Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

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, 2022

or
March 31, 2023

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 File Number: 1-8491

HECLA MINING COMPANY

(Exact nameName of registrantRegistrant as specifiedSpecified in its Charter)

Delaware
77-0664171
State or Other Jurisdiction of
Incorporation or Organization
I.R.S. Employer
Identification No.

Delaware

77-0664171

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

6500 Mineral Drive, Suite 200

Coeur d’Alene, Idaho

83815-9408

(Address of Principal Executive Offices

principal executive offices)

(Zip Code

Code)

208-769-4100

Registrant’s Telephone Number, Including Area Code

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

New York Stock Exchange

Indicate by check mark whether the registrant: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

☐

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 4, 2022

May 5, 2023

Common stock, par value

$0.25 par value per share

606,270,618

612,636,803

Table of Contents

Hecla Mining Company and Subsidiaries

Form 10 – Q

10-Q

For the Quarter Ended September 30, 2022

March 31, 2023

INDEX

*

Page

PART I – Financial Information

PART I.

FINANCIAL INFORMATION

3

Item 1 – Condensed Consolidated 1.

Financial Statements (Unaudited)

3

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income –- Three Months Ended March 31, 2023 and Nine Months Ended – September 30, 2022 and 2021

4

3

Condensed Consolidated Statements of Cash Flows – Nine- Three Months Ended September 30,March 31, 2023 and 2022 and 2021

5

4

Condensed Consolidated Balance Sheets – September 30, 2022- March 31, 2023 and December 31, 20212022

6

5

Condensed Consolidated Statements of Changes in Stockholders’Stockholders' Equity – Three Months Ended March 31, 2023 and Nine Months Ended – September 30, 2022 and 2021

7

6

Notes to Condensed Consolidated Financial Statements (Unaudited)(unaudited)

9

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

60

40

Item 4.

Controls and Procedures

61

41

PART II – Other Information

II.

OTHER INFORMATION

41

Item 1 – 1.

Legal Proceedings

61

41

Item 1A.

Risk Factors

41

Item 1A – Risk Factors

4.

61

Item 4 – Mine Safety Disclosures

62

41

Item 6.

Exhibits

42

Item 6 – ExhibitsSignatures

62

43

Signatures
64

*

Items 2, 3 and 5 of Part II are omitted as they are not applicable.

2

Table of Contents

Part I –- Financial Information

Item 1. Financial Statements

3
Table of Contents

Hecla Mining Company and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)

(Dollars and shares in thousands, except for

per-share
amounts)
   Three Months Ended  Nine Months Ended 
   September 30,
2022		  September 30,
2021		  September 30,
2022		  September 30,
2021		 
Sales
  $ 146,339  $ 193,560  $ 524,080  $ 622,395 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cost of sales and other direct production costs
   104,900   112,542   326,579   318,917 
Depreciation, depletion and amortization
   32,992   45,790   106,362   138,918 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of sales
   137,892   158,332   432,941   457,835 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
   8,447   35,228   91,139   164,560 
   
 
 
  
 
 
  
 
 
  
 
 
 
Other operating expenses:
                 
General and administrative
   11,003   8,874   28,989   27,985 
Exploration and
pre-development
   15,128   17,108   39,136   35,039 
Care and maintenance costs
   5,092   6,910   16,539   17,014��
Provision for closed operations and environmental matters
   1,781   7,564   4,154   12,297 
Other operating expense
   902   3,344   5,310   10,626 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total other operating expenses
   33,906   43,800   94,128   102,961 
   
 
 
  
 
 
  
 
 
  
 
 
 
(Loss) income from operations
   (25,459)   (8,572)   (2,989)   61,599 
   
 
 
  
 
 
  
 
 
  
 
 
 
Other income (expense):
                 
Interest expense
   (10,874)   (10,469)   (31,785)   (31,484) 
Fair value adjustments, net
   (4,240)   9,287   (14,703)   (10,651) 
Net foreign exchange gain
   5,667   3,995   8,111   24 
Other income (expense)
   1,853   247   4,828   (192) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total other (expense) income

   (7,594)   3,060   (33,549)   (42,303) 
   
 
 
  
 
 
  
 
 
  
 
 
 
(Loss) income before income and mining taxes
   (33,053)   (5,512)   (36,538)   19,296 
Income and mining tax benefit
   9,527   4,533   3,642   3,924 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net (loss) income
   (23,526)   (979)   (32,896)   23,220 
Preferred stock dividends
   (138)   (138)   (414)   (414) 
   
 
 
  
 
 
  
 
 
  
 
 
 
(Loss) income applicable to common stockholders

  $ (23,664)  $(1,117)  $ (33,310)  $22,806 
   
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive income (loss):
                 
Net (loss) income
  $ (23,526)  $(979)  $ (32,896)  $23,220 
Change in fair value of derivative contracts designated as hedge transactions
   (12,692)   (6,267)   19,491   (2,815) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive (loss) income
  $ (36,218)  $(7,246)  $ (13,405)  $20,405 
   
 
 
  
 
 
  
 
 
  
 
 
 
Basic (loss) income per common share after preferred dividends
  $(0.04)  $—    $(0.06)  $0.04 
   
 
 
  
 
 
  
 
 
  
 
 
 
Diluted (loss) income per common share after preferred dividends
  $(0.04)  $—    $(0.06)  $0.04 
   
 
 
  
 
 
  
 
 
  
 
 
 
Weighted average number of common shares outstanding – basic
   554,531   536,966   544,000   535,542 
   
 
 
  
 
 
  
 
 
  
 
 
 
Weighted average number of common shares outstanding – diluted
   554,531   536,966   544,000   541,769 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cash dividends declared per common share
  $0.00625  $0.01  $0.0125  $0.02 
   
 
 
  
 
 
  
 
 
  
 
 
 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

Sales

 

$

199,500

 

 

$

186,499

 

Cost of sales and other direct production costs

 

 

125,550

 

 

 

105,772

 

Depreciation, depletion and amortization

 

 

39,002

 

 

 

35,298

 

Total cost of sales

 

 

164,552

 

 

 

141,070

 

Gross profit

 

 

34,948

 

 

 

45,429

 

Other operating expenses:

 

 

 

 

 

 

General and administrative

 

 

12,070

 

 

 

8,294

 

Exploration and pre-development

 

 

4,967

 

 

 

12,808

 

Ramp-up and suspension costs

 

 

11,336

 

 

 

6,205

 

Provision for closed operations and environmental matters

 

 

1,044

 

 

 

901

 

Other operating (income) expense

 

 

(22

)

 

 

2,463

 

Total other operating expenses

 

 

29,395

 

 

 

30,671

 

Income from operations

 

 

5,553

 

 

 

14,758

 

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(10,165

)

 

 

(10,406

)

Fair value adjustments, net

 

 

3,181

 

 

 

5,965

 

Net foreign exchange gain (loss)

 

 

108

 

 

 

(2,038

)

Other income

 

 

1,392

 

 

 

1,505

 

Total other expense

 

 

(5,484

)

 

 

(4,974

)

Income before income and mining taxes

 

 

69

 

 

 

9,784

 

Income and mining tax expense

 

 

(3,242

)

 

 

(5,631

)

Net (loss) income

 

 

(3,173

)

 

 

4,153

 

Preferred stock dividends

 

 

(138

)

 

 

(138

)

Net (loss) income applicable to common stockholders

 

$

(3,311

)

 

$

4,015

 

Comprehensive income (loss):

 

 

 

 

 

 

Net (loss) income

 

$

(3,173

)

 

$

4,153

 

Change in fair value of derivative contracts designated as hedge transactions

 

 

6,516

 

 

 

(33,165

)

Comprehensive income (loss)

 

$

3,343

 

 

$

(29,012

)

Basic (loss) income per common share after preferred dividends

 

$

(0.01

)

 

$

0.01

 

Diluted (loss) income per common share after preferred dividends

 

$

(0.01

)

 

$

0.01

 

Weighted average number of common shares outstanding - basic

 

 

600,075

 

 

 

538,490

 

Weighted average number of common shares outstanding - diluted

 

 

600,075

 

 

 

544,061

 

Cash dividends declared per common share

 

$

0.01

 

 

$

0.01

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

4

3

Table of Contents

Hecla Mining Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

   Nine Months Ended 
   September 30,
2022		  September 30,
2021		 
Operating activities:
         
Net (loss) income
  $ (32,896)  $23,220 
Non-cash
elements included in net (loss) income:
         
Depreciation, depletion and amortization
   106,743   139,800 
Write-down of inventory
   2,159   6,524 
Fair value adjustments, net
   3,486   (7,978) 
Provision for reclamation and closure costs
   4,789   7,821 
Stock compensation
   4,298   4,774 
Deferred income taxes
   (17,828)   (17,886) 
Foreign exchange (gain) loss

   (8,353)   615 
Other
non-cash
items, net
   2,454   1,167 
Change in assets and liabilities:
         
Accounts receivable
   34,788   (3,798) 
Inventories
   (19,472)   22,372 
Other current and
non-current
assets
   (3,420)   1,650 
Accounts payable, accrued and other current liabilities

   (21,708)   (14,689) 
Accrued payroll and related benefits
   1,679   (1,829) 
Accrued taxes
   (2,652)   2,730 
Accrued reclamation and closure costs and other
non-current
liabilities
   (297)   2,489 
   
 
 
  
 
 
 
Cash provided by operating activities
   53,770   166,982 
Investing activities:
         
Additions to properties, plants, equipment and mineral interests
   (93,237)  (80,210) 
Change in restricted cash
   2,011   —   
Proceeds from sale of investments
   9,375   1,811 
Proceeds from disposition of properties, plants and equipment
   748   562 
Purchases of investments
   (30,540)   —   
Acquisitions, net
   8,952   —   
Pre-acquisition
advance to Alexco
   (25,000)   —   
Purchase of carbon credits
   —     (200) 
   
 
 
  
 
 
 
Net cash used in investing activities
   (127,691)   (78,037) 
Financing activities:
         
Proceeds from sale of common stock, net
   4,542   —   
Acquisition of treasury stock

   (3,677)   (4,525) 
Dividends paid to common and preferred stockholders
   (10,549)   (17,169) 
Credit facility fees paid
   (517)   (108) 
Draw on revolving credit facility
   25,000   
—
 
 
 
Repayments of finance leases
   (5,222)   (5,598) 
   
 
 
  
 
 
 
Net cash provided by (used in) financing activities
   9,577   (27,400) 
Effect of exchange rates on cash
   (804)   (471) 
Net (decrease) increase in cash, cash equivalents and restricted cash 

   (65,148)   61,074 
Cash, cash equivalents and restricted cash at beginning of period   211,063   130,883 
   
 
 
  
 
 
 
Cash, cash equivalents and restricted cash at end of period  $ 145,915  $ 191,957 
   
 
 
  
 
 
 
Supplemental disclosure of cash flow information:
         
Cash paid for interest
  $37,179  $37,173 
Cash paid for income and mining taxes, net

  $13,061  $10,299 
Significant
non-cash
investing and financing activities:
         
Addition of finance lease obligations and
right-of-use
assets
  $9,692  $4,006 
Common stock issued to Alexco Resource Corp. shareholders

  $68,733  $—   
Common stock issued to settle acquired silver stream
  $135,000  $—   
Common stock issued to pension plans
  $5,570  $22,250 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

Operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(3,173

)

 

$

4,153

 

Non-cash elements included in net (loss) income:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

39,892

 

 

 

35,456

 

Adjustments of inventory to net realizable value

 

 

4,521

 

 

 

—

 

Fair value adjustments, net

 

 

(3,181

)

 

 

(2,245

)

Provision for reclamation and closure costs

 

 

1,694

 

 

 

1,643

 

Stock-based compensation

 

 

1,190

 

 

 

1,271

 

Deferred income taxes

 

 

558

 

 

 

2,234

 

Foreign exchange (gain) loss

 

 

(2,218

)

 

 

2,280

 

Other non-cash items, net

 

 

186

 

 

 

483

 

Change in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

15,477

 

 

 

2,779

 

Inventories

 

 

(9,239

)

 

 

(5,081

)

Other current and non-current assets

 

 

(9,856

)

 

 

1,696

 

Accounts payable, accrued and other current liabilities

 

 

(9,304

)

 

 

(13,907

)

Accrued payroll and related benefits

 

 

4,705

 

 

 

6,909

 

Accrued taxes

 

 

2,226

 

 

 

3,754

 

Accrued reclamation and closure costs and other non-current liabilities

 

 

7,125

 

 

 

(3,516

)

Cash provided by operating activities

 

 

40,603

 

 

 

37,909

 

Investing activities:

 

 

 

 

 

 

Additions to properties, plants, equipment and mineral interests

 

 

(54,443

)

 

 

(21,478

)

Proceeds from sale of investments

 

 

—

 

 

 

2,487

 

Proceeds from disposition of properties, plants and equipment

 

 

—

 

 

 

617

 

Purchases of investments

 

 

—

 

 

 

(10,868

)

Net cash used in investing activities

 

 

(54,443

)

 

 

(29,242

)

Financing activities:

 

 

 

 

 

 

Proceeds from sale of common stock, net

 

 

11,885

 

 

 

—

 

Acquisition of treasury stock

 

 

(482

)

 

 

(1,921

)

Borrowing of debt

 

 

13,000

 

 

 

—

 

Repayment of debt

 

 

(13,000

)

 

 

—

 

Dividends paid to common and preferred stockholders

 

 

(3,891

)

 

 

(3,509

)

Credit facility fees paid

 

 

—

 

 

 

(54

)

Repayments of finance leases

 

 

(2,464

)

 

 

(1,695

)

Net cash provided by (used in) financing activities

 

 

5,048

 

 

 

(7,179

)

Effect of exchange rates on cash

 

 

171

 

 

 

519

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(8,621

)

 

 

2,007

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

105,907

 

 

 

211,063

 

Cash, cash equivalents and restricted cash at end of period

 

$

97,286

 

 

$

213,070

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

18,621

 

 

$

18,603

 

Cash paid for income and mining taxes, net

 

$

1,634

 

 

$

679

 

Significant non-cash investing and financing activities:

 

 

 

 

 

 

Addition of finance lease obligations and right-of-use assets

 

$

850

 

 

$

2,864

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

5

4

Table of Contents

Hecla Mining Company and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except shares)

   
September 30,
2022
  
December 31,
2021
 
ASSETS
 
Current assets:
         
Cash and cash equivalents
  $144,669  $210,010 
Accounts receivable:
         
Trade
   12,477   36,437 
Other, net
   12,846   8,149 
Inventories:
         
Concentrates, doré, and stockpiled ore
   40,985   25,906 
Materials and supplies
   51,020   41,859 
Derivatives assets
   7,190   2,709 
Other current assets
   14,733   16,557 
   
 
 
  
 
 
 
Total current assets
   283,920   341,627 
Investments
   13,299   10,844 
Restricted cash
   1,246   1,053 
Properties, plants, equipment and mineral interests, net
   2,553,974   2,310,810 
Operating lease
right-of-use
assets
   11,632   12,435 
Deferred income taxes
   45,562   45,562 
Derivatives assets
   20,794   2,503 
Other
non-current
assets
   4,202   3,974 
   
 
 
  
 
 
 
Total assets
  $2,934,629  $2,728,808 
   
 
 
  
 
 
 
LIABILITIES
 
Current liabilities:
         
Accounts payable and accrued liabilities
  $87,850  $68,100 
Accrued payroll and related benefits
   26,385   28,714 
Accrued taxes
   7,344   12,306 
Finance and operating leases
   12,489   8,098 
Accrued interest
   5,184   14,454 
Derivatives liabilities
   5,774   19,353 
Other current liabilities
   5,765   99 
Accrued reclamation and closure costs
   10,594   9,259 
   
 
 
  
 
 
 
Total current liabilities
   161,385   160,383 
Finance and operating leases
   20,242   17,726 
Accrued reclamation and closure costs
   105,717   103,972 
Long-term debt
   530,745   508,095 
Deferred tax liability
   154,225   149,706 
Derivatives liabilities
   5,560   18,528 
Other
non-current
liabilities
   1,987   9,611 
   
 
 
  
 
 
 
Total liabilities
   979,861   968,021 
   
 
 
  
 
 
 
Commitments and contingencies (
Notes 4
,
7
,
8,
and
10
)
      
STOCKHOLDERS’ EQUITY
 
Preferred stock, 5,000,000 shares authorized:
         
Series B preferred stock, 25 cent par value, 157,776 shares issued and outstanding, liquidation
preference – $7,891
   39   39 
Common stock, 25 cent par value, 750,000,000 authorized shares; issued September 30,
2022 – 603,702,910 shares and December 31, 2021 – 545,534,760 shares
   150,839   136,391 
Capital surplus
   2,241,649   2,034,485 
Accumulated deficit
   (397,096)   (353,651) 
Accumulated other comprehensive income (loss)
   (8,965)   (28,456) 
Less treasury stock, at cost; September 30, 2022 – 8,132,553 shares and December 31, 2021 – 7,395,295 shares issued and held in treasury
   (31,698)   (28,021) 
   
 
 
  
 
 
 
Total stockholders’ equity
   1,954,768   1,760,787 
   
 
 
  
 
 
 
Total liabilities and stockholders’ equity
  $ 2,934,629  $ 2,728,808 
   
 
 
  
 
 
 

 

 

March 31, 2023

 

 

December 31, 2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

95,939

 

 

$

104,743

 

Accounts receivable:

 

 

 

 

 

 

Trade

 

 

28,928

 

 

 

45,146

 

Other, net

 

 

13,216

 

 

 

10,695

 

Inventories:

 

 

 

 

 

 

Concentrates, doré, stockpiled ore, and metals in transit and in-process

 

 

28,054

 

 

 

37,303

 

Materials and supplies

 

 

56,286

 

 

 

53,369

 

Other current assets

 

 

22,527

 

 

 

16,471

 

Total current assets

 

 

244,950

 

 

 

267,727

 

Investments

 

 

26,434

 

 

 

24,018

 

Restricted cash

 

 

1,347

 

 

 

1,164

 

Properties, plants, equipment and mineral interests, net

 

 

2,587,565

 

 

 

2,569,790

 

Operating lease right-of-use assets

 

 

10,609

 

 

 

11,064

 

Deferred tax assets

 

 

13,280

 

 

 

21,105

 

Other non-current assets

 

 

41,439

 

 

 

32,304

 

Total assets

 

$

2,925,624

 

 

$

2,927,172

 

LIABILITIES

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

83,704

 

 

$

84,747

 

Accrued payroll and related benefits

 

 

41,141

 

 

 

37,579

 

Accrued taxes

 

 

6,318

 

 

 

4,030

 

Finance leases

 

 

9,040

 

 

 

9,483

 

Accrued reclamation and closure costs

 

 

8,531

 

 

 

8,591

 

Accrued interest

 

 

5,191

 

 

 

14,454

 

Other current liabilities

 

 

11,428

 

 

 

19,582

 

Total current liabilities

 

 

165,353

 

 

 

178,466

 

Accrued reclamation and closure costs

 

 

109,808

 

 

 

108,408

 

Long-term debt including finance leases

 

 

516,961

 

 

 

517,742

 

Deferred tax liability

 

 

121,081

 

 

 

125,846

 

Other non-current liabilities

 

 

20,264

 

 

 

17,743

 

Total liabilities

 

 

933,467

 

 

 

948,205

 

Commitments and contingencies (Notes 4, 7, 8, and 10)

 

 

 

 

 

 

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

 

 

 

39

 

Common stock, $0.25 par value, authorized 750,000,000 shares; issued March 31, 2023 — 610,490,740 shares and December 31, 2022 — 607,619,495 shares

 

 

152,536

 

 

 

151,819

 

Capital surplus

 

 

2,273,793

 

 

 

2,260,290

 

Accumulated deficit

 

 

(410,995

)

 

 

(403,931

)

Accumulated other comprehensive income, net

 

 

8,964

 

 

 

2,448

 

Less treasury stock, at cost; March 31, 2023 — 8,229,212 and December 31, 2022 — 8,132,553 shares issued and held in treasury

 

 

(32,180

)

 

 

(31,698

)

Total stockholders’ equity

 

 

1,992,157

 

 

 

1,978,967

 

Total liabilities and stockholders’ equity

 

$

2,925,624

 

 

$

2,927,172

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

6

5

Table of Contents

Hecla Mining Company and Subsidiaries

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, 2022 
   Series B
Preferred
Stock		   Common
Stock		   Capital
Surplus		   Accumulated
Deficit		  Accumulated
Other
Comprehensive
Income (Loss),
net		  Treasury
Stock		  Total 
Balances, July 1, 2022
  $39   $137,241   $2,043,621   $(370,048)  $3,727  $(31,698)  $1,782,882 
Net loss
   —      —      —      (23,526)   —     —     (23,526) 
Common stock issued to Alexco Resource Corp. shareholders
 (17,992,875 shares)
   —      4,498    64,235    —     —     —     68,733 
Common stock issued to settle the acquired silver
stream (34,800,990 shares)
   —      8,700    126,300    —     —     —     135,000 
Common stock issued for 401(k) match (422,860

shares)
   —    106    1,472    —   —   —   1,578 
Common stock issued under ATM program, net 
(1,176,861 shares)		   —      294    4,248    —   —   —   4,542 
Common stock dividends declared (0.0625 cents per
common share)		   —      —      —      (3,384)   —     —     (3,384) 
Series B Preferred Stock dividends declared (87.5 cents
per share)		   —    —    —    (138)   —   —   (138) 
Restricted stock units granted
    —    —    1,773    —   —   —   1,773 
Other comprehensive loss
   —      —      —      —     (12,692)   —     (12,692) 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances, September 30, 2022
  $39   $150,839   $2,241,649   $(397,096)  $(8,965)  $(31,698)  $1,954,768 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
   Three Months Ended September 3
0
, 2021		 
   Series B
Preferred
Stock		   Common
Stock		   Capital
Surplus		   Accumulated
Deficit		  Accumulated
Other
Comprehensive
Income (Loss),
net		  Treasury
Stock		  Total 
Balances, July 1, 2021
  $39   $136,065   $2,024,645   $(354,866)  $(29,437)  $(28,021)  $1,748,425 
Net loss
   —      —      —      (979)   —     —     (979) 
Restricted stock units granted
   —      —      1,472    —     —     —     1,472 
Common stock dividends declared (1.125 cents per common share)
   —      —      —      (6,040)   —     —     (6,040) 
Series B Preferred Stock dividends declared (87.5 cents per share)
   —      —      —      (138)   —     —     (138) 
Common stock issued for 401(k) match (141,000 shares)
   —      35    1,017    —     —     —     1,052 
Common stock issued to pension plans (1,000,000 shares)
   —      250    5,200    —     —     —     5,450 
Other comprehensive loss
   —      —      —      —     (6,267)   —     (6,267) 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances, September 30, 2021
  $39   $136,350   $2,032,334   $(362,023)  $(35,704)  $(28,021)  $1,742,975 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
7
Table of Contents
   Nine Months Ended September 30, 2022 
   Series B
Preferred
Stock		   Common
Stock		   Capital
Surplus		  Accumulated
Deficit		  Accumulated
Other
Comprehensive
Income (Loss),
net		  Treasury
Stock		  Total 
Balances, January 1, 2022
  $39   $136,391   $2,034,485  $(353,651)  $(28,456)  $(28,021)  $1,760,787 
Net loss
   —      —      —     (32,896)   —     —     (32,896) 
Restricted stock units granted
   —      —      3,881   —     —     —     3,881 
Restricted stock units and performance stock units distributed (1,789,042 shares)
   —      447    (447)   —     —     (3,677)   (3,677) 
Common stock issued for 401(k) match (321,110
shares)
   —      186    3,283   —     —     —     3,469 
Common stock issued to directors (98,310 shares)
   —      25    392   —     —     —     417 
Common stock issued to pension plans (1,190,000 shares)
   —      298    5,272   —     —     —     5,570 
Common stock issued to Alexco Resource Corp. shareholders (17,992,875 shares)
   —      4,498    64,235   —     —     —     68,733 
Common stock issued to settle the acquired silver
stream (34,800,990)
   —      8,700    126,300   —     —     —     135,000 
Common stock issued under ATM program, net

(1,176,861 shares)
    ——
—
    294    4,248   —   —   —   4,542 
Common stock dividends declared (1.25 cents per common share)
   —      —      —     (10,135)   —     —     (10,135) 
Series B Preferred Stock dividends declared ($2.625
per share)
   —      —      —     (414)   —     —     (414) 
Other comprehensive income
   —      —      —     —     19,491   —     19,491 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances, September 30, 2022
  $39   $150,839   $2,241,649  $(397,096)  $(8,965)  $(31,698)  $1,954,768 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   Nine Months Ended September 30, 2021 
   Series B
Preferred
Stock		   Common
Stock		   Capital
Surplus		  Accumulated
Deficit		  Accumulated
Other
Comprehensive
Income (Loss),
net		  Treasury
Stock		  Total 
Balances, January 1, 2021
  $39   $134,629   $2,003,576  $(368,074)  $(32,889)  $(23,496)  $1,713,785 
Net income
   —      —      —     23,220   —     —     23,220 
Restricted stock units granted
   —      —      2,930   —     —     —     2,930 
Restricted stock units distributed (1,653,000 shares)
   —      413    (413)   —     —     (4,525)   (4,525) 
Common stock dividends declared (3.125 cents per common share)
   —      —      —     (16,755)   —     —     (16,755) 
Series B Preferred Stock dividends declared ($2.625
per share)
   —      —      —     (414)   —     —     (414) 
Common stock issued for 401(k) match (524,000
shares)
   —      131    3,324   —     —     —     3,455 
Common stock issued to pension plans (4,500,000 shares)
   —      1,125    21,125   —     —     —     22,250 
Common stock issued to directors (207,000 shares)
   —      52    1,792   —     —     —     1,844 
Other comprehensive loss
   —      —      —     —     (2,815)   —     (2,815) 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances, September 30, 2021
  $39   $136,350   $2,032,334  $(362,023)  $(35,704)  $(28,021)  $1,742,975 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 

 

 

Three Months Ended March 31, 2023

 

 

Series B
Preferred
Stock

 

Common
Stock

 

Capital Surplus

 

Accumulated
Deficit

 

Accumulated
Other
Comprehensive Income (Loss), net

 

Treasury
Stock

 

Total

Balances, January 1, 2023

 

$39

 

$151,819

 

$2,260,290

 

$(403,931)

 

$2,448

 

$(31,698)

 

$1,978,967

Net loss

 

—

 

—

 

—

 

(3,173)

 

—

 

—

 

(3,173)

Stock-based compensation expense

 

—

 

—

 

1,190

 

—

 

—

 

—

 

1,190

Incentive compensation units distributed (498,348 shares)

 

—

 

125

 

(125)

 

—

 

—

 

(482)

 

(482)

Common stock ($0.00625 per share) and Series B Preferred Stock ($0.875 per share) dividends declared

 

—

 

—

 

—

 

(3,891)

 

—

 

—

 

(3,891)

Common stock issued under ATM program (2,173,274 shares)

 

—

 

542

 

11,343

 

—

 

—

 

—

 

11,885

Common stock issued for 401(k) match (199,623 shares)

 

—

 

50

 

1,095

 

—

 

—

 

—

 

1,145

Other comprehensive income

 

—

 

—

 

—

 

—

 

6,516

 

—

 

6,516

Balances, March 31, 2023

 

$39

 

$152,536

 

$2,273,793

 

$(410,995)

 

$8,964

 

$(32,180)

 

$1,992,157

 

 

Three Months Ended March 31, 2022

 

 

Series B
Preferred
Stock

 

Common
Stock

 

Capital Surplus

 

Accumulated
Deficit

 

Accumulated
Other
Comprehensive Income (Loss), net

 

Treasury
Stock

 

Total

Balances, January 1, 2022

 

$39

 

$136,391

 

$2,034,485

 

$(353,651)

 

$(28,456)

 

$(28,021)

 

$1,760,787

Net income

 

—

 

—

 

—

 

4,153

 

—

 

—

 

4,153

Stock-based compensation expense

 

—

 

—

 

1,271

 

—

 

—

 

—

 

1,271

Incentive compensation units distributed (888,000 shares)

 

—

 

222

 

(222)

 

—

 

—

 

(1,921)

 

(1,921)

Common stock ($0.00625 per share) and Series B Preferred Stock ($0.875 per share) dividends declared

 

—

 

—

 

—

 

(3,509)

 

—

 

—

 

(3,509)

Common stock issued for 401(k) match (180,000 shares)

 

—

 

44

 

883

 

—

 

—

 

—

 

927

Other comprehensive loss

 

—

 

—

 

—

 

—

 

(33,165)

 

—

 

(33,165)

Balances, March 31, 2022

 

$39

 

$136,657

 

$2,036,417

 

$(353,007)

 

$(61,621)

 

$(29,942)

 

$1,728,543


The accompanying notes are an integral part of the interim condensed consolidated financial statements.

6

8
Table

Note 1. Basis of Contents

Note 1.
Basis of Preparation of Financial Statements
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 accounting principles in the United States of America (“GAAP”). Therefore, this information should be read in conjunction with Hecla Mining Company’s consolidated financial statements and notes contained in our annual report on Form
10-K
for the year ended December 31, 20212022 (“20212022 Form
10-K”).
The consolidated December 31, 20212022 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-month periodsthree-month period ended September 30, 2022March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.2023.

On September 7, 2022, the Company completed the acquisition

Note 2. Business Segments and Sales of the remaining 90.1%

of Alexco Resource Corp. (“Alexco”) for non-cash consideration of
17,992,875
shares of Company common stock valued at $
68.7
 million.
Total consideration for the acquisition, deemed to be an asset acquisition under GAAP, was
 $
81.5
million of which $76.4 million was non cash including the fair value of the Company’s common stock issued and the fair value of the
9.9
%
Alexco investment held by the Company prior to the completion of the acquisition and previously accounted for as marketable equity securities of $7.7 million. Acquisition costs also included transaction costs of $5.1 million. The total consideration was allocated to the acquired assets and assumed liabilities based on their estimated fair values on the acquisition date, which primarily consisted of mineral interests of

$
236.6
million, a related deferred tax liability of
$
12.9
million, net liabilities of $7.2 million, and a silver stream liability
 of
$
135
million. Immediately following the closure of the acquisition, we settled the silver stream liability with the stream holder for
34,800,990
shares of Company common stock.
The 2019 novel strain of coronavirus
(“COVID-19”)
was characterized as a global pandemic by the World Health Organization on March 11, 2020. We continue to take precautionary measures to mitigate the impact of
COVID-19,
including implementing operational plans and practices. As long as they are required, the operational practices implemented could continue to have an adverse impact on our operating results due to deferred production and revenues or additional costs. We incurred $0.4 million and $3.1 million in
COVID-19
mitigation costs during the nine months ended September 30, 2022 and 2021, respectively. We continue to monitor the rapidly evolving situation and guidance from federal, state, local and foreign governments and public health authorities and may take additional actions based on their recommendations. The extent of the impact of
COVID-19
on our business and financial results will also depend on future developments, including the duration and spread of the outbreak and the success of the current vaccination programs and the related impact on prices, demand, creditworthiness and other market conditions and governmental reactions, all of which are highly
uncertain.
During the three months ended September 30, 2022, the Company recorded an out-of-period adjustment to correct an immaterial error related to the period ended June 30, 2022. This adjustment increased income taxes related to other comprehensive loss
by $12,649 for the three months ended September 30, 2022 to correct the previously recorded tax effect of changes in the fair value of derivative contracts designated as hedge transactions. This adjustment is non-cash, had no impact on net loss applicable to common shareholders and increased accumulated other comprehensive loss for the three months ended September 30, 2022 by $12,649.
Note 2.
Business Segments and Sales of Products
Products

We discover, acquire and develop mines and other mineral interests and produce and market (i) concentrates, containing silver, gold, lead and zinc, (ii) carbon material containing silver and gold, and (iii) doré containing silver and gold. We are currently organized and managed in fourfive segments: Greens Creek, Lucky Friday, Keno Hill, Casa Berardi and Nevada Operations.

General corporate activities not associated with operating mines and their various exploration activities, as well as discontinued operations, explorationidle properties and development projects and idle properties,environmental remediation services in the Yukon, are presented as “other.” Interest expense, interest income and income and mining taxes are considered general corporate items, and are not allocated to our segments.

The following tables present information about our reportable segments metal sales for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 (in thousands):

9
Table of Contents
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Net sales to unaffiliated customers:
                    
Greens Creek
  $60,875   $84,806   $239,688   $296,978 
Lucky Friday
   28,460    29,783    102,380    98,550 
Casa Berardi
   56,939    56,065    181,679    185,098 
Nevada Operations
   —    22,906    268    41,593 
Other
   65    —    65    176 
   
 
 
   
 
 
   
 
 
   
 
 
 
   $146,339   $193,560   $524,080   $622,395 
   
 
 
   
 
 
   
 
 
   
 
 
 
Income (loss) from operations:
                    
Greens Creek
  $1,378   $26,572   $63,768   $127,605 
Lucky Friday
   4,269    6,187    18,568    24,247 
Casa Berardi
   (5,226)    (6,233)    (8,497)    4,944 
Nevada Operations
   (8,917)    (12,077)    (30,879)    (35,558) 
Other
   (16,963)    (23,021)    (45,949)    (59,639) 
   
 
 
   
 
 
   
 
 
   
 
 
 
   $(25,459)   $(8,572)   $(2,989)   $61,599 
   
 
 
   
 
 
   
 
 
   
 
 
 

 

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Net sales to unaffiliated customers:

 

 

 

 

 

 

Greens Creek

 

$

98,611

 

 

$

86,090

 

Lucky Friday

 

 

49,110

 

 

 

38,040

 

Keno Hill

 

 

—

 

 

 

—

 

Casa Berardi

 

 

50,998

 

 

 

62,101

 

Nevada Operations

 

 

272

 

 

 

268

 

Other

 

 

509

 

 

 

—

 

 

 

$

199,500

 

 

$

186,499

 

Income (loss) from operations:

 

 

 

 

 

 

Greens Creek

 

$

31,241

 

 

$

34,586

 

Lucky Friday

 

 

14,568

 

 

 

8,771

 

Keno Hill

 

 

(6,763

)

 

 

—

 

Casa Berardi

 

 

(13,693

)

 

 

(2,699

)

Nevada Operations

 

 

(5,410

)

 

 

(12,231

)

Other

 

 

(14,390

)

 

 

(13,669

)

 

 

$

5,553

 

 

$

14,758

 

The following table presents identifiable assets by reportable segment as of September 30, 2022March 31, 2023 and December 31, 20212022 (in thousands):

 

 

March 31, 2023

 

 

December 31, 2022

 

Identifiable assets:

 

 

 

 

 

 

Greens Creek

 

$

582,855

 

 

$

582,687

 

Lucky Friday

 

 

553,447

 

 

 

571,510

 

Keno Hill

 

 

303,340

 

 

 

276,096

 

Casa Berardi

 

 

693,763

 

 

 

681,631

 

Nevada Operations

 

 

465,037

 

 

 

466,722

 

Other

 

 

327,182

 

 

 

348,526

 

 

 

$

2,925,624

 

 

$

2,927,172

 

7

   September 30,
2022		   December 31,
2021		 
Identifiable assets:
          
Greens Creek
  $594,811   $589,944 
Lucky Friday
   534,114    516,545 
Casa Berardi
   692,833    701,868 
Nevada Operations
   467,532    468,985 
Other
   645,339    451,466 
   
 
 
   
 
 
 
   $2,934,629   $2,728,808 
   
 
 
   
 
 
 
Following the acquisition of Alexco (see
Note 1
), our

Our sales for the three and nine month periodsperiod ended September 30, 2022March 31, 2023 are comprised of metal sales as described below and $65,000$0.5 million of environmental services revenue.

Sales by metal for the three- and nine-monththree month periods ended September 30,March 31, 2023 and 2022 and 2021 were as follows (in thousands):

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Silver
  $45,924   $61,890   $182,306   $232,414 
Gold
   69,289    94,984    228,475    282,471 
Lead
   16,033    18,082    56,912    56,198 
Zinc
   28,051    30,273    94,865    89,501 
Less: Smelter and refining charges
   (13,023)    (11,669)    (38,543)    (38,189) 
   
 
 
   
 
 
   
 
 
   
 
 
 
   $146,274   $193,560   $524,015   $622,395 
   
 
 
   
 
 
   
 
 
   
 
 
 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Silver

 

$

81,532

 

 

$

66,332

 

Gold

 

 

75,087

 

 

 

77,168

 

Lead

 

 

25,402

 

 

 

19,564

 

Zinc

 

 

32,943

 

 

 

35,638

 

Less: Smelter and refining charges

 

 

(15,973

)

 

 

(12,203

)

 

 

$

198,991

 

 

$

186,499

 

Sales of metals for the three month periods ended March 31, 2023 and 2022, included a net gainsgain of $1.6$0.9 million and $8.1a net loss of $4.8 million, for the

three-and
nine-month periods ended September 30, 2022, respectively, on financially-settled forward option contracts for silver, gold, lead and zinc contained in our sales. Sales included net gains of $5.0 million and $4.5 million for the
three-and
nine-month periods ended September 30, 2021, respectively, on such contracts.zinc. See
Note 8
for more information.

Note 3. Income and Mining Taxes

10
Table of Contents
Note 3.
Income and Mining Taxes

Major components of our income and mining tax benefit (provision) for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 are as follows (in thousands):

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

Current:

 

 

 

 

 

 

Domestic

 

$

(1,528

)

 

$

(2,103

)

Foreign

 

 

(1,174

)

 

 

(1,741

)

Total current income and mining tax provision

 

 

(2,702

)

 

 

(3,844

)

Deferred:

 

 

 

 

 

 

Domestic

 

 

(5,341

)

 

 

(5,091

)

Foreign

 

 

4,801

 

 

 

3,304

 

Total deferred income and mining tax provision

 

 

(540

)

 

 

(1,787

)

Total income and mining tax provision

 

$

(3,242

)

 

$

(5,631

)


   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Current:                    
Domestic
  $253   $(2,176)   $(2,296)   $(7,489) 
Foreign
   (1,085)   (1,578)    (4,172)   (4,690) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total current income and mining tax provision
   (832)    (3,754)    (6,468)   (12,179) 
Deferred:                    
Domestic
   8,156    3,213    915    8,226 
Foreign
   2,203    5,074    9,195    7,877 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total deferred income and mining tax benefit
   10,359    8,287    10,110    16,103 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total income and mining tax benefit (provision)
  $9,527   $4,533   $3,642   $3,924 
   
 
 
   
 
 
   
 
 
   
 
 
 

The income and mining tax benefit (provision) for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 varies from the amounts that would have resulted from applying the statutory tax rates to

pre-tax
income due primarily to the impact of taxation in foreign jurisdictions, and
non-recognition
of net operating losses and foreign exchange gains and losses in certain jurisdictions.

For the three-month and nine-month periodsthree month period ended September 30, 2022,March 31, 2023, we used the annual effective tax rate method to calculate the tax provision, a change from the discrete method used for the three- and nine-month periods ended September 30, 2021, due to reversal of a valuation allowance in the fourth quarter of 2021.provision. Valuation allowances on Nevada, Mexico and certain Canadian net operating losses were treated as discrete adjustments to the annual effective tax rate method calculation including losses incurred by the acquired Alexco Resource Corp. ("Alexco") entities, which were acquired on September 7, 2022, partially causing the increase in the income tax rate for the three and nine months ended September 30, 2022,March 31, 2023, as compared to the three and nine months ended September 30, 2021.March 31, 2022.

Note 4.Employee Benefit Plans

Note 4.
Employee Benefit Plans

We sponsor three defined benefit pension plans covering substantially all U.S. employees. Net periodic pension cost for the plans consisted of the following for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 (in thousands):

 

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Service cost

 

$

949

 

 

$

1,566

 

Interest cost

 

 

1,993

 

 

 

1,369

 

Expected return on plan assets

 

 

(3,107

)

 

 

(3,363

)

Amortization of prior service cost

 

 

125

 

 

 

128

 

Amortization of net loss

 

 

(47

)

 

 

512

 

Net periodic pension (benefit) cost

 

$

(87

)

 

$

212

 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Service cost
  $1,566   $1,455   $4,697   $4,365 
Interest cost
   1,369    1,248    4,107    3,744 
Expected return on plan assets
   (3,363)    (2,313)    (10,089)    (6,939) 
Amortization of prior service cost
   128    99    384    297 
Amortization of net loss
   512    1,125    1,537    3,375 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net periodic pension cost
  $212   $1,614   $636   $4,842 
   
 
 
   
 
 
   
 
 
   
 
 
 

For the three- and nine-monththree month periods ended September 30,March 31, 2023 and 2022, and 2021, the service cost component of net periodic pension cost is included in the same line items of our condensed consolidated financial statements as other employee compensation costs. The net benefit related

8

to all other components of net periodic pension cost of $1.4$1.0 million and $4.1 million, respectively, for the three- and nine-month periods ended September 30, 2022, and net expense of $0.2 million and $0.5$1.4 million for the three-three month period ended March 31, 2023, and nine-month periods ended September 30, 2021,2022, respectively, is included in other (expense) income on our condensed consolidated statements of operations and comprehensive income (loss). income.

11
Table of Contents
In May 2022 and October 2022, we contributed $5.6 million and $4.2 
million, respectively, in shares of our common stock to two of our defined benefit plans. In January 2021 and September 2021, we contributed
$16.8 
million and $5.4 million, respectively, in shares of our common stock to three of our defined benefit plans. We do not expect to be required to make additional contributions to our defined benefit pension plans in 2022, but may elect to do so.
Note 5.
(Loss) Income Per Common Share

Note 5. (Loss) Income Per Common Share

We calculate basic (loss) income per common share on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted income 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, warrants and convertible preferred stock for periods in which we have reported net income. For periods in which we report net losses, potential dilutive shares of common stock are excluded, as their conversion and exercise would be anti-dilutive.

The following table represents net (loss) income per common share – basic and diluted (in thousands, except income (loss) per share):

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Numerator

 

 

 

 

 

 

Net (loss) income

 

$

(3,173

)

 

$

4,153

 

Preferred stock dividends

 

 

(138

)

 

 

(138

)

Net (loss) income applicable to common shares

 

$

(3,311

)

 

$

4,015

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

Basic weighted average common shares

 

 

600,075

 

 

 

538,490

 

Dilutive restricted stock units, warrants and deferred shares

 

 

—

 

 

 

5,571

 

Diluted weighted average common shares

 

 

600,075

 

 

 

544,061

 

 

 

 

 

 

 

 

Basic (loss) income per common share

 

$

(0.01

)

 

$

0.01

 

Diluted (loss) income per common share

 

$

(0.01

)

 

$

0.01

 

   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2022
   
2021
   
2022
   
2021
 
Numerator
                    
Net (loss) income
  $(23,526)   $(979)   $(32,896)   $23,220 
Preferred stock dividends
   (138)    (138)    (414)    (414) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net (loss) income applicable to common shares
  $(23,664)   $(1,117)   $(33,310)   $22,806 
   
 
 
   
 
 
   
 
 
   
 
 
 
Denominator
                    
Basic weighted average common shares
   554,531    536,966    544,000    535,542 
Dilutive restricted stock units, warrants and deferred shares
   —      —      —      6,227 
   
 
 
   
 
 
   
 
 
   
 
 
 
Diluted weighted average common shares
   554,531    536,966    544,000    541,769 
   
 
 
   
 
 
   
 
 
   
 
 
 
Basic (loss) income per common share
  
$
(0.04
) 
  
$
—  
 
  
$
(0.06
) 
  
$
0.04
 
Diluted (loss) income per common share
  
$
(0.04
) 
  
$
—  
 
  
$
(0.06
) 
  
$
0.04
 

For the three month periodsmonths ended September 30, 2022 and 2021, respectively, and the nine month period ended September 30, 2022,March 31, 2023, all outstanding unvested restricted stock units, deferred restricted stock units, warrants and deferred sharesconvertible preferred stock were excluded from the computation of diluted loss per share, as our reported net losses for those periodsloss would cause their conversion and exercise to have noan anti-dilutive effect on the calculation of diluted loss per share.For the ninethree months ended September 30, 2021,March 31, 2022, the calculation of diluted income per common share included (i) 2,496,622 restricted stock1,954,773 incentive compensation units
that were unvested during the period, (ii) 1,578,2931,506,950 warrants to purchase one share of common stock and (iii) 2,152,5782,109,056 deferred compensation stock unitsshares that were dilutive.

Note 6.
Stockholders’ Equity

Note 6. Stockholders’ Equity

At-The-Market

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 equity distribution agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form
S-3.
As of September 30, 2022March 31, 2023 we had sold 1,176,8616,033,473 shares under the agreement for proceeds of $4.5$29.2 million, net of commissions and fees of approximately $0.1$0.5 million. AllOf this balance, 2,173,274shares were sold during the three months ended March 31, 2023 for proceeds of the sales occurred during September 2022.
12
Table$11.9 million, net of Contents
commissions and fees of $0.2 million.

Stock-based Compensation Plans

The Company has stock incentive plans for executives, directors and eligible employees, comprised of performance shares and restricted stock. Stock-based compensation expense for restricted stock unit and performance-based grants (collectively “incentive compensation”"incentive compensation") to employees and shares issued to

non-employee
directors totaled $1.8$1.2 million and $4.3$1.3 million for the three months

9

ended March 31, 2023 and nine months ended September 30, 2022, respectively, and $1.5 million and $4.8 million for the three and nine months ended September 30, 2021, respectively. At September 30, 2022,March 31, 2023, there was $8.4$5.2 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.8 1.2 years.

The following table summarizes the grants awarded during the nine months ended September 30, 2022:
Grant date Award type Number granted Grant date fair value
June 21, 2022 Restricted stock 1,103,801 $ 4.43
June 21, 2022 Performance based 322,799 $ 3.78
June 28, 2022 Directors retainer 98,310 $ 4.24
September 30, 2022 Restricted stock 121,826 $ 3.94

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 first ninethree months of 2022,2023, we withheld 737,25896,659 shares valued at approximately $3.7 $0.5million, or approximately $4.99$4.98 per share. In the first nine months of 2021, we withheld 574,251 shares valued at approximately $4.5 million, or approximately $7.88 per share.

Common Stock Dividends

The following table summarizes the dividends our Board of Directors have declared and we have paid during 20222023 pursuant to our dividend policy:

Quarter

 

Prior Quarter Realized Silver Price

 

Silver-linked component

 

Minimum component

 

Total dividend per share

First

 

22.03

 

$0.0025

 

$0.00375

 

$0.00625

Quarter Realized Silver Price Silver-linked component Minimum component Total dividend per share
First
 $24.68 $0.0025 $0.00375 $0.00625
Second
 $20.68 $0.0025 $0.00375 $0.00625
Note 7.
Debt, Credit Facility and Leases

Note 7. Debt, Credit Agreement and Leases

Our debt as of September 30, 2022March 31, 2023 and December 31, 20212022 consisted of our 7.25%7.25% Senior Notes due February 15, 2028 (“Senior Notes”) and our Series

2020-A
Senior Notes due July 9, 2025 (the “IQ Notes”) and any drawn amounts on the Newour $150 million Credit Agreement, which is described separately below. The following tables summarize our long-term debt balances, excluding interest and borrowings under the New Credit Agreement, as of September 30, 2022March 31, 2023 and December 31, 20212022 (in thousands):

 

 

March 31, 2023

 

 

 

Senior Notes

 

 

IQ Notes

 

 

Total

 

Principal

 

$

475,000

 

 

$

35,643

 

 

$

510,643

 

Unamortized discount/premium and issuance costs

 

 

(4,415

)

 

 

356

 

 

 

(4,059

)

Long-term debt balance

 

$

470,585

 

 

$

35,999

 

 

$

506,584

 

 

 

December 31, 2022

 

 

 

Senior Notes

 

 

IQ Notes

 

 

Total

 

Principal

 

$

475,000

 

 

$

35,614

 

 

$

510,614

 

Unamortized discount/premium and issuance costs

 

 

(4,640

)

 

 

392

 

 

 

(4,248

)

Long-term debt balance

 

$

470,360

 

 

$

36,006

 

 

$

506,366

 

   
September 30, 2022
 
   
Senior Notes
   
IQ Notes
   
Total
 
Principal
  $475,000   $35,194   $510,194 
Unamortized discount/premium and issuance costs
   (4,868)    419    (4,449) 
   
 
 
   
 
 
   
 
 
 
Long-term debt balance
  $470,132   $35,613   $505,745 
   
 
 
   
 
 
   
 
 
 
13
Table of Contents
   
December 31, 2021
 
   
Senior Notes
   
IQ Notes
   
Total
 
Principal
  $475,000   $38,051   $513,051 
Unamortized discount/premium and issuance costs
   (5,552)    596    (4,956) 
   
 
 
   
 
 
   
 
 
 
Long-term debt balance
  $469,448   $38,647   $508,095 
   
 
 
   
 
 
   
 
 
 

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, 2022March 31, 2023 (in thousands). 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, 2022.March 31, 2023.

Twelve-month period ending March 31,

 

Senior Notes

 

 

IQ Notes

 

 

Finance Leases

 

 

Operating Leases

 

2024

 

$

34,438

 

 

$

2,322

 

 

$

8,812

 

 

$

2,652

 

2025

 

 

34,438

 

 

 

38,604

 

 

 

6,813

 

 

 

1,276

 

2026

 

 

34,438

 

 

 

—

 

 

 

3,681

 

 

 

1,281

 

2027

 

 

34,438

 

 

 

—

 

 

 

1,327

 

 

 

1,256

 

2028

 

 

505,131

 

 

 

—

 

 

 

23

 

 

 

1,161

 

Thereafter

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,307

 

 

 

 

642,883

 

 

 

40,926

 

 

 

20,656

 

 

 

13,933

 

Less: effect of discounting

 

 

—

 

 

 

—

 

 

 

(1,239

)

 

 

(3,285

)

Total

 

$

642,883

 

 

$

40,926

 

 

$

19,417

 

 

$

10,648

 

Twelve-month period ending September 30,
  
Senior Notes
   
IQ Notes
   
Finance Leases
   
Operating Leases
 
2023
  $34,438   $2,293   $9,296   $3,101 
2024
   34,438    2,293    7,206    1,565 
2025
   34,438    36,964    3,779    1,065 
2026
   34,438         1,980    1,060 
2027
   34,438    —      37
    979 
Thereafter
   487,914    —      —      5,878 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $660,104   $41,550   $22,298   $13,648 
   
 
 
   
 
 
   
 
 
   
 
 
 

Credit Facility

New $150 million facility
Agreement

On July 21, 2022, we entered into a Credit Agreement (“New Credit Agreement”revolving credit facility (the "Credit Agreement") with the 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, to replace our prior credit agreement. The New Credit Agreement is a $150$150 million senior secured revolving facility, with an option to be increased in an aggregate amount not to exceed $75$75 million. TheAny revolving loans under the New Credit Agreement will have a maturity date of July 21, 2026. Proceeds of the revolving loans under the New Credit Agreement may be used for general corporate purposes. The interest rate on the outstanding loans under the New Credit Agreement is based on the Company’s net leverage ratio and is calculated at (i) Term Secured Overnight Financing Rate (“SOFR”("SOFR") plus 2%2% to 3.5%3.5%; or (ii) Bank of America’s Base Rate plus 1%1% to 2.5%2.5% with Base Rate being the highest of (i) the Bank of America prime rate, (ii) the Federal Funds rate plus .50% .50%

10

or (iii) Term SOFR plus 1.00%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%0.45% to 0.78750%0.78750%, depending on our net leverage ratio. Letters of credit issued under the New Credit Agreement bear a fee between 2.00%2.00% and 3.50%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 New Credit Agreement, while certain of our other subsidiaries are guarantors of the borrowers’ obligations under the New Credit Agreement. As further security, the credit facilityCredit 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 Green 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, 2022, we had drawn $25March 31, 2023, there was $6.7 million at an interest rate of 7.5% and had $7.8 million in outstanding letters of credit under the New Credit Agreement.credit. Letters of credit that are outstanding reduce availability under the New Credit Agreement.

We believe we were in compliance with all covenants under the New Credit Agreement as of September 30, 2022.

14
Table of Contents
Prior $250 million facility
In July 2018, we entered into a credit agreement (as amended, the “Prior Credit Agreement”) providing for a $250 million senior secured revolving credit facility which had a term ending on February 7, 2023.    As of DecemberMarch 31, 2021, no amounts were outstanding under the facility.2023.

We were also able to obtain letters of credit under the facility, and for any such letters we were required to pay a participation fee of between 2.25% and 4.00% of the amount of the letters of credit based on our total leverage ratio, as well as a fronting fee to each issuing bank of 0.20% annually on the average daily dollar amount of any outstanding letters of credit.
In connection with our entry into the New Credit Agreement, the Prior Credit Agreement was terminated on July 21, 2022. We believe we were in compliance with all covenants under the Prior Credit Agreement as of July 21, 2022.
Note 8.
Derivative Instruments

Note 8. Derivative Instruments

General

Our current risk management policy provides that up to 75%75% of five years of our foreign currency, lead and zinc metals price and silver and gold price exposure may be covered under a derivatives program with certain other limitations. The silver and gold price program can only establish a floor (puts). We are not currently utilizing this silver and gold program. 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 as well as the recently acquiredand Keno Hill development property which Alexco ownedoperation 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’subsidiaries' future operating and capital costs denominated in CAD. The program utilizes forward contracts to buy CAD, some of which are designated as cash flow hedges. As of September 30, 2022,March 31, 2023, we have
296
569forward contracts outstanding to buy a total of CAD$
539.9
604.8 million having a notional amount of USD$
408.7
454.7 million. The CAD contracts that are related to forecasted cash operating costs at Casa Berardi to be incurred from
2022
2023 through
2026
have a total notional value of CAD$
430.3
393.9 million and have
CAD-to-USD
exchange rates ranging between
1.2702
1.272and
1.3714
1.3757.

As of September 30, 2022March 31, 2023 and December 31, 2021,2022, we recorded the following balances for the fair value of the contracts (in millions):

 

 

March 31,

 

 

December 31,

 

Balance sheet line item:

 

2023

 

 

2022

 

Other current assets

 

$

1.6

 

 

$

1.1

 

Other non-current assets

 

 

0.8

 

 

 

0.4

 

Current derivative liabilities

 

 

3.6

 

 

 

4.0

 

Non-current derivative liabilities

 

$

3.1

 

 

$

3.6

 

   
September 30,
   
December 31,
 
Balance sheet line item:
  
2022
   
2021
 
Current derivatives assets
  $ 0.3   $ 2.7 
Non-current
derivatives assets
   0.3    2.5 
Current derivatives liabilities
   5.8    —   
Non-current
derivatives liabilities
   5.6    —   

Net unrealized losses of approximately $10.8$6.1 million related to the effective portion of the hedges wereare included in accumulated other comprehensive income (loss) as of September 30, 2022.March 31, 2023. 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 approximately $5.1$3.3 million in net unrealized losses included in accumulated other comprehensive income (loss) as of September 30, 2022March 31, 2023 will be reclassified to current earnings in the next twelve months. Net realized gainslosses of approximately $0.2 million and $2.0$0.9 million 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 for the three and nine months ended September 30, 2022, respectively. NoMarch 31, 2023. Net gains of $0.7 million for the three months ended March 31, 2023 related to contracts not designated as hedges and no net unrealized gains or losses related to ineffectiveineffectiveness of the hedges wereare included in current earnings for the nine months ended September 30, 2022. Net losses of approximately $0.8 million and $1.1 million for the three and nine months ended September 30, 2022, respectively, related to contracts not designated as hedges were included

11

in fair value adjustments, net on our consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2022.

15
Table of Contents
March 31, 2023

Metals Prices

We are currently using financially-settled forward contracts to manage the exposure to:

•
changes in prices of silver, gold, zinc and lead contained in our concentrate shipments between the time of shipment and final settlement; and
•
changes in prices of zinc and lead (but not silver and gold) contained in our forecasted future concentrate shipments.

The following tables summarize the quantities of metals committed under forward sales contracts at September 30, 2022March 31, 2023 and December 31, 2021:2022:

March 31, 2023

 

Ounces/pounds under contract (in 000's)

 

 

Average price per ounce/pound

 

 

 

Silver

 

 

Gold

 

 

Zinc

 

 

Lead

 

 

Silver

 

 

Gold

 

 

Zinc

 

 

Lead

 

 

 

(ounces)

 

 

(ounces)

 

 

(pounds)

 

 

(pounds)

 

 

(ounces)

 

 

(ounces)

 

 

(pounds)

 

 

(pounds)

 

Contracts on provisional sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023 settlements

 

 

3,350

 

 

 

8

 

 

 

15,543

 

 

 

18,133

 

 

$

22.27

 

 

$

1,883

 

 

$

1.35

 

 

$

1.01

 

Contracts on forecasted sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023 settlements

 

 

—

 

 

 

—

 

 

 

29,873

 

 

 

38,581

 

 

 

—

 

 

 

—

 

 

$

1.47

 

 

$

1.00

 

2024 settlements

 

 

—

 

 

 

—

 

 

 

1,764

 

 

 

75,178

 

 

 

—

 

 

 

—

 

 

 

1.31

 

 

$

0.98

 

2025 settlements

 

 

—

 

 

 

—

 

 

 

—

 

 

 

882

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

0.97

 

December 31, 2022

 

Ounces/pounds under contract (in 000's)

 

 

Average price per ounce/pound

 

 

 

Silver

 

 

Gold

 

 

Zinc

 

 

Lead

 

 

Silver

 

 

Gold

 

 

Zinc

 

 

Lead

 

 

 

(ounces)

 

 

(ounces)

 

 

(pounds)

 

 

(pounds)

 

 

(ounces)

 

 

(ounces)

 

 

(pounds)

 

 

(pounds)

 

Contracts on provisional sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023 settlements

 

 

3,124

 

 

 

8

 

 

 

18,629

 

 

 

11,960

 

 

$

21.55

 

 

$

1,795

 

 

$

1.38

 

 

$

0.98

 

Contracts on forecasted sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023 settlements

 

 

—

 

 

 

—

 

 

 

37,533

 

 

 

75,618

 

 

N/A

 

 

N/A

 

 

$

1.34

 

 

$

1.00

 

2024 settlements

 

 

—

 

 

 

—

 

 

 

—

 

 

 

45,856

 

 

N/A

 

 

N/A

 

 

N/A

 

 

$

0.99

 

September 30, 2022
  
Ounces/pounds under contract (in 000’s)
   
Average price per ounce/pound
 
   
Silver
   
Gold
   
Zinc
   
Lead
   
Silver
   
Gold
   
Zinc
   
Lead
 
   
(ounces)
   
(ounces)
   
(pounds)
   
(pounds)
   
(ounces)
   
(ounces)
   
(pounds)
   
(pounds)
 
Contracts on provisional sales
                                        
2022 settlements
   2,235    1,840    18,739    14,991   $ 19.54   $ 1,760   $ 1.30   $ 0.96 
Contracts on forecasted sales
                                        
2022 settlements
   2,235    1,840    8,763    1,984    N/A    N/A   $1.32   $0.97 
2023 settlements
   —      —      71,209    75,618    N/A    N/A   $1.30   $1.00 
2024 settlements
   —      —      78,760    31,526    N/A    N/A   $1.34   $1.00 
2025 settlements
   —      —      2,480    —      N/A    N/A   $1.33    N/A 
December 31, 2021
  
Ounces/pounds under contract (in 000’s)
   
Average price per ounce/pound
 
   
Silver
   
Gold
   
Zinc
   
Lead
   
Silver
   
Gold
   
Zinc
   
Lead
 
   
(ounces)
   
(ounces)
   
(pounds)
   
(pounds)
   
(ounces)
   
(ounces)
   
(pounds)
   
(pounds)
 
Contracts on provisional sales
                                        
2022 settlements
   1,814    6    13,371    4,575   $ 23.02   $ 1,812   $ 1.39   $ 0.96 
Contracts on forecasted sales
                                        
2022 settlements
   —      —      57,706    59,194    N/A    N/A   $1.28   $0.98 
2023 settlements
   —      —      76,280    71,650    N/A    N/A   $1.29   $1.00 
Effective November 1, 2021, we designated the contracts for lead and zinc contained in our forecasted future shipments as hedges for accounting purposes, with gains and losses deferred to accumulated other comprehensive loss until the hedged product ships. Prior to November 1, 2021, these contracts had not been designated as hedges for hedge accounting and were therefore
marked-to-market
through earnings each period. The forward contracts for silver and gold contained in our concentrate shipments have not been designated as hedges and are
marked-to-market
through earnings each period.

We recorded the following balances for the fair value of the forward contracts as of September 30, 2022March 31, 2023 and forward and put option contracts as of December 31, 20212022 (in millions):

 

 

March 31, 2023

 

 

December 31, 2022

 

Balance sheet line item:

 

Contracts in an asset position

 

 

Contracts in a liability position

 

 

Net asset (liability)

 

 

Contracts in an asset position

 

 

Contracts in a liability position

 

 

Net asset (liability)

 

Other current assets

 

$

5.3

 

 

$

—

 

 

$

5.3

 

 

$

1.2

 

 

$

—

 

 

$

1.2

 

Other non-current assets

 

$

1.3

 

 

$

—

 

 

$

1.3

 

 

$

0.1

 

 

$

—

 

 

$

0.1

 

Current derivative liabilities

 

 

—

 

 

 

(4.6

)

 

 

(4.6

)

 

 

—

 

 

 

(12.1

)

 

 

(12.1

)

Non-current derivative liabilities

 

 

—

 

 

 

(0.05

)

 

 

(0.1

)

 

 

—

 

 

 

(2.5

)

 

 

(2.5

)

   
September 30, 2022
   
December 31, 2021
 
Balance sheet line item:  
Contracts in an
asset position
   
Contracts in
a liability
position
   
Net asset
(liability)
   
Contracts in
an asset
position
   
Contracts in a
liability
position
  
Net asset
(liability)
 
Current derivatives assets
  $6.9   $ —     $6.9   $ —     $—    $—   
Non-current
derivatives assets
  $ 20.5   $—      20.5   $—     $—    $—   
Current derivatives liabilities
   —      —      —      0.7    (20.1)   (19.4) 
Non-current
derivatives liabilities
   —      —      —      0.4    (18.9)   (18.5) 

Net realized and unrealized gains of approximately $28.3$24.8 million related to the effective portion of the contracts designated as hedges were included in accumulated other comprehensive income (loss) as of September 30, 2022,March 31, 2023, and are net of related deferred taxes. Unrealized gains and losses will be transferred from accumulated other comprehensive income (loss) to current

16
Table of Contents
earnings as the underlying operatingforecasted sales are recognized. We estimate approximately $6.0 $15.2million in net realized and unrealized gains included in accumulated other comprehensive income (loss) as of September 30, 2022March 31, 2023 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 for net proceeds of $17.4 million. We recognized a net gain of $1.6$0.9 million, including a $4.2 $3.0million loss transferred from accumulated other comprehensive income (loss), and a net loss of $4.8 million, during the three months ended September 30, 2022. For the nine months ended September 30,March 31, 2023 and 2022, we recognized a net gain of $8.1 million, including a $8.1 million loss transferred from accumulated other comprehensive income (loss).respectively. These gains and losses were recognized on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which isare 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.
We recognized a net gain of $12.1 million and a net loss of $4.7 million during the three and nine months ended September 30, 2021, respectively, on the contracts utilized to manage exposure to prices for forecasted future sales, which were not designated as hedges. The net gain or loss on these contracts are included as a separate line item under other income (expense), as they relate to forecasted future sales, as opposed to sales that have already taken place but are subject to final pricing as discussed in the preceding paragraph.

Credit-risk-related Contingent Features

Certain of our derivative contracts contain cross default provisions which provide that a default under our New Credit Agreement would cause a default under the derivative contract. As of September 30, 2022,March 31, 2023, 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 $14.2$14.0 million as of September 30, 2022,March 31, 2023, which includes

12

accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at September 30, 2022,March 31, 2023, we could have been required to settle our obligations under the agreements at their termination value of $14.2$14.0 million.

Note 9. Fair Value Measurement

Note 9.
Fair Value Measurement

Fair value adjustments, net is comprised of the following:

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Gain (loss) on derivative contracts

 

$

987

 

 

$

(201

)

Unrealized gain on equity securities investments

 

 

2,194

 

 

 

6,100

 

Gain on disposition or exchange of investments

 

 

—

 

 

 

66

 

Total fair value adjustments, net

 

$

3,181

 

 

$

5,965

 

   
Three Months Ended
September 30,
  
Nine Months Ended

September 30,
 
   
2022
   
2021
  
2022
   
2021
 
(Loss) gain on derivative contracts
  $873   $ 12,148  $(20)   $(4,692) 
Unrealized loss on investments in equity securities
   (5,110)    (2,861)   (14,749)    (7,117) 
(Loss) gain on disposition or exchange of investments
   (3)    —     66    1,158 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total fair value adjustments, net
  $(4,240)   $9,287  $(14,703)   $(10,651) 
   
 
 
   
 
 
  
 
 
   
 
 
 

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.

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 at
March 31,
2023

 

 

Balance at
December 31,
2022

 

 

Input
Hierarchy Level

Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Money market funds and other bank deposits

 

$

95,939

 

 

$

104,743

 

 

Level 1

Current and non-current investments

 

 

 

 

 

 

 

 

Equity securities - mining industry

 

 

26,434

 

 

 

24,018

 

 

Level 1

Trade accounts receivable:

 

 

 

 

 

 

 

 

Receivables from provisional concentrate sales

 

 

28,535

 

 

 

45,146

 

 

Level 2

Restricted cash balances:

 

 

 

 

 

 

 

 

Certificates of deposit and other deposits

 

 

1,347

 

 

 

1,164

 

 

Level 1

Derivative contracts - current and non-current derivatives assets:

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 

2,359

 

 

 

1,518

 

 

Level 2

Metal forward contracts

 

 

6,636

 

 

 

1,309

 

 

Level 2

Total assets

 

$

161,250

 

 

$

177,898

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Derivative contracts - current derivatives liabilities and other non-current
liabilities:

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

6,674

 

 

$

7,548

 

 

Level 2

Metal forward contracts

 

 

4,682

 

 

 

14,643

 

 

Level 2

Total liabilities

 

$

11,356

 

 

$

22,191

 

 

 

17
Table of Contents
Description
  Balance at
September 30, 2022		   Balance at
December 31, 2021		   Input
Hierarchy Level		 
Assets:
               
Cash and cash equivalents:
               
Money market funds and other bank deposits
  $ 144,669   $ 210,010    Level 1 
Current and
non-current
investments
               
Equity securities
   13,299    14,470    Level 1 
Trade accounts receivable:
               
Receivables from provisional concentrate sales
   12,477    36,437    Level 2 
Restricted cash balances:
               
Certificates of deposit and other deposits
   1,246    1,053    Level 1 
Derivative contracts – current and
non-current
derivatives assets:
               
Foreign exchange contracts
   591    5,207    Level 2 
Metal forward and put option contracts
   27,393    —      Level 2 
   
 
 
   
 
 
      
Total assets
  $199,675   $267,177      
   
 
 
   
 
 
      
Liabilities:
               
Derivative contracts – current derivatives liabilities and other
non-current
liabilities:
               
Foreign exchange contracts
  $11,334   $8    Level 2 
Metal forward and put option contracts
   —      37,873    Level 2 
   
 
 
   
 
 
      
Total liabilities
  $11,334   $37,881      
   
 
 
   
 
 
      

Cash and cash equivalents consist primarily of money market funds and are valued at cost, which approximates fair value, and a small portion consists of municipal bonds having maturities of less than 90 days, which are recorded at fair value.

Current and

non-current
restricted cash 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
available for sale securities 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. The embedded derivative contained in our concentrate sales is adjusted to fair market value through earnings each period prior to final settlement.

13

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 unitoperation and the Keno Hill mineoperation (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 silver, 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, 2022,March 31, 2023, our Senior Notes and IQ Notes were recorded at their carrying value of $470.1$470.6 million and $35.6 $36.0million, respectively, net of unamortized initial purchaser discount/premium and issuance costs. The estimated fair values of our Senior Notes and IQ Notes were $442.2$480.6 million and $32.7$35.7 million, respectively, at September 30, 2022.March 31, 2023. Quoted market prices, which we consider to be Level 1 inputs, are utilized to estimate fair values of the Senior Notes. Unobservable inputs which we consider to be Level 3, including an assumed current annual yield of 8.7%7.1%, are utilized to estimate the fair value of the IQ Notes. See

Note 7
for more information.

18
Table of Contents
Note 10.

Note 10. Commitments, Contingencies and Obligations

General
We follow GAAP guidance in determining our accruals and disclosures with respect to loss contingencies, and evaluate such accruals and contingencies for each reporting period. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.
Obligations

Johnny M Mine Area near San Mateo, McKinley County and San Mateo Creek Basin, New Mexico

In August 2012, Hecla Limited and the U.S. Environmental Protection Agency (the “EPA”) entered into a Settlement Agreement and Administrative Order on Consent for Removal Action (“Consent Order”) regarding 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 the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) for environmental remediation and past costs incurred by the EPA at the site. Under the Consent Order, Hecla Limited agreed to pay (i) $1.1$1.1 million to the EPA for its past response costs at the site and (ii) any future response costs at the site under the Consent Order, in exchange for a covenant not to sue by the EPA. In December 2014, Hecla Limited submitted to the EPA the Engineering Evaluation and Cost Analysis (“EE/CA”) for the site which recommended

on-site
disposal of mine-related material. In January 2021, the parties began negotiating a new consent order to design and implement the
on-site
disposal response action recommended in the EE/CA. Based on the foregoing, we believe it is probable that Hecla Limited will incur a liability for the CERCLA removal action and we increased our accrual by $2.9have accrued $9.0 million, to $9.0 million in the first quarter of 2021, primarily representing estimated current costs to begin design and implementation ofimplement the remedy.remedy, which are subject to change as fieldwork is performed. It is possible that Hecla Limited’s liability will be more than $9.0$9.0 million, and any increase in liability could have a material adverse effect on Hecla Limited’s or our results of operations or financial position.

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 appears to have deferred consideration of listing the SMCB site on CERCLA’s National Priorities List (“Superfund”) by removing the site from its emphasis list, and 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 EE/CA 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 $9.0 million due to the 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$9.6 million in response costs to date. On May 2, 2022, Hecla Limited received a letter from an attorney representing a PRP notifying Hecla Limited that three PRPs will 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

14

Hecla Limited leased 6 mining claims and performed limited exploration activities at the site. Hecla Limited terminated the mining lease in 1988.

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Table of Contents

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$4.5 million in response costs and estimated that total remediation costs may exceed $100$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 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.

Greens Creek and Lucky Friday Environmental Issues

On June 30, 2022, our Greens Creek mine received a Notice of Violation (“NOV”) from the EPA alleging that the mine treated, stored, and disposed of certain hazardous waste without a permit in violation of the Resource Conservation and Recovery Act (“RCRA”), relating to the alleged presence of lead outside the concentrate storage building and the alleged improper reuse/recycling of certain materials produced from the

on-site
laboratories. The NOV contained two other less significant alleged violations. We disagree with several of the EPA’s allegations on a factual and legal basis.

Currently, the EPA has not initiated any formal enforcement proceeding against our Greens Creek subsidiary. In civil judicial cases, EPA can seek statutory penalties up to $81,540$81,540 per day per violation and, in administrative settlements, the EPA can seek administrative penalties of up to $47,423$47,423 per day per violation plus the economic benefit of noncompliance. The EPA typically pursues administrative penalties and assesses lower penalties on a per day basis. At this time, we cannot reasonably assess the amount of penalties the EPA may seek, or predict the terms of any potential settlement with the EPA.

On July 12, 2022, our Lucky Friday mine received a NOV from the EPA alleging violations of the Clean Water Act (“CWA”) between 2018 and 2021 relating primarily to concentration levels of zinc and lead in the mine’s permitted water discharges. Currently, the EPA has not initiated any formal enforcement proceeding against our Lucky Friday subsidiary. In civil judicial cases, the EPA can seek statutory penalties up to $59,973$59,973 per day per violation and, in administrative actions, the EPA can seek administrative penalties up to $23,989$23,989 per day per violation with a maximum administrative penalty of $299,989$299,989 for all alleged violations. The EPA typically pursues administrative penalties. At this time, we cannot reasonably assess the amount of penalties the EPA may seek, or predict the terms of any potential settlement with the EPA.

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 is 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 alleges that these misstatements and omissions artificially inflated the market price of Hecla common stock during the class period, thus purportedly harming investors. Filings with the court regardingThe Court granted our motionMotion to dismissDismiss the lawsuit, were completedwithout prejudice, in February 2023, and the first quarter of 2021.plaintiffs filed an amended complaint in March 2023 which repeats the same claims. We cannot predict the outcome of this lawsuit or estimate damages if plaintiffs were to prevail. We believe that these claims are without merit and intend to defend them vigorously.

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 (i) members of Hecla’s board of directors and (ii) officers of Hecla. The case was filed

15

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.

20
Table of Contents

Debt


See

Note 7
for information on the commitments related to our debt arrangements as of September 30, 2022.
March 31, 2023.

Other Commitments

Our contractual obligations as of September 30, 2022March 31, 2023 included open purchase orders and commitments of approximately $9.0$15.2 million, $20.4$29.4 million, $1.2$1.3 million,

,
$2.6 million
and
$0.31.4 million
and $3.7 million for various capital and
non-capital
items at Greens Creek, Lucky Friday, Casa Berardi,
,
Nevada
Operations and Keno Hill, respectively.
We also have total commitments of approximately $22.3$20.7 million relating to scheduled payments on finance leases, including interest, primarily for equipment at our Greens Creek, Lucky Friday, Casa Berardi, and Nevada OperationsKeno Hill units, and total commitments of approximately $13.6$13.9 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, 2022,March 31, 2023, we had surety bonds totaling $193.8$192.8 million and letters of credit totaling $7.8$6.7 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

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
 11. Developments in Accounting Pronouncements

Note 11. Developments in Accounting Pronouncements

Accounting Standards Updates Adopted

In AugustMarch 2020, ASU No. 2020-04 was issued which provides optional guidance for a limited period of time to ease the Financial Accounting Standards Board (“FASB”)potential burden on accounting for contract modifications caused by reference rate reform. In January 2021, ASU No. 2021-01 was issued which broadened the scope of ASU

No. 2020-06
Debt – Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.2020-04 to include certain derivative instruments. In December 2022, ASU No. 2022-06 was issued which deferred the sunset date of ASU No. 2020-04. The update is to address issues identified as a result of the complexity associated with applying GAAP to certain financial instruments with characteristics of liabilities and equity. The updateguidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and with early adoption permitted. We adopted the updateall entities as of January 1, 2022, which did not have a material impact on our consolidated financial statements or disclosures.
21
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In October 2021, the FASB issued ASU
2021-08,
Business Combinations (Topic 805): Accounting for Contract AssetsMarch 12, 2020 through December 31, 2024. The guidance may be adopted over time as reference rate reform activities occur and Contract
Liabilities from Contracts with Customers
, which requires entities to recognize and measure contract assets and contract liabilities acquired in
a business combination in accordance with ASC
2014-09,
Revenue from Contracts with Customers (Topic 606)
. The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. The update is effectiveshould be applied on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. We adopted the new standard effective January 1, 2022, which did not have a material impact on our consolidated financial statements or disclosures.
Accounting Standards Updates to Become Effective in Future Periods
In 2017, the United Kingdom’s Financial Conduct Authority (“FCA”) announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (“LIBOR”), which have been widely used as reference rates for various securities and financial contracts, including loans, debt and derivatives. This announcement indicated that the continuation of LIBOR on the current basis would not be guaranteed after 2021. Subsequently in March 2021, the FCA announced some USD LIBOR tenors (overnight, 1 month, 3 month, 6 month and 12 month) will continue to be published until June 30, 2023. Regulators in the U.S. and other jurisdictions have been working to replace these rates with alternative reference interest rates that are supported by transactions in liquid and observable markets, such as SOFR. Our New Credit Agreement references SOFR-based rates, compared to our prior credit facility which referenced LIBOR based- rates.basis. Certain of our derivative instruments reference LIBOR-basedLondon Interbank Offered Rate ("LIBOR") based rates and are in the process of being amended to eliminate the LIBOR-based rate references prior to JanuaryJuly 1, 2023. We do not expect a significant impact to our financial results, financial position or cash flows from the transition from LIBOR to alternative reference interest rates, but we will continue to monitor the impact of this transition until it is completed.

22
Table

Note 12. Subsequent Events

On April 6, 2023, we and ATAC Resources Ltd. ("ATAC") a Canadian publicly traded company, announced a definitive agreement for one of Contentsour subsidiaries to acquire ATAC and its Rackla and Connaught projects in Yukon, Canada. Under the proposed transaction, our wholly-owned subsidiary, Alexco Resource Corp., would acquire all of the issued and outstanding shares of ATAC for a consideration of CAD$31 million, or 0.0166 of a share of Hecla common stock per common share of ATAC (consisting of 3,693,516 shares of Hecla common stock in aggregate). Hecla would also invest CAD$2 million in seed capital, equal to a 19.9% interest, for a new exploration company Cascadia Minerals Ltd. (“Cascadia”), which would be spun-out with certain properties to ATAC’s shareholders as part of the transaction. The total consideration to the ATAC shareholders, including the implied value for the shares in Cascadia (CAD$0.036/share), is CAD$39 million.

16

Forward-Looking Statements

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 20212022 Form
10-K,
as updated in
Part II, Item 1.A. – Risk Factors
in our Quarterly Report on Form
10-Q
for the quarter ended June 30, 2022. 10-K. 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.

17

Item 2. Management’sManagement'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 in our 20212022 Form

10-K
filed 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 MD&A, all references to losses or income per share are on a diluted basis.

Overview

Established in 1891, we believe we are the oldest operating precious metals mining company in the United States. We are the largest silver producer in the United States, producing over 40%45% of the U.S. silver production at our Greens Creek and Lucky Friday operations. We produce gold at our Casa Berardi operation in Quebec, Canada, and Greens Creek, and produced gold at our Nevada Operations segment prior to suspension of operations during 2021. WeCreek. In addition, we are developing the Keno Hill mine in the Yukon, Canada which we acquired on September 7, 2022, and which we believe could become Canada’s largestexpect will start producing silver producer.in the third quarter of 2023. Based upon our operational footprint, we believe we have low 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.

Acquisition of Alexco
We completed the acquisition of Alexco on September 7, 2022, for consideration of $81.5 million, which we have accounted for as an asset acquisition, and are continuing to advance the development of Keno Hill which we believe could become Canada’s largest silver producer. See
Note 1
of
Notes to Condensed Consolidated Financial Statements (unaudited)
23
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regarding our acquisition of Alexco. Immediately following the acquisition of Alexco, we terminated the acquired silver stream on the Keno Hill property for $135 million, through the issuance of 34,800,990 Hecla common shares to Wheaton Precious Metals, the silver stream holder.
Third

First Quarter 20222023 Highlights

Operational:

•
Operational:
Produced 3.64.0 million ounces of silver and 44,74739,717 ounces of gold. See
Consolidated Results of Operations
below for information on total cost of sales and cash costs and all in sustaining costs (“AISC”("AISC"), after
by-product
credits, per silver and gold ounce for the three-month periods ended September 30, 2022March 31, 2023 and 2021.2022.
•
Continued mitigation of the impacts of
COVID-19
through refinement of our operational plans and procedures to protect our workforce, operations and communities while maintaining liquidity.
Financial:
Reported sales of $146.3 million.
Made capital expenditures (excluding lease additions and other
non-cash
items) of approximately $37.4 million, including $7.0 million at Greens Creek, $16.1 millionIncreased silver production at Lucky Friday $10.8 million at Casa Berardi.
Returned $3.5 million to our stockholders through payment of dividends.
Spent $15.1 million on exploration and
pre-development
activities.
Year to date 2022 Highlights
Operational:
Produced 10.5 million ounces of silver and 132,108 ounces of gold. See
Consolidated Results of Operations
below for information on total cost of sales and cash costs and AISC, after
by-product
credits, per silver and gold ounce for the nine-month periods ended September 30, 2022 and 2021.
Continued our trend of strong safety performance, as our All Injury Frequency Rate (“AIFR”) for the year to date was 1.3, 38% below the U.S. national average for MSHA’s “metal and nonmetal” category and 10% below our AIFR of 1.45 for the full year of 2021.
Continued mitigation of the impacts of
COVID-19
through refinement of our operational plans and procedures to protect our workforce, operations and communities while maintaining liquidity.
Financial:
Reported sales of $524.1 million.
Generated $53.8 million in net cash provided by operating activities. See the
Financial Liquidity and Capital Resources
section below for further discussion.
Made capital expenditures (excluding lease additions and other
non-cash
items) of approximately $93.2 million, including $24.7 million at Greens Creek $37.3 million at Lucky Friday, $26.7 million at Casa Berardi, $3.8 million at Corporateby 42% and Other.14%, respectively, compared to 2022.
•
Returned $10.5 million to our stockholders through payment of dividends.
Spent $39.1 million on exploration and
pre-development
activities.
Our current business strategy is to focus our financial and human resources in the following areas:
executing value enhancing transactions, such as with the recently consummated Alexco acquisition;
advancingAdvanced the development of the Keno Hill mine with the anticipationby 552 meters.

Financial:

•
Generated sales of commencement$199.5 million.
•
Made capital expenditures of production before the end of 2023;
rapidly responding to the threats from the
COVID-19
pandemic to protect our workforce, operations and communities while maintaining liquidity;
operating our properties safely, in an environmentally responsible and cost-effective manner;
maintaining and investing in exploration and
pre-development
projects in the vicinities of eleven mining districts and projects we believe to be under-explored and under-invested:approximately $54.4 million, including $6.7 million at Greens Creek, on Alaska’s Admiralty Island located near
24
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Juneau; North Idaho’s Silver Valley in the historic Coeur d’Alene Mining District; the silver-producing district near Durango, Mexico; in the vicinity of our Casa Berardi mine and the Heva-Hosco project in the Abitibi region of northwestern Quebec, Canada; our projects located in two districts in Nevada; our projects in northwestern Montana; the Creede district of southwestern Colorado; the Kinskuch project in British Columbia, Canada; and the Republic mining district in Washington state;
improving operations$14.7 million at each of our mines, which includes incurring costs for new technologies and equipment;
expanding our proven and probable reserves, mineral resources and production capacity at our properties;
conducting our business with financial stewardship to preserve our financial position in varying metals price and operational environments;
advancing permitting of our Montana assets; and
continuing to seek opportunities to acquire and invest in mining and exploration properties and companies.
We strive to achieve excellent mine safety and health performance. We seek to implement this goal by: training employees in safe work practices; establishing, following and improving safety standards; investigating accidents, incidents and losses to avoid recurrence; involving employees in the establishment of safety standards; and participating in the National Mining Association’s CORESafety program. We seek to implement reasonable best practices with respect to mine safety and emergency preparedness. We respond to issues outlined in investigations and inspections by MSHA, the Commission of Labor Standards, Pay Equity and Occupational Health and Safety in Quebec, and the Mexico Ministry of Economy and Mining and continue to evaluate our safety practices. There can be no assurance that our practices will mitigate or eliminate all safety risks. Achieving and maintaining compliance with regulations will be challenging and may increase our operating costs. See
Item 1A. Risk Factors – We face substantial governmental regulation, including the Mine Safety and Health Act, various environmental laws and regulations and the 1872 Mining Law
in our 2021 Form
10-K
.
Since its outbreak in 2020, the
COVID-19
pandemic continues to impact our operational practices and we continue to incur incremental costs and modify our operational plans to keep our workforce safe. In 2020, the pandemic adversely impacted our expected production of goldLucky Friday, $17.1 million at Casa Berardi and $17.1 million at Keno Hill, partially offset by corporate and non-operating sites.
•
Returned $3.9 million to our stockholders through dividend payments.
•
Spent $5.0 million on exploration drilling at Greens Creek. We incurred $0.4 million and $3.1 million in
COVID-19pre-development activities.
mitigation costs during the nine months ended September 30, 2022 and 2021, respectively. To mitigate the impact of
COVID-19,
we have taken precautionary measures, including implementing operational plans and practices and increasing our cash reserves. As long as they are required, the operational practices implemented could continue to have an adverse impact on our operating results due to additional costs or deferred production and revenues. There is uncertainty related to the potential additional impacts
COVID-19
and any subsequent variants could have on our operations and

Outlook

Our financial results vary as a result of fluctuations in market prices primarily for the rest of 2022. In our 2021 Form

10-K,
see
Item IA. Risk Factors – Natural disasters, public health crises (including
COVID-19),
political crises,silver and other catastrophic events or other events outside of our control may materiallygold and, adversely affect our business or financial results
to a lesser extent, zinc and
COVID-19
virus pandemic may heighten other risks
lead. World market prices for information on how restrictions related to
COVID-19
these commodities have recently affected some of our operations.
A number of key factors may impact the execution of our strategy, including regulatory issues, metals prices and inflationary pressures on input costs. Metals prices can be very volatilefluctuated historically and are influencedaffected by a number ofnumerous factors beyond our control (except oncontrol. Beginning in 2020, with the onset of the COVID-19 pandemic, and continuing in 2022 because of a limited basis throughseries of macro-economic factors, there has been significant volatility in the use of derivative contracts)financial and commodities markets, including recent central bank actions to raise interest rates which have negatively impactedthe precious metals prices. See
market. Market sentiment improved beginning in late 2022 and we believe the outlook for precious metals fundamentals in the medium- and long-term are favorable. Refer to “Markets” and Item 7.
Critical Accounting Estimates
1A. “Risk Factors” contained in Part I of our 2021annual report on Form
10-K
for the year ended December 31, 2022, 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 (“Cash Cost”) (non-GAAP) and above in
Note 8
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
.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, except gold, were lower in the three months ended September 30, 2022,March 31, 2023 than in the comparable period last year. The average realized prices for all metals sold by us were lower, except for zinc and gold, in the nine months ended September 30, 2022 than in the comparable period last year, as illustrated by the table in
Results of Operations
below. While we believe longer-term global economic and industrial trends could result in continued demand for the metals we produce, prices have been volatile and there can be no assurance that current prices will continue. We have also experienced significant cost inflation compared to 2021 across our operations, principally associated with higher energy prices, increased costs for other consumables such as reagents, explosives and steel, and labor and contractor costs.
Volatility in global financial markets and other factors can pose a significant challenge to our ability to access credit and equity markets, should we need to do so, and to predict sales prices for our products. To help mitigate this challenge, we utilize forward contracts to manage exposure to declines in the prices of (i) silver, gold, zinc and lead contained in our concentrates that have been shipped but have not yet settled, and (ii) zinc and lead that we forecast for future concentrate shipments. In addition, we have in place a $150 million revolving credit agreement, of which we had drawn $25.0 million as of September 30, 2022, and an additional $7.8 million was used as of September 30, 2022 for letters of credit, leaving approximately $117.2 million available for borrowing.
Another challenge for us is the risk associated with environmental litigation and ongoing reclamation activities. As described in
Item 1A. Risk Factors
in our 2021 Form
10-K
and above in
Note 10
of
Notes to Condensed Consolidated Financial Statements (Unaudited),
it is possible that our estimate of these liabilities (and our ability to estimate liabilities in general) may change in the future, affecting our strategic plans. We are involved in various environmental legal matters and the estimate of
25

18

Table of Contents
our environmental liabilities and liquidity needs, as well as our strategic plans, may be significantly impacted as a result of these matters or new matters that may arise. We strive to ensure that our activities are conducted in compliance with applicable laws and regulations and attempt to resolve environmental litigation on terms as favorable to us as possible.
26
Table of Contents

Consolidated Results of Operations

Sales by metal for the three- and nine-monththree month periods ended September 30,March 31, 2023 and 2022 and 2021 were as follows:

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
(in thousands)  2022   2021   2022   2021 
Silver
  $45,924   $61,890   $182,306   $232,414 
Gold
   69,289    94,984    228,475    282,471 
Lead
   16,033    18,082    56,912    56,198 
Zinc
   28,051    30,273    94,865    89,501 
Less: smelter charges
   (13,023)    (11,669)    (38,543)    (38,189) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Sales of products
  $146,274   $193,560   $524,015   $622,395 
  
 
 
   
 
 
   
 
 
   
 
 
 

 

 

Three Months Ended
March 31,

 

(in thousands)

 

2023

 

 

2022

 

Silver

 

$

81,532

 

 

$

66,332

 

Gold

 

 

75,087

 

 

 

77,168

 

Lead

 

 

25,402

 

 

 

19,564

 

Zinc

 

 

32,943

 

 

 

35,638

 

Less: smelter charges

 

 

(15,973

)

 

 

(12,203

)

Sales of products

 

$

198,991

 

 

$

186,499

 

Sales by metal for the three- and nine-monththree month periods ended September 30,March 31, 2023 and 2022, and 2021, and the approximate variances attributed to differences in metals prices, sales volumes and smelter terms, were as follows:

(in thousands)  
Silver
  
Gold
  
Base metals
  
Less: smelter
and refining
charges
  
Total sales
of products
 
Three months ended September 30, 2021
  $61,890  $94,984  $48,355  $(11,669)  $193,560 
Variances - 2022 versus 2021:
      
Price
   (13,459)   (3,125)   (3,637)   (1,475)   (21,696) 
Volume
   (2,134)   (22,570)   (634)   162   (25,176) 
Smelter terms
   (373)   —     —     (41)   (414) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Three months ended September 30, 2022
  $45,924  $69,289  $44,084  $(13,023)  $146,274 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(in thousands)  
Silver
  
Gold
  
Base metals
  
Less: smelter
and refining
charges
  
Total sales
of products
 
Nine months ended September 30, 2021
  $232,414  $282,471  $145,699  $(38,189)  $622,395 
Variances - 2022 versus 2021:
      
Price
   (37,682)   2,557   7,748   (3,381)   (30,758) 
Volume
   (12,335)   (56,468)   (1,670)   1,567   (68,906) 
Smelter terms
   (91)   (85)   —     1,460   1,284 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Nine months ended September 30, 2022
  $182,306  $228,475  $151,777  $(38,543)  $524,015 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 

(in thousands)

 

Silver

 

 

Gold

 

 

Base metals

 

 

Less: smelter and refining charges

 

 

Total sales of products

 

Three months ended March 31, 2022

 

$

66,332

 

 

$

77,168

 

 

$

55,202

 

 

$

(12,203

)

 

$

186,499

 

Variances - 2023 versus 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price

 

 

(7,458

)

 

 

394

 

 

 

(11,081

)

 

 

(1,489

)

 

 

(19,634

)

Volume

 

 

22,658

 

 

 

(2,747

)

 

 

14,224

 

 

 

(3,140

)

 

 

30,995

 

Smelter terms

 

 

—

 

 

 

272

 

 

 

—

 

 

 

859

 

 

 

1,131

 

Three months ended March 31, 2023

 

$

81,532

 

 

$

75,087

 

 

$

58,345

 

 

$

(15,973

)

 

$

198,991

 

The fluctuations in sales for the third quarter and first ninethree months of 2022ended 2023 compared to the same periods of 2021period in 2022 were primarily due to the following two reasons:

•
Lower average realized prices for all metals sold, except gold, during the third quarter and first nine months of 2022, except for gold and zinc for which the average realized price was higher during the ninethree months ended September 30, 2022 allMarch 31, 2023 compared to the same periods of 2021. These price variances are illustratedperiod in 2022.The table below summarizes spot prices and our realized prices for the following table:commodities we sell:
27
Table of Contents
      Three Months Ended
September 30,		   Nine Months Ended
September 30,		   
      2022   2021   2022   2021 
Silver –  London PM Fix ($/ounce)  $19.22   $24.36   $21.94   $25.78 
  Realized price per ounce  $18.30   $23.97   $21.25   $25.75 
Gold –  London PM Fix ($/ounce)  $1,728   $1,789   $1,825   $1,801 
  Realized price per ounce  $1,713   $1,792   $1,817   $1,794 
Lead –  LME Final Cash Buyer ($/pound)  $0.90   $1.06   $0.98   $0.98 
  Realized price per pound  $0.95   $1.02   $0.98   $1.00 
Zinc –  LME Final Cash Buyer ($/pound)  $1.48   $1.36   $1.65   $1.31 
  Realized price per pound  $1.23   $1.35   $1.47   $1.34 

 

 

 

 

Three Months Ended
March 31,

 

 

 

 

 

2023

 

 

2022

 

Silver –

 

 London PM Fix ($/ounce)

 

$

22.56

 

 

$

23.95

 

 

 

 Realized price per ounce

 

$

22.62

 

 

$

24.68

 

Gold –

 

 London PM Fix ($/ounce)

 

$

1,889

 

 

$

1,874

 

 

 

 Realized price per ounce

 

$

1,902

 

 

$

1,880

 

Lead –

 

 LME Final Cash Buyer ($/pound)

 

$

0.97

 

 

$

1.06

 

 

 

 Realized price per pound

 

$

1.02

 

 

$

1.08

 

Zinc –

 

 LME Final Cash Buyer ($/pound)

 

$

1.42

 

 

$

1.70

 

 

 

 Realized price per pound

 

$

1.39

 

 

$

1.79

 

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. For the three- and nine-month periods ended September 30, 2022, weWe recorded net negative price adjustments to provisional settlements of $6.6 million and $21.5 million, respectively, compared to net positive price adjustments to provisional settlements of $0.1$2.1 million and $3.7$1.0 million respectively, infor the three and nine months ended SeptemberMarch 31, 2021.2023 and 2022. 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.

•
LowerHigher quantities of all metals sold, in the third quarter and first nine months of 2022 compared to 2021 (except for lead in the nine months and zincexcept gold in the three months ended September 30,March 31, 2023 compared to the same period in 2022, respectively,primarily due to higher production at Greens Creek and Lucky Friday, during the first nine months of 2022), primarily due to the decision to defer a silver concentrate shipmentpartially offset by lower gold production at Greens Creek to October 2022 to ensure adequate concentrate volumes for cost-effective shipping, and the
non-recurrence
of Nevada refractory ore processing at a third-party facility in 2021.Casa Berardi. See
The Greens Creek Segment,
The Lucky Friday Segment, The Casa Berardi Segment
and
The Nevada Operations Segment
sections below for more information on metal production and sales volumes at each of our operating segments. Total metals production and sales volumes for each period are shown in the following table:
      Three Months Ended
September 30,		   Nine Months Ended
September 30,		   
      2022   2021   2022   2021 
Silver -
  Ounces produced   3,549,392    2,676,084    10,525,917    9,660,313 
  Payable ounces sold   2,479,724    2,581,690    8,554,894    9,027,180 
Gold -
  Ounces produced   44,747    42,207    132,173    153,350 
  Payable ounces sold   40,443    53,000    125,721    157,454 
Lead -
  Tons produced   11,600    9,904    35,794    32,148 
  Payable tons sold   8,049    8,835    28,788    28,166 
Zinc -
  Tons produced   15,859    15,546    47,571    48,864 
  Payable tons sold   11,523    11,174    32,328    33,344 

19

 

 

 

 

Three Months Ended
March 31,

 

 

 

 

 

2023

 

 

2022

 

Silver -

 

 Ounces produced

 

 

4,041,878

 

 

 

3,324,708

 

 

 

 Payable ounces sold

 

 

3,604,494

 

 

 

2,687,261

 

Gold -

 

 Ounces produced

 

 

39,717

 

 

 

41,642

 

 

 

 Payable ounces sold

 

 

39,473

 

 

 

41,053

 

Lead -

 

 Tons produced

 

 

13,236

 

 

 

10,863

 

 

 

 Payable tons sold

 

 

12,513

 

 

 

9,054

 

Zinc -

 

 Tons produced

 

 

15,795

 

 

 

14,946

 

 

 

 Payable tons sold

 

 

11,858

 

 

 

9,947

 

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 changes incidental to shipping schedules, or variances in ore grades which impact the amount of metals contained in concentrates produced and sold.

28
Table of Contents

Sales, total cost of sales, gross profit (loss), Cash Cost, After

By-product
Credits, per Ounce (“Cash Cost”)
(non-GAAP)
and
All-In
Sustaining Cost, After
By-product
Credits, per Ounce (“AISC”)
(non-GAAP)
at our operating units for the three-three months ended March 31, 2023 and nine -months ended September 30, 2022 and 2021 were as follows (in thousands, except for Cash Cost and AISC):

 

 

Silver

 

 

Gold

 

 

 

Greens Creek

 

 

Lucky Friday

 

 

Other

 

 

Total Silver (2)

 

 

Casa Berardi

 

 

Nevada Operations and Other (3)

 

 

Total Gold

 

Three Months Ended March 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

98,611

 

 

$

49,110

 

 

$

—

 

 

$

147,721

 

 

$

50,998

 

 

$

781

 

 

$

51,779

 

Total cost of sales

 

 

(66,288

)

 

 

(34,534

)

 

 

—

 

 

 

(100,822

)

 

 

(62,998

)

 

 

(732

)

 

 

(63,730

)

Gross profit (loss)

 

$

32,323

 

 

$

14,576

 

 

$

—

 

 

$

46,899

 

 

$

(12,000

)

 

$

49

 

 

$

(11,951

)

Cash Cost (1)

 

$

1.16

 

 

$

4.30

 

 

$

—

 

 

$

2.14

 

 

$

1,775

 

 

$

—

 

 

$

1,775

 

AISC (1)

 

$

3.82

 

 

$

10.69

 

 

$

—

 

 

$

8.96

 

 

$

2,392

 

 

$

—

 

 

$

2,392

 

Three Months Ended March 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

86,090

 

 

$

38,040

 

 

$

—

 

 

$

124,130

 

 

$

62,101

 

 

$

268

 

 

$

62,369

 

Total cost of sales

 

 

(49,638

)

 

 

(29,264

)

 

 

—

 

 

 

(78,902

)

 

 

(62,168

)

 

 

—

 

 

 

(62,168

)

Gross profit (loss)

 

$

36,452

 

 

$

8,776

 

 

$

—

 

 

$

45,228

 

 

$

(67

)

 

$

268

 

 

$

201

 

Cash Cost (1)

 

$

(0.90

)

 

$

6.57

 

 

$

—

 

 

$

1.09

 

 

$

1,516

 

 

$

—

 

 

$

1,516

 

AISC (1)

 

$

1.83

 

 

$

13.15

 

 

$

—

 

 

$

7.37

 

 

$

1,764

 

 

$

—

 

 

$

1,764

 

(1)
A reconciliation of these non-GAAP measures to total cost of sales, the most comparable GAAP measure, can be found below in Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).
   Silver  Gold 
   Greens
Creek		  Lucky
Friday		  Other   Total
Silver
(2)
  Casa
Berardi		  Nevada
Operations		  Total
Gold		 
Three Months Ended September 30, 2022:
         
Sales
  $60,875  $28,460  $ —     $89,335  $56,939  $—    $56,939 
Total cost of sales
   (52,502)   (24,164)   —      (76,666)   (59,532)   (1,623)   (61,155) 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit (loss)
  $8,373  $4,296  $—     $12,669  $(2,593)  $(1,623)  $(4,216) 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cash Cost per silver or gold ounce
(1)
  $2.65  $5.23  $—     $3.43  $1,349  $—    $1,349 
AISC per silver or gold ounce
(1)
  $8.61  $15.98  $—     $14.20  $1,738  $—    $1,738 
Three Months Ended September 30, 2021:
         
Sales
  $84,806  $29,783  $—     $114,589  $56,065  $22,906  $78,971 
Total cost of sales
   (55,193)   (23,591)     (78,784)   (58,164)   (21,384)   (79,548) 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit (loss)
  $29,613  $6,192  $—     $35,805  $(2,099)  $1,522  $(577) 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cash Cost per silver or gold ounce
(1)
  $0.74  $6.35  $—     $2.49  $1,175  $1,038  $1,163 
AISC per silver or gold ounce
(1)
  $5.94  $16.79  $—     $12.82  $1,476  $1,167  $1,450 

(2)
The calculation of AISC for our consolidated silver properties includes corporate costs for general and administrative expense and sustaining capital.
   Silver  Gold 
   Greens
Creek		  Lucky
Friday		  Other  Total
Silver
(2)
  Casa
Berardi		  Nevada
Operations		  Total
Gold		 
Nine Months Ended September 30, 2022:
        
Sales
  $239,688  $102,380  $ —    $342,068  $181,679  $268  $181,947 
Total cost of sales
   (162,644)   (83,779)   —     (246,423)   (183,570)   (2,878)   (186,448) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
  $77,044  $18,601  $—    $95,645  $(1,891)  $(2,610)  $(4,501) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Cash Cost per silver or gold ounce
(1)
  $(0.49)  $4.77  $—    $1.11  $1,409  $—    $1,409 
AISC per silver or gold ounce
(1)
  $4.69  $12.86  $—    $10.17  $1,729  $—    $1,729 
Nine Months Ended September 30, 2021:
        
Sales
  $296,978  $98,550  $176  $395,704  $185,098  $41,593  $226,691 
Total cost of sales
   (163,861)   (74,287)   (95)   (238,243)   (172,760)   (46,832)   (219,592) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
  $133,117  $24,263  $81  $157,461  $12,338  $(5,239)  $7,099 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Cash Cost per silver or gold ounce
(1)
  $(1.03)  $7.37  $—    $1.26  $1,127  $1,124  $1,127 
AISC per silver or gold ounce
(1)
  $2.40  $15.00  $—    $8.88  $1,387  $1,167  $1,349 

(3)
Other includes $509,000 of sales and $432,000 of cost of sales for the environmental services business acquired as part of the Alexco acquisition.
(1)
A reconciliation of these
non-GAAP
measures to total cost of sales, the most comparable GAAP measure, can be found below in
Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before
By-product
Credits and Cash Cost, After
By-product
Credits
(non-GAAP)
and
All-In
Sustaining Cost, Before
By-product
Credits and
All-In
Sustaining Cost, After
By-product
Credits
(non-GAAP)
.
(2)
The calculation of AISC, After
By-product
Credits, Per Ounce for our consolidated silver properties includes corporate costs for general and administrative expense and sustaining exploration and capital costs.

While revenue from zinc, lead and gold

by-products
is significant, we believe that identification of silver as the primary product of Greens Creek and Lucky Friday is appropriate because:

•
silver has historically accounted for a higher proportion of revenue than any other metal and is expected to do so in the future;
29
Table of Contents
•
we have historically presented these units as a primary silver producer, based on the original analysis that justified putting the project into production, and believe that consistency in disclosure is important to our investors regardless of the relationships of metals prices and production from year to year;
•
metallurgical treatment maximizes silver recovery;
•
the Greens Creek and Lucky Friday deposits are massive sulfide deposits containing an unusually high proportion of silver; and

20

•
in most of their working areas, Greens Creek and Lucky Friday utilize selective mining methods in which silver is the metal targeted for highest recovery.

Accordingly, we believe the identification of gold, lead and zinc as

by-product
credits at Greens Creek and Lucky Friday 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. 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 San Sebastian we consider zinc, lead and gold 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 believe the identification of silver as a

by-product
credit is appropriate at Casa Berardi and Nevada Operations 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 Casa Berardi 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 and Nevada Operations, 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.
For the third quarter we recorded

We reported a net loss applicable to common stockholders of $23.7$3.3 million (($0.04) per basic common share)for the three months ended March 31, 2023, compared to $1.1income of $4.0 million ($Nil) per basic common share) in the third quartercomparable period in 2022. The following were the significant drivers of 2021. The varianceschanges in net loss applicable to common stockholders compared to the income in 2022:

•
Consolidated gross profit (loss)decreased by $10.5 million at our operating units as illustrated in the table above contributed to the results for the third quarter of 2022 compared to the same period in 2021.above. See
The Greens Creek Segment,
The Lucky Friday Segment, The Casa Berardi Segment
and
The Nevada Operations Segment
sections below.
In addition tobelow for a discussion on the impact of lower gross profit on loss applicable to common stockholders, the following were the other significantkey drivers of changes in loss applicable to common stockholders compared to the prior period in 2021:by operating unit.
•
General and administrative costs increased by $2.1$3.8 million, primarily due towhich reflects the impactpersonnel that joined the Company as a result of the Alexco acquisition closed on September 7, 2022 Alexco acquisition, and compensation adjustments effective July 1, 2022.
Fair value adjustments, net were losses of $4.2 million versus a gain of $9.3 million in 2021 primarily due to the accounting for our base metals contracts as accounting hedges effective November 1, 2021, which resulted in unrealized gains/losses on these contracts being deferred on the balance sheet, versus them being recognized in the statement of operations in the 2021 comparable quarter (see
Notes 8 and 9
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information).
•
Exploration and
pre-development
decreased by $2.0$7.8 million primarily due to lower expenditures at the Hatter Graben project in Nevada.across our exploration portfolio.
•
Provision for closed operationsRamp-up and environmental matters decreasedsuspension costs increased by $5.8$5.1 million primarily due to Keno Hill ramp-up activities following the settlement in 2021 of a lawsuit for $6.5 million related to a 1989 agreement entered into by our subsidiary, CoCa Mines, Inc. and its subsidiary, Creede Resources, Inc.
Alexco acquisition
•
Other operating expenseFair value adjustments, net gains decreased by $2.4$2.8 million primarily due to lower unrealized gains in our marketable equity securities portfolio.

21

Greens Creek

Dollars are in thousands (except per ounce and per ton amounts)

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Sales

 

$

98,611

 

 

$

86,090

 

Cost of sales and other direct production costs

 

 

(51,824

)

 

 

(38,218

)

Depreciation, depletion and amortization

 

 

(14,464

)

 

 

(11,420

)

Total cost of sales

 

 

(66,288

)

 

 

(49,638

)

Gross profit

 

$

32,323

 

 

$

36,452

 

Tons of ore milled

 

 

233,167

 

 

 

211,687

 

Production:

 

 

 

 

 

 

Silver (ounces)

 

 

2,772,860

 

 

 

2,429,782

 

Gold (ounces)

 

 

14,885

 

 

 

11,402

 

Zinc (tons)

 

 

12,482

 

 

 

12,494

 

Lead (tons)

 

 

5,202

 

 

 

4,883

 

Payable metal quantities sold:

 

 

 

 

 

 

Silver (ounces)

 

 

2,292,035

 

 

 

1,772,391

 

Gold (ounces)

 

 

12,646

 

 

 

7,922

 

Zinc (tons)

 

 

9,244

 

 

 

8,092

 

Lead (tons)

 

 

4,156

 

 

 

3,063

 

Ore grades:

 

 

 

 

 

 

Silver ounces per ton

 

 

14.40

 

 

 

13.84

 

Gold ounces per ton

 

 

0.08

 

 

 

0.07

 

Zinc percent

 

 

6.0

%

 

 

6.6

%

Lead percent

 

 

2.6

%

 

 

2.8

%

Total production cost per ton

 

$

198.60

 

 

$

192.16

 

Cash Cost, After By-product Credits, per Silver Ounce (1)

 

$

1.16

 

 

$

(0.90

)

AISC, After By-Product Credits, per Silver Ounce (1)

 

$

3.82

 

 

$

1.83

 

Capital additions

 

$

6,658

 

 

$

3,092

 

(1)
A reconciliation of these non-GAAP measures to total cost of sales, the receiptmost comparable GAAP measure, can be found below in Reconciliation of $2.5Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).

The $4.1 million in insurance proceeds related to a coverage lawsuit received during September 2022 and the completion of projects to identify and implement potential operational improvements at our operating sites.

Net foreign exchange gains increased by $1.7 million reflecting the continued depreciation of the CAD against the USD in 2022. The change is primarily related to the impact of changes in the
CAD-to-USD
exchange rate on the remeasurement of our net monetary liabilities in Quebec.
For the first nine months of 2022, we recorded loss applicable to common stockholders of $33.3 million (($0.06) per basic common share) compared to income applicable to common stockholders of $22.8 million ($0.04 per basic common share) in the first nine months of 2021. The variancesdecrease in gross profit (loss) at our operating units as illustrated in the table above contributed to the results for the first ninethree months of 2022ended March 31, 2023 compared to the same period in 2021. See
The Greens Creek Segment,
The Lucky Friday Segment, The Casa Berardi Segment
and
The Nevada Operations Segment
sections below.
30
Table of Contents
In addition to the impact of lower gross profit on loss applicable to common stockholders, the following were the other significant drivers of changes in loss applicable to common stockholders compared to the prior period in 2021:
Exploration and
pre-development
expense increased by $4.1 million reflecting increased exploration spending across the Company’s exploration portfolio primarily at San Sebastian, Casa Berardi, Greens Creek and the Nevada Operations.
Pre-development
expense2022 was for the development of a decline to the Hatter Graben area at the Hollister mine in Nevada.
Fair value adjustments, net losses increased by $4.1 million due to unrealized losses on our equity securities portfolio increasing by $7.6 million offset by a lower loss of $4.7 million on our derivative contracts primarily due to the accounting for our base metals contracts as accounting hedges effective November 1, 2021, which resulted in unrealized gains/losses on these contracts being deferred on the balance sheet, versus them being recognized in the income statement in 2021 the comparable quarter (see
Notes 8 and 9
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information).
Net foreign exchange gains increased by $8.1 million reflecting the continued depreciation of the CAD against the USD in 2022. The change is primarily related to the impact of changes in the
CAD-to-USD
exchange rate on the remeasurement of our net monetary liabilities in Quebec.
Provision for closed operations and environmental matters decreased by $8.1 million primarily due to the settlement in 2021 of a lawsuit for $6.5 million related to a 1989 agreement entered into by our subsidiary, CoCa Mines, Inc. and its subsidiary, Creede Resources, Inc and an increase in the estimated costs accrual for the Johnny M. site in New Mexico of $2.9 million in 2021(see
Note 10
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information).
Other operating expense decreased by $5.3 million primarily due to the receipt of $4.2 million in insurance proceeds related to a coverage lawsuit received during June and September 2022 and the completion of projects to identify and implement potential operation improvements at our operating sites.
31
Table of Contents
Greens Creek
Dollars are in thousands (except per ounce and per ton amounts)
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
   2022  2021  2022  2021 
Sales
  $60,875  $84,806  $239,688  $296,978 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cost of sales and other direct production costs
   (42,197)   (42,096)   (127,290)   (121,451) 
Depreciation, depletion and amortization
   (10,305)   (13,097)   (35,354)   (42,410) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of sales
   (52,502)   (55,193)   (162,644)   (163,861) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
  $8,373  $29,613  $77,044  $133,117 
   
 
 
  
 
 
  
 
 
  
 
 
 
Tons of ore milled
   229,975   211,142   651,220   620,153 
Production:
                 
Silver (ounces)
   2,468,280   1,837,270   7,308,660   6,980,587 
Gold (ounces)
   11,412   9,734   35,227   35,859 
Zinc (tons)
   12,580   13,227   38,470   41,191 
Lead (tons)
   4,428   4,591   14,495   15,142 
Payable metal quantities sold:
                 
Silver (ounces)
   1,663,909   1,774,421   5,702,301   6,493,528 
Gold (ounces)
   7,478   9,232   25,952   31,599 
Zinc (tons)
   9,138   9,472   25,725   27,783 
Lead (tons)
   2,755   3,834   10,069   12,098 
Ore grades:
                 
Silver ounces per ton
   13.63   11.14   13.83   13.84 
Gold ounces per ton
   0.07   0.07   0.07   0.08 
Zinc percent
   6.3%   7.1%   6.7%   7.4% 
Lead percent
   2.4%   2.7%   2.7%   3.0% 
Total production cost per ton
  $185.34  $181.60  $191.58  $178.29 
Cash Cost, After
By-product
Credits, Per Silver Ounce
(1)
  $2.65  $0.74  $(0.49)  $(1.03) 
AISC, After
By-Product
Credits, per Silver Ounce
(1)
  $8.61  $5.94  $4.69  $2.40 
Capital additions
  $6,988  $6,228  $24,748  $14,339 
(1)
A reconciliation of these
non-GAAP
measures to total cost of sales, the most comparable GAAP measure, can be found below in
Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before
By-product
Credits and Cash Cost, After
By-product
Credits
(non-GAAP)
and
All-In
Sustaining Cost, Before
By-product
Credits and
All-In
Sustaining Cost, After
By-product
Credits
(non-GAAP)
.
The $21.2 million and $56.1 million decreases in gross profit for the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021 were primarily due to: (i) lower payable metals sold for all metals produced reflecting the decision to defer a silver concentrate shipment to October to ensure adequate concentrate volumes for cost-effective shipment, (ii) lower realized prices for all metals in both the threeexcept gold and nine month periods respectively, with the exception of zinc in the nine month period ended September 30, 2022, and (iii) higher production costs reflecting the impact of inflationarymore ore mined and processed and cost increases in consumables, labor, maintenance and contractor costs.
costs, which were partially offset by higher sales volumes.

Capital additions increased by $3.6 million in the three months ended March 31, 2023 compared to the same period in 2022 primarily due to mine development expenditure.

The charts below illustrate the factors contributing to the variances in Cash Cost, After

By-product
Credits, Per Silver Ounce for the third quarter and first ninethree months of 2022ended March 31, 2023 compared to the same periods of 2021.
period in 2022.

22

The following table summarizeschart below illustrates the components offactors contributing to Cash Cost, After

By-product
Credits, per Silver Ounce:
32
Table of Contents

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Cash Cost, Before
By-product
Credits, per Silver Ounce
  $22.69   $26.76   $22.24   $21.05 
By-product
credits
   (20.04)    (26.02)    (22.73)    (22.08) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Silver Ounce
  $2.65   $0.74   $(0.49)   $(1.03) 
   
 
 
   
 
 
   
 
 
   
 
 
 

img155799497_0.jpg 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Cash Cost, Before By-product Credits, per Silver Ounce

 

$

21.80

 

 

$

21.82

 

By-product credits

 

 

(20.64

)

 

 

(22.72

)

Cash Cost, After By-product Credits, per Silver Ounce

 

$

1.16

 

 

$

(0.90

)

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

AISC, Before By-product Credits, per Silver Ounce

 

$

24.46

 

 

$

24.55

 

By-product credits

 

 

(20.64

)

 

 

(22.72

)

AISC, After By-product Credits, per Silver Ounce

 

$

3.82

 

 

$

1.83

 

The following table summarizes the components of AISC, After

By-product
Credits, per Silver Ounce:
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
AISC, Before
By-product
Credits, per Silver Ounce
  $28.65   $31.96   $27.42   $24.48 
By-product
credits
   (20.04)    (26.02)    (22.73)    (22.08) 
   
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Silver Ounce
  $8.61   $5.94   $4.69   $2.40 
   
 
 
   
 
 
   
 
 
   
 
 
 
33
Table of Contents
The increase in Cash Cost, After
By-product
Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the third quarter and first nine months of 2022 compared to 2021 was primarily due to higher cash costs reflecting inflationary cost pressures and lower
by-product
credits for the three months ended September 30, 2022.
The increase in AISC, After
By-product
Credits, per Silver Ounce for the third quarter and first nine months of 2022 compared to 2021 was primarily due to higher sustaining capital of $10.2 million and $30.8 million for the third quarter and first nine months of 2022, respectively, compared to $6.2 million and $17.5 million, respectively, in 2021, reflecting the costs being incurred on camp construction and higher definition and development drilling during 2022 compared to 2021.
Lucky Friday
Dollars are in thousands (except per ounce and per ton amounts)
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
   2022  2021  2022  2021 
Sales
  $28,460  $29,783  $102,380  $98,550 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cost of sales and other direct production costs
   (16,903)   (17,001)   (59,624)   (53,959) 
Depreciation, depletion and amortization
   (7,261)   (6,590)   (24,155)   (20,328) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of sales
   (24,164)   (23,591)   (83,779)   (74,287) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
  $4,296  $6,192  $18,601  $24,263 
   
 
 
  
 
 
  
 
 
  
 
 
 
Tons of ore milled
   90,749   78,227   265,971   241,740 
Production:
                 
Silver (ounces)
   1,074,230   831,532   3,188,565   2,608,727 
Lead (tons)
   7,172   5,313   21,299   17,006 
Zinc (tons)
   3,279   2,319   9,101   7,673 
Payable metal quantities sold:
                 
Silver (ounces)
   801,115   783,672   2,822,281   2,481,753 
Lead (tons)
   5,295   5,001   18,720   16,068 
Zinc (tons)
   2,385   1,702   6,602   5,561 
Ore grades:
                 
Silver ounces per ton
   12.50   11.21   12.67   11.34 
Lead percent
   8.5%   7.2%   8.5%   7.4% 
Zinc percent
   4.2%   3.3%   3.9%   3.5% 
Total production cost per ton
  $207.1  $190.66  $220.41  $189.06 
Cash Cost, After
By-product
Credits, per Silver Ounce
(1)
  $5.23  $6.35  $4.77  $7.37 
AISC, After
By-product
Credits, per Silver Ounce
(1)
  $15.98  $16.79  $12.86  $15.00 
Capital additions
  $16,125  $9,133  $37,278  $20,776 
(1)
A reconciliation of these
non-GAAP
measures to total cost of sales, the most comparable GAAP measure, can be found below in
Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before
By-product
Credits and Cash Cost, After
By-product
Credits
(non-GAAP)
and
All-In
Sustaining Cost, Before
By-product
Credits and
All-In
Sustaining Cost, After
By-product
Credits
(non-GAAP)
.
Gross profit for the three months ended September 30, 2022 decreased by $1.9 millionMarch 31, 2023 compared to the same period in 2021,2022 was primarily due to lower by-product credits in 2023.

23

Lucky Friday

Dollars are in thousands (except per ounce and per ton amounts)

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Sales

 

$

49,110

 

 

$

38,040

 

Cost of sales and other direct production costs

 

 

(24,079

)

 

 

(21,232

)

Depreciation, depletion and amortization

 

 

(10,455

)

 

 

(8,032

)

Total cost of sales

 

 

(34,534

)

 

 

(29,264

)

Gross profit

 

$

14,576

 

 

$

8,776

 

Tons of ore milled

 

 

95,303

 

 

 

77,725

 

Production:

 

 

 

 

 

 

Silver (ounces)

 

 

1,262,464

 

 

 

887,858

 

Lead (tons)

 

 

8,034

 

 

 

5,980

 

Zinc (tons)

 

 

3,313

 

 

 

2,452

 

Payable metal quantities sold:

 

 

 

 

 

 

Silver (ounces)

 

 

1,306,013

 

 

 

899,454

 

Lead (tons)

 

 

8,357

 

 

 

5,991

 

Zinc (tons)

 

 

2,614

 

 

 

1,855

 

Ore grades:

 

 

 

 

 

 

Silver ounces per ton

 

 

13.84

 

 

 

12.04

 

Lead percent

 

 

8.8

%

 

 

8.2

%

Zinc percent

 

 

4.1

%

 

 

3.6

%

Total production cost per ton

 

$

210.72

 

 

$

247.17

 

Cash Cost, After By-product Credits, per Silver Ounce (1)

 

$

4.30

 

 

$

6.57

 

AISC, After By-product Credits, per Silver Ounce (1)

 

$

10.69

 

 

$

13.15

 

Capital additions

 

$

14,707

 

 

$

9,652

 

(1)
A reconciliation of these non-GAAP measures to total cost of sales, the most comparable GAAP measure, can be found below in Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).

Gross profit increased by $5.8 million for the three months ended March 31, 2023 compared to the same period in 2022, as the impact of increased sales quantities from mining and processing more high grade material and in higher volumes did not offset the combinationeffects of lower realized silver, lead and zinc prices compared to 2021, andprices.

Capital additions increased production costs from more ore mined and processed and inflationary cost increases in consumables and contractor maintenance costs. Gross profitby $5.1 million for the nine month period September 30, 2022 decreased by $5.7 millionthree months ended March 31, 2023 compared to the same period in 2021, as2022, primarily due to expenditures on key projects including the service hoist and coarse ore bunker, increased sales from a combinationdevelopment, and pre-production drilling to achieve the annual throughput goal of mining and processing more high grade material and in higher volumes did not offset the impact of lower silver and lead realized prices and higher production costs which were the result of the same factors experienced425,000 tons in the three months ended September 30, 2022.    

fourth quarter of 2023.

24

The chartschart below illustrateillustrates the factors contributing to Cash Cost, After

By-product
Credits, Per Silver Ounce for the third quarter and first nine months of 2022 compared to the same periods of 2021.
34
Table of Contents
The following table summarizes the components of Cash Cost, After
By-product
Credits, per Silver Ounce:
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Cash Cost, Before
By-product
Credits, per Silver Ounce
  $22.87   $24.14   $23.44   $24.70 
By-product
credits
   (17.64)    (17.79)    (18.67)    (17.33) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Silver Ounce
  $5.23   $6.35   $4.77   $7.37 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table summarizes the components of AISC, After
By-product
Credits, per Silver Ounce:
35
Table of Contents
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
AISC, Before
By-product
Credits, per Silver Ounce
  $33.62   $34.58   $31.53   $32.33 
By-product
credits
   (17.64)    (17.79)    (18.67)    (17.33) 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Silver Ounce
  $15.98   $16.79    12.86   $15.00 
  
 
 
   
 
 
   
 
 
   
 
 
 

img155799497_1.jpg 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Cash Cost, Before By-product Credits, per Silver Ounce

 

$

21.03

 

 

$

26.63

 

By-product credits

 

 

(16.73

)

 

 

(20.06

)

Cash Cost, After By-product Credits, per Silver Ounce

 

$

4.30

 

 

$

6.57

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

AISC, Before By-product Credits, per Silver Ounce

 

$

27.42

 

 

$

33.21

 

By-product credits

 

 

(16.73

)

 

 

(20.06

)

AISC, After By-product Credits, per Silver Ounce

 

$

10.69

 

 

$

13.15

 

The decrease in Cash Cost, After By-product Credits, per Silver Ounce and AISC, After

By-product
Credits, per Silver Ounce for the three and nine month periodsmonths ended September 30, 2022March 31, 2023 compared to the three and nine month periods ended September 30, 2021same period in 2022 was due to higher silver production resulting from increased grades and volumes processed, higher
partially offset by lower by-product
credits (for the nine months ended September 30, 2022) due to higher realized zinc prices, and concentrate quality improvement resulting inas higher lead and zinc production withdid not offset lower prices.

25

Casa Berardi

Dollars are in thousands (except per ounce and per ton amounts)

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Sales

 

$

50,998

 

 

$

62,101

 

Cost of sales and other direct production costs

 

 

(48,962

)

 

 

(46,322

)

Depreciation, depletion and amortization

 

 

(14,036

)

 

 

(15,846

)

Total cost of sales

 

 

(62,998

)

 

 

(62,168

)

Gross loss

 

$

(12,000

)

 

$

(67

)

Tons of ore milled

 

 

429,158

 

 

 

386,150

 

Production:

 

 

 

 

 

 

Gold (ounces)

 

 

24,686

 

 

 

30,240

 

Silver (ounces)

 

 

6,554

 

 

 

7,068

 

Payable metal quantities sold:

 

 

 

 

 

 

Gold (ounces)

 

 

26,826

 

 

 

33,066

 

Silver (ounces)

 

 

6,446

 

 

 

9,054

 

Ore grades:

 

 

 

 

 

 

Gold ounces per ton

 

 

0.07

 

 

 

0.09

 

Silver ounces per ton

 

 

0.02

 

 

 

0.02

 

Total production cost per ton

 

$

107.95

 

 

$

117.96

 

Cash Cost, After By-product Credits, per Gold Ounce (1)

 

$

1,775

 

 

$

1,516

 

AISC, After By-product Credits, per Gold Ounce (1)

 

$

2,392

 

 

$

1,764

 

Capital additions

 

$

17,086

 

 

$

7,808

 

(1)
A reconciliation of these non-GAAP measures to total cost of sales, the decreasemost comparable GAAP measure, can be found below in AISC,Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After
By-product
Credits per Silver Ounce partially offset(non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).

Gross loss increased by higher sustaining capital spending.

The Casa Berardi Segment
Dollars are in thousands (except per ounce and per ton amounts)
  Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Sales
  $56,939   $56,065   $181,679   $185,098 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cost of sales and other direct production costs
   (44,443)    (38,196)    (137,176)    (111,601) 
Depreciation, depletion and amortization
   (15,089)    (19,968)    (46,394)    (61,159) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total cost of sales
   (59,532)    (58,164)    (183,570)    (172,760) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
  $(2,593)   $(2,099)   $(1,891)   $12,338 
  
 
 
   
 
 
   
 
 
   
 
 
 
Tons of ore milled
   389,941    398,143    1,177,709    1,141,229 
Production:
        
Gold (ounces)
   33,335    29,722    96,881    97,245 
Silver (ounces)
   6,882    7,012    22,329    25,604 
Payable metal quantities sold:
        
Gold (ounces)
   32,965    31,227    99,703    102,711 
Silver (ounces)
   14,700    7,764    23,950    24,538 
Ore grades:
        
Gold ounces per ton
   0.10    0.09    0.09    0.10 
Silver ounces per ton
   0.02    0.02    0.02    0.02 
Total production cost per ton
  $114.52   $86.95   $115.15   $95.13 
Cash Cost, After
By-product
Credits, per Gold Ounce
(1)
  $1,349   $1,175   $1,409   $1,127 
AISC, After
By-product
Credits, per Gold Ounce
(1)
  $1,738   $1,476   $1,729   $1,387 
Capital additions
  $10,771   $11,488   $26,672   $37,488 
(1)
A reconciliation of these
non-GAAP
measures to total cost of sales, the most comparable GAAP measure, can be found below in
Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before
By-product
Credits and Cash Cost, After
By-product
Credits
(non-GAAP)
and
All-In
Sustaining Cost, Before
By-product
Credits and
All-In
Sustaining Cost, After
By-product
Credits
(non-GAAP)
.
Gross profit decreased by $0.5 million and $14.2$11.9 million for the third quarter and first ninethree months of 2022, respectively,ended March 31, 2023 compared to the same periods of 2021.period in 2022. The decrease for the third quarter and first nine months of 2022increase was due to lower realized pricesproduction and sales volumes and higher costcosts of sales resulting from increased production costs due to: (i) higher volumes of lower grade ore tonnage for the nine monthprocessed during period, only, (ii) mill contractor costs related to maintenance and optimization activities, (iii) higher underground maintenance costs resulting from repairs and replacements of major components for the production fleet and (iv) higher fuel and other consumables costs which have been negatively impacted by current inflationary pressures. The impact of higher costs of sales and lower realized prices was partially offset by increased sales volume in the third quarter of 2022. Lower sales volume in the first nine months of 2022 compared to 2021 due to lower grades mined and processed, was partially offset by higher realized gold price.
36
Table of Contents

Total capital additions decreasedincreased by $0.7$9.3 million and $10.8 million infor the third quarter of 2022 and first ninethree months of 2022 respectively,ended March 31, 2023 compared to the same periods of 2021, reflecting lowerperiod in 2022, primarily due to the tailings raise project and mining development costs following commissioning of the new 160 zone open pit mine in the fourth quarter of 2021.

costs.

The chartschart below illustrateillustrates the factors contributing to Cash Cost, After

By-product
Credits, Per Gold Ounce for the third quarter and first nine months of 2022 and 2021:
The following table summarizes the components of Cash Cost, After
By-product
Credits, per Gold Ounce:
37

img155799497_2.jpg 

26

Table of Contents
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Cash Cost, Before
By-product
Credits, per Gold Ounce
  $1,353   $1,181   $1,415   $1,134 
By-product
credits
   (4)    (6)    (6)    (7) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Gold Ounce
  $1,349   $1,175   $1,409   $1,127 
  
 
 
   
 
 
   
 
 
   
 
 
 
The following table summarizes the components of AISC, After
By-product
Credits, per Gold Ounce:
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
AISC, Before
By-product
Credits, per Gold Ounce
  $1,742   $1,482   $1,735   $ 1,394 
By-product
credits
   (4)    (6)    (6)    (7) 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Gold Ounce
  $ 1,738   $ 1,476   $ 1,729   $1,387 
  
 
 
   
 
 
   
 
 
   
 
 
 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Cash Cost, Before By-product Credits, per Gold Ounce

 

$

1,780

 

 

$

1,521

 

By-product credits

 

 

(5

)

 

 

(5

)

Cash Cost, After By-product Credits, per Gold Ounce

 

$

1,775

 

 

$

1,516

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

AISC, Before By-product Credits, per Gold Ounce

 

$

2,397

 

 

$

1,769

 

By-product credits

 

 

(5

)

 

 

(5

)

AISC, After By-product Credits, per Gold Ounce

 

$

2,392

 

 

$

1,764

 

The increase in Cash Cost After

By-product
Credits, per Gold Ounce, for the third quarter and first ninethree months of 2022ended March 31, 2023 compared to the same periods in 2021period for 2022 was primarily due to a combination of higher production costs as discussed above, partially offset by higherand lower gold production in the third quarter of 2022 compared with the same period in 2021.production. The lower production in 2022 also negatively impacted AISC, After
By-product
Credits, per Gold Ounce, however this was partially offset by lower sustaining capital spent in 2022 compared to 2021.
The Nevada Operations Segment
Dollars are in thousands (except per ounce and per ton amounts)
  Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Sales
  $—     $22,906   $268   $41,593 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cost of sales and other direct production costs
   (1,285)    (15,249)    (2,418)    (31,811) 
Depreciation, depletion and amortization
   (338)    (6,135)    (460)    (15,021) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total cost of sales
   (1,623)    (21,384)    (2,878)    (46,832) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Gross (loss) profit
  $(1,623)   $1,522   $ (2,610)   $ (5,239) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Payable metal quantities sold:
        
Gold (ounces)
   —      12,542    65    23,097 
Silver (ounces)
   —      15,833    6,363    23,868 
The gross loss of $1.6 million for the three months ended September 30, 2022,March 31, 2023 combined with increased sustaining capital also negatively impacting AISC, After By-product Credits, per Gold Ounce.

Nevada Operations

Dollars are in thousands (except per ounce and per ton amounts)

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Sales

 

$

272

 

 

$

268

 

Cost of sales and other direct production costs

 

 

(253

)

 

 

—

 

Depreciation, depletion and amortization

 

 

(47

)

 

 

—

 

Total cost of sales

 

 

(300

)

 

 

—

 

Gross (loss) profit

 

$

(28

)

 

$

268

 

Payable metal quantities sold:

 

 

 

 

 

 

Gold (ounces)

 

 

146

 

 

 

65

 

Silver (ounces)

 

-

 

 

 

6,363

 

The gross loss of $28 thousand for the three months ended March 31, 2023, was attributable to write downs of stockpiled material to net realizable value reflecting a lower spot gold price versusreceived for the gross profit realized in the comparable period in 2021, due to processing and sale of refractory ore at a third party facility.

The decrease in gross loss for the first nine months of 2022 compared to the same period of 2021 was primarily the result of lower sales volumes

Exploration and lower write-downs of ore stockpiled to estimated net realizable value. During 2021, production and revenue were generated from processing of the stockpiled

non-refractory
ore at the Midas mill and third-party processing of refractory ore in a roaster and autoclave facility, respectively. Fire Creek was placed on
care-and-maintenance
in the second quarter of 2021 after processing of the remaining
non-refractory
ore stockpile. Care and maintenance costs are reported in a separate line item on our consolidated statements of operations and excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization.
Exploration activities and
pre-development
activities continued in 2022the three months ended March 31, 2023 and waswere focused on drill testing targets at Aurora, Midas and the Hatter Graben in addition to target generation through detailed modeling and analysis of geological mapping sampling and geological mapping.
sampling.

See

Item 1A. Risk Factors –- Operation, Development, Exploration and Acquisition Risks
in our 20212022 Form
10-K
for a discussion of certain risks relating to our recent and ongoing analysis of the carrying value of the Nevada assets.
38

27

Table

Keno Hill

We acquired our Keno Hill operations as part of Contents

Corporate Matters
Employee Benefit Plans
Our three defined benefit pension plans (the “DB plans”) provide a significant benefit to our employees, but represent a liability to us. The liability recorded for the underfunded status of our plans was $4.8 million and $6.0 million as ofAlexco acquisition on September 30, 2022 and December 31, 2021, respectively. During May 2022, we contributed an aggregate of $5.6 million in shares of our common stock to two of our DB plans.7, 2022. We contributed an additional $4.2 million in shares of our common stock to one of our DB plans in October 2022 and do not expect to make additional contributions to our DB plans in 2022, but may choose to do so. While the economic variables which will determine future funding requirements are uncertain, we expect contributions to continueKeno Hill to be required in future years under the provisions of two DB plans, and we periodically examine the plans for affordability and competitiveness. See
Note 6
of
Notes to Consolidated Financial Statements
in our 2021 Form
10-K
for more information.
Income Taxes
Duringproduction during the third quarter of 2023. Keno Hill has not generated any revenue since we acquired it, due to being in development. During the three months ended March 31, 2023, $5.9million of site specific costs were included in the line item "Ramp-up and first ninesuspension costs" and $0.4 million of site specific costs were included in the line item "Exploration and pre-development" on our condensed consolidated statement of operations and comprehensive (loss) income.

Corporate Matters

Income Taxes

During the three months of 2022,ended March 31, 2023, an income and mining tax benefitprovision of approximately $9.5 million and $3.6$3.2 million resulted in an effective tax rate of 29% and 10% for the respective periods.4,699%. This compares to an income and mining tax benefitprovision of $4.5$5.6 million and $3.9 million for the third quarter and first nine months of 2021, orresulted in an effective tax rate of 82.2% and (20.3)%58% for the respective periods.comparable period in 2022. The comparability of our income and mining tax (provision) benefit 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 significant increase in the effective tax rate to 4,699% for the three months ended March 31, 2023 compared to 58% for the comparable period in 2022 is primarily related to incurring losses at the consolidated Alexco subsidiaries, which were acquired September 7, 2022, and the Nevada operations, for which no tax benefit is recognized due to uncertainty surrounding our ability to utilize these future tax benefits. Beginning with the periodthree months ended March 31, 2022 and including the period September 30, 2022, we used the annual effective tax rate method to calculate the quarterly tax provision, a change from the discrete method used for the period ended September 30, 2021, due to reversal of valuation allowance in the fourth quarter of 2021.
provision.

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 will 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 20212022 Form
10-K.

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)

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-monththree month periods ended September 30, 2022March 31, 2023 and 2021.
2022.

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’smine's operating performance. We use AISC, After
By-product
Credits, per Ounce as a measure of our mines’mines' net cash flow after costs for exploration,
pre-development,
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
on-site
exploration, 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
39
Table of Contents
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, and aggregating Casa Berardi and Nevada Operations for comparison with other gold 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.

28

Cash Cost, Before

By-product
Credits and AISC, Before
By-product
Credits include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining expense,
on-site
general and administrative costs, royalties and mining production taxes. AISC, Before
By-product
Credits for each mine also includes
on-site
exploration, reclamation and sustaining capital costs. AISC, Before
By-product
Credits for our consolidated silver properties also includes corporate costs for general and administrative expense and sustaining exploration and 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.

The Casa Berardi, Nevada Operations and combined gold properties information below reports Cash Cost, After

By-product
Credits, per Gold Ounce and AISC, After
By-product
Credits, per Gold Ounce for the production of gold, their primary product, and
by-product
revenues earned from silver, which is a
by-product
at Casa Berardi and Nevada Operations. Only costs and ounces produced relating to units with the same primary product are combined to represent Cash Cost, After
By-product
Credits, per Ounce and AISC, After
By-product
Credits, per Ounce. Thus, the gold produced at our Casa Berardi and Nevada Operations units 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 two units is not included as a
by-product
credit when calculating the gold metrics for Casa Berardi and Nevada Operations.

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2023

 

 

 

Greens Creek

 

 

Lucky Friday

 

 

Corporate (2)

 

 

Total Silver

 

Total cost of sales

 

$

66,288

 

 

$

34,534

 

 

$

—

 

 

$

100,822

 

Depreciation, depletion and amortization

 

 

(14,464

)

 

 

(10,455

)

 

 

—

 

 

 

(24,919

)

Treatment costs

 

 

10,368

 

 

 

5,277

 

 

 

—

 

 

 

15,645

 

Change in product inventory

 

 

(1,615

)

 

 

(2,409

)

 

 

—

 

 

 

(4,024

)

Reclamation and other costs

 

 

(129

)

 

 

(409

)

 

 

—

 

 

 

(538

)

Cash Cost, Before By-product Credits (1)

 

 

60,448

 

 

 

26,538

 

 

 

—

 

 

 

86,986

 

Reclamation and other costs

 

 

722

 

 

 

285

 

 

 

—

 

 

 

1,007

 

Sustaining capital

 

 

6,641

 

 

 

7,784

 

 

 

—

 

 

 

14,425

 

General and administrative

 

 

—

 

 

 

—

 

 

 

12,070

 

 

 

12,070

 

AISC, Before By-product Credits (1)

 

 

67,811

 

 

 

34,607

 

 

 

12,070

 

 

 

114,488

 

By-product credits:

 

 

 

 

 

 

 

 

 

 

 

 

Zinc

 

 

(24,005

)

 

 

(6,816

)

 

 

—

 

 

 

(30,821

)

Gold

 

 

(25,286

)

 

 

—

 

 

 

—

 

 

 

(25,286

)

Lead

 

 

(7,942

)

 

 

(14,299

)

 

 

—

 

 

 

(22,241

)

Total By-product credits

 

 

(57,233

)

 

 

(21,115

)

 

 

—

 

 

 

(78,348

)

Cash Cost, After By-product Credits

 

$

3,215

 

 

$

5,423

 

 

$

—

 

 

$

8,638

 

AISC, After By-product Credits

 

$

10,578

 

 

$

13,492

 

 

$

12,070

 

 

$

36,140

 

Divided by ounces produced

 

 

2,773

 

 

 

1,262

 

 

 

 

 

 

4,035

 

Cash Cost, Before By-product Credits, per Ounce

 

$

21.80

 

 

$

21.03

 

 

 

 

 

$

21.56

 

By-product credits per ounce

 

 

(20.64

)

 

 

(16.73

)

 

 

 

 

 

(19.42

)

Cash Cost, After By-product Credits, per Ounce

 

$

1.16

 

 

$

4.30

 

 

 

 

 

$

2.14

 

AISC, Before By-product Credits, per Ounce

 

$

24.46

 

 

$

27.42

 

 

 

 

 

$

28.38

 

By-product credits per ounce

 

 

(20.64

)

 

 

(16.73

)

 

 

 

 

 

(19.42

)

AISC, After By-product Credits, per Ounce

 

$

3.82

 

 

$

10.69

 

 

 

 

 

$

8.96

 

29

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2023

 

 

 

Casa Berardi

 

 

Nevada Operations and Other (4)

 

 

Total Gold

 

Total cost of sales

 

$

62,998

 

 

$

732

 

 

$

63,730

 

Depreciation, depletion and amortization

 

 

(14,036

)

 

 

(47

)

 

 

(14,083

)

Treatment costs

 

 

467

 

 

 

—

 

 

 

467

 

Change in product inventory

 

 

(2,417

)

 

 

—

 

 

 

(2,417

)

Reclamation and other costs

 

 

(217

)

 

 

—

 

 

 

(217

)

Exclusion of Casa Berardi cash costs (3)

 

 

(2,851

)

 

 

—

 

 

 

(2,851

)

Exclusion of Nevada Operations and Other costs

 

 

—

 

 

 

(685

)

 

 

(685

)

Cash Cost, Before By-product Credits (1)

 

 

43,944

 

 

 

—

 

 

 

43,944

 

Reclamation and other costs

 

 

217

 

 

 

—

 

 

 

217

 

Sustaining capital

 

 

15,015

 

 

 

—

 

 

 

15,015

 

AISC, Before By-product Credits (1)

 

 

59,176

 

 

 

—

 

 

 

59,176

 

By-product credits:

 

 

 

 

 

 

 

 

 

Silver

 

 

(127

)

 

 

—

 

 

 

(127

)

Total By-product credits

 

 

(127

)

 

 

—

 

 

 

(127

)

Cash Cost, After By-product Credits

 

$

43,817

 

 

$

—

 

 

$

43,817

 

AISC, After By-product Credits

 

$

59,049

 

 

$

—

 

 

$

59,049

 

Divided by ounces produced

 

 

25

 

 

 

—

 

 

 

25

 

Cash Cost, Before By-product Credits, per Ounce

 

$

1,780

 

 

$

—

 

 

$

1,780

 

By-product credits per ounce

 

 

(5

)

 

 

—

 

 

 

(5

)

Cash Cost, After By-product Credits, per Ounce

 

$

1,775

 

 

$

—

 

 

$

1,775

 

AISC, Before By-product Credits, per Ounce

 

$

2,397

 

 

$

—

 

 

$

2,397

 

By-product credits per ounce

 

 

(5

)

 

 

—

 

 

 

(5

)

AISC, After By-product Credits, per Ounce

 

$

2,392

 

 

$

—

 

 

$

2,392

 

30

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2023

 

 

 

Total Silver

 

 

Total Gold

 

 

Total

 

Total cost of sales

 

$

100,822

 

 

$

63,730

 

 

$

164,552

 

Depreciation, depletion and amortization

 

 

(24,919

)

 

 

(14,083

)

 

 

(39,002

)

Treatment costs

 

 

15,645

 

 

 

467

 

 

 

16,112

 

Change in product inventory

 

 

(4,024

)

 

 

(2,417

)

 

 

(6,441

)

Reclamation and other costs

 

 

(538

)

 

 

(217

)

 

 

(755

)

Exclusion of Casa Berardi cash costs (3)

 

 

—

 

 

 

(2,851

)

 

 

(2,851

)

Exclusion of Nevada Operations and Other costs

 

 

—

 

 

 

(685

)

 

 

(685

)

Cash Cost, Before By-product Credits (1)

 

 

86,986

 

 

 

43,944

 

 

 

130,930

 

Reclamation and other costs

 

 

1,007

 

 

 

217

 

 

 

1,224

 

Sustaining capital

 

 

14,425

 

 

 

15,015

 

 

 

29,440

 

General and administrative

 

 

12,070

 

 

 

—

 

 

 

12,070

 

AISC, Before By-product Credits (1)

 

 

114,488

 

 

 

59,176

 

 

 

173,664

 

By-product credits:

 

 

 

 

 

 

 

 

 

Zinc

 

 

(30,821

)

 

 

—

 

 

 

(30,821

)

Gold

 

 

(25,286

)

 

 

—

 

 

 

(25,286

)

Lead

 

 

(22,241

)

 

 

—

 

 

 

(22,241

)

Silver

 

 

—

 

 

 

(127

)

 

 

(127

)

Total By-product credits

 

 

(78,348

)

 

 

(127

)

 

 

(78,475

)

Cash Cost, After By-product Credits

 

$

8,638

 

 

$

43,817

 

 

$

52,455

 

AISC, After By-product Credits

 

$

36,140

 

 

$

59,049

 

 

$

95,189

 

Divided by ounces produced

 

 

4,035

 

 

 

25

 

 

 

 

Cash Cost, Before By-product Credits, per Ounce

 

$

21.56

 

 

$

1,780

 

 

 

 

By-product credits per ounce

 

 

(19.42

)

 

 

(5

)

 

 

 

Cash Cost, After By-product Credits, per Ounce

 

$

2.14

 

 

$

1,775

 

 

 

 

AISC, Before By-product Credits, per Ounce

 

$

28.38

 

 

$

2,397

 

 

 

 

By-product credits per ounce

 

 

(19.42

)

 

 

(5

)

 

 

 

AISC, After By-product Credits, per Ounce

 

$

8.96

 

 

$

2,392

 

 

 

 

31

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2022 (5)

 

 

 

Greens Creek

 

 

Lucky Friday

 

 

Corporate (2)

 

 

Total Silver

 

Total cost of sales

 

$

49,638

 

 

$

29,264

 

 

$

—

 

 

$

78,902

 

Depreciation, depletion and amortization

 

 

(11,420

)

 

 

(8,032

)

 

 

—

 

 

 

(19,452

)

Treatment costs

 

 

9,096

 

 

 

3,677

 

 

 

—

 

 

 

12,773

 

Change in product inventory

 

 

6,538

 

 

 

(905

)

 

 

—

 

 

 

5,633

 

Reclamation and other costs

 

 

(850

)

 

 

(361

)

 

 

—

 

 

 

(1,211

)

Cash Cost, Before By-product Credits (1)

 

 

53,002

 

 

 

23,643

 

 

 

—

 

 

 

76,645

 

Reclamation and other costs

 

 

705

 

 

 

282

 

 

 

—

 

 

 

987

 

Sustaining capital

 

 

5,956

 

 

 

5,562

 

 

 

48

 

 

 

11,566

 

General and administrative

 

 

—

 

 

 

—

 

 

 

8,294

 

 

 

8,294

 

AISC, Before By-product Credits (1)

 

 

59,663

 

 

 

29,487

 

 

 

8,342

 

 

 

97,492

 

By-product credits:

 

 

 

 

 

 

 

 

 

 

 

 

Zinc

 

 

(28,651

)

 

 

(5,977

)

 

 

—

 

 

 

(34,628

)

Gold

 

 

(18,583

)

 

 

—

 

 

 

—

 

 

 

(18,583

)

Lead

 

 

(7,966

)

 

 

(11,836

)

 

 

—

 

 

 

(19,802

)

Total By-product credits

 

 

(55,200

)

 

 

(17,813

)

 

 

—

 

 

 

(73,013

)

Cash Cost, After By-product Credits

 

$

(2,198

)

 

$

5,830

 

 

$

—

 

 

$

3,632

 

AISC, After By-product Credits

 

$

4,463

 

 

$

11,674

 

 

$

8,342

 

 

$

24,479

 

Divided by ounces produced

 

 

2,430

 

 

 

888

 

 

 

 

 

 

3,318

 

Cash Cost, Before By-product Credits, per Ounce

 

$

21.82

 

 

$

26.63

 

 

 

 

 

$

23.10

 

By-product credits per ounce

 

 

(22.72

)

 

 

(20.06

)

 

 

 

 

 

(22.01

)

Cash Cost, After By-product Credits, per Ounce

 

$

(0.90

)

 

$

6.57

 

 

 

 

 

$

1.09

 

AISC, Before By-product Credits, per Ounce

 

$

24.55

 

 

$

33.21

 

 

 

 

 

$

29.38

 

By-product credits per ounce

 

 

(22.72

)

 

 

(20.06

)

 

 

 

 

 

(22.01

)

AISC, After By-product Credits, per Ounce

 

$

1.83

 

 

$

13.15

 

 

 

 

 

$

7.37

 

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2022 (5)

 

 

 

Casa Berardi

 

 

Total Gold

 

Total cost of sales

 

$

62,168

 

 

$

62,168

 

Depreciation, depletion and amortization

 

 

(15,846

)

 

 

(15,846

)

Treatment costs

 

 

458

 

 

 

458

 

Change in product inventory

 

 

(563

)

 

 

(563

)

Reclamation and other costs

 

 

(210

)

 

 

(210

)

Exclusion of Nevada Operations costs

 

 

—

 

 

 

—

 

Cash Cost, Before By-product Credits (1)

 

 

46,007

 

 

 

46,007

 

Reclamation and other costs

 

 

210

 

 

 

210

 

Sustaining capital

 

 

7,281

 

 

 

7,281

 

AISC, Before By-product Credits (1)

 

 

53,498

 

 

 

53,498

 

By-product credits:

 

 

 

 

 

 

Silver

 

 

(166

)

 

 

(166

)

Total By-product credits

 

 

(166

)

 

 

(166

)

Cash Cost, After By-product Credits

 

$

45,841

 

 

$

45,841

 

AISC, After By-product Credits

 

$

53,332

 

 

$

53,332

 

Divided by ounces produced

 

 

30

 

 

 

30

 

Cash Cost, Before By-product Credits, per Ounce

 

$

1,521

 

 

$

1,521

 

By-product credits per ounce

 

 

(5

)

 

 

(5

)

Cash Cost, After By-product Credits, per Ounce

 

$

1,516

 

 

$

1,516

 

AISC, Before By-product Credits, per Ounce

 

$

1,769

 

 

$

1,769

 

By-product credits per ounce

 

 

(5

)

 

 

(5

)

AISC, After By-product Credits, per Ounce

 

$

1,764

 

 

$

1,764

 

32

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2022 (5)

 

 

 

Total Silver

 

 

Total Gold

 

 

Total

 

Total cost of sales

 

$

78,902

 

 

$

62,168

 

 

$

141,070

 

Depreciation, depletion and amortization

 

 

(19,452

)

 

 

(15,846

)

 

 

(35,298

)

Treatment costs

 

 

12,773

 

 

 

458

 

 

 

13,231

 

Change in product inventory

 

 

5,633

 

 

 

(563

)

 

 

5,070

 

Reclamation and other costs

 

 

(1,211

)

 

 

(210

)

 

 

(1,421

)

Exclusion of Nevada Operations costs

 

 

—

 

 

 

—

 

 

 

—

 

Cash Cost, Before By-product Credits (1)

 

 

76,645

 

 

 

46,007

 

 

 

122,652

 

Reclamation and other costs

 

 

987

 

 

 

210

 

 

 

1,197

 

Sustaining capital

 

 

11,566

 

 

 

7,281

 

 

 

18,847

 

General and administrative

 

 

8,294

 

 

 

—

 

 

 

8,294

 

AISC, Before By-product Credits (1)

 

 

97,492

 

 

 

53,498

 

 

 

150,990

 

By-product credits:

 

 

 

 

 

 

 

 

 

Zinc

 

 

(34,628

)

 

 

—

 

 

 

(34,628

)

Gold

 

 

(18,583

)

 

 

—

 

 

 

(18,583

)

Lead

 

 

(19,802

)

 

 

—

 

 

 

(19,802

)

Silver

 

 

—

 

 

 

(166

)

 

 

(166

)

Total By-product credits

 

 

(73,013

)

 

 

(166

)

 

 

(73,179

)

Cash Cost, After By-product Credits

 

$

3,632

 

 

$

45,841

 

 

$

49,473

 

AISC, After By-product Credits

 

$

24,479

 

 

$

53,332

 

 

$

77,811

 

Divided by ounces produced

 

 

3,318

 

 

 

30

 

 

 

 

Cash Cost, Before By-product Credits, per Ounce

 

$

23.10

 

 

$

1,521

 

 

 

 

By-product credits per ounce

 

 

(22.01

)

 

 

(5

)

 

 

 

Cash Cost, After By-product Credits, per Ounce

 

$

1.09

 

 

$

1,516

 

 

 

 

AISC, Before By-product Credits, per Ounce

 

$

29.38

 

 

$

1,769

 

 

 

 

By-product credits per ounce

 

 

(22.01

)

 

 

(5

)

 

 

 

AISC, After By-product Credits, per Ounce

 

$

7.37

 

 

$

1,764

 

 

 

 

(1)
Includes all direct and indirect operating costs related to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs and royalties, before by-product revenues earned from all metals other than the primary metal produced at each operation. AISC, Before By-product Credits also includes reclamation and sustaining capital costs.

(2)
40AISC, Before By-product Credits for our consolidated silver properties includes corporate costs for general and administrative expense and sustaining capital.

(3)
During the three months ended March 31, 2023, the Company completed the necessary studies to conclude usage of the F-160 pit as a tailings storage facility after mining is complete. As a result, a portion of the mining costs have been excluded from Cash Cost, Before By-product Credits and AISC, Before By-product Credits.

(4)
TableOther includes $509,000 of Contents
In thousands (except per ounce amounts)
  Three Months Ended September 30, 2022 
   Greens
Creek		   Lucky
Friday		   Corporate
(2)
   Total
Silver		 
Total cost of sales
  $52,502   $24,164   $—     $76,666 
Depreciation, depletion and amortization
   (10,305)    (7,261)    —      (17,566) 
Treatment costs
   9,477    4,791    —      14,268 
Change in product inventory
   4,464    3,022    —      7,486 
Reclamation and other costs
   (118)    (152)    —      (270) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   56,020    24,564      80,584 
Reclamation and other costs
   705    282    —      987 
Sustaining exploration
   3,776    —      722    4,498 
Sustaining capital
   10,219    11,264    187    21,670 
General and administrative
   —      —      11,003    11,003 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   70,720    36,110    11,912    118,742 
By-product
credits:
        
Zinc
   (26,244)    (7,155)    —      (33,399) 
Gold
   (17,019)    —      —      (17,019) 
Lead
   (6,212)    (11,796)    —      (18,008) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (49,475)    (18,951)    —      (68,426) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $6,545   $5,613   $—     $12,158 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $21,245   $17,159    11,912   $50,316 
  
 
 
   
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   2,469    1,075      3,544 
Cash Cost, Before
By-product
Credits, per Ounce
  $22.69   $22.87     $22.74 
By-product
credits per ounce
   (20.04)    (17.64)      (19.31) 
  
 
 
   
 
 
     
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $2.65   $5.23     $3.43 
  
 
 
   
 
 
     
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $28.65   $33.62     $33.51 
By-product
credits per ounce
   (20.04)    (17.64)      (19.31) 
  
 
 
   
 
 
     
 
 
 
AISC, After
By-product
Credits, per Ounce
  $8.61   $15.98     $14.20 
  
 
 
   
 
 
     
 
 
 
sales and $432,000 of cost of sales for the environmental services business acquired as part of the Alexco acquisition.

(5)
41Prior year presentation has been adjusted to conform with current year presentation to eliminate exploration costs from the calculation of AISC, Before By-product Credits as exploration is an activity directed at the Corporate level to find new mineral reserve and resource deposits, and therefore we believe it is inappropriate to include exploration costs in the calculation of AISC, Before By-product Credits for a specific mining operation.
Table of Contents
In thousands (except per ounce amounts)
  Three Months ended
September 30, 2022		 
   Casa
Berardi		   Total Gold 
Total cost of sales
  $59,532   $59,532 
Depreciation, depletion and amortization
   (15,089)    (15,089) 
Treatment costs
   429    429 
Change in product inventory
   420    420 
Reclamation and other costs
   (203)    (203) 
  
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   45,089    45,089 
Reclamation and other costs
   204    204 
Sustaining exploration
   2,314    2,314 
Sustaining capital
   10,457    10,457 
  
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   58,064    58,064 
By-product
credits:
    
Silver
   (131)    (131) 
  
 
 
   
 
 
 
Total
By-product
credits
   (131)    (131) 
  
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $44,958   $44,958 
  
 
 
   
 
 
 
AISC, After
By-product
Credits
  $57,933   $57,933 
  
 
 
   
 
 
 
Divided by ounces produced
   33    33 
Cash Cost, Before
By-product
Credits, per Ounce
  $1,353   $1,353 
By-product
credits per ounce
   (4)    (4) 
  
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $1,349   $1,349 
  
 
 
   
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $1,742   $1,742 
By-product
credits per ounce
   (4)    (4) 
  
 
 
   
 
 
 
AISC, After
By-product
Credits, per Ounce
  $1,738   $1,738 
  
 
 
   
 
 
 
42
Table of Contents
In thousands (except per ounce amounts)
  Three Months ended September 30,
2022		 
   Total Silver   Total Gold   Total 
Total cost of sales
  $76,666   $59,532   $136,198 
Depreciation, depletion and amortization
   (17,566)    (15,089)    (32,655) 
Treatment costs
   14,268    429    14,697 
Change in product inventory
   7,486    420    7,906 
Reclamation and other costs
   (270)    (203)    (473) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   80,584    45,089    125,673 
Reclamation and other costs
   987    204    1,191 
Sustaining exploration
   4,498    2,314    6,812 
Sustaining capital
   21,670    10,457    32,127 
General and administrative
   11,003    —      11,003 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   118,742    58,064    176,806 
By-product
credits:
      
Zinc
   (33,399)    —      (33,399) 
Gold
   (17,019)    —      (17,019) 
Lead
   (18,008)    —      (18,008) 
Silver
   —      (131)    (131) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (68,426)    (131)    (68,557) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $12,158   $44,958   $57,116 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $50,316   $57,933   $108,249 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   3,544    33   
Cash Cost, Before
By-product
Credits, per Ounce
  $22.74   $1,353   
By-product
credits per ounce
   (19.31)    (4)   
  
 
 
   
 
 
   
Cash Cost, After
By-product
Credits, per Ounce
  $3.43   $1,349   
  
 
 
   
 
 
   
AISC, Before
By-product
Credits, per Ounce
  $33.51   $1,742   
By-product
credits per ounce
   (19.31)    (4)   
  
 
 
   
 
 
   
AISC, After
By-product
Credits, per Ounce
  $14.20   $1,738   
  
 
 
   
 
 
   
43
Table of Contents
In thousands (except per ounce amounts)
  Three Months Ended September 30, 2021 
   Greens
Creek		   Lucky
Friday		   Corporate and
other
(2)
   Total
Silver		 
Total cost of sales
  $55,193   $23,591   $—     $78,784 
Depreciation, depletion and amortization
   (13,097)    (6,590)    —      (19,687) 
Treatment costs
   7,979    3,427    —      11,406 
Change in product inventory
   (122)    (68)    —      (190) 
Reclamation and other costs
   (786)    (281)    —      (1,067) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   49,167    20,079    —      69,246 
Reclamation and other costs
   848    264    —      1,112 
Sustaining exploration
   2,472    —      474    2,946 
Sustaining capital
   6,228    8,406    —      14,634 
General and administrative
   —      —      8,874    8,874 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   58,715    28,749    9,348    96,812 
By-product
credits:
        
Zinc
   (25,295)    (4,611)    —      (29,906) 
Gold
   (14,864)    —      —      (14,864) 
Lead
   (7,640)    (10,188)    —      (17,828) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (47,799)    (14,799)    —      (62,598) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $1,368   $5,280    —     $6,648 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $10,916   $13,950    9,348   $34,214 
  
 
 
   
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   1,837    832      2,669 
Cash Cost, Before
By-product
Credits, per Ounce
  $26.76   $24.14     $25.93 
By-product
credits per ounce
   (26.02)    (17.79)      (23.44) 
  
 
 
   
 
 
     
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $0.74   $6.35     $2.49 
  
 
 
   
 
 
     
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $31.96   $34.58     $36.26 
By-product
credits per ounce
   (26.02)    (17.79)      (23.44) 
  
 
 
   
 
 
     
 
 
 
AISC, After
By-product
Credits, per Ounce
  $5.94   $16.79     $12.82 
  
 
 
   
 
 
     
 
 
 
44
Table of Contents
In thousands (except per ounce amounts)
  Three Months Ended September 30, 2021 
   Casa
Berardi		   Nevada
Operations		   Total Gold 
Total cost of sales
  $58,164   $21,384   $79,548 
Depreciation, depletion and amortization
   (19,968)    (6,135)    (26,103) 
Treatment costs
   475    1    476 
Change in product inventory
   (3,369)    (12,389)    (15,758) 
Reclamation and other costs
   (210)    —      (210) 
Exclusion of Nevada Operations costs
   —      —      —   
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   35,092    2,861    37,953 
Reclamation and other costs
   209    327    536 
Sustaining exploration
   1,541    —      1,541 
Sustaining capital
   7,208    29    7,237 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   44,050    3,217    47,267 
By-product
credits:
      
Silver
   (169)    (6)    (175) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (169)    (6)    (175) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $34,923   $2,855   $37,778 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $43,881   $3,211   $47,092 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   30    3    33 
Cash Cost, Before
By-product
Credits, per Ounce
  $1,181   $1,040   $1,168 
By-product
credits per ounce
   (6)    (2)    (5) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $1,175   $1,038   $1,163 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $1,482   $1,169   $1,455 
By-product
credits per ounce
   (6)    (2)    (5) 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Ounce
  $1,476   $1,167   $1,450 
  
 
 
   
 
 
   
 
 
 
45
Table of Contents
In thousands (except per ounce amounts)
  Three Months Ended September 30, 2021 
   Total
Silver		   Total Gold   Total 
Total cost of sales
  $78,784   $79,548   $ 158,332 
Depreciation, depletion and amortization
   (19,687)    (26,103)    (45,790) 
Treatment costs
   11,406    476    11,882 
Change in product inventory
   (190)    (15,758)    (15,948) 
Reclamation and other costs
   (1,067)    (210)    (1,277) 
Exclusion of Nevada Operations costs
   —       
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   69,246    37,953    107,199 
Reclamation and other costs
   1,112    536    1,648 
Sustaining exploration
   2,946    1,541    4,487 
Sustaining capital
   14,634    7,237    21,871 
General and administrative
   8,874    —      8,874 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   96,812    47,267    144,079 
By-product
credits:
      
Zinc
   (29,906)    —      (29,906) 
Gold
   (14,864)    —      (14,864) 
Lead
   (17,828)    —      (17,828) 
Silver
   —      (175)    (175) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (62,598)    (175)    (62,773) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $6,648   $37,778   $44,426 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $34,214   $47,092   $81,306 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   2,669    33   
Cash Cost, Before
By-product
Credits, per Ounce
  $25.93   $1,168   
By-product
credits per ounce
   (23.44)    (5)   
  
 
 
   
 
 
   
Cash Cost, After
By-product
Credits, per Ounce
  $2.49   $1,163   
  
 
 
   
 
 
   
AISC, Before
By-product
Credits, per Ounce
  $36.26   $1,455   
By-product
credits per ounce
   (23.44)    (5)   
  
 
 
   
 
 
   
AISC, After
By-product
Credits, per Ounce
  $12.82   $1,450   
  
 
 
   
 
 
   
46
Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2022 
   Greens
Creek		   Lucky
Friday		   Corporate
(1)
   Total Silver 
Total cost of sales
  $162,644   $83,779   $—     $246,423 
Depreciation, depletion and amortization
   (35,354)    (24,155)    —      (59,509) 
Treatment costs
   27,369    13,271    —      40,640 
Change in product inventory
   9,899    2,620    —      12,519 
Reclamation and other costs
   (1,988)    (769)    —      (2,757) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   162,570    74,746    —      237,316 
Reclamation and other costs
   2,115    846    —      2,961 
Sustaining exploration
   4,870    —      2,207    7,077 
Sustaining capital
   30,843    24,937    334    56,114 
General and administrative
   —      —      28,989    28,989 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   200,398    100,529    31,530    332,457 
By-product
credits:
        
Zinc
   (87,723)    (21,358)    —      (109,081) 
Gold
   (55,966)    —      —      (55,966) 
Lead
   (22,449)    (38,175)    —      (60,624) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (166,138)    (59,533)    —      (225,671) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $(3,568)   $15,213    —     $11,645 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $34,260   $40,996   $ 31,530   $106,786 
  
 
 
   
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   7,309    3,189      10,498 
Cash Cost, Before
By-product
Credits, per Ounce
  $22.24   $23.44     $22.61 
By-product
credits per ounce
   (22.73)    (18.67)      (21.50) 
  
 
 
   
 
 
     
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $(0.49)   $4.77     $1.11 
  
 
 
   
 
 
     
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $27.42   $31.53     $31.67 
By-product
credits per ounce
   (22.73)    (18.67)      (21.50) 
  
 
 
   
 
 
     
 
 
 
AISC, After
By-product
Credits, per Ounce
  $4.69   $12.86     $10.17 
  
 
 
   
 
 
     
 
 
 
47
Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended
September 30, 2022		 
   Casa
Berardi		   Total
Gold		 
Total cost of sales
  $ 183,570   $ 183,570 
Depreciation, depletion and amortization
   (46,394)    (46,394) 
Treatment costs
   1,345    1,345 
Change in product inventory
   (936)    (936) 
Reclamation and other costs
   (623)    (623) 
  
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   136,962    136,962 
Reclamation and other costs
   623    623 
Sustaining exploration
   4,886    4,886 
Sustaining capital
   25,587    25,587 
  
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   168,058    168,058 
By-product
credits:
    
Silver
   (485)    (485) 
  
 
 
   
 
 
 
Total
By-product
credits
   (485)    (485) 
  
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $136,477   $136,477 
  
 
 
   
 
 
 
AISC, After
By-product
Credits
  $167,573   $167,573 
  
 
 
   
 
 
 
Divided by ounces produced
   97    97 
Cash Cost, Before
By-product
Credits, per Ounce
  $1,415   $1,415 
By-product
credits per ounce
   (6)    (6) 
  
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $1,409   $1,409 
  
 
 
   
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $1,735   $1,735 
By-product
credits per ounce
   (6)    (6) 
  
 
 
   
 
 
 
AISC, After
By-product
Credits, per Ounce
  $1,729   $1,729 
  
 
 
   
 
 
 
48
Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2022 
   Total Silver   Total Gold   Total 
Total cost of sales
  $246,423   $ 183,570   $429,993 
Depreciation, depletion and amortization
   (59,509)    (46,394)    (105,903) 
Treatment costs
   40,640    1,345    41,985 
Change in product inventory
   12,519    (936)    11,583 
Reclamation and other costs
   (2,757)    (623)    (3,380) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   237,316    136,962    374,278 
Reclamation and other costs
   2,961    623    3,584 
Sustaining exploration
   7,077    4,886    11,963 
Sustaining capital
   56,114    25,587    81,701 
General and administrative
   28,989    —      28,989 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   332,457    168,058    500,515 
By-product
credits:
      
Zinc
   (109,081)    —      (109,081) 
Gold
   (55,966)    —      (55,966) 
Lead
   (60,624)    —      (60,624) 
Silver
     (485)    (485) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (225,671)    (485)    (226,156) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $11,645   $136,477   $148,122 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $106,786   $167,573   $274,359 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   10,498    97   
Cash Cost, Before
By-product
Credits, per Ounce
  $22.61   $1,415   
By-product
credits per ounce
   (21.50)    (6)   
  
 
 
   
 
 
   
Cash Cost, After
By-product
Credits, per Ounce
  $1.11   $1,409   
  
 
 
   
 
 
   
AISC, Before
By-product
Credits, per Ounce
  $31.67   $1,735   
By-product
credits per ounce
   (21.50)    (6)   
  
 
 
   
 
 
   
AISC, After
By-product
Credits, per Ounce
  $10.17   $1,729   
  
 
 
   
 
 
   
49
Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2021 
   Greens
Creek		   Lucky
Friday		   Corporate
and other
 (2)
   Total Silver 
Total cost of sales
  $163,861   $74,287   $95   $238,243 
Depreciation, depletion and amortization
   (42,410)    (20,328)    —      (62,738) 
Treatment costs
   27,444    13,087    —      40,531 
Change in product inventory
   (156)    (1,757)    —      (1,913) 
Reclamation and other costs
   (1,777)    (840)    (95)    (2,712) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   146,962    64,449      211,411 
Reclamation and other costs
   2,543    792      3,335 
Sustaining exploration
   3,895    —      1,359    5,254 
Sustaining capital
   17,459    19,104    —      36,563 
General and administrative
   —      —      27,985    27,985 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   170,859    84,345    29,344    284,548 
By-product
credits:
        
Zinc
   (74,571)    (14,457)    —      (89,028) 
Gold
   (56,299)    —        (56,299) 
Lead
   (23,265)    (30,762)    —      (54,027) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (154,135)    (45,219)    —      (199,354) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $(7,173)   $19,230   $—     $12,057 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $16,724   $39,126   $ 29,344   $85,194 
  
 
 
   
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   6,981    2,609      9,590 
Cash Cost, Before
By-product
Credits, per Ounce
  $21.05   $24.70     $22.05 
By-product
credits per ounce
   (22.08)    (17.33)      (20.79) 
  
 
 
   
 
 
     
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $(1.03)   $7.37     $1.26 
  
 
 
   
 
 
     
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $24.48   $32.33     $29.67 
By-product
credits per ounce
   (22.08)    (17.33)      (20.79) 
  
 
 
   
 
 
     
 
 
 
AISC, After
By-product
Credits, per Ounce
  $2.40   $15.00     $8.88 
  
 
 
   
 
 
     
 
 
 
50
Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2021 
   Casa
Berardi		   Nevada
Operations		   Total
Gold		 
Total cost of sales
  $ 172,760   $46,832   $ 219,592 
Depreciation, depletion and amortization
   (61,159)    (15,021)    (76,180) 
Treatment costs
   1,723    1,731    3,454 
Change in product inventory
   (2,401)    (9,951)    (12,352) 
Reclamation and other costs
   (632)    299    (333) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   110,291    23,890    134,181 
Reclamation and other costs
   632    681    1,313 
Sustaining exploration
   3,551    —      3,551 
Sustaining capital
   21,030    195    21,225 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   135,504    24,766    160,270 
By-product
credits:
      
Silver
   (656)    (1,131)    (1,787) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (656)    (1,131)    (1,787) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $109,635   $22,759   $132,394 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $134,848   $23,635   $158,483 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   97    20    117 
Cash Cost, Before
By-product
Credits, per Ounce
  $1,134   $1,180   $1,142 
By-product
credits per ounce
   (7)    (56)    (15) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $1,127   $1,124   $1,127 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $1,394   $1,223   $1,364 
By-product
credits per ounce
   (7)    (56)    (15) 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Ounce
  $1,387   $1,167   $1,349 
  
 
 
   
 
 
   
 
 
 
51
Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2021 
   Total Silver   Total Gold   Total 
Total cost of sales
  $238,243   $ 219,592    457,835 
Depreciation, depletion and amortization
   (62,738)    (76,180)    (138,918) 
Treatment costs
   40,531    3,454    43,985 
Change in product inventory
   (1,913)    (12,352)    (14,265) 
Reclamation and other costs
   (2,712)    (333)    (3,045) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   211,411    134,181    345,592 
Reclamation and other costs
   3,335    1,313    4,648 
Sustaining exploration
   5,254    3,551    8,805 
Sustaining capital
   36,563    21,225    57,788 
General and administrative
   27,985    —      27,985 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   284,548    160,270    444,818 
By-product
credits:
      
Zinc
   (89,028)    —      (89,028) 
Gold
   (56,299)    —      (56,299) 
Lead
   (54,027)    —      (54,027) 
Silver
   —      (1,787)    (1,787) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (199,354)    (1,787)    (201,141) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $12,057   $132,394   $144,451 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $85,194   $158,483   $243,677 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   9,590    117   
Cash Cost, Before
By-product
Credits, per Ounce
  $22.05   $1,142   
By-product
credits per ounce
   (20.79)    (15)   
  
 
 
   
 
 
   
Cash Cost, After
By-product
Credits, per Ounce
  $1.26   $1,127   
  
 
 
   
 
 
   
AISC, Before
By-product
Credits, per Ounce
  $29.67   $1,364   
By-product
credits per ounce
   (20.79)    (15)   
  
 
 
   
 
 
   
AISC, After
By-product
Credits, per Ounce
  $8.88   $1,349   
  
 
 
   
 
 
   
(1)
Includes all direct and indirect operating costs related to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense,
on-site
general and administrative costs and royalties, before
by-product
revenues earned from all metals other than the primary metal produced at each operation. AISC, Before
By-product
Credits also includes
on-site
exploration, reclamation, and sustaining capital costs.
(2)
AISC, Before
By-product
Credits for our consolidated silver properties includes corporate costs for general and administrative expense, exploration and sustaining capital.

Financial Liquidity and Capital Resources

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 developmentexpenditures, exploration and explorationpre-development projects, while returning cash to stockholders through dividends and potential share repurchases.

At September 30, 2022,March 31, 2023, we had $144.7$95.9 million in cash and cash equivalents, of which $30.8$25.6 million was held in foreign subsidiaries’subsidiaries' local currency that we anticipate utilizing for near-term operating, exploration or capital costs by those foreign subsidiaries. We also have USD cash and cash equivalent balances held by our foreign subsidiaries that, if repatriated,

52
Table of Contents
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

33

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.

As discussed in
Overview
above, we continue to address the
COVID-19
outbreak and face uncertainty related to the potential additional impacts it could have on our operations. The impacts of
COVID-19
and increasing or prolonged restrictions, if required, on our operations could require access to additional sources of liquidity, which may not be available to us.

Pursuant to our common stock dividend policy described in

Note 12
11of
Notes to Consolidated Financial Statements
in our 20212022 Form
10-K,
our board of directors declared and paid dividends on our common stock totaling $3.8 million and $3.4 million, in each of the first second and third quarters of 20222023 and $4.7 million, $6.0 million and $6.0 million in the comparable periods of 2021,2022, 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  $0.015
$20  $0.0025  $0.01  $0.015  $0.025
$25  $0.0100  $0.04  $0.015  $0.055
$30  $0.0150  $0.06  $0.015  $0.075
$35  $0.0250  $0.10  $0.015  $0.115
$40  $0.0350  $0.14  $0.015  $0.155
$45  $0.0450  $0.18  $0.015  $0.195
$50  $0.0550  $0.22  $0.015  $0.235

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

 

$0.015

$

20

 

 

$0.0025

 

$0.01

 

$0.015

 

$0.025

$

25

 

 

$0.010

 

$0.04

 

$0.015

 

$0.055

$

30

 

 

$0.015

 

$0.06

 

$0.015

 

$0.075

$

35

 

 

$0.025

 

$0.10

 

$0.015

 

$0.115

$

40

 

 

$0.035

 

$0.14

 

$0.015

 

$0.155

$

45

 

 

$0.045

 

$0.18

 

$0.015

 

$0.195

$

50

 

 

$0.055

 

$0.22

 

$0.015

 

$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
11of
Notes to Consolidated Financial Statements
in our 20212022 Form
10-K,
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, 2022March 31, 2023 and December 31, 2021,2022, 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. The closing price of our common stock at November 4, 2022, was $4.76 per share.

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”
(ATM) “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 the equity distributionthat agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form
S-3.
As of September 30, 2022, During the three months ended March 31, 2023, we had sold 1,176,8612,173,274 shares under the agreement for proceeds of $4.5$11.9 million, net of commissions and fees of approximately $0.1$0.2 million. All of the sales occurred during September 2022.
53
Table of Contents

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 New Credit Agreement, we believe we will be able to meet our obligations and other potential cash requirements during the next 12 months from the date of this report. 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 New Credit Agreement; deferral of revenues,
care-and-maintenance
and other costs related to addressing the impacts of
COVID-19
on our operations; 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 $150 $190to 165 $200million will be spent in 20222023 on capital expenditures, primarily for equipment, infrastructure, and development at our mines, including $93.2$54.4 million already incurred as of September 30, 2022,March 31, 2023, before any lease financing. We also estimate exploration and
pre-development
expenditures will total approximately $45.0$33.0 million in 2022,2023, including $39.1$5.0 million already incurred as of September 30, 2022.March 31, 2023. Our expenditures for these items and our related plans for 20222023 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, and other factors. A sustained downturn in metals

34

prices, significant increase in operational or capital costs or other uses of cash, 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):

   
September 30,
2022
   
December 31,
2021
 
Cash and cash equivalents held in U.S. dollars
  $ 113.9   $ 196.2 
Cash and cash equivalents held in foreign currency
   30.8    13.8 
  
 
 
   
 
 
 
Total cash and cash equivalents
   144.7    210.0 
Marketable equity securities –
non-current
   13.3    14.4 
  
 
 
   
 
 
 
Total cash, cash equivalents and investments
  $158.0   $224.4 
  
 
 
   
 
 
 

 

 

March 31, 2023

 

 

December 31, 2022

 

Cash and cash equivalents held in U.S. dollars

 

$

70.3

 

 

$

86.8

 

Cash and cash equivalents held in foreign currency

 

 

25.6

 

 

 

17.9

 

Total cash and cash equivalents

 

 

95.9

 

 

 

104.7

 

Marketable equity securities - non-current

 

 

26.4

 

 

 

24.0

 

Total cash, cash equivalents and investments

 

$

122.3

 

 

$

128.7

 

Cash and cash equivalents decreased by $65.3$8.8 million in the first ninethree months of 2022.2023. Cash held in foreign currencies represents balances in Canadian dollars and Mexican Pesos, (“MXN”), with the $17.0$7.7 million increase in the first ninethree months of 20222023 resulting from increases in CAD held following the Alexco acquisition. The value of

non-current
marketable equity securities decreasedincreased by $1.1$2.4 million.
   
Nine Months Ended
 
   
September 30,
2022
   
September 30,
2021
 
Cash provided by operating activities (in millions)
  
$
 53.8
 
  
$
 167.0
 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

Cash provided by operating activities (in millions)

 

$

40.6

 

 

$

37.9

 

Cash provided by operating activities infor the first ninethree months ended March 31, 2023 of 2022 of $53.8$40.6 million represented a $113.2$2.7 million decrease increasecompared to the $167.0$37.9 million provided by operatingcompared to the same period for 2022. The increase was due to working capital management activities generating $1.1 million of cash inflows in the first ninethree months of 2021. $93.2 million of the variance was the result of a net lossended March 31, 2023 compared to a net income in 2021, as adjusted for

non-cash
items. Net working capital changes in 2022 resulted in an outflowoutflows of $11.0 million versus an inflow of $8.9$7.4 million in 2021 reflecting an increase in inventory balances inthe same period for 2022 primarily due to enhanced accounts receivable collection activities, partially offset by lower income adjusted for non cash items of $5.8 million in the deferral of a shipment from Greens Creekthree months ended March 31, 2023 compared to the fourth quarter ofsame period for 2022, reflecting lower realized prices and an inventory build at Lucky Friday, changes in fair value of the net hedge book and collections of accounts receivable balances.
   
Nine Months Ended
 
   
September 30,
2022
   
September 30,
2021
 
Cash used in investing activities (in millions)
  
$
(127.7
) 
  
$
(78.0
) 
54
Table of Contents
higher production costs.

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

Cash used in investing activities (in millions)

 

$

(54.4

)

 

$

(29.2

)

During the first ninethree months of 2022,ended March 31, 2023, we invested $93.2$54.4 million in capital expenditures, excluding $9.7 million in

non-cash
finance lease additions, an increase of $13.0$33.0 million compared to the same period in 2021.2022. The variance was primarily due to $17.1 million spend at Keno Hill during the three months ended March 31, 2023 and increased spending at Lucky Friday andCasa Berardi, Greens Creek partially offset by lower spending at Casa Berardi. As a result of the Alexco acquisition, we assumed a cash balance of $9.0 million, net of transaction costs of $5.1 million having advanced $25.0 million to Alexco
pre-acquisition,
to enable them to fund development of the Keno Hill mining district prior to the acquisition closing.and Lucky Friday. During the first nine months ofsame period in 2022, we acquired investmentsinvested $10.9 million in othermarketable securities of mining companies and short term investments for a total of $30.5 million, and disposed of the short-term investments and a mining company investment, generating totalgenerated proceeds of $9.4 million.
   Nine Months Ended 
   September 30,
2022		   September 30,
2021		 
Cash provided by (used in) financing activities (in millions)
  
$
 9.5
 
  
$
(27.4
) 
$2.5 million upon disposal of an investment.

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

Cash provided by (used in) financing activities (in millions)

 

$

5.0

 

 

$

(7.2

)

During the first ninethree months ofended March 31, 2023 and 2022, and 2021, we paid cash dividends on our common and preferred stock totaling $10.5 $3.9million and $17.2$3.5 million, respectively. Due to lower realized silver prices during 2022 to date, the dividends paid on our common stock were $6.8 million lower than in the prior year, reflecting our dividend policy discussed above. We issued stock under our ATM program described above for net proceeds of $4.5$11.9 million in 2022.the three months ended March 31, 2023. We made repayments on our finance leases of $5.2$2.5 million and $5.6$1.7 million in the nine-month periodsthree months ended September 30,March 31, 2023 and 2022, and 2021, respectively. We acquired treasury shares for $3.7 million and $4.5 million in the first half of 2022 and 2021, respectively, as a result of employees’ elections to utilize net share settlement to satisfy their tax withholding obligations related to incentive compensation paid in stock.

The effect of changes in foreign exchange rates resulted in a $0.8 million decrease in cash and cash equivalents in the first nine months of 2022 compared to a decrease of $0.5 million of 2021, with the variance due to depreciation of the CAD and MXN relative to the USD in the 2022 period.

Contractual Obligations, Contingent Liabilities and Commitments

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, certain capital expenditures and lease arrangements as of September 30, 2022March 31, 2023 (in thousands):

 

 

Payments Due By Period

 

 

 

Less than 1 year

 

 

1-3 years

 

 

4-5 years

 

 

More than
5 years

 

 

Total

 

Purchase obligations (1)

 

$

50,910

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

50,910

 

Credit facility(2)

 

 

1,074

 

 

 

2,149

 

 

 

1,398

 

 

 

—

 

 

 

4,621

 

Finance lease commitments (3)

 

 

8,812

 

 

 

10,494

 

 

 

1,350

 

 

 

—

 

 

 

20,656

 

Operating lease commitments (4)

 

 

2,652

 

 

 

2,557

 

 

 

2,417

 

 

 

6,307

 

 

 

13,933

 

Senior Notes (5)

 

 

34,438

 

 

 

68,876

 

 

 

539,569

 

 

 

—

 

 

 

642,883

 

IQ Notes (6)

 

 

2,322

 

 

 

38,604

 

 

 

—

 

 

 

—

 

 

 

40,926

 

Total contractual cash obligations

 

$

100,208

 

 

$

122,680

 

 

$

544,734

 

 

$

6,307

 

 

$

773,929

 

35

(1)
Consists of open purchase orders and commitments of approximately $15.2 million, $29.4 million, $1.3 million, $1.4 million and $3.7 million for various capital and non-capital items at Greens Creek, Lucky Friday, Casa Berardi, Nevada Operations and Keno Hill, respectively.
   Payments Due By Period 
   Less than 1
year		   1-3 years   
4-5
years		   More than
5 years		   Total 
Purchase obligations
(1)
  $33,514   $—     $—     $—     $33,514 
Credit facility
(2)
   25,722    1,447    583    —      27,752 
Finance lease commitments
(3)
   9,296    10,985    2,017    —      22,298 
Operating lease commitments
(4)
   3,101    2,630    2,039    5,878    13,648 
Senior Notes
(5)
   34,438    68,876    68,876    487,914    660,104 
IQ Notes
(6)
   2,293    39,257    —      —      41,550 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total contractual cash obligations
  $108,364   $123,195   $73,515   $493,792   $798,866 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 

(2)
The Credit Agreement provides for a $150 million revolving credit facility. We had $6.7 million in letters of credit outstanding as of March 31, 2023. The amounts in the table above assume no additional amounts will be drawn in future periods, and include only the standby fee on the current undrawn balance and accrued interest. For more information on our credit facility, see Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited).
(1)
Consists of open purchase orders and commitments of approximately $9.0 million at Greens Creek, $1.2 million at Casa Berardi, $20.4 million at Lucky Friday, $2.6 million at the Nevada Operations and $0.3 at Keno Hill.

(2)
The New Credit Agreement provides for a $150 million revolving credit facility, under which $25 million was drawn as of September 30, 2022 and repaid October 4, 2022. We had $7.8 million in letters of credit outstanding as of September 30, 2022. The amounts in the table above assume no additional amounts will be drawn in future periods, and include only the standby fee on the current undrawn balance. For more information on our credit facility, see
Note 7
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
.
(3)
(3)
Includes scheduled finance lease payments of $14.2 million, $3.4 million, $1.4 million, $0.049 million (including interest) and $3.3Includes scheduled finance lease payments of $11.8 million, $5.5 million, $1.1 million, and $2.3 million, respectively, for equipment at our Greens Creek, Lucky Friday, Casa Berardi, Nevada Operations and Keno Hill.

(4)
55We enter into operating leases in the normal course of business. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease arrangements.

(5)
On February 19, 2020, we completed an offering of $475 million in aggregate principal amount of our Senior Notes due February 15, 2028. The Senior Notes bear interest at a rate of 7.25% per year, with interest payable on February 15 and August 15 of each year. See Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information.

(6)
TableOn July 9, 2020, we entered into a note purchase agreement pursuant to which we issued our IQ Notes for CAD$50 million (approximately USD$36.8 million at the time of Contentsthe transaction) in aggregate principal amount. The IQ Notes bear interest on amounts outstanding at a rate of 6.515% per year, payable on January 9 and July 9 of each year. See Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information.
(4)
We enter into operating leases in the normal course of business. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease arrangements.
(5)
On February 19, 2020, we completed an offering of $475 million in aggregate principal amount of our Senior Notes due February 15, 2028. The Senior Notes bear interest at a rate of 7.25% per year, with interest payable on February 15 and August 15 of each year. See
Note 7
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information.
(6)
On July 9, 2020, we entered into a note purchase agreement pursuant to which we issued our IQ Notes for CAD$50 million (approximately USD$36.8 million at the time of the transaction) in aggregate principal amount. The IQ Notes bear interest on amounts outstanding at a rate of 6.515% per year, payable on January 9 and July 9 of each year. See
Note 7
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information.

We record liabilities for costs associated with mine closure, reclamation of land and other environmental matters. At September 30, 2022,March 31, 2023, our liabilities for these matters totaled $116.3$118.3 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 10
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
.

Critical Accounting Estimates

There have been no significant changes to the critical accounting estimates disclosed in

Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
in our 20212022 Form
10-K.

Off-Balance

Sheet Arrangements

At September 30, 2022,March 31, 2023, 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.

Guarantor Subsidiaries

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’sHecla'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’sHecla'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.; and 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.

36

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:

•
56
Table of Contents
Investments in subsidiaries
. The acquisition of a company results in an investment in debt or equity capital on the records of the parent company and a contribution to debt or equity capital on the records of the subsidiary. Such investments and capital contributions are eliminated in consolidation.
•
Capital contributions
. Certain of Hecla’sHecla's subsidiaries do not generate cash flow, either at all or that is sufficient to meet their capital needs, and their cash requirements are routinely met with inter-company advances from their parent companies. Generally on an annual basis, when not otherwise intended as debt, the boards of directors of such parent companies declare contributions of capital to their subsidiary companies, which increase the parents’parents' investment and the subsidiaries’subsidiaries' additional
paid-in
capital. In consolidation, investments in subsidiaries and related additional
paid-in
capital are eliminated.
•
Debt.
At times, inter-company debt agreements have been established between certain of Hecla’sHecla's subsidiaries and their parents. The related debt liability and receivable balances, accrued interest expense (if any) and income activity (if any), and payments of principal and accrued interest amounts (if any) by the subsidiary companies to their parents are eliminated in consolidation.
•
Dividends.
Certain of Hecla’sHecla's subsidiaries which generate cash flow routinely provide cash to their parent companies through inter-company transfers. On at least an annual basis, the boards of directors of such subsidiary companies declare dividends to their parent companies, which reduces the subsidiaries’subsidiaries' retained earnings and increases the parents’parents' dividend income. In consolidation, such activity is eliminated.
•
Deferred taxes
. Our ability to realize deferred tax assets and liabilities is considered for two consolidated tax groups of subsidiaries within the United States: The Nevada U.S. Group and the Hecla U.S. Group. Within each tax group, all subsidiaries’subsidiaries' estimated future taxable income contributes to the ability of their tax group to realize all such assets and liabilities. However, when Hecla’sHecla's subsidiaries are viewed independently, we use the separate return method to assess the realizability of each subsidiary’ssubsidiary's deferred tax assets and whether a valuation allowance is required against such deferred tax assets. In some instances, a parent company or subsidiary may possess deferred tax assets whose realization depends on the future taxable incomes of other subsidiaries on a consolidated-return basis, but would not be considered realizable if such parent or subsidiary filed on a separate stand-alone basis. In such a situation, a valuation allowance is assessed on that subsidiary’ssubsidiary's deferred tax assets, with the resulting adjustment reported in the eliminations column of the guarantor and parent’sparent's financial statements, as is the case in the unaudited interim financial statements set forth below. The separate return method can result in significant eliminations of deferred tax assets and liabilities and related income tax provisions and benefits.
Non-current
deferred tax asset balances are included in other
non-current
assets on the consolidating balance sheets and make up a large portion of that item, particularly for the guarantor balances.

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.

57

37

Table of Contents

Unaudited Interim Condensed Consolidating Balance Sheets

   
As of September 30, 2022
 
   
Parent
  
Guarantors
  
Non-

Guarantors
   
Eliminations
  
Consolidated
 
           
   
(in thousands)
 
Assets
       
Cash and cash equivalents
  $100,333  $24,486  $19,850   $—    $144,669 
Other current assets
   11,939   118,657   8,655    —     139,251 
Properties, plants, equipment and mineral interests, net
   1,913   2,288,145   263,916     2,553,974 
Intercompany receivable (payable)
   (195,180)   (188,353)   321,214    62,319   —   
Investments in subsidiaries
   2,110,836   —     —      (2,110,836)   —   
Other
non-current
assets
   378,230   29,860   32,545    (343,900)   96,735 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Total assets
  $2,408,071  $2,272,795  $646,180   $(2,392,417)  $2,934,629 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Liabilities and Stockholders’ Equity
       
Current liabilities
  $(105,320)  $246,660  $12,561   $7,484  $161,385 
Long-term debt
   530,745   20,242   —      —     550,987 
Non-current
portion of accrued reclamation
   —     99,888   5,829    —     105,717 
Non-current
deferred tax liability
   22,098   408,148   13,043    (289,064)   154,225 
Other
non-current
liabilities
   5,780   1,076   691    —     7,547 
Stockholders’ equity
   1,954,768   1,496,781   614,056    (2,110,837)   1,954,768 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Total liabilities and stockholders’ equity
  $2,408,071  $2,272,795  $646,180   $(2,392,417)  $2,934,629 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 

 

 

As of March 31, 2023

 

 

 

Parent

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

54,365

 

 

$

31,522

 

 

$

10,052

 

 

$

—

 

 

$

95,939

 

Other current assets

 

 

12,235

 

 

 

133,378

 

 

 

3,398

 

 

 

—

 

 

 

149,011

 

Properties, plants, equipment and mineral interests, net

 

 

(38

)

 

 

2,579,385

 

 

 

8,218

 

 

 

—

 

 

 

2,587,565

 

Intercompany receivable (payable)

 

 

(188,218

)

 

 

(708,757

)

 

 

562,447

 

 

 

334,528

 

 

 

—

 

Investments in subsidiaries

 

 

2,267,701

 

 

 

—

 

 

 

—

 

 

 

(2,267,701

)

 

 

—

 

Other non-current assets

 

 

389,556

 

 

 

21,303

 

 

 

20,979

 

 

 

(338,729

)

 

 

93,109

 

Total assets

 

$

2,535,601

 

 

$

2,056,831

 

 

$

605,094

 

 

$

(2,271,902

)

 

$

2,925,624

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

32,312

 

 

$

134,219

 

 

$

3,023

 

 

$

(4,201

)

 

$

165,353

 

Long-term debt

 

 

506,584

 

 

 

10,377

 

 

 

—

 

 

 

—

 

 

 

516,961

 

Non-current portion of accrued reclamation

 

 

—

 

 

 

107,880

 

 

 

1,928

 

 

 

—

 

 

 

109,808

 

Non-current deferred tax liability

 

 

—

 

 

 

121,081

 

 

 

—

 

 

 

—

 

 

 

121,081

 

Other non-current liabilities

 

 

4,548

 

 

 

6,721

 

 

 

8,995

 

 

 

—

 

 

 

20,264

 

Stockholders' equity

 

 

1,992,157

 

 

 

1,676,553

 

 

 

591,148

 

 

 

(2,267,701

)

 

 

1,992,157

 

Total liabilities and stockholders' equity

 

$

2,535,601

 

 

$

2,056,831

 

 

$

605,094

 

 

$

(2,271,902

)

 

$

2,925,624

 

Unaudited Interim Condensed Consolidating Statements of Operations

   
Three Months Ended September 30, 2022
 
   
Parent
  
Guarantors
  
Non-

Guarantors
  
Eliminations
  
Consolidated
 
           
   
(in thousands)
 
Revenues
  $1,640  $144,634  $65  $—    $146,339 
Cost of sales
   204   (105,031)   (73)   —     (104,900) 
Depreciation, depletion, amortization
   —     (32,992)   —     —     (32,992) 
General and administrative
   (3,792)   (5,664)   (1,547)   —     (11,003) 
Exploration and
pre-development
   (292)   (13,143)   (1,693)   —     (15,128) 
Equity in earnings of subsidiaries
   2,871   —     —     (2,871)   —   
Other (expense) income
   (32,300)   12,289   (4,398)   9,040   (15,369) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) before income taxes
   (31,669)   93   (7,646)   6,169   (33,053) 
(Provision) benefit from income taxes
   8,142   10,424   —     (9,039)   9,527 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   (23,527)   10,517   (7,646)   (2,870)   (23,526) 
Preferred stock dividends
   (138)   —     —     —     (138) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) applicable to common stockholders
  $(23,665)  $10,517  $(7,646)  $(2,870)  $(23,664) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   (23,527)   10,517   (7,646)   (2,870)   (23,526) 
Changes in comprehensive income (loss)
   (12,692)   —     —     —     (12,692) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive income (loss)
  $(36,219)  $10,517  $(7,646)  $(2,870)  $(36,218) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
58

 

 

Three Months Ended March 31, 2023

 

 

 

Parent

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

 

 

(in thousands)

 

Revenues

 

$

900

 

 

$

198,600

 

 

$

—

 

 

$

—

 

 

$

199,500

 

Cost of sales and other direct production costs

 

 

(878

)

 

 

(124,672

)

 

 

—

 

 

 

—

 

 

 

(125,550

)

Depreciation, depletion, amortization

 

 

—

 

 

 

(39,002

)

 

 

—

 

 

 

—

 

 

 

(39,002

)

General and administrative

 

 

(4,863

)

 

 

(6,829

)

 

 

(378

)

 

 

—

 

 

 

(12,070

)

Exploration and pre-development

 

 

(91

)

 

 

(4,008

)

 

 

(868

)

 

 

—

 

 

 

(4,967

)

Equity in earnings of subsidiaries

 

 

2,015

 

 

 

—

 

 

 

—

 

 

 

(2,015

)

 

 

—

 

Other (expense) income

 

 

4,953

 

 

 

(20,038

)

 

 

2,473

 

 

 

(5,230

)

 

 

(17,842

)

Income before income and mining taxes

 

 

2,036

 

 

 

4,051

 

 

 

1,227

 

 

 

(7,245

)

 

 

69

 

Income and mining tax expense

 

 

(5,209

)

 

 

(3,263

)

 

 

—

 

 

 

5,230

 

 

 

(3,242

)

Net income (loss)

 

 

(3,173

)

 

 

788

 

 

 

1,227

 

 

 

(2,015

)

 

 

(3,173

)

Preferred stock dividends

 

 

(138

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(138

)

Net income (loss) applicable to common stockholders

 

$

(3,311

)

 

$

788

 

 

$

1,227

 

 

$

(2,015

)

 

$

(3,311

)

Net income (loss)

 

 

(3,173

)

 

 

788

 

 

 

1,227

 

 

 

(2,015

)

 

 

(3,173

)

Changes in comprehensive income (loss)

 

 

6,516

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,516

 

Comprehensive income (loss)

 

$

3,343

 

 

$

788

 

 

$

1,227

 

 

$

(2,015

)

 

$

3,343

 

38

Table of Contents
   
Nine Months Ended September 30, 2022
 
   
Parent
  
Guarantors
  
Non-

Guarantors
  
Eliminations
  
Consolidated
 
           
   
(in thousands)
 
Revenues
  $8,193  $515,822  $65  $—    $524,080 
Cost of sales
   2,000   (328,506)   (73)   —     (326,579) 
Depreciation, depletion, amortization
   —     (106,362)   —     —     (106,362) 
General and administrative
   (12,682)   (14,464)   (1,843)   —     (28,989) 
Exploration and
pre-development
   (586)   (32,489)   (6,061)   —     (39,136) 
Equity in earnings of subsidiaries
   (5,476)   —     —     5,476   —   
Other expense
   (25,483)   (13,577)   (11,653)   (8,839)   (59,552) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) before income taxes
   (34,034)   20,424   (19,565)   (3,363)   (36,538) 
(Provision) benefit from income taxes
   1,137   (6,345)   11   8,839   3,642 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   (32,897)   14,079   (19,554)   5,476   (32,896) 
Preferred stock dividends
   (414)   —     —     —     (414) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) applicable to common stockholders
  $(33,311)  $14,079  $(19,554)  $5,476  $(33,310) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   (32,897)   14,079   (19,554)   5,476   (32,896) 
Changes in comprehensive income (loss)
   19,491   —     —     —     19,491 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive income (loss)
  $(13,406)  $14,079  $(19,554)  $5,476  $(13,405) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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Table of Contents

Unaudited Interim Condensed Consolidating Statements of Cash Flows

   
Nine Months Ended September 30, 2022
 
   
Parent
  
Guarantors
  
Non-

Guarantors
  
Eliminations
  
Consolidated
 
           
   
(in thousands)
 
Cash flows from operating activities
  $287,919  $145,834  $(153,190)  $(226,793)  $53,770 
Cash flows from investing activities:
      
Additions to properties, plants, and equipment
   —     (90,138)   (3,099)   —     (93,237) 
Acquisition, net
   8,952    
—  
 
   
8,952
 
Other investing activities, net
   (573,131)   (1,880)   (16,525)   548,130   (43,406) 
Cash flows from financing activities:
      
Dividends paid to stockholders
   (10,549)   —     —     —     (10,549) 
Issuance of debt
   25,000   —     —      25,000 
Payments on debt
   —     (5,222)   —     —     (5,222) 
Other financing activity
   187,036   (37,653)   172,302   (321,337)   348 
Effect of exchange rate changes on cash
   —     548   (256)   —     (804) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Changes in cash, cash equivalents and restricted cash
   (74,773)   10,393   (768)    (65,148) 
Beginning cash, cash equivalents and restricted cash
   175,108   15,135   20,820   —     211,063 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending cash, cash equivalents and restricted cash
  $100,335  $25,528  $20,052  $—    $145,915 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk

 

 

Three Months Ended March 31, 2023

 

 

 

Parent

 

 

Guarantors

 

 

Non-Guarantors

 

 

Eliminations

 

 

Consolidated

 

 

 

(in thousands)

 

Cash flows from operating activities

 

$

5,497

 

 

$

52,516

 

 

$

(28,184

)

 

$

10,774

 

 

$

40,603

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions to properties, plants, and equipment

 

 

—

 

 

 

(54,443

)

 

 

—

 

 

 

—

 

 

 

(54,443

)

Other investing activities, net

 

 

(40,113

)

 

 

—

 

 

 

—

 

 

 

40,113

 

 

 

—

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to common and preferred stockholders

 

 

(3,891

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,891

)

Issuance of debt

 

 

13,000

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

13,000

 

Payments on debt

 

 

(13,000

)

 

 

(2,135

)

 

 

(329

)

 

 

—

 

 

 

(15,464

)

Other financing activity

 

 

22,983

 

 

 

15,557

 

 

 

23,750

 

 

 

(50,887

)

 

 

11,403

 

Effect of exchange rate changes on cash

 

 

—

 

 

 

171

 

 

 

—

 

 

 

—

 

 

 

171

 

Changes in cash, cash equivalents and restricted cash

 

 

(15,524

)

 

 

11,666

 

 

 

(4,763

)

 

 

—

 

 

 

(8,621

)

Beginning cash, cash equivalents and restricted cash

 

 

69,890

 

 

 

21,202

 

 

 

14,815

 

 

 

—

 

 

 

105,907

 

Ending cash, cash equivalents and restricted cash

 

$

54,366

 

 

$

32,868

 

 

$

10,052

 

 

$

—

 

 

$

97,286

 

39

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, 2022,March 31, 2023, 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
(See Item 1A. – Risk Factors
of our 20212022 Form
10-K),
as updated in
Part II. Item 1A – Risk Factors
in our Quarterly Report on Form
10-Q
for the quarter ended June 30, 2022.
.

Metals Prices

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 20212022 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 20212022 Form
10-K). At
September 30, 2022, March 31, 2023, metals contained in concentrate sales and exposed to future price changes totaled 2.235 3,350million ounces of silver, 1,8407,660 ounces of gold, 8,500 7,050tons of zinc, and 6,8008,225 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 $8.2$12.8 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.
60
Table of Contents

Commodity-Price Risk Management

See

Note 8
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
and
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
in our 20212022 Form
10-K
for a description of our commodity-price risk management program.

Foreign Currency Risk Management

We operate or have mining interests in Canada, and Mexico, which exposes us to risks associated with fluctuations in the exchange rates between the USD and the CAD and MXN, respectively.CAD. We have determined the functional currency for our Canadian and Mexican operations is the USD. As such, foreign exchange gains and losses associated with the

re-measurement
of monetary assets and liabilities from CAD and MXN to USD are recorded to earnings each period. For the three and nine months ended September 30,March 31, 2023 and 2022, we recognized a net foreign exchange gain of $5.7$0.4 million and $8.1loss of $2.0 million, respectively, compared to $4.0 million and $0.02 million, respectively for the comparable periods in 2021.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, 2022March 31, 2023 would have resulted in a change of approximately $7.2 million in our net foreign exchange gain or loss. A 10% change in the exchange rate between the USD and MXN from the rate at September 30, 2022 would have resulted in a change of approximately $0.027 $10.7million 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 foreign currency.

See

Note 8
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
and
Note 11
9of
Notes to Consolidated Financial Statements
in our 20212022 Form
10-K
for a description of our foreign currency risk management.
Item 4.
Controls and Procedures

40

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including the 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, 2022,March 31, 2023, 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 quarter ended September 30, 2022March 31, 2023 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

Hecla Mining Company and Subsidiaries

Item 1.
Legal Proceedings

For information concerning legal proceedings, refer to

Note 10
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

Item 1A. – Risk Factors

of our 20212022 Form
10-K
and Item 1A. – Risk Factors of Part II of our Quarterly Report on Form
10-Q
for our fiscal quarter ended June 30, 2022 set forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results.
61
Table of Contents
Item 4.
Mine Safety Disclosures

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.

41

Item 6. Exhibits

Hecla Mining Company and Wholly Owned Subsidiaries

Form 10-Q – March 31, 2023

Index to Exhibits

Exhibit

Number

Hecla Mining Company and Wholly Owned Subsidiaries
Form
10-Q
– September 30, 2022
Index to Exhibits

Description

4.1(a)

    2.1(a)

Arrangement AgreementIndenture, dated as of July 4, 2022,February 19, 2020, by and among Hecla Mining Company Hecla Canada Ltd.and The Bank of New York Mellon Trust Company, N.A., 1080980 B.C. Ltd. And Alexco Resource Corp.as trustee. Filed as exhibit 2.14.1 to ourRegistrant’s Current Report on Form 8-K filed on July 5, 2022February 19, 2020 (File No. 1-8491) and incorporated herein by reference.

4.1(b)

  10.1

Assignment and Amendment AgreementFirst Supplemental Indenture, dated as of July 25, 2022,February 19, 2020, among Hecla Mining Company, Alexco Resource Corp.as Issuer, certain subsidiaries of Hecla Mining Company, as Guarantors hereto, and the Bank of New York Mellon Trust, N.A., and 1080980 B.C. Ltd.as Trustee. Filed as exhibit 10.24.2 to our QuarterlyRegistrant’s Current Report on Form 10-Q for the quarter ended June 30, 20228-K filed on February 19, 2020 (File No. 1-8491) and incorporated herein by reference.

4.1(c)*

  10.2

Credit AgreementSecond Supplemental Indenture, dated as of July 21, 2022, by andFebruary 6, 2023, among Hecla Mining Company, as Issuer, certain subsidiaries of Hecla Limited, Hecla Alaska LLC, Hecla Greens Creek Mining Company, and Hecla Juneau Mining Company, as Guarantors hereto, and the Borrowers, Bank of America,New York Mellon Trust, N.A., as the Administrative Agent for the Lenders, and various Lenders. Filed as exhibit 10.1 to our Current Report on Form 8-KTrustee. on July 21, 2022 (File No. 1-8491) and incorporated herein by reference. 

31.1*

  10.3

Stream Termination Agreement datedCertification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as of July 4, 2022, by and between Hecla Mining Company and Wheaton Precious Metals Corp. * 

  31.1Certification pursuantAdopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

31.2*

  31.2

Certification pursuantof 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*

  32.1

Certification pursuantof 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*

  32.2

Certification pursuantof 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*

  95

Mine safety information listed in Section 1503 of the Dodd-Frank Act. *

101.INS

101.INS

Inline XBRL Instance Document – Thethe instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. **

101.SCH

101.SCH

Inline XBRL Taxonomy Extension Schema.**Schema Document **

101.CAL

101.CAL

Inline XBRL Taxonomy Extension Calculation.**Calculation Linkbase Document **

101.DEF

101.DEF

Inline XBRL Taxonomy Extension Definition.**Definition Linkbase Document **

101.LAB

101.LAB

Inline XBRL Taxonomy Extension Labels.**Label Linkbase Document **

101.PRE

101.PRE

Inline XBRL Taxonomy Extension Presentation.**Presentation Linkbase Document **

104

104

Cover Page Interactive Data File (formatted as(embedded within the Inline XBRL and contained in Exhibit 101)document) **

*
Filed herewith.
62
Table of Contents

* 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.

Items 3 and 5 of Part II are not applicable and are omitted from this report.

63

42

Table of Contents

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.

HECLA MINING COMPANY
    (Registrant)
Date:

November 9, 2022

HECLA MINING COMPANY

By:

    (Registrant)

Date:

May 10, 2023

By:

/s/ Phillips S. Baker, Jr.

Phillips S. Baker, Jr., President,

Chief Executive Officer and Director

Date:

May 10, 2023

November 9, 2022

By:

By:

/s/ Russell D. Lawlar

Russell D. Lawlar, Senior Vice President,

Chief Financial Officer

64

43