Market Overview

Hecla Reports Second Quarter 2018 Results

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Hecla Mining Company ((HL)
today announced second quarter 2018 financial and operating results.

HIGHLIGHTS

  • Net income applicable to common shareholders of $11.9 million, or
    $0.03 per share.
  • Adjusted net income applicable to common shareholders of $3.0 million,
    or $0.01 per share. 1
  • Sales of $147.3 million.
  • Adjusted EBITDA of $57.7 million and net debt/adjusted EBITDA (last 12
    months) of 1.2x. 2,3
  • Operating cash flow of $30.6 million compared to $7.5 million in the
    second quarter of 2017.
  • Cost of sales and other direct production costs and depreciation,
    depletion and amortization ("cost of sales") of $112.3 million.
  • Cash cost, after by-product credits, of $(0.57) per silver ounce, a
    319% decrease compared to the second quarter of 2017. 4
  • All in sustaining cost (AISC), after by-product credits, of $11.40 per
    silver ounce. 5
  • Cash and cash equivalents and short-term investments of $245 million
    at June 30.
  • The acquisition of Klondex Mines Ltd., and its high-grade gold mines
    in Nevada, is now closed, and the integration and optimization of the
    assets has now begun.
  • Credit rating upgrade by S&P Global to B+ from B, with a stable
    outlook.

"In the second quarter Hecla performed strongly, reflecting the
investments we are making in our mines and exploration programs," said
Phillips S. Baker, Jr., President and CEO. "The significant decline in
our silver cash cost, after by-product credits per ounce, is a function
of strong base metals prices and improved treatment charges. The decline
in gold cash cost per ounce is due to higher throughput at Casa Berardi.
Additionally, our exploration program continues to discover high-grade
material at our operations as well as advance our exploration
properties."

"We have now closed the acquisition of the high-grade Nevada mines, and
are beginning their integration into Hecla," Mr. Baker added. "Our plan
is to operate the mines and mill as one unit, allocating the workforce
and capital to generate margins and focus on profitability, not just on
production for production's sake. Fire Creek has the best margin of the
3 mines by a considerable amount, so ramping it up is our priority. We
are also focused on the exceptional exploration opportunities in the 110
square mile land package. "

FINANCIAL OVERVIEW

  Second Quarter Ended   Six Months Ended
HIGHLIGHTS   June 30, 2018   June 30, 2017   June 30, 2018   June 30, 2017
FINANCIAL DATA                
Sales (000) $ 147,259   $ 134,279 $ 286,968   $ 276,823
Gross profit (000) $ 35,002 $ 31,207 $ 73,788 $ 66,123
Income (loss) applicable to common shareholders (000) $ 11,936 $ (24,154 ) $ 20,038 $ 2,542
Basic and diluted income (loss) per common share $ 0.03 $ (0.06 ) $ 0.05 $ 0.01
Net income (loss) (000) $ 12,074 $ (24,016 ) $ 20,314 $ 2,818
Cash provided by operating activities (000) $ 30,635 $ 7,536 $ 47,018 $ 45,821
 

Net income applicable to common shareholders for the second quarter 2018
was $11.9 million, or $0.03 per share, compared to a net loss applicable
to common shareholders of $24.2 million, or $0.06 per share, for the
same period in 2017. The second quarter result was mainly due to the
following items:

  • Gain on base metal derivative contracts of $16.8 million compared to a
    gain of $2.5 million in the second quarter of 2017.
  • Net foreign exchange gain of $2.5 million recorded in the second
    quarter of 2018 compared to a loss of $3.9 million in the same period
    of 2017.
  • Income tax provision of $0.4 million compared to $16.1 million in the
    second quarter of 2017, with the variance due to impacts of U.S. tax
    reform and lower foreign taxes.

Operating cash flow was $30.6 million compared to $7.5 million in the
second quarter of 2017, with the increase mainly due to higher gold and
base metals prices and production, partially offset by higher research
and development investment.

Adjusted EBITDA was $57.7 million compared to $48.5 million in the
second quarter of 2017, with the increase mainly due to higher gold and
base metals prices.

Capital expenditures (excluding capitalized interest) at the operations
totaled $26.8 million for the second quarter, similar to 2017. Greens
Creek and Lucky Friday expenditures increased by $2.7 million and $0.3
million, respectively, offset by decreased expenditures at Casa Berardi
of $2.3 million and San Sebastian of $0.7 million. Expenditures at
Greens Creek, Casa Berardi, San Sebastian and Lucky Friday were $14.2
million, $9.8 million, $1.7 million, and $1.1 million respectively.

Metals Prices

The average realized silver price in the second quarter was $16.61 per
ounce, 3% lower than the $17.14 average realized silver price in the
second quarter of 2017. Average realized gold, lead and zinc prices
increased 3%, 19% and 13%, respectively.

Base Metals Forward Sales Contracts

The following table summarizes the quantities of base metals committed
under financially settled forward sales contracts at June 30, 2018:

 

Pounds Under Contract
(in thousands)

  Average Price per Pound
Zinc   Lead Zinc   Lead
Contracts on forecasted sales    
2018 settlements 9,039 5,787 $ 1.34 $ 1.09
2019 settlements 48,502 20,283 $ 1.40 $ 1.10
2020 settlements 42,329 19,401 $ 1.40 $ 1.13
2021 settlements 4,409 N/A $ 1.07
 

The contracts represent 44% of the forecasted payable zinc production
for the 36-month period ended June 30, 2021 at an average price of $1.39
per pound and 51% of the forecasted payable lead production for the same
period ended June 30, 2021 at an average price of $1.11 per pound.

OPERATIONS OVERVIEW

Overview

The following table provides the production summary on a consolidated
basis for the second quarter and six months ended June 30, 2018 and 2017:

    Second Quarter Ended   Six Months Ended
        June 30, 2018   June 30, 2017   June 30, 2018   June 30, 2017
PRODUCTION SUMMARY            
Silver - Ounces produced 2,596,423   2,807,474 5,130,518   6,176,901
Payable ounces sold 2,313,753 2,688,721 4,405,217 5,557,835
Gold - Ounces produced 60,313 52,561 118,121 108,674
Payable ounces sold 59,643 53,170 114,482 104,541
Lead - Tons produced 5,522 4,420 11,149 13,056
Payable tons sold 4,745 4,250 8,613 10,676
Zinc - Tons produced 14,299 12,966 29,510 28,503
Payable tons sold 10,686 8,978 20,790 20,825
 

The following tables provide a summary of the final production, cost of
sales, cash cost, after by-product credits, per silver and gold ounce,
and AISC, after by-product credits, per silver and gold ounce for the
second quarter and six months ended June 30, 2018, with comparisons to
the prior year period:

Second Quarter Ended         Greens Creek   Lucky Friday   Casa Berardi   San Sebastian
        Silver   Gold   Silver   Gold   Silver   Gold   Silver   Silver   Gold
Production (ounces)   June 30, 2018   2,596,423     60,313     1,999,791     13,719   24,687   42,722     12,298   559,647    

 

3,872

 
Increase/(decrease)       (211,051 )   7,752     67,744     1,015   24,687   9,461     3,821   (307,303 )  

 

(2,724

)
Cost of sales and other direct production costs and depreciation,
depletion and amortization (000)
  June 30, 2018   $ 60,562     $ 51,695     $ 47,742     $   $ 1,744   $ 51,695     $   $ 11,076    

$

 
Increase/(decrease)       $ 1,170     $ 8,015     $ (6,576 )   $   $ 1,744   $ 8,015     $   $ 6,002     $  

Cash costs, after by-product credits, per silver or gold ounce 4,
6

  June 30, 2018   $ (0.57 )   $ 775     $ (3.47 )   $   $   $ 775     $   $ 9.79     $  
Increase/(decrease)       $ (0.83 )   $ (197 )   $ (5.33 )   $   $   $ (197 )   $   $ 13.10     $  
AISC, after by-product credits per silver or gold ounce5   June 30, 2018   $ 11.40     $ 1,039     $ 4.43     $   $   $ 1,039     $   $ 17.15     $  
Increase/(decrease)       $ 1.43     $ (334 )   $ (4.28 )   $   $   $ (334 )   $   $ 17.09     $  
     
Six Months Ended         Greens Creek   Lucky Friday   Casa Berardi   San Sebastian
        Silver   Gold   Silver   Gold   Silver   Gold   Silver   Silver   Gold
Production (ounces)   June 30, 2018   5,130,518     118,121     3,913,023     26,837   124,467     82,899     21,189   1,071,839     8,385  
Increase/(decrease)       (1,046,383 )   9,447     51,679     111   (556,315 )   13,831     4,167   (545,914 )   (4,495 )
Cost of sales and other direct production costs and depreciation,
depletion and amortization (000)
  June 30, 2018   $ 112,298     $ 100,882     $ 89,602     $   $ 5,844     $ 100,882     $   $ 16,852     $  
Increase/(decrease)       $ (12,255 )   $ 14,735     $ (8,712 )   $   $ (8,698 )   $ 14,735     $   $ 5,155     $  

Cash costs, after by-product credits, per silver or gold ounce 4,
6

  June 30, 2018   $ (1.92 )   $ 800     $ (4.22 )   $   $     $ 800     $   $ 6.46     $  
Increase/(decrease)       $ (2.50 )   $ (127 )   $ (5.48 )   $   $     $ (127 )   $   $ 9.75     $  
AISC, after by-product credits per silver or gold ounce5   June 30, 2018   $ 8.61     $ 1,062     $ 2.56     $   $     $ 1,062     $   $ 12.95     $  
Increase/(decrease)       $ (0.22 )   $ (250 )   $ (3.72 )   $   $     $ (250 )   $   $ 12.71     $  
     

Greens Creek Mine - Alaska

At the Greens Creek mine, 2.0 million ounces of silver and 13,719 ounces
of gold were produced in the second quarter, compared to 1.9 million
ounces and 12,704 ounces, respectively, in the second quarter of 2017.
The increased silver production was due to higher grades compared to the
second quarter of 2017. The mill operated at an average of 2,290 tons
per day (tpd) in the second quarter, which was slightly lower than the
second quarter of 2017.

The cost of sales for the second quarter was $47.7 million, and the cash
cost, after by-product credits, per silver ounce, was $(3.47), compared
to $54.3 million and $1.86, respectively, for the second quarter of 2017.4
The AISC, after by-product credits, was $4.43 per silver ounce for the
second quarter compared to $8.71 in the second quarter of 2017.5
The per ounce silver costs were lower primarily due to higher gold and
base metals prices and production. Approximately 5% of production is
coming from automated headings. Higher by-product credits in the second
quarter 2018, along with lower exploration expenditures, contributed to
lower AISC, partially offset by higher capital spending. Estimates for
cash cost, after by-product credits, per silver ounce have declined to
$(0.50) from $0.50, and AISC, after by-product credits, declined per
silver ounce to $7.00 from $7.75.

Lucky Friday Mine - Idaho

Preparations for the introduction of the Remote Vein Miner (RVM),
expected in late 2019, continued to be a major focus at Lucky Friday in
the second quarter. The RVM project is proceeding as expected and has
the potential to revolutionize how the Lucky Friday is mined, making it
a safer and more efficient operation. In addition, limited production
and capital improvements continue to be performed by salaried staff.

Production has been limited since March 13, 2017 due to the ongoing
strike and now the focus is completing the development necessary to
accommodate the RVM in 2019. Costs related to care-and-maintenance of
the mine are reported in a separate line item in our condensed
consolidated statement of operations and are excluded from the
calculation of cost of sales, cash cost, after by-product credits, per
silver ounce and AISC, after by-product credits, per silver ounce.

Casa Berardi - Quebec

At the Casa Berardi mine, 42,722 ounces of gold were produced in the
second quarter, including 8,979 ounces from the East Mine Crown Pillar
(EMCP) pit, compared to 33,261 ounces in the prior year period, with the
increase primarily due to higher grades. The mill operated at an average
of 3,845 tpd in the second quarter, an increase of 6% over the second
quarter of 2017.

The cost of sales was $51.7 million for the second quarter and the cash
cost, after by-product credits, per gold ounce was $775, compared to
$43.7 million and $972, respectively, in the prior year period.4,6
The decrease in cash cost, after by-product credits, per gold ounce is
partly due to higher gold production and reduced costs related to
stripping of the EMCP pit. The AISC, after by-product credits, was
$1,039 per gold ounce for the second quarter compared to $1,373 in the
second quarter of 2017, with the decrease primarily due to higher gold
production and lower capital spending.5

The automated 985 drift project is working well, with the autonomous
haul truck running better and with higher availability than originally
anticipated. The second 40-ton Sandvik autonomous haul truck is expected
to be delivered later this year. Operating two autonomous trucks is
expected to result in operating savings of several million dollars a
year.

San Sebastian - Mexico

At the San Sebastian mine, 559,647 ounces of silver and 3,872 ounces of
gold were produced in the second quarter, compared to 866,950 ounces and
6,596 ounces, respectively, in the prior year period. Although silver
and gold production were lower compared to the second quarter of 2017,
both still exceeded our estimates for the quarter due to the amount of
higher-grade stockpile material processed. The mill operated at an
average of 415 tpd in the second quarter, which was slightly lower than
the second quarter of 2017.

The cost of sales was $11.1 million for the second quarter and the cash
cost, after by-product credits, was $9.79 per silver ounce, compared to
$5.1 million and $(3.31), respectively, in the second quarter of 2017.
The cash cost, after by-product credits, increased as expected, due to
lower silver production and higher mining costs, resulting from the
transition of production from the high grade, shallow open pits to
underground. The AISC, after by-product credits, was $17.15 per silver
ounce for the second quarter compared to $0.06 in the second quarter of
2017, principally due to the same factors, including increased
investment in development. A reduction in per ounce costs is expected in
the second half of the year as underground production continues to ramp
up.

The Company plans to collect a bulk sample of the Hugh Zone material
from the Francine Vein in the fourth quarter and plans to process it to
determine the viability of processing the material on a larger scale.

Nevada Operations

Hecla took control of the Nevada assets previously belonging to Klondex
on July 20, 2018. Hecla is quickly moving forward with multiple
initiatives aimed at improving the operations.

Key focus for the integrated Nevada operations:

  • All operations now report to a single Vice President and General
    Manager, Kevin Shiell.
  • Work is underway to create a unified mine plan including Fire Creek,
    Midas, Hollister and Hatter Graben, all feeding the Midas Mill.
  • Priority will be given to ramping up production at Fire Creek and
    beginning development of Hatter Graben. Midas is being ramped down,
    with personnel and machines moving to Hollister and Fire Creek.

Key focus for the Midas mill:

  • Completion of the Carbon-In-Leach (CIL) circuit to improve recoveries
    for processing Hollister ore.
  • Installation of new sampling equipment to better reconcile mill and
    mine reporting.
  • Construction of the new tailings facility.

Key focus for Fire Creek:

  • Rehabilitating existing mine access, increasing development to allow
    increased throughput from 350 tpd to 550 tpd.
  • Rehabilitation includes improving road conditions with an engineered
    roadbase and introducing in-cycle shotcreting to improve development
    and better manage ground conditions.
  • Improving mine to mill reconciliation.

CAPITAL

Expectations for capital investment in 2018 have increased to $140-$145
million from $95-$105 million, reflecting approximately $20 million of
investments to be made in the Nevada operations, including $11 million
for Fire Creek development and definition drilling, $5 million for the
new tailings facility at the Midas mill, and $2 million for completion
of the CIL plant. The remaining change in capital estimates is due to
the re-allocation of $10 million of costs relating to the RVM that is
now being assembled in Sweden and is no longer a Research and
Development expense and an additional $4 million of capital spending at
each of Greens Creek and San Sebastian.

EXPLORATION

Exploration (including corporate development) expenses for the second
quarter were $7.8 million, an increase of $2.0 million compared to the
prior year period. Full year exploration (including corporate
development) expenses are expected to be $34-37 million, reflecting $10
million for the Nevada properties and more drilling at San Sebastian.

A complete summary of exploration for the second quarter can be found in
the exploration news release entitled "Hecla Reports Continued
Discoveries at the Mines, Integrates Nevada, and Advances Key Projects"
issued on August 7, 2018.

PRE-DEVELOPMENT

Pre-development spending was $1.4 million for the quarter, slightly
higher than the $1.1 million for the prior year period, principally to
advance the permitting of Rock Creek and Montanore.

RESEARCH AND DEVELOPMENT

Research and Development spending was $2.3 million for the quarter, with
completion of the design and procurement phase of the RVM project.
Fabrication of the machine started at the end of the second quarter and
is expected to be complete in the fourth quarter of 2018, and a testing
phase in Sweden during the first half of 2019 is planned. The machine is
expected to be delivered to Lucky Friday in late 2019. Expectations for
2018 Research and Development spending have declined to $6-$10 million
from $12-$16 million, as investment in the RVM project are expected to
be capitalized going forwards.

2018 ESTIMATES7

The following revised estimates include the expected impact from the
addition of Nevada operations through the acquisition of Klondex for the
5-month period from August 1 to December 31, 2018.

2018 Production Outlook

 
    Silver Production

(Moz)

  Gold Production

(Koz)

  Silver Equivalent

(Moz)

  Gold Equivalent

(Koz)

   

Original
(if revised)

  Current  

Original
(if revised)

  Current  

Original
(if revised)

  Current  

Original
(if revised)

  Current
Greens Creek   7.5-8.0   7.5-8.1       50-55       21.0-22.5   300-313   300-315
Lucky Friday                                
San Sebastian       2.0-2.5   13-17   15-17   3.0-3.5   2.9-3.7   40-52   41-52
Casa Berardi           155-160   157-162       11.0-11.5   155-160   157-162
Nevada Operations       0.1-0.2       40-50       2.9-3.8       41-52
Total   9.5-10.5   9.6-10.8   218-232   262-284   35.0-37.5   37.8-41.5   495-525   539-581
               

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
   

Original
(if revised)

  Current  

Original
(if revised)

Current  

Original
(if revised)

Current
Greens Creek       $198   $0.50 $(0.50)   $7.75 $7.00
Lucky Friday                    
San Sebastian       $44     $8.50     $12.50
Total Silver       $242   $2.25 $1.50   $12.75 $12.25
Casa Berardi       $185     $800     $1,100
Nevada Operations       $68     $800    

$1,100

Total Gold       $253     $800     $1,100
       

2018 Capital and Exploration Outlook

   

Original
(if revised)

  Current
2018E Capital expenditures (excluding capitalized interest)   $95-$105 million  

$140-$145 million

2018E Exploration expenditures (includes Corporate Development)   $30-$37 million   $34-$37 million
2018E Pre-development expenditures       $5 million
2018E Research and Development expenditures   $12-$16 million  

$6-$10 million

   

DIVIDENDS

Common

The Board of Directors elected to declare a quarterly cash
dividend of $0.0025 per share of common stock, payable on or about
August 31, 2018, to shareholders of record on August 24, 2018. The
realized silver price was $16.61 in the second 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
October 1, 2018, to shareholders of record on September 14, 2018.

CONFERENCE CALL AND WEBCAST

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

ABOUT HECLA

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

NOTES

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional
information only and do not have any standard meaning prescribed by
generally accepted accounting principles in the United States (GAAP).
These measures should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with GAAP.

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

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

(3) Net debt to adjusted EBITDA is a non-GAAP measurement, a
reconciliation of which to debt and net income (loss), the most
comparable GAAP measurements, can be found at the end of the release. It
is an important measure for management to measure relative indebtedness
and the ability to service the debt relative to its peers. It is
calculated as total debt outstanding less total cash on hand divided by
adjusted EBITDA.

(4) Cash cost, after by-product credits, per silver or gold
ounce is a non-GAAP measurement, a reconciliation of which to cost of
sales and other direct production costs and depreciation, depletion and
amortization (sometimes referred to as "cost of sales" in this release),
can be found at the end of the release. It is an important operating
statistic that management utilizes to measure each mine's operating
performance. It also allows the benchmarking of performance of each mine
versus those of our competitors. As a 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 and the Nevada operations, 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. Cash cost, after by-product
credits, per silver ounce is not presented for Lucky Friday for the
second quarters of 2018 and 2017 and the first half of 2018, as
production was limited due to the strike and results are not comparable
to those from prior periods and are not indicative of future operating
results under full production. The estimated fair value of the stockpile
acquired at Hollister has been removed from the cash cost, after
by-product credits calculation.

(5) All in sustaining cost (AISC), after by-product credits,
is a non-GAAP measurement, a reconciliation of which to cost of sales
and other direct production costs and depreciation, depletion and
amortization, the closest GAAP measurement, can be found in the end of
the release. AISC, after by-product credits, includes cost of sales and
other direct production costs, expenses for reclamation and exploration
at the 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. AISC, after by-product credits, per
silver ounce is not presented for Lucky Friday for the second quarters
of 2018 and 2017 and the first half of 2018, as production was limited
due to the strike and results are not comparable to those from prior
periods and are not indicative of future operating results under full
production. 2018 AISC, after by-product credits, per gold ounce for the
Nevada operations excludes $5 million of capital as it distorts the AISC
estimates for the remainder part of the year. The estimated fair value
of the stockpile acquired at Hollister has been removed from the AISC,
after by-product credits calculation.

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

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

Other

(7) Expectations for 2018 includes silver, gold, lead and
zinc production from Greens Creek, San Sebastian, Casa Berardi and
Nevada operations 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.

Cautionary Statements to Investors on Forward-Looking Statements

This news release contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the safe harbor created by such sections
and other applicable laws, including Canadian securities laws. Such
forward-looking statements may include, without limitation: (i)
estimates of future production and sales; (ii) the impact of the Klondex
acquisition on Hecla's operations and results; (iii) expectations
regarding the development, growth potential, financial performance of
the Company's projects; (iv) ability to complete construction of the
remote vein miner and for it to operate successfully; (v) impact of the
Lucky Friday strike on production and cash flow; (vi) ability to
generate value from innovations being introduced into the mines; and
(vii) impact of metals prices on cash costs, after by-product credits.
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 rates for the Canadian dollar and
Mexican peso 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, and Forms 10-Q filed on May 10, 2018 and August 9, 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 publicly
release revisions to any "forward-looking statement," including, without
limitation, outlook, to reflect events or circumstances after the date
of this news release, or to reflect the occurrence of unanticipated
events, except as may be required under applicable securities laws.
Investors should not assume that any lack of update to a previously
issued "forward-looking statement" constitutes a reaffirmation of that
statement. Continued reliance on "forward-looking statements" is at
investors' own risk.

HECLA MINING COMPANY

Condensed Consolidated Statements of Income (Loss)

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

 
  Second Quarter Ended   Six Months Ended
June 30, 2018   June 30, 2017 June 30, 2018   June 30, 2017
Sales of products $ 147,259   $ 134,279   $ 286,968   $ 276,823  
Cost of sales and other direct production costs 80,440 77,503 153,309 156,179
Depreciation, depletion and amortization 31,817   25,569   59,871   54,521  
112,257   103,072   213,180   210,700  
Gross profit 35,002   31,207   73,788   66,123  
 
Other operating expenses:
General and administrative 9,787 10,309 17,522 19,515
Exploration 7,838 5,853 15,198 10,367
Pre-development 1,415 1,052 2,420 2,304
Research and development 2,337 312 3,773 995
Other operating expense 638 699 1,153 1,362
Provision for closed operations and environmental matters 1,420 985 2,682 2,104
Lucky Friday suspension-related costs 6,801 8,024 11,818 9,605
Acquisition costs 1,010   (2 ) 3,517   25  
31,246   27,232   58,083   46,277  
Income from operations 3,756   3,975   15,705   19,846  
Other income (expense):
Loss on disposition of investments (167 )
Unrealized (loss) gain on investments (564 ) (276 ) (254 ) 51
Gain (loss) on derivative contracts 16,804 2,487 20,811 (5,322 )
Interest and other income 108 319 52 644
Net foreign exchange gain (loss) 2,476 (3,883 ) 5,068 (6,145 )
Interest expense, net of amount capitalized (10,079 ) (10,543 ) (19,873 ) (19,065 )
8,745   (11,896 ) 5,804   (30,004 )
Income (loss) before income taxes 12,501 (7,921 ) 21,509 (10,158 )
Income tax (provision) benefit (427 ) (16,095 ) (1,195 ) 12,976  
Net income (loss) 12,074 (24,016 ) 20,314 2,818
Preferred stock dividends (138 ) (138 ) (276 ) (276 )
Income (loss) applicable to common shareholders $ 11,936   $ (24,154 ) $ 20,038   $ 2,542  
Basic and diluted income (loss) per common share after preferred
dividends
$ 0.03   $ (0.06 ) $ 0.05   $ 0.01  
Weighted average number of common shares outstanding - basic 400,619   396,178   399,972   395,774  
Weighted average number of common shares outstanding - diluted 403,610   396,178   402,873   399,236  
 

HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and shares in thousands - unaudited)

 
    June 30, 2018   December 31, 2017
ASSETS        
Current assets:    
Cash and cash equivalents $ 239,722 $ 186,107
Short-term investments and securities 5,556 33,758
Accounts receivable:
Trade 9,717 14,805
Other, net 19,307 17,385
Inventories 61,054 54,555
Other current assets 17,006   13,715  
Total current assets 352,362 320,325
Non-current investments 7,449 7,561
Non-current restricted cash and investments 1,005 1,032
Properties, plants, equipment and mineral interests, net 2,006,592 2,020,021
Non-current deferred income taxes 1,179 1,509
Other non-current assets and deferred charges 24,007   14,509  
Total assets $ 2,392,594   $ 2,364,957  
         
LIABILITIES        
Current liabilities:
Accounts payable and accrued liabilities $ 53,835 $ 46,549
Accrued payroll and related benefits 23,661 31,259
Accrued taxes 6,143 5,919
Current portion of capital leases 6,015 5,608
Current portion of debt
Other current liabilities 7,364 16,116
Current portion of accrued reclamation and closure costs 8,315   6,679  
Total current liabilities 105,333 112,130
Capital leases 8,757 6,193
Accrued reclamation and closure costs 78,102 79,366
Long-term debt 533,230 502,229
Non-current deferred tax liability 112,462 121,546
Non-current pension liability 48,973 46,628
Other non-current liabilities 4,438   12,983  
Total liabilities 891,295   881,075  
         
SHAREHOLDERS' EQUITY        
Preferred stock 39 39
Common stock 101,643 100,926
Capital surplus 1,628,440 1,619,816
Accumulated deficit (176,158 ) (195,484 )
Accumulated other comprehensive loss (31,929 ) (23,373 )
Treasury stock (20,736 ) (18,042 )
Total shareholders' equity 1,501,299   1,483,882  
Total liabilities and shareholders' equity $ 2,392,594   $ 2,364,957  
Common shares outstanding 401,322   399,176  
 

HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)

 
  Six Months Ended
    June 30, 2018   June 30, 2017
OPERATING ACTIVITIES        
Net income $ 20,314   $ 2,818
Non-cash elements included in net income:
Depreciation, depletion and amortization 62,852 56,908
Unrealized loss on investments 254 117
Gain on disposition of properties, plants, equipment and mineral
interests
(166 ) (94 )
Provision for reclamation and closure costs 2,640 2,247
Stock compensation 2,441 2,831
Deferred income taxes (2,977 ) (22,113 )
Amortization of loan origination fees 898 967
(Gain) loss on derivative contracts (30,236 ) 5,386
Foreign exchange (gain) loss (5,348 ) 5,201
Other non-cash items, net (35 ) 2
Change in assets and liabilities:
Accounts receivable 2,471 (1,150 )
Inventories (6,865 ) 1,594
Other current and non-current assets (2,507 ) 3,896
Accounts payable and accrued liabilities 8,701 (10,937 )
Accrued payroll and related benefits (337 ) (4,901 )
Accrued taxes (672 ) 4,408
Accrued reclamation and closure costs and other non-current
liabilities
(4,410 )   (1,359 )
Cash provided by operating activities 47,018     45,821  
         
INVESTING ACTIVITIES        
Additions to properties, plants, equipment and mineral interests (43,304 ) (45,964 )
Proceeds from disposition of properties, plants and equipment 463 142
Purchases of investments (31,682 ) (23,280 )
Maturities of investments 59,336     14,356  
Net cash used in investing activities (15,187 )   (54,746 )
         
FINANCING ACTIVITIES        
Proceeds from issuance of stock, net of related costs 9,610
Acquisition of treasury shares (2,694 ) (2,474 )
Dividends paid to common shareholders (2,000 ) (1,981 )
Dividends paid to preferred shareholders (276 ) (276 )
Credit availability and debt issuance fees paid (3 ) (91 )
Repayments of debt (470 )
Issuance of debt 31,024
Repayments of capital leases (3,762 )   (3,245 )
Net cash provided by financing activities 22,289     1,073  
Effect of exchange rates on cash (532 ) 1,086
Net increase (decrease) in cash, cash equivalents and restricted cash 53,588 (6,766 )
Cash, cash equivalents and restricted cash at beginning of period 187,139     171,977  
Cash, cash equivalents and restricted cash at end of period $ 240,727     $ 165,211  
 

HECLA MINING COMPANY
 

Production Data

 
  Three Months Ended   Six Months Ended
    June 30, 2018   June 30, 2017   June 30, 2018   June 30, 2017
GREENS CREEK UNIT                
Tons of ore milled 208,409   210,788   419,839   407,917
Mining cost per ton of ore $ 69.83 $ 68.17 $ 69.41 $ 69.74
Milling cost per ton of ore $ 33.59 $ 32.56 $ 33.11 $ 33.12
Ore grade milled - Silver (oz./ton) 12.46 12.11 12.08 12.40
Ore grade milled - Gold (oz./ton) 0.100 0.097 0.097 0.099
Ore grade milled - Lead (%) 3.17 2.68 3.06 2.86
Ore grade milled - Zinc (%) 7.84 7.20 7.95 7.50
Silver produced (oz.) 1,999,791 1,932,047 3,913,023 3,861,344
Gold produced (oz.) 13,719 12,704 26,837 26,726
Lead produced (tons) 5,305 4,420 10,326 9,229
Zinc produced (tons) 14,179 12,966 28,978 26,372
Cash cost, after by-product credits, per silver ounce (1) $ (3.47 ) $ 1.86 $ (4.22 ) $ 1.26
AISC, after by-product credits, per silver ounce (1) $ 4.43 $ 8.71 $ 2.56 $ 6.28
Capital additions (in thousands)   $ 14,183     $ 11,451     $ 23,665     $ 16,685
LUCKY FRIDAY UNIT                
Tons of ore milled 3,447 13,006 57,069
Mining cost per ton of ore $ 89.54 $ $ 108.08 $ 104.72
Milling cost per ton of ore $ 6.15 $ $ 17.56 $ 27.16
Ore grade milled - Silver (oz./ton) 10.63 10.98 12.39
Ore grade milled - Lead (%) 7.28 7.01 7.05
Ore grade milled - Zinc (%) 3.43 4.43 3.99
Silver produced (oz.) 24,687 124,467 680,782
Lead produced (tons) 217 823 3,827
Zinc produced (tons) 120 532 2,131
Cash cost, after by-product credits, per silver ounce (1) $ $ $ 5.93
AISC, after by-product credits, per silver ounce (1) $ $ $ $ 12.06
Capital additions (in thousands) $ 1,061 $ 805 $ 2,049 $ 4,792
 

  Three Months Ended   Six Months Ended
    June 30, 2018   June 30, 2017   June 30, 2018   June 30, 2017
CASA BERARDI UNIT                
Tons of ore milled - underground 184,373   195,039   375,706   399,992
Tons of ore milled - surface pit 165,564 135,070 322,780 223,809
Tons of ore milled - total 349,937 330,109 698,486 623,801
Surface tons mined - ore and waste 1,961,171 2,106,308 3,637,605 4,416,543
Mining cost per ton of ore - underground $ 106.75 $ 99.01 $ 106.28 $ 99.23
Mining cost per ton - combined $ 73.61 $ 76.83 $ 75.28 $ 81.42
Mining cost per ton of ore and waste - surface tons mined $ 3.10 $ 2.53 $ 3.48 $ 2.58
Milling cost per ton of ore $ 16.71 $ 15.50 $ 16.34 $ 16.33
Ore grade milled - Gold (oz./ton) - underground 0.209 0.148 0.195 0.155
Ore grade milled - Gold (oz./ton) - surface pit 0.062 0.078 0.070 0.082
Ore grade milled - Gold (oz./ton) - combined 0.140 0.119 0.137 0.129
Ore grade milled - Silver (oz./ton) 0.04 0.03 0.03 0.03
Gold produced (oz.) - underground 33,743 23,780 63,265 52,430
Gold produced (oz.) - surface pit 8,979 9,481 19,634 16,638
Gold produced (oz.) - total 42,722 33,261 82,899 69,068
Silver produced (oz.) 12,298 8,477 21,189 17,022
Cash cost, after by-product credits, per gold ounce (1) $ 775 $ 972 $ 800 $ 927
AISC, after by-product credits, per gold ounce (1) $ 1,039 $ 1,373 $ 1,062 $ 1,312
Capital additions (in thousands)   $ 9,809     $ 12,063     $ 18,876     $ 24,474  
SAN SEBASTIAN                
Tons of ore milled 37,780 38,478 72,177 75,141
Mining cost per ton of ore $ 180.12 $ 41.63 $ 149.14 $ 40.16
Milling cost per ton of ore $ 65.46 $ 66.97 $ 66.25 $ 65.29
Ore grade milled - Silver (oz./ton) 15.93 23.87 16.01 22.85
Ore grade milled - Gold (oz./ton) 0.115 0.182 0.127 0.182
Silver produced (oz.) 559,647 866,950 1,071,839 1,617,753
Gold produced (oz.) 3,872 6,596 8,385 12,880
Cash cost, after by-product credits, per silver ounce (1) $ 9.79 $ (3.31 ) $ 6.46 $ (3.29 )
AISC, after by-product credits, per silver ounce (1) $ 17.15 $ 0.06 $ 12.95 $ 0.24
Capital additions (in thousands)   $ 1,680     $ 2,423     $ 2,110     $ 4,130  
 
(1)   Cash cost, after by-product credits, per ounce and AISC, after
by-product credits. per ounce represent non-U.S. Generally Accepted
Accounting Principles (GAAP) measurements. 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 and Cash Cost, After By-product Credits (non-GAAP)
and All-In Sustaining Cost, Before By-product Credits and All-In
Sustaining Cost, After By-product Credits (non-GAAP)

The tables below present reconciliations between the most comparable
GAAP measure of cost of sales and other direct production costs and
depreciation, depletion and amortization to the non-GAAP measures of
Cash Cost, Before By-product Credits, Cash Cost, After By-product
Credits, AISC, Before By-product Credits and AISC, After By-product
Credits for our operations at the Greens Creek, Lucky Friday, San
Sebastian and Casa Berardi units for the three- and six-month periods
ended June 30, 2018 and 2017 and for estimated result for the full-year
of 2018.

Cash Cost, After By-product Credits, per Ounce is an important operating
statistic that we utilize to measure each mine's operating performance.
AISC, After By-product Credits, per Ounce is an important operating
statistic that we utilize as a measures of our mines' net cash flow
after costs for exploration, pre-development, reclamation, and
sustaining capital. 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. Cash Cost,
After By-product Credits, per Ounce and AISC, After By-product Credits,
per Ounce also allow us to benchmark the performance of each of our
mines versus those of our competitors. As a primary silver mining
company, we also use these statistics on an aggregate basis -
aggregating the Greens Creek, Lucky Friday and San Sebastian mines - to
compare our performance with that of other primary silver mining
companies. With regard to Casa Berardi, we use Cash Cost, After
By-product Credits, per Gold Ounce AISC, After By-product Credits, per
Gold Ounce to compare its performance with other gold mines. Similarly,
these statistics are useful in identifying acquisition and investment
opportunities as they provide a common tool for measuring the financial
performance of other mines with varying geologic, metallurgical and
operating characteristics.

Cash Cost, Before By-product Credits and AISC, Before By-product Credits
include all direct and indirect operating cash costs related directly to
the physical activities of producing metals, including mining,
processing and other plant costs, third-party refining expense, on-site
general and administrative costs, royalties and mining production taxes.
AISC, Before By-product Credits for each mine also includes on-site
exploration, reclamation, and sustaining capital costs. AISC, Before
By-product Credits for our consolidated silver properties also includes
corporate costs for general and administrative expense, reclamation,
exploration, and pre-development. By-product credits include revenues
earned from all metals other than the primary metal produced at each
unit. As depicted in the tables below, by-product credits comprise an
essential element of our silver unit cost structure, distinguishing our
silver operations due to the polymetallic nature of their orebodies.
Cash Cost, After By-product Credits, per Ounce and AISC, After
By-product Credits, per Ounce provide management and investors an
indication of operating cash flow, after consideration of the average
price, received from production. We also use these measurements for the
comparative monitoring of performance of our mining operations
period-to-period from a cash flow perspective. Cash Cost, After
By-product Credits, per Ounce is a measure developed by precious metals
companies (including the Silver Institute) in an effort to provide a
uniform standard for comparison purposes. There can be no assurance,
however, that our reporting of these non-GAAP measures are the same as
those reported by other mining companies.

The Casa Berardi section below reports Cash Cost, After By-product
Credits, per Gold Ounce and AISC, After By-product Credits, per Gold
Ounce for the production of gold, its primary product, and by-product
revenues earned from silver, which is a by-product at Casa Berardi. Only
costs and ounces produced relating to units with the same primary
product are combined to represent Cash Cost, After By-product Credits,
per Ounce and AISC, After By-product Credits, per Ounce. Thus, the gold
produced at our Casa Berardi unit is not included as a by-product credit
when calculating Cash Cost, After By-product Credits, per
Silver Ounce and AISC, After By-product Credits, per Silver Ounce for
the total of Greens Creek, Lucky Friday and San Sebastian, our combined
silver properties.

In thousands (except per ounce amounts)   Three Months Ended June 30, 2018
Greens Creek   Lucky Friday(2)   San Sebastian   Corporate(3)   Total Silver   Casa Berardi (Gold)   Total
Cost of sales and other direct production costs and depreciation,
depletion and amortization
$ 47,742 1,744 $ 11,076 $ 60,562 $ 51,695 $ 112,257
Depreciation, depletion and amortization (11,813 ) (182 ) (1,107 ) (13,102 ) (18,715 ) (31,817 )
Treatment costs 9,481 55 116 9,652 559 10,211
Change in product inventory 321 (1,160 ) 769 (70 ) (78 ) (148 )
Reclamation and other costs (449 ) (58 ) (319 ) (826 ) (139 ) (965 )
Exclusion of Lucky Friday cash costs   (399 )   (399 )   (399 )
Cash Cost, Before By-product Credits (1) 45,282 10,535 55,817 33,322 89,139
Reclamation and other costs 850 103 953 140 1,093
Exploration 778 2,334 434 3,546 1,330 4,876
Sustaining capital 14,183 1,680 517 16,380 9,809 26,189
General and administrative       9,787 9,787     9,787  
AISC, Before By-product Credits (1) 61,093 14,652 86,483 44,601 131,084
By-product credits:
Zinc (27,492 ) (27,492 ) (27,492 )
Gold (15,716 ) (5,057 ) (20,773 ) (20,773 )
Lead (9,022 ) (9,022 ) (9,022 )
Silver         (201 ) (201 )
Total By-product credits (52,230 )   (5,057 ) (57,287 ) (201 ) (57,488 )
Cash Cost, After By-product Credits $ (6,948 ) $   $ 5,478   $ (1,470 ) $ 33,121   $ 31,651  
AISC, After By-product Credits $ 8,863   $   $ 9,595   $ 29,196   $ 44,400   $ 73,596  
Divided by ounces produced 2,000 560 2,560 43
Cash Cost, Before By-product Credits, per Ounce $ 22.65 $ $ 18.82 $ 21.81 $ 779.96
By-product credits per ounce (26.12 )   (9.03 ) (22.38 ) (4.70 )
Cash Cost, After By-product Credits, per Ounce $ (3.47 ) $   $ 9.79   $ (0.57 ) $ 775.26  
AISC, Before By-product Credits, per Ounce $ 30.55 $ $ 26.18 $ 33.78 $ 1,043.97
By-product credits per ounce (26.12 )   (9.03 ) (22.38 ) (4.70 )
AISC, After By-product Credits, per Ounce $ 4.43   $   $ 17.15   $ 11.40   $ 1,039.27  
 

In thousands (except per ounce amounts)   Three Months Ended June 30, 2017
Greens Creek   Lucky Friday(2)   San Sebastian   Corporate(3)   Total Silver   Casa Berardi (Gold)   Total
Cost of sales and other direct production costs and depreciation,
depletion and amortization
$ 54,318 $ $ 5,074 $ 59,392 $ 43,680 $ 103,072
Depreciation, depletion and amortization (13,503 ) (722 ) (14,225 ) (11,344 ) (25,569 )
Treatment costs 11,423 259 11,682 554 12,236
Change in product inventory (5,542 ) 815 (4,727 ) (212 ) (4,939 )
Reclamation and other costs (694 )   (5 ) (699 ) (212 ) (911 )
Cash Cost, Before By-product Credits (1) 46,002 5,421 51,423 32,466 83,889
Reclamation and other costs 667 117 784 213 997
Exploration 1,117 1,957 452 3,526 1,071 4,597
Sustaining capital 11,451 845 256 12,552 12,059 24,611
General and administrative       10,309 10,309     10,309  
AISC, Before By-product Credits (1) 59,237 8,340 78,594 45,809 124,403
By-product credits:
Zinc (21,647 ) (21,647 ) (21,647 )
Gold (13,917 ) (8,287 ) (22,204 ) (22,204 )
Lead (6,847 ) (6,847 ) (6,847 )
Silver         (142 ) (142 )
Total By-product credits (42,411 )   (8,287 ) (50,698 ) (142 ) (50,840 )
Cash Cost, After By-product Credits $ 3,591   $   $ (2,866 ) $ 725   $ 32,324   $ 33,049  
AISC, After By-product Credits $ 16,826   $   $ 53   $ 27,896   $ 45,667   $ 73,563  
Divided by ounces produced 1,932 867 2,799 33
Cash Cost, Before By-product Credits, per Ounce $ 23.81 $ $ 6.25 $ 18.37 $ 976.07
By-product credits per ounce (21.95 )   (9.56 ) (18.11 ) (4.25 )
Cash Cost, After By-product Credits, per Ounce $ 1.86   $   $ (3.31 ) $ 0.26   $ 971.82  
AISC, Before By-product Credits, per Ounce $ 30.66 $ $ 9.62 $ 28.08 $ 1,377.21
By-product credits per ounce (21.95 )   (9.56 ) (18.11 ) (4.25 )
AISC, After By-product Credits, per Ounce $ 8.71   $   $ 0.06   $ 9.97   $ 1,372.96  
 

In thousands (except per ounce amounts)   Six Months Ended June 30, 2018
Greens Creek   Lucky Friday(2)   San Sebastian   Corporate(3)   Total Silver   Casa Berardi (Gold)   Total
Cost of sales and other direct production costs and depreciation,
depletion and amortization
$ 89,602 $ 5,844 $ 16,852 $ 112,298 $ 100,882 $ 213,180
Depreciation, depletion and amortization (22,452 ) (803 ) (1,791 ) (25,046 ) (34,825 ) (59,871 )
Treatment costs 20,869 627 320 21,816 1,094 22,910
Change in product inventory 5,475 (2,182 ) 3,407 6,700 (179 ) 6,521
Reclamation and other costs (1,360 ) (103 ) (814 ) (2,277 ) (281 ) (2,558 )
Exclusion of Lucky Friday cash costs   (3,383 )   (3,383 )   (3,383 )
Cash Cost, Before By-product Credits (1) 92,134 17,974 110,108 66,691 176,799
Reclamation and other costs 1,699 209 1,908 283 2,191
Exploration 1,138 4,646 878 6,662 2,520 9,182
Sustaining capital 23,665 2,110 634 26,409 18,876 45,285
General and administrative       17,522 17,522     17,522  
AISC, Before By-product Credits (1) 118,636 24,939 162,609 88,370 250,979
By-product credits:
Zinc (59,634 ) (59,634 ) (59,634 )
Gold (31,008 ) (11,055 ) (42,063 ) (42,063 )
Lead (17,996 ) (17,996 ) (17,996 )
Silver         (349 ) (349 )
Total By-product credits (108,638 )   (11,055 ) (119,693 ) (349 ) (120,042 )
Cash Cost, After By-product Credits $ (16,504 ) $   $ 6,919   $ (9,585 ) $ 66,342   $ 56,757  
AISC, After By-product Credits $ 9,998   $   $ 13,884   $ 42,916   $ 88,021   $ 130,937  
Divided by ounces produced 3,913 1,072 4,985 83
Cash Cost, Before By-product Credits, per Ounce $ 23.54 $ $ 16.77 $ 22.09 $ 804.44
By-product credits per ounce (27.76 )   (10.31 ) (24.01 ) (4.17 )
Cash Cost, After By-product Credits, per Ounce $ (4.22 ) $   $ 6.46   $ (1.92 ) $ 800.27  
AISC, Before By-product Credits, per Ounce $ 30.32 $ $ 23.26 $ 32.62 $ 1,065.95
By-product credits per ounce (27.76 )   (10.31 ) (24.01 ) (4.17 )
AISC, After By-product Credits, per Ounce $ 2.56   $   $ 12.95   $ 8.61   $ 1,061.78  
 

In thousands (except per ounce amounts)   Six Months Ended June 30, 2017
Greens Creek   Lucky Friday(2)   San Sebastian   Corporate(3)   Total Silver   Casa Berardi (Gold)   Total
Cost of sales and other direct production costs and depreciation,
depletion and amortization
$ 98,314 $ 14,542 $ 11,697 $ 124,553 $ 86,147 $ 210,700
Depreciation, depletion and amortization (26,835 ) (2,433 ) (1,395 ) (30,663 ) (23,858 ) (54,521 )
Treatment costs 25,554 3,817 484 29,855 1,092 30,947
Change in product inventory (2,277 ) (149 ) 435 (1,991 ) 1,169 (822 )
Reclamation and other costs (1,080 ) (181 ) (595 ) (1,856 ) (230 ) (2,086 )
Cash Cost, Before By-product Credits (1) 93,676 15,596 10,626 119,898 64,320 184,218
Reclamation and other costs 1,333 179 234 1,746 230 1,976
Exploration 1,395 1 3,489 830 5,715 1,868 7,583
Sustaining capital 16,685 3,990 1,977 1,170 23,822 24,470 48,292
General and administrative       19,515 19,515     19,515  
AISC, Before By-product Credits (1) 113,089 19,766 16,326 170,696 90,888 261,584
By-product credits:
Zinc (45,426 ) (4,060 ) (49,486 ) (49,486 )
Gold (28,769 ) (15,944 ) (44,713 ) (44,713 )
Lead (14,629 ) (7,496 ) (22,125 ) (22,125 )
Silver         (289 ) (289 )
Total By-product credits (88,824 ) (11,556 ) (15,944 ) (116,324 ) (289 ) (116,613 )
Cash Cost, After By-product Credits $ 4,852   $ 4,040   $ (5,318 ) $ 3,574   $ 64,031   $ 67,605  
AISC, After By-product Credits $ 24,265   $ 8,210   $ 382   $ 54,372   $ 90,599   $ 144,971  
Divided by ounces produced 3,861 681 1,618 6,160 69
Cash Cost, Before By-product Credits, per Ounce $ 24.27 $ 22.90 $ 6.56 $ 19.46 $ 931.26
By-product credits per ounce (23.01 ) (16.97 ) (9.85 ) (18.88 ) (4.18 )
Cash Cost, After By-product Credits, per Ounce $ 1.26   $ 5.93   $ (3.29 ) $ 0.58   $ 927.08  
AISC, Before By-product Credits, per Ounce $ 29.29 $ 29.03 $ 10.09 $ 27.71 $ 1,315.92
By-product credits per ounce (23.01 ) (16.97 ) (9.85 ) (18.88 ) (4.18 )
AISC, After By-product Credits, per Ounce $ 6.28   $ 12.06   $ 0.24   $ 8.83   $ 1,311.74  
 

In thousands (except per ounce amounts) Current Estimate for Twelve Months Ended December 31, 2018

Greens

Creek

 

Lucky

Friday(2)

 

San

Sebastian

  Corporate(3)  

Total

Silver

 

Casa

Berardi

  Nevada(4)  

Total

Gold

Cost of sales and other direct production costs and depreciation,
depletion and amortization
$ 198,000 $ 44,000 $ 242,000 $ 185,000 $ 68,000   $ 253,000
Depreciation, depletion and amortization (50,000 ) (6,000 ) (56,000 ) (58,000 ) (16,000 ) (74,000 )
Treatment costs 44,000 550 44,550 400 400
Adjustment for inventory acquired (14,000 )
Change in product inventory (1,000 ) (1,000 )
Reclamation and other costs (2,900 )   (500 ) (3,400 ) (800 )     (800 )
Cash Cost, Before By-product Credits (1) 189,100 37,050 226,150 126,600 38,000 178,600
Reclamation and other costs 2,500 240 2,740 450 450
Exploration 3,500 4,800 2,500 10,800 5,000 5,000 10,000
Sustaining capital 51,000 3,700 2,000 56,700 45,000 18,000 63,000
General and administrative       35,000 35,000          
AISC, Before By-product Credits (1) 246,100   45,790   331,390   177,050   61,000   252,050  
By-product credits (193,000 ) (18,000 ) (211,000 ) (800 ) (3,000 ) (3,800 )
Cash Cost, After By-product Credits $ (3,900 )   $ 19,050   $ 15,150   $ 125,800   $ 35,000     $ 174,800  
AISC, After By-product Credits $ 53,100     $ 27,790   $ 120,390   $ 176,250   $ 58,000     $ 248,250  
Divided by ounces produced 7,800 2,250 10,050 160 50 210
Cash Cost, Before By-product Credits, per Ounce $ 24.24 $ 16.47 $ 22.50 $ 791 $ 760 $ 850
By-product credits per ounce (24.74 )   (8.00 ) (21.00 ) (5 ) (60 ) (18 )
Cash Cost, After By-product Credits, per Ounce $ (0.50 )   $ 8.47   $ 1.50   $ 786   $ 700   $ 832  
AISC, Before By-product Credits, per Ounce $ 31.55 $ 20.35 $ 32.97 $ 1,107 $ 1,220 $ 1,200
By-product credits per ounce (24.74 )   (8.00 ) (21.00 ) (5 ) (60 ) (18 )
AISC, After By-product Credits, per Ounce $ 6.81     $ 12.35   $ 11.97   $ 1,102   $ 1,160   $ 1,182  
 

In thousands (except per ounce amounts)   Original Estimate for Twelve Months Ended December 31, 2018

Greens

Creek

 

San

Sebastian

  Corporate(3)  

Total

Silver

 

Casa

Berardi

Cost of sales and other direct production costs and depreciation,
depletion and amortization
$ 198,000 $ 44,000 $ 242,000 $ 185,000
Depreciation, depletion and amortization (50,000 ) (6,000 ) (56,000 ) (58,000 )
Treatment costs 44,000 550 44,550 400
Change in product inventory (1,000 ) (1,000 )
Reclamation and other costs (2,900 ) (500 ) (3,400 ) (800 )
Cash Cost, Before By-product Credits (1) 189,100 37,050 226,150 126,600
Reclamation and other costs 2,500 240 2,740 450
Exploration 3,500 4,800 2,500 10,800 5,000
Sustaining capital 51,000 3,700 2,000 56,700 45,000
General and administrative     35,000 35,000    
AISC, Before By-product Credits (1) 246,100   45,790   331,390   177,050  
By-product credits (186,000 ) (18,000 ) (204,000 ) (800 )
Cash Cost, After By-product Credits $ 3,100   $ 19,050   $ 22,150   $ 125,800  
AISC, After By-product Credits $ 60,100   $ 27,790   $ 127,390   $ 176,250  
Divided by ounces produced 7,750 2,250 10,000 158
Cash Cost, Before By-product Credits, per Ounce $ 24.40 $ 16.47 $ 22.62 $ 801
By-product credits per ounce (24.00 ) (8.00 ) (20.40 ) (5 )
Cash Cost, After By-product Credits, per Ounce $ 0.40   $ 8.47   $ 2.22   $ 796  
AISC, Before By-product Credits, per Ounce $ 31.75 $ 20.35 $ 33.14 $ 1,121
By-product credits per ounce (24.00 ) (8.00 ) (20.40 ) (5 )
AISC, After By-product Credits, per Ounce $ 7.75   $ 12.35   $ 12.74   $ 1,116  
 
(1)   Includes all direct and indirect operating costs related to the
physical activities of producing metals, including mining,
processing and other plant costs, third-party refining and marketing
expense, on-site general and administrative costs, royalties and
mining production taxes, before by-product revenues earned from all
metals other than the primary metal produced at each unit. AISC,
Before By-product Credits also includes on-site exploration,
reclamation, and sustaining capital costs.
 
(2) The unionized employees at Lucky Friday have been on strike since
March 13, 2017, and production at Lucky Friday has been limited
since that time. As a result, for the first quarter of 2018 and 2017
and the first half of 2018 Cash Cost, Before By-product Credits,
Cash Cost, After By-product Credits, AISC, Before By-product
Credits, and AISC, After By-product Credits are not presented for
Lucky Friday, and costs related to the limited production at Lucky
Friday are excluded from the calculation of Cash Cost, Before
By-product Credits, Cash Cost, After By-product Credits, AISC,
Before By-product Credits, and AISC, After By-product Credits for
our combined silver operations.
 
(3) AISC, Before By-product Credits for our consolidated silver
properties includes corporate costs for general and administrative
expense, exploration and sustaining capital.
 

(4)

Nevada 2018 estimate is for the time period July 20 to December
31, 2018.

 

Reconciliation of Net Income (Loss) Applicable to Common Shareholders
(GAAP) to Adjusted Net Income (Loss) Applicable to Common Stockholders
(non-GAAP)

This release refers to a non-GAAP measure of adjusted net income (loss)
applicable to common stockholders and adjusted net income (loss) per
share, which are indicators of our performance. They exclude certain
impacts which are of a nature which we believe are not reflective of our
underlying performance. Management believes that adjusted net income
(loss) per common share provides investors with the ability to better
evaluate our underlying operating performance.

Dollars are in thousands (except per share amounts)   Three Months Ended June 30,   Six Months Ended June 30,
2018   2017   2018   2017
Net income (loss) applicable to common shareholders (GAAP) $ 11,936   $ (24,154 )   $ 20,038   $ 2,542
Adjusting items:
(Gains) losses on derivatives contracts (16,804 ) (2,487 ) (20,811 ) 5,322
Provisional price losses 2,517 1,308 2,582 680
Foreign exchange (gain) loss (2,476 ) 3,883 (5,068 ) 6,145
Lucky Friday suspension-related costs 6,801 8,024 11,818 9,605
Acquisition costs 1,010 (2 ) 3,517 25
Bond offering costs 1,050 1,050
Nonrecurring deferred income tax adjustments       (17,486 )
Adjusted net income (loss) applicable to common shareholders $ 2,984   $ (12,378 ) $ 12,076   $ 7,883  
Weighted average shares - basic 400,619 396,178 399,972 395,774
Weighted average shares - diluted 403,610 396,178 402,873 399,236
Basic adjusted net income (loss) per common share $ 0.01 $ (0.03 ) $ 0.03 $ 0.02
Diluted adjusted net income (loss) per common share $ 0.01 $ (0.03 ) $ 0.03 $ 0.02
 

Reconciliation of Net Income (Loss) (GAAP) and Debt (GAAP) to
Adjusted EBITDA (non-GAAP) and Net Debt (non-GAAP)

This release refers to the non-GAAP measures of adjusted earnings before
interest, taxes, depreciation and amortization ("Adjusted EBITDA"),
which is a measure of our operating performance, and net debt to
adjusted EBITDA for the last 12 months (or "LTM adjusted EBITDA"), which
is a measure of our ability to service our debt. Adjusted EBITDA is
calculated as net income (loss) before the following items: interest
expense, income tax provision, depreciation, depletion, and amortization
expense, exploration expense, pre-development expense, acquisition
costs, foreign exchange gains and losses, gains and losses on derivative
contracts, Lucky Friday suspension-related costs, provisional price
gains and losses, stock-based compensation, unrealized gains on
investments, provisions for closed operations, and interest and other
income (expense). Net debt is calculated as total debt, which consists
of the liability balances for our Senior Notes, capital leases, and
other notes payable, less the total of our cash and cash equivalents and
short-term investments. Management believes that, when presented in
conjunction with comparable GAAP measures, Adjusted EBITDA and net debt
to LTM adjusted EBITDA are useful to investors in evaluating our
operating performance and ability to meet our debt obligations. The
following table reconciles net income (loss) and debt to Adjusted EBITDA
and net debt:

Dollars are in thousands  

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

Twelve Months Ended
June 30,

2018   2017 2018   2017 2018   2017
Net income (loss) $ 12,074 $ (24,016 ) $ 20,314 $ 2,818 $ (6,023 ) $ 48,867
Plus: Interest expense, net of amount capitalized 10,079 10,543 19,873 19,065 38,820 29,780
Plus/(Less): Income taxes 427 16,095 1,195 (12,976 ) 34,050 1,302
Plus: Depreciation, depletion and amortization 31,817 25,569 59,871 54,521 121,412 114,217
Plus: Exploration expense 7,838 5,853 15,198 10,367 28,341 18,775
Plus: Pre-development expense 1,415 1,052 2,420 2,304 5,564 4,516
Plus/(Less): Foreign exchange (gain) loss (2,476 ) 3,883 (5,068 ) 6,145 (913 ) (1,017 )
Plus: Lucky Friday suspension-related costs 6,801 8,024 11,818 9,605 23,514 9,605
Plus/(Less): (Gains) losses on disposition of properties, plants,
equipment and mineral interests
(36 ) (166 )
Plus: Acquisition costs 1,010 (2 ) 3,517 25 3,517 2,318
Plus: Stock-based compensation 1,314 1,482 2,404 2,831 5,904 5,549
Plus/(Less): (Gains) losses on derivative contracts (16,804 ) (2,487 ) (20,811 ) 5,322 (4,883 ) 893
Plus: Provisional price loss 2,517 1,308 2,582 680 1,160 3,115
Plus: Provision for closed operations and environmental matters 1,317 1,221 2,640 2,247 4,901 5,055
Plus/(Less): Unrealized loss (gain) on investments 564 276 254 (51 ) 552 565
Other (108 ) (319 ) (52 ) (644 ) (934 ) (1,116 )
Adjusted EBITDA $ 57,749   $ 48,482   $ 115,989   $ 102,259   $ 254,982   $ 242,424  
Total debt $ 548,002 $ 514,702
Less: Cash, cash equivalents and short-term investments $ (245,278 ) $ (201,929 )
Net debt $ 302,724   $ 312,773  
Net debt/LTM adjusted EBITDA (non-GAAP) 1.2   1.3  
 

Reconciliation of Cash Provided by Operating Activities (GAAP) to
Free Cash Flow (non-GAAP)

This release refers to a non-GAAP measure of free cash flow, calculated
as cash provided by operating activities, less additions to properties,
plants, equipment and mineral interests. Management believes that, when
presented in conjunction with comparable GAAP measures, free cash flow
is useful to investors in evaluating our operating performance. The
following table reconciles cash provided by operating activities to free
cash flow:

Dollars are in thousands  

Three Months Ended
June 30,

2018   2017
Cash provided by operating activities $ 30,635 $ 7,536
Less: Additions to properties, plants equipment and mineral interests (25,669 ) (24,306 )
Free cash flow $ 4,966   $ (16,770 )

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