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Hecla Reports Fourth Quarter and Full-year 2021 Results

Record annual revenue and 2nd highest cash flow from operations and free cash flow


COEUR D'ALENE, Idaho--()--February 22, 2022--Hecla Mining Company (NYSE:HL) today announced fourth quarter and full-year 2021 financial and operating results.

“Technical Report for the Lucky Friday Mine Shoshone County, Idaho, USA”

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ANNUAL HIGHLIGHTS

Operational

  • Produced 12.9 million silver ounces and 201,327 gold ounces, meeting production and cost guidance.
  • Developed the Underhand Closed Bench (UCB) mining method at Lucky Friday, which contributed to the 75% increase in silver production and showed improvements in managing seismicity.
  • Casa Berardi achieved record throughput and recoveries improved by 4%, producing 134,511 gold ounces.
  • Second highest reserves for both silver and gold in Company history.

Financial

  • Record sales of $807.5 million with net income of $35.1 million.
  • Record Adjusted EBITDA of $278.8 million.1
  • Second highest cash flow from operations of $220.3 million and free cash flow of $111.3 million.
  • Record exploration and pre-development expenditures of $47.9 million.
  • Returned $20.7 million, or 19%, of free cash flow to our common and preferred shareholders through dividends.

Environmental, Social, Governance

  • Strong safety performance with an All-Injury Frequency Rate of 1.45, 40% below the U.S. average.
  • Net neutral for scope 1 & 2 emissions with only 76,000 tonnes that were offset by carbon credits.
  • Successfully managed the impacts of COVID-19.

"2021 was an outstanding year for Hecla as we generated record revenues and adjusted EBITDA resulting in the second highest free cash flow in our 130-year history,” said Phillips S. Baker Jr., President and CEO. “The year also positions Hecla for future success with our exploration program delivering our highest silver reserves in more than 20 years and the Lucky Friday’s establishment of a new, innovative mining method that should be both safer and more productive. This method, which we call the Underhand Closed Bench method will allow the Lucky Friday to increase projected production in 2022 by almost a million silver ounces over 2021, which was a million and half more than 2020.”

Baker continued, “Since Hecla is not only the largest producer of silver in the United States but also has the largest silver reserve base in the U.S., our stakeholders are uniquely positioned to benefit from the growing demand for silver in the transition to clean energy.”

FINANCIAL OVERVIEW

In Thousands unless stated otherwise

4Q-2021

3Q-2021

2Q-2021

1Q-2021

4Q-2020

FY 2021

FY 2020

FINANCIAL AND PRODUCTION SUMMARY

Sales

$

185,078

 

$

193,560

 

$

217,983

 

$

210,852

 

$

188,890

 

$

807,473

 

$

691,873

 

Cost of Sales*

$

131,837

 

$

158,332

 

$

156,052

 

$

143,451

 

$

137,978

 

$

589,672

 

$

530,773

 

Gross profit

$

53,241

 

$

35,228

 

$

61,931

 

$

67,401

 

$

50,912

 

$

217,801

 

$

161,100

 

Income (loss) applicable to common stockholders

$

11,737

 

$

(1,117

)

$

2,610

 

$

21,313

 

$

2,967

 

$

34,543

 

$

(10,009

)

Basic income (loss) per common share (in dollars)

$

0.02

 

$

 

$

0.05

 

$

0.04

 

$

0.01

 

$

0.06

 

$

(0.02

)

Adjusted EBITDA 1

$

58,249

 

$

49,414

 

$

84,507

 

$

86,610

 

$

57,773

 

$

278,780

 

$

230,684

 

Net Debt to Adjusted EBITDA1

 

 

 

 

 

 

1.1

 

 

1.7

 

Cash provided by operating activities

$

53,355

 

$

42,742

 

$

86,304

 

$

37,936

 

$

64,901

 

$

220,337

 

$

180,793

 

Capital expenditures

$

(28,838

)

$

(26,899

)

$

(31,898

)

$

(21,413

)

$

(36,634

)

$

(109,048

)

$

(91,016

)

Free Cash Flow 2

$

24,517

 

$

15,843

 

$

54,406

 

$

16,523

 

$

28,267

 

$

111,289

 

$

89,777

 

Silver ounces produced

 

3,226,927

 

 

2,676,084

 

 

3,524,783

 

 

3,459,446

 

 

3,352,336

 

 

12,887,240

 

 

13,542,957

 

Silver payable ounces sold

 

2,606,622

 

 

2,581,690

 

 

3,415,464

 

 

3,030,026

 

 

3,227,951

 

 

11,633,802

 

 

12,305,917

 

Gold ounces produced

 

47,977

 

 

42,207

 

 

59,139

 

 

52,004

 

 

49,014

 

 

201,327

 

 

208,962

 

Gold payable ounces sold

 

44,156

 

 

53,000

 

 

47,168

 

 

57,286

 

$

43.144

 

 

201,610

 

 

202,694

 

*Cost of sales is comprised of cost of sales and other direct production costs and depreciation, depletion and amortization referred to herein as “cost of sales”.

Consolidated silver cost of sales for 2021 were $310.9 million; cash cost and all-in sustaining costs ("AISC") per silver ounce, after by-product credits, for the year were $1.37 and $9.19, respectively.3,4 The year over year decrease in cash cost and AISC per silver ounce (each after by-product credits) was due to higher silver production and by-product credits as well as lower treatment charges, partially offset by higher operating costs and additional sustaining capital.3,4 Consolidated gold cost of sales for the year were $278.8 million, cash cost and AISC per gold ounce (each after by-product credits), were $1,127 and $1,374, respectively.3,4 The year over year increase in cash cost was due to higher production costs partially offset by higher gold production with AISC also impacted by lower sustaining capital.

Income applicable to common stockholders increased in the fourth quarter 2021 over the third quarter due to:

  • Gross profit increased by 51% due primarily to increased production at all three operations.
  • Exploration and pre-development expense decreased by $4.2 million due to third-party assays being delayed and the completion of seasonal exploration programs in the prior quarter.
  • Increase in benefit from income and mining taxes of $21.1 million due to a partial release of the deferred tax asset valuation allowance.
  • Partially offsetting these increases are realized and unrealized losses on derivatives of $25.1 million compared to a third quarter gain of $9.3 million.

Income applicable to common stockholders increased in 2021 over 2020 due to:

  • Gross profit increased by 35% due to higher metal prices and a full year of production at Lucky Friday.
  • Lower interest expense by $7.6 million as a result of the revolving credit facility being undrawn in 2021 and 2020 debt refinancing expenses.
  • Income tax benefits of $29.6 million, compared to the 2020 provision of $8.2 million through the use of tax loss carryforwards and a partial release of the deferred tax asset valuation allowance.

The above items were partially offset by:

  • Increase in exploration and pre-development expense of $29.6 million.
  • Combined realized and unrealized losses on derivatives and investments of $35.8 million in 2021, compared to a loss of $11.8 million in 2020.
  • Provision for closed operations and environmental matters of $14.6 million, an increase of $10.6 million over 2020 primarily due to a $6.5 million lawsuit settlement payment for a 1989 indemnification agreement and a $5.0 million increase for estimated reclamation costs at two closed sites.

Cash provided by operating activities increased $39.5 million year over year and $10.6 million in the fourth quarter compared to the third quarter of 2021 due to increased gross margin, partially offset by unfavorable working capital changes. The yearly increase was also impacted by higher exploration and pre-development spending, which declined quarter over quarter due to seasonal variances.

Adjusted EBITDA increased $8.8 million in the fourth quarter compared to the third quarter of 2021, and was $278.8 million for the full-year 2021, an increase of $48.1 million over 2020, due to higher sales margins partially offset by higher exploration and pre-development spending.1

Fourth quarter capital expenditures totaled $28.8 million, including $9.5 million at Greens Creek, $9.5 million at Casa Berardi, and $9.1 million at Lucky Friday. Capital expenditures for the year 2021 totaled $109.0 million compared to $91.0 million in 2020.

Forward Sales Contracts for Base Metals and Foreign Currency

The Company uses financially settled forward sales contracts to manage exposures to changes in prices of zinc and lead. At December 31, 2021, the Company had contracts covering approximately 62% of the forecasted payable zinc production (through 2024) at an average price of $1.29 per pound, and 49% of the forecasted payable lead production (through 2024) at an average price of $0.99 per pound. Effective November 1, 2021, the Company elected to apply hedge accounting for all then open and future financially settled forward sales contracts, which will reduce income statement volatility for unrealized gains and losses on open positions.

The Company also enters into foreign exchange forward contracts to buy Canadian dollars. At December 31, 2021, the Company had hedged approximately 76% of forecasted Canadian dollar direct production costs for 2022 at an average CAD/USD rate of 1.30, 51% for 2023 at 1.30, 18% for 2024 at 1.31, and 5% for 2025 at 1.28. The Company has also hedged approximately 34% of capital costs for 2022 at 1.29.

OPERATIONS OVERVIEW

Greens Creek Mine - Alaska

Dollars are in thousands except cost per ton

4Q-2021

3Q-2021

2Q-2021

1Q-2021

4Q-2020

FY 2021

FY 2020

GREENS CREEK

 

Tons of ore processed

 

221,814

 

 

211,142

 

 

214,931

 

 

194,080

 

 

189,092

 

 

841,967

 

 

818,408

 

Total production cost per ton

$

174.55

 

$

181.60

 

$

171.13

 

$

182.61

 

$

195.02

 

$

177.30

 

$

179.37

 

Ore grade milled - Silver (oz./ton)

 

12.60

 

 

11.14

 

 

14.52

 

 

16.01

 

 

15.17

 

 

13.51

 

 

15.65

 

Ore grade milled - Gold (oz./ton)

 

0.07

 

 

0.07

 

 

0.08

 

 

0.09

 

 

0.07

 

 

0.08

 

 

0.08

 

Ore grade milled - Lead (%)

 

2.61

 

 

2.68

 

 

3.14

 

 

3.06

 

 

2.84

 

 

2.87

 

 

3.13

 

Ore grade milled - Zinc (%)

 

6.28

 

 

7.05

 

 

7.57

 

 

7.62

 

 

6.96

 

 

7.11

 

 

7.58

 

Silver produced (oz.)

 

2,262,635

 

 

1,837,270

 

 

2,558,447

 

 

2,584,870

 

 

2,330,664

 

 

9,243,222

 

 

10,494,726

 

Gold produced (oz.)

 

10,229

 

 

9,734

 

 

12,859

 

 

13,266

 

 

10,276

 

 

46,088

 

 

48,491

 

Lead produced (tons)

 

4,731

 

 

4,591

 

 

5,627

 

 

4,924

 

 

4,404

 

 

19,873

 

 

21,400

 

Zinc produced (tons)

 

12,457

 

 

13,227

 

 

14,610

 

 

13,354

 

 

11,956

 

 

53,648

 

 

56,814

 

Sales

$

87,865

 

$

84,806

 

$

113,763

 

$

98,409

 

$

95,602

 

$

384,843

 

$

327,820

 

Cost of sales

$

(49,252

)

$

(55,193

)

$

(55,488

)

$

(53,180

)

$

(57,252

)

$

(213,113

)

$

(210,748

)

Gross profit

$

38,613

 

$

29,613

 

$

58,275

 

$

45,229

 

$

38,350

 

$

171,730

 

$

117,072

 

Cash flow from operations

$

51,328

 

$

43,098

 

$

69,821

 

$

44,468

 

$

58,268

 

$

208,715

 

$

176,975

 

Capital expenditures

$

(9,544

)

$

(6,228

)

$

(6,339

)

$

(1,772

)

$

(7,155

)

$

(23,883

)

$

(19,685

)

Free cash flow

$

41,784

 

$

36,870

 

$

63,482

 

$

42,696

 

$

51,113

 

$

184,832

 

$

157,290

 

Cost of sales in 2021 increased to $213.1 million compared to $210.7 million in 2020 due to higher mining costs, as lower capitalized development footage resulted in an increased portion of costs allocated to production, and higher concentrate freight costs, as rates increased due to market conditions. Cash cost and AISC per silver ounce (each after by-product credits) were $(0.65) and $3.19, respectively, decreasing year over year due to higher by-product credits and lower treatment costs. 3,4

Lucky Friday Mine - Idaho

Dollars are in thousands except cost per ton

4Q-2021

3Q-2021

2Q-2021

1Q-2021

4Q-2020

FY 2021

FY 2020

LUCKY FRIDAY

Tons of ore processed

 

80,097

 

 

78,227

 

 

82,442

 

 

81,071

 

 

69,257

 

 

321,837

 

 

179,208

 

Total production cost per ton

$

198.83

 

$

190.66

 

$

199.48

 

$

181.28

 

$

213.82

 

$

191.50

 

$

251.49

 

Ore grade milled - Silver (oz./ton)

 

12.54

 

 

11.21

 

 

11.60

 

 

11.18

 

 

12.53

 

 

11.64

 

 

11.85

 

Ore grade milled - Lead (%)

 

8.11

 

 

7.22

 

 

7.55

 

 

7.51

 

 

7.74

 

 

7.60

 

 

7.49

 

Ore grade milled - Zinc (%)

 

3.33

 

 

3.30

 

 

3.44

 

 

3.70

 

 

3.85

 

 

3.44

 

 

3.88

 

Silver produced (oz.)

 

955,401

 

 

831,532

 

 

913,294

 

 

863,901

 

 

830,200

 

 

3,564,128

 

 

2,031,874

 

Lead produced (tons)

 

6,131

 

 

5,313

 

 

5,913

 

 

5,780

 

 

5,103

 

 

23,137

 

 

12,727

 

Zinc produced (tons)

 

2,296

 

 

2,319

 

 

2,601

 

 

2,753

 

 

2,457

 

 

9,969

 

 

6,298

 

Sales

$

32,938

 

$

29,783

 

$

39,645

 

$

29,122

 

$

27,928

 

$

131,488

 

$

63,025

 

Cost of sales

$

(23,251

)

$

(23,591

)

$

(27,901

)

$

(22,795

)

$

(20,919

)

$

(97,538

)

$

(56,706

)

Gross profit

$

9,687

 

$

6,192

 

$

11,744

 

$

6,327

 

$

7,009

 

$

33,950

 

$

6,319

 

Cash flow from operations

$

16,953

 

$

15,017

 

$

19,681

 

$

10,943

 

$

7,217

 

$

62,594

 

$

(870

)

Capital expenditures

$

(9,109

)

$

(9,133

)

$

(5,731

)

$

(5,912

)

$

(11,148

)

$

(29,885

)

$

(25,776

)

Free cash flow

$

7,844

 

$

5,884

 

$

13,950

 

$

5,031

 

$

(3,931

)

$

32,709

 

$

(26,646

)

Cost of sales in 2021 increased to $97.5 million compared to $56.7 million in 2020 reflecting a full year of production following the strike ending in 2020. Cash cost and AISC per silver ounce (each after by-product credits) were $6.60 and $14.34, respectively, decreasing year over year due to higher production and by-product credits partially offset by higher costs. 3,4

In 2021, we tested and implemented the UCB mining method. The UCB method is a new, productive mining method developed by Hecla in an effort to proactively control fault-slip seismicity in deep, high-stress, narrow-vein mining. The method uses bench drilling and blasting methods to fragment significant vertical and lateral extents of the vein beneath a top cut taken along the strike of the vein and under engineered backfill. The method is accomplished without the use of drop raises or lower mucking drives which may result in local stress concentrations and increased exposure to seismic events. Large blasts using up to 35,000 lbs. of pumped emulsion and programmable electronic detonators fragment up to 350 feet of strike length to a depth of approximately 30 feet. These large blasts proactively induce fault-slip seismicity at the time of the blast and shortly after it. This blasted corridor is then mined underhand for two cuts. As these cuts are mined, little to no blasting is done to advance them. Dilution is controlled by supporting the hanging wall and footwall as the mining progresses through the blasted ore. The entire cycle repeats and stoping advances downdip, under fill, and in a de-stressed zone. The method allows for greater control of fault-slip seismic events, significantly improving safety. In addition, a notable productivity increase has been achieved by reducing seismic delays and utilizing bulk mining techniques. In 2021, 86% of the tons mined were produced through the UCB method.

Casa Berardi - Quebec

Dollars are in thousands except cost per ton

4Q-2021

3Q-2021

2Q-2021

1Q-2021

4Q-2020

FY 2021

FY 2020

CASA BERARDI

 

 

 

 

 

 

 

Tons of ore processed - underground

 

161,355

 

 

167,435

 

 

178,908

 

 

186,919

 

 

185,335

 

 

694,617

 

 

658,271

 

Tons of ore processed - surface pit

 

225,662

 

 

230,708

 

 

195,775

 

 

181,484

 

 

197,646

 

 

833,629

 

 

625,430

 

Tons of ore processed - total

 

387,017

 

 

398,143

 

 

374,683

 

 

368,403

 

 

382,981

 

 

1,528,246

 

 

1,283,701

 

Surface tons mined - ore and waste

 

1,507,457

 

 

1,483,231

 

 

2,033,403

 

 

1,991,087

 

 

1,493,706

 

 

7,015,178

 

 

5,559,302

 

Total production cost per ton

$

108.82

 

$

86.95

 

$

99.36

 

$

99.67

 

$

98.33

 

$

98.60

 

$

105.71

 

Ore grade milled - Gold (oz./ton) - underground

 

0.165

 

 

0.155

 

 

0.148

 

 

0.147

 

 

0.147

 

 

0.161

 

 

0.136

 

Ore grade milled - Gold (oz./ton) - surface pit

 

0.072

 

 

0.037

 

 

0.055

 

 

0.048

 

 

0.052

 

 

0.056

 

 

0.051

 

Ore grade milled - Gold (oz./ton) - combined

 

0.110

 

 

0.087

 

 

0.100

 

 

0.120

 

 

0.123

 

 

0.104

 

 

0.117

 

Ore grade milled - Silver (oz./ton)

 

0.02

 

 

0.02

 

 

0.03

 

 

0.04

 

 

0.03

 

 

0.03

 

 

0.02

 

Gold produced (oz.) - underground

 

22,910

 

 

24,170

 

 

23,441

 

 

27,569

 

 

27,261

 

 

98,090

 

 

89,521

 

Gold produced (oz.) - surface pit

 

14,356

 

 

5,552

 

 

7,892

 

 

8,621

 

 

10,319

 

 

36,421

 

 

31,971

 

Total Gold produced (oz.)

 

37,266

 

 

29,722

 

 

31,333

 

 

36,190

 

 

37,580

 

 

134,511

 

 

121,492

 

Total Silver produced (oz.)

 

7,967

 

 

7,012

 

 

7,917

 

 

10,675

 

 

8,858

 

 

33,571

 

 

24,142

 

Sales

$

60,054

 

$

56,065

 

$

56,122

 

$

72,911

 

$

59,493

 

$

245,152

 

$

209,224

 

Cost of sales

$

(57,069

)

$

(58,164

)

$

(54,669

)

$

(59,927

)

$

(53,521

)

$

(229,829

)

$

(194,414

)

Gross profit (loss)

$

2,985

 

$

(2,099

)

$

1,453

 

$

12,984

 

$

5,972

 

$

15,323

 

$

14,810

 

Cash flow from operations

$

12,153

 

$

21,440

 

$

17,495

 

$

32,229

 

$

25,696

 

$

83,317

 

$

88,066

 

Capital expenditures

$

(9,537

)

$

(11,488

)

$

(14,745

)

$

(13,847

)

$

(16,427

)

$

(49,617

)

$

(40,840

)

Free cash flow

$

2,616

 

$

9,952

 

$

2,750

 

$

18,382

 

$

9,269

 

$

33,700

 

$

47,226

 

Full-year 2021 cost of sales was $229.8 million, cash cost and AISC per ounce, after by-product credits, were $1,125 and $1,399 respectively.3,4 Year over year decline in cash cost and AISC per ounce was due to higher gold production in 2021; AISC per ounce was also impacted by lower sustaining capital, partially offset by higher exploration spending. 3,4

Nevada Operations

Dollars are in thousands except cost per ton

4Q-2021

3Q-2021

2Q-2021

1Q-2021

4Q-2020

FY 2021

FY 2020

NEVADA OPERATIONS

 

 

 

 

 

 

 

Tons of ore processed

 

2,185

 

 

11,953

 

 

38,947

 

 

16,459

 

 

 

 

69,544

 

 

27,984

 

Total production cost per ton

$

200.72

 

$

374.46

 

$

161.50

 

$

360.72

 

$

 

$

132.64

 

$

892.09

 

Ore grade milled - Gold (oz./ton)

 

0.226

 

 

0.234

 

 

0.41

 

 

0.185

 

 

 

 

0.321

 

 

1.232

 

Silver produced (oz.)

 

924

 

 

270

 

 

45,125

 

 

 

 

 

 

46,319

 

 

37,443

 

Gold produced (oz.)

 

482

 

 

2,751

 

 

14,947

 

 

2,548

 

 

 

 

20,728

 

 

31,756

 

Cash flow from operations

$

(2,060

)

$

19,163

 

$

(573

)

$

855

 

$

1,897

 

$

17,385

 

$

13,696

 

Capital additions

$

(277

)

$

(29

)

$

(5,075

)

$

(89

)

$

(2,154

)

$

(5,470

)

$

(4,003

)

Free cash flow

$

(2,337

)

$

19,134

 

$

(5,648

)

$

766

 

$

(257

)

$

11,915

 

$

9,693

 

2021 production and revenue was generated from processing previously stockpiled ore at third-party processing facilities. Exploration activities at Midas and development of a decline to the Hatter Graben area at Hollister are ongoing, with underground exploration drilling of Hatter Graben commencing from available platforms in the fourth quarter of 2021.

EXPLORATION AND PRE-DEVELOPMENT

Exploration and pre-development expenses totaled $12.9 million for the fourth quarter and $47.9 million for the full year (a Company record), an increase of $29.6 million compared to 2020.

For the year ended 2021, the Company reported the second highest silver and gold reserves at 200 million ounces and 2.7 million ounces, respectively. Silver reserves increased 6% year over year with Greens Creek increasing reserves by 12% to 125 million ounces, the second highest in the mine’s history since 2002. Silver and gold inferred resources increased by 8% and 2%, respectively. A breakdown of the Company’s reserves and resources is located in Table A at the end of this news release.

For further details on the Company’s 2021 exploration and pre-development program and 2022 planned expenditures as well as reserves and resources at year-end 2021, please refer to the news release entitled “Hecla Reports 2nd Highest Silver Reserves in Company History” released on February 17, 2022.

2022 ESTIMATES5

The Company is providing a three-year production outlook and estimates of costs, capital and exploration and pre-development expenses for 2022. Cost guidance includes planned COVID-19 management costs and 5% inflation, which is being experienced throughout the industry. The guidance below excludes any unforeseen disruptions related to COVID-19 and its variants.

2022 Production Outlook

 

Silver Production
(Moz)

Gold Production
(Koz)

Silver Equivalent
(Moz)

Gold Equivalent
(Koz)

Greens Creek *

8.6 - 8.9

40 - 43

20.7 - 21.2

268 - 275

Lucky Friday *

4.3 - 4.6

N/A

8.9 - 9.3

116 - 120

Casa Berardi

N/A

125 - 132

9.7 - 10.2

125 - 132

2022 Total

12.9 - 13.5

165 - 175

39.3 - 40.7

509 - 527

2023 Total

13.5 - 14.5

175 - 185

40.7 - 42.5

527 - 550

2024 Total

14.5 - 15.1

185 - 195

42.5 - 43.8

550 - 567

*Equivalent ounces include lead and zinc production

2022 Cost Outlook

 

Costs of Sales
(million)

Cash cost, after by-product
credits, per
silver/gold ounce3

AISC, after by-product
credits, per produced
silver/gold ounce4

Greens Creek

$230

$0.75 - $2.50

$6.50 - $8.50

Lucky Friday

$115

$0.75 - $2.00

$7.25 - $9.25

Total Silver

$345

$0.75 - $2.50

$9.75 - $11.75

Casa Berardi (Total Gold)

$210

$1,175 - $1,325

$1,450 - $1,600

2022 Capital and Exploration Outlook

Capital expenditures

$135 million

Exploration and Pre-development expenditures

$45 million

DIVIDENDS

Common Stock

The Board of Directors declared a quarterly cash dividend of $0.00625 per share of common stock, consisting of $0.00375 per share for the minimum dividend component and $0.0025 per share for the silver-linked component. The common stock dividend is payable on or about March 18, 2022, to stockholders of record on March 9, 2022. The realized silver price was $23.49 in the fourth quarter satisfying the criterion for the silver-linked component under the Company's common stock dividend policy.

Preferred Stock

The Board of Directors elected to declare a quarterly cash dividend of $0.875 per share of preferred stock, payable on or about April 1, 2022, to stockholders of record on March 15, 2022.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Tuesday, February 22, at 10:00 a.m. Eastern Time to discuss these results. We recommend that you dial in at least 10 minutes before the call commencement. You may join the conference call by dialing toll-free 1-833-350-1380 or for international dialing 1-647-689-6934. The Participant Code is 3975176 and must be provided when dialing in. Hecla's live and archived webcast can be accessed at www.hecla-mining.com under Investors.

VIRTUAL INVESTOR EVENT

Hecla will be holding a Virtual Investor Event on Tuesday, February 22, from 1:00 p.m. to 2:30 p.m. Eastern Time.

Hecla invites shareholders, investors, and other interested parties to schedule a personal, 30-minute virtual meeting (video or telephone) with a member of senior management to discuss Exploration, Operations, or general matters. Click on the link below to schedule a call (or copy and paste the link into your web browser.). You can select a topic once you have entered the meeting calendar. If you are unable to book a time, either due to high demand or for other reasons, please reach out to Russell Lawlar, Sr. Vice President - CFO and Treasurer at rlawlar@hecla-mining.com or 208-769-4130.

One-on-One meeting URL: https://calendly.com/2022-february-vie

ABOUT HECLA

Founded in 1891, Hecla Mining Company (NYSE:HL) is the largest silver producer in the United States. In addition to operating mines in Alaska, Idaho, and Quebec, Canada, the Company owns a number of exploration and pre-development properties in world-class silver and gold mining districts throughout North America.

NOTES

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by United States generally accepted accounting principles (GAAP). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The non-GAAP financial measures cited in this release and listed below are reconciled to their most comparable GAAP measure at the end of this release.

(1) Adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to net income, the most comparable GAAP measure, can be found at the end of the release. Adjusted EBITDA is a measure used by management to evaluate the Company's operating performance but should not be considered an alternative to net income, or cash provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under its incentive program. Net debt to adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to debt and net income (loss), the most comparable GAAP measurements, can be found at the end of the release. It is an important measure for management to measure relative indebtedness and the ability to service the debt relative to its peers. It is calculated as total debt outstanding less total cash on hand divided by adjusted EBITDA.

(2) Free cash flow is a non-GAAP measure calculated as cash provided by operating activities less additions to properties, plants and equipment. Cash provided by operating activities for the Greens Creek, Lucky Friday, Casa Berardi, and Nevada operating segments excludes exploration and pre-development expense, as these are discretionary expenditures and not a component of the mines’ operating performance.

(3) Cash cost, after by-product credits, per silver and gold ounce is a non-GAAP measurement, a reconciliation of which to cost of sales, and other direct production costs and depreciation, depletion and amortization can be found at the end of the release. It is an important operating statistic that management utilizes to measure each mine's operating performance. It also allows the benchmarking of performance of each mine versus those of our competitors. As a primary silver mining company, management also uses the statistic on an aggregate basis - aggregating the Greens Creek and Lucky Friday mines - to compare performance with that of other silver mining companies, and aggregating Casa Berardi and the Nevada operations, to compare its performance with other gold mining companies. Similarly, the statistic is useful in identifying acquisition and investment opportunities as it provides a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics. In addition, the Company may use it when formulating performance goals and targets under its incentive program. Cash cost, after by-product credits, per silver ounce is not presented for Lucky Friday for the first nine-months of 2020, as production was limited due to the strike and subsequent ramp-up and results are not comparable to those from prior periods and are not indicative of future operating results under full production.

(4) All-in sustaining cost (AISC), after by-product credits, per silver and gold ounce is a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization can be found at the end of the release. AISC, after by-product credits, includes cost of sales and other direct production costs, expenses for reclamation and exploration at the mine sites, corporate exploration related to sustaining operations, and all site sustaining capital costs. AISC, after by-product credits, is calculated net of depreciation, depletion, and amortization and by-product credits.

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

Other

(5) Expectations for 2022 include silver, gold, lead and zinc production from Greens Creek, Lucky Friday and Casa Berardi converted using Au $1,700/oz, Ag $22/oz, Zn $1.50/lb., and Pb 1.00$/lb. Numbers may be rounded.

Cautionary Statement Regarding Forward Looking Statements, Including 2022 Outlook

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbor created by such sections and other applicable laws, including Canadian securities laws. Words such as “may”, “will”, “should”, “expects”, “intends”, “projects”, “believes”, “estimates”, “targets”, “anticipates” and similar expressions are used to identify these forward-looking statements. Such forward-looking statements may include, without limitation: (i) new mining method implemented at Lucky Friday should improve safety and increase productivity; (ii) increased demand for silver due to transition to clean energy; and; (iii) Mine-specific and Company-wide 2022 estimates of future production, sales and costs of sales, as well as cash cost and AISC per ounce (in each case after by-product credits) and Company-wide estimated spending on capital, exploration and pre-development for 2022. The material factors or assumptions used to develop such forward-looking statements or forward-looking information include that 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, to which the Company’s operations are subject.

Estimates or expectations of future events or results are based upon certain assumptions, which may prove to be incorrect. Such assumptions, include, but are not limited to: (a) there being no significant change to current geotechnical, metallurgical, hydrological and other physical conditions; (b) permitting, development, operations and expansion of the Company’s projects being consistent with current expectations and mine plans; (c) political/regulatory developments in any jurisdiction in which the Company operates being consistent with its current expectations; (d) the exchange rate for the Canadian dollar to the U.S. dollar, being approximately consistent with current levels; (e) certain price assumptions for gold, silver, lead and zinc; (f) prices for key supplies being approximately consistent with current levels; (g) the accuracy of our current mineral reserve and mineral resource estimates; (h) there being no significant changes to our plans for 2022 and beyond due to COVID-19 or any other public health issue, including, but not limited to with respect to availability of employees, vendors and equipment; and (i) 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 2020 Form 10-K, filed on February 18, 2021, with the Securities and Exchange Commission (SEC), as well as the Company’s other SEC filings, including the Company's 2021 10-K expected to be filed on February 22, 2022. 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 news release, 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-looking statements” is at investors’ own risk.

Cautionary Statements to Investors on Reserves and Resources

This news release uses the terms “mineral resources,” “measured mineral resources,” “indicated mineral resources” and “inferred mineral resources.” Mineral resources that are not mineral reserves do not have demonstrated economic viability. You should not assume that all or any part of measured or indicated mineral resources will ever be converted into mineral reserves. Further, inferred mineral resources have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically, and an inferred mineral resource may not be considered when assessing the economic viability of a mining project, and may not be converted to a mineral reserve. On October 31, 2018, the SEC adopted new mining disclosure rules (“S-K 1300”) that is more closely aligned with current industry and global regulatory practices and standards, including National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) which the Company complies with because the Company also is a “reporting issuer” under Canadian securities laws. While S-K 1300 is more closely aligned with NI 43-101 than the prior SEC mining disclosure rules, there are some differences. NI 43-101 is a rule developed by the Canadian Securities Administrators, which established standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all resource and reserve estimates contained in this press release have been prepared in accordance with NI 43-101, as well as S-K 1300.

Qualified Person (QP)

Kurt D. Allen, MSc., CPG, VP - Exploration of Hecla Mining Company and Keith Blair, MSc., CPG, Chief Geologist of Hecla Limited, who serve as a Qualified Person under S-K 1300 and “NI 43-101”, supervised the preparation of the scientific and technical information concerning Hecla’s mineral projects in this news release. Technical Report Summaries for each of the Company’s material properties are filed as exhibits 96.1, 96.2 and 96.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and are available at www.sec.gov. 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 December 31, 2018, 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 December 31, 2018 (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, 2015. Also included in these three 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. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of sample, analytical or testing procedures for the Fire Creek Mine are contained in a technical report prepared for Klondex Mines, dated March 31, 2018; the Hollister Mine dated May 31, 2017, amended August 9, 2017; and the Midas Mine dated August 31, 2014, amended April 2, 2015. Copies of these technical reports are available under Hecla’s and Klondex’s profiles on SEDAR at www.sedar.com. Mr. Allen and Mr. Blair reviewed and verified information regarding drill sampling, data verification of all digitally collected data, drill surveys and specific gravity determinations relating to all the mines. The review encompassed quality assurance programs and quality control measures including analytical or testing practice, chain-of-custody procedures, sample storage procedures and included independent sample collection and analysis. This review found the information and procedures meet industry standards and are adequate for Mineral Resource and Mineral Reserve estimation and mine planning purposes.

HECLA MINING COMPANY

Condensed Consolidated Statements of Income (Loss)

(dollars and shares in thousands, except per share amounts - unaudited)

 

 

 

Fourth Quarter
Ended

 

Third Quarter
Ended

 

Twelve Months Ended

 

 

December 31,
2021

 

September 30,
2021

 

December 31,
2021

 

December 31,
2020

Sales of products

 

$

185,078

 

 

$

193,560

 

 

$

807,473

 

 

$

691,873

 

Cost of sales and other direct production costs

 

 

98,962

 

 

 

112,542

 

 

 

417,879

 

 

 

382,663

 

Depreciation, depletion and amortization

 

 

32,875

 

 

 

45,790

 

 

 

171,793

 

 

 

148,110

 

Total cost of sales

 

 

131,837

 

 

 

158,332

 

 

 

589,672

 

 

 

530,773

 

Gross profit

 

 

53,241

 

 

 

35,228

 

 

 

217,801

 

 

 

161,100

 

 

 

 

 

 

 

 

 

 

Other operating expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

6,585

 

 

 

8,874

 

 

 

34,570

 

 

 

35,561

 

Exploration and pre-development

 

 

12,862

 

 

 

17,108

 

 

 

47,901

 

 

 

18,295

 

Other operating expense

 

 

3,375

 

 

 

3,344

 

 

 

14,240

 

 

 

10,854

 

Loss (gain) on disposition of property, plants, equipment and mineral interests

 

 

326

 

 

 

(390

)

 

 

87

 

 

 

572

 

Ramp-up and suspension costs

 

 

5,998

 

 

 

6,910

 

 

 

23,012

 

 

 

24,911

 

Provision for closed operations and reclamation

 

 

2,274

 

 

 

7,564

 

 

 

14,571

 

 

 

3,929

 

 

 

 

31,420

 

 

 

43,410

 

 

 

134,381

 

 

 

94,122

 

Income (loss) from operations

 

 

21,821

 

 

 

(8,182

)

 

 

83,420

 

 

 

66,978

 

Other (expense) income:

 

 

 

 

 

 

 

 

Fair value adjustments, net

 

 

(25,141

)

 

 

9,287

 

 

 

(35,792

)

 

 

(11,806

)

Foreign exchange (loss) gain, net

 

 

393

 

 

 

3,995

 

 

 

417

 

 

 

(4,605

)

Other net expense

 

 

(382

)

 

 

(143

)

 

 

(574

)

 

 

(2,256

)

Interest expense

 

 

(10,461

)

 

 

(10,469

)

 

 

(41,945

)

 

 

(49,569

)

 

 

 

(35,591

)

 

 

2,670

 

 

 

(77,894

)

 

 

(68,236

)

(Loss) income before income taxes

 

 

(13,770

)

 

 

(5,512

)

 

 

5,526

 

 

 

(1,258

)

Income and mining tax benefit (provision)

 

 

25,645

 

 

 

4,533

 

 

 

29,569

 

 

 

(8,199

)

Net income (loss)

 

 

11,875

 

 

 

(979

)

 

 

35,095

 

 

 

(9,457

)

Preferred stock dividends

 

 

(138

)

 

 

(138

)

 

 

(552

)

 

 

(552

)

Income (loss) applicable to common stockholders

 

$

11,737

 

 

$

(1,117

)

 

$

34,543

 

 

$

(10,009

)

Basic income (loss) per common share after preferred dividends (in cents)

 

$

0.022

 

 

$

(0.002

)

 

$

0.064

 

 

$

(0.019

)

Diluted income (loss) per common share after preferred dividends (in cents)

 

$

0.022

 

 

$

(0.002

)

 

$

0.064

 

 

$

(0.019

)

Weighted average number of common shares outstanding basic

 

 

538,124

 

 

 

536,966

 

 

 

536,192

 

 

 

527,329

 

Weighted average number of common shares outstanding diluted

 

 

543,134

 

 

 

536,966

 

 

 

542,176

 

 

 

527,329

 

HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and shares in thousands – unaudited)

 

 

December 31, 2021

 

December 31, 2020

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

210,010

 

 

$

129,830

 

Accounts receivable

 

44,586

 

 

 

39,193

 

Inventories

 

67,765

 

 

 

96,175

 

Other current assets

 

19,266

 

 

 

19,114

 

Total current assets

 

341,627

 

 

 

284,312

 

Investments

 

10,844

 

 

 

15,148

 

Restricted cash and investments

 

1,053

 

 

 

1,053

 

Properties, plants, equipment and mineral interests, net

 

2,310,810

 

 

 

2,378,074

 

Operating lease right-of-use assets

 

12,435

 

 

 

10,628

 

Deferred tax assets

 

45,562

 

 

 

2,912

 

Other non-current assets

 

6,477

 

 

 

8,083

 

Total assets

$

2,728,808

 

 

$

2,700,210

 

 

 

 

 

LIABILITIES

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

68,100

 

 

$

68,516

 

Accrued payroll and related benefits

 

28,714

 

 

 

31,807

 

Accrued taxes

 

12,306

 

 

 

5,774

 

Finance leases

 

5,612

 

 

 

6,491

 

Accrued reclamation and closure costs

 

9,259

 

 

 

5,582

 

Operating leases

 

2,486

 

 

 

3,008

 

Accrued interest

 

14,454

 

 

 

14,157

 

Derivatives liabilities

 

19,353

 

 

 

11,737

 

Other current liabilities

 

99

 

 

 

138

 

Total current liabilities

 

160,383

 

 

 

147,210

 

Finance leases

 

7,776

 

 

 

9,274

 

Accrued reclamation and closure costs

 

103,972

 

 

 

110,466

 

Long-term debt

 

508,095

 

 

 

507,242

 

Long-term operating leases

 

9,950

 

 

 

7,634

 

Deferred income tax liability

 

149,706

 

 

 

156,091

 

Non-current pension liability

 

4,673

 

 

 

44,144

 

Derivatives liabilities

 

18,528

 

 

 

18

 

Other non-current liabilities

 

4,938

 

 

 

4,346

 

Total liabilities

 

968,021

 

 

 

986,425

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

Preferred stock

 

39

 

 

 

39

 

Common stock

 

136,391

 

 

 

134,629

 

Capital surplus

 

2,034,485

 

 

 

2,003,576

 

Accumulated deficit

 

(353,651

)

 

 

(368,074

)

Accumulated other comprehensive loss

 

(28,456

)

 

 

(32,889

)

Treasury stock

 

(28,021

)

 

 

(23,496

)

Total stockholders’ equity

 

1,760,787

 

 

 

1,713,785

 

Total liabilities and stockholders’ equity

$

2,728,808

 

 

$

2,700,210

 

Common shares outstanding

 

538,139

 

 

531,666

 

HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)

 

 

 

Fourth Quarter Ended

 

Third Quarter Ended

 

Twelve Months Ended

 

 

December 31,
2021

 

September 30,
2021

 

December 31,
2021

 

December 31,
2020

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

11,875

 

 

$

(979

)

 

$

35,095

 

 

$

(9,457

)

Non-cash elements included in net income (loss):

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

32,851

 

 

 

46,939

 

 

 

172,651

 

 

 

155,006

 

Loss (gain) on disposition of properties, plants, equipment and mineral interests

 

 

326

 

 

 

(390

)

 

 

87

 

 

 

572

 

Provision for reclamation and closure costs

 

 

3,693

 

 

 

1,638

 

 

 

11,514