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HECLA MINING CO/DE/ (HL)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue was $245.1M, essentially flat versus Q2 and the second-highest in company history; GAAP EPS was $0.00, adjusted EPS $0.03, and Adjusted EBITDA $88.9M, while free cash flow was -$0.7M .
  • Silver segment revenues were strong, but operational issues impacted production: Greens Creek had 5 days of unplanned SAG mill maintenance and Keno Hill’s mill was offline ~35 days due to permitting delays following the Eagle Gold heap leach failure; Lucky Friday posted the second-highest mill throughput in its 80-year history .
  • Guidance was tightened: silver production was lowered at Greens Creek and Lucky Friday; Lucky Friday’s cost guidance was raised; Casa Berardi and Keno Hill production/cost outlooks were affirmed; total 2024 silver guidance moved to 16.0–17.0 Moz (from 16.5–17.5 Moz) .
  • Deleveraging continued: total debt fell $50.6M Q/Q and net leverage improved to 1.8x, aided by ATM proceeds and insurance receipts; the company reiterated an intent to further reduce revolver borrowings at current price/production levels .
  • CEO transition: Rob Krcmarov named President & CEO effective Nov 7; management emphasized disciplined capital allocation, focus on internal growth, and a stakeholder-first approach at Keno Hill (First Nation of Na-Cho Nyäk Dun, Yukon Government) .

What Went Well and What Went Wrong

What Went Well

  • Silver segment revenue strength and operational resilience: “record silver segment revenues” and second-highest company revenues driven by strong silver/gold price realizations and segment performance .
  • Greens Creek free cash flow and cash generation: $54.1M CFO and $46.9M FCF for Q3; YTD FCF surpassed $100M at Greens Creek .
  • Deleveraging: reduced total debt by $50.6M; net leverage cut to 1.8x; CFO highlighted use of ATM proceeds and insurance to pay down revolver .

What Went Wrong

  • Operational interruptions: Greens Creek saw 5 days of unplanned SAG mill maintenance (plus 2 days in October) impacting throughput and by-product credits; Lucky Friday faced higher maintenance/contractor costs; Keno Hill’s mill downtime (~35 days) due to permitting delays .
  • Consolidated silver costs rose Q/Q: Silver cash cost increased to $4.46/oz and AISC to $15.29/oz, reflecting lower silver production/by-product credits and inventory drawdowns at Greens Creek .
  • Non-cash write-down: $14.5M write-down (mostly remote vein miner) following vendor exit and improved Underhand Closed Bench method at Lucky Friday; ramp-up/suspension costs increased to $13.7M on Keno Hill throughput delays .

Financial Results

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$189.5 $245.7 $245.1
Net Income to Common ($USD Millions)-$5.9 $27.7 $1.6
Diluted EPS ($USD)-$0.01 $0.04 $0.00
Adjusted EBITDA ($USD Millions)$71.6 $90.9 $88.9
Gross Profit ($USD Millions)$19.2 $51.4 $59.3
Cash from Operations ($USD Millions)$17.1 $78.7 $55.0
Capital Expenditure ($USD Millions)$47.6 $50.4 $55.7
Free Cash Flow ($USD Millions)-$30.5 $28.3 -$0.7
Silver Produced (oz)4,192,098 4,458,484 3,645,004
Silver Cash Cost ($/oz, after by-product credits)$4.78 $2.08 $4.46
Silver AISC ($/oz, after by-product credits)$13.10 $12.54 $15.29

Segment breakdown – Q3 2024:

SegmentSales ($USD ‘000)Total Cost of Sales ($USD ‘000)Gross Profit ($USD ‘000)CFO ($USD ‘000)Capex ($USD ‘000)FCF ($USD ‘000)Silver Produced (oz)Gold Produced (oz)Cash Cost ($/oz)AISC ($/oz)
Greens Creek$116,568 $(73,597) $42,971 $54,076 $11,466 $46,935 1,857,314 11,746 $0.93 $7.04
Lucky Friday$51,072 $(39,286) $11,786 $34,374 $11,178 $23,196 1,184,819 —$9.98 $19.40
Keno Hill$19,809 $(19,809) $0 $(6,811) $14,406 $(18,553) 597,293 —N/A N/A
Casa Berardi$50,308 $(46,280) $4,028 $15,305 $18,606 $(3,301) —20,534 $1,754 $2,059

Key KPIs and balance metrics:

KPIQ1 2024Q2 2024Q3 2024
Realized Silver Price ($/oz)$24.77 $29.77 $29.43
Net Debt / LTM Adjusted EBITDA (x)2.7 2.3 1.8
Total Debt ($USD ‘000)$671,092 $590,451 $539,804
Cash & Cash Equivalents ($USD ‘000)$80,169 $24,585 $22,273
Dividend per Common Share ($)$0.00625 $0.01375 $0.01375

Note: For Q3 estimates comparisons, S&P Global consensus was unavailable at time of analysis due to data access limits.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Greens Creek silver production (Moz)FY 20248.8–9.2 8.6–9.0 Lowered
Lucky Friday silver production (Moz)FY 20245.0–5.3 4.7–5.0 Lowered
Casa Berardi gold production (koz)FY 202480–87 80–87 Maintained
Keno Hill silver production (Moz)FY 20242.7–3.0 2.7–3.0 Maintained
Total silver production (Moz)FY 202416.5–17.5 16.0–17.0 Lowered
Greens Creek cash cost ($/silver oz)FY 2024$2.25–$3.00 $1.50–$2.00 Lowered
Greens Creek AISC ($/silver oz)FY 2024$8.25–$9.00 $7.50–$8.00 Lowered
Lucky Friday cash cost ($/silver oz)FY 2024$4.25–$5.25 $6.00–$6.50 Raised
Lucky Friday AISC ($/silver oz)FY 2024$12.75–$14.00 $14.50–$15.00 Raised
Total silver AISC ($/oz)FY 2024$13.00–$14.50 $13.50–$14.50 Slightly raised
Keno Hill production costs excl. D&A ($M/quarter)H2 2024$25–$27 $25–$27 Maintained
Total capex ($M)FY 2024$196–$218 $196–$218 Maintained
Common dividend declaredQ3 2024—$0.01375/share Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1)Previous Mentions (Q2)Current Period (Q3)Trend
Keno Hill permitting & stakeholder engagementSafety/environment improvements, ramp-up; cemented tails plant targeted Q4’24 Record production; underhand mining conversion targeted end-2025 Mill offline ~35 days due to permitting delays post Eagle Gold incident; cemented tails plant completion now Q2’25; production in 2025 similar to 2024; underhand mining now expected in 2026 More cautious/extended timelines
Greens Creek operationsStrong production; lower AISC Planned maintenance, inventory build; low cash costs 5 days unplanned SAG VFD maintenance (2 more in Oct); added copper as payable metal; still strong FCF Short-term disruption; strategic positive (copper)
Lucky Friday throughput & costsRestart, ramp to full production Record mill throughput; strong FCF Second-highest throughput; higher maintenance/contractor costs; guidance raised for costs Operational strength; cost inflation
Capital allocation & leverageNet leverage 2.7x; plan to <2.0 in 12 months Record EBITDA; net leverage 2.3x Net leverage 1.8x; reduced revolver using ATM/insurance; continued deleveraging expected Improving
Governance/strategy (CEO)——New CEO; focus on disciplined M&A, internal growth, future Investor Day considered Strategic refresh
Casa Berardi strategyTransition to surface-only; underground evaluation Gold production guidance increased; cost guidance unchanged Underground ceases mid-2025; 2027–2032 hiatus; alternatives under evaluation Long-term reset

Management Commentary

  • Interim CEO Cassandra Boggs: “Hecla produced 3.6 million ounces of silver in the third quarter… Strong performance from our silver operations has generated free cash flow of $170 million year-to-date… reducing total debt by $50.6 million” . On Keno Hill: “We are prioritizing building the foundation… valuing the perspectives of the Yukon Government and the First Nation of Na-Cho Nyäk Dun” .
  • Incoming CEO Rob Krcmarov: “Hecla has a remarkable legacy… strong commitment to responsible mining… I look forward to contributing to the Company’s continued growth and success” .
  • CFO Russell Lawlar: “We… issued equity under our ATM program to pay down our revolver… net leverage ratio improved to 1.8x… we also generated a small amount of revenue from copper [at Greens Creek]” .
  • COO Carlos Aguiar (Greens Creek): “5 days of unplanned SAG mill maintenance… We added copper as a payable metal in our silver concentrates… strong free cash flow generation” . (Lucky Friday): “Second highest throughput… costs trended higher… revising production to 4.7–5.0 Moz and AISC to $14.5–$15/oz” . (Keno Hill): “Expenditures on production costs were $25M… cemented tails batch plant now expected mid-2025; underhand mining in 2026” .

Q&A Highlights

  • Labor/contractor costs: ~45–55% of costs inclusive of contractors; contractor usage expected to decline in Q4 as project work subsides .
  • Keno Hill downtime: “We were down 35 days during the third quarter” .
  • Dry stack tailings capacity: plans to continue expansion into year-end and next year; “over 2 years of capacity” expected; not weather restricted .
  • Strategy/M&A: CEO emphasized disciplined criteria, thorough due diligence, focus on internal asset performance; “M&A is best done from a position of strength” .
  • Deleveraging target: management reiterated aim to operate “less than 2x” net leverage over time; aspiration to move towards 1x historically .
  • Portfolio rationalization: review underway; focusing on near/medium-term value assets; updates likely as opportunities arise (potentially around Q2 next year) .

Estimates Context

  • S&P Global consensus for Q3 EPS and revenue was unavailable at time of analysis due to data access limits. As a result, we cannot assess beat/miss versus Wall Street for Q3 at this time.
  • Guidance adjustments imply potential estimate revisions: consolidated silver production lowered (16.0–17.0 Moz), Lucky Friday cost guidance raised, Greens Creek cost guidance lowered, and Keno Hill timelines extended; these changes likely flow into Street models for FY24–FY26 .

Key Takeaways for Investors

  • Greens Creek remains a robust cash engine with Q3 FCF of $46.9M and added copper payability supporting by-product credits; watch for throughput normalization post SAG VFD repair .
  • Lucky Friday execution remains strong on throughput, but costs rose; 2024 silver guidance reduced and cost guidance raised—model margin compression near-term .
  • Keno Hill faces stakeholder/permitting headwinds; mill downtime and revised project timelines (cemented tails Q2’25; underhand mining 2026) suggest 2025 production flat and growth deferred to 2026—key regulatory/capacity milestones are the near-term catalysts .
  • Deleveraging is progressing: total debt -$50.6M Q/Q and net leverage 1.8x; continued revolver paydown expected at current price and production levels—supports equity narrative and optionality .
  • Dividend policy remains active with silver-linked component ($0.01375 this quarter), reflecting realized silver price of $29.43/oz—income kicker tied to commodity tailwinds .
  • Casa Berardi multi-year reset: underground ceases mid-2025 and production hiatus (2027–2032); strategic alternatives under evaluation—monitor for portfolio decisions and timing clarity .
  • New CEO is a potential medium-term catalyst: expect disciplined M&A framework, internal optimization, and possible Investor Day outlining strategic priorities .