Hecla Mining Reports First Quarter 2019 Results

• Financial Results & Earnings
• Mexico
• Quebec
• Alaska
• Idaho

COEUR D'ALENE, Idaho--(BUSINESS WIRE)--Hecla Mining Company (NYSE:HL) (Hecla or the Company) today announced first quarter financial and operating results.

HIGHLIGHTS

• Sales of $152.6 million.
• Cash provided by operating activities of $20 million.
• Net loss applicable to common stockholders of $25.7 million, or $0.05 per basic share.
• Adjusted net loss applicable to common stockholders of $18.5 million, or $0.04 per basic share.¹
• Cost of sales and other direct production costs and depreciation, depletion and amortization ("cost of sales") of $149.2 million.
• Gross profit of $3.4 million and adjusted EBITDA of $33.4 million. Net debt/adjusted EBITDA (last 12 months) of 2.8x.^2,3
• Silver cash cost, after by-product credits, of $2.26 per ounce.⁴
• All in sustaining cost (AISC), after by-product credits, of $9.34 per silver ounce.⁵
• Cash and cash equivalents and short-term investments of $11.8 million.
• Maintain annual capital and exploration spending estimates on a Company-wide basis.
• Suspending Nevada production and cost estimates pending results of comprehensive review.

“Because of Greens Creek’s exceptional performance, Hecla’s first quarter was largely as expected, financially.” said Phillips S. Baker, Jr., Hecla’s President and CEO. “Greens Creek exceeded expectations for both gold and silver production due to higher grades and recoveries. However, Casa Berardi and our Nevada operations both produced less cash flow than expected.”

“Casa Berardi’s gold production was lower in part due to lower grades, which were expected, and also due to the lower mill throughput resulting from some temporary issues in the mill that have now been addressed, and we expect results to improve over the rest of the year,” Mr. Baker continued. “While Nevada operations had better development advance rates, the operating metrics including cost, grade and negative cash flow, were unacceptable. We are reviewing our Nevada operations to determine the best path forward and expect the results of this review in the second quarter. In the meantime, we are suspending our annual Nevada estimates for production and cost. We are maintaining our annual estimates for capital and exploration spending to maintain our liquidity and balance sheet.”

FINANCIAL OVERVIEW

Net loss for the first quarter of $25.5 million was primarily impacted by losses from operations in Nevada of $13.8 million, due to higher costs, as well as lower grades and recoveries, than anticipated. In addition, gross profit was lower by $15.4 million at Casa Berardi as a result of 11,000 less gold ounces sold, as compared to the first quarter 2018; about half was due to planned lower grades, and the balance due to the mill maintenance activities.

Operating cash flow of $20.0 million increased 22% over the first quarter of 2018, principally due to the timing of working capital changes, offset by lower gross profit. Adjusted EBITDA of $33.4 million decreased 40% over the first quarter of 2018, mainly due to lower margins at Casa Berardi and negative margins at our Nevada operations.²

Capital expenditures totaled $36.4 million for the first quarter of 2019 compared to $20.0 million in the prior year period, with the increase mainly due to the addition of the Nevada operations, as well as increased expenditures at San Sebastian of $1.5 million and Lucky Friday of $0.7 million, partly offset by decreased expenditures at Greens Creek of $4.2 million and Casa Berardi of $3.4 million. Expenditures at Nevada operations, Casa Berardi, Greens Creek, San Sebastian, and Lucky Friday were $21.8 million, $5.7 million, $5.3 million, $1.9 million, and $1.7 million, respectively.

Metals Prices

The average realized silver price in the first quarter of 2019 was $15.70 per ounce, 7% lower than the $16.84 price realized in the first quarter of 2018. Realized gold, lead and zinc prices decreased 2%, 22%, and 13%, respectively.

OPERATIONS OVERVIEW

The following table provides the production summary on a consolidated basis for the quarters ended March 31, 2019 and 2018:

The following table provides a summary of the production, cost of sales, cash cost, after by-product credits, per silver or gold ounce, and AISC, after by-product credits, per silver or gold ounce, for the quarters ended March 31, 2019 and 2018.

At the Greens Creek mine, 2.2 million ounces of silver and 14,328 ounces of gold were produced, compared to 1.9 million ounces and 13,118 ounces, respectively, in the first quarter of 2018. The increase was the result of higher silver and gold grades and recoveries, partially offset by reduced ore throughput. The mill operated at an average of 2,298 tons per day (tpd) in the first quarter compared to 2,349 the first quarter of 2018.

The cost of sales for the first quarter was $54.1 million, and the cash cost, after by-product credits, per silver ounce, was $0.49, compared to $41.9 million and $(4.99), respectively, for the first quarter of 2018.⁴ The AISC, after by-product credits, was $3.24 per silver ounce compared to $0.59 in the first quarter of 2018.⁵ The per ounce silver costs were higher primarily due to lower by-product metals prices and production as well as higher onsite power generation costs, partially offset by higher silver production.

Casa Berardi Mine - Quebec

At the Casa Berardi mine, 31,799 ounces of gold were produced, including 6,535 ounces from the East Mine Crown Pillar (EMCP) pit, compared to 40,177 ounces in the first quarter of 2018. The decrease was expected due to lower grades and to lower mill throughput and recovery as a result of adjustments to mill components to accommodate a higher throughput and the requirement for a new carbon in leach (CIL) drivetrain, which is being installed in early May. The shortfall in production in the first quarter is expected to be made up over the remainder of the year. The mill operated at an average of 3,664 tpd in the first quarter, a decrease of 5% compared to the first quarter of 2018.

The cost of sales was $49.1 million and the cash cost, after by-product credits, per gold ounce was $1,113, compared to $49.2 million and $827, respectively, in the first quarter of 2018.^4,6 The increase in cash cost, after by-product credits, per gold ounce is mainly due to lower gold production. The lower production, partially offset by lower capital spending, resulted in higher AISC, after by-product credits, of $1,338 per gold ounce compared to $1,086 in the first quarter of 2018.⁵

San Sebastian Mine - Mexico

At the San Sebastian mine, 441,079 ounces of silver and 3,530 ounces of gold were produced in the first quarter, compared to 512,192 silver ounces and 4,513 gold ounces in the prior year period. The decreases were due to lower grades, as expected, upon transitioning to increased throughput coming from underground mine material, versus higher-grade open pit. The mill operated at an average of 494 tpd in the first quarter, a 29% increase over the first quarter of 2018.

The cost of sales was $12.4 million for the first quarter and the cash cost, after by-product credits, was $11.23 per silver ounce, compared to $5.8 million and $2.81, respectively, in the first quarter of 2018.⁴ The cash cost, after by-product credits, increased due to lower silver production and lower by-product gold production. The AISC, after by-product credits, was $16.55 per silver ounce compared to $8.37 in the first quarter of 2018, principally due to the same factors along with higher capital spending, partially offset by lower exploration costs.⁵

A review of the sulfide ore continues, including a bulk sample to test the capabilities of the third-party plant and the suitability of long-hole stoping for the ore body, with results expected by the fourth quarter of 2019.

Nevada Operations - Nevada

For the Nevada operations, 10,364 ounces of gold and 67,438 ounces of silver were produced. Advance rate increased 27% from the fourth quarter of 2018 but milled tons declined 30%. Capital investment increased from the fourth quarter by $4 million to $21.8 million. Of that amount, $15.8 million was for development at Fire Creek and Hollister, including $4.2 million for the Hatter Graben decline.

The Company is demobilizing the mining contractor, mining some previously-developed remnant stopes at Midas and considering other alternatives to reduce the cash spend and improve the cash flow at the Nevada operations. Some of the possible alternatives include third party processing, reducing development, and changing grade control procedures. Pending the outcome of the review, the annual production and cost estimates for Nevada are being suspended.

Lucky Friday Mine - Idaho

Silver production of 173,627 ounces increased 74% over the prior year period mainly due to a shift in focus from development to production by the salaried staff. Cost of sales for the first quarter was $2.2 million compared to $4.1 million in the first quarter of 2018, with the decrease resulting from lower sales volume due to the timing of concentrate shipments.

The higher level of production is helping to defray more costs associated with the strike at Lucky Friday than originally anticipated. The mine recently celebrated two years of operations without a Restricted Work Duty Injury (RWDI) or Lost Time Injury (LTI).

The construction of the Remote Vein Miner (RVM) continues in Sweden, and delivery is expected in the first half of 2020.

EXPLORATION

Exploration (including Corporate Development) expenses were $4.4 million in the first quarter of 2019, a decrease of $3.0 million compared to the first quarter 2018.

A complete summary of exploration for the first quarter can be found in the news release entitled "Hecla Reports Drilling Success at Casa Berardi, San Sebastian, Greens Creek and Nevada" released on May 8, 2019.

PRE-DEVELOPMENT

Pre-development spending was $0.9 million for the quarter, principally to advance the permitting of Rock Creek and Montanore.

2019 ESTIMATES⁷

The annual production and cost outlook have been suspended for Nevada pending the results of the comprehensive review.

DIVIDENDS

Common

The Board of Directors elected to declare a quarterly cash dividend of $0.0025 per share of common stock, payable on or about June 9, 2019, to stockholders of record on May 24, 2019. The realized silver price was $15.70 in the first quarter and therefore did not satisfy the criteria for a larger dividend under the Company's dividend policy.

Preferred

The Board of Directors elected to declare a quarterly cash dividend of $0.875 per share of preferred stock, payable on or about July 1, 2019, to stockholders of record on June 14, 2019.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Thursday, May 9, at 10:00 a.m. Eastern Time to discuss these results. You may join the conference call by dialing toll-free 1-855-760-8158 or for international dialing 1-720-634-2922. The participant passcode is HECLA. Hecla's live and archived webcast can be accessed at www.hecla-mining.com under Investors or via Thomson StreetEvents Network.

ABOUT HECLA

Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading low-cost U.S. silver producer with operating mines in Alaska, Idaho, and Mexico and is a gold producer with operating mines in Quebec, Canada and Nevada. The Company also has exploration and pre-development properties in seven world-class silver and gold mining districts in the U.S., Canada and Mexico, and an exploration office and investments in early-stage silver exploration projects in Canada.

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 generally accepted accounting principles in the United States (GAAP). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

⁽¹⁾ Adjusted net income (loss) applicable to common stockholders is a non-GAAP measurement, a reconciliation of which to net income (loss) applicable to common stockholders, the most comparable GAAP measure, can be found at the end of the release. Adjusted net income (loss) is a measure used by management to evaluate the Company's operating performance but should not be considered an alternative to net income (loss), 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.

⁽²⁾ Adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to net income (loss), 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 (loss), 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.

⁽³⁾ Net debt to adjusted EBITDA is a non-GAAP measurement, a reconciliation of adjusted EBITDA and net debt to the closest GAAP measurements of net income (loss) and debt 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.

⁽⁴⁾ Cash cost, after by-product credits, per silver or 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 (sometimes referred to as "cost of sales" in this release), 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 silver and gold mining company, management also uses the statistic on an aggregate basis - aggregating the Greens Creek, Lucky Friday and San Sebastian mines - to compare performance with that of other silver mining companies, and aggregating Casa Berardi and Nevada Operations to compare performance with other gold 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 quarter of 2019 and 2018, as production was limited due to the strike and results are not comparable to those from prior periods and are not indicative of future operating results under full production.

⁽⁵⁾ All in sustaining cost (AISC), after by-product credits, is a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization, the closest GAAP measurement, can be found in 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. AISC, after by-product credits, per silver ounce is not presented for Lucky Friday for the first quarter of 2019 and 2018, as production was limited due to the strike and results are not comparable to those from prior periods and are not indicative of future operating results under full production.

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 in the understanding of the economics of our operations and performance compared to other producers and in the investor's visibility 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.

⁽⁶⁾ Cash cost, after by-product credits, per gold ounce is only applicable to Casa Berardi and Nevada Operations production. Gold produced from Greens Creek and San Sebastian is treated as a by-product credit against the silver cash cost.

Other

⁽⁷⁾ Expectations for 2019 include silver, gold, lead and zinc production from Greens Creek, San Sebastian, Casa Berardi and Nevada Operations converted using Au $1,250/oz, Ag $16.00/oz, Zn $1.25/lb, and Pb $1.00/lb. Lucky Friday expectations are currently suspended as there is currently a strike. Numbers may be rounded.

⁽⁸⁾ Estimates for 2019 Nevada production and costs, as well as annual gold estimates, are suspended pending completion of the comprehensive review of Nevada operations.

Cautionary Statements to Investors on Forward-Looking Statements

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. Such forward-looking statements may include, without limitation: (i) estimates of future production and sales; (ii) successful integration of our recently acquired Nevada operations unit and its impact on Hecla's operations and results; (iii) expectations regarding the development, growth potential, financial performance of the Company’s projects; (iv) the Company’s mineral reserves and resources; (v) ability to optimize operations at Casa Berardi; (vi) ability to complete construction of the remote vein miner and for it to operate successfully; (vii) impact of the Lucky Friday strike on production and cash flow; (viii) ability to generate value from innovations being introduced into the mines; (ix) impact of metals prices on cash costs, after by-product credits; and (x) estimates of future smelter demand. 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: (i) there being no significant change to current geotechnical, metallurgical, hydrological and other physical conditions; (ii) permitting, development, operations and expansion of the Company’s projects being consistent with current expectations and mine plans; (iii) political/regulatory developments in any jurisdiction in which the Company operates being consistent with its current expectations; (iv) the exchange rate for the Canadian dollar to the U.S. dollar, being approximately consistent with current levels; (v) certain price assumptions for gold, silver, lead and zinc; (vi) prices for key supplies being approximately consistent with current levels; (vii) the accuracy of our current mineral reserve and mineral resource estimates; and (viii) the Company’s plans for development and production will proceed as expected and will not require revision as a result of risks or uncertainties, whether known, unknown or unanticipated. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the “forward-looking statements.” Such risks include, but are not limited to gold, silver and other metals price volatility, operating risks, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, community relations, conflict resolution and outcome of projects or oppositions, litigation, political, regulatory, labor and environmental risks, and exploration risks and results, including that mineral resources are not mineral reserves, they do not have demonstrated economic viability and there is no certainty that they can be upgraded to mineral reserves through continued exploration. For a more detailed discussion of such risks and other factors, see the Company’s 2018 Form 10-K, filed on February 22, 2019, and Form 10-Q filed on May 9, 2019 with the Securities and Exchange Commission (SEC), as well as the Company’s other SEC filings. The Company does not undertake any obligation to publicly release 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

Reporting requirements in the United States for disclosure of mineral properties are governed by the SEC and included in the SEC's Securities Act Industry Guide 7, entitled “Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations” (Guide 7). Although the SEC has recently issued new rules rescinding Guide 7, the new rules are not binding until January 1, 2021, and at this time the Company still reports in accordance with Guide 7. However, the Company is also a “reporting issuer” under Canadian securities laws, which require estimates of mineral resources and reserves to be prepared in accordance with Canadian National Instrument 43-101 (NI 43-101). NI 43-101 requires all disclosure of estimates of potential mineral resources and reserves to be disclosed in accordance with its requirements. Such Canadian information is included herein to satisfy the Company's “public disclosure” obligations under Regulation FD of the SEC and to provide U.S. holders with ready access to information publicly available in Canada.

Reporting requirements in the United States for disclosure of mineral properties under Guide 7 and the requirements in Canada under NI 43-101 standards are substantially different. This document contains a summary of certain estimates of the Company, not only of proven and probable reserves within the meaning of Guide 7, but also of mineral resource and mineral reserve estimates estimated in accordance with the definitional standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. Under Guide 7, the term "reserve" means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The term "economically", as used in the definition of reserve, means that profitable extraction or production has been established or analytically demonstrated to be viable and justifiable under reasonable investment and market assumptions. The term "legally", as used in the definition of reserve, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a reserve to exist, Hecla must have a justifiable expectation, based on applicable laws and regulations, that issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with Hecla's current mine plans. The terms “measured resources”, “indicated resources,” and “inferred resources” are Canadian mining terms as defined in accordance with NI 43-101. These terms are not defined under Guide 7 and are not normally permitted to be used in reports and registration statements filed with the SEC in the United States, except where required to be disclosed by foreign law. The term “resource” does not equate to the term “reserve”. Under Guide 7, the material described herein as “indicated resources” and “measured resources” would be characterized as “mineralized material” and is permitted to be disclosed in tonnage and grade only, not ounces. The category of “inferred resources” is not recognized by Guide 7. Investors are cautioned not to assume that any part or all of the mineral deposits in such categories will ever be converted into proven or probable reserves. “Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of such a “resource” will ever be upgraded to a higher category or will ever be economically extracted. Investors are cautioned not to assume that all or any part of a “resource” exists or is economically or legally mineable. Investors are also especially cautioned that the mere fact that such resources may be referred to in ounces of silver and/or gold, rather than in tons of mineralization and grades of silver and/or gold estimated per ton, is not an indication that such material will ever result in mined ore which is processed into commercial silver or gold.

Qualified Person (QP) Pursuant to Canadian National Instrument 43-101

Dean McDonald, PhD. P.Geo., Senior Vice President - Exploration of Hecla Mining Company, who serves as a Qualified Person under National Instrument 43-101, supervised the preparation of the scientific and technical information concerning Hecla’s mineral projects in this news release. 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 Greens Creek Mine are contained in a technical report prepared for Hecla titled “Technical Report for the Greens Creek Mine, Juneau, Alaska, USA” effective date March 28, 2013, and for the Lucky Friday Mine are contained in a technical report prepared for Hecla titled “Technical Report on the Lucky Friday Mine Shoshone County, Idaho, USA” effective date April 2, 2014, for the Casa Berardi Mine are contained in a technical report prepared for Hecla titled "Technical Report on the Mineral Resource and Mineral Reserve Estimate for the Casa Berardi Mine, Northwestern Quebec, Canada" effective date March 31, 2014 (the "Casa Berardi Technical Report"), and for the San Sebastian Mine 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. Copies of these technical reports are available under Hecla's profile on SEDAR at www.sedar.com.

The current Casa Berardi drill program was performed on core sawed in half and included the insertion of blanks and standards of variable grade in every 24 core samples. Standards were generally provided by Analytical Solutions Ltd and prepared in 30 gram bags. Samples were sent to the Swastika Laboratories in Swastika, Ontario, a registered accredited laboratory, where they were dried, crushed, and split for gold analysis. Analysis for gold was completed by fire assay with AA finish. Gold over-limits were analyzed by fire assay with gravimetric finish. Data received from the lab were subject to validation using in-built program triggers to identify outside limit blank or standard assays that require re-analysis. Over 5% of the original pulps and rejects are sent for re-assay to ALS Chemex in Val d’Or for quality control.

Dr. McDonald reviewed and verified information regarding drill sampling, data verification of all digitally-collected data, drill surveys and specific gravity determinations relating to the Casa Berardi mine. 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.