Hecla Mining Company - Earnings Call - Q2 2025

Executive Summary

• Record quarter: revenue $304.0M (+16% q/q), gross profit $119.5M (+62% q/q), Adjusted EBITDA $132.5M (+46% q/q), and free cash flow $103.8M; EPS $0.09 diluted.
• Strong beats vs S&P Global consensus: revenue $304.0M vs $257.7M*, EPS $0.09 vs $0.054*, and EBITDA $132.5M vs $76.4M*; driven by higher realized silver ($34.82/oz) and gold ($3,314/oz) prices and higher precious metals volumes.
• Balance sheet actions: ATM equity proceeds and free cash used to repay CAD$50M IQ notes and to fund partial redemption notice for $212M of 7.25% Senior Notes (expected Aug-19), cutting annual interest expense by ~$17.8M; net leverage fell to 0.7x LTM Adjusted EBITDA.
• Guidance improved: consolidated gold production raised to 126–137 koz; consolidated silver cash cost/AISC lowered; Greens Creek gold guidance raised and cost guidance materially lowered; Lucky Friday and Casa Berardi maintained.
• Catalysts: Keno Hill’s first positive free cash flow quarter and pathway to 440 tpd, Casa Berardi strategic review update “in the coming weeks,” and debt redemption completion; Q3 seasonality and planned maintenance imply near-term production/cost mix effects.

Values retrieved from S&P Global. All S&P values are marked with an asterisk (*).

What Went Well and What Went Wrong

What Went Well

• “Record quarterly revenue: $304.0 million” and “Record Adjusted EBITDA: $132.5 million,” “record quarterly free cash flow of $103.8 million,” with cash from operations $161.8M; mines delivered silver +10% q/q and gold +34% q/q production.
• CEO: “We generated record sales of $304 million, record free cash flow of $103.8 million, and record Adjusted EBITDA of $132.5 million, while dramatically improving our net leverage to 0.7x... Lucky Friday achieving a new milling record”.
• Greens Creek cost/outlook improved with negative silver cash costs ($11.91/oz) and AISC ($8.19/oz) after credits; gold guidance raised and per-ounce cost guidance lowered for the mine.

What Went Wrong

• Taxes and FX: income/mining tax provision up $16.4M; foreign exchange loss up $3.2M; exploration/pre-development expense +$4.3M q/q.
• Lucky Friday costs remain elevated vs peers: silver cash cost $6.19/oz and AISC $19.07/oz despite strong throughput; management addressing contractor reliance and cost controls.
• Keno Hill still below nameplate throughput (294 tpd) and only modest gross profit ($0.24M), with power curtailments expected to reduce Q3 output by ~90k oz; production ramp and permitting remain gating factors.

Transcript

Speaker 7

Thank you for standing by. My name is Liz, and I'll be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2025 Hecla Mining Company earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Mike Parkin, Vice President, Strategy & Investor Relations. Please go ahead.

Speaker 5

Thank you, Operator. Good morning, and thank you all for joining us for Hecla Mining Company's second quarter 2025 results conference call. I am Mike Parkin, Vice President, Strategy and Investor Relations. Our earnings release that was issued yesterday, along with today's presentation, are available on our website. On today's call are Rob Krcmarov, President and Chief Executive Officer; Russell Lawlar, Chief Financial Officer; Carlos Aguiar, Chief Operating Officer; Kurt Allen, Vice President, Exploration; Anvita Patil, Vice President, Finance and Treasurer; and Matt Blattman, Vice President, Technical Services. At the conclusion of our prepared remarks, we will be available to answer questions. Turning to slide two, our cautionary statement slide, any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on slide two.

In our earnings release and in our 10-Q filings with the SEC, 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 or the news release. I will now pass the call over to Rob.

Speaker 2

Thank you, Mike, and good morning, everyone. Turning to slide three, our strategic vision remains focused on four key pillars grounded in ESG leadership that position Hecla for sustainable value creation. The first pillar is operational excellence. We're starting to implement semi-automation and advanced analytics across our operations. We're standardizing our systems and processes and improving mine planning to drive efficiency gains throughout the organization. Our second pillar is portfolio optimization. Our CASA Berardi strategic review has progressed well, and I'm pleased to report that we should be in a position to update the market in the coming weeks on a path forward. I also want to address the recent acquisition activity in the sector. I believe the best opportunities to add value for shareholders are through deals that focus on earlier-stage assets versus acquisitions of well-defined producing assets that are already being fully valued in the market.

While we will continue to evaluate potential opportunities, as any prudent management team should, at this time we see more compelling value surfacing opportunities within our own robust project pipeline. Our third pillar focuses on disciplined capital allocation, prioritizing high-return projects while strengthening our balance sheet. We're structuring our framework to prioritize free cash flow generation with clear return on invested capital targets. This means that every dollar we deploy must meet analytically derived return hurdles. Our effective execution on the ATM to deliver $212 million of the $475 million long-term debt, while minimizing shareholder dilution, is a reflection of our capital allocation strategy in meeting these goals, and Russell is going to speak more on this in a moment. Fourth, we're committed to maintaining our silver market leadership. Our high-quality operations average 14+ year reserve lives, which is double the peer average, and they operate exclusively in low-risk jurisdictions.

We strive to achieve these pillars, and we continue to aim to be an ESG leader in the silver sector through environmental stewardship, through strengthening First Nations partnerships, and maintaining safety excellence. Turning to slide four, I want to walk you through the strategic recalibration at Keno Hill that really demonstrates our disciplined approach to value creation. Our focus on optimizing Keno Hill has confirmed that it is a core asset capable of delivering strong returns, even at conservative metal price assumptions. The asset meets our investment hurdle rates at $25 per ounce silver and approaches self-financing capability at current metal prices. The key strategic decision was revising our production target to 440 tons per day, down from the original 550 to 600 tons per day baseline. This isn't about scaling back; it's about optimization.

Through improved wall quality control, over-break reduction, and cost control, this three-point level delivers superior returns while preserving our expansion optionality. We've identified mining capacity as the primary near-term production constraint, and we have high confidence in achieving our target through systematic capital deployment, including cement and tailings plant construction, waste dump upgrades, mine development programs, tailings capacity expansion, and water treatment infrastructure enhancements. This measured approach gives us high confidence in achieving our target of 440 tons per day while maintaining the flexibility to expand when the conditions are warranted. As we turn to slide five, let me walk you through the compelling financial case for our 440 tons per day optimization at Keno Hill. The economics here are particularly strong.

Looking at the table in the upper left of the slide, at $30 silver, a significant discount to current spot prices, Keno Hill would deliver a 35% IRR over its reserve mine life. This return profile is well above our investment thresholds and demonstrates the potential quality of this asset. Even under our conservative case at $25 per ounce silver, the project would generate a solid 15% IRR from January 1, 2025 forwards. The 16-year reserve life provides another strategic advantage. This longevity has the potential to capture value through multiple metal cycles. As illustrated by the red line on the chart, we expect there is the potential for particularly strong free cash flow generation in later years as the mine reaches its steady-state production of 440 tons per day. Ongoing exploration success could extend the mine life, which could further enhance the already attractive returns.

I'll now discuss the medium-term outlook for Keno Hill and some of the major projects we'll undertake to deliver the asset into nameplate capacity. Slide six outlines our systematic approach to ramping up Keno Hill to its optimized production level. Our production timeline demonstrates a measured de-risk path from current operations to 440 tons per day, which we anticipate achieving in 2028. The key here is that we're building Keno Hill with a long-term future in mind rather than rushing the ramp-up. This approach allows for sustainable returns to our shareholders while ensuring ESG excellence through our commitment to environmental stewardship and partnering with the local First Nations. From an infrastructure perspective, our tailings storage facility will operate under phase two through 2028, when phase three will seamlessly take over. This sequencing aligns with our waste storage capacity and existing permitting framework, diminishing the risk of potential bottlenecks.

While our analysis confirms that 440 tons per day meets our return thresholds, even at conservative silver price assumptions, we've preserved valuable optionality. The infrastructure we're building can support expansion beyond this level should future conditions warrant. Meanwhile, our exploration program continues to deliver consistently, replacing depletion and growing our resource base. What we're accomplishing at Keno Hill is systematic de-risking while advancing the project towards sustainable, profitable production. With each milestone we achieve, we're increasing our confidence in the project's potential to deliver meaningful returns to our shareholders. As with any development project, execution remains key. Turning to slide seven, the second quarter delivered exceptional results across multiple metrics. On the financial side, we achieved record sales of $304 million, net income applicable to common shareholders of nearly $58 million, and record adjusted EBITDA of $133 million, improving our net leverage ratio to 0.7 times.

We generated cash from operations of over $160 million and record quarterly free cash flow of $104 million. Operationally, we produced 4.5 million ounces of silver and nearly 46,000 ounces of gold. Our silver operations delivered cash costs of -$5.46 per ounce and all-in sustaining costs of $5.19 per ounce. That's after byproduct credits. CASA Berardi's unit costs dropped by over $600 per ounce over the prior quarter. Lucky Friday set a new quarterly milling record. On Greens Creek, strong performance year to date. We made positive revisions to gold production and silver cost guidance, with the new guidance summarized in slide 24 and the appendix of this presentation. I'll now hand the call over to Russell for a detailed financial review.

Speaker 5

Thank you, Rob. Turning to slide nine, our capital allocation priorities center on strengthening our balance sheet, investing in our highest return opportunities across our portfolio, and maximizing free cash flow generation. As we focus on these priorities, we're investing in organic growth. Notably, this was Keno Hill's first positive free cash flow quarter under our ownership. We continue focusing on deleveraging, having improved our net leverage ratio to 0.7 times, and earlier this week, we initiated a partial redemption for $212 million of our senior notes. Additionally, we also repaid our investment Quebec notes totaling CA$50 million from free cash flow in July. We're also progressing on portfolio optimization with strategic review of CASA Berardi and disposal of a non-core exploration property and a non-core equity position.

On the right-hand side of the slide, you'll note that our producing asset base generated over $100 million in free cash flow, a new quarterly record with all four mines contributing to this total. Moving on to slide 10, silver made up 41% of our consolidated revenue, with gold increasing to 42% based on the performance of CASA Berardi and Greens Creek, in addition to the increase in the price of gold, while base metals made up the remaining 17%. With the increase in the silver price, we've also seen an expansion in our margins, which grew from 65% last quarter to 85% this quarter, with silver AISC at $5.19 per ounce after byproduct credits.

I'll discuss the details more on the next slide, but in addition to the performance of our operations, we took steps during the quarter to improve our balance sheet, which resulted in our net leverage ratio improving significantly from 2.7 times to 1.5 times last quarter. Turning to slide 11, our strategic approach to raising capital demonstrates prudent financial management, in which we utilized our ATM facility to raise funds for a partial redemption of the senior notes. We chose the ATM facility to execute this capital raise to minimize shareholder dilution versus traditional equity offerings, which have had discounts of more than 10% this year, whereas we executed the ATM at a price which is approximately 10% higher than the volume weighted average price for the quarter at a minimal cost to our shareholders.

This planned debt reduction lowers our overall future interest expense by about $16 million on an annual basis. We anticipate the interest savings will be reinvested to accelerate value-creating activities, including investment in our operations, expanded exploration programs, as well as strengthening the balance sheet. Our strong existing asset base provides us confidence in our ability to service the remaining debt, even apart from using the proceeds from any potential asset sales and fund growth initiatives while maintaining operational flexibility. Going forward, we would prioritize other means for debt reduction before issuing more equity. I'll now turn the call to Carlos to discuss the details of our operations.

Speaker 6

Thank you, Russell. I'll begin on slide 13. Greens Creek continues to be our flagship asset, generating a strong free cash flow. The second quarter's silver production was 2.4 million ounces, a 21% increase over the first quarter, with silver grades averaging 13.44 ounces per ton. Total cost of sale decreased 15% to just under $59 million. Our second quarter's silver cash cost was negative $11.91 per ounce, and all-in sustaining costs were negative $8.19 per ounce, both after byproduct credits. Better than expected gold production and higher gold prices drove Greens Creek's strong cost performance over the prior quarter. The operation generated over $75 million in operating cash flow and $69 million in free cash flow. For Greens Creek, we maintain our silver production guidance, increased gold production guidance, and reduced cost guidance because we expect higher byproduct credits from gold.

The table on slide 13 summarizes the guidance for the mine. Turning to slide 14, Lucky Friday achieved a new quarterly milling record of over 114,000 tons, beating the first quarter record by 5%. We maintain consistent silver production of 1.3 million ounces, with grades of 12.5 ounces per ton. Total cost of sale decreased 4% to $42.3 million, with cash costs of $6.19 per ounce and all-in sustaining costs of $19.07 per ounce. The operation generated $20.7 million in operating cash flow and nearly $5 million in free cash flow. We expect the third quarter to be our softer production quarter of the year due to planned capital projects that will impact cost availability, which was anticipated in our February guidance. Lucky Friday guidance remains with no change.

Turning to slide 15, Keno Hill's second quarter's silver production reached just over 750,000 ounces at a milling rate of just under 300 tons per day as we continue ramping to higher tonnage rates. Importantly, we delivered $2.7 million in free cash flow in the second quarter, our first positive free cash flow quarter under Hecla ownership. The operation remains in pre-commercial production as the ramp-up continues and capital projects are executed. The cemented tailings plant construction work is progressing well, and we expect completion at the year's end. On slide 16, CASA Berardi showed significant cost improvements over the prior quarter, with both cash costs and all-in sustaining costs decreasing by more than $600 per ounce. Second quarter gold production increased 37% to just over 28,000 ounces, driven by planned increases in both underground and surface outputs.

We expect the stripping ratio of the 160P to decline in the fourth quarter, with our surface mining contractor completing demobilization. This will drive further cost reduction while maintaining full mill capacity. Cash costs in the second quarter improved to $1,578 per ounce and all-in sustaining costs to $1,669 per ounce. We expect to provide an update on our strategic review process in the coming weeks. I will now pass the call to Kurt.

Speaker 8

Thanks, Carlos. Turning to slide 17, I will give an update on the activities going on in Nevada. Historically, Midas produced 2.2 million ounces of gold and 27 million ounces of silver at exceptional grades. With a fully permitted mill, ample tailings capacity, and 30,000 acres barely explored, Midas offers potentially transformative upside. The 2020-2021 center discovery containing 169,000 ounces of gold and inferred resources hints at a larger untapped system. Active drilling is delivering results. Seven of 12 planned holes are completed and have yielded two new gold-bearing structures with visible gold. This is not from infill drilling or incremental extensions, but from areas located over two miles from the existing underground development and dense drilling, and that really is what makes this particularly exciting. These potentially emerging discoveries, combined with widespread mineralization indicators throughout the area, support potential for a significant new deposit.

A recent draft engineering assessment confirms the mill remains in good condition, requiring only modest capital to restart. Hollister was historically ranked as North America's third highest-grade underground gold mine, producing 0.5 million ounces of gold equivalent. Located within trucking distance of Midas' processing facilities, the large property shows extensive surface alteration and mineralization. The Hadar Graben resource anchors multiple high-grade expansion targets with additional potential at Santorini. Both assets feature proven high-grade production history, existing infrastructure eliminating major capital needs, and vast unexplored potential. With that, I'll turn it back to Rob.

Speaker 2

Thanks, Kurt. Turning to slide 18, our 2025 strategy focuses on four key themes. First, we're focused on creating long-term value at Keno Hill by prioritizing permitting and project execution. Second, we'll continue deleveraging through strong free cash flow generation. Third, we're establishing a capital allocation framework to ensure smart organic investment. Fourth, we're rationalizing our portfolio with the CASA Berardi strategic review expected to conclude in the coming weeks. I now want to address why I feel Hecla Mining Company makes for a compelling investment opportunity, so please turn to slide 19. Hecla's competitive advantage is evident in our industry-leading reserve mine life. Our average reserve mine life of 14 years is double the silver industry peer average of just 7 years.

This provides exceptional stability and long-term value creation potential and allows for us to invest in these operations under the belief that we have more than a decade to earn a return on those investments. Not only do our mines have world-class mine lives, they're also positioned in the U.S. and Canada, which gives us the best jurisdictional risk ranking of any of our peers. Moving on to slide 20, we see another reason to own Hecla shares and what makes our portfolio unique. Hecla offers investors substantial silver revenue exposure, with about 45% of our nine-month 2024 revenue coming from silver, amongst the highest in our peer group. This calculation includes recent peer transactions on a pro forma basis. Our silver exposure has remained strong, with second quarter results showing 41% of revenues from silver sales.

Our asset portfolio is heavily focused on silver, with both revenues and resources concentrated in this precious metal. Finally, on slide 21, we compare Hecla to our immediate peer group on core valuation metrics. We believe Hecla represents the best value investment in the mid-cap silver space. We trade at approximately $1.60 per silver equivalent ounce of total resources, the lowest amongst mid-cap peers, and at 1.3 times NAV, which puts us at the low end of the peer range. The bubble sizes on this chart are equally important. They reflect jurisdictional quality, with larger bubbles indicating safer jurisdictions. As you can see, Hecla's focus on safe jurisdictions is demonstrated by our bubble size relative to our peers. This undervaluation represents significant asset reevaluation upside as we shift capital towards high-return projects designed to unlock the true value of our mineral reserves and resources.

I'm confident that over time and through continued execution, our true value will be better reflected in our share price. With that, Operator, I'd like to open the call to questions.

Speaker 7

At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from a line of Wayne Lam with TD Securities. Please go ahead.

Yeah, thanks. Morning, guys. Maybe at Greens Creek, congrats on a good quarter there operationally. Just wondering what was driving the higher grades and the outperformance there in the quarter. Was that a function of positive reconciliation, or were those higher grades anticipated as part of the mine plan? Just wondering maybe if there's potential for that to kind of continue here, or should we expect a bit of a reversion in the back half of the year?

Speaker 6

We are expecting to continue with similar grades for the remainder of the year. The main reason for this was the good execution. We had additional areas available with better grades, and that was the main reason for it.

Okay, got it. Thanks. Maybe at Keno Hill, it seems like there's been quite a change in commentary quarter to quarter, maybe helped by the continued strength in metal prices. I guess last quarter, the commentary seemed to indicate that the 440 tons wasn't sustainable given the confines of the current permit constraints. Just wondering, you know, what's changed there that would enable you to reach that target? Are you anticipating more ore from Birmingham or Flaming Moth? Just wondering what's driving the change in thinking here.

Speaker 2

Thank you for your question. We started the year with just Birmingham. We've expanded to Flaming Moth, so we have a little bit more operational flexibility. We're also now focused on reducing overbreak, controlling dilution, ore control, all those sorts of things. Anything you want to add, Carlos, or Matt?

Speaker 6

It is just the proper balance between capital execution, permitting, and space for growth. We are trying to balance all the components, and that's it.

Okay, you have enough capacity on the back end to get to the 440 tons given the current permit constraints?

Speaker 2

We won't be getting there this year. That will still take some time, but we do expect to see an increase next year.

Okay. Okay. Maybe just one last question from me, maybe on the debt. Just wondering in the context of record prices and the number of your peers being able to delever organically and buy back some stock, did you guys feel as though the portfolio is not positioned to where the current operations would be able to service that debt? Just wondering if viewed in conjunction with the elimination of the Silver Link dividend, has the capital allocation strategy changed here, or just wondering why you felt the need to retire a large amount of the notes with quite a bit of term left on the debt?

Speaker 1

Yeah, thanks, thanks, Wayne. The idea behind that was both the Silver Link dividend and the interest that leaves the company to service the debt. Those funds would be better served by our investors to be invested in our operations and in the opportunities that we have within our portfolio. We took the opportunity to reduce the debt so that we could increase the cash flow and reinvest in the assets. You know, you heard Kurt talk about Nevada. We've owned Nevada for quite some time. We've been high on Nevada for quite some time. The exploration there has been kind of in fits and starts as we've had cash flow. What we're looking to do is really generate consistent cash flow so that we can then reinvest those cash flows back into those areas that will benefit our investors the most.

Okay, great. Thanks for taking my questions and congrats on a good quarter.

Thank you.

Speaker 7

Your next question comes from the line of Heiko Ihle from H.C. Wainwright. Please go ahead.

Speaker 0

Hey, Rob and team. Thanks for taking my questions.

Good morning, Heiko.

Oh, perfect. At CASA, you state in the release that the pit stripping ratio is expected to decline in the fourth quarter of this year. That should be further reducing your costs. Two-part follow-up to that. First of all, we're halfway through Q3 next week. Can you provide a bit of color on what we should model for this quarter? Maybe also quantify the improvements in the stripping ratio that you expect to see in Q4 and your current costs to haul that waste, please.

Speaker 4

Hi, Heiko. This is Matt Blattman. There are a lot of pieces that are moving here, but one of the primary factors to the decrease in stripping ratio is the pit is nearing the end of its mine life. As you go down deeper in the pit, your stripping ratio is just going to increase or improve geometrically as it goes down. We started off the year somewhere around that 15 to 20 to 1 stripping. We're probably close to 10 to 1 at this point. You'll just see it completely decrease over the next 18 months until that last ton of ore that comes out is probably 1 to 1. We're probably looking at something like a 10% decrease before the end of the year, but it's just going to go slowly until we reach the end.

Speaker 1

Maybe I'll jump in just a little bit, right? Because, you know, clearly we don't give guidance on a quarterly basis. We've seen the stripping ratio go down as we've gone through the year, and you see that come through in the economics. We expect as that stripping ratio will go down, we'll be able to reduce contract reliance, which we should see then a cost improvement from that. As we look at the guidance that we provided, we expect to meet the annual guidance throughout the year. You know, clearly we don't give that quarter by quarter.

Speaker 0

Fair enough. The permitting process or the cost to haul the waste, any color on that?

Speaker 4

I wouldn't expect a dramatic change. As we go deeper, the distances are going to get farther. The biggest improvement we'll see is as we let the mining contractor go and mine with our own fleet, that will help. Like I said, the haulage distances are just going to get longer for us and not going to help.

Speaker 0

Got it. I get there is a strategic review process here, but with the permitting process for the new pits at CASA Berardi, how much time should we mentally be looking at for that to happen? Maybe just cash costs, like the costs that you pay to get the sundries, I assume are reasonably de minimis, correct?

Speaker 2

Permitting is not a super well-defined process. It takes time. There are review periods, backwards and forwards. What we've previously said is that there was going to be a five-year permitting hiatus. That would allow us, towards the tail end of that, to do some pre-stripping, some dewatering, and so on and so forth, getting ready. That's all we can say. We can't be much more specific than that at this point.

Speaker 0

Cool. Okay, I'll get back to you. Thank you.

Speaker 2

Thank you, Heiko.

Speaker 7

Your next question comes from the line of Joseph Reagor with ROTH Capital Markets. Please go ahead.

Hey, guys. Thanks for taking the questions. I guess first, I'm back on Keno. On the slide five from the presentation, it shows that at the 440 tons per day, that the free cash flow increases starting pretty much in 2028. Is that driven by higher grades, lower CapEx, a combination thereof, just so we can, you know, model out that?

Speaker 1

Yeah, Joel, I can jump in here. It's a combination of a few things. You do see some of the larger projects coming to an end at that point. You do see capital coming off to some degree. If you flip to the next slide, you will see that there are some projects that will have to obviously continue and will have to continue mine development and those types of things. It's not that capital comes to an absolute halt, but it does. As we complete the tailings batch build plant, there's some water treatment capacity, those types of things. When those things come to a completion, you do see the capital decrease. You also see that throughput, that throughput getting to 440 tons per day will scale up and get to that 440 tons per day kind of late in this decade is the anticipation.

As a result, you see more throughput, and therefore you would see higher ounce production as well.

Okay. That's helpful. Over at Greens Creek, it looks like it could have been an even better quarter. I mean, it was already a pretty good quarter for the mine, but it could have been a better quarter if not for maybe some concentrate that didn't get shipped out in time to count it. Should we expect that to get sold next quarter?

Yeah, Greens Creek, we've talked about this. You know, the sales can be lumpy, right? Because we ship out essentially generally once per month on a ship. Depending on when you ship within the month, we had a shipment in June, but it was kind of earlier in the month of June. Compared to in March, it was later in the month of March. We just had an inventory buildup. It really just comes down to when a ship would leave in September, whether we would have that inventory kind of remain stable or whether we would see a drawdown in inventory.

Okay, at some point, it'll go out.

From the perspective of, sorry, Joe, what was that?

At some point, it'll be sold. It's just, it's not necessarily going to show up in Q3. It's just eventually going to show up.

Oh, yeah, absolutely. You know, we have to put together, in one ship, you may have two or three different parcels going to two or three different customers. You are managing that process, trying to both manage the inventory on site, as well as getting ships in and out based on types and light and when customers need it, etc. It is a balancing act trying to get it all done. We look at that and try to maximize, get as much revenue as quickly as possible. It is not like we're sitting on it.

Okay. All right. That's helpful. Thanks. I'll turn it over.

Speaker 7

Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Alex Gerentu with National Bank Financial. Please go ahead.

Hey, good morning, guys, and congrats on the great quarter. Good to see all your operations firing in all cylinders there. A couple of questions for me on CASA Berardi and Keno Hill. Maybe just starting with Keno Hill, I wanted to clarify your slide five. You've got, you know, free cash flow and discounted cash flow expectations at different silver prices. They're saying 440 tons per day. Is that kind of assuming your gradual ramp-up to 440, or is that a hypothetical assuming it was 440 in 2026, 2027, 2028, etc.? I'm just trying to remember.

Speaker 1

Yeah, maybe we should have clarified that in that slide. That is a ramp-up to 440 tons per day. We would get to that 440 tons per day later in the decade, 2029 or 2030 in this scenario, ramping up to that point. I appreciate the question because, you know, we should have clarified that on the slide.

Okay. That makes sense. I figured that was probably the case, but yeah, I wanted to check. Just kind of related there, and I know somebody asked this earlier or a variation of it, just on the capital side, you know, I could kind of use that chart to help calibrate, but you noted a few things are coming off. Any big spending that we could kind of think about over the next two years to get to that $440 rate? Any major investments that have to be done?

Yeah, you know, Carlos is sitting here with me too, so please fill in some of the details. We do have to build some tailings over the next few years, and I think you see that on slide six. It's kind of laid out there. We're working on a tailings batch build plant now, and that will, you know, kind of come to the conclusion sometime next year. There's some additional water treatment that we have to put in. I think there's some waste storage, some other infrastructure, some buildings, and things like that.

Speaker 6

Yeah, there are already investments related with power distribution upgrades. In some of the projects that are going to take over one year, there are significant upgrades in the infrastructure, and we are expecting to maintain a similar level of investment for the rest of the decade.

Okay. On the permitting for dry site tailings, slide six shows that later in 2028, additional permitting capacity is required. Is that capacity required just to maintain it at 440? My question is, come 2028, end of the year, what's the risk that that's kind of a hard stop unless you have the permitted additional capacity, or do you have a bit more room to keep going and work on the permits?

Speaker 4

I guess I'll take that one. Yes, you know, in the end of 2028, we start to run into a capacity requirement. We need additional capacity for tailings. We do have some flexibility that once we have the cemented tailings plant constructed and operational, we have more opportunity to put more of the tailings underground, which then makes that surface capacity less of a risk. Yeah, somewhere in 2029, we do have to have that permit in place. It's already underway. We're already chasing that. It does give us some room to work. Similarly, the waste production, there is a limit in our permit that says total tons of waste that we can mine. It's not a surface constraint. It's not any physical constraint. It's in the permit. That needs an expansion as well, and they hit about the same timeframe.

That's part of the reason why you ramp up to 440 over a longer period. If you ramp up the mine to 440 very quickly and then run out of capacity, then you're shut down. That doesn't help anyone either. It's all about balancing all the pieces at once.

Yeah, okay. That makes a lot of sense. Thanks. Just lastly, CASA Berardi, gold prices are obviously quite high. Is there opportunity to, and I guess a similar question here on the tailings and permits, is there opportunity to continue CASA Berardi even for another 6 or 12 months, you know, kind of lowering the cutoff, getting more tons through, or are there other constraints, whether it's permits or tailings or something like that, that kind of making end of 2027 a deadline?

Speaker 2

We started this year with a view of closing down the underground around May of this year. Obviously, gold prices have helped, and you know, it's turning out to be an increasingly valuable asset. We've now extended the underground to at least the end of the year, and then we'll just see where gold prices are.

Okay. Last one here on CASA, obviously a very strong Q2. You guys have made 49,000 ounces from that mine year to date. You've kept guidance. I guess my question is, you know, any upside to that number, or should we be kind of thinking that production will come down the second half of this year?

Speaker 1

I guess I can jump in and ask that. You know, we're working through a strategic review right now. I would suggest, as Rob said in his comments early in the slide, we'll have something to talk about for the market in a few weeks, and at that point, we'll be able to answer that question.

All right. Fair enough. Thanks.

Speaker 7

Your last question comes from the line of Kevin O'Halloran with BMO Capital Markets. Please go ahead.

Hey, Rob and team, thanks for taking my question, and congrats on the quarter. Just going back one more time to Keno, on the ramp-up there, can you give us any granularity on the trajectory of the throughput? Would it be like a more gradual increase to the 440 tons per day, or should we expect kind of more lumpy gains in throughput as you complete some of these infrastructure items?

Speaker 2

It'll be a gradual ramp-up. In 2027, we'll probably be somewhere at around 330 tons per day from memory, and that's around 75% of the permanent capacity. It'll continue to ramp up to 440. Yeah, that's, yeah, there's nothing to that. That's the plan.

Okay, great. That's helpful. Just final question for me, shifting to the Montana assets. Can you remind us what your current thinking is on how to advance those? I think you've previously been looking at a few options, like maybe bringing in a partner versus advancing it yourself. Is there any updates on your thinking there?

Not really. Our focus has really been on completing the CASA review. I have David Sienko here with me. We're basically in the final stages of the review period. In fact, I think that finishes next week. Can you fill us in, David?

Sure. Yeah. We expect to get a finding of no significant impact on our permit application, and the objection period ended this week. The Forest Service will work through that. We would expect by, say, October timeframe that we would have that plan of operations approved, which would allow us to begin to rehab the adit and the portal and to begin the exploration work at that project. We'll see what happens with the objection period.

This is, just to remind you, primarily a copper asset, a copper equivalent grade of about 1.2% copper equivalent. I would say that it's probably not going to be a core for us, and we would be receptive to someone who's going to have a copper focus coming in and partnering with us. We do definitely want to participate in the upside on this thing because we see substantial value there to be realized.

Okay, great. That's it for me. Thanks, guys.

Thank you, Kevin.

Speaker 7

Thank you. That concludes our question and answer session. I will now hand over the call to Mike Parkin for closing remarks.

Speaker 2

Actually, I'll make some closing remarks, Operator. Just before we wrap up, I do want to recap Hecla's value proposition. Unmatched jurisdictional security is something I've talked about. In an era of increasing geopolitical uncertainty, I think Hecla offers what others can't: complete operational stability. With 100% of our core assets in Canada and the U.S., we eliminate the regulatory surprises, the policy shifts, the security risks that plague some of our competitors in less stable jurisdictions. Your investment's going to be protected by really the world's most reliable mining frameworks. You've got industry-leading silver exposure, and if you believe in silver's fundamentals, and you should, Hecla delivers peer-leading silver revenue exposure. While we do produce gold and lead and zinc, silver dominates our revenue matrix, our revenue mix, rather. That percentage could increase further depending on the results of the strategic review of CASA Berardi.

When silver moves, we should move more. This concentrated exposure gives you high leverage to the metal with some very compelling supply-demand dynamics in the sector. You've got decades of visible production. Short mine lives create investment uncertainty, and our assets offer something rare: multi-decade production visibility that extends well beyond typical investment horizons. Our long-life mines don't just offer returns next quarter; they provide a sustainable production platform that's positioned to deliver value through multiple commodity cycles. This isn't just speculating on finding tomorrow's ounces; it's ownership of proven long-term cash flow generation. There's disciplined capital allocation. While competitors chase expensive M&A deals in risky jurisdictions, we're deliberately staying on the sidelines of the recent consolidation frenzy. Our strategy is clear: create value through the drill bit, not through the checkbook.

Our proven exploration teams consistently delivered mine life extensions and new discoveries, and that's the most accretive form of growth. We're also built for all cycles. Our crown jewels, Greens Creek and Lucky Friday, they're not just mines; they're fortresses. These are low-cost, long-life assets that are projected to generate cash even in downturns. That positions us to play offense when others are forced to play defense. When the next cycle turns and distressed assets flood the market, we expect to have a balance sheet that will allow us to capitalize while others perhaps struggle to find their high-cost operations in risky jurisdictions. The bottom line really is that I think Hecla offers what smart investors seek, and that's jurisdictional certainty, industry-leading silver leverage, decades of production visibility, disciplined management, and cycle-proof assets.

In a sector full of risks, our approach is to systematically eliminate the variables that destroy value while maximizing exposure to silver's upside. This is not just another mining investment, it's a strategic position in the future of silver backed by the stability that only the U.S. and Canadian assets can provide. Thanks for joining us today, and we look forward to updating you on our continued progress in delivering shareholder value through operational excellence and strategic execution. Have a great day, everyone.

Speaker 7

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.