UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 1-8491
HECLA MINING COMPANY
(Exact Name of Registrant as Specified in its Charter)
Delaware
77-0664171
(State or other jurisdiction of
incorporation or organization)
(I.R.S. EmployerIdentification No.)
6500 N. Mineral Drive, Suite 200
Coeur d’Alene, Idaho
83815-9408
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (208) 769-4100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.25 per share
HL
New York Stock Exchange
Series B Cumulative Convertible Preferred
Stock, par value $0.25 per share
HL-PB
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No __
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No __
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Shares Outstanding November 1, 2024
Common stock, par value
$0.25 par value per share
637,015,436
Hecla Mining Company and Subsidiaries
Form 10-Q
For the Quarter Ended September 30, 2024
INDEX*
Page
PART I.
FINANCIAL INFORMATION
3
Item 1.
Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - Three Months Ended and Nine Months Ended September 30, 2024 and 2023
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2024 and 2023
4
Condensed Consolidated Balance Sheets - September 30, 2024 and December 31, 2023
5
Condensed Consolidated Statements of Changes in Stockholders' Equity – Three Months Ended and Nine Months Ended September 30, 2024 and 2023
6
Notes to Condensed Consolidated Financial Statements (unaudited)
8
Forward-Looking Statements
21
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22
Overview
Consolidated Results of Operations
23
Reconciliation of Total Cost of Sales 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)
37
Financial Liquidity and Capital Resources
50
Contractual Obligations, Contingent Liabilities and Commitments
53
Critical Accounting Estimates
Off-Balance Sheet Arrangements
Guarantor Subsidiaries
54
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
57
Item 4.
Controls and Procedures
58
PART II.
OTHER INFORMATION
59
Legal Proceedings
Item 1A.
Risk Factors
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
60
Signatures
61
*Items 2 and 3 of Part II are omitted as they are not applicable.
2
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
(Dollars and shares in thousands, except for per-share amounts)
Three Months Ended
Nine Months Ended
September 30, 2024
September 30, 2023
Sales
$
245,085
181,906
680,270
559,537
Cost of sales and other direct production costs
144,855
112,212
406,780
345,516
Depreciation, depletion and amortization
40,944
36,217
143,614
107,937
Total cost of sales
185,799
148,429
550,394
453,453
Gross profit
59,286
33,477
129,876
106,084
Other operating expenses:
General and administrative
10,401
7,596
36,357
30,449
Exploration and pre-development
10,553
13,686
21,577
25,546
Ramp-up and suspension costs
13,679
21,025
33,740
48,684
Provision for closed operations and environmental matters
1,542
2,256
3,681
6,411
Write down of property, plant and equipment
14,464
—
Other operating (income) expense, net
(13,828
)
1,555
(48,082
(2,729
Total other operating expenses
36,811
46,118
61,737
108,361
Income (loss) from operations
22,475
(12,641
68,139
(2,277
Other expense:
Interest expense
(10,901
(10,710
(36,050
(31,186
Fair value adjustments, net
3,654
(6,397
6,804
(5,774
Net foreign exchange (loss) gain
(3,246
4,176
3,409
434
Other income
1,229
1,657
3,921
4,425
Total other expense
(9,264
(11,274
(21,916
(32,101
Income (loss) before income and mining taxes
13,211
(23,915
46,223
(34,378
Income and mining tax (provision) benefit
(11,450
1,500
(22,345
(6,904
Net income (loss)
1,761
(22,415
23,878
(41,282
Preferred stock dividends
(138
(414
Net income (loss) applicable to common stockholders
1,623
(22,553
23,464
(41,696
Comprehensive income (loss):
Change in fair value of derivative contracts designated as hedge transactions
3,171
(11,384
(8,720
364
Comprehensive income (loss)
4,932
(33,799
15,158
(40,918
Basic income (loss) per common share after preferred dividends
0.00
(0.04
0.04
(0.07
Diluted income (loss) per common share after preferred dividends
Weighted average number of common shares outstanding - basic
621,921
607,896
618,419
604,028
Weighted average number of common shares outstanding - diluted
625,739
621,792
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Operating activities:
Non-cash elements included in net income (loss):
149,265
111,705
Inventory adjustments
10,074
16,332
(6,804
5,774
Provision for reclamation and closure costs
5,428
7,805
Stock-based compensation
6,401
5,122
Deferred income taxes
14,261
795
Net foreign exchange gain
(3,409
(434
Other non-cash items, net
145
1,624
Change in assets and liabilities:
Accounts receivable
(24,199
25,020
Inventories
(27,375
(24,339
Other current and non-current assets
353
(15,045
Accounts payable, accrued and other current liabilities
(6,991
(2,389
Accrued payroll and related benefits
6,592
(11,244
Accrued taxes
1,069
(1,008
Accrued reclamation and closure costs and other non-current liabilities
(12,345
(3,821
Net cash provided by operating activities
150,807
74,615
Investing activities:
Additions to property, plant and mine development
(153,708
(161,265
Proceeds from disposition of assets
1,473
160
Purchases of investments
(73
(1,753
Net cash used in investing activities
(152,308
(162,858
Financing activities:
Proceeds from sale of common stock, net
58,368
25,888
Acquisition of treasury stock
(1,197
(2,036
Borrowing of debt
150,000
119,000
Repayment of debt
(265,000
(39,000
Dividends paid to common and preferred stockholders
(16,691
(11,755
Repayments of finance leases
(7,841
(7,990
Net cash (used in) provided by financing activities
(82,361
84,107
Effect of exchange rates on cash
(220
77
Net decrease in cash, cash equivalents and restricted cash and cash equivalents
(84,082
(4,059
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period
107,539
105,907
Cash, cash equivalents and restricted cash and cash equivalents at end of period
23,457
101,848
Supplemental disclosure of cash flow information:
Cash paid for interest
44,424
37,514
Cash paid for income and mining taxes, net
5,730
7,385
Significant non-cash investing and financing activities:
Addition of finance lease obligations and right-of-use assets
16,092
Common stock issued to ATAC Resources Ltd. shareholders
18,789
Common stock issued as incentive compensation
Common stock issued to directors
770
676
Common stock issued to interim CEO
182
Common stock issued for 401-K match
3,714
3,713
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except shares)
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
22,273
106,374
Accounts receivable:
Trade
40,718
19,425
Other, net
16,218
13,691
Inventories:
Product inventories
34,807
28,823
Materials and supplies
69,721
64,824
Other current assets
22,230
27,125
Total current assets
205,967
260,262
Investments
42,019
33,724
Restricted cash and cash equivalents
1,184
1,165
Property, plant and mine development, net
2,665,342
2,666,250
Operating lease right-of-use assets
5,173
8,349
Deferred tax assets
2,883
Other non-current assets
36,026
38,471
Total assets
2,955,711
3,011,104
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities
86,976
81,599
26,447
28,240
4,563
3,501
Current debt
35,874
Finance leases
7,299
9,752
Accrued reclamation and closure costs
10,261
9,660
Accrued interest
5,192
14,405
Other current liabilities
11,960
10,303
Total current liabilities
188,572
157,460
108,329
110,797
Long-term debt including finance leases
496,631
653,063
Deferred tax liabilities
111,331
104,835
Other non-current liabilities
12,566
16,845
Total liabilities
917,429
1,043,000
Commitments and contingencies (Notes 4, 7, 8, and 11)
STOCKHOLDERS’ EQUITY
Preferred stock, 5,000,000 shares authorized:
Series B preferred stock, $0.25 par value, 157,776 shares issued and outstanding, liquidation preference — $7,889
39
Common stock, $0.25 par value, authorized 750,000,000 shares; issued September 30, 2024 — 637,078,901 shares and December 31, 2023 — 624,647,379 shares
159,185
156,076
Capital surplus
2,413,546
2,343,747
Accumulated deficit
(496,674
(503,861
Accumulated other comprehensive (loss) income, net
(2,883
5,837
Less treasury stock, at cost; September 30, 2024 — 8,813,127 and December 31, 2023 — 8,535,161 shares issued and held in treasury
(34,931
(33,734
Total stockholders’ equity
2,038,282
1,968,104
Total liabilities and stockholders’ equity
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(Dollars are in thousands, except for share and per share amounts)
Three Months Ended September 30, 2024
Series BPreferredStock
CommonStock
Capital Surplus
AccumulatedDeficit
AccumulatedOtherComprehensive Income (Loss), net
TreasuryStock
Total
Balances, July 1, 2024
$39
$156,745
$2,354,004
$(489,738)
$(6,054)
$(34,931)
$1,980,065
Net income
Stock-based compensation expense
2,128
Incentive compensation units distributed (357,723 shares)
89
981
1,070
Common stock issued as compensation to interim CEO (20,840 shares)
122
127
Common stock ($0.01375 per share) and Series B Preferred stock ($0.875 per share) dividends declared
(8,697)
Common stock issued under ATM program (9,090,726 shares)
2,273
54,992
57,265
Common stock issued for 401(k) match (291,794 shares)
73
1,319
1,392
Other comprehensive income
Balances, September 30, 2024
$159,185
$2,413,546
$(496,674)
$(2,883)
$2,038,282
Three Months Ended September 30, 2023
Balances, July 1, 2023
$153,334
$2,289,607
$(430,606)
$14,196
$(33,734)
$1,992,836
Net loss
(22,415)
1,758
Common stock ($0.00625 per share) and Series B Preferred stock ($0.875 per share) dividends declared
(3,947)
Common stock issued for 401(k) match (283,541 shares)
71
1,386
1,457
Common stock issued to ATAC Resources Ltd. shareholders (3,676,904 shares)
919
17,870
Common stock issued to directors (125,063 shares)
31
645
Other comprehensive loss
(11,384)
Balances, September 30, 2023
$154,355
$2,311,266
$(456,968)
$2,812
$1,977,770
Nine Months Ended September 30, 2024
Balances, January 1, 2024
$156,076
$2,343,747
$(503,861)
$5,837
$1,968,104
5,449
Incentive compensation units distributed (2,134,659 shares)
534
3,891
(1,197)
3,228
Common stock issued as compensation to interim CEO (31,671 shares)
174
Common stock issued to directors (145,687 shares)
733
Common stock ($0.02625 per share) and Series B Preferred stock ($1.75 per share) dividends declared
(16,691)
Common stock issued under ATM program (9,339,287 shares)
2,335
56,033
Common stock issued for 401(k) match (780,218 shares)
195
3,519
(8,720)
Nine Months Ended September 30, 2023
AccumulatedOtherComprehensive Income, net
Balances, January 1, 2023
$151,819
$2,260,290
$(403,931)
$2,448
$(31,698)
$1,978,967
(41,282)
4,446
Incentive compensation units distributed (1,435,193 shares)
359
(359)
(2,036)
Common stock ($0.0125 per share) and Series B Preferred stock ($1.75 per share) dividends declared
(11,755)
Common stock issued under ATM program (4,253,334 shares)
1,063
24,825
Common stock issued for 401(k) match (657,678 shares)
164
3,549
7
Note 1. Basis of Preparation of Financial Statements
The accompanying unaudited interim condensed consolidated financial statements of Hecla Mining Company and its subsidiaries (collectively, “Hecla,” “the Company,” “we,” “our,” or “us,” except where the context requires otherwise) have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required annually by accounting principles generally accepted in the United States of America (“GAAP”). Therefore, this information should be read in conjunction with the Company’s consolidated financial statements and notes contained in our annual report for the year ended December 31, 2023, which were revised to conform with current year financial statement changes as described in Note 2 "Business Segments and Sales of Products", and are included in Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 20, 2024. The consolidated December 31, 2023 balance sheet data was derived from our audited consolidated financial statements. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
Note 2. Business Segments and Sales of Products
We discover, acquire and develop mines and other mineral interests and produce and market (i) concentrates containing silver, gold, lead, zinc and copper, (ii) carbon material containing silver and gold, and (iii) doré containing silver and gold. We are currently organized and managed in four segments: Greens Creek, Lucky Friday, Keno Hill and Casa Berardi.
Effective January 2024, we revised our internal reporting provided to our Chief Operating Decision Maker to no longer include any financial performance information for our Nevada Operations, reflecting the current status of the Nevada Operations being on care and maintenance. General corporate activities not associated with operating mines and their various exploration activities, idle properties and environmental remediation services in the Yukon, Canada, and the previously separately reported Nevada Operations are presented as “Other". The presentation of the prior period information disclosed below has been revised to reflect this change.
The following tables present information about our reportable segments sales for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2024
2023
Total sales to external customers:
Greens Creek
116,568
96,459
309,537
290,961
Lucky Friday
51,072
21,409
145,483
113,167
Keno Hill
19,809
16,001
59,606
17,582
Casa Berardi
50,308
46,912
150,515
134,856
Other
7,328
1,125
15,129
2,971
Income (loss) from operations:
37,916
31,169
100,321
92,824
12,552
(4,935
74,817
20,161
(12,674
(7,462
(25,467
(24,145
3,403
(12,433
(24,309
(35,492
(18,722
(18,980
(57,223
(55,625
Reconciliation of income (loss) from operations to income (loss) before income and mining taxes:
Adjustments all attributable to the Other segment
Other sales for the three and nine months ended September 30, 2024 and 2023 is comprised of revenue from our environmental remediation services subsidiary in the Yukon for both years presented and Nevada Operations metal sales in 2023. During the three and nine months ended September 30, 2024, Keno Hill sold $1.6 million and $3.0 million, respectively, of zinc concentrate to Greens Creek which is eliminated upon consolidation.
Lucky Friday's income from operations for the three and nine months ended September 30, 2024 includes $14.8 million and $50.0 million, respectively, of business interruption and property damage insurance proceeds received during the respective periods related to the fire which suspended Lucky Friday's operations from August 2023 through January 8, 2024. The insurance proceeds received are recorded as part of "Other operating (income) expense, net" in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
During the three and nine month periods ended September 30, 2024, the Company wrote down $14.5 million of property, plant and mine development which had no salvage value. Of this amount, $13.9 million is included in Lucky Friday's income from operations and is related to the remote vein miner machine for which (i) we no longer had a use following the success of the Underhand Closed Bench ("UCB") mining method, (ii) we had been unsuccessful in locating a buyer, and (iii) the vendor advised us during the period that it would discontinue support for the program. The write down is recorded as part of "Write down of Property, Plant and Mine Development" in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
Sales by metal for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):
Three Months Ended September 30,
Nine Months Ended September 30,
Silver
109,756
74,425
308,681
235,447
Gold
79,239
70,206
229,123
208,216
Lead
21,591
15,719
65,002
62,778
Zinc
37,281
33,066
94,741
91,912
Copper
409
Less: Smelter and refining charges
(10,518
(12,550
(32,814
(40,743
Total metal sales
237,758
180,866
665,142
557,610
Environmental remediation services
7,327
1,040
15,128
1,927
Total sales
Sales of metals for the three and nine months ended September 30, 2024 include a net gain of $0.6 million and net loss of $8.8 million, respectively, on financially-settled forward contracts for silver, gold, lead and zinc and for the three and nine months ended September 30, 2023 include net gains of $4.0 million and $13.1 million, respectively, on such contracts. See Note 8 for more information.
The following table presents total assets by reportable segment as of September 30, 2024 and December 31, 2023 (in thousands):
Total assets:
566,552
569,369
563,833
578,110
401,587
362,986
666,259
683,035
757,480
817,604
9
Note 3. Income and Mining Taxes
Major components of our income and mining tax for the three and nine months ended September 30, 2024 and 2023 are as follows (in thousands):
September 30,
Current:
Domestic
(1,871
(1,182
(4,824
(2,980
Foreign
(1,006
(1,029
(3,260
(3,050
Total current income and mining tax provision
(2,877
(2,211
(8,084
(6,030
Deferred:
(9,532
(3,696
(26,155
(17,619
959
7,407
11,894
16,745
Total deferred income and mining tax (provision) benefit
(8,573
3,711
(14,261
(874
Total income and mining tax (provision) benefit
The income and mining tax provision for the three and nine months ended September 30, 2024 and 2023 varies from the amounts that would have resulted from applying the statutory tax rates to pre-tax income or loss due primarily to the impact of taxation in foreign jurisdictions, non-recognition of net operating losses and foreign exchange gains and losses in certain jurisdictions.
For the three and nine months ended September 30, 2024, we used the annual effective tax rate method to calculate the tax provision. Valuation allowances on Nevada, Mexico and certain Canadian net operating losses were treated as discrete adjustments to the tax provision.
Note 4. Employee Benefit Plans
We sponsor three defined benefit pension plans, two of which cover substantially all U.S. employees. Net periodic pension benefit for the plans consisted of the following for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Service cost
914
949
2,744
2,847
Interest cost
2,076
1,993
6,227
5,979
Expected return on plan assets
(3,136
(3,107
(9,408
(9,321
Amortization of prior service cost
67
125
199
375
Amortization of net loss
15
(47
46
(141
Net periodic pension benefit
(64
(87
(192
(261
For the three and nine months ended September 30, 2024 and 2023, the service cost component of net periodic pension benefit is included in the same line items of our condensed consolidated financial statements as other employee compensation costs. The net benefit related to all other components of net periodic pension cost of $1.0 million and $2.9 million for the three and nine months ended September 30, 2024, respectively, and $1.0 million and $3.1 million for the three and nine months ended September 30, 2023, respectively, is included in other income on our condensed consolidated statements of operations and comprehensive income (loss).
During July 2024, we closed the Hecla Mining Company Retirement Plan for Employees (the “Plan”) to new participants. The closure of the Plan does not affect employees hired prior to July 19, 2024, and they will continue to accrue benefits. Benefits to retirees will continue unchanged.
10
Note 5. Earnings (Loss) Per Common Share
We calculate basic income (loss) per common share on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share is calculated using the weighted average number of shares of common stock outstanding during the period plus the effect of potential dilutive common shares during the period using the treasury stock and if-converted methods.
Potential dilutive shares of common stock include outstanding unvested restricted stock awards, deferred restricted stock units, performance based units, warrants and convertible preferred stock (collectively referred to as dilutive units) for periods in which we have reported net income. For periods in which we report net losses, potential dilutive units are excluded, as their conversion and exercise would be anti-dilutive.
The following table represents net income (loss) per common share – basic and diluted (in thousands, except income (loss) per share):
Numerator
Denominator
Basic weighted average common shares
Dilutive units
3,818
3,373
Diluted weighted average common shares
Basic earnings (loss) per common share
Diluted earnings (loss) per common share
For the three and nine months ended September 30, 2023, all outstanding dilutive units were excluded from the computation of diluted loss per share, as our reported net loss would cause their conversion and exercise to have an anti-dilutive effect on the calculation of diluted loss per share.
Note 6. Stockholders’ Equity
At-The-Market ("ATM") Equity Distribution Agreement
Pursuant to an equity distribution agreement dated February 18, 2021, we may offer and sell up to 60 million shares of our common stock from time to time to or through sales agents. Sales of the shares, if any, will be made by means of ordinary brokers transactions or as otherwise agreed between the Company and the agents as principals. Whether or not we engage in sales from time to time may depend on a variety of factors, including our share price, our cash resources, customary black-out restrictions, and whether we have any material inside information. The agreement can be terminated by us at any time. Any sales of shares under the agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form S-3. Under the agreement we have sold 23,844,684 shares for total proceeds of $132.3 million, net of commissions and fees of $2.1 million from September 2022 through September 30, 2024. During the three months ended September 30, 2024, we sold 9,090,726 shares under the agreement for proceeds of $57.3 million, net of commissions and fees of $0.9 million and during the nine months ended September 30, 2024, we sold 9,339,287 shares under the agreement for proceeds of $58.4 million, net of commissions and fees of $0.94 million.
Stock-based Compensation Plans
The Company has stock incentive plans for executives, directors and eligible employees, under which performance shares, restricted stock and shares of common stock are granted. Stock-based compensation expense for restricted stock unit, performance-based grants and common stock grants (collectively "incentive compensation") to employees, shares granted to the interim CEO and non-employee directors totaled $2.3 million and $6.4 million for the three and nine months ended September 30, 2024, respectively, and $2.4 million and $5.1 million for the three and nine months ended September 30, 2023, respectively. At September 30, 2024, there was $10.0 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 2.2 years.
11
The following table summarizes the incentive compensation grants awarded during the nine months ended September 30, 2024:
Grant date
Award type
Number granted
Grant date fair value per share
June 21, 2024
Restricted stock
1,466,677
$5.17
Performance based
518,336
$3.32
August 20, 2024
5,092
$6.01
In connection with the vesting of incentive compensation, employees have in the past, at their election and when permitted by us, chosen to satisfy their minimum tax withholding obligations through net share settlement, pursuant to which the Company withholds the number of shares necessary to satisfy such withholding obligations and pays the obligations in cash. As a result, in the nine months ended September 30, 2024, we withheld 277,966 shares valued at approximately $1.2 million, or approximately $4.31 per share.
Common Stock Dividends
The following table summarizes the dividends our Board of Directors have declared and we have paid during 2024 pursuant to our dividend policy:
Quarter
Prior Quarter Realized Silver Price
Silver-linked component
Minimum component
Total dividend per share
First
23.47
$0.0025
$0.00375
$0.00625
Second
24.77
Third
29.77
$0.010
$0.01375
Accumulated Other Comprehensive Income (Loss), Net
The following table lists the beginning balance, quarterly activity and ending balances, net of income and mining tax, of each component of “Accumulated other comprehensive income (loss), net” (in thousands):
Changes in fair value of derivative contracts designated as hedge transactions
AdjustmentsFor Pension Plans
TotalAccumulatedOtherComprehensiveIncome (Loss), Net
Balance January 1, 2024
13,708
(7,871
Change in fair value of derivative contracts
(3,971
Gains and deferred gains transferred from accumulated other comprehensive income
(1,432
Balance March 31, 2024
8,305
Changes in fair value of derivative contracts
(4,545
(1,943
Balance June 30, 2024
1,817
(6,054
3,872
(701
Balance September 30, 2024
4,988
Balance January 1, 2023
9,162
(6,714
2,448
8,665
(2,149
Balance March 31, 2023
15,678
8,964
7,445
(2,213
Balance June 30, 2023
20,910
14,196
(5,265
(6,119
Balance September 30, 2023
9,526
2,812
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Note 7. Debt, Credit Agreement and Leases
Our debt as of September 30, 2024 and December 31, 2023 consisted of our 7.25% Senior Notes due February 15, 2028 (“Senior Notes”), our Series 2020-A Senior Notes due July 9, 2025 (the “IQ Notes”) and any drawn amounts on our $225 million Credit Agreement, which is described separately below. The following tables summarize our current and long-term debt balances, including principal amounts outstanding under the Credit Agreement, as of September 30, 2024 and December 31, 2023 (in thousands):
Senior Notes
IQ Notes
Credit Agreement
Principal
475,000
35,735
13,000
523,735
Unamortized discount/premium and issuance costs
(3,044
139
(2,905
Long-term debt balance
471,956
484,956
Current debt balance
36,473
128,000
639,473
(3,730
257
(3,473
471,270
36,730
636,000
The following table summarizes the scheduled annual future payments, including interest, for our Senior Notes, IQ Notes, and finance and operating leases as of September 30, 2024 (in thousands). Operating leases are included in other current and non-current liabilities on our condensed consolidated balance sheets. The amounts for the IQ Notes are stated in U.S. dollars (“USD”) based on the USD/Canadian dollar (“CAD”) exchange rate as of September 30, 2024.
Twelve-month period ending September 30,
Finance Leases
Operating Leases
2025
34,438
38,064
8,303
1,862
2026
6,474
1,298
2027
3,200
1,221
2028
487,914
1,172
1,150
2029
990
Thereafter
879
5,138
591,228
21,200
11,659
Less: effect of discounting
(2,226
(2,948
18,974
8,711
On July 21, 2022, we entered into a revolving credit agreement (the "Original Credit Agreement") with various financial institutions (the “Lenders”), Bank of Montreal and Bank of America, N.A. as letters of credit issuers, and Bank of America, N.A., as administrative agent for the Lenders and as swingline lender. The Original Credit Agreement was amended on May 3, 2024, when we entered into a First Amendment to Credit Agreement (the “First Amendment”), which made certain changes to the Original Credit Agreement (the Original Credit Agreement, as amended, modified and supplemented by the First Amendment, is referred to hereafter as the “Credit Agreement”). The First Amendment modified the Original Credit Agreement as follows:
Proceeds of the revolving loans under the Credit Agreement may be used for general corporate purposes. The interest rate on the outstanding loans under the Credit Agreement is based on the Company’s net leverage ratio and is calculated at (i) Term Secured Overnight Financing Rate ("SOFR") plus 2% to 3.5% or (ii) Bank of America’s Base Rate plus 1% to 2.5% with Base Rate being the
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highest of (i) the Bank of America prime rate, (ii) the Federal Funds rate plus .50% or (iii) Term SOFR plus 1.00%. For each amount drawn, we elect whether we draw on a one, three or six month basis or annual basis for SOFR. If we elect to draw for greater than six months, we pay interest quarterly on the outstanding amount.
We are also required to pay a commitment fee of between 0.45% to 0.78750%, depending on our net leverage ratio. Letters of credit issued under the Credit Agreement bear a fee between 2.00% and 3.50% based on our net leverage ratio, as well as a fronting fee to each issuing bank at an agreed upon rate per annum on the average daily dollar amount of our letter of credit exposure.
Hecla Mining Company and certain of our subsidiaries are the borrowers under the Credit Agreement, while certain of our other subsidiaries are guarantors of the borrowers’ obligations under the Credit Agreement. As further security, the Credit Agreement is collateralized by a mortgage on the Greens Creek mine, the equity interests of subsidiaries that own the Greens Creek mine or are part of the Greens Creek Joint Venture and our subsidiary Hecla Admiralty Company (the “Greens Creek Group”), and by all of the Greens Creek Group’s rights and interests in the Greens Creek Joint Venture Agreement, and in all assets of the joint venture and of any member of the Greens Creek Group.
At September 30, 2024, we had net draws of $13.0 million outstanding at an interest rate of 7.8%, and $6.3 million of outstanding letters of credit under the Credit Agreement. Letters of credit that are outstanding reduce availability under the Credit Agreement.
We believe we were in compliance with all covenants under the Credit Agreement as of September 30, 2024.
Note 8. Derivative Instruments
General
Our current risk management policy provides that up to 75% of five years of our foreign currency, and 100% of our metals price exposure may be covered under a derivatives program, with certain other limitations. Our program also utilizes derivatives to manage price risk exposure created from when revenue is recognized from a shipment of concentrate until final settlement.
These instruments expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price exceeds the spot price of the hedged commodity or foreign currency and (ii) price risk to the extent that the spot price or currency exchange rate exceeds the contract price for quantities of our production and/or forecasted costs covered under contract positions.
Foreign Currency
Our wholly-owned subsidiaries owning the Casa Berardi operation and Keno Hill operation are USD-functional entities which routinely incur expenses denominated in CAD. Such expenses expose us to exchange rate fluctuations between the USD and CAD. We have a program to manage our exposure to fluctuations in the USD exchange rate for these subsidiaries' future operating and capital costs denominated in CAD. The program related to forecasted cash operating costs at Casa Berardi and Keno Hill utilizes forward contracts to buy CAD, some of which are designated as cash flow hedges. As of September 30, 2024, we have a total of 359 forward contracts outstanding to buy a total of CAD $236.9 million having a notional amount of USD $178.0 million to hedge the following exposures for 2024 through 2026:
As of September 30, 2024 and December 31, 2023, we recorded the following balances for the fair value of the foreign currency forward contracts (in millions):
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December 31,
Balance sheet line item:
0.4
2.7
2.0
(1.7
(1.1
(0.3
(0.4
Net unrealized losses of $1.6 million related to the effective portion of the foreign currency forward contracts designated as hedges are included in accumulated other comprehensive income (loss) as of September 30, 2024. Unrealized gains and losses will be transferred from accumulated other comprehensive income (loss) to current earnings as the underlying operating expenses are recognized. We estimate $1.5 million in net unrealized losses included in accumulated other comprehensive income (loss) as of September 30, 2024 will be reclassified to current earnings in the next twelve months.
Net realized losses of $1.5 million and $3.0 million for the three and nine months ended September 30, 2024, respectively, and $0.6 million and $2.5 million for the three and nine months ended September 30, 2023, respectively, on contracts related to underlying expenses which have been recognized were transferred from accumulated other comprehensive income (loss) and included in cost of sales and other direct production costs.
A net gain of $0.5 million and a net loss of $1.9 million for the three and nine months ended September 30, 2024, respectively, and a net loss of $3.2 million and a net gain of $0.1 million for the three and nine months ended September 30, 2023, respectively, were related to contracts not designated as hedges.
No net unrealized gains or losses related to ineffectiveness of the hedges are included in fair value adjustments, net on our consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023, respectively.
Metals Prices
We are currently using financially-settled forward contracts to manage the exposure to:
The following tables summarize the quantities of metals committed under forward metals contracts at September 30, 2024 and December 31, 2023:
Ounces/pounds under contract (in 000's except gold)
Average price per ounce/pound
(ounces)
(pounds)
Contracts on provisional sales
2024 settlements
1,460
500
18,905
13,558
30.29
2,689
1.36
0.97
Contracts on forecasted sales
4,299
4,519
N/A
1.31
2025 settlements
26,455
62,501
1.39
0.98
2026 settlements
33,290
1.04
2023 settlements
735
441
15,542
24.40
2,045
1.51
1.00
56,713
49,273
We recorded the following balances for the fair value of the forward metals contracts as of September 30, 2024 and December 31, 2023 (in millions):
3.1
0.9
1.5
(2.6
(0.1
Net realized and unrealized gains of $5.6 million related to the effective portion of the forward metals contracts designated as hedges were included in accumulated other comprehensive income (loss) as of September 30, 2024. Unrealized gains and losses will be transferred from accumulated other comprehensive income (loss) to current earnings as the underlying forecasted sales are recognized. We estimate $4.5 million in net realized and unrealized gains included in accumulated other comprehensive income (loss) as of September 30, 2024 would be reclassified to current earnings in the next twelve months. The realized gains arose due to cash settlement of zinc contracts prior to maturity in 2022 and zinc and lead contracts during 2023 for net proceeds of $17.4 million and $8.5 million, respectively.
We recognized a net gain of $0.6 million, including a $2.1 million gain transferred from accumulated other comprehensive income (loss), and a net gain of $4.0 million, including a $6.7 million gain transferred from accumulated other comprehensive income (loss) during the three months ended September 30, 2024 and 2023, respectively. We recognized a net loss of $8.8 million, including a $7.1 million gain transferred from accumulated other comprehensive income (loss), and a net gain of $13.1 million, including a $13.0 million gain transferred from accumulated other comprehensive income (loss) during the nine months ended September 30, 2024 and 2023, respectively. These gains and losses were recognized on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which are included in sales. The net losses and gains recognized on the contracts offset gains and losses related to price adjustments on our provisional concentrate sales due to changes to silver, gold, lead and zinc prices between the time of sale and final settlement.
During June 2024, the Company purchased 26,900 ounces of gold put options priced at $2,100 per ounce, which are not designated as hedges, to provide price protection for Casa Berardi's underground production for the remainder of 2024 at a total cost of $0.1 million. At September 30, 2024, the fair value of these gold put options was negative $0.1 million.
Credit-risk-related Contingent Features
Certain of our derivative contracts contain cross default provisions which provide that a default under our Credit Agreement would cause a default under the derivative contract. As of September 30, 2024, we have not posted any collateral related to these contracts. The fair value of derivatives in a net liability position related to these agreements was $5.8 million as of September 30, 2024, which includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at September 30, 2024, we could have been required to settle our obligations under the agreements at their termination value of $5.8 million.
Note 9. Fair Value Measurement
Fair value adjustments, net is comprised of the following (in thousands):
Gain (loss) on derivative contracts
394
(2,160
(2,091
1,848
Unrealized gain (loss) on equity securities investments
3,260
(4,237
8,895
(7,622
Total fair value adjustments, net
Accounting guidance has established a hierarchy for inputs used to measure assets and liabilities at fair value on a recurring basis. The three levels included in the hierarchy are:
Level 1: quoted prices in active markets for identical assets or liabilities;
Level 2: significant other observable inputs; and
Level 3: significant unobservable inputs.
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The table below sets forth our assets and liabilities that were accounted for at fair value on a recurring basis and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category (in thousands).
Description
Balance atSeptember 30,2024
Balance atDecember 31,2023
InputHierarchy Level
Assets:
Cash and cash equivalents:
Money market funds and other bank deposits
Level 1
Current and non-current investments:
Equity securities
40,915
32,284
Trade accounts receivable:
Receivables from provisional concentrate sales
40,124
17,940
Level 2
Restricted cash and cash equivalent balances:
Certificates of deposit and other deposits
Derivative contracts - current and non-current derivative assets:
Foreign exchange contracts
805
4,657
Metal forward contracts
886
4,698
Liabilities:
Derivative contracts - current and non-current derivative liabilities:
2,010
1,508
2,625
40
Cash and cash equivalents consist primarily of money market funds and are valued at cost, which approximates fair value.
Current and non-current restricted cash and cash equivalent balances consist primarily of certificates of deposit, U.S. Treasury securities, and other deposits and are valued at cost, which approximates fair value.
Our non-current investments consist of marketable equity securities of companies in the mining industry which are valued using quoted market prices for each security.
Trade accounts receivable from provisional concentrate sales are subject to final pricing and valued using quoted prices based on forward curves for the particular metals.
We use financially-settled forward contracts to manage exposure to changes in the exchange rate between USD and CAD, and the impact on CAD-denominated operating and capital costs incurred at our Casa Berardi and Keno Hill operations (see Note 8 for more information). The fair value of each contract represents the present value of the difference between the forward exchange rate for the contract settlement period as of the measurement date and the contract settlement exchange rate.
We use financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments that have not reached final settlement. We also use financially-settled forward contracts to manage the exposure to changes in prices of gold, zinc and lead contained in our forecasted future sales (see Note 8 for more information). The fair value of each forward contract represents the present value of the difference between the forward metal price for the contract settlement period as of the measurement date and the contract settlement metal price.
At September 30, 2024, our Senior Notes and IQ Notes were recorded at their carrying value of $472.0 million and $35.9 million, respectively, net of unamortized initial purchaser discount/premium and issuance costs. The estimated fair values of our Senior Notes and IQ Notes were $484.7 million and $37.2 million, respectively, at September 30, 2024. Quoted market prices, which are considered to be Level 1 inputs, are utilized to estimate fair values of the Senior Notes. Unobservable inputs which are considered to be Level 3, including an assumed current annual yield of 6.12%, are utilized to estimate the fair value of the IQ Notes. See Note 7 for more information. The Credit Agreement, which we consider to be Level 1 in the fair value hierarchy, has a carrying and fair value of $13.0 million.
Note 10. Product Inventories
Our major components of product inventories are (in thousands):
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Concentrates
14,544
13,328
Stockpiled ore
13,481
7,168
In-process
6,782
8,327
Total product inventories
Note 11. Commitments, Contingencies and Obligations
Johnny M Mine Area near San Mateo, McKinley County and San Mateo Creek Basin, New Mexico
Effective on August 26, 2024, Hecla Limited, its New Mexico Land LLC subsidiary and the U.S. Environmental Protection Agency (the “EPA”) are parties to a Settlement Agreement and Order on Consent for Removal Action (“Consent Order”) resolving certain liabilities of Hecla Limited under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) at the Johnny M Mine Area near San Mateo, McKinley County, New Mexico. Mining at the Johnny M Mine was conducted for a limited period of time by a predecessor of Hecla Limited, and the EPA had previously asserted that Hecla Limited may be responsible under CERCLA for environmental remediation and past costs incurred by the EPA at the site. Under the Consent Order, Hecla Limited agreed to pay $420,000 to the EPA for its past response costs at the site and any future response costs at the site under the Consent Order, and undertake remediation work at the site (the “Remedy”), in exchange for a covenant not to sue by the EPA and protection for certain claims of contribution under CERCLA by third parties related to the site. We have accrued $10.1 million in prior periods, primarily representing estimated current costs to design and implement the Remedy, which are subject to change as fieldwork is performed.
The Johnny M Mine is in an area known as the San Mateo Creek Basin (“SMCB”), which is an approximately 321 square mile area in New Mexico that contains numerous legacy uranium mines and mills. In addition to Johnny M, Hecla Limited’s predecessor was involved at other mining sites within the SMCB. The EPA is working with various potentially responsible parties (“PRPs”) at the site in order to study and potentially address perceived groundwater issues within the SMCB. The Remedy discussed above relates primarily to contaminated rock and soil at the Johnny M site, not groundwater and not elsewhere within the SMCB site. It is possible that Hecla Limited’s liability at the Johnny M Site, and for any other mine site within the SMCB at which Hecla Limited’s predecessor may have operated, will be greater than our current accrual of $10.1 million for the Remedy due to any increased scope of required remediation.
In July 2018, the EPA informed Hecla Limited that it and several other PRPs may be liable for cleanup of the SMCB site or for costs incurred by the EPA in cleaning up the site. The EPA stated it has incurred approximately $9.6 million in response costs to date. In each of May, 2022, and August, 2024, Hecla Limited received a letter from a PRP notifying Hecla Limited that other PRPs may seek cost recovery and contribution from Hecla Limited under CERCLA for certain investigatory work performed by the PRPs at the SMCB site. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site, including the relative contributions of contamination by the various PRPs.
Carpenter Snow Creek and Barker-Hughesville Sites in Montana
In July 2010, the EPA made a formal request to Hecla for information regarding the Carpenter Snow Creek Superfund site located in Cascade County, Montana. The Carpenter Snow Creek site is located in a historical mining district, and in the early 1980s Hecla Limited leased 6 mining claims and performed limited exploration activities at the site. Hecla Limited terminated the mining lease in 1988.
In June 2011, the EPA informed Hecla Limited that it believes Hecla Limited, and several other PRPs, may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA stated in the letter that it has incurred approximately $4.5 million in response costs and estimated that total remediation costs may exceed $100 million. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site, including the relative contributions of contamination by various other PRPs.
In February 2017, the EPA made a formal request to Hecla for information regarding the Barker-Hughesville Mining District Superfund site located in Judith Basin and Cascade Counties, Montana. Hecla Limited submitted a response in April 2017. The Barker-Hughesville site is located in a historic mining district, and between approximately June and December 1983, Hecla Limited was party to an agreement with another mining company under which limited exploration activities occurred at or near the site.
In August 2018, the EPA informed Hecla Limited that it and several other PRPs may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA did not include an amount of its alleged response costs to date. Hecla Limited
18
cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning past or anticipated future costs at the site and the relative contributions of contamination by various other PRPs.
Lucky Friday and Keno Hill Environmental Issues
Effective on October 16, 2024, Hecla Limited and the EPA are parties to a Consent Agreement and Final Order (the “Settlement”) resolving certain liabilities of Hecla Limited under the Clean Water Act involving the Lucky Friday mine’s permitted water discharges between 2018 and 2024. Under the Settlement, Hecla Limited will pay the EPA $174,300 and undertake a Supplemental Environmental Project involving river habitat restoration on the South Fork of the Coeur d’Alene River estimated to cost $299,000.
Litigation Related to Klondex Acquisition
On May 24, 2019, a purported Hecla stockholder filed a putative class action lawsuit in the U.S. District Court for the Southern District of New York against Hecla and certain of our executive officers, one of whom was also a director. The complaint, purportedly brought on behalf of all purchasers of Hecla common stock from March 19, 2018 through and including May 8, 2019, asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks, among other things, damages and costs and expenses. Specifically, the complaint alleges that Hecla, under the authority and control of the individual defendants, made certain material false and misleading statements and omitted certain material information regarding Hecla’s Nevada Operations. The complaint was dismissed by the Federal District Court with prejudice on September 30, 2024. On October 28, 2024, the plaintiffs filed a notice of appeal with the United States Court of Appeals for the Second Circuit.
Related to this class action lawsuit, Hecla has been named as a nominal defendant in a shareholder derivative lawsuit which also names as defendants certain current and past members of Hecla’s Board of Directors and certain past officers of Hecla. The case was filed on May 4, 2022 in the Delaware Chancery Court. In general terms, the suit alleges breaches of fiduciary duties by the individual defendants, waste of corporate assets and unjust enrichment, and seeks damages, purportedly on behalf of Hecla.
Debt
See Note 7 for information on the commitments related to our debt arrangements as of September 30, 2024.
Indirect Taxes
In May 2024, our Keno Hill subsidiary received a notice of assessment ("NOA") for goods and services tax ("GST") on its 2023 sales for CAD $1,973,181 from the Canada Revenue Agency ("CRA"). In addition, in May 2024 Keno Hill also received correspondence from the CRA for GST on Keno Hill's sales and input tax credits from 2020 through 2022 of CAD$1,038,834. As Keno Hill's sales are to a non-Canadian party, we do not believe Keno Hill is subject to collect and remit GST, and we have disputed the NOA and proposed audit adjustments.
Other Commitments
Our contractual obligations as of September 30, 2024 included open purchase orders and commitments of $9.8 million, $18.8 million, $13.1 million, $13.5 million and $0.8 million for various capital and non-capital items at Greens Creek, Lucky Friday, Keno Hill, Casa Berardi and Other, respectively. We also have total commitments of $21.2 million relating to scheduled payments on finance leases, including interest, primarily for equipment at our operations, and total commitments of $11.7 million relating to payments on operating leases (see Note 7 for more information). As part of our ongoing business and operations, we are required to provide surety bonds, bank letters of credit, and restricted deposits for various purposes, including financial support for environmental reclamation obligations and workers compensation programs. As of September 30, 2024, we had surety bonds totaling $215.4 million and letters of credit totaling $6.3 million in place as financial support for future reclamation and closure costs, self-insurance, and employee benefit plans. The obligations associated with these instruments are generally related to performance requirements that we address through ongoing operations. As the requirements are met, the beneficiary of the associated instruments cancels or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure of the sites. We believe we are in compliance with all applicable bonding requirements and will be able to satisfy future bonding requirements as they arise.
Other Contingencies
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We also have certain other contingencies resulting from litigation, claims, EPA investigations, and other commitments and are subject to a variety of environmental and safety laws and regulations incident to the ordinary course of business. We currently have no basis to conclude that any or all of such contingencies will materially affect our financial position, results of operations or cash flows. However, in the future, there may be changes to these contingencies, or additional contingencies may occur, any of which might result in an accrual or a change in current accruals recorded by us, and there can be no assurance that their ultimate disposition will not have a material adverse effect on our financial position, results of operations or cash flows.
Note 12. Recent Accounting Pronouncements
Accounting Standards Updates to Become Effective in Future Periods
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, amending reportable segment disclosure requirements to include disclosure of incremental segment information on an annual and interim basis. Among the requirements are new disclosures regarding significant segment expenses that are regularly provided to the chief operating decision-maker and included within each reported measure of segment profit or loss, as well as other segment items bridging segment revenue to each reported measure of segment profit or loss. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and are applied retrospectively. Early adoption is permitted. We will retrospectively adopt the segment disclosures required under these amendments in the year ended December 31, 2024, financial statements and don't expect any changes to our current reportable segments.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 and are applied prospectively. Early adoption and retrospective application of the amendments are permitted. We are currently evaluating the impact of this update on our consolidated financial statements and disclosures.
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Certain statements contained in this Form 10-Q, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk, are intended to be covered by the safe harbor provided for under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Our forward-looking statements include our current expectations and projections about future results, performance, results of litigation, prospects and opportunities, including reserves and other mineralization. We have tried to identify these forward-looking statements by using words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “feel,” “plan,” “estimate,” “project,” “forecast” and similar expressions. These forward-looking statements are based on information currently available to us and are expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.
These risks, uncertainties and other factors include, but are not limited to, those set forth under Part I, Item 1A. – Risk Factors in our 2023 Form 10-K and Part II, Item 1A - Risk Factors in our Form 10-Q for the quarterly period ended June 30, 2024. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to Hecla Mining Company or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), “Hecla,” “the Company,” “we,” “us” and “our” refer to Hecla Mining Company and its consolidated subsidiaries, except where the context requires otherwise. You should read this discussion in conjunction with our consolidated financial statements, the related MD&A and the discussion of our Business and Properties for the year ended December 31, 2023, which were revised to conform with current year financial statement changes as described in Note 2 "Business Segments and Sales of Products", and are included in Exhibit 99.1 to the Company's Current Report on Form 8-K filed May 20, 2024, with the United States Securities and Exchange Commission (the “SEC”). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Forward-Looking Statements” above for further discussion). References to “Notes” are Notes included in our Notes to Condensed Consolidated Financial Statements (Unaudited). Throughout this MD&A, all references to losses or income per share are on a diluted basis.
Established in 1891, we are the oldest operating precious metals mining company in the United States. We are also the largest silver producer in the United States and Canada, producing over 45% of the U.S. silver production at our Greens Creek and Lucky Friday operations. We also produce gold at our Casa Berardi and Greens Creek operations. In addition, we are developing the Keno Hill mine in the Yukon Territory, Canada which we acquired on September 7, 2022 and began ramp-up during the second quarter of 2023. Based upon the jurisdictions in which we operate, we believe we have lower political and economic risk compared to other mining companies whose mines are located in other parts of the world. Our exploration interests are located in the United States, Canada and Mexico. Our operating and strategic framework is based on expanding our production and locating and developing new resource potential in a safe and responsible manner.
Third Quarter 2024 Highlights
Operational:
Financial:
Year to date 2024 Highlights
External Factors that Impact our Results
Our financial results vary as a result of fluctuations in market prices primarily for silver and gold and, to a lesser extent, zinc and lead. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. We believe that the outlook for precious metals fundamentals in the medium- and long-term is favorable due to macro-economic factors such as lower interest rate expectations, geopolitical uncertainty and global growth expectations, which have resulted in significant volatility in the financial and commodities markets, including the precious metals market. See Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K"), for further discussion. Because we cannot control the price of our products, the key measures that management focuses on in operating our business are production volumes, payable sales volumes, Cash Cost, After By-product Credits, per Ounce (non-GAAP) and All-In Sustaining Cost, After By-product Credits, per Ounce (“AISC”) (non-GAAP), operating cash flows, capital expenditures, free cash flow and adjusted EBITDA. The average realized prices for all metals sold by us continued to exhibit significant volatility during the period. We have also experienced significant cost inflation across our operations, principally associated with higher energy prices, increased costs for other consumables such as reagents, explosives and steel, and higher labor and contractor costs.
Total sales for the three and nine months ended September 30, 2024 and 2023 were as follows:
(in thousands)
-
Environmental remediation services revenue is generated by performing remediation work in the historical Yukon Territory mining district on behalf of the Canadian government. The scope and estimated cost of all work is agreed to in advance by the Canadian government, and the expenses incurred are essentially passed through to the government for reimbursement with minimal margin generated by our subsidiary in performing this work.
Total metal sales for the three and nine months ended September 30, 2024 and 2023, and the approximate variances attributed to differences in metals prices, sales volumes and smelter terms, were as follows:
Base metals
Less: smelter and refining charges
Total sales of products
Three months ended September 30, 2023
48,785
Variances - 2024 versus 2023:
Price
20,400
19,693
(5,238
34,855
Volume
14,931
(10,660
15,734
(2,481
17,524
Smelter terms
4,513
Three months ended September 30, 2024
59,281
Nine months ended September 30, 2023
154,690
52,513
39,147
(2,674
88,986
20,721
(18,240
8,136
(1,104
9,513
9,033
Nine months ended September 30, 2024
160,152
The fluctuations in sales for the three and nine months ended September 30, 2024 compared to the same periods in 2023 were primarily due to the following two reasons:
Silver –
London PM Fix ($/ounce)
29.43
23.57
27.21
23.44
Realized price per ounce
23.71
28.07
23.28
Gold –
2,477
1,929
2,296
1,932
2,522
1,908
2,317
1,921
Lead –
LME Final Cash Buyer ($/pound)
0.93
0.99
0.95
Realized price per pound
1.07
1.02
Zinc –
1.26
1.10
1.22
1.52
1.32
1.34
Copper –
4.18
4.14
4.20
Average realized prices typically differ from average market prices primarily because concentrate sales are generally recorded as revenues at the time of shipment at forward prices for the estimated month of settlement, which differ from average market prices. Due to the time elapsed between shipment of concentrates and final settlement with the customers, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices each period through final settlement. We recorded net positive price adjustments to provisional settlements of $5.0 million and $19.5 million for the three and nine months ended September 30, 2024, respectively, and $8.1 million and $12.3 million for the three and nine months ended September 30, 2023, respectively. The price adjustments related to silver, gold, zinc and lead contained in our concentrate shipments were partially offset by gains and losses on forward contracts for those metals. See Note 8 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information. The gains and losses on these contracts are included in revenues and impact the realized prices for silver, gold, lead and zinc. Realized prices are calculated by dividing gross revenues for each metal (which include the price adjustments and gains and losses on the forward contracts discussed above) by the payable quantities of each metal included in concentrate, doré and carbon material shipped during the period.
Silver -
Ounces produced
3,645,004
3,533,704
12,295,586
11,407,232
Payable ounces sold
3,729,782
3,142,227
10,996,951
10,107,415
Gold -
32,280
39,269
106,196
114,091
31,414
36,792
98,879
108,372
Lead -
Tons produced
12,497
8,024
38,183
34,583
Payable tons sold
11,563
7,440
32,922
30,848
Zinc -
16,605
14,636
49,007
47,715
10,993
35,788
34,326
490
457
1,447
1,374
49
The difference between what we report as “ounces/tons produced” and “payable ounces/tons sold” is attributable to the difference between the quantities of metals contained in the concentrates we produce versus the portion of those metals actually paid for by our customers according to the terms of our sales contracts. Differences can also arise from inventory
24
changes incidental to shipping schedules, or variances in ore grades which impact the amount of metals contained in concentrates produced and sold.
Sales, total cost of sales, gross profit (loss), Cash Cost, After By-product Credits, per Ounce (“Cash Cost”) (non-GAAP) and AISC (non-GAAP) at our operating units for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands, except for Cash Cost and AISC):
Gold and Other
Total Silver (2)
Other (3)
Total Gold and Other
Three Months Ended September 30, 2024:
$116,568
$51,072
$19,809
$187,449
$50,308
$7,328
$57,636
(73,597)
(39,286)
(19,809)
(132,692)
(46,280)
$(6,827)
(53,107)
$42,971
$11,786
$—
$54,757
$4,028
$501
$4,529
Cash Cost (1)
$0.93
$9.98
$4.46
$1,754
AISC (1)
$7.04
$19.40
$15.29
$2,059
Three Months Ended September 30, 2023:
$96,459
$21,409
$16,001
$133,869
$46,912
$1,125
$48,037
(60,322)
(14,344)
(16,001)
(90,667)
(56,822)
(940)
(57,762)
Gross profit (loss)
$36,137
$7,065
$43,202
$(9,910)
$185
$(9,725)
$3.04
$4.74
$3.31
$1,475
$8.18
$10.63
$11.39
$1,695
Total Gold
$309,537
$145,483
$59,606
$514,626
$150,515
$15,129
$165,644
(200,240)
(104,328)
(59,606)
(364,174)
(171,880)
(14,340)
(186,220)
$109,297
$41,155
$150,452
$(21,365)
$789
$(20,576)
$1.62
$7.86
$3.71
$1,707
$6.53
$16.26
$13.57
$1,923
$290,961
$113,167
$17,582
$421,710
$134,856
$2,971
137,827
(189,664)
(81,068)
(17,582)
(288,314)
(162,396)
(2,743)
(165,139)
$101,297
$32,099
$133,396
$(27,540)
$228
$(27,312)
$1.81
$5.51
$2.86
$1,635
$5.67
$12.21
$10.52
$2,075
While revenue from zinc, lead and gold by-products is significant, we believe that identification of silver as the primary product of Greens Creek, Lucky Friday and Keno Hill is appropriate because:
25
Accordingly, we believe the identification of gold, lead, zinc and copper as by-product credits at Greens Creek, Lucky Friday and Keno Hill is appropriate because of their lower economic value compared to silver and due to the fact that silver is the primary product we intend to produce at those locations. In addition, we have not consistently received sufficient revenue from any single by-product metal to warrant classification of such as a co-product.
We periodically review our revenues to ensure that reporting of primary products and by-products is appropriate. Because for Greens Creek, Lucky Friday and Keno Hill we consider zinc, lead, gold and copper to be by-products of our silver production, the values of these metals offset operating costs within our calculations of Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce. We currently do not report Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for our Keno Hill operation as it is in the production ramp-up phase and has not met our definition of commercial production, and accordingly it is excluded from our consolidated Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce. We define an operation as being in commercial production upon achievement of the following criteria:
Determination of when these criteria have been met requires the use of judgment, and our definition of commercial production may differ from that of other mining companies.
We believe the identification of silver as a by-product credit is appropriate at Casa Berardi because of its lower economic value compared to gold and due to the fact that gold is the primary product we intend to produce there. In addition, we do not receive sufficient revenue from silver at the Casa Berardi mine to warrant classification of such as a co-product. Because we consider silver to be a by-product of our gold production at Casa Berardi, the value of silver offsets operating costs within our calculations of Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce.
We reported net income applicable to common stockholders of $1.6 million for the three months ended September 30, 2024, compared to a net loss applicable to common stockholders of $22.6 million in the comparable period in 2023. The following were the significant drivers of the change:
The positive movements mentioned above were partly offset by:
26
We reported net income applicable to common stockholders of $23.5 million for the nine months ended September 30, 2024, compared to a net loss applicable to common stockholders of $41.7 million in the comparable period in 2023. The following were the significant drivers of the change:
27
Dollars are in thousands (except per ounce and per ton amounts)
(59,649
(49,307
(160,533
(151,107
(13,948
(11,015
(39,707
(38,557
(73,597
(60,322
(200,240
(189,664
42,971
36,137
109,297
101,297
Tons of ore milled
212,863
228,978
670,797
694,610
Production:
Silver (ounces)
1,857,314
2,343,192
6,579,459
7,471,725
Gold (ounces)
11,746
15,010
40,471
46,245
Lead (tons)
4,165
4,740
13,512
14,668
Zinc (tons)
12,585
13,224
38,047
38,961
Copper (tons)
Payable metal quantities sold:
1,921,040
1,973,606
5,588,407
6,421,060
11,302
12,371
33,800
38,025
3,822
3,600
10,382
11,506
10,466
9,444
27,555
27,648
Ore grades:
Silver ounces per ton
11.2
13.1
12.4
13.4
Gold ounces per ton
0.08
0.09
Lead percent
2.4
%
2.5
2.6
Zinc percent
6.6
6.5
6.4
6.3
Copper percent
0.3
Total production cost per ton
222.39
200.30
217.66
197.94
Cash Cost, After By-product Credits, per Silver Ounce (1)
3.04
1.62
1.81
AISC, After By-Product Credits, per Silver Ounce (1)
7.04
8.18
6.53
5.67
Capital additions
11,466
12,060
31,997
27,546
The $6.8 million increase in gross profit for the three months ended September 30, 2024, compared to the same period in 2023 was primarily due to higher realized sales prices for silver and gold, partially offset by lower metals sales volumes. Capital additions were largely consistent with the comparable period, decreasing by $0.6 million.
The $8.0 million increase in gross profit for the nine months ended September 30, 2024, compared to the same period in 2023 was primarily due to higher realized sales prices for silver and gold, partially offset by lower metals sales volumes. Capital additions increased by $4.5 million in the same period primarily due to primary ore access development.
Production during the three and nine months ended September 30, 2024, declined primarily due to a combination of unplanned semi-antogenous grinding ("SAG") mill maintenance and lower grade. Throughput for the quarter averaged 2,314 tons per day, a decline of 7% as various mill maintenance projects were completed during the quarter, including SAG liners inspection, bolts retorquing, as well as work completed during a 7-day unscheduled maintenance event, of which 5 were in September. The mill restarted during early October and we expect similar production levels in the fourth quarter as during the quarter ended September 30, 2024.
28
The charts below illustrate the factors contributing to Cash Cost, After By-product Credits, per Silver Ounce for Greens Creek:
Cash Cost, Before By-product Credits, per Silver Ounce
29.97
25.48
26.73
24.03
By-product credits
(29.04
(22.44
(25.11
(22.22
Cash Cost, After By-product Credits, per Silver Ounce
29
AISC, Before By-product Credits, per Silver Ounce
36.08
30.62
31.64
27.89
AISC, After By-product Credits, per Silver Ounce
For the three months ended September 30, 2024, the decrease in Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce was primarily due to an increase in by-product credits, benefiting from higher realized gold prices, partly offset by higher production costs and lower ounces produced.
For the nine months ended September 30, 2024, Cash Cost, After By-product Credits, per Silver Ounce was slightly lower compared to the comparable period from 2023, as higher production costs were offset by higher by-product credits on a per ounce basis, benefiting from higher realized gold prices. In addition to the factors impacting Cash Cost per Silver Ounce, AISC, After By-product Credits, per Silver Ounce was also impacted by higher sustaining capital.
(28,605)
(10,038)
(75,028)
(57,327)
(10,681)
(4,306)
(29,300)
(23,741)
104,281
36,619
297,956
225,965
1,184,819
475,414
3,554,039
3,024,544
7,662
2,957
22,580
19,171
3,528
1,159
9,699
7,810
1,100,873
534,183
3,275,614
2,974,835
7,042
3,330
20,633
18,809
2,706
7,266
6,061
12.1
13.6
12.6
14.0
7.9%
8.6%
8.1%
8.9%
3.9%
3.5%
3.8%
4.1%
$260.99
$191.81
$243.18
$223.44
AISC, After By-product Credits, per Silver Ounce (1)
$11,178
$15,494
$36,984
$46,518
During August 2023, mining was suspended due to a fire which occurred while repairing an unused station in the #2 ventilation shaft, which is also the secondary egress. By early September, the fire had been extinguished, normal ventilation was reestablished and the workforce recalled. Following evaluation of alternatives, it was determined that in order to safely bring the mine back into production in the most rapid and cost-effective way, a new secondary egress needed to be developed to bypass the damaged portion of the #2 shaft. The new egress involved extending an existing ramp 1,600 feet, installing a 290-foot-long manway raise, and developing an 850-foot ventilation raise. This work resulted in operations being suspended for the remainder of 2023, with the mine restarting production on January 9, 2024, and ramping up to full production during the first quarter. The Company has property and business interruption insurance coverage with an underground sub-limit of $50.0 million, and through September 30, 2024, has received the full coverage amount of $50.0 million. The discussion of Lucky Friday's results below for the nine months ended September 30, 2024 and 2023, has been impacted by the prior suspension of operations.
30
Gross profit increased by $4.7 million for the three months ended September 30, 2024 compared to the same period in 2023, reflecting a combination of higher sales volumes for all metals and higher realized sales prices for silver, as the mine suspended operations in August 2023 and did not resume operations until January 9, 2024.
Gross profit increased by $9.1 million for the nine months ended September 30, 2024, compared to the same period in 2023, reflecting higher realized prices for silver, and higher sales volumes for all metals produced due to the suspension of mining operations mentioned above.
For both the three and nine month periods ended September 30, 2023, $12.0 million of site specific suspension costs were included within Ramp-up and suspension costs.
Capital additions decreased by $4.3 million for the three months ended September 30, 2024 and decreased by $9.5 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. Capital expenditures decreased during 2024 as the prior period included expenditures for bolters, the installation of a service hoist and the coarse ore bunker.
The charts below illustrate the factors contributing to Cash Cost, After By-product Credits, Per Silver Ounce for Lucky Friday:
27.11
20.20
24.53
21.45
(17.13
(15.46
(16.67
(15.94
9.98
4.74
7.86
5.51
32
36.53
26.09
32.93
28.15
19.40
10.63
16.26
12.21
The increase in Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the three months ended September 30, 2024, compared to the same period in 2023 was primarily due to higher production costs, partly offset by higher silver production in the current quarter as mining operations were suspended in August 2023. AISC, After By-product Credits, per Silver Ounce was also negatively impacted higher sustaining capital.
The increase in Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the nine months ended September 30, 2024, compared to the same period in 2023 was primarily due to higher production costs, partly offset by higher silver production in the current year as mining operations were suspended in August 2023 and resumed on January 9, 2024.
(15,591
(14,053
(47,057
(15,373
(4,218
(1,948
(12,549
(2,209
(19,809
(16,001
(59,606
(17,582
24,027
24,616
86,169
36,680
597,293
710,012
2,144,045
894,276
670
327
2,091
744
492
252
1,261
943
703,951
628,571
2,115,825
694,198
699
509
1,907
533
514
569
967
617
25.7
33.0
25.6
28.2
3.0
2.1
1.7
14,406
11,497
39,285
32,123
Since acquiring our Keno Hill operations as part of the acquisition of Alexco Resource Corp. ("Alexco") on September 7, 2022, we have focused on development activities, with initial operation of the mill beginning in the second quarter of 2023. The average throughput during the nine months ended September 30, 2024 was 314 tons per day, with silver grades milled of 25.6 ounces per ton. Since commencing production, mill throughput has generally increased as planned, leading to increased levels of production. However, we expect 2025 silver production to remain similar to 2024 as we focus on stakeholder engagement, permitting, infrastructure and capital projects, with production projected to increase again in 2026. The pause in silver production growth at Keno Hill is a direct result of the heap leach failure at Victoria Gold’s Eagle Mine in late June 2024. This failure had several immediate and ongoing impacts on our operations. The primary impact was the Company was forced to suspend milling operations at Keno Hill on August 27, 2024, due to delays in receiving an authorization to construct and a permit modification Keno Hill’s dry stack tailings storage facility (“DSTF”). The delayed authorization and permit were a result of the focus of the Yukon Government (“YG”) and the First Nation of Na-Cho Nyäk Dun (“FNNND”) on Eagle Mine incident response and not on routine permitting matters. Mill operations resumed on October 26, 2024 after receiving the authorization and modification and completing related design and construction work on the DSTF. A second impact of the Eagle Mine incident has been expression of strong positions by the FNNND on continuing and future mining activities at projects within their Traditional Territory, where Keno Hill is located, including a call to halt mining production. We are committed to responsible and sustainable mining that governments and local communities support. As such, the projected flat production levels at Keno Hill for 2025 should allow us to focus on stakeholder outreach and ensuring we have local support for increasing production levels by 2026. In 2025, the Company's environmental remediation services group is also expected to increase construction activities, adding incremental demand on Keno Hill's infrastructure and resources.
33
During the three months ended September 30, 2024, Keno Hill recorded sales and total cost of sales of $19.8 million related to concentrate produced and sold. The third quarter of 2024 had $10.0 million of site-specific ramp-up costs, compared to $5.1 million in the third quarter of 2023, due to the mill shutdown. During the quarter, Keno Hill recorded capital additions of $14.4 million, related to mine development, work on the DSTF and other mining equipment purchases.
During the nine months ended September 30, 2024, Keno Hill recorded sales and total cost of sales of $59.6 million related to concentrate produced and sold. The nine months ended September 30, 2024 and 2023 had $20.4 million of site-specific ramp up costs included in ramp-up and suspension costs. During the current year, Keno Hill recorded capital additions of $39.3 million, primarily related to mine development, work on the DSTF, a surface backfill plant and other mining equipment purchases.
(34,183
(37,842
(109,822
(119,108
(12,097
(62,058
(43,288
(46,280
(56,822
(171,880
(162,396
4,028
(9,910
(21,365
(27,540
369,599
343,619
1,118,204
1,091,477
20,534
24,259
65,725
67,846
5,578
5,084
18,043
16,685
20,112
24,423
65,079
69,804
3,918
5,864
17,105
17,209
0.06
0.07
0.02
97.82
103.75
100.67
103.63
Cash Cost, After By-product Credits, per Gold Ounce (1)
1,754
1,475
1,707
1,635
AISC, After By-product Credits, per Gold Ounce (1)
2,059
1,695
1,923
2,075
18,606
16,225
44,298
54,127
As part of the transition of the Casa Berardi mine from a combined underground and open pit operation to an open pit only operation, the lower margin east mine underground operations were closed in July 2023 and, along with mining the 160 open pit, only the higher margin stopes of the west underground mine will be mined until they are exhausted, which is expected to occur in mid-2025, at which time most underground activity is expected to cease. Following the halt to underground mining, Casa Berardi is expected to only produce gold from the 160 open pit, and at lower volumes than historic production levels with production expected to conclude in 2027. We forecast a gap in production commencing in 2027 and lasting until 2032 or later, when no ore is expected to be mined and no revenue is expected. During this hiatus, our focus is expected to be on investing in infrastructure and equipment, permitting and de-watering and stripping two expected new open pits, Principal and West Mine Crown Pillar. Upon conclusion of the hiatus and related permitting and construction, the mine is expected to generate significant free cash flow at current gold prices.
Gross profit increased by $13.9 million to $4.0 million for the three months ended September 30, 2024, compared to a gross loss of $9.9 million in the same period in 2023. The increase in gross profit is primarily related to higher realized prices, partly offset by lower gold ounces sold, and lower depreciation costs in the current quarter due to the west underground mine being fully depreciated during the first half of the year. Capital additions increased by $2.4 million during the quarter, compared to the same period in 2023, primarily related to a tailings dam raise.
Gross loss decreased by $6.2 million to $21.4 million for the nine months ended September 30, 2024, compared to a gross loss of $27.5 million in the same period in 2023. The decrease in gross loss primarily relates to an increase in realized gold prices, partly offset by lower gold ounces sold and a $9.3 million reduction in production costs due to the closure of the east mine in July 2023. These
34
items were partly offset by a $18.8 million increase in depreciation expense, reflecting the west underground mine being fully depreciated during the first half of the year, in line with the initial expectation of underground mining ceasing in the first half of 2024 and $6.3 million in product inventory net realizable value write downs attributable to higher depreciation. Capital additions decreased by $9.8 million during the nine months ended September 30, 2024, compared to the same period in 2023, primarily related to the cessation of capitalization of underground development. The majority of capital additions for the current year are related to a tailings dam raise.
Although Casa Berardi generated gross profit during the third quarter of 2024, it has generated gross losses during the previous eight quarters. This lack of profitability, the expected hiatus in future production discussed above, and the uncertainty surrounding permitting and timing of construction of the new open pits, has caused us to undertake a review of how Casa Berardi fits into the Company’s future strategy. While it is possible we may continue down the path towards future production at the Principal and West Mine Crown Pillar pits, we are also examining potential strategic alternatives.
35
The charts below illustrate the factors contributing to Cash Cost, After By-product Credits, Per Gold Ounce for Casa Berardi:
Cash Cost, Before By-product Credits, per Gold Ounce
1,762
1,480
1,714
1,641
(8
(5
(7
(6
Cash Cost, After By-product Credits, per Gold Ounce
36
AISC, Before By-product Credits, per Gold Ounce
2,067
1,700
1,930
2,081
AISC, After By-product Credits, per Gold Ounce
The increase in Cash Cost After By-product Credits, per Gold Ounce, for the three months ended September 30, 2024, compared to the same period in 2023 was primarily due to lower gold production and higher production costs. Higher AISC, After By-product Credits, per Gold Ounce reflected lower gold production and higher sustaining capital over the comparable period in 2023.
The increase in Cash Cost After By-product Credits, per Gold Ounce, for the nine months ended September 30, 2024 was primarily related to lower gold production, partly offset by lower production costs from the cessation of underground mining of the east mine during July 2023. Sustaining capital decreased for the nine months ended September 30, 2024, reflecting no underground development and the prior period containing machinery and equipment expenditures related to surface operations positively impacted AISC, After By-product Credits, per Gold Ounce.
Corporate Matters
Income Taxes
During the three and nine months ended September 30, 2024, an income and mining tax provision of $11.5 million and $22.3 million, respectively, resulted in an effective tax rate of 86.7% and 48.3%, respectively. This compares to an income and mining tax benefit of $1.5 million and an income and mining tax provision of $6.9 million which resulted in an effective tax rate of 6.3% and -20.1%, for the three and nine months ended September 30, 2023, respectively. The comparability of our income and mining tax provision and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) mining taxes; (ii) variations in our income before income taxes; (iii) geographic distribution of that income; (iv) foreign exchange rates including non-recognition of foreign exchange gains and losses; (v) percentage depletion; and (vi) the non-recognition of tax assets. The effective tax rate will fluctuate, sometimes significantly, period to period. The change in the effective tax rate during the three and nine months ended September 30, 2024, compared to the comparable periods in 2023 is primarily related to the reported consolidated income (loss) as well as the losses incurred at our consolidated Alexco subsidiaries, and our Nevada subsidiaries, for which no tax benefit is recognized due to uncertainty surrounding our ability to utilize these future tax benefits.
Each reporting period we assess our deferred tax balances based on a review of long-range forecasts and quarterly activity. A valuation allowance is provided for deferred tax assets for which it is more likely than not the related tax benefits will not be realized. We analyze our deferred tax assets and, if it is determined that we will not realize all or a portion of our deferred tax assets, we record or increase a valuation allowance. Conversely, if it is determined we will ultimately more likely than not be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact our ability to realize our deferred tax assets. Valuation allowances are provided on deferred tax assets in Nevada, Mexico, and certain Canadian jurisdictions. For additional information, please see risk factors Our accounting and other estimates may be imprecise and Our ability to recognize the benefits of deferred tax assets related to net operating loss carryforwards and other items is dependent on future cash flows and taxable income in Item 1A - Risk Factors in our 2023 Form 10-K.
The tables below present reconciliations between the most comparable GAAP measure of total cost of sales to the non-GAAP measures of (i) Cash Cost, Before By-product Credits, (ii) Cash Cost, After By-product Credits, (iii) AISC, Before By-product Credits and (iv) AISC, After By-product Credits for our operations and for the Company for the three and nine months ended September 30, 2024 and 2023.
Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce are measures developed by precious metals companies (including the Silver Institute and the World Gold Council) in an effort to provide a uniform standard for comparison purposes. There can be no assurance, however, that these non-GAAP measures as we report them are the same as those reported by other mining companies.
Cash Cost, After By-product Credits, per Ounce is an important operating statistic that we utilize to measure each mine's operating performance. We use AISC, After By-product Credits, per Ounce as a measure of our mines' net cash flow after costs for reclamation and sustaining capital. This is similar to the Cash Cost, After By-product Credits, per Ounce non-GAAP measure we report, but also includes reclamation and sustaining capital costs. 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 silver and gold mining company, we also use these statistics on an aggregate basis - aggregating the Greens Creek and Lucky Friday mines to compare our performance with that of other silver mining companies. 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.
We have not disclosed cost per ounce statistics for the Keno Hill operation as it is in the production ramp-up phase and has not met our definition of commercial production. See above "Consolidated Results of Operations" for our definition of commercial production. Determination of when those criteria have been met requires the use of judgment, and our definition of commercial production may differ from that of other mining companies.
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 reclamation and sustaining capital costs. AISC, Before By-product Credits for our consolidated silver properties also includes corporate costs for general and administrative expense and sustaining capital costs. 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.
In addition to the uses described above, 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. We currently do not report Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for our Keno Hill operation as it is in the ramp-up phase of production and accordingly it is excluded from our consolidated Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce.
Casa Berardi reports Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce for the production of gold, their 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 Casa Berardi 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 and Lucky Friday, our combined silver properties. Similarly, the silver produced at our other three units is not included as a by-product credit when calculating the gold metrics for Casa Berardi.
38
In thousands (except per ounce amounts)
Keno Hill (6)
Corporate (2)
Total Silver
73,597
39,286
132,692
(10,681
(28,847
Treatment costs
5,962
3,650
9,612
Change in product inventory
(8,125
106
(8,019
Reclamation and other costs
(1,825
(241
(2,066
Exclusion of Keno Hill cash costs (6)
Cash Cost, Before By-product Credits (1)
55,661
32,120
87,781
786
303
1,089
Sustaining capital
10,558
10,862
42
21,462
AISC, Before By-product Credits (1)
67,005
43,285
10,443
120,733
By-product credits:
(22,126
(7,046
(29,172
(25,430
(5,970
(13,245
(19,215
(409
Total By-product credits
(53,935
(20,291
(74,226
Cash Cost, After By-product Credits
1,726
11,829
13,555
AISC, After By-product Credits
13,070
22,994
46,507
1,857
1,185
3,042
Cash Cost, Before By-product Credits, per Ounce
28.86
By-product credits per ounce
(24.40
Cash Cost, After By-product Credits, per Ounce
4.46
AISC, Before By-product Credits, per Ounce
39.69
AISC, After By-product Credits, per Ounce
15.29
Gold - Casa Berardi
Other (4)
46,280
6,827
53,107
2,176
(207
Exclusion of Other costs
(6,827
36,188
207
6,054
42,449
(163
36,025
42,286
Divided by ounces produced
(40,944
9,648
(5,843
(2,273
123,969
1,296
27,516
163,182
(74,389
49,580
88,793
41
60,322
14,344
90,667
(4,306
(17,269
10,369
1,368
1,033
12,770
377
(2,450
(2,073
(348
(168
(516
Exclusion of Lucky Friday cash costs
(20
Exclusion of Keno Hill cash costs
(15,086
59,705
8,768
68,473
722
101
823
11,330
7,386
237
18,953
Exclusion of Lucky Friday sustaining costs
(4,934
71,757
11,321
7,833
90,911
(20,027
(2,019
(22,046
(25,344
(7,201
(5,368
(12,569
Exclusion of Lucky Friday by-product credits
(52,572
(6,711
(59,283
7,133
2,057
9,190
19,185
4,610
31,628
2,343
475
2,818
Exclusion of Lucky Friday ounces produced
(41
2,777
24.66
(21.35
3.31
32.74
11.39
56,822
940
57,762
(18,948
254
(1,977
(219
(972
35,900
219
5,133
41,252
(119
35,781
41,133
43
(36,217
13,024
(4,050
(735
Exclusion of Lucky Friday cash costs (3)
104,373
1,042
24,086
Exclusion of Lucky Friday sustaining costs (3)
132,163
Exclusion of Lucky Friday by-product credits (3)
(59,402
44,971
72,761
Exclusion of Lucky Friday ounces produced (3)
44
200,240
104,328
364,174
(29,300
(81,556
21,755
9,619
31,374
(3,025
602
(2,423
(3,362
(654
(4,016
(3,634
175,901
80,961
256,862
2,356
708
3,064
29,885
32,430
1,143
63,458
(5,396
208,142
108,703
37,500
354,345
(64,205
(18,537
(82,742
(80,826
(19,769
(40,432
(60,201
3,943
(165,209
(55,026
(220,235
10,692
25,935
36,627
42,933
53,677
134,110
6,579
3,554
10,133
(253
3,301
9,880
26.00
(22.29
3.71
35.86
13.57
45
171,880
14,340
186,220
112
3,365
(622
(14,340
112,677
622
13,582
126,881
(489
112,188
126,392
66
(143,614
31,486
942
(4,638
369,539
3,686
77,040
481,226
(220,724
148,815
260,502
47
Keno Hill(6)
189,664
81,068
288,314
(23,741
(64,507
31,114
10,832
1,146
43,092
(2,479
(3,313
(5,792
(214
(826
(1,040
(16,519
179,528
64,000
243,528
2,166
671
2,837
26,686
24,251
831
51,768
208,380
83,988
31,280
323,648
(64,955
(14,284
(79,239
(79,089
(22,002
(33,953
(55,955
(166,046
(47,561
(213,607
13,482
16,439
29,921
42,334
36,427
110,041
7,472
3,025
10,497
2,984
10,456
23.29
(20.43
2.86
30.95
10.52
48
162,396
2,743
165,139
(142
(43,430
1,072
(5,345
(655
Exclusion of Casa Berardi cash costs (5)
(2,851
(2,601
111,329
655
29,175
141,159
(390
110,939
140,769
68
(107,937
44,164
(11,137
(1,695
354,857
3,492
80,943
464,807
(213,997
140,860
250,810
We have a disciplined cash management strategy of maintaining financial flexibility to execute our capital priorities and provide long-term value to our stockholders. Consistent with that strategy, we aim to maintain an acceptable level of net debt and sufficient liquidity to fund debt service costs, operations, capital expenditures, exploration and pre-development projects, while returning cash to stockholders through dividends and potential share repurchases.
At September 30, 2024, we had $22.3 million in cash and cash equivalents, of which $8.8 million was held in foreign subsidiaries' local currency that we anticipate utilizing for near-term operating, exploration or capital costs by those foreign subsidiaries. At September 30, 2024, we had utilized $13.0 million drawn on our credit facility of $225 million, with $6.3 million used for letters of credit and the remainder available as borrowings. We also have USD cash and cash equivalent balances held by our foreign subsidiaries that, if repatriated, may be subject to withholding taxes. We expect that there would be no additional tax burden upon repatriation after considering the cash cost associated with the withholding taxes. We believe that our liquidity and capital resources from our U.S. operations are adequate to fund our U.S. operations and corporate activities.
Pursuant to our common stock dividend policy described in Note 12 of Notes to Consolidated Financial Statements in our consolidated financial statements and notes for the year ended December 31, 2023, our Board of Directors declared and paid dividends on our common stock and preferred of $8.7 million and $16.7 million during the three and nine months ended September 30, 2024, respectively, and $3.9 million and $11.8 million for the three and nine months ended September 30, 2023, respectively. Our dividend policy has a silver-linked component which ties the amount of declared common stock dividends to our realized silver price for the preceding quarter. Another component of our common stock dividend policy anticipates paying an annual minimum dividend.
For illustrative purposes only, the table below summarizes potential dividend amounts under our dividend policy.
Quarterly Average Realized Silver Price ($ per ounce)
Quarterly Silver-Linked Dividend ($ per share)
Annualized Silver-Linked Dividend ($ per share)
Annualized Minimum Dividend ($ per share)
Annualized Dividends per Share: Silver-Linked and Minimum ($ per share)
Less than $20
$0.015
$0.01
$0.025
$0.04
$0.055
$0.06
$0.075
$0.10
$0.115
$0.035
$0.14
$0.155
$0.045
$0.18
$0.195
$0.22
$0.235
The declaration and payment of dividends on our common stock is at the sole discretion of our Board of Directors, and there can be no assurance that we will continue to declare and pay common stock dividends in the future.
Pursuant to our stock repurchase program described in Note 12 of Notes to Consolidated Financial Statements in our consolidated financial statements and notes for the year ended December 31, 2023, we are authorized to repurchase up to 20 million shares of our outstanding common stock from time to time in open market or privately negotiated transactions, depending on prevailing market conditions and other factors. The repurchase program may be modified, suspended or discontinued by us at any time. Whether or not we engage in repurchases from time to time may depend on a variety of factors, including not only price and cash resources, but customary black-out restrictions, whether we have any material inside information, limitations on share repurchases or cash usage that may be imposed by our credit agreement or in connection with issuances of securities, alternative uses for cash, applicable law, and other investment opportunities from time to time. As of September 30, 2024 and December 31, 2023, 934,100 shares had been purchased in prior periods at an average price of $3.99 per share, leaving 19.1 million shares that may yet be purchased under the program. We have not repurchased any shares since June 2014.
As discussed in Note 6 of Notes to Condensed Consolidated Financial Statements (Unaudited) pursuant to an equity distribution agreement dated February 18, 2021, we may offer and sell up to 60 million shares of our common stock from time to time to or through sales agents in “at-the-market” offerings. Sales of the shares, if any, will be made by means of ordinary brokers transactions or as otherwise agreed between the Company and the agents as principals. Whether or not we engage in sales from time to time may depend on a variety of factors, including share price, our cash resources, customary black-out restrictions, and whether we have any material inside information. The equity distribution agreement can be terminated by us at any time. Any sales of shares under that agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form S-3. During the three months ended September 30, 2024, we sold 9,090,726 shares under the agreement for proceeds of $57.3 million, net of commissions and fees of $0.9 million and during the nine months ended September 30, 2024, we sold 9,339,287 shares under the agreement for proceeds of $58.4 million, net of commissions and fees of $0.94 million.
As a result of our current cash balances, the performance of our current and expected operations, current metals prices, proceeds from potential at-the-market sales of common stock, and availability under our Credit Agreement, we believe we will be able to meet
51
our obligations and other potential cash requirements during the next 12 months and beyond. Our obligations and other uses of cash may include, but are not limited to: debt service obligations related to the Senior Notes and IQ Notes; principal and interest payments under our Credit Agreement; ramp up and suspension costs; capital expenditures at our operations; potential acquisitions of other mining companies or properties; regulatory matters; litigation; potential repurchases of our common stock under the program described above; and payment of dividends on common stock, if declared by our Board of Directors.
We currently estimate a range of approximately $196 to $218 million (before any lease financing) will be invested in 2024 on capital expenditures, primarily for equipment, infrastructure, and development at our mines, including $153.7 million already incurred as of September 30, 2024. We also estimate exploration and pre-development expenditures will total approximately $31.5 million in 2024, including $21.6 million already incurred as of September 30, 2024. Our expenditures for these items and our related plans for 2024 may change based upon our financial position, metals prices, and other considerations. Our ability to fund the activities described above will depend on our operating performance, metals prices, our ability to estimate revenues and costs, sources of liquidity available to us, including the revolving credit facility (which requires compliance with certain financial and other covenants), and other factors. A sustained downturn in metals prices, significant increase in operational or capital costs or other uses of cash, poor results of our operating units, our inability to access the credit facility or the sources of liquidity discussed above, or other factors beyond our control could impact our plans.
We may defer some capital investment and/or exploration and pre-development activities, engage in asset sales or secure additional capital if necessary to maintain liquidity. We also may pursue additional acquisition opportunities, which could require additional equity issuances or other forms of financing. There can be no assurance that such financing will be available to us.
Our liquid assets include (in millions):
Cash and cash equivalents held in U.S. dollars
13.5
98.8
Cash and cash equivalents held in foreign currency
8.8
7.6
Total cash and cash equivalents
22.3
106.4
Marketable equity securities - non-current
40.9
32.3
Total cash, cash equivalents and investments
63.2
138.7
Cash and cash equivalents decreased by $84.1 million in the first nine months of 2024. Cash held in foreign currencies represents balances in Canadian dollars and Mexican Pesos. The value of non-current marketable equity securities increased by $8.6 million.
Cash provided by operating activities (in millions)
150.8
74.6
Cash provided by operating activities for the nine months ended September 30, 2024, of $150.8 million represents a $76.2 million increase compared to the $74.6 million provided in the same period for 2023. $106.3 million of the variance was attributable to higher income adjusted for non-cash items, reflecting higher non-cash depreciation, depletion and amortization expense, a foreign exchange gain and write down of property, plant and equipment. The increase was partly offset by negative net working capital changes resulting from higher accounts receivable balances reflecting the timing of sales at Greens Creek, Lucky Friday and Keno Hill and an increase in inventories at Lucky Friday, Casa Berardi and Keno Hill.
Cash used in investing activities (in millions)
(152.3
(162.9
During the nine months ended September 30, 2024, cash used in investing activities of $152.3 million, included $153.7 million invested in our business, net of $1.5 million in proceeds from the sale of property, plant and mine development. Capital expenditures decreased by $7.6 million compared to the same period in 2023. The variance was primarily due to lower capital spending at Lucky Friday and Casa Berardi, partially offset by higher capital spending at Greens Creek.
Cash (used in) provided by financing activities (in millions)
(82.4
84.1
During the nine months ended September 30, 2024, we had net repayments of $115.0 million on our revolving credit facility resulting in $13.0 million outstanding at an interest rate of 7.8% on September 30, 2024. During the nine months ended September 30, 2024 and 2023:
52
The table below presents our fixed, non-cancelable contractual obligations and commitments primarily related to our Senior Notes, IQ Notes, credit facility, outstanding purchase orders (including certain capital expenditures) and lease arrangements as of September 30, 2024 (in thousands):
Payments Due By Period
Less than 1 year
1-3 years
4-5 years
More than5 years
Purchase obligations (1)
55,865
Credit facility(2)
14,882
3,086
1,243
19,211
Finance lease commitments (3)
9,674
2,344
Operating lease commitments (4)
2,519
2,140
Senior Notes (5)
68,876
IQ Notes (6)
Total contractual cash obligations
153,414
84,155
493,641
6,017
737,227
We record liabilities for costs associated with mine closure, reclamation of land and other environmental matters. At September 30, 2024, our liabilities for these matters totaled $118.6 million. Future expenditures related to closure, reclamation and environmental expenditures at our sites are difficult to estimate, although we anticipate we will incur expenditures relating to these obligations over the next 30 years. For additional information relating to our environmental obligations, see Note 11 of Notes to Condensed Consolidated Financial Statements (Unaudited).
There have been no significant changes to the critical accounting estimates disclosed in “Critical Accounting Policies” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Exhibit 99.1 to the May 20, 2024 8-K.
At September 30, 2024, we had no existing off-balance sheet arrangements, as defined under SEC regulations, that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Presented below are Hecla’s unaudited interim condensed consolidating financial statements as required by Rule 3-10 of Regulation S-X of the Securities Exchange Act of 1934, as amended, resulting from the guarantees by certain of Hecla's subsidiaries of the Senior Notes and IQ Notes (see Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information). The Guarantors consist of the following of Hecla's 100%-owned subsidiaries: Hecla Limited; Silver Hunter Mining Company; Rio Grande Silver, Inc.; Hecla MC Subsidiary, LLC; Hecla Silver Valley, Inc.; Burke Trading, Inc.; Hecla Montana, Inc.; Revett Silver Company; RC Resources, Inc.; Troy Mine Inc.; Revett Exploration, Inc.; Revett Holdings, Inc.; Mines Management, Inc.; Newhi, Inc.; Montanore Minerals Corp.; Hecla Alaska LLC; Hecla Greens Creek Mining Company; Hecla Admiralty Company; Hecla Juneau Mining Company; Klondex Holdings Inc.; Klondex Gold & Silver Mining Co.; Klondex Midas Holdings Limited; Klondex Aurora Mine Inc.; Klondex Hollister Mine Inc.; Hecla Quebec, Inc.; and Alexco Resource Corp. We completed the offering of the Senior Notes on February 19, 2020 under our shelf registration statement previously filed with the SEC. We issued the IQ Notes in four equal tranches between July and October 2020.
The unaudited interim condensed consolidating financial statements below have been prepared from our financial information on the same basis of accounting as the unaudited interim condensed consolidated financial statements set forth elsewhere in this report. Investments in the subsidiaries are accounted for under the equity method. Accordingly, the entries necessary to consolidate Hecla, the Guarantors, and our non-guarantor subsidiaries are reflected in the intercompany eliminations column. In the course of preparing consolidated financial statements, we eliminate the effects of various transactions conducted between Hecla and its subsidiaries and among the subsidiaries. While valid at an individual subsidiary level, such activities are eliminated in consolidation because, when taken as a whole, they do not represent business activity with third-party customers, vendors, and other parties. Examples of such eliminations include the following:
Separate financial statements of the Guarantors are not presented because the guarantees by the Guarantors are joint and several and full and unconditional, except for certain customary release provisions, including: (1) the sale or disposal of all or substantially all of the assets of the Guarantor; (2) the sale or other disposition of the capital stock of the Guarantor; (3) the Guarantor is designated as an unrestricted entity in accordance with the applicable provisions of the indenture; (4) Hecla ceases to be a borrower as defined in the indenture; and (5) upon legal or covenant defeasance or satisfaction and discharge of the indenture.
Unaudited Interim Condensed Consolidating Balance Sheets
As of September 30, 2024
Parent
Guarantors
Non-Guarantors
Eliminations
Consolidated
Assets
13,095
8,216
962
22,950
137,520
23,224
183,694
Properties, plants, equipment and mineral interests, net
2,657,082
8,260
Intercompany receivable (payable)
(191,308
(850,839
552,052
490,095
Investments in subsidiaries
2,232,270
(52
(2,232,218
490,750
21,573
77,996
(505,917
84,402
2,567,757
1,973,500
662,494
(2,248,040
Liabilities and Stockholders' Equity
Current liabilities
43,224
164,312
22,960
(41,924
Long-term debt
466,178
4,300
26,153
Non-current portion of accrued reclamation
106,551
1,778
Non-current deferred tax liability
20,074
91,257
Stockholders' equity
2,038,281
1,594,514
637,756
(2,232,269
Total liabilities and stockholders' equity
As of December 31, 2023
89,377
16,053
944
15,929
127,531
10,428
153,888
Properties, plants, equipment and mineral interests - net
642
2,657,261
8,347
(132,464
(812,078
589,842
354,700
2,248,533
(2,248,533
432,468
21,960
29,353
(399,189
84,592
2,654,485
2,010,727
638,914
(2,293,022
50,383
141,439
10,128
(44,490
17,063
0
108,731
2,066
1,968,102
1,621,814
626,720
(2,248,532
55
Unaudited Interim Condensed Consolidating Statements of Operations
Revenues
(8,761
689,031
Cost of sales
(2,976
(403,804
(406,780
Depreciation, depletion, amortization
(16,436
(18,474
(1,447
(36,357
(375
(18,919
(2,283
(21,577
Equity in earnings of subsidiaries
28,758
(28,758
Other income (expense)
50,206
(60,159
7,005
(22,771
(25,719
Income before income and mining taxes
50,416
44,061
3,275
(51,529
Expense from income taxes
(26,539
(18,576
22,770
23,877
25,485
(28,759
Income applicable to common stockholders
23,463
Changes in comprehensive income
Comprehensive income
15,157
56
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following discussion about our exposure to market risks and risk management activities includes forward-looking statements that involve risks and uncertainties, as well as summarizes the financial instruments held by us at September 30, 2024, which are sensitive to changes in commodity prices and foreign exchange rates and are not held for trading purposes. Actual results could differ materially from those projected in the forward-looking statements. In the normal course of business, we also face risks that are either non-financial or non-quantifiable (See Part I, Item 1A. – Risk Factors of our 2023 Form 10-K and Part II, Item 1A - Risk Factors in our Form 10-Q for the quarterly period ended June 30, 2024).
Changes in the market prices of silver, gold, lead and zinc can significantly affect our profitability and cash flow. Metals prices can and often do fluctuate widely and are affected by numerous factors beyond our control (see Item 1A – Risk Factors – A substantial or extended decline in metals prices would have a material adverse effect on us in our 2023 Form 10-K). We utilize financially-settled forward and put option contracts to manage our exposure to changes in prices for silver, gold, zinc and lead.
Provisional Sales
Sales of all metals products sold directly to customers, including by-product metals, are recorded as revenues when all performance obligations have been completed and the transaction price can be determined or reasonably estimated. For concentrate sales, revenues are generally recorded at the time of shipment at forward prices for the estimated month of settlement. Due to the time elapsed between shipment to the customer and the final settlement with the customer, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices until final settlement by the customer. Changes in metals prices between shipment and final settlement will result in changes to revenues previously recorded upon shipment. Metals prices can and often do fluctuate widely and are affected by numerous factors beyond our control (see Item 1A – Risk Factors – A substantial or extended decline in metals prices would have a material adverse effect on us in our 2023 Form 10-K). At September 30, 2024, metals contained in concentrate sales and exposed to future price changes totaled 1.5 million ounces of silver, 500 ounces of gold, 22,525 tons of zinc and 51,650 tons of lead. If the price for each metal were to change by 10%, the change in the total value of the concentrates sold would be approximately $21.3 million. As discussed in Note 8 of Notes to Condensed Consolidated Financial Statements (Unaudited), we utilize a program designed and intended to mitigate the risk of negative price adjustments with limited mark-to-market financially-settled forward contracts for our silver, gold, zinc and lead sales.
Commodity-Price Risk Management
See Note 8 of Notes to Condensed Consolidated Financial Statements (Unaudited) for a description of our commodity-price risk management program.
Foreign Currency Risk Management
We operate and have mining interests in Canada, which exposes us to risks associated with fluctuations in the exchange rates between the USD and the CAD. We determined the functional currency for our Canadian operations is the USD. As such, foreign exchange gains and losses associated with the re-measurement of monetary assets and liabilities from CAD to USD are recorded to earnings each period. For the three and nine months ended September 30, 2024, we recognized a net foreign exchange loss of $3.2 million and net foreign exchange gain of $3.4 million, respectively, compared to a net foreign exchange gain of $4.2 million and $0.4 million for the three and nine months ended September 30, 2023, respectively. Foreign currency exchange rates are influenced by a number of factors beyond our control. A 10% change in the exchange rate between the USD and CAD from the rate at September 30, 2024 would have resulted in a change of approximately $7.3 million in our net foreign exchange gain or loss. We do not hedge the remeasurement of monetary assets and liabilities. We do hedge some of our operating and capital costs denominated in CAD.
See Note 9 of Notes to Condensed Consolidated Financial Statements (Unaudited) for a description of our foreign currency risk management program.
Item 4. Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including the Interim Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as required by Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures, including controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated to our management (including our CEO and CFO), were effective as of September 30, 2024, in assuring them in a timely manner that material information required to be disclosed in this report has been properly recorded, processed, summarized and reported. There were no changes in our internal control over financial reporting during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
Part II - Other Information
Item 1. Legal Proceedings
For information concerning legal proceedings, refer to Note 11 of Notes to Condensed Consolidated Financial Statements (Unaudited), which is incorporated by reference into this Item 1.
Item 1A. Risk Factors
Item 1A. – Risk Factors of our 2023 Form 10-K set forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results.
Item 4. Mine Safety Disclosures
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in exhibit 95 to this Quarterly Report.
Item 5. Other Information
During the three months ended September 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
Hecla Mining Company and Wholly Owned Subsidiaries
Form 10-Q – September 30, 2024
Index to Exhibits
Exhibit
Number
10.3*
Amended and Restated Hecla Mining Company Stock Plan for Nonemployee Directors
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95*
Mine safety information listed in Section 1503 of the Dodd-Frank Act.
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document. **
101.SCH
Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents **
104
Cover page formatted as Inline XBRL and contained in Exhibit 101 **
* Filed herewith
** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
(1) Indicates a management contract or compensatory plan or arrangement.
Items 2 and 3 of Part II are not applicable and are omitted from this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
(Registrant)
Date:
November 7, 2024
By:
/s/ Catherine J. Boggs
Catherine J. Boggs, Interim President and Chief Executive Officer,
Director
/s/ Russell D. Lawlar
Russell D. Lawlar, Senior Vice President,
Chief Financial Officer