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Press Release

Hecla Reports Third Quarter 2016 Results

Company Release - 11/8/2016 6:30 AM ET

Higher silver and gold production; Record sales

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

THIRD QUARTER HIGHLIGHTS AND SIGNIFICANT ITEMS (compared to Q3 2015)

  • Net income applicable to common shareholders of $25.7 million, or $0.07 per share.
  • Sales of $179.4 million, up 71%, a record.
  • Adjusted EBITDA of $75.2 million, up 323%.1
  • Cash provided by operating activities of $87.0 million, up 225%. Includes $16 million of insurance proceeds for the Troy Mine reclamation.
  • Free cash flow of $27.7 million, up $38 million.2
  • Total silver production of 4.3 million ounces, up 67%.
  • Gold production of 52,126 ounces, up 19%.
  • Silver equivalent production of 10.3 million ounces, up 17%.3
  • Last 12 months net loss of $13.7 million and adjusted EBITDA of $234 million.1
  • Net debt/adjusted EBITDA (last 12 months) of 1.4x, a 49% decline.1,4
  • Cash and cash equivalents and short-term investments of $192.4 million at September 30, 2016, up $33 million over the second quarter.
  • Completed the acquisition of the Montanore project, located near the Rock Creek project.
  • Reduced estimate for 2016 cash cost, after by-product credits, per silver ounce to $4.00 and increased estimate for 2016 cash cost, after by-product credits, per gold ounce to $750.5

"Hecla's quarterly production growth, record sales, cash provided by operating activities of $87 million and free cash flow of $28 million reflect how our commitment to invest when prices were lower allows us to now reap the benefits of having more production at higher prices," said Phillips S. Baker, Jr., Hecla's President and CEO. "This quarter was just another step towards establishing new 125-year records in 2016. Our free cash flow and strengthening balance sheet allow us to immediately invest in more innovation, exploration and high-return projects. And with the acquisition of our second large undeveloped silver project, Montanore, we expect to generate additional value in the future."

FINANCIAL OVERVIEW

 
  Third Quarter Ended   Nine Months Ended
HIGHLIGHTS  

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

FINANCIAL DATA                
Sales (000) $ 179,393   $ 104,941 $ 481,712   $ 328,230
Gross profit (000) $ 58,685 ($2,561 ) $ 147,958 $ 26,776
Income (loss) applicable to common shareholders (000) $ 25,651 ($10,028 ) $ 48,871 ($24,419 )

Basic and diluted income (loss) per common share

$ 0.07 ($0.03 ) $ 0.13 ($0.07 )
Net income (loss) (000) $ 25,789 ($9,890 ) $ 49,285 ($24,005 )
Cash provided by operating activities (000) $ 86,976 $ 26,795 $ 173,114 $ 78,968
 

Net income applicable to common shareholders for the third quarter was $25.7 million, or $0.07 per share, compared to a net loss applicable to common shareholders of $10.0 million, or $0.03 per share, for the same period a year ago, the result mainly due to the following items:

  • Sales were 71% higher than the third quarter of 2015, mainly due to 67% increase in silver production and 19% increase in gold production, as well as higher silver and gold prices.
  • Cost of sales and other direct production costs and depreciation, depletion and amortization ("cost of sales") of $120.7 million was higher by 12% mainly due to San Sebastian being in commercial production.
  • Cash cost, after by-product credits, per silver ounce decreased to $3.68 from $7.52, or 51% over the prior year period, mainly due to the addition of silver production at San Sebastian and higher silver production at Greens Creek and Lucky Friday.6
  • Cash cost, after by-product credits, per gold ounce increased to $915 from $793, or 15% over the prior year period principally due to the expensing of stripping costs, which were previously capitalized, for the new East Mine Crown Pillar ("EMCP") pit.6
  • A $2.4 million foreign exchange gain compared to a $9.1 million foreign exchange gain in the prior year period due primarily to strengthening of the Canadian dollar on deferred tax assets.
  • Income tax provision of $9.5 million versus a benefit of $5.5 million in the prior year due to higher taxable income this quarter and the recording of a valuation allowance against the future benefit of U.S. net operating losses in the prior year.

Higher production and metals prices resulted in cash provided by operating activities of $87.0 million, $60.2 million higher compared to the third quarter of 2015.

Capital expenditures (excluding capitalized interest) at the operations totaled $42.0 million for the third quarter 2016. Expenditures were $17.6 million at Casa Berardi, $14.2 million at Greens Creek, $9.7 million at Lucky Friday, and $0.5 million at San Sebastian.

Metals Prices

The average realized silver price in the third quarter was $19.53 per ounce, 34% higher than the $14.54 price realized in the third quarter of 2015. The average realized gold price in the third quarter was $1,341 per ounce, 20% higher than the prior year period. Realized lead and zinc prices also increased by 10%, and 22%, respectively, from the third quarter of 2015.

Base Metals Forward Sales Contracts

There is no quantity of base metals committed under financially settled forward sales contracts for forecasted future sales at September 30, 2016.

OPERATIONS OVERVIEW

Overview

The following table provides the production, cost of sales, and cash cost, after by-product credits, per silver and gold ounce summary for the third quarter and nine months ended September 30, 2016 and 2015:

Third Quarter and
Nine Months Ended

        Greens Creek  

Lucky
Friday

  Casa Berardi   San Sebastian
September 30, 2016       Silver   Gold   Silver   Gold   Silver   Gold   Silver   Silver   Gold
Production (ounces) Q3 4,316,663 52,126 2,445,328   11,988 887,364 31,949   8,361 975,610   8,189
  9 Mos   13,200,765     170,779     7,020,688     39,497     2,721,991     104,282     24,034     3,434,052     27,000  
Increase/(decrease) over Q3 2015 Q3 67 % 19 % 23 % (17 )% 50 % 9 % 15 % 100 % 100 %
  9 Mos   66 %   32 %   19 %   (9 )%   33 %   22 %   16 %   100 %   100 %
Cost of sales and other direct production costs and depreciation, depletion and amortization (000) Q3 $ 84,413 $ 36,295 $ 58,398 N/A $ 19,483 $ 36,295 N/A $ 6,532 N/A
  9 Mos   $ 227,116     $ 106,638     $ 146,985     N/A   $ 56,696     $ 106,638     N/A   $ 23,435     N/A
Cash costs, after by-product credits, per silver or gold ounce6,7 Q3 $ 3.68 $ 915 $ 4.80 N/A $ 9.07 $ 915 N/A $ (4.03 ) N/A
  9 Mos   $ 3.54     $ 750     $ 4.68     N/A   $ 9.34     $ 750     N/A   $ (3.40 )   N/A
                                         
Third Quarter and
Nine Months Ended
Greens Creek

Lucky
Friday

Casa Berardi San Sebastian
September 30, 2015       Silver   Gold   Silver   Gold   Silver   Gold   Silver   Silver Gold
Production (ounces) Q3 2,591,546 43,635 1,992,037 14,376 592,243 29,259 7,266
  9 Mos   7,947,293     128,977     5,884,128     43,368     2,042,436     85,609     20,729          
Cost of sales and other direct production costs and depreciation, depletion and amortization (000) Q3 $ 70,043 $ 37,459 $ 52,238 N/A $ 17,806 $ 37,459 N/A N/A N/A
  9 Mos   $ 196,056     $ 105,398     $ 146,761     N/A   $ 49,295     $ 105,398     N/A   N/A   N/A
Cash costs, after by-product credits, per silver or gold ounce6,7 Q3 $ 7.52 $ 793 $ 4.82 N/A $ 16.60 $ 793 N/A N/A N/A
  9 Mos   $ 5.98     $ 861     $ 3.79     N/A   $ 12.30     $ 861     N/A   N/A   N/A
 

The following table provides the production summary on a consolidated basis for the third quarter and nine months ended September 30, 2016 and 2015:

    Third Quarter Ended   Nine Months Ended
        September 30, 2016   September 30, 2015   September 30, 2016   September 30, 2015
PRODUCTION SUMMARY            
Silver - Ounces produced 4,316,663   2,591,546 13,200,765   7,947,293
Payable ounces sold 4,284,842 2,392,798 12,222,084 7,305,740
Gold - Ounces produced 52,126 43,635 170,779 128,977
Payable ounces sold 50,348 44,937 161,217 124,969
Lead - Tons produced 10,411 9,123 31,840 28,526
Payable tons sold 9,967 8,315 28,380 24,068
Zinc - Tons produced 14,825 17,435 50,321 51,037
Payable tons sold 13,596 13,487 37,948 36,821
 

Greens Creek Mine - Alaska

Silver production of 2,445,328 ounces increased 22.8% and gold production of 11,988 ounces decreased 16.6% over the prior year period. Increased silver production resulted from higher grades, while gold production was lower due to slightly lower ore grades and throughput. The mill operated at an average of 2,201 tons per day (tpd) in the third quarter 2016.

The cost of sales was $58.4 million, and the cash cost, after by-product credits, per silver ounce of $4.80 decreased slightly from $4.82 in the third quarter 2015.6

The estimated 2016 silver production is increased to 8.5 million ounces and gold production remains unchanged at 53,000 ounces.

Lucky Friday Mine - Idaho

Silver production of 887,364 ounces was 49.8% higher than the third quarter of 2015 due to higher grades and ore throughput in the current period and ventilation repairs made in the prior year period. The mill operated at an average of 809 tpd in the third quarter 2016.

The cost of sales was $19.5 million, and the cash cost, after by-product credits, per silver ounce of $9.07, decreased from $16.60 per ounce in the third quarter of 2015.6 This decrease was principally due to higher silver production as a result of mining higher-grade material.

The focus of the #4 Shaft Project, having reached its final depth of 9,600 feet below surface in early May, is on equipping the shaft with steel sets, guides, skip loading facilities and electrical infrastructure. The work is proceeding as planned, with commissioning expected to begin by year end.

The estimated 2016 silver production is increased to 3.4 million ounces.

Casa Berardi - Quebec

Gold production of 31,949 ounces was 9.2% higher than the third quarter of 2015 due to higher ore throughput and mill recoveries. The mill operated at an average of 2,805 tpd in the third quarter 2016. The Company has received a permit to increase production to 1,250,000 tonnes (1,378,000 tons) per year from 1,100,000 tonnes (1,213,000 tons) per year, and with minimal changes to the plant, we have seen record production days in the third quarter over 3,400 tonnes per day (3,750 tpd).

The cost of sales was $36.3 million, and the cash cost, after by-product credits, per gold ounce of $915, increased from $793 in the third quarter of 2015 due to the expensing of stripping costs for the new EMCP pit that were capitalized in previous quarters before ore was encountered.3

The estimated 2016 gold production is unchanged from 145,000 ounces (surface and underground). The estimated 2016 cash cost, after by-product credits, per gold ounce has been increased to $750 from $700 to reflect expensing of stripping costs.

San Sebastian - Mexico

Silver production was 975,610 ounces at a cost of sales of $6.5 million, and a cash cost, after by-product credits, of ($4.03) per ounce in the third full quarter of production since reopening.6 The strong cash cost, after by-product credit, performance was due to the production of 8,189 ounces of gold, which is used as a by-product credit. The mill operated at an average of 437 tpd in the third quarter 2016.

The estimated production for 2016 remains unchanged from prior estimates at 4.35 million ounces of silver and 35,000 ounces of gold. The estimated 2016 cash cost, after by-product credits, per silver ounce has been reduced to ($2.00) from $1.00.

The Company is working on a plan to transition from open pit to underground mining around the end of 2017. The mill has been secured for a third year (2018) and studies are underway to incorporate recent discoveries of high-grade material into an underground mine plan.

EXPLORATION AND PRE-DEVELOPMENT

Expenditures

Exploration and pre-development expenses were $3.9 million and $0.6 million, respectively, in the third quarter of 2016. This is a decrease of $1.7 million and $1.1 million, respectively, compared to the third quarter 2015 as a result of reduced discretionary spending in exploration and pre-development expenses. Full year exploration and pre-development expenses are expected to be about $19 million.

The Company’s exploration efforts are focused on discovering high-grade deposits near its existing operations, particularly at San Sebastian, where the results continue to be encouraging. As a result of consistent exploration success over the last ten years across all projects, the level of reserves has shown a remarkable resilience despite changes in commodity prices; production has been replaced and reserves have grown steadily. A summary of this activity in the quarter is provided below.

San Sebastian - Mexico

Exploration activities at San Sebastian are focused on defining extensions to the current open pits and identifying new resources that could prolong high-margin precious metals production. Shallow drilling along strike and below the current Middle and North vein pits have cut vein extensions and in combination with past drilling show intervals of near-surface mineralization beyond the current open pits that may represent an opportunity to expand and possibly connect the Middle and North vein pits.

Drilling of the West Middle Vein approximately 1,200 to 2,400 feet west from the current Middle Vein pit has confirmed the continuity of a new zone of high-grade mineralization that is being upgraded to indicated resource category. This high-grade zone is over 1,250 feet in strike length and located about 350 to 800 feet below surface. Assay results from West Middle Vein drilling in the quarter include 0.24 oz/ton gold and 50.1 oz/ton silver over 8.6 feet, and 0.60 oz/ton gold and 149.3 oz/ton silver over 2.7 feet. This zone is currently being evaluated for potential underground mining options and shallower portions of this zone may be amenable to open pit mining. The horizontal control of dominantly oxide with some supergene mineralization is open to the west and continues to be evaluated with step-out exploration drilling.

To the east and northeast of the East Francine pit, drilling continues on silver-bearing quartz vein and breccia extensions of the East Francine Vein. Current drilling has defined a 4 to 15-foot wide vein/breccia zone that can be traced for 800 feet and is best developed at 350 to 500 feet from surface. However, recent shallow drilling has defined this vein closer to surface. Drilling also continues on a new target area referred to as the West Francine Vein that is about 3,000 feet west of previous mining at the Francine Vein. Drilling has defined a continuous vein with over 1,600 feet of strike length that varies in thickness from 2 to 16-feet wide and the vein is open in all directions. Drilling to the east will likely connect this veining with the current western extent of the Francine resource. Most of the additional 2016 exploration spending at San Sebastian is expected to follow up on results on the Middle and West Francine veins.

Casa Berardi - Quebec

During the third quarter, drilling at Casa Berardi focused on both underground 118, 121, 123, 124 and Lower Inter zone targets, and near surface targets at the 124 and 134 zones. Up to six drills have been operating underground and two on surface.

Drilling of the upper 118 Zone from the 530 level down to the 610 level has defined multiple shear zones that extend for over 1,000 feet down-plunge and include a series of continuous mineralized intervals up to 0.47 oz/ton gold with good mining widths. This zone continues to plunge to the west at depth and there is good potential to add both new reserves and resources. Drilling of the 121 Zone from the 790 level is a continuation of the high-grade 123 Zone to the west but recent drilling shows that the zone is also open both up-plunge above the 710 level with an intercept of 0.21 oz/ton over 17.4 feet and down-plunge below the 810 level with an intersection of 0.22 oz/ton gold over 24.1 feet.

Drilling of the 123 Zone from the 870 level continues to intercept high-grade mineralization, including 0.77 oz/ton gold over 7.5 feet along western vein extensions that are open to exploration. Underground exploration drilling is in progress at the west end of the mine off the 360 Drift to refine and expand four distinct mineralized zones. Recent drilling has intersected mineralization in the 104 Zone below the Lower Inter Zone.

Surface and underground drilling of the 124 Zone has identified high-grade lenses with continuity up to 350 feet of strike length. Recent drilling of the 124 Zone from the 290 level included intersections of 0.47 oz/ton gold over 4.6 feet. Surface drilling of the 134 Zone to the east of the proposed Principal pit has intersected mineralization with good continuity at and north of the Casa Berardi Fault. These broad zones of mineralization vary in width from 150 to 330 feet and intersections include 0.10 oz/ton gold over 69.6 feet and 0.11 oz/ton gold over 21.7 feet within 350 feet of surface.

Greens Creek - Alaska

At Greens Creek, definition drilling is refining the resources of the 9A, Upper Southwest, East Ore and NWW zones for expected conversion to reserves. Recent definition drilling of the 9A Zone confirmed continuity of the mineralization and refined the geometry to the south end of the resource model. Drill intersections of the 9A Zone include 21.6 oz/ton silver, 0.03 oz/ton gold, 20.7% zinc, and 7.0% lead over 15.3 feet.

Drilling of the southern portion of the NWW Zone defined mineralization of similar overall geometry as the resource model but thinner and of slightly lesser extent in places. Mineralization is present primarily along the lower fold, spanning from the fold nose to the upper limb and is represented by multiple distinct mineralized bands near the mine contact. Recent drill intersections include 55.3 oz/ton silver, 0.51 oz/ton gold, 4.1% zinc, and 2.3% lead over 10.0 feet. In addition, definition drilling of the Upper Southwest Zone around previously mined levels has identified mineralization that could be incorporated into a future mine plan. Recent drill intersections include 46.9 oz/ton silver, 0.03 oz/ton gold, 15.1% zinc, and 7.9% lead over 13.3 feet. Initial definition drilling of the East Ore Zone shows that overall the mineralization is thinner than expected compared to the model, but this drilling is now advancing into the stronger mineralized portions of the resource to the north and south. Revised resource models for the 5250, 9A, West, NWW and Deep 200 South zones are expected by the end of the year and all will likely contribute to increased reserves.

Exploration drilling of the Gallagher Zone at the southwest corner of the mine is defining a new flat-lying zone just west of the Gallagher Fault about 450 feet beneath the current Gallagher Zone resource. This drilling has also moved the location of the Gallagher fault further east than originally interpreted, allowing room into which this mineralization could be extended. Additional drilling in the near future should systematically test for the down-plunge extent of this mineralization with extensions of Gallagher exploration drillholes. Drilling of the upper limb of the Southwest Bench fold has defined an intermittent mineralized contact and lies along trend of the upper 5250 Zone and middle Southwest Zone trends of mineralization opening up a new area for possible expansion of resources.

More complete drill assay highlights from San Sebastian, Casa Berardi, and Greens Creek can be found in Table A at the end of the release.

Other Properties

At the Rock Creek and Montanore projects in Montana, validation and check assay work including the integration of data for revised resource models is nearly complete. From these revised resource models, future definition and exploration programs will be developed for implementation if the projects are successfully permitted.

2016 ESTIMATES

For the full year 2016, the Company increased its production estimates at Greens Creek and Lucky Friday. It also lowered the cash cost, after by-product credits, per silver ounce, estimate at San Sebastian and increased the cash cost, after by-product credits, per gold ounce, estimate at Casa Berardi. The Company currently estimates:

Mine  

2016E
Silver
Production
(Moz)9

 

Prior
2016E Silver
Production
(Moz)9

 

2016E Gold
Production (oz)

 

 

Prior
2016E Gold
Production (oz)

 

Cash cost, after
by-product credits,
per silver/gold
ounce5

 

Prior cash cost, after
by-product credits,
per silver/gold
ounce5

Greens Creek   8.50   8.30   53,000   53,000   $5.00/silver oz   $5.00/silver oz
Lucky Friday 3.40 3.10 $9.00/silver oz $9.00/silver oz
San Sebastian 4.35 4.35 35,000 35,000 ($2.00)/silver oz $1.00/silver oz
Casa Berardi 145,000 145,000 $750/gold oz $700/gold oz
Total 16.25 15.8 233,000 233,000 $4.00/silver oz $4.75/silver oz
AgEq Production8: 44.5 44.0
AuEq Production8: 582,000 576,000
     

2016E capital expenditures (excluding capitalized interest)

  $150 million
2016E pre-development and exploration expenditures   $19 million
 

DIVIDENDS

The Board of Directors declared a quarterly cash dividend of $0.0025 per share of common stock, payable on or about December 2, 2016, to stockholders of record on November 21, 2016. The realized silver price was $19.53 in the third quarter and therefore did not satisfy the criteria for a larger dividend under the Company's dividend policy.

The Board of Directors also declared the regular quarterly dividend of $0.875 per share on the 157,816 outstanding shares of Series B Cumulative Convertible Preferred Stock. This represents a total amount to be paid of approximately $138,000. The cash dividend is payable on or about January 2, 2017, to shareholders of record on December 15, 2016.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Tuesday, November 8, 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 by 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 growing gold producer with an operating mine in Quebec, Canada. 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

(1) 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.

(2) Free cash flow is a non-GAAP measurement used by management to analyze cash flows generated from operations. It is calculated as cash provided by operating activities (GAAP) less additions to properties, plants equipment and mineral interests (GAAP). The Company believes free cash flow is also useful as one of the bases for comparing the Company's performance with its competitors. Although free cash flow and similar measures are frequently used as measures of cash flows generated from operations by other companies, the Company's calculation of free cash flow is not necessarily comparable to such other similarly titled captions of other companies. Does not include $16 million of insurance proceeds for the Troy Mine reclamation.

(3) Silver or gold equivalent production includes silver, gold, lead and zinc production from Lucky Friday, Greens Creek, San Sebastian and Casa Berardi converted using average realized prices for the quarter.

(4) 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.

(5) The estimates of future cash cost, after by-product credits, per silver ounce or gold ounce (non-GAAP) are made applying management’s judgment and experience to forecasted metals and prices, inventory changes, performance year to date and expectations for the remainder of the year. It is not calculated from the GAAP measure of costs of sales, which is not available, and therefore providing a reconciliation to it requires an unreasonable effort.

(6) Cash cost, after by-product credits, per silver and gold ounce represents 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 mines versus those of our competitors. As a primary silver 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 primary silver mining companies. With regard to Casa Berardi, management uses cash cost, after by-product credits, per gold ounce to compare its performance with other gold mines. 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.

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

(8) Silver or gold equivalent production includes silver, gold, lead and zinc production from Lucky Friday, Greens Creek, San Sebastian and Casa Berardi converted using the following metal price assumptions: Au $1,150/oz, Ag $15/oz, Zn $0.75/lb, Pb $0.80/lb; USD/CAD assumed at 0.75, USD/MXN at $0.06.

(9) 2016E refers to the Company's estimates for 2016.

Cautionary Statements to Investors on Forward-Looking Statements, including 2016 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. Such forward-looking statements may include, without limitation: (i) estimates of future production, sales and shareholder value; (ii) the ability to convert resources to reserves at Greens Creek; (iii) guidance for 2016 for silver and gold production, cash cost, after by-product credits, capital expenditures and pre-development and exploration expenditures (which assumes metal prices of gold at $1,150/oz, silver at $15/oz, zinc at $0.75/lb, lead at $0.80/lb; USD/CAD assumed at 0.75, USD/MXN at $0.06$1,225/oz.); (iv) expectations regarding the development, growth and exploration potential of the Company’s projects (including the San Sebastian property); (v) expectations of growth; (vi) the ability to convert resources to reserves at Casa Berardi and to add them to the mine plan; (vii) the possibility of increasing production at Casa Berardi due to the EMCP; (viii) possible strike extensions of veins at the San Sebastian project and ability to extend the mine's life with surface or underground mining and (ix) expectation of beginning commissioning of the #4 Shaft by the end of 2016 and total estimated cost of the project. 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 2015 Form 10-K, filed on February 23, 2016 with the Securities and Exchange Commission (SEC), as well as the Company’s other SEC filings. 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.

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 and Aurizon Mines Ltd. titled “Technical Report for the Greens Creek Mine, Juneau, Alaska, USA” effective date March 28, 2013, 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, and 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 four 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.

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”). 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 being included here 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, which requires the preparation of a “final” or “bankable” feasibility study demonstrating the economic feasibility of mining and processing the mineralization using the three-year historical average price for any reserve or cash flow analysis to designate reserves and that the primary environmental analysis or report be filed with the appropriate governmental authority, 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. 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. 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.

HECLA MINING COMPANY
Condensed Consolidated Statements of Income (Loss)
(dollars and shares in thousands, except per share amounts - unaudited)
 
  Third Quarter Ended   Nine Months Ended

September 30,
2016

 

September 30,
2015

September 30,
2016

 

September 30,
2015

Sales of products $ 179,393   $ 104,941   $ 481,712   $ 328,230  
Cost of sales and other direct production costs 94,061 79,273 251,335 220,805
Depreciation, depletion and amortization 26,647   28,229   82,419   80,649  
120,708   107,502   333,754   301,454  
Gross profit (loss) 58,685   (2,561 ) 147,958   26,776  
 
Other operating expenses:
General and administrative 11,155 9,461 31,728 26,477
Exploration 3,859 5,540 10,171 14,748
Pre-development 550 1,696 1,475 3,834
Other operating expense 954 743 2,216 2,137
Provision or closed operations and reclamation 2,162 1,181 4,779 10,983
Acquisition costs 1,765   15   2,167   2,162  
20,445   18,636   52,536   60,341  
Income (loss) from operations 38,240   (21,197 ) 95,422   (33,565 )
Other income (expense):
Gain (loss) on derivative contracts 7 3,347 8,252
Unrealized gain (loss) on investments 49 (100 ) 488 (3,226 )
Foreign exchange gain (loss) 2,375 9,077 (7,713 ) 19,518
Interest and other income 145 100 346 173
Interest expense, net of amount capitalized (5,574 ) (6,617 ) (16,655 ) (19,350 )
(2,998 ) 5,807   (23,534 ) 5,367  
Income (loss) before income taxes 35,242 (15,390 ) 71,888 (28,198 )
Income tax benefit (provision) (9,453 ) 5,500   (22,603 ) 4,193  
Net income (loss) 25,789 (9,890 ) 49,285 (24,005 )
Preferred stock dividends (138 ) (138 ) (414 ) (414 )
Income (loss) applicable to common shareholders $ 25,651   $ (10,028 ) $ 48,871   $ (24,419 )
Basic income (loss) per common share after preferred dividends $ 0.07   $ (0.03 ) $ 0.13   $ (0.07 )
Diluted income (loss) per common share after preferred dividends $ 0.07   $ (0.03 ) $ 0.13   $ (0.07 )
Weighted average number of common shares outstanding - basic 387,578   377,508   383,458   372,555  
Weighted average number of common shares outstanding - diluted 389,918   377,508   386,318   372,555  

 

HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and share in thousands - unaudited)

 
    September 30, 2016   December 31, 2015
ASSETS        
Current assets:    
Cash and cash equivalents $ 167,844 $ 155,209
Short-term investments and securities 24,534
Accounts receivable:
Trade 26,622 13,490
Other, net 22,333 27,859
Inventories 46,079 45,542
Current deferred income taxes 8,238 17,980
Current restricted cash 3,900
Other current assets 10,451   9,453  
Total current assets 310,001 269,533
Non-current investments 6,356 1,515
Non-current restricted cash and investments 2,184 999
Properties, plants, equipment and mineral interests, net 2,023,109 1,896,811
Non-current deferred income taxes 19,456 36,589
Reclamation insurance asset 13,695
Other non-current assets and deferred charges 2,573   2,783  
Total assets $ 2,363,679   $ 2,221,925  
         
LIABILITIES        
Current liabilities:
Accounts payable and accrued liabilities $ 57,003 $ 51,277
Accrued payroll and related benefits 28,696 27,563
Accrued taxes 5,990 8,915
Current portion of capital leases 7,175 8,735
Current portion of debt 1,384 2,721
Current portion of accrued reclamation and closure costs 17,866 20,989
Other current liabilities 17,033   6,884  
Total current liabilities 135,147 127,084
Capital leases 6,532 8,841
Accrued reclamation and closure costs 83,598 74,549
Long-term debt 500,666 500,199
Non-current deferred tax liability 124,385 119,623
Non-current pension liability 43,742 46,513
Other non-current liabilities 7,626   6,190  
Total liabilities 901,696   882,999  
         
SHAREHOLDERS’ EQUITY        
Preferred stock 39 39
Common stock 99,759 95,219
Capital surplus 1,594,816 1,519,598
Accumulated deficit (186,579 ) (232,565 )
Accumulated other comprehensive loss (30,942 ) (32,631 )
Treasury stock (15,110 ) (10,734 )
Total shareholders’ equity 1,461,983   1,338,926  
Total liabilities and shareholders’ equity $ 2,363,679   $ 2,221,925  
Common shares outstanding 395,110   378,113  

 

HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows
(dollars in thousands - unaudited)
 
  Nine Months Ended
   

September 30,
2016

 

September 30,
2015

OPERATING ACTIVITIES        
Net income (loss) $ 49,285   $ (24,005 )
Non-cash elements included in net income (loss):
Depreciation, depletion and amortization 83,900 81,475
(Gain) loss on disposition of properties, plants, equipment and mineral interests (319 ) 175
Unrealized (gain) loss on investments (488 ) 3,060
Provision for reclamation and closure costs 3,685 11,028
Acquisition costs 1,048
Stock compensation 4,814 4,036
Deferred income taxes 10,330 (1,781 )
Amortization of loan origination fees 1,397 1,365
Loss on derivative contracts 337 9,561
Foreign exchange loss (gain) 7,555 (17,566 )
Other non-cash items, net 5 45
Change in assets and liabilities:
Accounts receivable 5,776 (2,951 )
Inventories (44 ) 4,382
Other current and non-current assets (539 ) (6,779 )
Accounts payable and accrued liabilities 2,042 3,986
Accrued payroll and related benefits 8,621 2,221
Accrued taxes (2,894 ) 2,782
Accrued reclamation and closure costs and other non-current liabilities (1,397 )   7,934  
Cash provided by operating activities 173,114     78,968  
         
INVESTING ACTIVITIES        
Additions to properties, plants, equipment and mineral interests (120,236 ) (95,399 )
Acquisition of other companies, net of cash acquired (3,931 ) (809 )
Proceeds from disposition of properties, plants and equipment 348 277
Purchases of investments (32,847 ) (947 )
Maturities of short-term investments 7,240
Changes in restricted cash and investment balances (3,900 )    
Net cash used in investing activities (153,326 )   (96,878 )
         
FINANCING ACTIVITIES        
Proceeds from issue of stock, net of related costs 8,121
Acquisition of treasury shares (4,363 ) (1,875 )
Dividends paid to common shareholders (2,882 ) (2,796 )
Dividends paid to preferred shareholders (414 ) (414 )
Debt origination fees (107 ) (123 )
Repayments of debt (1,807 ) (216 )
Payments on capital leases (6,328 )   (7,833 )
Net cash used in financing activities (7,780 )   (13,257 )
Effect of exchange rates on cash 627     (4,044 )
Net increase (decrease) in cash and cash equivalents 12,635 (35,211 )
Cash and cash equivalents at beginning of period 155,209     209,665  
Cash and cash equivalents at end of period $ 167,844     $ 174,454  

 

HECLA MINING COMPANY

Metal Prices

 
    Three Months Ended   Nine Months Ended
       

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

AVERAGE METAL PRICES                
Silver - London PM Fix ($/oz) $ 19.62   $ 14.91   $ 17.08   $ 16.01
Realized price per ounce $ 19.53 $ 14.54 $ 17.33 $ 16.08
Gold - London PM Fix ($/oz) $ 1,335 $ 1,124 $ 1,258 $ 1,179
Realized price per ounce $ 1,341 $ 1,121 $ 1,262 $ 1,177
Lead - LME Cash ($/pound) $ 0.85 $ 0.78 $ 0.81 $ 0.83
Realized price per pound $ 0.86 $ 0.78 $ 0.81 $ 0.85
Zinc - LME Cash ($/pound) $ 1.02 $ 0.84 $ 0.89 $ 0.93
Realized price per pound $ 1.01 $ 0.83 $ 0.89 $ 0.91

 

Production Data

 
  Three Months Ended   Nine Months Ended
   

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

GREENS CREEK UNIT                
Tons of ore milled 202,523   205,437   610,879   600,600
Mining cost per ton $ 69.66 $ 71.95 $ 69.20 $ 73.06
Milling cost per ton $ 31.55 $ 30.55 $ 31.07 $ 29.88
Ore grade milled - Silver (oz./ton) 15.40 12.68 14.61 12.92
Ore grade milled - Gold (oz./ton) 0.088 0.104 0.095 0.109
Ore grade milled - Lead (%) 2.92 3.25 3.05 3.29
Ore grade milled - Zinc (%) 6.86 8.91 7.90 8.73
Silver produced (oz.) 2,445,328 1,992,037 7,020,688 5,884,128
Gold produced (oz.) 11,988 14,376 39,497 43,368
Lead produced (tons) 4,803 5,394 15,236 15,717
Zinc produced (tons) 12,144 16,024 42,330 45,406
Total cash cost, net of by-product credits, per silver ounce (1) $ 4.80 $ 4.82 $ 4.68 $ 3.79
Capital additions (in thousands)   $ 14,163     $ 13,584     $ 35,200     $ 31,984
LUCKY FRIDAY UNIT                
Tons of ore processed 74,397 65,817 216,247 212,121
Mining cost per ton $ 99.13 $ 95.98 $ 99.27 $ 93.10
Milling cost per ton $ 25.99 $ 28.05 $ 24.77 $ 22.77
Ore grade milled - Silver (oz./ton) 12.40 9.48 13.05 10.10
Ore grade milled - Lead (%) 7.89 6.06 8.01 6.40
Ore grade milled - Zinc (%) 3.85 2.33 3.94 2.89
Silver produced (oz.) 887,364 592,243 2,721,991 2,042,436
Lead produced (tons) 5,608 3,729 16,604 12,809
Zinc produced (tons) 2,681 1,411 7,991 5,631
Total cash cost, net of by-product credits, per silver ounce (1) $ 9.07 $ 16.60 $ 9.34 $ 12.30
Capital additions (in thousands)   $ 9,725     $ 16,459     $ 32,218     $ 41,519
CASA BERARDI UNIT                
Tons of ore processed 258,100 208,074 693,288 615,171
Mining cost per ton $ 92.17 $ 89.76 $ 90.53 $ 96.75
Milling cost per ton $ 18.07 $ 19.09 $ 18.88 $ 19.91
Ore grade milled - Gold (oz./ton) 0.141 0.163 0.172 0.161
Ore grade milled - Silver (oz./ton) 0.04 0.04 0.04 0.04
Gold produced (oz.) 31,949 29,259 104,282 85,609
Total cash cost, net of by-product credits, per gold ounce (1) $ 915 $ 793 $ 750 $ 861
Capital additions (in thousands)   $ 17,603     $ 16,459     $

50,385

    $ 41,519
SAN SEBASTIAN                
Tons of ore processed 40,192 108,750
Mining cost per ton $ 59.49 $ $ 83.31 $
Milling cost per ton $ 66.88 $ $ 68.52 $
Ore grade milled - Silver (oz./ton) 25.77 33.70
Ore grade milled - Gold (oz./ton) 0.216 0.265
Silver produced (oz.) 975,610 3,434,052
Gold produced (oz.) 8,189 27,000
Total cash cost, net of by-product credits, per silver ounce (1) $ (4.03 ) $ $ (3.40 ) $
Capital additions (in thousands)   $ 530     $     $ 1,223     $

(1) Cash cost, after by-product credits, per silver and gold ounce represents a non-U.S. Generally Accepted Accounting Principles (GAAP) measurement. A reconciliation of cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) to cash cost, after by-product credits can be found in the cash cost per ounce reconciliation section of this news release. Gold, lead and zinc produced have been treated as by-product credits in calculating silver costs per ounce. The primary metal produced at Casa Berardi is gold, with a by-product credit for the value of silver production.

Non-GAAP Measures
(Unaudited)

Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits, per Ounce and Cash Cost, After By-product Credits, per Ounce (non-GAAP)

This release contains references to a non-GAAP measure of cash cost, before by-product credits, per ounce and cash cost, after by-product credits, per ounce. Cash cost, before by-product credits, per ounce and cash cost, after by-product credits, per ounce represent non-U.S. Generally Accepted Accounting Principles (GAAP) measurements that the Company believes provide management and investors an indication of net cash flow. Management also uses this measurement for the comparative monitoring of performance of mining operations period-to-period from a cash flow perspective. Cash cost, before by-product credits, per ounce and Cash cost, after by-product credits, per ounce are measures developed by gold companies and used by silver companies in an effort to provide a comparable standard; however, there can be no assurance that our reporting of these non-GAAP measures is similar to those reported by other mining companies. Cost of sales and other direct production costs and depreciation, depletion and amortization are the most comparable financial measures calculated in accordance with GAAP to cash cost, before by-product credits cash cost, after by-product credits.

As depicted in the Greens Creek, Lucky Friday, and San Sebastian Unit tables below, by-product credits comprise an essential element of our silver unit cost structure. By-product credits constitute an important competitive distinction for our silver operations due to the polymetallic nature of their orebodies. By-product credits included in our presentation of cash cost, after by-product credits, per silver ounce include:

  Total, Greens Creek, Lucky Friday and San Sebastian Units
In thousands (except per ounce amounts) Three Months Ended
September 30,
  Nine Months Ended
September 30,
2016   2015 2016   2015
By-product value, all silver properties:
Zinc $ 21,354 $ 20,851 $ 62,789 $ 67,764
Gold 24,729 13,299 75,979 42,294
Lead 15,859   12,251   45,081   40,616
Total by-product credits $ 61,942   $ 46,401   $ 183,849   $ 150,674
 
By-product credits per silver ounce, all silver properties
Zinc $ 4.96 $ 8.07 $ 4.76 $ 8.55
Gold 5.74 5.15 5.77 5.34
Lead 3.68   4.74   3.42   5.12
Total by-product credits $ 14.38   $ 17.96   $ 13.95   $ 19.01
 

By-product credits included in our presentation of cash cost, after by-product credits, per gold ounce for our Casa Berardi Unit include:

  Casa Berardi Unit
In thousands (except per ounce amounts) Three Months Ended
September 30,
  Nine Months Ended
September 30,
2016   2015 2016   2015
Silver by-product value $ 162 $ 107 $ 409 $ 327
Silver by-product credits per gold ounce $ 5.07 $ 3.66 $ 3.92 $ 3.82
 

The following tables calculates cash cost, before by-product credits, per silver ounce and cash cost, after by-product credits, per Silver ounce (in thousands, except ounce and per ounce amounts):

  Total, Greens Creek, Lucky Friday and San Sebastian
In thousands (except per ounce amounts) Three Months Ended
September 30,
  Nine Months Ended
September 30,
2016   2015 2016   2015
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 84,413 $ 70,043 $ 227,116 $ 196,056
Depreciation, depletion and amortization (16,181 ) (16,669 ) (49,855 ) (49,732 )
Treatment costs 20,673 18,518 62,585 57,744
Change in product inventory (9,523 ) (5,445 ) (5,442 ) (5,044 )
Reclamation and other costs (1,571 ) (624 ) (3,966 ) (921 )
Cash Cost, Before By-product Credits (1) 77,811 65,823 230,438 198,103
By-product credits (61,942 ) (46,401 ) (183,849 ) (150,674 )
Cash Cost, After By-product Credits $ 15,869   $ 19,422   $ 46,589   $ 47,429  
Divided by silver ounces produced 4,309 2,584 13,177 7,926
Cash Cost, Before By-product Credits, per Silver Ounce $ 18.06 $ 25.47 $ 17.49 $ 24.99
By-product credits per silver ounce $ (14.38 ) $ (17.96 ) $ (13.95 ) $ (19.01 )
Cash Cost, After By-product Credits, per Silver Ounce $ 3.68   $ 7.52   $ 3.54   $ 5.98  
 
Greens Creek Unit
In thousands (except per ounce amounts) Three Months Ended
September 30,
  Nine Months Ended
September 30,
2016   2015 2016   2015
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 58,398 $ 52,238 $ 146,985 $ 146,761
Depreciation, depletion and amortization (12,559 ) (13,868 ) (38,573 ) (41,389 )
Treatment costs 15,114 15,231 46,069 46,103
Change in product inventory (10,407 ) (4,003 ) (6,083 ) (4,922 )
Reclamation and other costs (1,260 ) (568 ) (1,826 ) (870 )
Cash Cost, Before by-Product Credits (1) $ 49,286 $ 49,030 $ 146,572 $ 145,683
By-product credits (37,537 ) (39,436 ) (113,718 ) (123,376 )
Cash Cost, After By-product Credits 11,749 9,594 32,854 22,307
Divided by silver ounces produced 2,446 1,992 7,021 5,884
Cash Cost, Before By-product Credits, per Silver Ounce $ 20.15 $ 24.62 $ 20.88 $ 24.76
By-product credits per silver ounce $ (15.35 ) $ (19.80 ) $ (16.20 ) $ (20.97 )
Cash Cost, After By-product Credits, per Silver Ounce $ 4.80   $ 4.82   $ 4.68   $ 3.79  

 
Lucky Friday Unit
In thousands (except per ounce amounts) Three Months Ended
September 30,
  Nine Months Ended
September 30,
2016   2015 2016   2015
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 19,483 $ 17,806 $ 56,696 $ 49,295
Depreciation, depletion and amortization (2,945 ) (2,801 ) (8,774 ) (8,343 )
Treatment costs 5,211 3,287 15,323 11,641
Change in product inventory (46 ) (1,442 ) (1,102 ) (122 )
Reclamation and other costs (171 ) (57 ) (557 ) (51 )
Total Cash Cost, Before By-product Credits (1) $ 21,532 $ 16,793 $ 61,586 $ 52,420
By-product credits (13,484 ) (6,965 ) (36,170 ) (27,298 )
Total Cash Cost, After By-product Credits 8,048 9,828 25,416 25,122
Divided by silver ounces produced 887 592 2,722 2,042
Total Cash Cost, Before By-product Credits, per Silver Ounce $ 24.26 $ 28.37 $ 22.63 $ 25.67
By-product credits per silver ounce $ (15.19 ) $ (11.77 ) $ (13.29 ) $ (13.37 )
Total Cash Cost, After By-product Credits, per Silver Ounce $ 9.07   $ 16.60   $ 9.34   $ 12.30  
 
In thousands (except per ounce amounts) San Sebastian Unit
Three Months Ended
September 30,
  Nine Months Ended
September 30,
2016   2015 2016   2015
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 6,532 $ $ 23,435 $
Depreciation, depletion and amortization (677 ) (2,508 )
Treatment costs 348 1,193
Change in product inventory 930 1,743
Reclamation and other costs (140 ) (1,583 )
Cash Cost, Before By-product Credits (1) 6,993