Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hecla Mining Co (HL, Financial) reported record revenues and the second highest silver production in its 133-year history.
- The company generated strong free cash flow, particularly from its Greens Creek and Lucky Friday mines.
- Hecla Mining Co (HL) is committed to deleveraging its balance sheet, having reduced net debt by $25 million in the second quarter.
- The company is investing in its operations, particularly at Keno Hill, which has shown remarkable success and potential for long-term value.
- Hecla Mining Co (HL) has a unique silver-linked dividend policy, which provides additional exposure and leverage to silver prices.
Negative Points
- Higher labor and contractor costs have impacted the cost structure, particularly at the Lucky Friday mine.
- Keno Hill has not yet declared commercial production despite strong production, indicating ongoing challenges.
- The company is facing increased capital expenditures, particularly at Keno Hill, due to necessary infrastructure and safety improvements.
- There is uncertainty regarding the timeline for appointing a new CEO, which could impact strategic direction.
- Hecla Mining Co (HL) is experiencing inflationary pressures in mining supplies and contractor costs, affecting overall cost management.
Q & A Highlights
Q: What's your appetite for further paydown beyond the targets that you outlined, specifically regarding net leverage?
A: Russell Lawlar, CFO, stated that the first priority is to invest in operations and exploration programs. Any additional free cash flow will be allocated to reducing the revolver. Once the revolver is paid down, the focus will shift to building cash reserves, potentially between $100 million and $200 million, before considering further capital allocation.
Q: Can you provide additional color on where you may still be seeing inflation and where you've seen the most relief in costs?
A: Russell Lawlar, CFO, noted that while there hasn't been significant inflation in specific areas, the strong performance at Lucky Friday has led to increased profit sharing costs. Carlos Aguiar, VP of Operations, added that there are normal increases in mining supplies and contractor costs, and the challenge of finding skilled workers sometimes necessitates hiring contractors.
Q: Regarding Keno Hill, when should we expect meaningful cost improvements, especially given the increased capital investment guidance?
A: Russell Lawlar, CFO, explained that while production has increased, costs have also risen. The focus is on establishing a sustainable production level, with cost optimization to follow. Carlos Aguiar, VP of Operations, mentioned that investments in infrastructure and mining methods will have a significant impact on future costs.
Q: Under what scenarios would you consider cutting losses and moving on from Keno Hill?
A: Russell Lawlar, CFO, emphasized the significant geological potential at Keno Hill, comparing it to the early days of Lucky Friday. The company is committed to the long-term potential of the mine and does not speculate on scenarios for cutting losses. Catherine Boggs, Interim CEO, reiterated the commitment to the Yukon and confidence in the project's future.
Q: Are there any large philosophical changes expected in the post-Phil era, particularly regarding geographic focus?
A: Catherine Boggs, Interim CEO, stated that the current strategy is to maximize the value of North American assets. While there is no immediate plan to explore opportunities outside North America, the company remains open to possibilities in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
