Thank you for standing by. Welcome to the Q3 2023 Hecla Mining Company Earnings Conference Call. I would now like to welcome Anvita Patil, VP, Investor Relations and Treasurer to begin the call. Anvita, over to you.

Good morning, Mondeep, and thank you all for joining us for Hecla's third quarter 2023 financial and operations results conference call. I'm Anvita Patil, Hecla's Vice President of Investor Relations and Treasurer. Our financial results news release that was issued yesterday, along with today's presentation, are available on Hecla's website. On today's call, we have Phil Baker, Hecla's President and Chief Executive Officer; Lauren Roberts, Hecla's Senior Vice President and Chief Operating Officer; Russell Lawlar, Hecla's Senior Vice President and Chief Financial Officer; and Carlos Aguiar, Hecla's Vice President of Operations. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on Slide 2 and our earnings release, as well as in our 10-K and 10-Q filings with the SEC. These and other risks could cause results to differ from those projected in the forward-looking statements. Non-GAAP measures cited in this call and related slides are reconciled in the slides or the news release. I want to remind you that if you would like to have a call with the management, you can do so by using the link under the section Virtual Investor Event in our earnings release that was issued yesterday. With that, I will pass the call to Phil.

Thanks, Anvita. Good morning, everyone. Thanks for joining the call. Before I get to the slides, I want to remind you that Lauren is going to be retiring at the end of the year, and I just want to thank Lauren for his tenure at Hecla. During his time, there has been a lot of accomplishments that he has – the company has done and that he has led. But what really stands out to me is that when he arrived at Hecla, we were still at the Lucky Friday focused on cutting the rock using mechanical mining. But we began the steps that led to the new mining method at the Lucky Friday. Without his support, knowledge, and leadership, I doubt the UCB would have been developed. We wouldn't have a patent for a new mining method. So thanks, Lauren, for all that you've done. I'd also like to introduce Carlos Aguiar, he is our Vice President of Operations, and Carlos is from Mexico and he became a U.S. citizen two years ago and has been with the company a total of 27 years. Seventeen of those years, he has been working for us in Latin America, in both Mexico and Venezuela. He has nine years of experience as a GM for us at both San Sebastian and Lucky Friday mines, and he also knows Casa Berardi. He really started the mill modifications. I've known Carlos now for about 20 years. I first met him on a tour of the mill in Venezuela. His leadership abilities and commitment to operational excellence have really been reflected in the consistent and improving results that he has achieved everywhere that he has worked. Every operation has seen significant improvement with him at the helm. So, you are going to enjoy getting to know him and with that interaction, I'll start with Slide 3. I want to take a moment to step back and discuss our performance from a longer-term perspective. We typically do this. It's the way we look at the businesses on a long-term basis. Over the past five years, you've seen our revenues grow 27%, silver reserves 79%, silver production 37%. As we work toward producing up to 20 million ounces by 2025, it means that we will close to double our silver production since 2018. More impressively, the $767 million of free cash flow that our three operating mines generated has resulted in strong share performance. The quality of our assets checks all five boxes; long reserve lives, high grades, low costs, consistent performance, and significant exploration potential. Lucky Friday currently checks four of the five, with Casa and Keno checking three, but all the mines check the long lives. We are focusing on setting up the mines for the long-term, pushing for continuous improvement, and allowing innovation to fundamentally improve them. I’m convinced all of them will end up checking all five boxes. Now, let me move to Slide 4 and talk about Lucky Friday, which will not have production until early 2024 as we block off the lower part of the two shafts and build a new secondary escapeway ventilation raise. This three-month project is going well. Simultaneously, we are still advancing other projects and completing our equipment purchases. We actually have ten pieces of equipment on the surface that are ready to go underground. We expect to ramp back up to full production in Q1 and see Lucky Friday continue the production growth and free cash flow that we saw before the fire. Now, at Keno Hill, production has been slowed due to the delay in the shotcrete plant commissioning, just yesterday in the cement rockfill plant scheduled to be completed later this month. Their completion puts us in a position to advance development and production faster. The grade of the ore has been better than our block model predicted. However, we are concerned with the safety culture at Keno. Our all-injury frequency rate at Keno is around four, which is not acceptable. Greens Creek and Lucky Friday are both less than one. In the last couple of months and more recently in the last two weeks, we've had some near misses that didn't result in injuries or damage to equipment, but that could have, and that's not acceptable to us. As a result, I've tasked Carlos and his team to methodically review all our processes and procedures to get safety right because excellent safety not only prevents injury but also standardizes activities which increases predictability and production. The safety review of Keno will likely lead to changes in our processes, schedules, equipment, and the way we mine. And to make the mine safer, we will re-engineer certain processes. With Keno just starting up and its expected long mine life, we must get off on the right foot regarding safety. So we are going to take whatever time is needed to do that. Greens Creek had another consistently strong operational quarter, and we are increasing silver production guidance at the mine. Greens Creek has already generated over $100 million of free cash flow for the year. Casa Berardi had a very good quarter progressing on the transition to becoming only an open pit mine, reporting cash costs and all-in sustaining costs that are well within guidance while building infrastructure that sets the mine up for success in the next decade. Earlier this year, we saw the need to make fundamental changes, which we began implementing just this past quarter, and we are already seeing the benefits. Company-wide, silver production guidance is only slightly lower, with the midpoint of guidance just 400,000 ounces less silver. Silver costs are unchanged, while gold is slightly lower cash cost. Finally, the safety performance at our mines, with the exception of Keno Hill, has been one of the best in the industry with an all-injury frequency rate consistently lower than the U.S. national average. With that, I’ll pass the call to Russell.

Thanks, Phil. I'll start on Slide 6. As we think about the year so far, even with Lucky Friday down for most of the third quarter, silver accounted for 38% of revenues, with silver operations generating more than $120 million of free cash flow. With strong gold production of 39,000 ounces, gold accounted for 36% of revenues, and base metals contributed 25%. We are on a path for more than half of our revenues to come from silver. The strong balance sheet and financial flexibility have always been key priorities with the goal of maintaining a leverage ratio of less than 2x and maintaining significant liquidity. In the third quarter, our leverage ratio increased to 2.2x due to the Lucky Friday suspension of production and our continued investment at Keno Hill. Although we expect our leverage ratio will remain elevated next quarter, we see this increase as temporary. Our liquidity is adequate at $165 million. I expect our leverage ratio will be less than 2x and our liquidity will grow substantially once Lucky Friday is back into production and Keno Hill matures. Now I'll turn to Slide 7 to highlight some of the key attributes of our silver mines, especially now that we are going through a period of investment. Our silver mines have consistently provided strong margins. This is shown in the graph on the left where over the past four years, this margin has been near or above 50% and has translated into consistent free cash flows. The chart on the right highlights just how strong this free cash flow generation is from our silver mines. Since 2020, Lucky Friday and Greens Creek have generated more than $800 million of cash flow from operations, and even more impressive is the nearly $600 million of free cash flow. These strong margins and the resulting free cash flow generation allow us to invest both capital and exploration at these mines, as well as in our broad exploration portfolio, in addition to returning capital to our shareholders in the form of dividends. Now, I'll turn the call to Lauren.

Thanks, Russell. I'd like to make a few comments on my time with Hecla. I began with Hecla as a summer intern in 1988 and became a full-time employee in 1989. I spent a little under eight years with Hecla and could not have asked for a better start to my career. So, when the opportunity to rejoin Hecla presented itself some two decades later, it was a very easy decision for me to return home. The chance to give something back was very important to me, and it has been a really rewarding four years. I'd like to thank the Hecla family for that. With that, I'll start on Slide 9. Greens Creek, our flagship mine, turned in another strong and consistent quarter producing 2.3 million ounces of silver in line with the prior quarter’s 2.4 million ounces. The mine has already produced 7.5 million ounces in the first three quarters of the year and remains on track to achieve its throughput target of 2,600 tons per day by the end of the year. Cash costs and all-in sustaining costs per silver ounce were $3.04 and $8.18, respectively, and were higher than the second quarter because of lower gold production and lower gold prices. Capital spend for the quarter was $12 million higher than the previous quarter, and as planned due to equipment purchases and seasonal surface projects. The mine generated $28 million in free cash flow in the quarter and has already generated more than $100 million in free cash flow this year. We are increasing silver production guidance to 9.8 million to 10 million ounces for the year. Due to mine sequencing, zinc production is expected to be lower, which will increase our cash costs and all-in sustaining costs per ounce guidance due to lower expected byproduct credits. Capital guidance is unchanged at $47 million to $50 million. Greens Creek truly is a premier silver mine, the 11th largest in the world. I want to congratulate the team on delivering excellent and consistent results from this truly world-class asset. Turning to Slide 10. I'm excited to report that we've been executing well on our plan to transition Casa Berardi to a fully open-pit operation by mid-2024. The mine produced approximately 24,000 ounces of gold at a cash cost of $1,475 and an all-in sustaining cost of $1,695. Mill throughput was lower than the previous quarter due to planned upgraded gravity circuits. We are optimizing that circuit now and expect it to enhance overall plant recovery. The first phase of the in-house open-pit fleet was commissioned this quarter, resulting in record tons moved with our plans on track and good performance on cost control. We are lowering our cash cost guidance to $1,600 to $1,800 per ounce. The mine remains on track to achieve its production and all-in sustaining cost guidance. Carlos was General Manager of Lucky Friday mine until just a few months ago when he was promoted to Vice President of Operations. The progress and consistency we've seen from the Lucky Friday over the past few years was largely a result of Carlos and his team. As I will be retiring at the end of the quarter, I'll hand him the reins to discuss the remainder of the operations.

Thanks, Lauren, and good morning, everyone. I will start on Slide 11. However, before we discuss the progress made at Lucky Friday, I want to congratulate our team on Lucky Friday for receiving the 2023 NIOSH Mine Safety and Health Technology Metals Sector Innovation Award for the UCB Mining Method. Additionally, we also received the U.S. patent in the third quarter. In August, we reported a fire at the Lucky Friday in the #2 shaft, which is also the secondary egress. The fire was extinguished in September; however, the operations of the mine are suspended for the remainder of the year until the secondary egress is established. Our mitigation plans include driving a ramp, a vertical escapeway, and a vein raise to bypass the damaged portion of the shaft. The ramp and a ladderway raise will serve as a secondary egress, with the vein raise serving as a bypass for ventilation. To explain our mitigation plans in more detail, I will turn to Slide 12. I want to highlight that the Lucky Friday has two shafts that start at the surface. The silver shaft, which is on the left graphic, is the main production shaft. It is a circular concrete-lined shaft that moves people, equipment, and materials; it's critical for our operations at Lucky Friday. This is the shaft where the service hoist was installed early this year and is unaffected by the fire. To the right of the silver shaft in the graphic is the #2 shaft where the fire occurred about halfway down. This shaft provides ventilation and in an emergency, an alternative way to leave the mine. Between the two shafts is the new 850-foot vent raise we are driving for ventilation. The graphics to the right shows the plans to reestablish the secondary egress. The plans comprise an extension of a 1,600-foot ramp, and from this ramp, we will install a 290-foot vertical escapeway raise, basically a ladder with a landing. Once complete, this infrastructure will allow for the mine to restart production. The escapeway is the critical path to production and is on schedule with 35% of the ramp and 10% of the raise complete. The ventilation raise work has just begun. These mitigation plans are expected to cost about $10 million, and we expect the mine to restart production in January of next year. We have properties and business interruption insurance with an underground sublimit up to $50 million. I will now move to Slide 13. As Phil mentioned earlier, the safety performance at Keno Hill has not been to Hecla’s standards. I am on my way with my team to assess what needs to be done to get safety where it needs to be. With the mine just starting, this is a critical time to establish the culture we want to run at Keno Hill, and it's easier to do that now than later. Keno has produced almost 900,000 ounces a year, 700,000 in the third quarter. I expect in the third quarter we will produce between 800,000 and 1 million ounces. We have the shotcrete plant commissioned at the portal, expanded camp facilities, and 8,000 feet of development which includes 10 headings and modified secondary crushing. We are in a good position for a strong 2024 if we can get safety right. Slide 14 shows two of our critical projects, the secondary crusher on the left in the shotcrete plant on the right. With that, I will pass the call back to Phil.

Thanks, Carlos. So on Slide 15, just a bit on the exploration at Keno. With the tons we’ve mined, we’ve been pleased with Keno’s grade at 33 ounces per ton. The rock has a net smelter return value in excess of $700. Our exploration team is finding more in a number of deposits, and I’ll just talk about Birmingham. The Birmingham has a number of zones: Bear, Arctic, Northeast deep, and we are going to be mining here for a long time. The images you see are only of the Bear zone; the image on the left is the Bear vein, and on the right is the Footwall vein. There’s a third vein, not shown, called the Main vein. Looking at the left image to the Northeast, outside the current design stopes, we are identifying another mineralized zone. The grade appears high enough to have the potential to add to our resource. The best hole is about 163 ounces over seven feet. In the right image, you see the Footwall vein within currently planned stopes, and we have 36 feet of 36 ounces and 17 feet of 56 ounces. We don't yet have the results on the Main vein drilling, but the point is there is a strong likelihood to continue to grow high-grade resources at Keno. We couldn't be more excited about the exploration results that we’re seeing and the potential we have for the future. Slide 16 summarizes our production cost guidance for the year, and we are reiterating our consolidated cost guidance for silver while lowering silver production guidance slightly, as previously mentioned. Gold cash costs are lower, and capital expenditure remains unchanged. Exploration spending is also unchanged. As we look ahead to 2025, we think we are still on track to produce up to 20 million ounces. So if you go to Slide 17, before I open the call for questions, I want to end our prepared remarks by focusing on the expected increase in solar energy. Last year, globally, 269 gigawatts of solar was installed. The International Energy Agency estimates that in seven years, the world will install about twice as many solar panels, around 500 gigawatts. This is a 9% growth rate, which compares to a 12% growth rate over the last 10 years. It takes half a million ounces of silver for every gigawatt installed, resulting in 140 million ounces or 12% of total silver demand last year. By 2030, at 498 gigawatts, we will need 100 million ounces more, totaling almost 250 million ounces, or 21% of demand if overall demand does not grow—though that is unlikely. To put this demand in context, the production for every year is equivalent to two of the largest silver mines in the world. Clearly, the additional silver demand over the next seven years will not be met by more mine production. Discoveries of silver won’t be fast enough to meet that demand, necessitating higher prices to mobilize existing above-ground supplies. I'm going to be the Chair of the Silver Institute for the next two and a half years, and as such, I was invited to speak at the LBMA conference three weeks ago. It was striking that knowledgeable market participants have been thinking of silver the same way they have for the past 40 years, primarily as a derivative of gold. I encourage you to think about silver differently, as its demand is so tied to our changing energy sources. It's not going to behave like it has in the past. Therefore, while gold and copper prices may rise, I foresee a higher silver price simply from the increase in solar energy demand, regardless of other markets. And with that, Anvita, you mentioned you got a question from one of the analysts who is traveling. What’s that question?

That's right, Phil. We have a question from Mike Parkin of National Bank. He's in transit, so he's sent along this question. The question is, what are management's thoughts on the potential timeline to get Keno Hill operating to Hecla standards of practice?

I'll make some comments and then turn it to Lauren and Carlos. Fundamentally, we will never reach our standard of practice. It's a continuous improvement effort and will take time. We will get to a level where we have all the proper processes and procedures in place, and where site management understands the importance of safety and adherence to regulations; that will set the foundation. The infrastructure we are putting in puts us in a very good place to see improvements. Lauren, do you have anything to add?

Sure. I'll start and then pass it to Carlos. The way to think about Keno is that in the past year, we’ve been very focused on the initial mine development and building out the infrastructure, which is essentially coming to a close now. As Phil suggests, we’ll have an evolution of process even within that phase of work. Now we need to focus on our operational practices and deliver on our commitments. Carlos and a group of people from our corporate tech services team are heading up there this week to begin that work. Carlos?

Yes. We’re making progress with safety as our priority. We’re ensuring we have the right people in the right roles, with the necessary materials and equipment. It will take some time; we still don’t know the exact timeline. We’re expecting to complete the initial assessment before the end of the year, and thereafter, we will execute our plan.

So, I would suggest that we will have substantial production from Keno in 2024. We will provide specific guidance early in the New Year.

That is all.

Our first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Hey, there. Thanks for taking my questions. I'll also join Phil in thanking Lauren for all he's done for the firm. I didn't realize you were at the firm since you were a summer intern.

Yes. It started a long time ago, Heiko.

This builds a little on the emailed-in question, but I mean, there's been some mine infrastructure delays at Keno Hill. We're not concerned about it, especially since it seems like drilling onsite is going quite well. But can you provide some color on what exactly you're seeing and then also the timelines and anticipated costs to remediate the issues?

The short answer is it's a variety of things. It's not just one factor. The culture that is developing at the site is part of it. We have only been operating for about five months. People from different mines across Canada have different expectations and practices, which leads to communication issues. It’s not merely one thing; our focus is on shaping the culture.

Yes. I agree, Phil. Keno is unique due to the diversity of miners and supervision from various areas. We must build the culture from scratch, the way Hecla wants it. However, as the culture forms, production will naturally increase. It's a normal process at the beginning of a mine, particularly at Keno.

It involves behaviors from the miners and their supervisors. Changing attitudes will lead to modified behaviors.

No, that makes sense. Completely different topic. You maintained your capital guidance. Can you provide some insight on inflation for expenses? Where do we stand compared to what you expected? What are you seeing in regards to cost inflation?

The inflationary pressure has reduced. Some items within capital and operating costs still face inflation, but it’s not as significant as before.

Inflation tends to be sticky. It comes quickly and dissipates slowly, but we are not seeing the big increases we did before. Things are relatively flat. Fuel prices are moderating, and we're able to procure the necessary equipment and materials, although lead times can vary. Skilled trades remain a challenge across the industry. We're hiring relatively inexperienced people and training them, as many seasoned workers are retiring.

That's it for me. I'll get back in queue. Thank you.

Thanks, Heiko.

Our next question comes from the line of Michael Siperco with RBC Capital Markets. Please go ahead.

Thanks, and thanks for taking my question. Maybe shifting gears to Lucky Friday. You've outlined three key items to complete to bring the mine back into production. Based on your commentary, it appears you’re about 15% done on the work required across those three items. Is that accurate, or how should we assess the timing and effort needed for the rehab work?

We'll be done in early January unless we encounter a major surprise. Carlos?

As of today, we are between 35% and 40% of the project completed. We are expecting to restart the mine in early 2024.

In fact, Carlos and I were underground yesterday looking at progress, and we are slightly ahead of schedule in some areas. We were pleased with what we observed.

Has the event bypass raise been completed yet? Based on your commentary, it seems it’s not…

Both raises have commenced, and the ramp is around 35% complete.

It’s at 40% complete.

It’s a contractor that has been mobilized on the escapeway first. More recently, they have been focused on the ventilation. We understand the ventilation raise isn't critical for returning to production immediately, as we have sufficient ventilation without it for a period.

Understood. On the insurance front, can you share when you expect clarity on what will be covered? Do you anticipate the entirety of the estimated $25 million being covered, along with business continuity?

We will certainly be covered up to $50 million. There's a process with insurance claims, and we're engaged with them, but I cannot predict the outcome at this time. However, we're confident a large portion will be covered.

It's in progress as we are getting Lucky Friday back online, and we're engaging with the insurance company through that process. As more information becomes clear, we will communicate that to the market.

Should we assume a six-month timeframe for this process, or will it conclude as we approach Lucky’s production restart?

It depends on who you ask. To be conservative, think of it more as a six-month process rather than immediate, but I believe they should pay us immediately based on current claims.

Thanks very much. I’ll pass it on.

Okay.

Our next question comes from Lucas Pipes with B. Riley Securities. Please go ahead.

Thank you very much, operator. Lauren, I would like to extend my congratulations. I wanted to start my questions with Phil concerning your points on silver and solar energy—what substitutes exist for silver in PV solar panels?

Ultimately copper would be a substitute. However, given the processes for building solar panels, copper’s use substitutes silver in specific scenarios is limited. Additionally, the performance and durability of solar panels using copper would diminish significantly. Yes, there is a price point in which the industry may switch, but right now, more efficient processes that require more silver are being used in newer plants under construction. Solar panels have an efficiency of around 25% to 30% with silver, and these new processes aim to increase that efficiency further.

From your point of view as a silver supplier, do you care if solar panels are built in Asia or nearshore in the U.S.?

Practically, it doesn’t matter. However, seeing them produced in the U.S. or friendly countries would minimize potential supply chain disruptions, as China currently accounts for a large majority of solar panel production.

Would you consider off-take agreements or supply agreements with customers?

Remember that what we produce is a concentrate that goes to smelters. Unfortunately, there are very few smelters in the U.S. that can process our material, and many times we have to ship the concentrate to Korea or Japan for processing, making us a step removed from the actual customer.

That's helpful. To return to Keno, can you remind us what caused the slowdown in infrastructure developments?

The main issue lies in our location. The challenges in Yukon regarding mobilizing people and materials have been significant. Additionally, securing camp space and aligning resources is crucial.

We are bringing in contractors, comprising nearly 25% of our workforce at once. That can lead to delays in project execution.

The good news is we’re wrapping up those infrastructure projects, with some cleanup work planned through November. Key projects like the rockfill plant will finish by the end of this month, and we are nearing completion on others.

When do you expect to demobilize contractors and workforce?

Some demobilization is happening already, but primarily expect it to take place in December. Thank you.

Our next question comes from Steven Green with TD Securities. Please go ahead.

Hi, everyone. Just a quick point on Greens Creek. You've raised the guidance a bit this year and also exceeded last year's forecast—which appears to be grade-driven. Can you confirm that? Is this positive grade reconciliation or did you encounter some higher-grade stopes?

It is grade-driven and slightly higher. Realize it doesn’t take much in additional grade to provide significant impact. Gold grades in particular have exceeded our expectations. This can lead to odd outcomes where you produce more gold, resulting in more silver, while having lower lead and zinc per ounce, increasing costs per ounce resulting from a lesser byproduct credit.

That’s accurate; we are seeing a slightly positive grade reconciliation.

As we approach 2024, you have previously guided for slightly lower silver grades. How is that looking now—do you expect recent performance to translate into the next year?

Generally, you will notice slightly lower grades at Greens Creek over the next decade. This is a result of optimizing the asset's net present value. Hence, expect lower grades. We’re offsetting this with increased throughput, raising our target to 2,600 tons per day—historically, we were closer to 2,100 tons per day when we took over in 2008. Current accomplishments demonstrate our team's capability to maximize production at Greens Creek.

The recovery rates have dramatically improved as well.

Just remember to maintain realistic expectations based on grades and anticipated performance.

Thanks for the insights.

There are no further questions at this time. I would now like to turn the call over to Phil Baker for closing remarks.

Thank you for the questions. We really enjoy the engagement we have with all of you. If anyone wishes to schedule a one-on-one call with us, we have time set up for that, so please take advantage of it. I want to thank the Hecla team, which truly makes Hecla a unique silver producer. Again, thank you, Lauren, for your service. Have a great day.

I would like to thank our speakers for today’s presentation, and thank you all for joining us. This now concludes today’s call, and you may now disconnect.