Mining and Metallurgical Society of America Denver

Transcription

1 Mining and Metallurgical Society of America Denver September 16, 2016

2 Lucky Friday: 75 Years Old Has Never Looked So Good!

3 Cautionary Statements Cautionary Statement Regarding Forward Looking Statements, This presentation 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, including as a result of the #4 Shaft Project; (ii) estimates of future costs and cash cost, after by-product credits per ounce of silver/gold, including the expected cost of the #4 Shaft project; (iii) guidance for 2015 for silver and gold production, silver equivalent production, cash cost, after by-product credits, capital expenditures and pre-development and exploration expenditures (which assumes metal prices of gold at $1,225/oz., silver at $17.25/oz., zinc at $0.90/lb. and lead at $0.95/lb. and US dollar/canadian dollar at $0.91); (iv) expectations regarding the development, growth and exploration potential of the Company s projects; (v) expectations of growth; (vi) expected level of hydroelectric usage at Greens Creek;(vii) the possibility of increasing production due to accessing higher grade material at Casa Berardi and possible strike extensions; (viii) possible strike extensions of veins at San Sebastian and estimates of mining, grade, recovery, free cash flow, mine life, IRR, ability to reactivate existing mill permits, production of silver, gold and silver equivalent ounces, ability to begin mining by year end; (ix) estimates or expectations of future events or results are based upon certain assumptions, which may prove to be incorrect; (x) the ability to Permit and bring Rock Creek into production in years; and (xii) expectations of grade increases at depth at Lucky Friday and the ability to complete the #4 Shaft project by Q within the $225 Million budget. 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.S. dollar, being approximately consistent with current levels; (v) certain price assumptions for gold, silver, lead and zinc; (vi) prices for key supplies being approximately consistent with current levels; (vii) the accuracy of our current mineral reserve and mineral resource estimates; and (viii) the Company s plans for development and production will proceed as expected and will not require revision as a result of risks or uncertainties, whether known, unknown or unanticipated. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the forward-looking statements. Such risks include, but are not limited to gold, silver and other metals price volatility, operating risks, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, community relations, conflict resolution and outcome of projects or oppositions, litigation, political, regulatory, labor and environmental risks, and exploration risks and results, including that mineral resources are not mineral reserves, they do not have demonstrated economic viability and there is no certainty that they can be upgraded to mineral reserves through continued exploration. For a more detailed discussion of such risks and other factors, see the Company s third quarter 2015 Form 10-Q and 2014 Form 10-K, filed on November 4, 2015 and February 18, 2015, respectively, with the Securities and Exchange Commission (SEC), as well as the Company s other SEC filings. The Company does not undertake any obligation to release publicly revisions to any forward-looking statement, including, without limitation, outlook, to reflect events or circumstances after the date of this presentation, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Investors should not assume that any lack of update to a previously issued forward-looking statement constitutes a reaffirmation of that statement. Continued reliance on forward-loo king statements is at investors own risk. Cautionary Note Regarding Estimates of Measured, Indicated and Inferred Resources The United States Securities and Exchange Commission (SEC) permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms in this presentation, such as resource, measured resources, indicated resources, and inferred resources that are recognized by Canadian regulations, but that SEC guidelines generally prohibit U.S. registered companies from including in their filings with the SEC, except in certain circumstances. U.S. investors are urged to consider closely the disclosure in our most recent Form 10-K and Form 10-Q. You can review and obtain copies of these filings from the SEC s website at Qualified Person (QP) Pursuant to Canadian National Instrument Dean McDonald, PhD. P.Geo., Senior Vice President - Exploration of Hecla Mining Company, who serves as a Qualified Person under National Instrument ("NI "), supervised the preparation of the scientific and technical information concerning Hecla s mineral projects in this presentation. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of analytical or testing procedures for the Greens Creek Mine are contained in a technical report titled Technical Report for the Greens Creek Mine effective date March 28, 2013, and for the Lucky Friday Mine are contained in a technical report titled Technical Report for the Lucky Friday Mine Shoshone County, Idaho, USA effective date April 2, 2014, for Casa Berardi are contained in a technical report titled "Technical Report on the mineral resource and mineral reserve estimate for Casa Berardi Mine, Northwestern Quebec, Canada" effective date March 31, 2014 (the "Casa Berardi Technical Report"), and for the San Sebastian Mine, Mexico, are contained in a technical report prepared for Hecla titled Technical Report for the San Sebastian Ag-Au Property, Durango, Mexico effective date September 8-K Also included in these four technical reports is a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors. Copies of these technical reports are available under Hecla's and Aurizon's profiles on SEDAR at The Casa Berardi Technical Report was reviewed by Dr. McDonald on behalf of Hecla. To the best of Hecla's knowledge, information and belief, there is no new material scientific or technical information that would make the disclosure of the mineral resources and mineral reserves for Casa Berardi in this document inaccurate or misleading. Cautionary Note Regarding Non-GAAP measures Cash cost per ounce of silver and gold, net of by-product credits represents non-u.s. Generally Accepted Accounting Principles (GAAP) measurement. A reconciliation of this non-gaap measure to the most comparable GAAP measurement can be found in the Appendix. 3

4 A Long History In The Silver Valley 4

5 What Hecla has done to modernize? How Can the Lucky Friday Be 75 Years Young? 5

6 Silver Shaft Rehabilitation: Lemonade Out of Lemons 14 month closure 6060 ft of shaft cleaned 120,334 manhours no lost-time or reportable accidents Cost $28.5 million 7,738 tons of material removed Shaft upgraded with brattice, new power cables, and communication cables 9

7 Mine Rehabilitation 12 miles of ramp repaired and upgraded 50,000 bolts 2012 installed

8 Infrastructure Upgrade Silver Shaft Hoist Drive & Gearing Upgrade Underground Fan Replacement 12

9 Mill Rebuild Before After

10 # 2 Shaft Repairs 2013 Today

11 Organizational Changes Added Positions Corporate: Safety Director Geotechnical Director (now VP level) Lucky Friday: Rock Mechanics Engineer Manager of Safety & Health Technical Services Manager 15

12 Cultural Changes: Safety

13 Bypass Drift

14 A Focus on Rock Mechanics Today 21

15 Arched Back Profiles Increase Stability 22

16 Process Changes: Signoff

17 Process Changes: Risk Assessment

18 NMA s CORESafety Provides the Framework for Improved Safety Performance CORESafety is an industrywide partnership to make America s mines safer 7 Hecla All Injury Frequency Rate (AIFR) The goal is 0 fatalities & a 50% reduction in the injury rate over 5 years % Reduction in AIFR The industry freely shares the intellectual property for miners and non-miners at CoreSafety.org Incident Rate Hecla was a charter member in 2010 & began the implementation in

19 Introduced New Technologies D Bolt 23

20 Lucky Friday #4 Shaft Winze, access via Silver Shaft Top of shaft at 4900 Mine Level Work began Q with lateral development Hoisting facility complete Q Completion forecast - $225m & Q Circular, concrete lined, 18-ft diameter 3 production levels 6500L (7,460-ft below surface) 7500L (8,466-ft below surface) 8300L (9,293-ft below surface) Bottom at 8620L (9,589-ft below surface) 20

21 Overcame Complex Logistics North American based procurements Surface to 4,900 feet below surface via Silver Shaft No interruption to production operations Maximum cross section size possible is 6-ft by 6-ft Silver Shaft to #4 Shaft 5,000 feet lateral transport Numerous corners, 22 feet smallest radius Severely limited storage underground, just in time deliveries Concrete supply via borehole and transport to #4 Shaft 21

22 4 Shaft: Most Challenging Project in Our History Complex logistics Surface to 4,900 feet below surface via Silver Shaft No interruption to production operations Maximum cross section size possible is 6- ft by 6-ft 5,000 feet lateral transport Numerous corners, 22 feet smallest radius Severely limited storage underground, just in time deliveries Concrete supply via borehole and transport to #4 Shaft Ground pressure induced stresses High rock temperatures $225m and 10 year project largest and longest in Hecla s history 22

23 4 Shaft Hoist Room 23

24 Central Refrigeration Plant 24

25 Final Excavation Challenge: Liner Damage Concrete cracking above 7500L (8,465-ft below surface) Vertical stress 10,000-psi Maximum horizontal stress 15,000-psi Increased ground support length and density Steel liner plate used to reinforce concrete lining Continued cracking below 7500 required liner replacement Ultimately changed the design 25

26 Liner Repairs Steel Liner Plate Demolition and Replacement Steel Liner Plate Change to elliptical cross-section Instrumentation 26

27 Elliptical Excavation Implemented After Repairs Modeled and designed an elliptical excavation Time and cost Results 15% additional excavation volume 15% additional concrete 11% increase in shaft wall area to be supported 968-ft of shaft mined at an elliptical shape to the shaft bottom Pressures and deformations have not exceeded liner strength No damage to the liner or shaft/station intersections 27

28 #4 Shaft Excavation Complete, Operational by Year End 28

29 Shaft Steel & Guide Installation Halfway Done 29

30 Why we invested? And what are our challenges? Skip Scroll Skip Dump Permanent Collar Steel 30

31 Access to the Expanding High-Grade Zone 20 Years Past Mining 6500 Level Mine Face (Galena) 97.2 opt Silver 47.5% Lead ORE GRADE VALUES *AgEq Grade (opt) > < 6 Dec. 31, 2015 *Ag Equivalent Values Based Upon: Resource Prices $20.00/oz Ag, $0.90/lb Pb, $0.90/lb Zn 7500 Level +24 opt AgEq Resource Shown To 8300 #4 Shaft 30 Vein -31-

32 Develop a Mine Plan Eliminating the Pilar Future Pillar 6900L L 200 Tall, 520, Ag Oz/T

33 Ventilation & Refrigeration Requirements Are Increasing Ventilation is complicated by depth. Increasing depth equates to higher ventilation pressure and higher temperatures. The rock temperature increases 1 F for every 100ft of depth, current shaft rock temperature approaches 150 F. The Centralized Refrigeration Plant will facilitate mining to 8,000 ft. of depth.

34 Ground Conditions Worsening & Seismicity Increasing Most mines that are over 3,000 feet deep have some level of seismicity. Seismicity has the potential for injury or damage. Intervention to control seismicity is done through: Measuring/monitoring (risk assessment) Altering mining geometry Pillars Mining abutment Altering mining method Pre-conditioning Advance rate Remote Mining End of shift blasting Due to mined openings and geometries General Seismic Mechanisms Combination Due to existing geologic structures

35 Continuous Miner Could Provide a Step Change Simple, compact, flexible machine Track mounted with vertical stabilizing stingers Vertical and horizontal sweep of cutter head Loading arms feed internal conveyor Machine will cut from one end of orebody to the other in tele-remote mode. Initially, will likely be operated via a tethered connection. 35

36 Proposed Drill Targeting from Q to Resource Outline 30-vein composites Silver Fault Zone Proposed Drill Targets Ramp Definition Exploration 7500 Deep Infill 7500 Continuity Fan 7500 Central Infill 7500 Eastern Infill Longitudinal Looking North Silver Fault Zone 1000ft 4050 level 5900 level #4 Shaft 7500 level 36

37 37

38 Our Mines Generate Cash Flow (Q2) $[VALUE] Greens Creek $[CATEGO RY NAME] 65% Conversion to FCF 1 $[VALUE] $[VALUE] Casa Berardi $(17.2) 40% Conversion to FCF 1 $[VALUE] OCF* Capex FCF** OCF Capex FCF $[VALUE] San Sebastian $[CATEGO RY NAME] 99% Lucky Friday 60% Conversion to FCF 1 $[VALUE] $(2.1) Conversion to FCF 2 $[VALUE] $3.0 $(8.2) $(5.2) OCF* Capex FCF** OCF* Capex FCF** w/o #4 Shaft Capex 1. Cash flow conversion calculated as FCF from mines/ocf 2. Based on free cash flow w/o #4 Shaft capex OCF stands for Operating Cash Flow, ** FCF stands for Free Cash Flow, FCF is a non-gaap measure calculated as OCF (GAAP) less Capex (GAAP). Numbers in millions (USD) #4 Shaft Capex FCF** w/ #4 Shaft Capex

39 A Little Bit About Hecla The largest and one of the lowest-cost US silver producers Third largest US producer of both zinc and lead Growing gold producer Operations in Low-Risk + Mining-Friendly Jurisdictions Corporate Offices Operating mines Pre-development Exploration project 39

40 Mining Industry Has Destroyed Value But Hecla Is An Exception MW1 Silver Reserves -60% +3% Gold Reserves -18% 0% Total Project Write-downs $0 PM Group 1 Hecla Silver Production Peer Group 1 Hecla Gold Production $34.3B +5% +30% 0% +58% PM Group Hecla PM Group 1 Hecla PM Group 1 Hecla 2013 to 2015 Comparison Precious Metals (PM) group includes Silver Standard, Pan American Silver, Coeur Mining, First Majestic, Fortuna, Barrick, Newmont, Kinross and Goldcorp. 1. Average of PM group 40

41 Slide 40 MW1 Note my new title is specific to Hecla Mike Westerlund, 9/7/2016

42 Lowest Gold & Silver 2016 Reserve Prices $14.50 $16.00 $16.00 $17.00 $17.00 $17.50 $17.50 $19.00 Hecla Agnico Eagle Endeavour Pan American Kinross First Majestic Coeur - LT* Newmont $1,150 $1,180 $1,200 $1,200 $1,200 $1,200 $1,100 $1,100 Hecla Agnico Eagle Endeavour Pan American Kinross First Majestic Coeur - LT* Newmont *Coeur s short-term reserve prices are $1,150/oz Au and $15.50/oz Ag. -41-

43 HL Less Impacted by Lower Ag Reserve Price Hecla: Reserves 1.5% Moz Moz $17.25 Pan American: Reserves -6.6% Moz Moz $18.50 $17.00 $ Newmont: Reserves -21.1% Moz Coeur*: Reserves -48.7% Moz $ Moz $19.00 $ Moz [VALUE]* * San Bartolome and selected lower 76, Rosario and other underground deposits at Palmarejo were modeled at $15.50 silver. $17.50/oz is Coeur s long-term reserve price; short-term reserve price is $15.50/oz Ag. 42

44 Industry Leading Reserve & Production Growth Record (P+P) Ag Reserves 1 Strong Production Growth (AgEq) Moz 44 Moz +243% +208% 51 Moz 14.3 Moz E (P+P) Au Reserves 2.1 Moz Ag Production Growth 15.8 Moz Au Production Growth 233 Koz 0.6 Moz +241% 6.4 Moz +146% 55.5 Koz +320% E E 1. Reserves are based on $14.50/oz silver and $1,100 gold/oz silver equivalent calculations based on: $31.15/oz silver, $1,669/oz for gold, $0.94/lb for lead, and $0.88/lb for zinc. 2016E silver equivalent calculations based on: $15/oz silver, $1,150/oz gold, $0.80/lb lead, and $0.75/lb zinc. US/MXN assumed to be $

45 Our Strategy Has Worked Adjusted EBITDA*: In 6 Months is More Than a Year Ago $174.4 (in millions) Liquidity: Strong and Getting Stronger $312 M $310 M $255 M $259 M** $234 M $130.3 $116.8 $ Mos/2016 ** Includes $2.6 million held as L/C 120% Hecla Peer Average 100% +106% 80% 60% +51% 40% 20% 0% -20% -40% -60% -80% Share Price Outperformance Outperformed Gold and Silver Zinc: Strong Fundamentals Peers include: Pan American Silver, Tahoe, Coeur Mining, First Majestic, Silver Standard Source: Bloomberg, August 1, 2013 August 1, 2016 *Adjusted EBITDA represents a non-gaap measurement, a reconciliation of which to net income, the most comparable GAAP measurement, can be found in the Appendix. 44

46 Thank you!

47 LF History Underground metal mine - Produces Silver, Lead and Zinc 1889 Lucky Friday claims located 1900s minor production and exploration 1942 First recorded production 1953 Started sinking #2 shaft Depth of 5300 feet 1958 Acquired by Hecla 1983 Complete Silver Shaft Depth of 6200 feet Increased production rate from 800 tpd to 1000 tpd 2016 Projected completion of #4 Shaft Depth of 3860 feet (extends down to 8620 mine level)

48 Mining Method/Muck Handling

49 Lucky Friday Manpower 2016 Staffing Hourly Salary - 69 Turnover 2016 YTD % Salaried/Temp - 5.8% Hourly % Voluntary % Involuntary % Lucky Friday Leadership Clayr Alexander VP & GM Lucky Friday Torin Hasz Mill Superintendent Ralph Barker #4 Shaft Commissioning Kristin Dahlin Site Controller Mgr Chris Neville Mine Superintendent David Konsbruck Maintenance Systems Mgr Wes Johnson Acting Technical Services Manager Bob Golden Chief Geotechnical Engineer Michelle Horning Human Resources Manager Tim Kilbreath Health & Safety Manager

50 Lucky Friday Fiber backbone and wifi extension IT currently developing plan for overall fiber and wireless to support asset/personnel tracking, tele-remote and autonomous operation and VOD, complete in Q3. Fiber expansion to be included in 2017 capital budget. Guided (operator assist) truck control New Atlas Copco 20 ton truck underground RCT laser guidance controls installed mid-september steering, braking, speed control Initial trialing of truck in ramps end-september. Manual loading/dumping, guidance control in ramps and haulages Truck could be retrofitted for autonomous or tele-remote operation in future with addition of communication package -49-

51 High Temperatures Virgin rock temperatures typically exceed 150 degrees F Transitioned to use of less heat sensitive blasting products Centrally located refrigeration plant 972 tons of refrigeration Work place temperatures typically 80 degrees F Air Coolers 5900L permanent 5900L, 6500L, and 7500L for shaft/station work 50