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Press Release

Hecla Reports Fourth Quarter and Full Year 2017 Results

Company Release - 2/15/2018 3:00 AM ET

Near-record revenues and cash cost, after by-product credits, per silver ounce.

COEUR D'ALENE, Idaho--(BUSINESS WIRE)-- Hecla Mining Company (NYSE:HL) today announced fourth quarter and year end 2017 financial and operating results.

2017 HIGHLIGHTS

  • Revenues of $577.8 million, the second highest in Company history after the record set in 2016.
  • Net loss applicable to common stockholders of $24.1 million ($0.06 per share).
  • Tax provision of $19.9 million due in part to changes in U.S. tax law.
  • Adjusted net income applicable to common stockholders of $38.8 million, $0.10 per share.1
  • Cash flows from operations of $115.9 million.
  • Cost of sales and other direct production costs and depreciation, depletion and amortization ("cost of sales") of $420.8 million.
  • Total cash cost, after by-product credits, per silver ounce of ($0.01), the lowest in 7 years.2
  • All in sustaining cost ("AISC"), after by-product credits, per silver ounce of $7.86, down 33%.3
  • Silver production of 12.5 million ounces, the second highest in Company history.
  • Gold production of 232,684 ounces, the third highest in Company history.
  • Silver equivalent production of 40.9 million ounces or gold equivalent of 554,843 ounces.8
  • Record silver, gold and lead reserves and highest zinc reserves in five years.
  • Gold production at Casa Berardi of 156,653 ounces, the highest since its acquisition.
  • Cash, cash equivalents and short-term investments of approximately $220 million at year end, an increase of about $21 million.
  • 19% reduction in the All Injury Frequency Rate across the four mines.

"Our focus of improving our long-lived operations led to increased throughput and lower costs which, coupled with significantly higher base metals prices, drove our increasing cash balance and continued strong adjusted," said Phillips S. Baker, Jr., President and CEO. "2018 should have further value creation at all our mines as we advance low-cost, high-return technologies that are focused on improving productivity. We are also taking a bulk sample of San Sebastian's polymetallic zone which could further extend its mine life. Exploration spending is increasing as we see further opportunities for both discoveries and resource growth."

_______________

1,2,3

 

Non-GAAP measures. See page 11 for more information.

 

SILVER AND GOLD RESERVE SUMMARY

Proven and probable silver reserves are at 177 million ounces, an increase of 3% over December 31, 2016 levels. Proven and probable gold reserves are at 2.3 million ounces, an increase of 12% over December 31, 2016 levels. Proven and probable zinc and lead reserves of 841,000 tons and 737,000 tons are increases of 15% and 8%, respectively, over December 31, 2016 levels. The reserves for silver, gold and lead as of December 31, 2017 are the highest in our history. The price assumptions used for 2017 reserves of $14.50 for silver, $1,200 for gold, $1.05 for zinc and $0.90 from lead are unchanged from last year's assumptions, and the silver price assumption is among the lowest in the industry.

Please refer to the reserves and resources tables at the end of this press release, or to the press release entitled "Hecla Reports Record Reserves For Silver, Gold and Lead" issued on February 7, 2018 for the breakdown between proven and probable reserve and resource levels.

FINANCIAL OVERVIEW

    Fourth Quarter Ended     Twelve Months Ended
HIGHLIGHTS    

December 31,
2017

 

December 31,
2016

December 31,
2017

 

December 31,
2016

FINANCIAL DATA                
Sales (000) $ 160,113   $ 164,245 $ 577,775   $ 645,957
Gross profit (000) $ 47,226 $ 43,548 $ 156,986 $ 191,506
Income (loss) applicable to common stockholders (000) $ (27,887 ) $ 20,124 $ (24,071 ) $ 68,995
Basic and diluted income (loss) per common share $ (0.07 ) $ 0.05 $ (0.06 ) $ 0.18
Net income (loss) (000) $ (27,749 ) $ 20,262 $ (23,519 ) $ 69,547
Cash provided by operating activities (000) $ 41,763 $ 52,214 $ 115,878 $ 225,328
 

Net loss applicable to common stockholders for the fourth quarter and full year of 2017 was $27.9 million and $24.1 million, or $0.07 and $0.06 per basic share, respectively, compared to net income applicable to common stockholders of $20.1 million and $69.0 million, or $0.05 and $0.18 per basic share, respectively, for the fourth quarter and full year of 2016. Among items impacting the results for the 2017 periods compared to 2016 were the following:

  • Sales for the fourth quarter and full year were 3% and 11% lower, respectively, than the same periods in 2016, mainly due to lower silver, zinc and lead production due to the ongoing strike at Lucky Friday, partly offset by higher realized silver, gold, zinc and lead prices in 2017.
  • Losses on base metal derivative contracts of $4.7 million and $21.3 million were recorded in the fourth quarter and full year 2017, respectively, as compared to a gain of $4.4 million in the same periods of 2016, the result of higher zinc and lead prices.
  • A foreign exchange gain of $0.6 million was recognized in the fourth quarter of 2017, compared to a $4.8 million foreign exchange gain in the prior year fourth quarter. Annual foreign exchange losses of $10.3 million and $2.9 million were recognized in 2017 and 2016, respectively. The variances were primarily due to the strengthening of the Canadian dollar relative to the U.S. dollar.
  • Interest expense, net of amount capitalized, was $9.6 million in the fourth quarter compared to $5.1 million in the same period of 2016, and $38.0 million for the full year of 2017 compared to $21.8 million in 2016. The increase is due to interest capitalized in 2016 related to the #4 Shaft project, which was completed in January 2017.
  • Exploration and pre-development expense was $7.3 million for the fourth quarter and $29.0 million for the full year of 2017 compared to $6.2 million for the fourth quarter and $17.9 million for the full year of 2016 primarily due to increased exploration activity at Greens Creek, San Sebastian, Casa Berardi, the Kinskuch project in British Columbia, and the Little Baldy project in northern Idaho, and the addition of the Montanore pre-development project.
  • Research and development expense was $1.2 million for the fourth quarter and $3.3 million for the full year of 2017, compared to $0.1 million for the fourth quarter and $0.2 million for the full year of 2016, and is related to the evaluation and development of new technologies, such as the Remote Vein Miner project at Lucky Friday.
  • Lucky Friday had suspension costs of $5.6 million and $17.1 million, along with $1.3 million and $4.2 million in non-cash depreciation expense, for the fourth quarter and full year of 2017, respectively.
  • Income tax provisions for the fourth quarters 2017 and 2016, were $38.3 million and $4.8 million, respectively. Income tax provisions for the full year 2017 and 2016 were $19.9 million and $27.4 million, respectively. The tax provisions resulted primarily from the changes in the U.S. Tax Cuts and Jobs Act and the resulting revaluation of the deferred tax asset, as well as current income and mining taxes in Mexico.

"The fourth quarter and full year tax provisions were impacted by the recently enacted U.S. tax reform measures. While we were required to record a non-cash charge for the year, we see significant benefits to us in the future as a result of the elimination of the Alternative Minimum Tax, the lower regular income tax rate and our ability to repatriate earnings from our mining operations outside the U.S.," said Mr. Baker.

Cash provided by operating activities of $41.8 million for the fourth quarter 2017 was $10.5 million lower as compared to the fourth quarter of 2016. For the full year of 2017, $115.9 million in cash was provided by operating activities as compared to $225.3 million in 2016. The decreases were the result of lower production, payment of estimated income taxes in Mexico, suspension costs at Lucky Friday, and higher exploration, pre-development, and research and development spending. The full year variance was also the result of $16 million in proceeds in 2016 for settlement of a reclamation insurance policy for the Troy mine.

A net loss was recorded of $27.7 million for the fourth quarter and $23.5 million for the full year of 2017, compared to net income of $20.3 million for the fourth quarter and $69.5 million for the full year of 2016. Adjusted EBITDA was $72.0 million for the fourth quarter of 2017 compared to $65.9 million for the same period of 2016, and $235.0 million for the full year of 2017 compared to $265.1 million in 2016.4 The increase for the quarter was due to higher base metal prices, partially offset by lower metals production. The decrease for the year was due to lower metals production.

Capital expenditures at the operations totaled $27.8 million for the fourth quarter of 2017, of which expenditures were $12.4 million at Casa Berardi, $10.4 million at Greens Creek, $3.8 million at San Sebastian, and $1.3 million at Lucky Friday. Capital expenditures during 2017 totaled $103.4 million at the operations.

Metals Prices

Average realized silver prices in the fourth quarter and full year 2017 were $16.87 and $17.23 per ounce, respectively, both slightly higher than the same periods in 2016. Realized prices for gold for the fourth quarter and full year 2017 were $1,278 and $1,261 per ounce, respectively, 6% and 1% higher than the prior periods. The average realized price for lead for the fourth quarter of 2017 was 18% higher, and zinc was 27% higher, compared to the same period of 2016. The average realized price for lead for the full year of 2017 was 25% higher than the prior year, and zinc was 39% higher, as compared to 2016.

_______________

4

 

Non-GAAP measures. See page 12 for more information.

 

OPERATIONS OVERVIEW

Overview

The following table provides the production summary on a consolidated basis for the fourth quarter and twelve months ended December 31, 2017 and 2016:

      Fourth Quarter Ended     Twelve Months Ended
         

December 31,
2017

 

December 31,
2016

December 31,
2017

 

December 31,
2016

PRODUCTION SUMMARY          
Silver - Ounces produced 2,984,786   3,976,552 12,484,844   17,177,317
Payable ounces sold 3,210,306 3,775,003 11,308,958 15,997,087
Gold - Ounces produced 60,964 63,150 232,684 233,929
Payable ounces sold 58,008 60,888 219,929 222,105
Lead - Tons produced 4,307 10,632 22,733 42,472
Payable tons sold 4,348 9,139 17,960 37,519
Zinc - Tons produced 12,107 18,195 55,107 68,516
Payable tons sold 10,066 11,854 39,335 49,802
 

The following table provides a summary of the final production, cost of sales, cash cost, after by-product credits, per silver or gold ounce, and AISC, after by-product credits, per silver and gold ounce, for the fourth quarter and twelve months ended December 31, 2017:

                         
Fourth Quarter Ended       Greens Creek   Lucky Friday   Casa Berardi   San Sebastian
December 31, 2017   Silver   Gold   Silver   Gold   Silver   Gold   Silver   Silver   Gold
Production (ounces) 2,984,786 60,964 2,146,223   11,565   69,578   43,444   9,885   759,100   5,955
Increase/(decrease) over 2016     (25 )%     (3 )%     (4 )%   (20 )%     (92 )%     (3 )%   3 %     (12 )%   (15 )%
Cost of sales and other direct production costs and depreciation, depletion and amortization (000) $ 67,449 $ 45,438 $ 61,561 N/A $ 565 $ 45,438 N/A $ 5,323 N/A
Increase/(decrease) over 2016     (6 )%     (7 )%     39 %   N/A       (97 )%     (7 )%   N/A       (32 )%   N/A  
Cash costs, after by-product credits, per silver or gold ounce2,5 $ (0.56 ) $ 719 $ 0.66 N/A $ (2.65 ) $ 719 N/A $ (3.80 ) N/A
Increase/(decrease) over 2016     (133 )%     (10 )%     (45 )%   N/A       (135 )%     (10 )%   N/A       (22 )%   N/A  
AISC, after by-product credits3 $ 7.23 $ 1,039 $ 6.23 N/A $ 15.57 $ 1,039 N/A $ (0.64 ) N/A
Increase/(decrease) over 2016     (36 )%     (17 )%     (11 )%   N/A       (16 )%     (17 )%   N/A       (34 )%   N/A  
                                     
Year Ended Greens Creek   Lucky Friday   Casa Berardi   San Sebastian
December 31, 2017   Silver   Gold   Silver   Gold   Silver   Gold   Silver   Silver   Gold
Production (ounces) 12,484,844 232,684 8,351,882 50,854 838,658 156,653 36,566 3,257,738 25,177
Increase/(decrease) over 2016     (27 )%     (1 )%     (10 )%   (6 )%     (77 )%     7 %   9 %     (24 )%   (26 )%
Cost of sales and other direct production costs and depreciation, depletion and amortization (000) $ 240,610 $ 180,179 $ 201,803 N/A $ 15,107 $ 180,179 N/A $ 23,700 N/A
Increase/(decrease) over 2016     (19 )%     16 %     5 %   N/A       (80 )%     16 %   N/A       (24 )%   N/A  
Cash costs, after by-product credits, per silver or gold ounce2,5 $ (0.01 ) $ 820 $ 0.71 N/A $ 5.81 $ 820 N/A $ (3.36 ) N/A
Increase/(decrease) over 2016     (100 )%     7 %     (82 )%   N/A       (35 )%     7 %   N/A       %   N/A  
AISC, after by-product credits3 $ 7.86 $ 1,174 $ 5.76 N/A $ 12.48 $ 1,174 N/A $ (0.26 ) N/A
Increase/(decrease) over 2016     (33 )%     (6 )%     (39 )%   N/A       (40 )%     (6 )%   N/A       (87 )%   N/A  
 

Greens Creek Mine - Alaska

For the fourth quarter, silver production was 2,146,223 ounces and gold production was 11,565 ounces, a decrease of 3.9% and 19.8%, respectively, as compared to the prior year periods. Full year 2017 silver production was 8,351,882 ounces, a decrease of 9.7% compared to the record silver production of 2016, and 2017 gold production was 50,854 ounces, a decrease of 5.7%. The decrease in silver production resulted from lower grades, and gold production was lower due to lower recoveries and slightly lower ore grades. The mill operated at an average of 2,301 tons per day (tpd) in the fourth quarter and 2,300 tpd for the full year. The annual throughput was a record.

The cost of sales for the fourth quarter and full year 2017 was $61.6 million and $201.8 million, respectively. The cash cost, after by-product credits, per silver ounce, for the quarter and full year was $0.66 and $0.71, respectively, a decrease from $1.19 and $3.84 for the fourth quarter and full year 2016.2 The AISC, after by-product credits, was $6.23 per silver ounce for the fourth quarter and $5.76 for 2017, down from $7.03 and $9.42 for the same periods of 2016.3 The lower per silver ounce cash cost, after by-product credits, was primarily due to higher base metal prices. The lower AISC, after by-product credits, was also the result of lower capital spending, partially offset by higher exploration spending.

For the full year of 2017, Greens Creek generated cash provided by operating activities of approximately $136.7 million and spent $35.3 million on additions to properties, plants and equipment, resulting in free cash flow of $101.4 million.6

Casa Berardi - Quebec

Gold production of 43,444 ounces during the fourth quarter 2017, including 12,327 ounces from the East Mine Crown Pillar (EMCP) pit, was 4% higher than the same period of 2016 due to higher ore throughput and mill recoveries. Full-year 2017 gold production of 156,653 ounces, including 37,914 ounces from the EMCP pit, was higher than the prior year period by 7% and the highest since acquisition of the operation. The mill operated at an average of 3,764 tpd in the fourth quarter 2017 and 3,551 tpd for the year which is 825 tpd more than 2016 and approximately 1,350 tpd greater than the throughput at acquisition.

The cost of sales of $45.4 million and $180.2 million for the fourth quarter and full year 2017, respectively, a decrease of 7% for the quarter and an increase of 16% for the full year compared to 2016. The cash cost, after by-product credits, per gold ounce of $719 for the fourth quarter 2017 decreased 10% over the prior year period, due to higher gold production and reduced stripping costs.7 For the full year 2017, the cash cost, after by-product credits, per gold ounce increased to $820, from $764 for the prior year period, due to the expensing of EMCP pit stripping costs during the first half of the year.2,5 The AISC, after by-product credits, was $1,039 per gold ounce for the fourth quarter and $1,174 for the full year 2017 compared to $1,247 and $1,244 in the same periods of 2016, with the decrease due to higher gold production and lower capital spending.3

For the full year of 2017, Casa Berardi generated cash provided by operating activities of approximately $69.8 million and spent $50.7 million on additions to properties, plants and equipment, resulting in free cash flow of $19.1 million.6

San Sebastian - Mexico

Silver production was 759,100 ounces for the fourth quarter and 3,257,738 ounces for the full year of 2017 as compared to 860,071 and 4,294,123 ounces for the same periods of 2016. Gold production was 5,955 ounces for the fourth quarter and 25,177 ounces for the full year of 2017, compared to 7,042 and 34,042 ounces for the same periods of 2016. The lower metal production was expected with lower ore throughput and grades. The mill operated at an average of 354 tpd in the fourth quarter 2017 and 395 tpd for the year.

The cost of sales was $5.3 million and $23.7 million for the fourth quarter and full year 2017, respectively, compared to $7.8 million and $31.2 million for the same periods in 2016. Cash cost, after by-product credits, per silver ounce was ($3.80) in the fourth quarter and ($3.36) for the full year of 2017, as compared to ($3.12) and ($3.35) for the same periods of 2016.2 The strong cash cost performance, after by-product credit, was due to the high silver grades and strong gold production which is used as a by-product credit. The AISC, after by-product credits, was ($0.64) for the fourth quarter and ($0.26) for the full year of 2017 compared to ($0.97) and ($1.99) for the same periods of 2016, with the increase due to higher capital and exploration spending.3

Open pit mining concluded in 2017 as planned, and the plant is processing stockpiled and underground ore as the underground mine ramps up in early 2018.

For the full year of 2017, San Sebastian generated cash provided by operating activities of approximately $62.4 million and spent $11.2 million on additions to properties, plants and equipment, resulting in free cash flow of $51.2 million.6

_______________

2,3,5,6

 

Non-GAAP measure. See pages 11-12 for more information.

 

Lucky Friday Mine - Idaho

Silver production was 69,578 ounces in the fourth quarter and 838,658 ounces for the full year 2017, a decrease from 874,019 ounces and 3,596,010 ounces in the fourth quarter and full year of 2016 due to the ongoing strike by unionized employees, which began in March 2017. The Company continues to invest in the mine, with limited production and capital improvements being performed by salaried staff, as well as development in preparation for the arrival of the new Remote Vein Miner machine scheduled to arrive in late 2019.

Hecla has reached an agreement for binding third-party arbitration with the United Steelworkers. The agreement to arbitrate is subject to a ratification vote by the union membership in March. The three arbitrators, in early May, will select as a three-year contract either: 1) the contract the Company submitted in December 2017 as its revised last, best and final offer or 2) the agreement that expired in April 2016, as modified by certain changes agreed to by the union and the Company.

The cost of sales for the fourth quarter and full year 2017 was $0.6 million and $15.1 million, respectively, and the cash cost, after by-product credits, per silver ounce was ($2.65) and $5.81 for the fourth quarter and full year 2017, respectively, a decrease from $7.50 and $8.89 for the same periods of 2016 as a result of higher base metals prices.2 AISC, after by-product credits, was $15.57 and $12.48 per silver ounce, for the fourth quarter and full year 2017, respectively, compared to $18.52 and $20.66 for the same periods of 2016, with the decrease due to higher base metal prices, and lower capital spending as a result of completion of the #4 Shaft project and the strike.3 Costs not directly related to mining and processing ore have been classified as suspension costs during the strike period and are excluded from the calculations of per silver ounce costs. The per silver ounce costs for 2017 are not indicative of future operating results at full production.

For the full year of 2017, Lucky Friday generated cash provided by operating activities of approximately $7.8 million, incurred $17.1 million for suspension costs, and spent $6.3 million on additions to properties, plants and equipment, resulting in free cash flow of negative $15.6 million.6

_______________

6

 

Non-GAAP measures. See page 12 for more information.

 

EXPLORATION AND PRE-DEVELOPMENT

Expenditures

Exploration (including corporate development) expenses were $5.9 million, and $23.5 million for the fourth quarter and full year 2017, respectively. This represents an increase of 29% and 60% over the fourth quarter and full year 2016. These increases were primarily the result of more exploration at San Sebastian, Casa Berardi and Greens Creek and drilling at Kinskuch and Little Baldy projects.

A complete summary of exploration activities can be found in the news release entitled "Hecla Reports Discoveries at San Sebastian, Casa Berardi and Greens Creek" released on February 12, 2018.

Pre-development

Pre-development spending was $1.4 million in the fourth quarter and $5.4 million for the full year 2017, principally to advance the permitting at Rock Creek and Montanore.

Rock Creek

In June 2017, the U.S. Forest Service issued the Environmental Impact Statement (EIS) and draft Record of Decision (ROD) for the Rock Creek Project. The agency is incorporating comments made on the draft ROD and it is anticipated that it will issue a Final ROD and Final EIS in the first quarter of 2018 authorizing the evaluation phase of the project.

Montanore

In June 2017, the Federal District court judge in Missoula, Montana remanded back to the U.S. Forest Service and U.S. Fish and Wildlife Service their approvals for the Montanore project. The court advised that the agencies could proceed with the approval of the evaluation phase of the project. The U.S. Forest Service determined a focused supplemental EIS would be prepared focusing on the evaluation phase and published its notice of intent to do so in the Federal Register in December 2017. It is anticipated that the agency will complete its assessment and issue a new ROD in late 2018 or early 2019. As a part of this permitting process, the U.S. Fish and Wildlife Service is expected to prepare updated terrestrial and aquatic biological opinions for the project.

Troy Reclamation

Reclamation of the former Troy Mine near Troy, Montana continued as planned with the placement of cover soil on approximately one-half of the 330-acre tailings facility. Some building demolition work also was conducted in the mill site area. Reclamation works are expected to continue in 2018.

Research and Development

The Research and Development activities of the Company consisted primarily of work being conducted on the Remote Vein Miner project, the focus of which is shifting towards fabrication of the unit, with delivery expected late in 2019.

BASE METALS AND CURRENCY HEDGING

Base Metals Forward Sales Contracts

The following table summarizes the quantities of base metals committed under financially settled forward sales contracts at December 31, 2017:

   

Pounds Under Contract
(in thousands)

    Average Price per Pound
Zinc   Lead Zinc   Lead
Contracts on forecasted sales    
2018 settlements 32,187 16,645 $ 1.29 $ 1.06
2019 settlements 23,589 18,078 $ 1.33 $ 1.09
2020 settlements 3,307 2,866 $ 1.27 $ 1.08
 

The contracts represent 26% of the forecasted payable zinc production for the next three years at an average price of $1.31 per pound, and 39% of the forecasted payable lead production for the next three years at an average price of $1.08 per pound.

Foreign Currency Forward Purchase Contracts

The following table summarizes the Canadian dollars and Mexican pesos the Company has committed to purchase under foreign exchange forward contracts at December 31, 2017:

   

Currency Under Contract
(in thousands of CAD/MXN)

    Average Exchange Rate
CAD   MXN CAD/USD   MXN/USD
2018 settlements 119,450   168,400 1.29   19.36
2019 settlements 63,600 109,800 1.31 20.40
2020 settlements 30,000 1.29
 

2018 ESTIMATES7

2018 Production Outlook

     

Silver Production
(Moz)

 

Gold Production
(Koz)

 

Silver Equivalent
(Moz)

 

Gold Equivalent
(Koz)

Greens Creek     7.5-8.0   50-55   21.0-22.5   300-313
Lucky Friday                  
San Sebastian     2.0-2.5   13-17   3.0-3.5   40-52
Casa Berardi         155-160   11.0-11.5   155-160
Total     9.5-10.5   218-232   35.0-37.5   495-525
         

2018 Cost Outlook

     

Costs of Sales
(million)

 

Cash cost, after by-
product credits, per
silver/gold ounce2,5

 

AISC, after by-product
credits, per produced
silver/gold ounce3

Greens Creek     $198   $0.50   $7.75
Lucky Friday              
San Sebastian     $44   $8.50   $12.50
Total Silver     $242   $2.25   $12.75
Casa Berardi     $185   $800   $1,100
Total Gold     $185   $800   $1,100
       

2018 Capital and Exploration Outlook

2018E Capital expenditures (excluding capitalized interest)     $95-$105 million
2018E Exploration expenditures (includes Corporate Development)     $30-$37 million
2018E Pre-development expenditures     $5 million
2018 Research and Development expenditures     $12-$16 million
   

DIVIDENDS

The Board of Directors declared a quarterly dividend of $0.0025 per share of common stock, payable on or about March 13, 2018, to shareholders of record on March 6, 2018. The Company's realized silver price was $16.87 in the fourth 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 April 2, 2018, to shareholders of record on March 15, 2018.

_______________

2,3,5,7

 

Non-GAAP measures. See pages 11-12 for more information.

 

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held today, Thursday, February 15, 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

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 (GAAP). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The non-GAAP financial measures cited in this release and listed below are reconciled to their most comparable GAAP measure at the end of this release.

(1) Adjusted net income applicable to common stockholders is a non-GAAP measurement, a reconciliation of which to net income applicable to common stockholders, the most comparable GAAP measure, can be found at the end of the release. Adjusted net income is a measure used by management to evaluate the Company's operating performance but should not be considered an alternative to net income, or cash provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

(2) Cash cost, after by-product credits, per silver and gold ounce is a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization (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 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.

(3) 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 mines sites, corporate exploration related to sustaining operations, and all site sustaining capital costs. AISC, after by-product credits, is calculated net of depreciation, depletion, and amortization and by-product credits.

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

(4) Adjusted EBITDA is a non-GAAP measurement, a reconciliation of which to net income, the most comparable GAAP measure, can be found at the end of the release. Adjusted EBITDA is a measure used by management to evaluate the Company's operating performance but should not be considered an alternative to net income, or cash provided by operating activities as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In addition, the Company may use it when formulating performance goals and targets under its incentive program.

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

(6) Free cash flow is a non-GAAP measure calculated as cash provided by operating activities less additions to properties, plants and equipment. Free cash flow for Lucky Friday also includes a reduction for suspension costs incurred during the strike.

Other

(7) Expectations for 2018 includes silver, gold, lead and zinc production from Greens Creek, San Sebastian and Casa Berardi converted using Au $1,225/oz, Ag $17.25/oz, Zn $1.30/lb, and Pb $1.00/lb. Lucky Friday expectations are currently suspended as there is currently a strike. Numbers may be rounded.

(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 average prices for the year.

Cautionary Statement Regarding Forward Looking Statements, Including 2018 Outlook

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbor created by such sections and other applicable laws, including Canadian securities laws. Such forward-looking statements may include, without limitation: (i) estimates of future production; (ii) estimates of future costs including cash cost, after by-product credits per ounce of silver/gold and AISC, after by-product credits, per ounce of silver/gold; (iii) estimates for 2018 for silver and gold production, silver equivalent production, cash cost, after by-product credits, AISC, after by-product credits, capital expenditures and exploration and pre-development expenditures (which assumes metal prices of gold at $1,225/oz, Ag $17.25/oz, Zn $1.30/lb, Pb $1.00/lb; USD/CAD assumed to be $0.79, USD/MXN assumed to be $0.06; and (iv) the Company’s mineral reserves and resources. 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 2017 Form 10-K, filed on February 15, 2018, 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.

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 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 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.

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.

HECLA MINING COMPANY

Condensed Consolidated Statements of Income (Loss)

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

 

  Fourth Quarter Ended   Twelve Months Ended

December 31,
2017

 

December 31,
2016

December 31,
2017

 

December 31,
2016

Sales of products $ 160,113   $ 164,245   $ 577,775   $ 645,957  
Cost of sales and other direct production costs 80,190 86,990 304,727 338,325
Depreciation, depletion and amortization 32,697   33,707   116,062   116,126  
Total cost of sales 112,887   120,697   420,789   454,451  
Gross profit 47,226   43,548   156,986   191,506  
 
Other operating expenses:
General and administrative 6,567 13,312 35,611 45,040
Exploration 5,888 4,549 23,510 14,720
Pre-development 1,387 1,662 5,448 3,137
Research and development 1,151 126 3,276 243
Other operating expense 923 735 2,513 3,153
(Gain) loss on disposition of property, plants, equipment and mineral interests (1,118 ) 172 (6,042 ) (147 )
Lucky Friday suspension-related costs 6,916 21,301
Acquisition costs 528 25 2,695
Provision for closed operations and reclamation 1,657   942   6,701   5,721  
23,371   22,026   92,343   74,562  
Income from operations 23,855   21,522   64,643   116,944  
Other income (expense):
(Loss) gain on derivative contracts (4,702 ) 4,423 (21,250 ) 4,423
Gain (loss) on disposition of investments 1 (166 )
Unrealized loss on investments (174 ) (665 ) (247 ) (177 )
Net foreign exchange gain (loss) 609 4,787 (10,300 ) (2,926 )
Interest and other income 507 161 1,692 507
Interest expense (9,589 ) (5,141 ) (38,012 ) (21,796 )
(13,348 ) 3,565   (68,283 ) (19,969 )
Income (loss) before income taxes 10,507 25,087 (3,640 ) 96,975
Income tax provision (38,256 ) (4,825 ) (19,879 ) (27,428 )
Net income (loss) (27,749 ) 20,262 (23,519 ) 69,547
Preferred stock dividends (138 ) (138 ) (552 ) (552 )
Income (loss) applicable to common stockholders $ (27,887 ) $ 20,124   $ (24,071 ) $ 68,995  
Basic income (loss) per common share after preferred dividends $ (0.07 ) $ 0.05   $ (0.06 ) $ 0.18  
Diluted income (loss) per common share after preferred dividends $ (0.07 ) $ 0.05   $ (0.06 ) $ 0.18  
Weighted average number of common shares outstanding basic 399,133   395,229   397,394   386,416  
Weighted average number of common shares outstanding diluted 399,133   397,717   397,394   389,322  
 

HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and share in thousands - unaudited)

 
  December 31, 2017   December 31, 2016
ASSETS      
Current assets:  
Cash and cash equivalents $ 186,107 $ 169,777
Investments 33,758 29,117
Accounts receivable 32,190 30,049
Inventories 54,555 50,023
Other current assets 13,715   12,125  
Total current assets 320,325 291,091
Non-current investments 7,561 5,002
Non-current restricted cash and investments 1,032 2,200
Properties, plants, equipment and mineral interests, net 2,020,021 2,032,685
Deferred income tax asset 1,509 35,815
Other non-current assets and deferred charges 14,509   4,884  
Total assets $ 2,364,957   $ 2,371,677  
       
LIABILITIES      
Current liabilities:
Accounts payable and accrued liabilities $ 46,549 $ 60,064
Accrued payroll and related benefits 31,259 36,515
Accrued taxes 5,919 9,061
Current portion of capital leases 5,608 5,653
Current portion of accrued reclamation and closure costs 6,679 5,653
Current portion of debt 470
Accrued interest 5,745 5,745
Other current liabilities 10,371   3,064  
Total current liabilities 112,130 126,225
Capital leases 6,193 5,838
Accrued reclamation and closure costs 79,366 79,927
Long-term debt 502,229 500,979
Deferred income tax liability 121,546 122,855
Non-current pension liability 46,628 44,491
Other non-current liabilities 12,983   11,518  
Total liabilities 881,075   891,833  
       
STOCKHOLDERS’ EQUITY      
Preferred stock 39 39
Common stock 100,926 99,806
Capital surplus 1,619,816 1,597,212
Accumulated deficit (195,484 ) (167,437 )
Accumulated other comprehensive loss (23,373 ) (34,602 )
Treasury stock (18,042 ) (15,174 )
Total stockholders’ equity 1,483,882   1,479,844  
Total liabilities and stockholders’ equity $ 2,364,957   $ 2,371,677  
Common shares outstanding 399,176   395,287  
 

 
HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)

 
   

December 31,
2017

 

December 31,
2016

OPERATING ACTIVITIES        
Net income (loss)   $ (23,519 )   $ 69,547
Non-cash elements included in net income (loss):
Depreciation, depletion and amortization 121,930 117,413
Loss on disposition of investments 167
Unrealized loss on investments 251 177
Gain on disposition of properties, plants, equipment and mineral interests (6,042 ) (147 )
Provision for reclamation and closure costs 4,508 4,813
Deferred income taxes 18,308 2,112
Stock compensation 6,323 6,184
Acquisition costs 1,048
Amortization of loan origination fees 1,864 1,871
Loss (gain) on derivative contracts 20,741 (5,494 )
Foreign exchange loss 10,828 4,649
Adjustment of inventory to market value 811
Other non-cash charges, net 51 (174 )
Change in assets and liabilities:
Accounts receivable (2,414 ) 4,233
Inventories (3,744 ) (5,697 )
Other current and non-current assets (11,595 ) 14,422
Accounts payable and accrued liabilities (16,434 ) (6,539 )
Accrued payroll and related benefits 2,092 17,705
Accrued taxes (2,234 ) 263
Accrued reclamation and closure costs and other non-current liabilities (5,203 ) (1,869 )
Cash provided by operating activities