaker 8

I wasn't going to ask this until you just brought it up, but what is the cost differential Between winter drilling and summer drilling approximately.

Speaker 2

I couldn't tell you other than It's more and the big issue that they have is just managing the water because it gets so cold. Remember, it's Minus 40, 50 degrees on occasion there. Having said that, we experienced that at Casa and we actually do All of the surface, not all of it, but almost all of it.

Speaker 4

Referentially in the winter.

Speaker 2

Yes, in the winter because of the swampy nature of that area. So we have the skills and the experience to do it. We just have not done it there. And I say we, Alexco did not do it there. But we, I think it's likely that you'll see us start to do some.

Speaker 8

That's very helpful. Thank you. And I will get back in queue.

Operator

Thanks, Heiko. And with that, I'll hand the call back over to Phil Baker for any closing remarks.

Speaker 2

Okay. Well, thanks very much, Regina. I appreciate the questions. I hope that you'll think about the 5 years that we've Last experience and the accomplishments that we have had, because I think we're in a position to to see that same sort of experience where we see the growth, the dramatic growth in our silver production. And the fact that we have this silver production in the U.

Speaker 2

S. And in Canada is more meaningful today than it was 5 years ago. And we really have a group of people that is very capable. They like working for Heclin, working for a company that has the history and the expertise that we have, where we're able to do things like the to the Mining at the Lucky Friday. So stay tuned.

Speaker 2

We're certainly available for to questions. We have some time set up for analysts, to shareholders, anyone who's interested to be able to talk to Lauren, Russell or I. And so Please make a request to be on one of those calls. And with that, have a good rest of your day. Thank you very much.

Operator

That will conclude today's conference call. Thank you all for joining. You may now disconnect.

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Earnings Conference Call
Hecla Mining Q2 2023
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