Hecla Mining Company (HL) Earnings Call Transcript & Summary

Thank you for joining. I'm Phil Baker, President and CEO of Hecla Mining Company. In this webcast, I'll talk about Hecla's high-grade, low-cost mines that illustrates how large long-lived silver mines in the United States makes Hecla unique among silver mining investment options. I should note the statements that I'm going to make in this presentation are subject to the cautions found in this and the next slide and the cautions found in our 10-K, 10-Q and other filings with the SEC. Here are 7 characteristics that make Hecla stand out relative to any other mining investment: safe jurisdictions, the metals we produce that have a silver focus; the low-cost; the long mine lives; the production growth; our dividend policy; and Hecla's brand. In this webcast, I want to focus on the foundation of every mining company and all these characteristics, reserves and resources. This focus sets the stage for understanding why Hecla is both unique and exceptional from the rest of the silver mining industry. Hecla's silver reserve ounces have consistently increased over time as seen here in blue. World silver ounces reserves seen in orange tend to follow the price of silver, which is seen in gray, reflecting the sensitivity of some properties to price. However, Hecla's reserves steadily increase. There are 2 main factors that contribute to this. First, the geologic environment of our mines create continuous large systems with multiple metals deposit over extended areas. So once you understand the geology, expanding the reserves is largely a question of drilling access. Second, our cost structure is low and doesn't require significant incremental capital to further exploration or expand reserves. This allows Hecla to use some of the lowest price assumptions in the industry. So unlike most of the rest of the industry, when prices fell dramatically around 2013, Hecla didn't have to reduce reserves. In fact, Hecla's reserves have grown by about 50% since then, while world reserves are about 40% less. Now several mines are rare. High-grade silver mines of size are exceptionally rare. This chart shows on the left axis silver equivalent ounces or the size of the deposit. On the right axis, the silver equivalent grade or the quality of the mine. Silver equivalent basis at our Greens Creek and Lucky Friday mines are the largest and sixth largest in the world. Both mines have silver equivalent grades that nearly doubled that of the next highest-grade mine. This means Hecla has double or more the amount of metal per ton of rock compared to peers. Also note that not only does Hecla have bigger and better-quality silver mines, they're the only ones of size in the United States. Hecla's high grade is not an aberration. Hecla has had the industry-leading silver reserve grade at least the past 15 years, probably longer. I suspect it might go back to the early '90s. This slide compares the grade of silver companies over the last 1.5 decades. Now Hecla is the dark blue line at the top. And except for Fresnillo, our competitors' reserve grades have declined. Simply put, Hecla's mines are in a more robust geologic environment where the quality of the ore body can be maintained. Now there are 3 categories of reserves and resources. Reserves have a high degree of confidence of being mined profitably. Measured and indicated resources have a high degree of geologic confidence but is lacking something that prevents it from being reserved. And those are shown on the left graph. On the right is inferred resources. Generally speaking, we have not had enough drilling. So variability of the grade or the tons is very high. Over time, both measured and indicated resources and inferred resources can be converted to reserves or inferred to measured and indicated. Think of the conversion of resources as a pipeline. So looking at the left chart, in 2008, we solidated the ownership of Greens Creek, which gave us a big jump in both reserves, the blue line, and measured and indicated resources, the gold line. But it didn't stop there, with both categories growing so that we have more than 4x what we had 16 years ago. And remember what the previous slide showed us that this didn't happen by lowering the quality or the grade of the ore. On the right chart, inferred has grown even more dramatically from roughly 45 million ounces to 150 million ounces in 2010. And then with the acquisition of our Montana assets in 2015 and '16 to 450 million ounces. The measured and indicated and inferred is our pipeline and it is the strongest in our history and probably the strongest in the industry. It is remarkable to have these mines and reserves continue to have high quality and grow after all these years of mining. But it's what makes these mines remarkable and Hecla unique and exceptional. In another webcast, I'll have more to say about our characteristics and also talk about the silver market because I believe over this decade, the price of silver will go up dramatically with higher highs and higher lows. And Hecla, with these remarkable mines, will provide investors with years of exposure to silver to reap the benefit. Thank you for joining me today. And for more information, please see our website.