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 June 30, 2022March 31, 2023
or
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to.
|
|
Commission File Number: 1-8491
HECLA MINING COMPANY
(Exact nameName of registrantRegistrant as specifiedSpecified in its Charter)
|
| |||
Delaware | 77-0664171 | |||
(State or incorporation or organization) | (I.R.S. Employer | |||
|
| |||
6500 Mineral Drive, Suite 200 Coeur d’Alene, Idaho | ||||
| 83815-9408 | |||
|
| |||
| ||||
| (Zip Code) |
Registrant’s telephone number, including area code: (208) 769-4100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) | Name of each exchange on which registered | |
Common Stock, par value $0.25 per share |
| HL | New York Stock Exchange | |
Series B Cumulative Convertible Preferred Stock, par value $0.25 per share | HL-PB | 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 __
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 __
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☑ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).☐
Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Shares Outstanding | |
Common stock, par value $0.25 par value per share | 612,636,803 |
Hecla Mining Company and Subsidiaries
Form 10-Q
For the Quarter Ended June 30, 2022March 31, 2023
INDEX*
Page | |||
| |||
PART I. | 3 | ||
Item 1. |
| 3 | |
Condensed Consolidated Balance Sheets - | |||
Notes to Condensed Consolidated Financial Statements |
| ||
Item 2. |
| ||
Item 3. |
|
| |
Item 4. |
| ||
PART | |||
| |||
Item 1. |
| ||
Item 1A. | 41 | ||
Item 4. |
| ||
Item 6. |
| ||
| |||
*Items 2, 3 and 5 of Part II are omitted as they are not applicable. |
2
*Items 2, 3 and 5 of Part II are omitted as they are not applicable.
Part I - Financial Information
Item 1. Financial Statements
Hecla Mining Company and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Loss) (Unaudited)
(Dollars and shares in thousands, except for per-share amounts)
|
| 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 |
|
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
Sales | $ | 191,242 | $ | 217,983 | $ | 377,741 | $ | 428,835 | ||||||||
Cost of sales and other direct production costs | 115,907 | 110,320 | 221,679 | 207,029 | ||||||||||||
Depreciation, depletion and amortization | 38,072 | 45,732 | 73,370 | 92,474 | ||||||||||||
Total cost of sales | 153,979 | 156,052 | 295,049 | 299,503 | ||||||||||||
Gross profit | 37,263 | 61,931 | 82,692 | 129,332 | ||||||||||||
Other operating expenses: | ||||||||||||||||
General and administrative | 9,692 | 11,104 | 17,986 | 19,111 | ||||||||||||
Exploration and pre-development | 11,200 | 11,241 | 24,008 | 17,931 | ||||||||||||
Care and maintenance costs | 5,242 | 5,786 | 11,447 | 10,104 | ||||||||||||
Provision for closed operations and environmental matters | 1,472 | 1,024 | 2,373 | 4,733 | ||||||||||||
Other operating expense | 1,945 | 3,634 | 4,408 | 7,282 | ||||||||||||
Total other operating expenses | 29,551 | 32,789 | 60,222 | 59,161 | ||||||||||||
Income from operations | 7,712 | 29,142 | 22,470 | 70,171 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (10,505 | ) | (10,271 | ) | (20,911 | ) | (21,015 | ) | ||||||||
Fair value adjustments, net | (16,428 | ) | (18,063 | ) | (10,463 | ) | (19,938 | ) | ||||||||
Net foreign exchange gain (loss) | 4,482 | (1,907 | ) | 2,444 | (3,971 | ) | ||||||||||
Other income (expense) | 1,470 | (287 | ) | 2,975 | (439 | ) | ||||||||||
Total other expense | (20,981 | ) | (30,528 | ) | (25,955 | ) | (45,363 | ) | ||||||||
(Loss) income before income and mining taxes | (13,269 | ) | (1,386 | ) | (3,485 | ) | 24,808 | |||||||||
Income and mining tax (provision) benefit | (254 | ) | 4,134 | (5,885 | ) | (609 | ) | |||||||||
Net (loss) income | (13,523 | ) | 2,748 | (9,370 | ) | 24,199 | ||||||||||
Preferred stock dividends | (138 | ) | (138 | ) | (276 | ) | (276 | ) | ||||||||
(Loss) income applicable to common shareholders | $ | (13,661 | ) | $ | 2,610 | $ | (9,646 | ) | $ | 23,923 | ||||||
Comprehensive income (loss): | ||||||||||||||||
Net (loss) income | $ | (13,523 | ) | $ | 2,748 | $ | (9,370 | ) | $ | 24,199 | ||||||
Change in fair value of derivative contracts designated as hedge transactions | 65,348 | 1,620 | 32,183 | 3,452 | ||||||||||||
Comprehensive income | $ | 51,825 | $ | 4,368 | $ | 22,813 | $ | 27,651 | ||||||||
Basic (loss) income per common share after preferred dividends | $ | (0.03 | ) | $ | 0.01 | $ | (0.02 | ) | $ | 0.04 | ||||||
Diluted (loss) income per common share after preferred dividends | $ | (0.03 | ) | $ | 0.01 | $ | (0.02 | ) | $ | 0.04 | ||||||
Weighted average number of common shares outstanding - basic | 539,401 | 535,531 | 538,943 | 534,819 | ||||||||||||
Weighted average number of common shares outstanding - diluted | 539,401 | 542,262 | 538,943 | 541,468 | ||||||||||||
Cash dividends declared per common share | $ | 0.00625 | $ | 0.01 | $ | 0.01225 | $ | 0.02 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
Hecla Mining Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
|
| 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 |
|
Six Months Ended | ||||||||
June 30, 2022 | June 30, 2021 | |||||||
Operating activities: | ||||||||
Net (loss) income | $ | (9,370 | ) | $ | 24,199 | |||
Non-cash elements included in net (loss) income: | ||||||||
Depreciation, depletion and amortization | 73,656 | 92,861 | ||||||
Write-down of inventory | 754 | 6,431 | ||||||
Fair value adjustments, net | (14,185 | ) | 5,214 | |||||
Provision for reclamation and closure costs | 3,271 | 6,183 | ||||||
Stock compensation | 2,525 | 3,302 | ||||||
Deferred income taxes | (1,290 | ) | (7,745 | ) | ||||
Foreign exchange loss | (3,442 | ) | 4,455 | |||||
Other non-cash items, net | 982 | 1,071 | ||||||
Change in assets and liabilities: | ||||||||
Accounts receivable | 19,199 | (9,432 | ) | |||||
Inventories | (8,352 | ) | 5,719 | |||||
Other current and non-current assets | (894 | ) | 4,125 | |||||
Accounts payable and accrued liabilities | 17,119 | (6,489 | ) | |||||
Accrued payroll and related benefits | 278 | (5,351 | ) | |||||
Accrued taxes | (5,683 | ) | (999 | ) | ||||
Accrued reclamation and closure costs and other non-current liabilities | 3,524 | 696 | ||||||
Cash provided by operating activities | 78,092 | 124,240 | ||||||
Investing activities: | ||||||||
Additions to properties, plants, equipment and mineral interests | (55,807 | ) | (53,311 | ) | ||||
Proceeds from disposition of properties, plants and equipment | 730 | 131 | ||||||
Purchases of investments | (21,899 | ) | 0 | |||||
Proceeds from sale of investments | 2,487 | 0 | ||||||
Net cash used in investing activities | (74,489 | ) | (53,180 | ) | ||||
Financing activities: | ||||||||
Acquisition of treasury shares | (3,677 | ) | (4,525 | ) | ||||
Dividends paid to common and preferred stockholders | (7,027 | ) | (10,991 | ) | ||||
Credit facility fees paid | (74 | ) | (82 | ) | ||||
Repayments of finance leases | (3,333 | ) | (3,770 | ) | ||||
Net cash used in financing activities | (14,111 | ) | (19,368 | ) | ||||
Effect of exchange rates on cash | (1,321 | ) | (28 | ) | ||||
Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents | (11,829 | ) | 51,664 | |||||
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period | 211,063 | 130,883 | ||||||
Cash, cash equivalents and restricted cash and cash equivalents at end of period | $ | 199,234 | $ | 182,547 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 18,749 | $ | 18,499 | ||||
Cash paid for income and mining taxes | $ | 11,888 | $ | 9,469 | ||||
Significant non-cash investing and financing activities: | ||||||||
Addition of finance lease obligations and right-of-use assets | $ | 5,051 | $ | 3,120 | ||||
Accounts receivable for proceeds on exchange of investments | $ | 0 | $ | 1,832 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
4
Hecla Mining Company and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except shares)
|
| 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 |
|
June 30, 2022 | December 31, 2021 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 198,193 | $ | 210,010 | ||||
Accounts receivable: | ||||||||
Trade | 17,828 | 36,437 | ||||||
Other, net | 7,696 | 8,149 | ||||||
Inventories: | ||||||||
Concentrates, doré, and stockpiled ore | 30,167 | 25,906 | ||||||
Materials and supplies | 45,200 | 41,859 | ||||||
Derivatives assets | 9,923 | 2,709 | ||||||
Other current assets | 13,389 | 16,557 | ||||||
Total current assets | 322,396 | 341,627 | ||||||
Investments | 23,931 | 10,844 | ||||||
Restricted cash | 1,041 | 1,053 | ||||||
Properties, plants, equipment and mineral interests, net | 2,295,962 | 2,310,810 | ||||||
Operating lease right-of-use assets | 11,649 | 12,435 | ||||||
Deferred income taxes | 45,562 | 45,562 | ||||||
Derivatives assets | 12,897 | 2,503 | ||||||
Other non-current assets | 3,665 | 3,974 | ||||||
Total assets | $ | 2,717,103 | $ | 2,728,808 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 84,997 | $ | 68,100 | ||||
Accrued payroll and related benefits | 26,945 | 28,714 | ||||||
Accrued taxes | 8,341 | 12,306 | ||||||
Finance and operating leases | 8,580 | 8,098 | ||||||
Accrued interest | 14,435 | 14,454 | ||||||
Derivatives liabilities | 4,228 | 19,353 | ||||||
Other current liabilities | 109 | 99 | ||||||
Accrued reclamation and closure costs | 10,594 | 9,259 | ||||||
Total current liabilities | 158,229 | 160,383 | ||||||
Finance and operating leases | 18,154 | 17,726 | ||||||
Accrued reclamation and closure costs | 103,747 | 103,972 | ||||||
Long-term debt | 507,841 | 508,095 | ||||||
Deferred tax liability | 143,213 | 149,706 | ||||||
Derivatives liabilities | 522 | 18,528 | ||||||
Other non-current liabilities | 2,515 | 9,611 | ||||||
Total liabilities | 934,221 | 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, 157,816 shares issued and outstanding, liquidation preference — $7,891 | 39 | 39 | ||||||
Common stock, 25 cent par value, 750,000,000 authorized shares; issued June 30, 2022 — 548,037,253 shares and December 31, 2021 — 545,534,760 shares | 137,241 | 136,391 | ||||||
Capital surplus | 2,043,621 | 2,034,485 | ||||||
Accumulated deficit | (370,048 | ) | (353,651 | ) | ||||
Accumulated other comprehensive income (loss) | 3,727 | (28,456 | ) | |||||
Less treasury stock, at cost; June 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 | 1,782,882 | 1,760,787 | ||||||
Total liabilities and stockholders’ equity | $ | 2,717,103 | $ | 2,728,808 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
5
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 March 31, 2023 | ||||||||||||
|
| Series B |
| Common |
| Capital Surplus |
| Accumulated |
| Accumulated |
| Treasury |
| 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 June 30, 2022 | ||||||||||||||||||||||||||||
Series B Preferred Stock | Common Stock | Capital Surplus | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss), net | Treasury Stock | Total | ||||||||||||||||||||||
Balances, April 1, 2022 | $ | 39 | $ | 136,657 | $ | 2,036,417 | $ | (353,007 | ) | $ | (61,621 | ) | $ | (29,942 | ) | $ | 1,728,543 | |||||||||||
Net loss | 0 | 0 | 0 | (13,523 | ) | 0 | 0 | (13,523 | ) | |||||||||||||||||||
Restricted stock units granted | 0 | 0 | 837 | 0 | 0 | 0 | 837 | |||||||||||||||||||||
Restricted stock units distributed (901,215 shares) | 0 | 225 | (225 | ) | 0 | 0 | (1,756 | ) | (1,756 | ) | ||||||||||||||||||
Common stock dividends declared (0.0625 cents per common share) | 0 | 0 | 0 | (3,380 | ) | 0 | 0 | (3,380 | ) | |||||||||||||||||||
Series B Preferred Stock dividends declared (87.5 cents per share) | 0 | 0 | 0 | (138 | ) | 0 | 0 | (138 | ) | |||||||||||||||||||
Common stock issued for 401(k) match (143,200 shares) | 0 | 36 | 928 | 0 | 0 | 0 | 964 | |||||||||||||||||||||
Common stock issued to directors (98,310 shares) | 0 | 25 | 392 | 0 | 0 | 0 | 417 | |||||||||||||||||||||
Common stock issued to pension plans (1,190,000 shares) | 0 | 298 | 5,272 | 0 | 0 | 0 | 5,570 | |||||||||||||||||||||
Other comprehensive income | 0 | 0 | 0 | 0 | 65,348 | 0 | 65,348 | |||||||||||||||||||||
Balances, June 30, 2022 | $ | 39 | $ | 137,241 | $ | 2,043,621 | $ | (370,048 | ) | $ | 3,727 | $ | (31,698 | ) | $ | 1,782,882 |
|
| Three Months Ended March 31, 2022 | ||||||||||||
|
| Series B |
| Common |
| Capital Surplus |
| Accumulated |
| Accumulated |
| Treasury |
| 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 |
Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||
Series B Preferred Stock | Common Stock | Capital Surplus | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss), net | Treasury Stock | Total | ||||||||||||||||||||||
Balances, April 1, 2021 | $ | 39 | $ | 135,546 | $ | 2,021,072 | $ | (351,449 | ) | $ | (31,057 | ) | $ | (23,496 | ) | $ | 1,750,655 | |||||||||||
Net income | 0 | 0 | 0 | 2,748 | 0 | 0 | 2,748 | |||||||||||||||||||||
Restricted stock units granted | 0 | 0 | 959 | 0 | 0 | 0 | 959 | |||||||||||||||||||||
Restricted stock units distributed (1,653,000 shares) | 0 | 413 | (413 | ) | 0 | 0 | (4,525 | ) | (4,525 | ) | ||||||||||||||||||
Common stock dividends declared (1.125 cents per common share) | 0 | 0 | 0 | (6,027 | ) | 0 | 0 | (6,027 | ) | |||||||||||||||||||
Series B Preferred Stock dividends declared (87.5 cents per share) | 0 | 0 | 0 | (138 | ) | 0 | 0 | (138 | ) | |||||||||||||||||||
Common stock issued for 401(k) match (217,000 shares) | 0 | 54 | 1,235 | 0 | 0 | 0 | 1,289 | |||||||||||||||||||||
Common stock issued to pension plans (3,500,000 shares) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Common stock issued to directors (207,000 shares) | 0 | 52 | 1,792 | 0 | 0 | 0 | 1,844 | |||||||||||||||||||||
Other comprehensive income | 0 | 0 | 0 | 0 | 1,620 | 0 | 1,620 | |||||||||||||||||||||
Balances, June 30, 2021 | $ | 39 | $ | 136,065 | $ | 2,024,645 | $ | (354,866 | ) | $ | (29,437 | ) | $ | (28,021 | ) | $ | 1,748,425 |
Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||
Series B Preferred Stock | Common Stock | Capital | 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 | 0 | 0 | 0 | (9,370 | ) | 0 | 0 | (9,370 | ) | |||||||||||||||||||
Restricted stock units granted | 0 | 0 | 2,108 | 0 | 0 | 0 | 2,108 | |||||||||||||||||||||
Restricted stock units and performance stock units distributed (1,789,042 shares) | 0 | 447 | (447 | ) | 0 | 0 | (3,677 | ) | (3,677 | ) | ||||||||||||||||||
Common stock dividends declared (1.25 cents per common share) | 0 | 0 | 0 | (6,751 | ) | 0 | 0 | (6,751 | ) | |||||||||||||||||||
Series B Preferred Stock dividends declared ($1.75 per share) | 0 | 0 | 0 | (276 | ) | 0 | 0 | (276 | ) | |||||||||||||||||||
Common stock issued for 401(k) match (321,110 shares) | 0 | 80 | 1,811 | 0 | 0 | 0 | 1,891 | |||||||||||||||||||||
Common stock issued to pension plans (1,190,000 shares) | 0 | 298 | 5,272 | 0 | 0 | 0 | 5,570 | |||||||||||||||||||||
Common stock issued to directors (98,310 shares) | 0 | 25 | 392 | 0 | 0 | 0 | 417 | |||||||||||||||||||||
Other comprehensive loss | 0 | 0 | 0 | 0 | 32,183 | 0 | 32,183 | |||||||||||||||||||||
Balances, June 30, 2022 | $ | 39 | $ | 137,241 | $ | 2,043,621 | $ | (370,048 | ) | $ | 3,727 | $ | (31,698 | ) | $ | 1,782,882 |
Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||
Series B Preferred Stock | Common Stock | Capital | 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 | 0 | 0 | 0 | 24,199 | 0 | 0 | 24,199 | |||||||||||||||||||||
Restricted stock units granted | 0 | 0 | 1,459 | 0 | 0 | 0 | 1,459 | |||||||||||||||||||||
Restricted stock units distributed (1,653,000 shares) | 0 | 413 | (413 | ) | 0 | 0 | (4,525 | ) | (4,525 | ) | ||||||||||||||||||
Common stock dividends declared (2 cents per common share) | 0 | 0 | 0 | (10,715 | ) | 0 | 0 | (10,715 | ) | |||||||||||||||||||
Series B Preferred Stock dividends declared ($1.75 per share) | 0 | 0 | 0 | (276 | ) | 0 | 0 | (276 | ) | |||||||||||||||||||
Common stock issued for 401(k) match (382,000 shares) | 0 | 96 | 2,306 | 0 | 0 | 0 | 2,402 | |||||||||||||||||||||
Common stock issued to pension plans (3,500,000 shares) | 0 | 875 | 15,925 | 0 | 0 | 0 | 16,800 | |||||||||||||||||||||
Common stock issued to directors (207,000 shares) | 0 | 52 | 1,792 | 0 | 0 | 0 | 1,844 | |||||||||||||||||||||
Other comprehensive loss | 0 | 0 | 0 | 0 | 3,452 | 0 | 3,452 | |||||||||||||||||||||
Balances, June 30, 2021 | $ | 39 | $ | 136,065 | $ | 2,024,645 | $ | (354,866 | ) | $ | (29,437 | ) | $ | (28,021 | ) | $ | 1,748,425 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
6
Note 1.Basis of Preparation of Financial Statements
The accompanying unaudited interim condensed consolidated financial statements of Hecla Mining Company and its subsidiaries (collectively, “Hecla,” “the Company,” “we,” “our,” or “us,” except where the context requires otherwise) have been prepared in accordance with the instructions to Form 10-Q10-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-K10-K for the year ended December 31,2021 (“2021 2022 (“2022 Form 10-K”10-K”). The consolidated December 31,2021 2022 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 six-month periodsthree-month period ended June 30,2022March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31,2022. 2023.
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 $0.1 million and $0.4 million in COVID-19 mitigation costs during the three and six months ended June 30, 2022 compared to $1.4 million and $3.0 million during the three and six months ended June 30, 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.
Note 2.Business Segments and Sales of Products
We discover, acquire and develop mines and other mineral interests and produce and market (i) concentrates, containing silver, gold, lead 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 operationsidle properties 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 six months ended June 30,2022March 31, 2023 and 20212022 (in thousands):
|
| Three Months Ended |
| |||||
|
| 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 |
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net sales to unaffiliated customers: | ||||||||||||||||
Greens Creek | $ | 92,723 | $ | 113,763 | $ | 178,813 | $ | 212,172 | ||||||||
Lucky Friday | 35,880 | 39,645 | 73,920 | 68,767 | ||||||||||||
Casa Berardi | 62,639 | 56,122 | 124,740 | 129,033 | ||||||||||||
Nevada Operations | 0 | 8,450 | 268 | 18,687 | ||||||||||||
Other | 0 | 3 | 0 | 176 | ||||||||||||
$ | 191,242 | $ | 217,983 | $ | 377,741 | $ | 428,835 | |||||||||
Income (loss) from operations: | ||||||||||||||||
Greens Creek | $ | 27,803 | $ | 56,433 | $ | 62,389 | $ | 101,033 | ||||||||
Lucky Friday | 5,528 | 11,737 | 14,299 | 18,060 | ||||||||||||
Casa Berardi | (572 | ) | (529 | ) | (3,271 | ) | 11,177 | |||||||||
Nevada Operations | (9,728 | ) | (20,341 | ) | (21,963 | ) | (23,481 | ) | ||||||||
Other | (15,319 | ) | (18,158 | ) | (28,984 | ) | (36,618 | ) | ||||||||
$ | 7,712 | $ | 29,142 | $ | 22,470 | $ | 70,171 |
The following table presents identifiable assets by reportable segment as of June 30,2022March 31, 2023 and December 31,2021 2022 (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 |
|
June 30, 2022 | December 31, 2021 | |||||||
Identifiable assets: | ||||||||
Greens Creek | $ | 580,692 | $ | 589,944 | ||||
Lucky Friday | 524,734 | 516,545 | ||||||
Casa Berardi | 699,134 | 701,868 | ||||||
Nevada Operations | 468,901 | 468,985 | ||||||
Other | 443,642 | 451,466 | ||||||
$ | 2,717,103 | $ | 2,728,808 |
7
Our sales for the three month period ended March 31, 2023 are comprised of metal sales as described below and $0.5 million of environmental services revenue.
Sales by metal for the three- and six-month month periods ended June 30,2022March 31, 2023 and 20212022 were as follows (in thousands):
|
| 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 |
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Silver | $ | 70,050 | $ | 92,765 | $ | 136,382 | $ | 170,525 | ||||||||
Gold | 82,018 | 86,078 | 159,186 | 187,487 | ||||||||||||
Lead | 21,314 | 22,223 | 40,878 | 38,116 | ||||||||||||
Zinc | 31,176 | 30,037 | 66,814 | 59,228 | ||||||||||||
Less: Smelter and refining charges | (13,316 | ) | (13,120 | ) | (25,519 | ) | (26,521 | ) | ||||||||
$ | 191,242 | $ | 217,983 | $ | 377,741 | $ | 428,835 |
Sales of metals for the three month periods ended March 31, 2023 and 2022, included a net gainsgain of $11.3$0.9 million and $6.6a net loss of $4.8 million, for the second quarter and first half of 2022, respectively, on financially-settled forward option contracts for silver, gold, lead and zinc contained in our sales. Sales included net losses of $3.3 million and $0.5 million for the second quarter and first half of 2021, respectively, on such contracts.zinc. See Note 8 for more information.
Note 3.Income and Mining Taxes
Major components of our income and mining tax benefit (provision) for the three and six months ended June 30,March 31, 2023 and 2022and 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 | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Current: | ||||||||||||||||
Domestic | $ | (446 | ) | $ | (3,036 | ) | $ | (2,549 | ) | $ | (5,313 | ) | ||||
Foreign | (1,346 | ) | (826 | ) | (3,087 | ) | (3,112 | ) | ||||||||
Total current income and mining tax provision | (1,792 | ) | (3,862 | ) | (5,636 | ) | (8,425 | ) | ||||||||
Deferred: | ||||||||||||||||
Domestic | (2,150 | ) | 4,117 | (7,241 | ) | 4,436 | ||||||||||
Foreign | 3,688 | 3,879 | 6,992 | 3,380 | ||||||||||||
Total deferred income and mining tax benefit | 1,538 | 7,996 | (249 | ) | 7,816 | |||||||||||
Total income and mining tax benefit (provision) | $ | (254 | ) | $ | 4,134 | $ | (5,885 | ) | $ | (609 | ) |
The income and mining tax benefit (provision) for the three and six months ended June 30,2022March 31, 2023 and 20212022 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 six-month periods month period ended June 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 six-month periods ended June 30, 2021, due to reversal of 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 six months ended June 30, 2022, March 31, 2023, as compared to the three and six months ended June 30, 2021.March 31, 2022.
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 six months ended June 30,2022March 31, 2023 and 20212022 (in thousands):
|
| Three Months Ended |
| |||||
|
| 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 June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Service cost | $ | 1,566 | $ | 1,455 | $ | 3,131 | $ | 2,910 | ||||||||
Interest cost | 1,369 | 1,248 | 2,738 | 2,496 | ||||||||||||
Expected return on plan assets | (3,363 | ) | (2,313 | ) | (6,726 | ) | (4,626 | ) | ||||||||
Amortization of prior service cost | 128 | 99 | 256 | 198 | ||||||||||||
Amortization of net loss | 512 | 1,125 | 1,024 | 2,250 | ||||||||||||
Net periodic pension cost | $ | 212 | $ | 1,614 | $ | 423 | $ | 3,228 |
For the three- and six-month month periods ended June 30,2022March 31, 2023 and 2021,2022, 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 expensebenefit related
8
to all other components of net periodic pension cost of $1.4$1.0 million and $2.7 million, respectively, for the three- and six-month periods ended June 30,2022, and $0.2 million and $0.3$1.4 million for the three- month period ended March 31, 2023, and six-month periods ended June 30,2021,2022, respectively, is included in other (expense) income on our condensed consolidated statements of operations and comprehensive income (loss). income.
During May 2022, we contributed $5.6 million in shares of our common stock to two of our defined benefit plans. In January 2021, we contributed $16.8 million in shares of our common stock to our supplemental executive retirement plan. 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
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Numerator | ||||||||||||||||
Net (loss) income | $ | (13,523 | ) | $ | 2,748 | $ | (9,370 | ) | $ | 24,199 | ||||||
Preferred stock dividends | (138 | ) | (138 | ) | (276 | ) | (276 | ) | ||||||||
Net (loss) income applicable to common shares | $ | (13,661 | ) | $ | 2,610 | $ | (9,646 | ) | $ | 23,923 | ||||||
Denominator | ||||||||||||||||
Basic weighted average common shares | 539,401 | 535,531 | 538,943 | 534,819 | ||||||||||||
Dilutive restricted stock units, warrants and deferred shares | 0 | 6,731 | 0 | 6,649 | ||||||||||||
Diluted weighted average common shares | 539,401 | 542,262 | 538,943 | 541,468 | ||||||||||||
Basic (loss) income per common share | $ | (0.03 | ) | $ | 0.01 | $ | (0.02 | ) | $ | 0.04 | ||||||
Diluted (loss) income per common share | $ | (0.03 | ) | $ | 0.01 | $ | (0.02 | ) | $ | 0.04 |
For the three and six months ended June 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 three months ended June 30, 2021, March 31, 2022, the calculation of diluted income per common share included (i) 2,960,950 restricted stock1,954,773 incentive compensation units
that were unvested during the period, (ii) 1,635,6751,506,950 warrants to purchase one share of common stock and (iii) 2,134,009 deferred shares of common stock that were dilutive. For the six months ended June 30, 2021, the calculation of diluted income per common share included (i) 2,923,515 restricted stock units, (ii) 1,591,935 warrants to purchase one share of common stock and (iii) 2,134,0092,109,056 deferred shares that were dilutive.
Note 6. Stockholders’ Equity
Note 6.Stockholders’ Equityour 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 March 31, 2023 we had sold 6,033,473 shares under the agreement for proceeds of $29.2 million, net of commissions and fees of $0.5 million. Of this balance, 2,173,274shares were sold during the three months ended March 31, 2023 for proceeds of $11.9 million, net of commissions and fees of $0.2 million.
Stock-based Compensation Plans
The Company has stock incentive plans for executives, directors and eligible employees. Stock awards includeemployees, comprised of performance shares and restricted stock and stock options.stock. Stock-based compensation expense for restricted stock unit and performance-based grants (collectively "incentive compensation") to employees and shares issued to non-employee directors totaled $1.3$1.2 million and $2.5$1.3 million for the three months
9
ended March 31, 2023 and six months ended June 30,2022, respectively, and $2.8 million and $3.3 million for the three and six months ended June 30,2021, respectively. At June 30, 2022, March 31, 2023, there was $9.1$5.2 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 2.4 1.2 years.
The following table summarizes the grants awarded during the six months ended June 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 |
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 firstsix three months of 20222023, we withheld 737,25896,659 shares valued at approximately $3.7 $0.5million, or approximately $4.99$4.98 per share. In the firstsix months of 2021 we withheld 574,251 shares valued at approximately $4.5 million, or approximately $7.88 per share.
Common Stock Dividends
On May 5, 2022, The following table summarizes the dividends our Board of Directors have declared a quarterly cashand we have paid during 2023 pursuant to our dividend of $0.00625 per share of common stock, consisting of $0.00375 per share for the minimum dividend component of our common stock dividend policy and $0.0025 per share for the silver-linked dividend component of the policy, for a total dividend of $3.4 million paid in June 2022. The realized silver price of $24.68 in the first quarter of 2022 satisfied the criterion for the silver-linked dividend component of our common stock dividend policy.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 |
Note 7.Debt, Credit FacilityAgreement and Leases
Our debt as of June 30,2022March 31, 2023 and December 31,2021 2022 consisted of our 7.25%7.25% Senior Notes due February 15, 2028 (“(“Senior Notes”) and our Series 2020-A2020-A Senior Notes due July 9, 2025 (the(the “IQ Notes”). and any drawn amounts on our $150 million Credit Agreement, which is described separately below. The following tables summarize our long-term debt balances, excluding interest and borrowings under the Credit Agreement, as of June 30,2022March 31, 2023 and December 31,2021 2022 (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 |
|
June 30, 2022 | ||||||||||||
Senior Notes | IQ Notes | Total | ||||||||||
Principal | $ | 475,000 | $ | 37,433 | $ | 512,433 | ||||||
Unamortized discount/premium and issuance costs | (5,096 | ) | 504 | (4,592 | ) | |||||||
Long-term debt balance | $ | 469,904 | $ | 37,937 | $ | 507,841 |
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 June 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 June 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 | Senior Notes | IQ Notes | Finance Leases | Operating Leases | ||||||||||||
2023 | $ | 34,438 | $ | 2,441 | $ | 6,424 | $ | 3,011 | ||||||||
2024 | 34,438 | 2,441 | 5,220 | 2,041 | ||||||||||||
2025 | 34,438 | 2,441 | 3,070 | 1,072 | ||||||||||||
2026 | 34,438 | 37,528 | 1,213 | 1,059 | ||||||||||||
2027 | 34,438 | 0 | 0 | 1,010 | ||||||||||||
Thereafter | 496,521 | 0 | 0 | 6,043 | ||||||||||||
Total | $ | 668,711 | $ | 44,851 | $ | 15,927 | $ | 14,236 |
Credit Agreement
Credit Facility
In On July 2018, 21, 2022, we entered into a $250revolving credit facility (the "Credit Agreement") with various financial institutions (the “Lenders”), Bank of Montreal and Bank of America, N.A. as letters of credit issuers, and Bank of America, N.A., as administrative agent for the Lenders and as swingline lender, to replace our prior credit agreement. The Credit Agreement is a $150 million senior secured revolving credit facility, which has a term ending on February 7, 2023. As of June 30,2022 and December 31,2021, 0 amounts were outstandingwith an option to be increased in an aggregate amount not to exceed $75 million. Any revolving loans under the facility.Credit Agreement have a maturity date of July 21, 2026. Proceeds of the revolving loans under the Credit Agreement may be used for general corporate purposes. The interest rate on the outstanding loans under the Credit Agreement is based on the Company’s net leverage ratio and is calculated at (i) Term Secured Overnight Financing Rate ("SOFR") plus 2% to 3.5%; or (ii) Bank of America’s Base Rate plus 1% to 2.5% with Base Rate being the highest of (i) the Bank of America prime rate, (ii) the Federal Funds rate plus .50%
10
or (iii) Term SOFR plus 1.00%. For each amount drawn, we elect whether we draw on a one, three or six month basis or annual basis for SOFR. If we elect to draw for greater than six months, we pay interest quarterly on the outstanding amount.
We are also able to obtain letters of credit under the facility, and for any such letters we are required to pay a participationcommitment fee of between 2.25%0.45% to 0.78750%, depending on our net leverage ratio. Letters of credit issued under the Credit Agreement bear a fee between 2.00% and 4.00% of the amount of the letters of credit3.50% based on our totalnet leverage ratio, as well as a fronting fee to each issuing bank of 0.20% annuallyat an agreed upon rate per annum on the average daily dollar amount of our letter of credit exposure.
Hecla Mining Company and certain of our subsidiaries are the borrowers under the Credit Agreement, while certain of our other subsidiaries are guarantors of the borrowers’ obligations under the Credit Agreement. As further security, the Credit Agreement is collateralized by a mortgage on the Greens Creek mine, the equity interests of subsidiaries that own the Greens Creek mine or are part of the Greens Creek Joint Venture and our subsidiary Hecla Admiralty Company (the “Greens Creek Group”), and by all of the 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 March 31, 2023, there was $6.7 million of outstanding letters of credit. There were $14.9 million in letters of credit outstanding as of June 30,2022. Letters of credit that are outstanding reduce availability under the revolving credit facility. See Note 12regarding the termination of this Credit Facility and entry into a new facility.Agreement.
We believe we were in compliance with all covenants under the credit agreementCredit Agreement as of June 30,2022.March 31, 2023.
Note 8.Derivative Instruments
General
Our current risk management policy provides that up to 75%75% of five years 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 currently do not have a 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 subsidiarysubsidiaries owning the Casa Berardi operation is aand Keno Hill operation are USD-functional entityentities which routinely incursincur 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 between the USDfor these subsidiaries' future operating and CAD for this subsidiary's future operatingcapital costs denominated in CAD. The program utilizes forward contracts to buy CAD, and each contract issome of which are designated as a cash flow hedge.hedges. As of June 30,2022,March 31, 2023, we have 161569 forward contracts outstanding to buy a total of CAD$CAD$321.8604.8 million having a notional amount of USD$USD$247.9454.7 million. The CAD contracts that are related to forecasted cash operating costs at Casa Berardi to be incurred from 20212023 through 20242026 have a total notional value of CAD$393.9 million and have CAD-to-USD exchange rates ranging between 1.27021.272 and 1.3333. 1.3757.
As of June 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 |
|
June 30, | December 31, | |||||||
| 2022 | 2021 | ||||||
Balance sheet line item: | ||||||||
Current derivatives assets | $ | 1.1 | $ | 2.7 | ||||
Non-current derivatives assets | 1.3 | 2.5 | ||||||
Current derivative liabilities | 0.3 | 0 | ||||||
Non-current derivative liabilities | 0.2 | 0 |
Net unrealized gainslosses of approximately $2.0$6.1 million related to the effective portion of the hedges wereare included in accumulated other comprehensive income (loss) as of June 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 0.8$3.3 million in net unrealized gainslosses included in accumulated other comprehensive income (loss) as of June 30,2022,March 31, 2023 will be reclassified to current earnings in the next twelve months. Net realized gainslosses of approximately $0.8 million and $1.8$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 six months ended June 30,2022, respectively. NaNMarch 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 ineffectiveness of the hedges wereare included in current earnings for the six months ended June 30,2022. Net gains of approximately $0.3 million and $0.7 million for the three and six months ended June 30, 2022, 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 six months ended June 30, 2022.March 31, 2023
Metals Prices
We are currently using financially-settled forward contracts to manage the exposure to:
|
|
|
|
The following tables summarize the quantities of metals committed under forward sales contracts at June 30,2022March 31, 2023 and December 31,2021: 2022:
June 30, 2022 | Ounces/pounds under contract (in 000's) | Average price per ounce/pound | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2023 |
| Ounces/pounds under contract (in 000's) |
|
| Average price per ounce/pound |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Silver | Gold | Zinc | Lead | Silver | Gold | Zinc | Lead |
| Silver |
| Gold |
| Zinc |
| Lead |
| Silver |
| Gold |
| Zinc |
| Lead |
| ||||||||||||||||||||||||||||||||||||||||
(ounces) | (ounces) | (pounds) | (pounds) | (ounces) | (ounces) | (pounds) | (pounds) |
| (ounces) |
| (ounces) |
| (pounds) |
| (pounds) |
| (ounces) |
| (ounces) |
| (pounds) |
| (pounds) |
| ||||||||||||||||||||||||||||||||||||||||
Contracts on provisional sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
2022 settlements | 1,729 | 3 | 6,504 | 3,638 | $ | 22.19 | $ | 1,836 | $ | 1.58 | $ | 0.90 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 settlements |
|
| 3,350 |
|
|
| 8 |
|
|
| 15,543 |
|
|
| 18,133 |
|
| $ | 22.27 |
|
| $ | 1,883 |
|
| $ | 1.35 |
|
| $ | 1.01 |
| ||||||||||||||||||||||||||||||||
Contracts on forecasted sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
2022 settlements | 0 | 0 | 38,030 | 34,778 | N/A | N/A | $ | 1.31 | $ | 0.98 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 settlements | 0 | 0 | 78,264 | 75,618 | N/A | N/A | $ | 1.30 | $ | 1.00 |
|
| — |
|
|
| — |
|
|
| 29,873 |
|
|
| 38,581 |
|
|
| — |
|
|
| — |
|
| $ | 1.47 |
|
| $ | 1.00 |
| ||||||||||||||||||||||
2024 settlements | 0 | 0 | 78,760 | 31,526 | N/A | N/A | $ | 1.34 | $ | 1.01 |
|
| — |
|
|
| — |
|
|
| 1,764 |
|
|
| 75,178 |
|
|
| — |
|
|
| — |
|
|
| 1.31 |
|
| $ | 0.98 |
| ||||||||||||||||||||||
2025 settlements | 0 | 0 | 1,157 | 0 | N/A | N/A | $ | 1.37 | N/A |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 882 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 0.97 |
|
December 31, 2021 | Ounces/pounds under contract (in 000's) | Average price per ounce/pound | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2022 |
| Ounces/pounds under contract (in 000's) |
|
| Average price per ounce/pound |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Silver | Gold | Zinc | Lead | Silver | Gold | Zinc | Lead |
| Silver |
| Gold |
| Zinc |
| Lead |
| Silver |
| Gold |
| Zinc |
| Lead |
| ||||||||||||||||||||||||||||||||||||||||
(ounces) | (ounces) | (pounds) | (pounds) | (ounces) | (ounces) | (pounds) | (pounds) |
| (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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 settlements |
|
| 3,124 |
|
|
| 8 |
|
|
| 18,629 |
|
|
| 11,960 |
|
| $ | 21.55 |
|
| $ | 1,795 |
|
| $ | 1.38 |
|
| $ | 0.98 |
| ||||||||||||||||||||||||||||||||
Contracts on forecasted sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
2022 settlements | 0 | 0 | 57,706 | 59,194 | N/A | N/A | $ | 1.28 | $ | 0.98 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 settlements | 0 | 0 | 76,280 | 71,650 | N/A | N/A | $ | 1.29 | $ | 1.00 |
|
| — |
|
|
| — |
|
|
| 37,533 |
|
|
| 75,618 |
|
| N/A |
|
| N/A |
|
| $ | 1.34 |
|
| $ | 1.00 |
| ||||||||||||||||||||||||
2024 settlements |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,856 |
|
| N/A |
|
| N/A |
|
| N/A |
|
| $ | 0.99 |
|
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 June 30,2022March 31, 2023 and forward and put option contracts as of December 31,2021 2022 (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 | ) |
June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Contracts in an | Contracts in | Net asset | Contracts in | Contracts in a | Net asset | ||||||||||||||||||
Balance sheet line item: | ||||||||||||||||||||||||
Current derivatives assets | $ | 8.8 | $ | 0 | $ | 8.8 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Non-current derivative assets | $ | 11.6 | $ | 0 | 11.6 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||
Current derivatives liabilities | 0 | (3.9 | ) | (3.9 | ) | 0.7 | (20.1 | ) | (19.4 | ) | ||||||||||||||
Non-current derivatives liabilities | 0 | (0.4 | ) | (0.4 | ) | 0.4 | (18.9 | ) | (18.5 | ) |
Net realized and unrealized gains of approximately $15.6$24.8 million related to the effective portion of the contracts designated as hedges were included in accumulated other comprehensive income (loss) as of June 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 earnings as the underlying forecasted 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 June 30, 2022 March 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 $11.3$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 June 30, 2022. For the six months ended June 30,March 31, 2023 and 2022, we recognized a net gain of $6.6 million, including a $3.8 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 net losses of $17.3 million and $16.8 million during the second quarter and first half of 2021, respectively, on the contracts utilized to manage exposure to prices for forecasted future sales, which were not designated as hedges. The net losses 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 revolving credit agreementCredit Agreement would cause a default under the derivative contract. As of June 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 $12.2$14.0 million as of June 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 June 30,2022,March 31, 2023, we could have been required to settle our obligations under the agreements at their termination value of $12.2$14.0 million.
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(Loss) gain on derivative contracts | $ | (689 | ) | $ | (17,313 | ) | $ | (893 | ) | $ | (16,840 | ) | ||||
Unrealized gain (loss) on investments in equity securities | (15,739 | ) | (750 | ) | (9,639 | ) | (4,256 | ) | ||||||||
Gain on disposition or exchange of investments | 0 | 0 | 69 | 1,158 | ||||||||||||
Total fair value adjustments, net | $ | (16,428 | ) | $ | (18,063 | ) | $ | (10,463 | ) | $ | (19,938 | ) |
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 |
|
| Balance at |
|
| Input | ||
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 |
|
|
|
|
|
|
|
| ||
Foreign exchange contracts |
| $ | 6,674 |
|
| $ | 7,548 |
|
| Level 2 |
Metal forward contracts |
|
| 4,682 |
|
|
| 14,643 |
|
| Level 2 |
Total liabilities |
| $ | 11,356 |
|
| $ | 22,191 |
|
|
|
Description | Balance at June 30, 2022 | Balance at December 31, 2021 | Input Hierarchy Level | ||||||
Assets: | |||||||||
Cash and cash equivalents: | |||||||||
Money market funds and other bank deposits | $ | 198,193 | $ | 210,010 | Level 1 | ||||
Current and non-current investments | |||||||||
Equity securities | 23,931 | 14,470 | Level 1 | ||||||
Trade accounts receivable: | |||||||||
Receivables from provisional concentrate sales | 17,828 | 36,437 | Level 2 | ||||||
Restricted cash balances: | |||||||||
Certificates of deposit and other deposits | 1,041 | 1,053 | Level 1 | ||||||
Derivative contracts - current and non-current derivatives assets: | |||||||||
Foreign exchange contracts | 2,414 | 5,207 | Level 2 | ||||||
Metal forward and put option contracts | 20,406 | 0 | Level 2 | ||||||
Total assets | $ | 263,813 | $ | 267,177 | |||||
Liabilities: | |||||||||
Derivative contracts - current derivatives liabilities and other non-current liabilities: | |||||||||
Foreign exchange contracts | $ | 529 | $ | 8 | Level 2 | ||||
Metal forward and put option contracts | 4,221 | 37,873 | Level 2 | ||||||
Total liabilities | $ | 4,750 | $ | 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 operation (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 June 30,2022,March 31, 2023, our Senior Notes and IQ Notes were recorded at their carrying value of $469.9$470.6 million and $37.9 $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 $453.3$480.6 million and $35.8$35.7 million, respectively, at June 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 8.2%7.1%, are utilized to estimate the fair value of the IQ Notes. See Note 7 for more information.
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.
Johnny M Mine Area near San Mateo, McKinley County and San Mateo Creek Basin, New Mexico
In August 2012, Hecla Limited and the EPAU.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$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 historichistorical 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.
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”(“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)10(b) and 20(a)20(a) of the Securities Exchange Act of 1934 and Rule 10b-510b-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.
Debt
See Note 7 for information on the commitments related to our debt arrangements as of June 30,2022.March 31, 2023.
Other Commitments
Our contractual obligations as of June 30, 2022 March 31, 2023 included open purchase orders and commitments of approximately $8.1$15.2 million, $19.1$29.4 million, $1.3$1.3 million, $1.4 million and $3.4$3.7 million for various capital and non-capital items at Greens Creek, Lucky Friday, Casa Berardi, and Nevada Operations and Keno Hill, respectively. We also have total commitments of approximately $15.9$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 $14.2$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 June 30,2022,March 31, 2023, we had surety bonds totaling $181.8$192.8 million and letters of credit totaling $14.9$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
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 generally accepted accounting principles 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.
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 ContractLiabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired ina 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 onbasis. Certain of 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 thederivative instruments reference London Interbank Offered Rate ("LIBOR"), which have been widely used as reference based 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. Regulatorsare in the U.S. and other jurisdictions have been workingprocess of being amended to replace these rates with alternative reference interest rates that are supported by transactions in liquid and observable markets, such aseliminate the Secured Overnight Financing Rate ("SOFR"). Currently, our credit facility and certain of our derivative instruments reference LIBOR-based rates. Our credit facility contains provisions specifying alternative interest rate calculationsreferences prior to be employed when LIBOR ceases to be available as a benchmark and we have adhered to the ISDA 2020 IBOR Fallbacks Protocol, which will govern our derivatives upon the final cessation of USD LIBOR. ASU 2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects ofReference Rate Reform on Financial Reporting, as amended, helps limit the accounting impact from contract modifications, includinghedging relationships, due to the transition from LIBOR to alternative reference rates that are completed by December 31, 2022. July 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.
Note 12.Subsequent Events
On July 5, 2022, April 6, 2023, we and Alexco Resource Corp.ATAC Resources Ltd. ("Alexco"ATAC") a Canadian publicly traded company, announced a definitive agreement for one of our 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 common shares of Alexco that Hecla does not already own. Each outstanding common shareATAC for a consideration of Alexco will be exchanged for 0.116CAD$31 million, or 0.0166 of a share of ourHecla common stock implying considerationper common share of ATAC (consisting of US$0.473,693,516 per Alexco shares of Hecla common share. In addition, we will (i) provide interim financingstock in aggregate). Hecla would also invest CAD$2 million in seed capital, equal to provide working capital and support the continued advancement of the development anda 19.9% interest, for a new exploration at Alexco's, Keno Hill mine, of which $20 million was advanced on July 19, 2022 and (ii) subscribe for additional common shares bringing Hecla's ownership stake to 9.9%company Cascadia Minerals Ltd. (“Cascadia”), which also closed on July 19, 2022.
The Company has also entered into an agreementwould be spun-out with Wheaton Precious Metals Corporationcertain properties to terminate its silver streaming interest at Alexco’s Keno Hill property in exchange for US$135 million of Company common stock, conditional upon the completion of the Alexco acquisition.
On July 21, 2022, we entered into a Credit Agreement (“New Credit Agreement”) with the various financial institutions (the “Lenders”), Bank of Montreal and Bank of America, N.A.ATAC’s shareholders 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, see Note 7for additional information on this credit agreement. The New Credit Agreement is a $150 million senior secured revolving facility, with an option to be increased in an aggregate amount not to exceed $75 million. The 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 to refinance the Prior Credit Agreement and for general corporate purposes. The interest rate on outstanding loans under the New Credit Agreement is, at the option of the Borrowers, one month, three months or six months Term SOFR plus (x) 0.10% for an interest period of one-month’s duration, (y) 0.15% for an interest period of 3-month’s duration and (z) 0.25% for an interest period of six-month’s duration plus the Applicable Margin or Base Rate (which is the highest of (i) the Bank of America prime rate, (ii) the Federal Funds rate plus .50% and (iii) Term SOFR plus 1.00%, subject to the interest rate floors) plus the Applicable Margin. The “Applicable Margin” means (a) for the first fiscal quarter ending after the closing date, in the case of Term SOFR loans, 2.25% per annum, and, in the case of Base Rate loans, 1.25% per annum, and (b) thereafter, between 2.00% and 3.50% for Term SOFR loans or between 1.00% and 2.50% for Base Rate loans depending on our total leverage ratio. We are also required to pay quarterly in arrears a commitment fee of between 0.45000% to 0.78750%, depending on our total leverage ratio, of the actual daily amount by which the Aggregate Revolving Commitments exceed the sum of the Outstanding Amount of Revolving Loan and the Outstanding Amount of L/C Obligations. We are also required to pay a participation fee for letters of credit issued under the New Credit Agreement in an amount between 2.00% and 3.50% based on our total 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 its subsidiaries are the borrowers under the New Credit Agreement, while certain of its other subsidiaries are guarantors of the borrowers’ obligations under the New Credit Agreement. As further security, the credit facility 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”)transaction. The total consideration to the ATAC shareholders, including the implied value for the shares in Cascadia (CAD$0.036/share), 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.is CAD$39 million.
16
In connection with entry into the New Credit Agreement, the Company’s Prior credit agreement was terminated on July 21, 2022.
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 and in Part II, Item 1.A. - Risk Factors in this Form 10-Q.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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), “Hecla,” “the Company,” “we,” “us” and “our” refer to Hecla Mining Company and its consolidated subsidiaries, except where the context requires otherwise. You should read this discussion in conjunction with our consolidated financial statements, the related MD&A and the discussion of our Business and Properties 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 United StatesU.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,Creek. In addition, we are developing the Keno Hill mine in the Yukon, Canada which we acquired on September 7, 2022, and produced gold at our Nevada Operations segment prior to suspensionwhich we expect will start producing silver in the third quarter of operations during 2021.2023. 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.
SecondFirst Quarter 20222023 Highlights
Operational:
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• Produced 4.0 million ounces of silver and 39,717 ounces of gold. See Consolidated Results of Operations below for information on total cost of sales and cash |
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Financial:
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Year to date 2022 Highlights
Operational:
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Financial:
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Our current business strategy is to focus our financial and human resources in the following areas:
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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 plansall in sustaining costs ("AISC"), after by-product credits, per silver and gold ounce for the three-month periods ended March 31, 2023 and 2022.
Financial:
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 resultsto 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-19these commodities have recently affected some of our operations.
A number of key factors may impact the execution of our strategy, including regulatory issues and metals prices. Metals prices can be very volatilefluctuated historically and are influencedaffected by a number ofnumerous factors beyond our control (exceptcontrol. Beginning in 2020, with the onset of the COVID-19 pandemic, and continuing in 2022 because of a series of macro-economic factors, there has been significant volatility in the financial and commodities markets, including the precious metals 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 1A. “Risk Factors” contained in Part I of our annual report on a limited basis through the use of derivative contracts). See Item 7.Critical Accounting Estimates in our 2021 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 offor all metals sold by us, except gold, and zinc were higher, with the average realized price for silver and lead lower in the second three months of 2022ended March 31, 2023 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, pricesyear. We have been volatile and there can be no assurance that current prices will continue.
Volatility in global financial markets and other factors can pose aalso experienced significant challenge tocost inflation across 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 $250 million revolving credit agreement, of which $14.9 million was used as of June 30, 2022 for letters of credit, leaving approximately $235.1 million available for borrowing.
Another challenge for us is the riskoperations, principally associated with environmental litigationhigher energy prices, increased costs for other consumables such as reagents, explosives and ongoing reclamation activities. As described in Item 1A. Risk Factors in our 2021 Form 10-Ksteel, 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 matterslabor and the estimate of 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.contractor costs.
18
Consolidated Results of Operations
Sales by metal for the three- and six-monththree month periods ended June 30,March 31, 2023 and 2022 and 2021 were as follows:
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| Three Months Ended |
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(in thousands) |
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Silver |
| $ | 81,532 |
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| $ | 66,332 |
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Gold |
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| 75,087 |
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| 77,168 |
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Lead |
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| 25,402 |
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| 19,564 |
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Zinc |
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| 32,943 |
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| 35,638 |
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Less: smelter charges |
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| (15,973 | ) |
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| (12,203 | ) |
Sales of products |
| $ | 198,991 |
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| $ | 186,499 |
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Silver | $ | 70,050 | $ | 92,765 | $ | 136,382 | $ | 170,525 | ||||||||
Gold | 82,018 | 86,078 | 159,186 | 187,487 | ||||||||||||
Lead | 21,314 | 22,223 | 40,878 | 38,116 | ||||||||||||
Zinc | 31,176 | 30,037 | 66,814 | 59,228 | ||||||||||||
Less: smelter charges | (13,316 | ) | (13,120 | ) | (25,519 | ) | (26,521 | ) | ||||||||
Sales of products | $ | 191,242 | $ | 217,983 | $ | 377,741 | $ | 428,835 |
Sales by metal for the three- and six-monththree month periods ended June 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) |
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| Less: smelter and refining charges |
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| Total sales of products |
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Three months ended March 31, 2022 |
| $ | 66,332 |
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| $ | 77,168 |
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| $ | 55,202 |
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| $ | (12,203 | ) |
| $ | 186,499 |
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Variances - 2023 versus 2022: |
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Price |
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| (7,458 | ) |
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| 394 |
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| (11,081 | ) |
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| (1,489 | ) |
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| (19,634 | ) |
Volume |
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| 22,658 |
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| (2,747 | ) |
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| 14,224 |
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| (3,140 | ) |
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| 30,995 |
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Smelter terms |
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| 272 |
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| 859 |
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| 1,131 |
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Three months ended March 31, 2023 |
| $ | 81,532 |
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| $ | 75,087 |
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| $ | 58,345 |
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| $ | (15,973 | ) |
| $ | 198,991 |
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(in thousands) | Silver | Gold | Base metals | Less: smelter | Total sales | |||||||||||||||
Three months ended June 30, 2021 | $ | 92,765 | $ | 86,078 | $ | 52,260 | $ | (13,120 | ) | $ | 217,983 | |||||||||
Variances - 2022 versus 2021: | ||||||||||||||||||||
Price | (21,990 | ) | 1,107 | (1,052 | ) | 1,360 | (20,575 | ) | ||||||||||||
Volume | (688 | ) | (5,167 | ) | 1,282 | 100 | (4,473 | ) | ||||||||||||
Smelter terms | (37 | ) | — | — | (1,656 | ) | (1,693 | ) | ||||||||||||
Three months ended June 30, 2022 | $ | 70,050 | $ | 82,018 | $ | 52,490 | $ | (13,316 | ) | $ | 191,242 |
(in thousands) | Silver | Gold | Base metals | Less: smelter | Total sales | |||||||||||||||
Six months ended June 30, 2021 | $ | 170,525 | $ | 187,487 | $ | 97,344 | $ | (26,521 | ) | $ | 428,835 | |||||||||
Variances - 2022 versus 2021: | ||||||||||||||||||||
Price | (24,348 | ) | 5,708 | 11,404 | (16 | ) | (7,252 | ) | ||||||||||||
Volume | (9,703 | ) | (33,924 | ) | (1,056 | ) | 1,428 | (43,255 | ) | |||||||||||
Smelter terms | (92 | ) | (85 | ) | — | (410 | ) | (587 | ) | |||||||||||
Six months ended June 30, 2022 | $ | 136,382 | $ | 159,186 | $ | 107,692 | $ | (25,519 | ) | $ | 377,741 |
The fluctuations in sales for the second quarter and first sixthree months of 2022ended 2023 compared to the same periods of 2021period in 2022 were primarily due to the following two reasons:
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Silver – |
| London PM Fix ($/ounce) |
| $ | 22.56 |
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| $ | 23.95 |
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| Realized price per ounce |
| $ | 22.62 |
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| $ | 24.68 |
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Gold – |
| London PM Fix ($/ounce) |
| $ | 1,889 |
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| $ | 1,874 |
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| Realized price per ounce |
| $ | 1,902 |
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| $ | 1,880 |
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Lead – |
| LME Final Cash Buyer ($/pound) |
| $ | 0.97 |
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| $ | 1.06 |
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| Realized price per pound |
| $ | 1.02 |
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| $ | 1.08 |
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Zinc – |
| LME Final Cash Buyer ($/pound) |
| $ | 1.42 |
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| $ | 1.70 |
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| Realized price per pound |
| $ | 1.39 |
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| $ | 1.79 |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
Silver – | London PM Fix ($/ounce) | $ | 22.64 | $ | 26.69 | $ | 23.30 | $ | 26.49 | ||||||||
Realized price per ounce | $ | 20.68 | $ | 27.14 | $ | 22.45 | $ | 26.45 | |||||||||
Gold – | London PM Fix ($/ounce) | $ | 1,872 | $ | 1,816 | $ | 1,873 | $ | 1,807 | ||||||||
Realized price per ounce | $ | 1,855 | $ | 1,825 | $ | 1,867 | $ | 1,795 | |||||||||
Lead – | LME Final Cash Buyer ($/pound) | $ | 1.00 | $ | 0.96 | $ | 1.03 | $ | 0.94 | ||||||||
Realized price per pound | $ | 0.97 | $ | 1.04 | $ | 1.02 | $ | 0.99 | |||||||||
Zinc – | LME Final Cash Buyer ($/pound) | $ | 1.78 | $ | 1.32 | $ | 1.74 | $ | 1.29 | ||||||||
Realized price per pound | $ | 1.44 | $ | 1.35 | $ | 1.61 | $ | 1.34 |
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 second quarter and first six months of 2022, weWe recorded net negative price adjustments to provisional settlements of $15.7 million and $14.8 million, respectively, compared to net positive price adjustments to provisional settlements of $3.1$2.1 million and 3.6$1.0 million respectively, infor the second quarterthree months ended March 31, 2023 and first six months of 2021.2022. 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.
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19
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
Silver - | Ounces produced | 3,645,454 | 3,524,783 | 6,970,162 | 6,984,229 | ||||||||||||
Payable ounces sold | 3,387,909 | 3,415,464 | 6,075,170 | 6,445,490 | |||||||||||||
Gold - | Ounces produced | 45,719 | 59,139 | 87,361 | 111,143 | ||||||||||||
Payable ounces sold | 44,225 | 47,168 | 85,278 | 104,454 | |||||||||||||
Lead - | Tons produced | 13,331 | 11,540 | 24,194 | 22,244 | ||||||||||||
Payable tons sold | 11,685 | 10,663 | 20,739 | 19,331 | |||||||||||||
Zinc - | Tons produced | 16,766 | 17,211 | 31,712 | 33,318 | ||||||||||||
Payable tons sold | 10,858 | 11,143 | 20,805 | 22,170 |
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| Three Months Ended |
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| 2023 |
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| 2022 |
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Silver - |
| Ounces produced |
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| 4,041,878 |
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| 3,324,708 |
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| Payable ounces sold |
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| 3,604,494 |
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| 2,687,261 |
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Gold - |
| Ounces produced |
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| 39,717 |
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| 41,642 |
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| Payable ounces sold |
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| 39,473 |
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| 41,053 |
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Lead - |
| Tons produced |
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| 13,236 |
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| 10,863 |
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| Payable tons sold |
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| 12,513 |
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| 9,054 |
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Zinc - |
| Tons produced |
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| 15,795 |
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| 14,946 |
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| Payable tons sold |
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| 11,858 |
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| 9,947 |
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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.
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 six-months ended June 30, 2022 and 2021 were as follows (in thousands, except for Cash Cost and AISC):
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| Silver |
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| Gold |
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| Greens Creek |
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| Lucky Friday |
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| Other |
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| Total Silver (2) |
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| Casa Berardi |
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| Nevada Operations and Other (3) |
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| Total Gold |
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Three Months Ended March 31, 2023: |
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Sales |
| $ | 98,611 |
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| $ | 49,110 |
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| $ | — |
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| $ | 147,721 |
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| $ | 50,998 |
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| $ | 781 |
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| $ | 51,779 |
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Total cost of sales |
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| (66,288 | ) |
|
| (34,534 | ) |
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| — |
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| (100,822 | ) |
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| (62,998 | ) |
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| (732 | ) |
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| (63,730 | ) |
Gross profit (loss) |
| $ | 32,323 |
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| $ | 14,576 |
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| $ | — |
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| $ | 46,899 |
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| $ | (12,000 | ) |
| $ | 49 |
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| $ | (11,951 | ) |
Cash Cost (1) |
| $ | 1.16 |
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| $ | 4.30 |
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| $ | — |
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| $ | 2.14 |
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| $ | 1,775 |
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| $ | — |
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| $ | 1,775 |
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AISC (1) |
| $ | 3.82 |
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| $ | 10.69 |
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| $ | — |
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| $ | 8.96 |
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| $ | 2,392 |
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| $ | — |
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| $ | 2,392 |
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Three Months Ended March 31, 2022: |
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Sales |
| $ | 86,090 |
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| $ | 38,040 |
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| $ | — |
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| $ | 124,130 |
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| $ | 62,101 |
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| $ | 268 |
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| $ | 62,369 |
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Total cost of sales |
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| (49,638 | ) |
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| (29,264 | ) |
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| — |
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| (78,902 | ) |
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| (62,168 | ) |
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| — |
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| (62,168 | ) |
Gross profit (loss) |
| $ | 36,452 |
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| $ | 8,776 |
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| $ | — |
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| $ | 45,228 |
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| $ | (67 | ) |
| $ | 268 |
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| $ | 201 |
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Cash Cost (1) |
| $ | (0.90 | ) |
| $ | 6.57 |
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| $ | — |
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| $ | 1.09 |
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| $ | 1,516 |
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| $ | — |
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| $ | 1,516 |
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AISC (1) |
| $ | 1.83 |
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| $ | 13.15 |
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| $ | — |
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| $ | 7.37 |
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| $ | 1,764 |
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| $ | — |
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| $ | 1,764 |
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Greens Creek | Lucky Friday | Other | Total Silver (2) | Casa Berardi | Nevada Operations | Total Gold | ||||||||||||||||||||||
Three Months Ended June 30, 2022: | ||||||||||||||||||||||||||||
Sales | $ | 92,723 | $ | 35,880 | $ | — | $ | 128,603 | $ | 62,639 | $ | — | $ | 62,639 | ||||||||||||||
Total cost of sales | (60,506 | ) | (30,348 | ) | — | (90,854 | ) | (61,870 | ) | (1,255 | ) | (63,125 | ) | |||||||||||||||
Gross profit (loss) | $ | 32,217 | $ | 5,532 | $ | 37,749 | $ | 769 | $ | (1,255 | ) | $ | (486 | ) | ||||||||||||||
Cash Cost per silver or gold ounce (1) | $ | (3.29 | ) | $ | 3.07 | $ | — | $ | (1.14 | ) | $ | 1,371 | — | $ | 1,371 | |||||||||||||
AISC per silver or gold ounce (1) | $ | 3.48 | $ | 9.91 | $ | — | $ | 8.55 | $ | 1,641 | $ | — | $ | 1,641 | ||||||||||||||
Three Months Ended June 30, 2021: | ||||||||||||||||||||||||||||
Sales | $ | 113,763 | $ | 39,645 | $ | 3 | $ | 153,411 | $ | 56,122 | $ | 8,450 | $ | 64,572 | ||||||||||||||
Total cost of sales | (55,488 | ) | (27,901 | ) | (1 | ) | (83,390 | ) | (54,669 | ) | (17,993 | ) | (72,662 | ) | ||||||||||||||
Gross profit (loss) | $ | 58,275 | $ | 11,744 | $ | 2 | $ | 70,021 | $ | 1,453 | $ | (9,543 | ) | $ | (8,090 | ) | ||||||||||||
Cash Cost per silver or gold ounce (1) | $ | (2.64 | ) | $ | 8.07 | $ | — | $ | 0.18 | $ | 1,199 | $ | 1,369 | $ | 1,254 | |||||||||||||
AISC per silver or gold ounce (1) | $ | 0.68 | $ | 14.10 | $ | — | $ | 7.54 | $ | 1,434 | $ | 1,386 | $ | 1,419 |
Silver | Gold | |||||||||||||||||||||||||||
Greens Creek | Lucky Friday | Other | Total Silver (2) | Casa Berardi | Nevada Operations | Total Gold | ||||||||||||||||||||||
Six Months Ended June 30, 2022: | ||||||||||||||||||||||||||||
Sales | $ | 178,813 | $ | 73,920 | $ | — | $ | 252,733 | $ | 124,740 | $ | 268 | $ | 125,008 | ||||||||||||||
Total cost of sales | (110,143 | ) | (59,613 | ) | — | (169,756 | ) | (124,038 | ) | (1,255 | ) | (125,293 | ) | |||||||||||||||
Gross profit | $ | 68,670 | $ | 14,307 | $ | — | $ | 82,977 | $ | 702 | $ | (987 | ) | $ | (285 | ) | ||||||||||||
Cash Cost per silver or gold ounce (1) | $ | (2.09 | ) | $ | 4.54 | $ | — | $ | (0.07 | ) | $ | 1,440 | $ | — | $ | 1,440 | ||||||||||||
AISC per silver or gold ounce (1) | $ | 2.69 | $ | 11.27 | $ | — | $ | 8.12 | $ | 1,721 | $ | — | $ | 1,721 | ||||||||||||||
Six Months Ended June 30, 2021: | ||||||||||||||||||||||||||||
Sales | $ | 212,172 | $ | 68,767 | $ | 176 | $ | 281,115 | $ | 129,033 | $ | 18,687 | $ | 147,720 | ||||||||||||||
Total cost of sales | (108,668 | ) | (50,696 | ) | (95 | ) | (159,459 | ) | (114,596 | ) | (25,448 | ) | (140,044 | ) | ||||||||||||||
Gross profit | $ | 103,504 | $ | 18,071 | $ | 81 | $ | 121,656 | $ | 14,437 | $ | (6,761 | ) | $ | 7,676 | |||||||||||||
Cash Cost per silver or gold ounce (1) | $ | (1.65 | ) | $ | 7.85 | $ | — | $ | 0.79 | $ | 1,106 | $ | 1,371 | $ | 1,161 | |||||||||||||
AISC per silver or gold ounce (1) | $ | 1.14 | $ | 14.17 | $ | — | $ | 7.38 | $ | 1,347 | $ | 1,393 | $ | 1,357 |
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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:
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20
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 second quarter we recordedWe reported a net loss applicable to common shareholdersstockholders of $13.7$3.3 million (($0.03) per basic common share)for the three months ended March 31, 2023, compared to income of $4.0 million in the comparable period in 2022. The following were the significant drivers of changes in net loss applicable to common shareholders of $2.6 million (($0.01) per basic common share)stockholders compared to the income in the second quarter of 2021. The variances in2022:
The impactbelow for a discussion on the key drivers by operating unit.
21
Greens Creek
Dollars are in thousands (except per ounce and per ton amounts) |
| Three Months Ended |
| |||||
|
| 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 |
|
The $4.1 million decrease in gross profit in the period was partially offset by:
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For the first six months of 2022, we recorded loss applicable to common shareholders of $9.6 million ($0.02 per basic common share) compared to income applicable to common shareholders of $23.9 million ($0.04 per basic common share) in the first six months of 2021. The following factors contributed to the results for the first sixthree months of 2022ended March 31, 2023 compared to the same period in 2021:
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The impact of these factors in the period was partially offset by:
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The Greens Creek Segment
Dollars are in thousands (except per ounce and per ton amounts) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Sales | $ | 92,723 | $ | 113,763 | $ | 178,813 | $ | 212,172 | ||||||||
Cost of sales and other direct production costs | (46,877 | ) | (40,996 | ) | (85,094 | ) | (79,355 | ) | ||||||||
Depreciation, depletion and amortization | (13,629 | ) | (14,492 | ) | (25,049 | ) | (29,313 | ) | ||||||||
Total cost of sales | (60,506 | ) | (55,488 | ) | (110,143 | ) | (108,668 | ) | ||||||||
Gross profit | $ | 32,217 | $ | 58,275 | $ | 68,670 | $ | 103,504 | ||||||||
Tons of ore milled | 209,558 | 214,931 | 421,245 | 409,011 | ||||||||||||
Production: | ||||||||||||||||
Silver (ounces) | 2,410,598 | 2,558,447 | 4,840,380 | 5,143,317 | ||||||||||||
Gold (ounces) | 12,413 | 12,859 | 23,815 | 26,125 | ||||||||||||
Zinc (tons) | 13,396 | 14,610 | 25,890 | 27,964 | ||||||||||||
Lead (tons) | 5,184 | 5,627 | 10,067 | 10,551 | ||||||||||||
Payable metal quantities sold: | ||||||||||||||||
Silver (ounces) | 2,266,001 | 2,471,833 | 4,038,392 | 4,719,107 | ||||||||||||
Gold (ounces) | 10,552 | 11,820 | 18,474 | 22,367 | ||||||||||||
Zinc (tons) | 8,495 | 9,215 | 16,587 | 18,311 | ||||||||||||
Lead (tons) | 4,251 | 4,619 | 7,314 | 8,264 | ||||||||||||
Ore grades: | ||||||||||||||||
Silver ounces per ton | 14.02 | 14.52 | 13.93 | 15.23 | ||||||||||||
Gold ounces per ton | 0.08 | 0.08 | 0.08 | 0.09 | ||||||||||||
Zinc percent | 7.2 | % | 7.6 | % | 6.9 | % | 7.6 | % | ||||||||
Lead percent | 3.0 | % | 3.1 | % | 2.9 | % | 3.1 | % | ||||||||
Total production cost per ton | $ | 197.84 | $ | 171.13 | $ | 194.98 | $ | 176.58 | ||||||||
Cash Cost, After By-product Credits, Per Silver Ounce (1) | $ | (3.29 | ) | $ | (2.64 | ) | $ | (2.09 | ) | $ | (1.65 | ) | ||||
AISC, After By-Product Credits, per Silver Ounce (1) | $ | 3.48 | $ | 0.68 | $ | 2.69 | $ | 1.14 | ||||||||
Capital additions | $ | 14,668 | $ | 6,339 | 17,760 | 11,231 |
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The $26.1 million and $34.8 million decreases in gross profit for the second quarter and first six 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 lower grade material mined and processed, (ii) lower realized prices for silver and lead, partially offset by higherall metals except gold and zinc realized prices, and (iii) higher production costs reflecting the impact of more lower grade materialore mined and processed and inflationary 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 second quarter and first sixthree 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:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Cash Cost, Before By-product Credits, per Silver Ounce | $ | 22.21 | $ | 19.08 | $ | 22.01 | $ | 19.03 | ||||||||
By-product credits | (25.50 | ) | (21.72 | ) | (24.10 | ) | (20.68 | ) | ||||||||
Cash Cost, After By-product Credits, per Silver Ounce | $ | (3.29 | ) | $ | (2.64 | ) | $ | (2.09 | ) | $ | (1.65 | ) |
|
| Three Months Ended March 31, |
| |||||
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| 2023 |
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| 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 |
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The following table summarizes the components ofincrease in Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce:Ounce for the three months ended March 31, 2023 compared to the same period in 2022 was primarily due to lower by-product credits in 2023.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
AISC, Before By-product Credits, per Silver Ounce | $ | 28.98 | $ | 22.40 | $ | 26.79 | $ | 21.82 | ||||||||
By-product credits | (25.50 | ) | (21.72 | ) | (24.10 | ) | (20.68 | ) | ||||||||
AISC, After By-product Credits, per Silver Ounce | $ | 3.48 | $ | 0.68 | $ | 2.69 | $ | 1.14 |
23
Lucky Friday
Dollars are in thousands (except per ounce and per ton amounts) |
| Three Months Ended |
| |||||
|
| 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: |
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|
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|
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| ||
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: |
|
|
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|
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| ||
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 |
|
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 in higher volumes offset the effects of lower realized prices.
Capital additions increased by $5.1 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to expenditures on key projects including the service hoist and coarse ore bunker, increased development, and pre-production drilling to achieve the annual throughput goal of 425,000 tons in the fourth quarter of 2023.
24
The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, Per Silver Ounce:
|
| 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 for the second quarter and first six months of 2022 compared to 2021 was primarily due to higher by-product credits.
The increase in AISC, After By-product Credits, per Silver Ounce for the second quarter and first six months of 2022 compared to 2021 was primarily due to higher sustaining capital of $14.7 million and $20.6 million for the second quarter and first six months of 2022, respectively, compared to $6.3 million and $11.2 million in 2021, reflecting the costs being incurred on camp construction and higher definition and development drilling during 2022 compared to 2021.
The Lucky Friday Segment
Dollars are in thousands (except per ounce and per ton amounts) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Sales | $ | 35,880 | $ | 39,645 | $ | 73,920 | $ | 68,767 | ||||||||
Cost of sales and other direct production costs | (21,486 | ) | (20,499 | ) | (42,719 | ) | (36,958 | ) | ||||||||
Depreciation, depletion and amortization | (8,862 | ) | (7,402 | ) | (16,894 | ) | (13,738 | ) | ||||||||
Total cost of sales | (30,348 | ) | (27,901 | ) | (59,613 | ) | (50,696 | ) | ||||||||
Gross profit | $ | 5,532 | $ | 11,744 | $ | 14,307 | $ | 18,071 | ||||||||
Tons of ore milled | 97,497 | 82,442 | 175,222 | 163,513 | ||||||||||||
Production: | ||||||||||||||||
Silver (ounces) | 1,226,477 | 913,294 | 2,114,335 | 1,777,195 | ||||||||||||
Lead (tons) | 8,147 | 5,913 | 14,127 | 11,693 | ||||||||||||
Zinc (tons) | 3,370 | 2,601 | 5,822 | 5,354 | ||||||||||||
Payable metal quantities sold: | ||||||||||||||||
Silver (ounces) | 1,121,712 | 934,258 | 2,021,166 | 1,698,081 | ||||||||||||
Lead (tons) | 7,434 | 6,045 | 13,425 | 11,067 | ||||||||||||
Zinc (tons) | 2,362 | 1,929 | 4,217 | 3,859 | ||||||||||||
Ore grades: | ||||||||||||||||
Silver ounces per ton | 13.17 | 11.60 | 12.67 | 11.39 | ||||||||||||
Lead percent | 8.81 | % | 7.55 | % | 8.52 | % | 7.53 | % | ||||||||
Zinc percent | 3.90 | % | 3.44 | % | 3.77 | % | 3.57 | % | ||||||||
Total production cost per ton | $ | 211.45 | $ | 199.48 | $ | 227.30 | $ | 188.30 | ||||||||
Cash Cost, After By-product Credits, per Silver Ounce (1) | $ | 3.07 | $ | 8.07 | $ | 4.54 | $ | 7.85 | ||||||||
AISC, After By-product Credits, per Silver Ounce (1) | $ | 9.91 | $ | 14.10 | $ | 11.27 | $ | 14.17 | ||||||||
Capital additions | $ | 11,501 | $ | 5,731 | $ | 21,153 | $ | 11,643 |
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Gross profit for the three months ended June 30, 2022 decreased by $6.2 million compared to the comparable period in 2021, as the impact of increased sales from mining and processing more high grade material and volumes thereof did not offset the combination of lower realized silver and lead prices compared to 2021, and increased production costs from more ore mined and processed and inflationary cost increases in consumables and contractor maintenance costs. Gross profit for the six month period June 30, 2022 decreased by $3.8 million compared to the comparable period in 2021, as increased sales from a combination of mining and processing more high grade material and higher volumes did not offset the impact of lower silver and lead realized prices and higher production costs.
The charts below illustrate the factors contributing to Cash Cost, After By-product Credits, Per Silver Ounce for the second quarter and first six months of 2022 compared to the same periods of 2021.
The following table summarizes the components of Cash Cost, After By-product Credits, per Silver Ounce:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Cash Cost, Before By-product Credits, per Silver Ounce | $ | 21.65 | $ | 25.49 | $ | 23.74 | $ | 24.97 | ||||||||
By-product credits | (18.58 | ) | (17.42 | ) | (19.20 | ) | (17.12 | ) | ||||||||
Cash Cost, After By-product Credits, per Silver Ounce | $ | 3.07 | $ | 8.07 | $ | 4.54 | $ | 7.85 |
The following table summarizes the components of AISC, After By-product Credits, per Silver Ounce:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
AISC, Before By-product Credits, per Silver Ounce | $ | 28.49 | $ | 31.52 | $ | 30.47 | $ | 31.29 | ||||||||
By-product credits | (18.58 | ) | (17.42 | ) | (19.20 | ) | (17.12 | ) | ||||||||
AISC, After By-product Credits, per Silver Ounce | $ | 9.91 | $ | 14.10 | 11.27 | $ | 14.17 |
The decrease in Cash Cost and AISC, After By-product Credits, per Silver Ounce for the three and six month periodsmonths ended June 30, 2022March 31, 2023 compared to the three and six month periods ended June 30, 2021same period in 2022 was due to higher silver production resulting from increased grades and volumes processed, higherpartially offset by lower by-product credits due to higher realized zinc prices, and concentrate quality improvement resulting inas higher lead and zinc production with AISC,did not offset lower prices.
25
Casa Berardi
Dollars are in thousands (except per ounce and per ton amounts) |
| Three Months Ended |
| |||||
|
| 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 |
|
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 June 30, | Six Months Ended June 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Sales | $ | 62,639 | $ | 56,122 | $ | 124,740 | $ | 129,033 | ||||||||
Cost of sales and other direct production costs | (46,411 | ) | (36,430 | ) | (92,733 | ) | (73,405 | ) | ||||||||
Depreciation, depletion and amortization | (15,459 | ) | (18,239 | ) | (31,305 | ) | (41,191 | ) | ||||||||
Total cost of sales | (61,870 | ) | (54,669 | ) | (124,038 | ) | (114,596 | ) | ||||||||
Gross profit | $ | 769 | $ | 1,453 | $ | 702 | $ | 14,437 | ||||||||
Tons of ore milled | 401,618 | 374,683 | 787,771 | 743,086 | ||||||||||||
Production: | ||||||||||||||||
Gold (ounces) | 33,306 | 31,333 | 63,546 | 67,523 | ||||||||||||
Silver (ounces) | 8,379 | 7,917 | 15,447 | 18,592 | ||||||||||||
Payable metal quantities sold: | ||||||||||||||||
Gold (ounces) | 33,672 | 30,615 | 66,738 | 71,484 | ||||||||||||
Silver (ounces) | 196 | 8,059 | 9,250 | 16,774 | ||||||||||||
Ore grades: | ||||||||||||||||
Gold ounces per ton | 0.10 | 0.10 | 0.09 | 0.11 | ||||||||||||
Silver ounces per ton | 0.02 | 0.03 | 0.02 | 0.03 | ||||||||||||
Total production cost per ton | $ | 113.07 | $ | 99.36 | $ | 115.46 | $ | 99.52 | ||||||||
Cash Cost, After By-product Credits, per Gold Ounce (1) | $ | 1,371 | $ | 1,199 | $ | 1,440 | $ | 1,106 | ||||||||
AISC, After By-product Credits, per Gold Ounce (1) | $ | 1,641 | $ | 1,434 | $ | 1,721 | $ | 1,347 | ||||||||
Capital additions | $ | 8,093 | $ | 12,153 | $ | 15,901 | $ | 26,000 |
|
|
Gross profit decreased by $0.7 million and $13.7$11.9 million for the second quarter and first half of 2022, respectively,three months ended March 31, 2023 compared to the same periods of 2021.period in 2022. The decrease for the second quarter and first half of 2022increase was due to lower production and sales volumes and higher costcosts of sales resulting from increased production costs due to: (i) higher volumes of lower grade ore tonnage processed during period, (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 was partially offset by increased sales due to higher average realized gold prices and volume in the second quarter of 2022. Lower sales volume in the first half of 2022 compared to 2021 due to lower grades mined and processed meant gross profit was not favorably impacted by higher realized prices in the period.
Total capital additions decreasedincreased by $4.1$9.3 million and $10.1 million infor the second quarter of 2022 and first half of 2022 respectively,three months 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 second quarter and first half of 2022 and 2021:Ounce:
The following table summarizes the components of Cash Cost, After By-product Credits, per Gold Ounce:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Cash Cost, Before By-product Credits, per Gold Ounce | $ | 1,377 | $ | 1,206 | $ | 1,446 | $ | 1,113 | ||||||||
By-product credits | (6 | ) | (7 | ) | (6 | ) | (7 | ) | ||||||||
Cash Cost, After By-product Credits, per Gold Ounce | $ | 1,371 | $ | 1,199 | $ | 1,440 | $ | 1,106 |
The following table summarizes the components of AISC, After By-product Credits, per Gold Ounce:26
|
| 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 |
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
AISC, Before By-product Credits, per Gold Ounce | $ | 1,647 | $ | 1,441 | $ | 1,727 | $ | 1,354 | ||||||||
By-product credits | (6 | ) | (7 | ) | (6 | ) | (7 | ) | ||||||||
AISC, After By-product Credits, per Gold Ounce | $ | 1,641 | $ | 1,434 | $ | 1,721 | $ | 1,347 |
The increase in Cash Cost After By-product Credits, per Gold Ounce, for the second quarter and first half of 2022three months ended 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 second quarter of 2022 compared with the same period in 2021.production. The lower production in 2022for the three months ended March 31, 2023 combined with increased sustaining capital also negatively impactedimpacting AISC, After By-product Credits, per Gold Ounce, however this was partially offset by lower sustaining capital spent in 2022 compared to 2021.Ounce.
The Nevada Operations Segment
Dollars are in thousands (except per ounce and per ton amounts) |
| Three Months Ended |
| |||||
|
| 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 |
|
Dollars are in thousands (except per ounce and per ton amounts) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Sales | $ | — | $ | 8,450 | $ | 268 | $ | 18,687 | ||||||||
Cost of sales and other direct production costs | (1,133 | ) | (12,394 | ) | (1,133 | ) | (17,216 | ) | ||||||||
Depreciation, depletion and amortization | (122 | ) | (5,599 | ) | (122 | ) | (8,232 | ) | ||||||||
Total cost of sales | (1,255 | ) | (17,993 | ) | (1,255 | ) | (25,448 | ) | ||||||||
Gross (loss) | $ | (1,255 | ) | $ | (9,543 | ) | $ | (987 | ) | $ | (6,761 | ) | ||||
Tons of ore milled | — | 38,947 | — | 55,406 | ||||||||||||
Production: | ||||||||||||||||
Gold (ounces) | — | 14,947 | — | 17,495 | ||||||||||||
Silver (ounces) | — | 45,125 | 45,125 | |||||||||||||
Payable metal quantities sold: | ||||||||||||||||
Gold (ounces) | — | 4,732 | 65 | 10,555 | ||||||||||||
Silver (ounces) | — | 1,214 | 6,363 | 8,035 | ||||||||||||
Ore grades: | ||||||||||||||||
Gold ounces per ton | — | 0.410 | 0.343 | 0.343 | ||||||||||||
Silver ounces per ton | — | 1.24 | 0.88 | 0.88 | ||||||||||||
Production cost per ton | $ | — | $ | 161.5 | $ | 220.68 | $ | 220.68 | ||||||||
Cash Cost, After By-product Credits, per Gold Ounce (1) | $ | 1,369 | $ | — | $ | 1,371 | ||||||||||
AISC, After By-product Credits, per Gold Ounce (1) | $ | — | $ | 1,386 | $ | — | $ | 1,393 | ||||||||
Capital additions | $ | 297 | $ | 77 | $ | 1,173 | $ | 166 |
|
|
The decreases in gross loss of $28 thousand for the second quarter and first halfthree months ended March 31, 2023, was attributable to write downs of 2022 comparedstockpiled material to the same periods of 2021 were primarily the result of lower sales volumes and lower write-downs of ore stockpiled to estimated net realizable value. Development ceased at Fire Creek invalue reflecting a lower gold price received for the second quarter of 2019 when the decision was made to limit near-term production to areas of the mine where development was already completed. Mining of non-refractory ore at Fire Creek in areas where development had already been performed was completed in the fourth quarter of 2020. During 2021, productionprocessing and revenue were generated from processing of the stockpiled non-refractory ore at the Midas mill and third-party processingsale of refractory ore inat 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.third party facility.
Exploration activities and pre-development activities related tocontinued in the Hatter Graben area at Hollister are ongoing. Carethree months ended March 31, 2023 and maintenance costs are reported in a separate line itemwere focused on our consolidated statementstarget generation through detailed modeling and analysis of operationsgeological mapping and excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization, total production costs per ton and Cash Cost and AISC, After By-product Credits, per Gold Ounce.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.
Corporate Matters27
Keno Hill
Employee Benefit Plans
Our defined benefit pension plans provide a significant benefit toWe acquired our employees, but represent a significant liability to us. The liability recorded forKeno Hill operations as part of the underfunded status of our plans was $4.7 million and $6.0 million as of June 30, 2022 and December 31, 2021, respectively. During May 2022, we contributed $5.6 million in shares of our common stock to two of our defined benefit plans.Alexco acquisition on September 7, 2022. We do not expect to make additional contributions to our defined benefit pension 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 current plan provisions, andproduction during the third quarter of 2023. Keno Hill has not generated any revenue since we periodically examine the plans for affordability and competitiveness. See Note 6 of Notesacquired it, due to Consolidated Financial Statements being in our 2021 Form 10-K for more information.
Income Taxes
development. During the second quarterthree months ended March 31, 2023, $5.9million of site specific costs were included in the line item "Ramp-up and first sixsuspension 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 provision of approximately $0.3 million and $5.9$3.2 million resulted in an effective tax rate of 1.9% and 168.9% for the respective periods.4,699%. This compares to an income and mining tax benefit of $4.1 million and provision of $0.6$5.6 million for the second quarter and first six months of 2021, orresulted in an effective tax rate of 298.3% and 2.5%,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. ForThe 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 three months ended March 31, 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 March 31, 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 our 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 six-monththree month periods ended June 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's operating performance. We use AISC, After By-product Credits, per Ounce as a measure of our 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 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 CashCost, 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 |
|
|
|
|
In thousands (except per ounce amounts) | Three Months Ended June 30, 2022 | |||||||||||||||
Greens Creek | Lucky Friday | Corporate(2) | Total Silver | |||||||||||||
Total cost of sales | $ | 60,506 | $ | 30,348 | $ | — | $ | 90,854 | ||||||||
Depreciation, depletion and amortization | (13,629 | ) | (8,862 | ) | — | (22,491 | ) | |||||||||
Treatment costs | 8,778 | 4,803 | — | 13,581 | ||||||||||||
Change in product inventory | (1,102 | ) | 503 | — | (599 | ) | ||||||||||
Reclamation and other costs | (1,005 | ) | (256 | ) | — | (1,261 | ) | |||||||||
Cash Cost, Before By-product Credits (1) | 53,548 | 26,536 | 80,084 | |||||||||||||
Reclamation and other costs | 705 | 282 | — | 987 | ||||||||||||
Sustaining exploration | 929 | — | 769 | 1,698 | ||||||||||||
Sustaining capital | 14,668 | 8,110 | 99 | 22,877 | ||||||||||||
General and administrative | 9,692 | 9,692 | ||||||||||||||
AISC, Before By-product Credits (1) | 69,850 | 34,928 | 10,560 | 115,338 | ||||||||||||
By-product credits: | ||||||||||||||||
Zinc | (32,828 | ) | (8,227 | ) | — | (41,055 | ) | |||||||||
Gold | (20,364 | ) | — | — | (20,364 | ) | ||||||||||
Lead | (8,271 | ) | (14,543 | ) | — | (22,814 | ) | |||||||||
Total By-product credits | (61,463 | ) | (22,770 | ) | — | (84,233 | ) | |||||||||
Cash Cost, After By-product Credits | $ | (7,915 | ) | $ | 3,766 | $ | — | $ | (4,149 | ) | ||||||
AISC, After By-product Credits | $ | 8,387 | $ | 12,158 | $ | 10,560 | $ | 31,105 | ||||||||
Divided by ounces produced | 2,410 | 1,226 | 3,636 | |||||||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 22.21 | $ | 21.65 | $ | 22.03 | ||||||||||
By-product credits per ounce | (25.50 | ) | (18.58 | ) | (23.17 | ) | ||||||||||
Cash Cost, After By-product Credits, per Ounce | $ | (3.29 | ) | $ | 3.07 | $ | (1.14 | ) | ||||||||
AISC, Before By-product Credits, per Ounce | $ | 28.98 | $ | 28.49 | $ | 31.85 | ||||||||||
By-product credits per ounce | (25.50 | ) | (18.58 | ) | (23.17 | ) | ||||||||||
AISC, After By-product Credits, per Ounce | $ | 3.48 | $ | 9.91 | $ | 8.68 |
In thousands (except per ounce amounts) | Three months ended June 30, 2022 | |||||||
Casa Berardi | Total Gold | |||||||
Total cost of sales | $ | 61,870 | $ | 61,870 | ||||
Depreciation, depletion and amortization | (15,459 | ) | (15,459 | ) | ||||
Treatment costs | 457 | 457 | ||||||
Change in product inventory | (793 | ) | (793 | ) | ||||
Reclamation and other costs | (209 | ) | (209 | ) | ||||
Cash Cost, Before By-product Credits (1) | 45,866 | 45,866 | ||||||
Reclamation and other costs | 209 | 209 | ||||||
Sustaining exploration | 1,178 | 1,178 | ||||||
Sustaining capital | 7,597 | 7,597 | ||||||
AISC, Before By-product Credits (1) | 54,850 | 54,850 | ||||||
By-product credits: | ||||||||
Silver | (188 | ) | (188 | ) | ||||
Total By-product credits | (188 | ) | (188 | ) | ||||
Cash Cost, After By-product Credits | $ | 45,678 | $ | 45,678 | ||||
AISC, After By-product Credits | $ | 54,662 | $ | 54,662 | ||||
Divided by ounces produced | 33 | 33 | ||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 1,377 | $ | 1,377 | ||||
By-product credits per ounce | (6 | ) | (6 | ) | ||||
Cash Cost, After By-product Credits, per Ounce | $ | 1,371 | $ | 1,371 | ||||
AISC, Before By-product Credits, per Ounce | $ | 1,647 | $ | 1,647 | ||||
By-product credits per ounce | (6 | ) | (6 | ) | ||||
AISC, After By-product Credits, per Ounce | $ | 1,641 | $ | 1,641 |
In thousands (except per ounce amounts) | Three months ended June 30, 2022 | |||||||||||
Total Silver | Total Gold | Total | ||||||||||
Total cost of sales | $ | 90,854 | $ | 61,870 | $ | 152,724 | ||||||
Depreciation, depletion and amortization | (22,491 | ) | (15,459 | ) | (37,950 | ) | ||||||
Treatment costs | 13,581 | 457 | 14,038 | |||||||||
Change in product inventory | (599 | ) | (793 | ) | (1,392 | ) | ||||||
Reclamation and other costs | (1,261 | ) | (209 | ) | (1,470 | ) | ||||||
Cash Cost, Before By-product Credits (1) | 80,084 | 45,866 | 125,950 | |||||||||
Reclamation and other costs | 987 | 209 | 1,196 | |||||||||
Sustaining exploration | 1,698 | 1,178 | 2,876 | |||||||||
Sustaining capital | 22,877 | 7,597 | 30,474 | |||||||||
General and administrative | 9,692 | — | 9,692 | |||||||||
AISC, Before By-product Credits (1) | 115,338 | 54,850 | 170,188 | |||||||||
By-product credits: | ||||||||||||
Zinc | (41,055 | ) | — | (41,055 | ) | |||||||
Gold | (20,364 | ) | — | (20,364 | ) | |||||||
Lead | (22,814 | ) | — | (22,814 | ) | |||||||
Silver | — | (188 | ) | (188 | ) | |||||||
Total By-product credits | (84,233 | ) | (188 | ) | (84,421 | ) | ||||||
Cash Cost, After By-product Credits | $ | (4,149 | ) | $ | 45,678 | $ | 41,529 | |||||
AISC, After By-product Credits | $ | 31,105 | $ | 54,662 | $ | 85,767 | ||||||
Divided by ounces produced | 3,636 | 33 | ||||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 22.03 | $ | 1,377 | ||||||||
By-product credits per ounce | (23.17 | ) | (6 | ) | ||||||||
Cash Cost, After By-product Credits, per Ounce | $ | (1.14 | ) | $ | 1,371 | |||||||
AISC, Before By-product Credits, per Ounce | $ | 31.72 | $ | 1,647 | ||||||||
By-product credits per ounce | (23.17 | ) | (6 | ) | ||||||||
AISC, After By-product Credits, per Ounce | $ | 8.55 | $ | 1,641 |
In thousands (except per ounce amounts) | Three Months Ended June 30, 2021 | |||||||||||||||
Greens Creek | Lucky Friday | Corporate and other( 2) | Total Silver | |||||||||||||
Total cost of sales | $ | 55,488 | $ | 27,901 | $ | 1 | $ | 83,390 | ||||||||
Depreciation, depletion and amortization | (14,492 | ) | (7,402 | ) | — | (21,894 | ) | |||||||||
Treatment costs | 8,924 | 4,686 | — | 13,610 | ||||||||||||
Change in product inventory | (435 | ) | (1,596 | ) | — | (2,031 | ) | |||||||||
Reclamation and other costs | (672 | ) | (325 | ) | (1 | ) | (998 | ) | ||||||||
Cash Cost, Before By-product Credits (1) | 48,813 | 23,264 | — | 72,077 | ||||||||||||
Reclamation and other costs | 847 | 264 | — | 1,111 | ||||||||||||
Sustaining exploration | 1,300 | — | 450 | 1,750 | ||||||||||||
Sustaining capital | 6,339 | 5,244 | — | 11,583 | ||||||||||||
General and administrative | 11,104 | 11,104 | ||||||||||||||
AISC, Before By-product Credits (1) | 57,299 | 28,772 | 11,554 | 97,625 | ||||||||||||
By-product credits: | ||||||||||||||||
Zinc | (26,510 | ) | (5,093 | ) | — | (31,603 | ) | |||||||||
Gold | (20,438 | ) | — | — | (20,438 | ) | ||||||||||
Lead | (8,605 | ) | (10,799 | ) | — | (19,404 | ) | |||||||||
Total By-product credits | (55,553 | ) | (15,892 | ) | — | (71,445 | ) | |||||||||
Cash Cost, After By-product Credits | $ | (6,740 | ) | $ | 7,372 | — | $ | 632 | ||||||||
AISC, After By-product Credits | $ | 1,746 | $ | 12,880 | 11,554 | $ | 26,180 | |||||||||
Divided by ounces produced | 2,558 | 913 | 3,471 | |||||||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 19.08 | $ | 25.49 | $ | 20.76 | ||||||||||
By-product credits per ounce | (21.72 | ) | (17.42 | ) | (20.58 | ) | ||||||||||
Cash Cost, After By-product Credits, per Ounce | $ | (2.64 | ) | $ | 8.07 | $ | 0.18 | |||||||||
AISC, Before By-product Credits, per Ounce | $ | 22.40 | $ | 31.52 | $ | 28.12 | ||||||||||
By-product credits per ounce | (21.72 | ) | (17.42 | ) | (20.58 | ) | ||||||||||
AISC, After By-product Credits, per Ounce | $ | 0.68 | $ | 14.10 | $ | 7.54 |
In thousands (except per ounce amounts) | Three Months Ended June 30, 2021 | |||||||||||
Casa Berardi | Nevada Operations | Total Gold | ||||||||||
Total cost of sales | $ | 54,669 | $ | 17,993 | $ | 72,662 | ||||||
Depreciation, depletion and amortization | (18,239 | ) | (5,599 | ) | (23,838 | ) | ||||||
Treatment costs | 535 | 1,719 | 2,254 | |||||||||
Change in product inventory | 1,015 | 12,583 | 13,598 | |||||||||
Reclamation and other costs | (215 | ) | (218 | ) | (433 | ) | ||||||
Exclusion of Nevada Operations costs | — | (4,914 | ) | (4,914 | ) | |||||||
Cash Cost, Before By-product Credits (1) | 37,765 | 21,564 | 59,329 | |||||||||
Reclamation and other costs | 215 | 218 | 433 | |||||||||
Sustaining exploration | 1,103 | — | 1,103 | |||||||||
Sustaining capital | 6,064 | 44 | 6,108 | |||||||||
AISC, Before By-product Credits (1) | 45,147 | 21,826 | 66,973 | |||||||||
By-product credits: | ||||||||||||
Silver | (209 | ) | (1,103 | ) | (1,312 | ) | ||||||
Total By-product credits | (209 | ) | (1,103 | ) | (1,312 | ) | ||||||
Cash Cost, After By-product Credits | $ | 37,556 | $ | 20,461 | $ | 58,017 | ||||||
AISC, After By-product Credits | $ | 44,938 | $ | 20,723 | $ | 65,661 | ||||||
Divided by ounces produced | 31 | 15 | 46 | |||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 1,206 | $ | 1,443 | $ | 1,282 | ||||||
By-product credits per ounce | (7 | ) | (74 | ) | (28 | ) | ||||||
Cash Cost, After By-product Credits, per Ounce | $ | 1,199 | $ | 1,369 | $ | 1,254 | ||||||
AISC, Before By-product Credits, per Ounce | $ | 1,441 | $ | 1,460 | $ | 1,447 | ||||||
By-product credits per ounce | (7 | ) | (74 | ) | (28 | ) | ||||||
AISC, After By-product Credits, per Ounce | $ | 1,434 | $ | 1,386 | $ | 1,419 |
In thousands (except per ounce amounts) | Three Months Ended June 30, 2021 | |||||||||||
Total Silver | Total Gold | Total | ||||||||||
Total cost of sales | $ | 83,390 | $ | 72,662 | $ | 156,052 | ||||||
Depreciation, depletion and amortization | (21,894 | ) | (23,838 | ) | (45,732 | ) | ||||||
Treatment costs | 13,610 | 2,254 | 15,864 | |||||||||
Change in product inventory | (2,031 | ) | 13,598 | 11,567 | ||||||||
Reclamation and other costs | (998 | ) | (433 | ) | (1,431 | ) | ||||||
Exclusion of Nevada Operations costs | — | (4,914 | ) | (4,914 | ) | |||||||
Cash Cost, Before By-product Credits (1) | 72,077 | 59,329 | 131,406 | |||||||||
Reclamation and other costs | 1,111 | 433 | 1,544 | |||||||||
Sustaining exploration | 1,750 | 1,103 | 2,853 | |||||||||
Sustaining capital | 11,583 | 6,108 | 17,691 | |||||||||
General and administrative | 11,104 | — | 11,104 | |||||||||
AISC, Before By-product Credits (1) | 97,625 | 66,973 | 164,598 | |||||||||
By-product credits: | ||||||||||||
Zinc | (31,603 | ) | — | (31,603 | ) | |||||||
Gold | (20,438 | ) | — | (20,438 | ) | |||||||
Lead | (19,404 | ) | — | (19,404 | ) | |||||||
Silver | — | (1,312 | ) | (1,312 | ) | |||||||
Total By-product credits | (71,445 | ) | (1,312 | ) | (72,757 | ) | ||||||
Cash Cost, After By-product Credits | $ | 632 | $ | 58,017 | $ | 58,649 | ||||||
AISC, After By-product Credits | $ | 26,180 | $ | 65,661 | $ | 91,841 | ||||||
Divided by ounces produced | 3,471 | 46 | ||||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 20.76 | $ | 1,282 | ||||||||
By-product credits per ounce | (20.58 | ) | (28 | ) | ||||||||
Cash Cost, After By-product Credits, per Ounce | $ | 0.18 | $ | 1,254 | ||||||||
AISC, Before By-product Credits, per Ounce | $ | 28.12 | $ | 1,447 | ||||||||
By-product credits per ounce | (20.58 | ) | (28 | ) | ||||||||
AISC, After By-product Credits, per Ounce | $ | 7.54 | $ | 1,419 |
In thousands (except per ounce amounts) | Six Months Ended June 30, 2022 | |||||||||||||||
Greens Creek | Lucky Friday | Corporate(1) | Total Silver | |||||||||||||
Total cost of sales | $ | 110,143 | $ | 59,613 | $ | — | $ | 169,756 | ||||||||
Depreciation, depletion and amortization | (25,049 | ) | (16,894 | ) | — | (41,943 | ) | |||||||||
Treatment costs | 17,892 | 8,480 | — | 26,372 | ||||||||||||
Change in product inventory | 5,436 | (402 | ) | — | 5,034 | |||||||||||
Reclamation and other costs | (1,872 | ) | (619 | ) | — | (2,491 | ) | |||||||||
Cash Cost, Before By-product Credits (1) | 106,550 | 50,178 | — | 156,728 | ||||||||||||
Reclamation and other costs | 1,410 | 564 | — | 1,974 | ||||||||||||
Sustaining exploration | 1,094 | — | 1,485 | 2,579 | ||||||||||||
Sustaining capital | 20,624 | 13,671 | 147 | 34,442 | ||||||||||||
General and administrative | 17,986 | 17,986 | ||||||||||||||
AISC, Before By-product Credits (1) | 129,678 | 64,413 | 19,618 | 213,709 | ||||||||||||
By-product credits: | ||||||||||||||||
Zinc | (61,479 | ) | (14,204 | ) | — | (75,683 | ) | |||||||||
Gold | (38,947 | ) | — | — | (38,947 | ) | ||||||||||
Lead | (16,237 | ) | (26,379 | ) | — | (42,616 | ) | |||||||||
Total By-product credits | (116,663 | ) | (40,583 | ) | — | (157,246 | ) | |||||||||
Cash Cost, After By-product Credits | $ | (10,113 | ) | $ | 9,595 | — | $ | (518 | ) | |||||||
AISC, After By-product Credits | $ | 13,015 | $ | 23,830 | $ | 19,618 | $ | 56,463 | ||||||||
Divided by ounces produced | 4,840 | 2,114 | 6,954 | |||||||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 22.01 | $ | 23.74 | $ | 22.54 | ||||||||||
By-product credits per ounce | (24.10 | ) | (19.20 | ) | (22.61 | ) | ||||||||||
Cash Cost, After By-product Credits, per Ounce | $ | (2.09 | ) | $ | 4.54 | $ | (0.07 | ) | ||||||||
AISC, Before By-product Credits, per Ounce | $ | 26.79 | $ | 30.47 | $ | 30.73 | ||||||||||
By-product credits per ounce | (24.10 | ) | (19.20 | ) | (22.61 | ) | ||||||||||
AISC, After By-product Credits, per Ounce | $ | 2.69 | $ | 11.27 | $ | 8.12 |
In thousands (except per ounce amounts) | Six Months Ended June 30, 2022 | |||||||
Casa Berardi | Total Gold | |||||||
Total cost of sales | $ | 124,038 | $ | 124,038 | ||||
Depreciation, depletion and amortization | (31,305 | ) | (31,305 | ) | ||||
Treatment costs | 915 | 915 | ||||||
Change in product inventory | (1,356 | ) | (1,356 | ) | ||||
Reclamation and other costs | (419 | ) | (419 | ) | ||||
Cash Cost, Before By-product Credits (1) | 91,873 | 91,873 | ||||||
Reclamation and other costs | 419 | 419 | ||||||
Sustaining exploration | 2,572 | 2,572 | ||||||
Sustaining capital | 14,878 | 14,878 | ||||||
AISC, Before By-product Credits (1) | 109,742 | 109,742 | ||||||
By-product credits: | ||||||||
Silver | (354 | ) | (354 | ) | ||||
Total By-product credits | (354 | ) | (354 | ) | ||||
Cash Cost, After By-product Credits | $ | 91,519 | $ | 91,519 | ||||
AISC, After By-product Credits | $ | 109,388 | $ | 109,388 | ||||
Divided by ounces produced | 64 | 64 | ||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 1,446 | $ | 1,446 | ||||
By-product credits per ounce | (6 | ) | (6 | ) | ||||
Cash Cost, After By-product Credits, per Ounce | $ | 1,440 | $ | 1,440 | ||||
AISC, Before By-product Credits, per Ounce | $ | 1,727 | $ | 1,727 | ||||
By-product credits per ounce | (6 | ) | (6 | ) | ||||
AISC, After By-product Credits, per Ounce | $ | 1,721 | $ | 1,721 |
In thousands (except per ounce amounts) | Six Months Ended June 30, 2022 | |||||||||||
Total Silver | Total Gold | Total | ||||||||||
Total cost of sales | $ | 169,756 | $ | 124,038 | $ | 293,794 | ||||||
Depreciation, depletion and amortization | (41,943 | ) | (31,305 | ) | (73,248 | ) | ||||||
Treatment costs | 26,372 | 915 | 27,287 | |||||||||
Change in product inventory | 5,034 | (1,356 | ) | 3,678 | ||||||||
Reclamation and other costs | (2,491 | ) | (419 | ) | (2,910 | ) | ||||||
Cash Cost, Before By-product Credits (1) | 156,728 | 91,873 | 248,601 | |||||||||
Reclamation and other costs | 1,974 | 419 | 2,393 | |||||||||
Sustaining exploration | 2,579 | 2,572 | 5,151 | |||||||||
Sustaining capital | 34,442 | 14,878 | 49,320 | |||||||||
General and administrative | 17,986 | — | 17,986 | |||||||||
AISC, Before By-product Credits (1) | 213,709 | 109,742 | 323,451 | |||||||||
By-product credits: | ||||||||||||
Zinc | (75,683 | ) | — | (75,683 | ) | |||||||
Gold | (38,947 | ) | — | (38,947 | ) | |||||||
Lead | (42,616 | ) | — | (42,616 | ) | |||||||
Silver | — | (354 | ) | (354 | ) | |||||||
Total By-product credits | (157,246 | ) | (354 | ) | (157,600 | ) | ||||||
Cash Cost, After By-product Credits | $ | (518 | ) | $ | 91,519 | $ | 91,001 | |||||
AISC, After By-product Credits | $ | 56,463 | $ | 109,388 | $ | 165,851 | ||||||
Divided by ounces produced | 6,954 | 64 | ||||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 22.54 | $ | 1,446 | ||||||||
By-product credits per ounce | (22.61 | ) | (6 | ) | ||||||||
Cash Cost, After By-product Credits, per Ounce | $ | (0.07 | ) | $ | 1,440 | |||||||
AISC, Before By-product Credits, per Ounce | $ | 30.73 | $ | 1,727 | ||||||||
By-product credits per ounce | (22.61 | ) | (6 | ) | ||||||||
AISC, After By-product Credits, per Ounce | $ | 8.12 | $ | 1,721 |
In thousands (except per ounce amounts) | Six Months Ended June 30, 2021 | |||||||||||||||
Greens Creek | Lucky Friday | Corporate and other(2) | Total Silver | |||||||||||||
Total cost of sales | $ | 108,668 | $ | 50,696 | $ | 95 | $ | 159,459 | ||||||||
Depreciation, depletion and amortization | (29,313 | ) | (13,738 | ) | — | (43,051 | ) | |||||||||
Treatment costs | 19,465 | 9,664 | — | 29,129 | ||||||||||||
Change in product inventory | (34 | ) | (1,689 | ) | — | (1,723 | ) | |||||||||
Reclamation and other costs | (932 | ) | (559 | ) | (95 | ) | (1,586 | ) | ||||||||
Cash Cost, Before By-product Credits (1) | 97,854 | 44,374 | 142,228 | |||||||||||||
Reclamation and other costs | 1,695 | 528 | 2,223 | |||||||||||||
Sustaining exploration | 1,423 | — | 885 | 2,308 | ||||||||||||
Sustaining capital | 11,231 | 10,698 | — | 21,929 | ||||||||||||
General and administrative | — | — | 19,111 | 19,111 | ||||||||||||
AISC, Before By-product Credits (1) | 112,203 | 55,600 | $ | 19,996 | 187,799 | |||||||||||
By-product credits: | ||||||||||||||||
Zinc | (49,277 | ) | (9,846 | ) | — | (59,123 | ) | |||||||||
Gold | (41,434 | ) | — | (41,434 | ) | |||||||||||
Lead | (15,625 | ) | (20,574 | ) | — | (36,199 | ) | |||||||||
Total By-product credits | (106,336 | ) | (30,420 | ) | — | (136,756 | ) | |||||||||
Cash Cost, After By-product Credits | $ | (8,482 | ) | $ | 13,954 | $ | — | $ | 5,472 | |||||||
AISC, After By-product Credits | $ | 5,867 | $ | 25,180 | $ | 19,996 | $ | 51,043 | ||||||||
Divided by ounces produced | 5,143 | 1,777 | 6,920 | |||||||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 19.03 | $ | 24.97 | $ | 20.55 | ||||||||||
By-product credits per ounce | (20.68 | ) | (17.12 | ) | (19.76 | ) | ||||||||||
Cash Cost, After By-product Credits, per Ounce | $ | (1.65 | ) | $ | 7.85 | $ | 0.79 | |||||||||
AISC, Before By-product Credits, per Ounce | $ | 21.82 | $ | 31.29 | $ | 27.14 | ||||||||||
By-product credits per ounce | (20.68 | ) | (17.12 | ) | (19.76 | ) | ||||||||||
AISC, After By-product Credits, per Ounce | $ | 1.14 | $ | 14.17 | $ | 7.38 |
In thousands (except per ounce amounts) | Six Months Ended June 30, 2021 | |||||||||||
Casa Berardi | Nevada Operations | Total Gold | ||||||||||
Total cost of sales | $ | 114,596 | $ | 25,448 | $ | 140,044 | ||||||
Depreciation, depletion and amortization | (41,191 | ) | (8,232 | ) | (49,423 | ) | ||||||
Treatment costs | 1,249 | 1,730 | 2,979 | |||||||||
Change in product inventory | 968 | 11,499 | 12,467 | |||||||||
Reclamation and other costs | (423 | ) | (245 | ) | (668 | ) | ||||||
Exclusion of Nevada Operations costs | — | (5,103 | ) | (5,103 | ) | |||||||
Cash Cost, Before By-product Credits (1) | 75,199 | 25,097 | 100,296 | |||||||||
Reclamation and other costs | 423 | 245 | 668 | |||||||||
Sustaining exploration | 2,010 | — | 2,010 | |||||||||
Sustaining capital | 13,822 | 133 | 13,955 | |||||||||
AISC, Before By-product Credits (1) | 91,454 | 25,475 | 116,929 | |||||||||
By-product credits: | ||||||||||||
Silver | (487 | ) | (1,103 | ) | (1,590 | ) | ||||||
Total By-product credits | (487 | ) | (1,103 | ) | (1,590 | ) | ||||||
Cash Cost, After By-product Credits | $ | 74,712 | $ | 23,994 | $ | 98,706 | ||||||
AISC, After By-product Credits | $ | 90,967 | $ | 24,372 | $ | 115,339 | ||||||
Divided by ounces produced | 68 | 17 | 85 | |||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 1,113 | $ | 1,434 | $ | 1,180 | ||||||
By-product credits per ounce | (7 | ) | (63 | ) | (19 | ) | ||||||
Cash Cost, After By-product Credits, per Ounce | $ | 1,106 | $ | 1,371 | $ | 1,161 | ||||||
AISC, Before By-product Credits, per Ounce | $ | 1,354 | $ | 1,456 | $ | 1,376 | ||||||
By-product credits per ounce | (7 | ) | (63 | ) | (19 | ) | ||||||
AISC, After By-product Credits, per Ounce | $ | 1,347 | $ | 1,393 | $ | 1,357 |
In thousands (except per ounce amounts) | Six Months Ended June 30, 2021 | |||||||||||
Total Silver | Total Gold | Total | ||||||||||
Total cost of sales | $ | 159,459 | $ | 140,044 | 299,503 | |||||||
Depreciation, depletion and amortization | (43,051 | ) | (49,423 | ) | (92,474 | ) | ||||||
Treatment costs | 29,129 | 2,979 | 32,108 | |||||||||
Change in product inventory | (1,723 | ) | 12,467 | 10,744 | ||||||||
Reclamation and other costs | (1,586 | ) | (668 | ) | (2,254 | ) | ||||||
Suspension of Nevada Operations costs | — | (5,103 | ) | (5,103 | ) | |||||||
Cash Cost, Before By-product Credits (1) | 142,228 | 100,296 | 242,524 | |||||||||
Reclamation and other costs | 2,223 | 668 | 2,891 | |||||||||
Sustaining exploration | 2,308 | 2,010 | 4,318 | |||||||||
Sustaining capital | 21,929 | 13,955 | 35,884 | |||||||||
General and administrative | 19,111 | — | 19,111 | |||||||||
AISC, Before By-product Credits (1) | 187,799 | 116,929 | 304,728 | |||||||||
By-product credits: | ||||||||||||
Zinc | (59,123 | ) | — | (59,123 | ) | |||||||
Gold | (41,434 | ) | — | (41,434 | ) | |||||||
Lead | (36,199 | ) | — | (36,199 | ) | |||||||
Silver | — | (1,590 | ) | (1,590 | ) | |||||||
Total By-product credits | (136,756 | ) | (1,590 | ) | (138,346 | ) | ||||||
Cash Cost, After By-product Credits | $ | 5,472 | $ | 98,706 | $ | 104,178 | ||||||
AISC, After By-product Credits | $ | 51,043 | $ | 115,339 | $ | 166,382 | ||||||
Divided by ounces produced | 6,920 | 85 | ||||||||||
Cash Cost, Before By-product Credits, per Ounce | $ | 20.55 | $ | 1,180 | ||||||||
By-product credits per ounce | (19.76 | ) | (19 | ) | ||||||||
Cash Cost, After By-product Credits, per Ounce | $ | 0.79 | $ | 1,161 | ||||||||
AISC, Before By-product Credits, per Ounce | $ | 27.14 | $ | 1,376 | ||||||||
By-product credits per ounce | (19.76 | ) | (19 | ) | ||||||||
AISC, After By-product Credits, per Ounce | $ | 7.38 | $ | 1,357 |
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Reconciliation of Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
The non-GAAP measure of free cash flow is calculated as net cash provided by operating activities (GAAP) less additions to properties, plants, equipment and mineral interests (GAAP). Management believes that, when presented in conjunction with comparable GAAP measures, free cash flow is useful to investors in evaluating our operating performance. The following table reconciles net cash provided by operating activities to free cash flow:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net cash provided by operating activities (GAAP) | $ | 40,183 | $ | 86,304 | $ | 78,092 | $ | 124,240 | ||||||||
Less: Additions to properties, plants, equipment and mineral interests (GAAP) | (34,329 | ) | (31,898 | ) | (55,807 | ) | (53,311 | ) | ||||||||
Free cash flow | $ | 5,854 | $ | 54,406 | $ | 22,285 | $ | 70,929 |
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 shareholders.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 June 30, 2022,March 31, 2023, we had $198.2$95.9 million in cash and cash equivalents, of which $23.8$25.6 million was held in foreign 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, 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 1211 of 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 the first and second quarters of 20222023 and $4.7 million and $6.0 million in the first and second quarters of 2021,2022, respectively. Our dividend policy has a silver-linked component which ties the amount of declared common stock dividends to our realized silver price for the preceding quarter. Another component of our common stock dividend policy anticipates paying an annual minimum dividend.
For illustrative purposes only, the table below summarizes potential dividend amounts under our dividend policy.
Quarterly Average Realized Silver Price ($ 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 |
|
| $0.010 |
| $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 |
| $0.235 |
Quarterly Average Realized Silver Price ($ 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) | |||||||||
$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 |
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 1211 of 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 June 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 August 1, 2022, was $4.49 per share.
PursuantAs 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) 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 issued 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. NoDuring the three months ended March 31, 2023, we sold 2,173,274 shares have been sold under the agreement asfor proceeds of June 30, 2022.$11.9 million, net of commissions and fees of approximately $0.2 million.
As a result of our current cash balances, the performance of our current and expected operations, current metals prices, proceeds from potential at-the-market sales of common stock, and availability under our revolving credit facility,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 revolving credit facility;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 160 $200million will be spent in 20222023 on capital expenditures, primarily for equipment, infrastructure, and development at our mines, including $60.9$54.4 million already incurred as of June 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 $24.0$5.0 million already incurred as of June 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):
|
| 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 |
|
June 30, 2022 | December 31, 2021 | |||||||
Cash and cash equivalents held in U.S. dollars | $ | 174.4 | $ | 196.2 | ||||
Cash and cash equivalents held in foreign currency | 23.8 | 13.8 | ||||||
Total cash and cash equivalents | 198.2 | 210.0 | ||||||
Marketable equity securities - non-current | 23.9 | 14.4 | ||||||
Total cash, cash equivalents and investments | $ | 222.1 | $ | 224.4 |
Cash and cash equivalents decreased by $11.8$8.8 million in the first sixthree months of 2022.2023. Cash held in foreign currencies represents balances in Canadian dollars and Mexican Pesos, (“MXN”), with the $10.0$7.7 million increase in the first halfthree months of 20222023 resulting from increases in CAD and MXN held.held following the Alexco acquisition. The value of non-current marketable equity securities increased by $9.5$2.4 million.
|
| Three Months Ended |
| |||||
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||
Cash provided by operating activities (in millions) |
| $ | 40.6 |
|
| $ | 37.9 |
|
Six Months Ended | ||||||||
June 30, 2022 | June 30, 2021 | |||||||
Cash provided by operating activities (in millions) | $ | 78.1 | $ | 124.2 |
Cash provided by operating activities infor the first halfthree months ended March 31, 2023 of 2022 of $78.1$40.6 million represented a $46.1$2.7 million decrease increasecompared to the $124.2$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 halfthree months ended March 31, 2023 compared to outflows of 2021. The variance was$7.4 million in the result of lower net income, as adjustedsame period for non-cash items, a reduction in2022 primarily due to enhanced accounts receivable of $14.6 and an increase in accounts payable of $17.1 million,collection activities, partially offset by an increaselower income adjusted for non cash items of $5.8 million in inventory of $8.4 millionthe three months ended March 31, 2023 compared to the same period for 2022, reflecting lower realized prices and smaller decreases to accrued taxes and accrued reclamation and other non-current liabilities.higher production costs.
|
| Three Months Ended |
| |||||
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||
Cash used in investing activities (in millions) |
| $ | (54.4 | ) |
| $ | (29.2 | ) |
Six Months Ended | ||||||||
June 30, 2022 | June 30, 2021 | |||||||
Cash used in investing activities (in millions) | $ | (74.5 | ) | $ | (53.2 | ) |
During the first half of 2022,three months ended March 31, 2023, we invested $55.8$54.4 million in capital expenditures, excluding $5.1 million in non-cash finance lease additions, an increase of $2.5$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 Casa Berardi spend.and Lucky Friday. During the first half ofsame period in 2022, we acquired investmentsinvested $10.9 million in othermarketable securities of mining companies for a total of $21.9 million, and disposed of an investment generatinggenerated proceeds of $2.5 million. 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 | ) |
Six Months Ended | ||||||||
June 30, 2022 | June 30, 2021 | |||||||
Cash used in financing activities (in millions) | $ | (14.1 | ) | $ | (19.4 | ) |
During the first sixthree months ofended March 31, 2023 and 2022, and 2021, we paid cash dividends on our common and preferred stock totaling $7.0 $3.9million and $11.0$3.5 million, respectively. Due to lower realized silver prices during 2022 to date, the dividends paid onWe issued stock under our common stock were $4ATM program described above for net proceeds of $11.9 million lower than in the prior year, reflecting our dividend policy discussed above.three months ended March 31, 2023. We made repayments on our finance leases of $3.3$2.5 million and $3.8$1.7 million in the six-month periodsthree months ended June 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 $1.3 million decrease in cash and cash equivalents in the first half of 2022 compared to a decrease of $28 thousand in the first half 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 June 30, 2022March 31, 2023 (in thousands):
|
| Payments Due By Period |
| |||||||||||||||||
|
| Less than 1 year |
|
| 1-3 years |
|
| 4-5 years |
|
| More than |
|
| 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
Payments Due By Period | ||||||||||||||||||||
Less than 1 year | 1-3 years | 4-5 years | More than 5 years | Total | ||||||||||||||||
Purchase obligations (1) | $ | 31,918 | $ | — | $ | — | $ | — | $ | 31,918 | ||||||||||
Credit facility(2) | 1,072 | — | — | — | 1,072 | |||||||||||||||
Finance lease commitments (3) | 6,423 | 8,291 | 1,213 | — | 15,927 | |||||||||||||||
Operating lease commitments (4) | 3,011 | 3,113 | 2,069 | 6,043 | 14,236 | |||||||||||||||
Senior Notes (5) | 34,438 | 68,875 | 68,875 | 496,523 | 668,711 | |||||||||||||||
IQ Notes (6) | 2,441 | 4,882 | 37,528 | — | 44,851 | |||||||||||||||
Total contractual cash obligations | $ | 79,303 | $ | 85,161 | $ | 109,685 | $ | 502,566 | $ | 776,715 |
|
|
|
|
|
|
|
|
|
|
|
|
We record liabilities for costs associated with mine closure, reclamation of land and other environmental matters. At June 30, 2022,March 31, 2023, our liabilities for these matters totaled $114.3$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's Discussion and Analysis of Financial Condition and Results of Operations in our 20212022 Form 10-K.
Off-Balance Sheet Arrangements
At June 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's subsidiaries of the Senior Notes and IQ Notes (see Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information). The Guarantors consist of the following of Hecla's 100%-owned subsidiaries: Hecla Limited; Silver Hunter Mining Company; Rio Grande Silver, Inc.; Hecla MC Subsidiary, LLC; Hecla Silver Valley, Inc.; Burke Trading, Inc.; Hecla Montana, Inc.; Revett Silver Company; RC Resources, Inc.; Troy Mine Inc.; Revett Exploration, Inc.; Revett Holdings, Inc.; Mines Management, Inc.; Newhi, Inc.; Montanore Minerals Corp.; Hecla Alaska LLC; Hecla Greens Creek Mining Company; Hecla Admiralty Company; Hecla Juneau Mining Company; Klondex Holdings Inc.; Klondex Gold & Silver Mining Co.; Klondex Midas Holdings Limited; Klondex Aurora Mine Inc.; Klondex Hollister Mine Inc; andInc.; 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:
|
|
|
|
|
|
|
|
|
|
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.
37
Unaudited Interim Condensed Consolidating Balance Sheets
As of June 30, 2022 |
| As of March 31, 2023 |
| |||||||||||||||||||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated |
| Parent |
|
| Guarantors |
|
| Non-Guarantors |
|
| Eliminations |
|
| Consolidated |
| |||||||||||||||||||||
(in thousands) |
| (in thousands) |
| |||||||||||||||||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Cash and cash equivalents | $ | 151,846 | $ | 30,923 | $ | 15,424 | $ | — | $ | 198,193 |
| $ | 54,365 |
|
| $ | 31,522 |
|
| $ | 10,052 |
|
| $ | — |
|
| $ | 95,939 |
| ||||||||||
Other current assets | 11,861 | 111,008 | 1,334 | — | 124,203 |
|
| 12,235 |
|
|
| 133,378 |
|
|
| 3,398 |
|
|
| — |
|
|
| 149,011 |
| |||||||||||||||
Properties, plants, equipment and mineral interests, net | 1,913 | 2,285,819 | 8,230 | — | 2,295,962 |
|
| (38 | ) |
|
| 2,579,385 |
|
|
| 8,218 |
|
|
| — |
|
|
| 2,587,565 |
| |||||||||||||||
Intercompany receivable (payable) | (226,858 | ) | (208,167 | ) | 217,705 | 217,320 | — |
|
| (188,218 | ) |
|
| (708,757 | ) |
|
| 562,447 |
|
|
| 334,528 |
|
|
| — |
| |||||||||||||
Investments in subsidiaries | 1,415,938 | — | — | (1,415,938 | ) | — |
|
| 2,267,701 |
|
|
| — |
|
|
| — |
|
|
| (2,267,701 | ) |
|
| — |
| ||||||||||||||
Other non-current assets | 359,373 | 28,272 | (116,425 | ) | (172,475 | ) | 98,745 |
|
| 389,556 |
|
|
| 21,303 |
|
|
| 20,979 |
|
|
| (338,729 | ) |
|
| 93,109 |
| |||||||||||||
Total assets | $ | 1,714,073 | $ | 2,247,855 | $ | 126,268 | $ | (1,371,093 | ) | $ | 2,717,103 |
| $ | 2,535,601 |
|
| $ | 2,056,831 |
|
| $ | 605,094 |
|
| $ | (2,271,902 | ) |
| $ | 2,925,624 |
| |||||||||
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Current liabilities | $ | (590,549 | ) | $ | 250,516 | $ | (1,940 | ) | $ | 500,202 | $ | 158,229 |
| $ | 32,312 |
|
| $ | 134,219 |
|
| $ | 3,023 |
|
| $ | (4,201 | ) |
| $ | 165,353 |
| ||||||||
Long-term debt | 507,841 | 172,397 | (522 | ) | (153,721 | ) | 525,995 |
|
| 506,584 |
|
|
| 10,377 |
|
|
| — |
|
|
| — |
|
|
| 516,961 |
| |||||||||||||
Non-current portion of accrued reclamation | — | 101,001 | 2,746 | — | 103,747 |
|
| — |
|
|
| 107,880 |
|
|
| 1,928 |
|
|
| — |
|
|
| 109,808 |
| |||||||||||||||
Non-current deferred tax liability | 13,980 | 430,867 | — | (301,634 | ) | 143,213 |
|
| — |
|
|
| 121,081 |
|
|
| — |
|
|
| — |
|
|
| 121,081 |
| ||||||||||||||
Other non-current liabilities | (81 | ) | 2,422 | 696 | — | 3,037 |
|
| 4,548 |
|
|
| 6,721 |
|
|
| 8,995 |
|
|
| — |
|
|
| 20,264 |
| ||||||||||||||
Stockholders' equity | 1,782,882 | 1,290,652 | 125,288 | (1,415,940 | ) | 1,782,882 |
|
| 1,992,157 |
|
|
| 1,676,553 |
|
|
| 591,148 |
|
|
| (2,267,701 | ) |
|
| 1,992,157 |
| ||||||||||||||
Total liabilities and stockholders' equity | $ | 1,714,073 | $ | 2,247,855 | $ | 126,268 | $ | (1,371,093 | ) | $ | 2,717,103 |
| $ | 2,535,601 |
|
| $ | 2,056,831 |
|
| $ | 605,094 |
|
| $ | (2,271,902 | ) |
| $ | 2,925,624 |
|
Unaudited Interim Condensed Consolidating Statements of Operations
Three Months Ended June 30, 2022 |
| Three Months Ended March 31, 2023 |
| |||||||||||||||||||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated |
| Parent |
|
| Guarantors |
|
| Non-Guarantors |
|
| Eliminations |
|
| Consolidated |
| |||||||||||||||||||||
(in thousands) |
| (in thousands) |
| |||||||||||||||||||||||||||||||||||||
Revenues | $ | 11,323 | $ | 179,919 | $ | — | $ | — | $ | 191,242 |
| $ | 900 |
|
| $ | 198,600 |
|
| $ | — |
|
| $ | — |
|
| $ | 199,500 |
| ||||||||||
Cost of sales | 746 | (116,653 | ) | — | — | (115,907 | ) | |||||||||||||||||||||||||||||||||
Cost of sales and other direct production costs |
|
| (878 | ) |
|
| (124,672 | ) |
|
| — |
|
|
| — |
|
|
| (125,550 | ) | ||||||||||||||||||||
Depreciation, depletion, amortization | — | (38,072 | ) | — | — | (38,072 | ) |
|
| — |
|
|
| (39,002 | ) |
|
| — |
|
|
| — |
|
|
| (39,002 | ) | |||||||||||||
General and administrative | (4,497 | ) | (5,036 | ) | (159 | ) | — | (9,692 | ) |
|
| (4,863 | ) |
|
| (6,829 | ) |
|
| (378 | ) |
|
| — |
|
|
| (12,070 | ) | |||||||||||
Exploration and pre-development | (148 | ) | (8,700 | ) | (2,352 | ) | — | (11,200 | ) |
|
| (91 | ) |
|
| (4,008 | ) |
|
| (868 | ) |
|
| — |
|
|
| (4,967 | ) | |||||||||||
Fair value adjustments, net | (1,553 | ) | (4,231 | ) | (10,644 | ) | — | (16,428 | ) | |||||||||||||||||||||||||||||||
Equity in earnings of subsidiaries | (12,559 | ) | — | — | 12,559 | — |
|
| 2,015 |
|
|
| — |
|
|
| — |
|
|
| (2,015 | ) |
|
| — |
| ||||||||||||||
Other expense | (3,237 | ) | (1,688 | ) | (1,179 | ) | (7,108 | ) | (13,212 | ) | ||||||||||||||||||||||||||||||
Income (loss) before income taxes | (9,925 | ) | 5,539 | (14,334 | ) | 5,451 | (13,269 | ) | ||||||||||||||||||||||||||||||||
(Provision) benefit from income taxes | (3,598 | ) | (3,763 | ) | — | 7,107 | (254 | ) | ||||||||||||||||||||||||||||||||
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) | (13,523 | ) | 1,776 | (14,334 | ) | 12,558 | (13,523 | ) |
|
| (3,173 | ) |
|
| 788 |
|
|
| 1,227 |
|
|
| (2,015 | ) |
|
| (3,173 | ) | ||||||||||||
Preferred stock dividends | (138 | ) | — | — | — | (138 | ) |
|
| (138 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (138 | ) | |||||||||||||
Income (loss) applicable to common stockholders | $ | (13,661 | ) | $ | 1,776 | $ | (14,334 | ) | $ | 12,558 | $ | (13,661 | ) | |||||||||||||||||||||||||||
Net income (loss) applicable to common stockholders |
| $ | (3,311 | ) |
| $ | 788 |
|
| $ | 1,227 |
|
| $ | (2,015 | ) |
| $ | (3,311 | ) | ||||||||||||||||||||
Net income (loss) | (13,523 | ) | 1,776 | (14,334 | ) | 12,558 | (13,523 | ) |
|
| (3,173 | ) |
|
| 788 |
|
|
| 1,227 |
|
|
| (2,015 | ) |
|
| (3,173 | ) | ||||||||||||
Changes in comprehensive income (loss) | 65,348 | — | — | — | 65,348 |
|
| 6,516 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,516 |
| |||||||||||||||
Comprehensive income (loss) | $ | 51,825 | $ | 1,776 | $ | (14,334 | ) | $ | 12,558 | $ | 51,825 |
| $ | 3,343 |
|
| $ | 788 |
|
| $ | 1,227 |
|
| $ | (2,015 | ) |
| $ | 3,343 |
|
Six Months Ended June 30, 2022 | ||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | 6,553 | $ | 371,188 | $ | — | $ | — | $ | 377,741 | ||||||||||
Cost of sales | 1,796 | (223,475 | ) | — | — | (221,679 | ) | |||||||||||||
Depreciation, depletion, amortization | — | (73,370 | ) | — | — | (73,370 | ) | |||||||||||||
General and administrative | (8,890 | ) | (8,800 | ) | (296 | ) | — | (17,986 | ) | |||||||||||
Exploration and pre-development | (294 | ) | (19,346 | ) | (4,368 | ) | — | (24,008 | ) | |||||||||||
Fair value adjustments, net | (1,297 | ) | (2,292 | ) | (6,874 | ) | — | (10,463 | ) | |||||||||||
Equity in earnings of subsidiaries | (8,347 | ) | — | — | 8,347 | — | ||||||||||||||
Other expense | 8,114 | (23,574 | ) | (381 | ) | (17,879 | ) | (33,720 | ) | |||||||||||
Income (loss) before income taxes | (2,365 | ) | 20,331 | (11,919 | ) | (9,532 | ) | (3,485 | ) | |||||||||||
(Provision) benefit from income taxes | (7,005 | ) | (16,769 | ) | 11 | 17,878 | (5,885 | ) | ||||||||||||
Net income (loss) | (9,370 | ) | 3,562 | (11,908 | ) | 8,346 | (9,370 | ) | ||||||||||||
Preferred stock dividends | (276 | ) | — | — | — | (276 | ) | |||||||||||||
Income (loss) applicable to common stockholders | $ | (9,646 | ) | $ | 3,562 | $ | (11,908 | ) | $ | 8,346 | $ | (9,646 | ) | |||||||
Net income (loss) | (9,370 | ) | 3,562 | (11,908 | ) | 8,346 | (9,370 | ) | ||||||||||||
Changes in comprehensive income (loss) | 32,183 | — | — | — | 32,183 | |||||||||||||||
Comprehensive income (loss) | $ | 22,813 | $ | 3,562 | $ | (11,908 | ) | $ | 8,346 | $ | 22,813 |
38
Unaudited Interim Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2022 |
| Three Months Ended March 31, 2023 |
| |||||||||||||||||||||||||||||||||||||
Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated |
| Parent |
|
| Guarantors |
|
| Non-Guarantors |
|
| Eliminations |
|
| Consolidated |
| |||||||||||||||||||||
(in thousands) |
| (in thousands) |
| |||||||||||||||||||||||||||||||||||||
Cash flows from operating activities | $ | 10,940 | $ | 65,524 | $ | (3,189 | ) | $ | 4,817 | $ | 78,092 |
| $ | 5,497 |
|
| $ | 52,516 |
|
| $ | (28,184 | ) |
| $ | 10,774 |
|
| $ | 40,603 |
| |||||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Additions to properties, plants, and equipment | — | (55,798 | ) | (9 | ) | — | (55,807 | ) |
|
| — |
|
|
| (54,443 | ) |
|
| — |
|
|
| — |
|
|
| (54,443 | ) | ||||||||||||
Other investing activities, net | 146,768 | (2,060 | ) | (16,622 | ) | (146,768 | ) | (18,682 | ) |
|
| (40,113 | ) |
|
| — |
|
|
| — |
|
|
| 40,113 |
|
|
| — |
| |||||||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Dividends paid to stockholders | (7,027 | ) | — | — | — | (7,027 | ) | |||||||||||||||||||||||||||||||||
Dividends paid to common and preferred stockholders |
|
| (3,891 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,891 | ) | ||||||||||||||||||||
Issuance of debt |
|
| 13,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,000 |
| ||||||||||||||||||||
Payments on debt | — | (3,333 | ) | — | — | (3,333 | ) |
|
| (13,000 | ) |
|
| (2,135 | ) |
|
| (329 | ) |
|
| — |
|
|
| (15,464 | ) | |||||||||||||
Other financing activity | (173,943 | ) | 11,652 | 16,591 | 141,949 | (3,751 | ) |
|
| 22,983 |
|
|
| 15,557 |
|
|
| 23,750 |
|
|
| (50,887 | ) |
|
| 11,403 |
| |||||||||||||
Effect of exchange rate changes on cash | — | 843 | (2,167 | ) | 3 | (1,321 | ) |
|
| — |
|
|
| 171 |
|
|
| — |
|
|
| — |
|
|
| 171 |
| |||||||||||||
Changes in cash, cash equivalents and restricted cash and cash equivalents | (23,262 | ) | 16,828 | (5,395 | ) | (11,829 | ) | |||||||||||||||||||||||||||||||||
Beginning cash, cash equivalents and restricted cash and cash equivalents | 175,108 | 15,135 | 20,820 | — | 211,063 | |||||||||||||||||||||||||||||||||||
Ending cash, cash equivalents and restricted cash and cash equivalents | $ | 151,846 | $ | 31,963 | $ | 15,425 | $ | — | $ | 199,234 | ||||||||||||||||||||||||||||||
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 June 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 Item 1A. – Risk Factors of our 20212022 Form 10-K).
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 June 30, 2022,March 31, 2023, metals contained in concentrate sales and exposed to future price changes totaled 2.2 3,350million ounces of silver, 2,8407,660 ounces of gold, 5,828 7,050tons of zinc, and 4,6698,225 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 $8.1$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.
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 six months ended June 30,March 31, 2023 and 2022, we recognized a net foreign exchange gain of $4.5$0.4 million and $2.4 million respectively, compared to a net foreign exchange loss of $1.9$2.0 million, and $4.0 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 June 30, 2022March 31, 2023 would have resulted in a change of approximately $7.7 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 June 30, 2022 would have resulted in a change of approximately $0.1 $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 119 of Notes to Consolidated Financial Statements in our 20212022 Form 10-K for a description of our foreign currency risk management.
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 June 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 June 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.
Hecla Mining Company and Subsidiaries
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 of our 20212022 Form 10-K setsset forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results.
On July 4, 2022, we entered into an arrangement agreement with Alexco Resource Corp. (“Alexco”) pursuant to which we would acquire all of the issued and outstanding common stock of Alexco. See Note 12 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information. The proposed acquisition is subject to approval by Alexco’s stockholders and receipt of certain regulatory approvals. The information below includes additional risk factors related to the potential acquisition.
Risk Factors Relating to the Acquisition
The acquisition of Alexco may not be completed on the terms or timeline currently contemplated or at all. Failure to complete the acquisition could negatively impact our stock price and future business and financial results.
The completion of the transactions contemplated by the arrangement agreement is subject to certain conditions, including (1) approval and adoption by Alexco shareholders, (2) approval by the Supreme Court of British Columbia and receipt of certain other regulatory approvals, (3) the absence of certain legal impediments and (4) other customary closing conditions. There can be no assurance the acquisition will be consummated on the terms or timeline currently contemplated, or at all. We have expended and will continue to expend a significant amount of time and resources on the acquisition, and a failure to consummate the acquisition as currently contemplated, or at all, could have a material adverse effect on our business and results of operations.
If the acquisition is not completed, our ongoing business may be adversely affected and we will be subject to several risks, including the following:
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in each case, without realizing any of the anticipated benefits of having the acquisition completed. In addition, if the acquisition is not completed, we may experience negative reactions from the financial markets and from our employees and other stakeholders. We could also be subject to litigation related to any failure to complete the acquisition or to perform our obligations under the arrangement agreement. If the acquisition is not completed, we cannot assure our stockholders that these risks will not materialize and will not materially affect our business, financial results and stock price.
The agreement for the acquisition of Alexco may be terminated by us in certain circumstances, including in the event of the occurrence of an Alexco material adverse effect.
Both we and Alexco have the right to terminate the arrangement agreement in certain circumstances. Accordingly, there can be no assurance that the arrangement agreement will not be terminated by either us or Alexco before the completion of the acquisition. For example, we have the right, in certain circumstances, to terminate the arrangement agreement if an Alexco material adverse effect, as defined in the agreement, occurs.
The exchange ratio is fixed and will not be adjusted in the event of any change in either our or Alexco’s stock price.
Upon the closing of the acquisition, each share of Alexco common stock (other than shares already owned by us) will be converted into the right to receive 0.116 of a share of our common stock. This exchange ratio was fixed in the arrangement agreement and will not be adjusted for changes in the market price of either our common stock or Alexco common stock. Changes in the price of our common stock prior to the acquisition will affect the market value that Alexco shareholders will receive on the date of the acquisition. Stock price changes may result from a variety of factors (many of which are beyond the control of us orAlexco), including, without limitation, the following:
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The price of our common stock at the closing of the acquisition may vary from its price on the date the arrangement agreement was executed, on the date of this Form 10-Q and on the date of the shareholder meeting of Alexco. As a result, the market value represented by the exchange ratio will also vary.
Any delay in completing the acquisition may reduce or eliminate the expected benefits from the acquisition.
In addition to the required Alexco shareholder approval and adoption, the acquisition is subject to a number of other conditions beyond our and Alexco’s control that may prevent, delay or otherwise materially adversely affect its completion. We and Alexco cannot predict whether and when these other conditions will be satisfied. Furthermore, obtaining the required approval and adoption could delay the completion of the acquisition for a significant period of time or prevent it from occurring. Any delay in completing the acquisition could cause us not to realize some or all of the benefits that we expect to achieve if the acquisition is successfully completed within its expected time frame.
The acquisition will involve substantial costs.
We and Alexco have incurred and expect to continue to incur substantial costs and expenses relating directly to the transaction, including fees and expenses payable to legal, accounting and financial advisors and other professional fees relating to the transaction, insurance premium costs, fees and costs relating to regulatory filings and notices, printing and mailing costs and other transaction-related costs, fees and expenses.
Risk Factors Relating to Us Following the Acquisition
We will incur transaction and integration costs in connection with the acquisition.
We and Alexco expect to incur transaction fees and other costs related to the acquisition. In addition to transaction costs related to the acquisition, we will incur integration costs following the completion of the acquisition as we integrate the Alexco business with that of ours.
After completion of the acquisition, we may fail to realize anticipated benefits.
The success of the acquisition will depend, in part, on our ability to realize the anticipated benefits from the acquisition of Alexco. If we are not able to successfully integrate Alexco into our operations within the anticipated time frame, or at all, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected.
The market price of our common stock following the acquisition may decline as a result of the acquisition.
The market price of our common stock following the acquisition may decline as a result of the acquisition for a number of reasons, including the unsuccessful integration of Alexco and our business, our failure to achieve the perceived benefits of the acquisition, including financial results, or declines in the mining industry, the market price of silver, our business or the economy as a whole. These factors are, to some extent, beyond our control.
Uncertainties associated with the acquisition may cause a loss of management personnel and other key employees of Alexco which could adversely affect future business and operations following the acquisition.
Hecla and Alexco are dependent on the experience and industry knowledge of their officers, other key employees and hourly employees at the mine sites to execute their business plans and conduct operations. Success after the acquisition will depend in part upon its ability to retain key employees of Alexco, as well as hourly employees. Current and prospective employees of Alexco may experience uncertainty about their future roles with Hecla following the acquisition, which may materially adversely affect the ability of Alexco to attract and retain key personnel during the pendency of the acquisition. Accordingly, no assurance can be given that Hecla will be able to retain key employees or hourly employees of Alexco. Losses of such personnel could adversely affect the business and operations of Hecla after the acquisition is complete.
The Alexco properties and any others we may acquire may not produce as expected and may not generate additional reserves, and may come with liabilities beyond those known at the time of acquisition.
The properties we acquire in the acquisition of Alexco, if consummated, or in other acquisitions may not produce as expected, may not generate reserves beyond those known at the time of acquisition, may be in an unexpected condition and we may be subject to increased costs and liabilities, including environmental liabilities. Although we review properties prior to acquisition in a manner consistent with industry practices, such reviews are not capable of identifying all potential adverse conditions. Generally, it is not feasible to review in depth every individual property involved in each acquisition. Even a detailed review of records and properties may not necessarily reveal existing or potential problems or permit a buyer to become sufficiently familiar with the properties to fully assess their condition, any deficiencies, and development potential.
Our number of outstanding common shares will increase as a result of the acquisition and the stream termination agreement and our stock price could be affected.
As indicated in Note 12, we have also entered into an agreement with Wheaton Precious Metals ("WPM") to terminate WPM’s silver streaming interest at Alexco’s Keno Hill property in exchange for $135 million of our common stock, conditional upon completion of the acquisition. As a result, if the acquisition is completed, it will result, together with the stream termination agreement, in the issuance of common stock that is expected to represent approximately [__]% of our outstanding common stock following completion of the transactions. This increase in the number of shares of our common stock outstanding could have a negative effect on our stock price.
Item 2. Unregistered Sales of Securities and Use of Proceeds
On May 19, 2022, we issued 290,0000 unregistered shares of our common stock to the Lucky Friday Pension Plan Trust and 900,000 shares to the Hecla Mining Company Retirement Plan Trust in private placements in order to fund those defined benefit pension plans. The private placements were exempt from registration under the Securities Act of 1933 pursuant to section 4(a)(2) of that Act. The shares will be registered for resale on a registration statement on Form S-3 to be filed with the SEC within 120 days of May 19, 2022. We did not receive any cash proceeds from the issuance of the shares. The shares had a value of approximately $5.6 million at the time of issuance.
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
Hecla Mining Company and Wholly Owned Subsidiaries
Form 10-Q – June 30, 2022March 31, 2023
Index to Exhibits
Exhibit Number | Description | |
4.1(a) | ||
4.1(b) | ||
4.1(c)* | ||
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
95* | ||
Mine safety information listed in Section 1503 of the Dodd-Frank Act. | ||
101.INS | ||
Inline XBRL Instance Document | ||
101.SCH | ||
Inline XBRL Taxonomy Extension | ||
101.CAL | ||
Inline XBRL Taxonomy Extension | ||
101.DEF | ||
Inline XBRL Taxonomy Extension | ||
101.LAB | ||
Inline XBRL Taxonomy Extension | ||
101.PRE | ||
Inline XBRL Taxonomy Extension | ||
104 | ||
Cover Page Interactive Data File |
___________________
* Filed herewith.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.
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: |
| By: | /s/ Phillips S. Baker, Jr. | ||
Phillips S. Baker, Jr., President, | |||||
Chief Executive Officer and Director | |||||
|
|
| |||
Date: | May 10, 2023 | By: | /s/ Russell D. Lawlar | ||
Russell D. Lawlar, Senior Vice President, | |||||
Chief Financial Officer |
43