Hecla Reports First Quarter 2024 Results
Press Release
May 8, 2024
COEUR D’ALENE, Idaho- Hecla Mining Company (NYSE:HL) today announced first quarter 2024 financial and operating results.
FIRST QUARTER HIGHLIGHTS
Operational
- Produced 4.2 million silver ounces, an increase of 43% over the fourth quarter of 2023 (“prior quarter”)
- Lucky Friday completed ramp-up to full production with 1.1 million silver ounces produced.
- Improved safety at Keno Hill – 41% improvement over the 2023 All-injury Frequency Rate (“AIFR”); increased throughput 29% over the prior quarter, produced 0.6 million ounces of silver.
- 2024 production and cost guidance reiterated.
Financial
- Sales of $189.5 million, 44% from silver and 34% from gold.
- Net loss applicable to common stockholders of $5.9 million or ($0.01) per share and adjusted net income applicable to common stockholders of $6.5 million or $0.01 per share.1
- Consolidated silver total cost of sales of $108.2 million and cash cost and all-in sustaining cost (“AISC”) per silver ounce (each after by-product credits) of $4.78 and $13.10, respectively.3,4
- Received $17.4 million in Lucky Friday fire related insurance proceeds.
Silver Nuggets*
- Solar in 2023
- Solar’s demand for silver reached 194 million ounces, up 64% over 2022.
- 16% of global silver demand is for solar, up from 7% in 2019.
- Indian Silver Demand
- Accounts for 19% of global silver demand and is at pre-pandemic levels.
- February 2024 silver imports set a record, while the silver price in Indian rupees set an all-time high in April.
“The first quarter reflects an inflection point with the strong performance from Greens Creek, achieving full production at the Lucky Friday, and significant improvements in safety, environment, and production from Keno Hill,” said Phillips S. Baker Jr., President and CEO. “With this strong start to the year, we are well-positioned to achieve our production and cost guidance for 2024.”
Baker continued, “Silver demand for solar has been growing at a remarkable 17% annual growth rate over the past five years and is projected to continue. In India, buyers long known as being price sensitive, are importing silver in record quantities despite higher silver prices. Solar and India represent more than 35% of world demand and continues to grow.”
Baker concluded, “Hecla is the largest U.S. silver producer and is on track to be Canada’s largest this year. With silver production growth expected up to 20 million silver ounces by 2026, Hecla is the fastest growing established silver producer and should benefit from this strong and growing demand.”
FINANCIAL OVERVIEW
In the following table and throughout this release, “total cost of sales” is comprised of cost of sales and other direct production costs and depreciation, depletion and amortization; comparisons are made to the “prior quarter” which refers to the fourth quarter of 2023. In the ‘Operations Overview’ section, free cash flow for operations excludes hedging adjustments.2
|
In Thousands unless stated otherwise |
|
1Q-2024 |
|
|
4Q-2023 |
|
|
3Q-2023 |
|
|
2Q-2023 |
|
|
1Q-2023 |
|
|
FY 2023 |
|
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|
FINANCIAL AND PRODUCTION SUMMARY |
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|||||||||||||||||||||||
|
Sales |
|
$ |
189,528 |
|
|
$ |
160,690 |
|
|
$ |
181,906 |
|
|
$ |
178,131 |
|
|
$ |
199,500 |
|
|
$ |
720,227 |
|
|
Total cost of sales |
|
$ |
170,368 |
|
|
$ |
153,825 |
|
|
$ |
148,429 |
|
|
$ |
140,472 |
|
|
$ |
164,552 |
|
|
$ |
607,278 |
|
|
Gross profit |
|
$ |
19,160 |
|
|
$ |
6,865 |
|
|
$ |
33,477 |
|
|
$ |
37,659 |
|
|
$ |
34,948 |
|
|
$ |
112,949 |
|
|
Net loss applicable to common stockholders |
|
$ |
(5,891 |
) |
|
$ |
(43,073 |
) |
|
$ |
(22,553 |
) |
|
$ |
(15,832 |
) |
|
$ |
(3,311 |
) |
|
$ |
(84,769 |
) |
|
Basic income (loss) per common share (in dollars) |
|
$ |
(0.01 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.14 |
) |
|
Adjusted EBITDA1 |
|
$ |
72,968 |
|
|
$ |
32,907 |
|
|
$ |
46,251 |
|
|
$ |
67,740 |
|
|
$ |
61,901 |
|
|
$ |
208,799 |
|
|
Total Debt |
|
$ |
671,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
662,815 |
|
||||
|
Net Debt to Adjusted EBITDA1 |
|
|
2.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.7 |
|
||||
|
Cash provided by operating activities |
|
$ |
17,080 |
|
|
$ |
884 |
|
|
$ |
10,235 |
|
|
$ |
23,777 |
|
|
$ |
40,603 |
|
|
$ |
75,499 |
|
|
Capital Expenditures |
|
$ |
(47,589 |
) |
|
$ |
(62,622 |
) |
|
$ |
(55,354 |
) |
|
$ |
(51,468 |
) |
|
$ |
(54,443 |
) |
|
$ |
(223,887 |
) |
|
Free Cash Flow2 |
|
$ |
(30,509 |
) |
|
$ |
(61,738 |
) |
|
$ |
(45,119 |
) |
|
$ |
(27,691 |
) |
|
$ |
(13,840 |
) |
|
$ |
(148,388 |
) |
|
Silver ounces produced |
|
|
4,192,098 |
|
|
|
2,935,631 |
|
|
|
3,533,704 |
|
|
|
3,832,559 |
|
|
|
4,040,969 |
|
|
|
14,342,863 |
|
|
Silver payable ounces sold |
|
|
3,481,884 |
|
|
|
2,847,591 |
|
|
|
3,142,227 |
|
|
|
3,360,694 |
|
|
|
3,604,494 |
|
|
|
12,955,006 |
|
|
Gold ounces produced |
|
|
36,592 |
|
|
|
37,168 |
|
|
|
39,269 |
|
|
|
35,251 |
|
|
|
39,571 |
|
|
|
151,259 |
|
|
Gold payable ounces sold |
|
|
32,189 |
|
|
|
33,230 |
|
|
|
36,792 |
|
|
|
31,961 |
|
|
|
39,619 |
|
|
|
141,602 |
|
|
Cash Costs and AISC, each after by-product credits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Silver cash costs per ounce 3 |
|
$ |
4.78 |
|
|
$ |
4.94 |
|
|
$ |
3.31 |
|
|
$ |
3.32 |
|
|
$ |
2.14 |
|
|
$ |
3.23 |
|
|
Silver AISC per ounce 4 |
|
$ |
13.10 |
|
|
$ |
17.48 |
|
|
$ |
11.39 |
|
|
$ |
11.63 |
|
|
$ |
8.96 |
|
|
$ |
11.76 |
|
|
Gold cash costs per ounce 3 |
|
$ |
1,669 |
|
|
$ |
1,702 |
|
|
$ |
1,475 |
|
|
$ |
1,658 |
|
|
$ |
1,775 |
|
|
$ |
1,652 |
|
|
Gold AISC per ounce 4 |
|
$ |
1,899 |
|
|
$ |
1,969 |
|
|
$ |
1,695 |
|
|
$ |
2,147 |
|
|
$ |
2,392 |
|
|
$ |
2,048 |
|
|
Realized Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Silver, $/ounce |
|
$ |
24.77 |
|
|
$ |
23.47 |
|
|
$ |
23.71 |
|
|
$ |
23.67 |
|
|
$ |
22.62 |
|
|
$ |
23.33 |
|
|
Gold, $/ounce |
|
$ |
2,094 |
|
|
$ |
1,998 |
|
|
$ |
1,908 |
|
|
$ |
1,969 |
|
|
$ |
1,902 |
|
|
$ |
1,939 |
|
|
Lead, $/pound |
|
$ |
0.97 |
|
|
$ |
1.09 |
|
|
$ |
1.07 |
|
|
$ |
0.99 |
|
|
$ |
1.02 |
|
|
$ |
1.03 |
|
|
Zinc, $/pound |
|
$ |
1.10 |
|
|
$ |
1.39 |
|
|
$ |
1.52 |
|
|
$ |
1.13 |
|
|
$ |
1.39 |
|
|
$ |
1.35 |
|
Sales in the first quarter of 2024 increased by 18% to $189.5 million from the prior quarter due to higher sales volumes of all metals produced except gold and higher realized prices for silver and gold, partially offset by lower realized lead and zinc prices. The higher sales volumes are because of resuming production at Lucky Friday.
Gross profit increased to $19.2 million, an increase of 179%, with Lucky Friday back in operation.
Net loss applicable to common stockholders for the quarter was $5.9 million, a $37.2 million improvement, primarily due to:
- Receipt of $17.4 million of Lucky Friday insurance proceeds included in other operating income.
- Ramp-up and suspension costs decreased by $13.0 million to $14.5 million, with Lucky Friday’s restart.
- A foreign exchange gain of $4.0 million, compared to a loss of $4.2 million, reflecting the impact of the U.S. dollar (“USD”) appreciation on Canadian dollar-denominated monetary assets and liabilities.
The above items were partly offset by:
- Fair value adjustments, net, declined due to unrealized losses on both our derivative contracts not designated as accounting hedges, and marketable equity securities portfolio.
- An income and mining tax provision compared to a benefit.
Consolidated silver total cost of sales in the first quarter increased by 19% to $108.2 million, due to the restart at Lucky Friday. Consolidated cash costs and AISC per silver ounce, each after by-product credits, were $4.78 and $13.10, respectively, and include costs of Greens Creek for the full quarter and those of Lucky Friday for February and March. The decrease in cash costs per ounce was due to higher silver production, higher by-product credits (attributable to the restart at Lucky Friday) partially offset by higher production costs. Consolidated AISC per silver ounce decreased due to lower sustaining capital spending at Greens Creek and Lucky Friday. 3,4
Consolidated gold total cost of sales was $58.3 million, and consistent with the prior quarter. Cash costs and AISC per gold ounce, each after by-product credits, were $1,669 and $1,899, respectively.3,4 The decrease in cash costs per ounce was attributable to lower labor costs partially offset by lower gold production at Casa Berardi, with AISC also impacted by lower sustaining capital spend.
Adjusted EBITDA for the quarter increased by 122% to $73.0 million primarily due to higher gross profit attributable to the production restart at Lucky Friday, and receipt of $17.4 million of Lucky Friday insurance proceeds.5 The Net Leverage Ratio, calculated as the ratio of net debt (calculated as long-term debt and finance leases less cash) to Adjusted EBITDA remained consistent at 2.7 due to higher net debt.5 Cash and cash equivalents at the end of the first quarter were $80.2 million and included $140 million drawn on the revolving credit facility. Borrowing on the revolving credit facility increased in the first quarter due to the working capital required by the Lucky Friday restart, ongoing ramp-up at Keno Hill, and the semi-annual interest payments on the Company’s senior unsecured notes. The Company expects the Net Leverage Ratio to return to the Company’s target of less than 2.0 in the next twelve months as Lucky Friday working capital returns to normal levels and the Company receives additional insurance proceeds.5
Cash provided by operating activities was $17.1 million and increased by $16.2 million primarily due to the resumption of full production at Lucky Friday, and the receipt of insurance proceeds, partially offset by unfavorable working capital changes.
Capital expenditures, decreased by 24% to $47.6 million, compared to $62.6 million with the decrease related to timing and completion of the majority of the rehabilitation and mitigation work related to the fire at the Lucky Friday in 2023. Capital investment of $8.8 million at Greens Creek was related to development, equipment purchases and surface projects. Capital investment at the other operations was as follows: (i) $13.3 million at Casa Berardi, primarily related to tailings construction activities, (ii) $15.0 million at Lucky Friday primarily attributable to development, and (iii) $10.3 million at Keno Hill, primarily related to underground development and mobile equipment purchases.
Free cash flow for the quarter was negative $30.5 million, compared to negative $61.7 million.2 The improvement in free cash flow was attributable to the Lucky Friday resuming operations, receipt of $17.4 million of Lucky Friday insurance proceeds and lower capital spend.
Forward Sales Contracts for Base Metals and Foreign Currency
The Company uses financially settled forward sales contracts to manage exposures to zinc and lead price changes in forecasted concentrate shipments. On March 31, 2024, the Company had contracts covering approximately 50% of the forecasted payable lead production from 2024 – 2025 at an average price of $0.98 per pound.
The Company also manages Canadian dollar (“CAD”) exposure through forward contracts. On March 31, 2024, the Company had hedged approximately 59% of forecasted Casa Berardi and Keno Hill CAD-denominated direct production costs through 2026 at an average CAD/USD rate of 1.32. The Company has also hedged approximately 26% of Casa Berardi and Keno Hill CAD-denominated total capital expenditures through 2026 at 1.35.
OPERATIONS OVERVIEW
IBF4
