Hecla Reports Fourth Quarter and Full-year 2020 Results

Hecla reports record annual revenue

COEUR D’ALENE, Idaho–(BUSINESS WIRE)–Hecla Mining Company (NYSE:HL) today announced fourth quarter and full year 2020 financial and operating results.

HIGHLIGHTS

  • Fourth quarter sales of $188.9 million; cash flow from operations of $64.9 million; free cash flow $28.3 million1 net income of $0.8 million; adjusted net income applicable to common shareholders of $13.0 million, or $0.02 per share2; and adjusted EBITDA of $55.8 million.3
  • 2020 silver production of 13.5 million ounces, up 7% and gold production of 208,962 ounces, down 23%, from 2019, which was Hecla’s highest annual gold production.
  • 2020 sales of $691.9 million (the highest in the Company’s history); cash flow from operations of $180.8 million; free cash flow of $89.8 million1; adjusted net income applicable to common shareholders of $23.1 million, or $0.04 per share2; net loss of $16.8 million; and adjusted EBITDA of $224.3 million.3
  • Third highest silver and gold reserves in Company’s 130-year history despite significant interruptions to 2020 exploration program due to COVID-19.
  • Exploration discoveries at Midas, Casa Berardi, San Sebastian, Heva Hosco, and Kinskuch expect to be further drilled in 2021.
  • Net debt reduction of approximately $81 million, or 17%, from March 31, 2020.
  • Year-end cash position of $130 million, an increase of $67 million from 2019 with the credit facility undrawn.
  • All-Injury Frequency Rate (AIFR) of 1.22 for 2020, lowest in the Company’s history and a reduction of 24% over 2019.
  • Lucky Friday returned to full production levels in the fourth quarter of 2020.
  • Production guidance increases projected silver production over 2020 production.

“The COVID pandemic provided significant challenges to Hecla and the mining industry; however, due to our people and the jurisdictions we operate in, Hecla exceeded the high end of our pre-COVID silver guidance by 1.4 million ounces,” said Phillips S. Baker, Jr., President and CEO. “We saw modest disruptions in Quebec and Mexico; however, these did not materially impact our business. During the year we refinanced our long-term debt now due in 2028, and through solid free cash flow generation, added cash to the balance sheet, reduced our net debt, and increased dividends.”

Baker continued, “As we look to 2021, we see three significant value drivers. First, with Lucky Friday running at full production, positive results from the work at Casa Berardi, and the continued consistency of Greens Creek, we expect to grow silver production and generate significant free cash flow. Silver production from our United States silver mines is expected to go from 8 million ounces in 2018 to almost 15 million ounces by 2023, further increasing Hecla’s position as the most significant US silver producer.”

“Second, we start the year with the 3rd highest reserves in our history despite disruptions to our planned exploration and definition drilling programs due to COVID‑19, and we expect reserve growth in 2021 from a normal drilling program. Finally, Hecla’s 2021 exploration program is following up on high-grade intercepts that have the potential to expand existing or develop new high-quality deposits in some of the world’s best mining jurisdictions. Examples of this are Midas’ Green Racer Sinter target where we have made a multi-ounce gold discovery in a never before drilled target and at San Sebastian’s El Bronco vein where we are seeing high-grade over significant widths,” Baker said.

FINANCIAL OVERVIEW

 

Fourth Quarter Ended

 

Twelve Months Ended

HIGHLIGHTS

December 31,

2020

 

December 31,

2019

 

December 31,

2020

 

December 31,

2019

FINANCIAL DATA (000s except per share)

 

 

 

 

 

 

 

Sales

$

188,890

 

 

$

224,945

 

 

 

$

691,873

 

 

 

$

673,266

 

 

Gross profit (loss)

$

46,764

 

 

$

25,318

 

 

 

$

145,703

 

 

 

$

23,399

 

 

Income (Loss) applicable to common stockholders

$

657

 

 

$

(8,114

)

 

 

$

(17,342

)

 

 

$

(100,109

)

 

Basic and diluted loss per common share

$

 

 

$

(0.02

)

 

 

$

(0.03

)

 

 

$

(0.20

)

 

Cash provided by operating activities

$

64,901

 

 

$

57,257

 

 

 

$

180,793

 

 

 

$

120,866

 

 

Items impacting income (loss) applicable to common shareholders for the 2020 periods compared to 2019 include the following:

  • Gross profit for the fourth quarter was higher by $21.4 million due primarily to higher metal prices, Casa Berardi’s higher-grade underground stopes and Lucky Friday’s return to full production.
  • Full-year gross profit was $122.3 million higher, principally due to lower costs and depreciation at Nevada, higher quantities of silver, lead and zinc sold and higher realized silver and gold prices.
  • Exploration and pre-development expense was $8.5 million for the fourth quarter and $18.3 million for 2020, compared to $3.0 million and $19.1 million, respectively, in 2019. The fourth quarter increase was enabled by cash flow generation at our operating mines with the increase primarily at Midas and San Sebastian.
  • Ramp-up and suspension costs for the fourth quarter of $0.8 million and $24.9 million for 2020, compared to $3.3 million and $12.1 million, respectively, for the fourth quarter and full-year of 2019. The full-year 2020 costs were higher primarily due to 1) ramp-up of Lucky Friday prior to return to full production in the fourth quarter, 2) suspension costs in Nevada, and 3) temporary suspension costs at Casa Berardi and San Sebastian in response to COVID-19.
  • Losses on metal derivative contracts for the fourth quarter and 2020 of $9.3 million and $22.1 million, respectively, compared to losses of $1.3 million and $4.0 million in the fourth quarter and 2019, respectively. During 2019, the Company settled in-the-money contracts prior to their maturity date, for cash proceeds of approximately $6.7 million, with no such early settlements in 2020.
  • Foreign exchange losses of $5.8 million and $4.6 million were recognized in the fourth quarter and 2020, respectively, compared to losses of $1.5 million and $8.2 million, respectively, in 2019. The losses were primarily due to changes in the Canadian dollar’s value relative to the U.S. dollar.
  • Interest expense was $10.7 million in the fourth quarter and $49.6 million for the full year of 2020 compared to $14.7 million and $48.4 million, respectively, for 2019. The interest expense in 2020 was primarily related to our Senior Notes.
  • Income tax benefit for the fourth quarter of $1.1 million and a small provision for the full year of 2020, compared to benefits of $4.1 million and $24.1 million, respectively, for 2019.

Cash provided by operating activities for the fourth quarter and 2020 of $64.9 million and $180.8 million, was $7.6 million and $59.9 million higher, respectively, compared to the prior year periods. The increase in the fourth quarter of 2020 was primarily due to lower spending in Nevada and higher sales. Quarterly increase would have been higher except ore in Nevada was stockpiled for the bulk sample. The increase for the full year of 2020 was due to higher prices, lower Nevada spending and the Lucky Friday ramp-up.

Adjusted EBITDA3 of $224.3 million in 2020, $51.0 million more than 2019. The increase in 2020 was primarily due to higher sales and lower spending in Nevada.

Fourth quarter capital expenditures totaled $40.3 million, including $10.5 million at Greens Creek, $16.4 million at Casa Berardi, and $11.1 million at Lucky Friday. Capital expenditures for the year 2020 totaled $99.9 million, compared to $128.1 million in 2019.

Metals Prices

 

 

Fourth Quarter Ended

 

Twelve Months Ended

 

 

December 31,

2020

 

December 31,

2019

 

December 31,

2020

 

December 31,

2019

AVERAGE METAL PRICES

 

 

 

 

 

 

 

Silver –

London PM Fix ($/oz)

$

24.39

 

 

$

17.30

 

 

$

20.51

 

 

$

16.20

 

 

Realized price per ounce

$

25.16

 

 

$

17.47

 

 

$

21.15

 

 

$

16.65

 

Gold –

London PM Fix ($/oz)

$

1,873

 

 

$

1,480

 

 

$

1,770

 

 

$

1,392

 

 

Realized price per ounce

$

1,803

 

 

$

1,488

 

 

$

1,757

 

 

$

1,413

 

Lead –

LME Cash ($/pound)

$

0.87

 

 

$

0.92

 

 

$

0.83

 

 

$

0.91

 

 

Realized price per pound

$

0.90

 

 

$

0.91

 

 

$

0.84

 

 

$

0.91

 

Zinc –

LME Cash ($/pound)

$

1.19

 

 

$

1.08

 

 

$

1.03

 

 

$

1.16

 

 

Realized price per pound

$

1.27

 

 

$

1.10

 

 

$

1.03

 

 

$

1.14

 

*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 products sold during the period.

Base Metals Forward Sales Contracts

The following table summarizes the quantities of base metals committed under financially settled forward sales contracts, other than provisional hedges (which address changes in prices between shipment and settlement with customers), at December 31, 2020:

 

Pounds Under Contract

(in thousands)

 

Average Price per Pound

 

Zinc

Lead

 

Zinc

Lead

Contracts on forecasted sales

 

 

 

 

 

2021 settlements

41,557

 

30,876

 

 

$

1.17

 

$

0.88

 

2022 settlements

18,519

 

 

 

$

1.28

 

$

 

The contracts represent 33% of the forecasted payable zinc production for the next two years at an average price of $1.21 per pound, and 39% of the forecasted payable lead production for the next year at an average price of $0.88 per pound.

Foreign Currency Forward Purchase Contracts

The following table summarizes the Canadian dollars the Company has committed to purchase under foreign exchange forward contracts at December 31, 2020:

 

Currency Under Contract

(in thousands of CAD)

 

Average Exchange Rate

 

CAD

 

CAD/USD

2021 settlements

129,989

 

 

1.32

 

2022 settlements

84,754

 

 

1.31

 

2023 settlements

52,565

 

 

1.32

 

2024 settlements

26,446

 

 

1.33

 

OPERATIONS OVERVIEW

Overview

The following table provides the production summary on a consolidated basis for the fourth quarter and twelve months ended December 31, 2020 and 2019:

 

 

Fourth Quarter Ended

 

Twelve Months Ended

 

 

December 31,

2020

 

December 31,

2019

 

December 31,

2020

 

December 31,

2019

PRODUCTION SUMMARY

 

 

 

 

 

 

Silver –

Ounces produced

3,352,336

 

 

3,411,988

 

 

13,542,957

 

 

12,605,234

 

 

Payable ounces sold

3,227,951

 

 

3,999,013

 

 

12,305,917

 

 

11,548,373

 

Gold –

Ounces produced

49,014

 

 

74,773

 

 

208,962

 

 

272,873

 

 

Payable ounces sold

43,144

 

 

85,237

 

 

202,694

 

 

275,060

 

Lead –

Tons produced

9,507

 

 

6,804

 

 

34,127

 

 

24,210

 

 

Payable tons sold

9,160

 

 

7,118

 

 

29,108

 

 

19,746

 

Zinc –

Tons produced

14,413

 

 

16,185

 

 

63,112

 

 

58,857

 

 

Payable tons sold

11,632

 

 

12,147

 

 

46,349

 

 

39,381

 

The following tables provide a summary of the final production, cost of sales and other direct production costs and depreciation, depletion and amortization (referred to herein as “cost of sales”), cash cost, after by-product credits (“cash cost”), per silver or gold ounce, and All in Sustaining Cost, after by-product credits (“AISC”), per silver and gold ounce, for the fourth quarter and twelve months ended December 31, 2020:

Fourth Quarter Ended

Total

Greens Creek

Lucky Friday

San Sebastian

Casa Berardi

Nevada Ops

December 31, 2020

Silver

Gold

Silver

Gold

Silver

Silver

Gold

Gold

Silver

Gold

Silver

Production (ounces)

3,352,336

49,014

2,330,664

10,276

830,200

182,614

1,159

37,579

8,858

Increase/(decrease) over 2019

(2)%

(34)%

(15)%

(33)%

283%

(57)%

(70)%

8%

(16)%

N/A

N/A

Cost of sales (000)

$85,967

$56,159

$59,215

N/A

$20,919

$5,833

N/A

$55,706

N/A

$453

N/A

Increase/(decrease) over 2019

(6)%

(48)%

(17)%

N/A

282%

(59)%

N/A

(8)%

N/A

(99)%

N/A

Cash costs per silver or gold ounce 4

$7.38

$1,019

$7.21

N/A

$9.34

$0.65

N/A

$1,019

N/A

$—

N/A

Increase/(decrease) over 2019

$3.80

$26

$4.45

N/A

N/A

$(8.24)

N/A

$(18)

N/A

N/A

N/A

AISC per silver or gold ounce 5

$15.35

$1,330

$12.05

N/A

$18.22

$1.07

N/A

$1,330

N/A

$—

N/A

Increase/(decrease) over 2019

$4.04

$143

$4.19

N/A

N/A

$(10.71)

N/A

$52

N/A

N/A

N/A

 
Twelve Months Ended

Total

Greens Creek

Lucky Friday

San Sebastian

Casa Berardi

Nevada Ops

December 31, 2020

Silver

 

Gold

Silver

 

Gold

Silver

Silver

 

Gold

Gold

 

Silver

Gold

 

Silver

Production (ounces)

13,542,957

208,963

10,494,726

48,491

2,031,874

954,772

7,223

121,493

24,142

31,756

37,443

Increase/(decrease) over 2019

7%

(23)%

6%

(14)%

221%

(49)%

(54)%

(10)%

(23)%

N/A

N/A

Cost of sales (000)

$297,935

$248,235

$217,125

N/A

$56,706

$24,104

N/A

$203,434

N/A

$44,801

N/A

Increase/(decrease) over 2019

7%

(33)%

3%

N/A

241%

(52)%

N/A

(7)%

N/A

N/A

N/A

Cash costs per silver or gold ounce 4

$5.70

$1,045

$5.49

N/A

N/A

$4.92

N/A

$1,131

N/A

$716

N/A

Increase/(decrease) over 2019

$2.77

$(21)

$3.52

N/A

N/A

$(3.10)

N/A

$80

N/A

$(380)

N/A

AISC per silver or gold ounce 5

$11.89

$1,302

$8.57

N/A

N/A

$5.68

N/A

$1,436

N/A

$787

N/A

Increase/(decrease) over 2019

$1.76

$(109)

$2.58

N/A

N/A

$(6.42)

N/A

$82

N/A

$(740)

N/A

Greens Creek Mine – Alaska

The increase in silver production for the full year resulted from higher grades. The mill operated at an average of 2,236 tons per day (tpd) for the full year. Fourth quarter production was affected by a significant weather event in December when southeast Alaska was impacted by high winds and heavy rains that caused major damage in the area and communities.

The higher cost of sales in 2020 were due to higher sales volumes. The increase in per silver ounce cash costs and AISC was primarily due to higher concentrate treatment costs and lower by-product credits, on a per-ounce basis, with these items partially offset by lower capital spending for AISC.

For the full year of 2020, Greens Creek generated cash provided by operating activities of approximately $182.6 million and spent $23.0 million on additions to properties, plants and equipment, resulting in free cash flow of $159.6 million.1

Proven and Probable silver reserves decreased primarily due to COVID-19 limiting drilling to one-third of the amount drilled in 2019, changes to the mine plan, and less favorable smelter terms. This decline compares to average additions of nearly 8 million ounces per year for the past four years. Measured and Indicated resource increased due to reclassification of reserves and Inferred resource. Measured and Indicated Mineral Resources, inclusive of Mineral Reserves is down only 3% from 2019.

Casa Berardi – Quebec

Annual gold production decreased by 10%, compared to 2019, primarily due to the Government of Quebec’s COVID‑19 three-week suspension order and the third quarter planned mill repairs. Fourth quarter production increased 8% over the prior year period due to more tons milled and higher grades. The mill operated at an average of 4,129 tpd in the fourth quarter 2020 and 3,699 tpd for the year.

Lower quarterly and annual cost of sales were due to stripping the East Mine Crown Pillar Pit Extension (XCMP) in 2019 partially offset by increased quantities of waste and ore extracted from the pit and higher haulage costs due to deepening of the pit. However, milling and administrative costs were higher due to costs for pre-crushing of ore to allow for increased throughput, and higher costs for mill improvements, maintenance and reagents. These factors impacted mining and milling costs, along with lower gold production, resulting in increased cash costs and AISC, after by-product credits.

For the full year of 2020, Casa Berardi generated cash provided by operating activities of approximately $68.5 million and spent $40.9 million on additions to properties, plants and equipment, resulting in free cash flow of $27.6 million.1

Proven and Probable gold reserves decreased approximately 10% to 1.54 million ounces. Most of the decreases were due to mining depletion and engineering changes. The 2020 drilling program at Casa Berardi was also impacted by COVID. Despite the drilling delays, approximately 85 thousand ounces were added to reserve by drilling in 2020.

Measured and Indicated gold resources increased 19% to 1.25 million ounces given exploration additions and some reclassification from reserves given engineering changes. Measured and Indicated Mineral Resources, inclusive of Mineral Reserves, increased 1% over last year.

Lucky Friday Mine – Idaho

At the Lucky Friday Mine, 2.0 million and 0.8 million ounces of silver were produced in 2020 and the fourth quarter, respectively. Lucky Friday returned to full production in the fourth quarter.

The cost of sales for the fourth quarter was $20.9 million, and the cash cost per silver ounce4 was $9.34. AISC5 was $18.22 per silver ounce.

Proven and Probable reserves declined 4% due primarily to mining depletion; the current mine plan is unchanged at 16 years (2036). Measured and Indicated resources for silver and lead increased 5%.

San Sebastian – Mexico

At the San Sebastian Mine, 1.0 million ounces of silver and 7,223 ounces of gold were produced. For the fourth quarter, 0.2 million ounces of silver and 1,159 ounces of gold were produced. Mining was completed in the third quarter and milling completed in the fourth quarter of 2020. The mill operated at an average of 474 tpd for the year when in production.

The lower cost of sales and silver per ounce cash costs4 was primarily due to lower mining costs, higher by-product, partially offset by lower silver production, and for AISC, lower capital and exploration spending.

For the full year of 2020, San Sebastian generated cash provided by operating activities of approximately $14.4 million and spent $0.6 million on additions to properties, plants and equipment, resulting in free cash flow of $13.8 million.1

The Company continues to explore this highly prospective land package and will evaluate further mining based on exploration results.

Nevada Operations

During the second half of 2020, all ore mined at Nevada Operations was stockpiled, with no ore milled and no production reported during the period. Mining of refractory ore at Fire Creek in areas with existing development was completed in the fourth quarter with most of the material shipped to a third-party processor by February 2021. The bulk test demonstrated that larger scale, more productive mining methods could be applied successfully to this material. Ground conditions were as good or better than expected and water in the test area was readily managed. The bulk test refractory ore is being processed by a third party through a tolling agreement. While the processing is not yet complete, the recovery information to date follows the grade-recovery curve established through bench testing. Metal prices increased significantly since the tolling agreement was signed, and it is no longer attractive for the third party to displace their own feed to toll. Discussions are underway with another processor with surplus capacity. Fire Creek is expected to be placed on care and maintenance in the second quarter of 2021.

SILVER AND GOLD RESERVE SUMMARY

Proven and Probable silver and gold reserves dropped 11% for the year to 188 million ounces of silver and 2.4 million ounces of gold. Lead and zinc reserves dropped 9% and 12% to 740 thousand tons of lead and 886 thousand tons of zinc. Due to the Company’s focus on essential mining during implemented COVID-19 protocols, the 2020 exploration programs were disrupted company-wide with approximately one-third less drilling achieved at Greens Creek than in 2019 coupled with significant third-party assay laboratory delays.

Measured and Indicated silver ounces increased 5% to a record 228 million ounces, an increase of 10.3 million ounces over 2019 with increases due to limited drilling and reclassification of reserve at Greens Creek and remodeling at Lucky Friday. Measured and Indicated gold ounces decreased 37% to 3.7 million ounces, a reduction of 2.1 million ounces, due to reclassification of resources in Nevada and the Heva Hosco project, respectively. Measured and Indicated base metals increased overall, with lead increasing 5% for a total of 921 thousand tons and zinc increasing 2% at 1,132 thousand tons.

Inferred silver resources are essentially unchanged from last year with a slight drop of 1% to 454 million ounces. Inferred gold resources increased 12% to 5.5 million ounces due to reclassification of higher resource classes in Nevada and the increased Inferred resource overall at the Heva Hosco Project. Inferred base metal resources are down slightly with a 3% change in lead to 467.6 thousand tons and a 5% change in zinc to 425.1 thousand tons. Base metal changes are mostly due to small losses and reclassification to higher classes at Greens Creek and remodeling of the Hugh Zone polymetallic zone at San Sebastian.

Please refer to the reserves and resources table at the end of this news release for a complete breakdown of the Company’s reserves and resources.

EXPLORATION AND PRE-DEVELOPMENT

Exploration

Fourth quarter exploration (including corporate development) expenses were $8.0 million, over half of the full year expenditures and an increase of $5.6 million compared to the fourth quarter 2019 primarily due to increased activity and focus on Midas, Casa Berardi, and San Sebastian.

During the quarter, there were two new discoveries: Green Racer Sinter at Midas and the 160 Zone eastern extension at Casa Berardi.

At Midas, four core rigs intersected mineralization in five of seven targets. At the Green Racer Sinter, a target with no previous drilling located two miles east of the main mine, detailed surface mapping identified an outcrop of spicular geyserite sinter with anomalous gold. The deeper holes are encountering the same favorable host rocks as those of the historic Midas mine where mineralization had an average grade of 0.81 oz/ton gold and 11.3 oz/ton silver over an average width of 4.0 feet. The following table shows the strength of mineralization in three recent holes (the surface is at an elevation of 5,434 feet):

Drillhole

Elevation

(Feet)

Drilled Width

(Feet)

Gold Grade

(oz/ton)

Silver Grade

(oz/ton)

DMC-371

4901

1.6

1.12

16.9

DMC-374

4537

4.3

0.34

7.8

DMC-390

4088

4.5

3.26

14.3

At Casa Berardi, a new discovery was made in the 160 Zone 500 feet east of the current resource blocks and the zone open in all directions. The discovery drillhole intersected 0.32 oz/ton gold over 9.5 feet estimated true width including 1.16 oz/ton gold over 2.0 feet estimated true width.

San Sebastian exploration focused on the El Tigre and El Bronco veins discovered under thick soil cover this year. So far, the veins are strong structures that in places have over 28 feet of true thickness, almost a mile of strike length down to 1,000 feet below the surface and are open. The best results to date include 44.5 oz/ton silver and 0.22 oz/ton gold over 9.5 feet estimated true width in the El Bronco vein and 16.2 oz/ton silver and 0.09 oz/ton gold over 3.5 feet estimated true width in the El Tigre vein.

Please refer to the assay results tables at the end of this news release for more complete drill assay highlights.

2021 Exploration Program

Exploration expenditures for 2021 are estimated to be $30 million. Greens Creek and Casa Berardi programs should each be about 15% of the total expenditures with surface programs in addition to their normal underground exploration.

San Sebastian should also represent 15% of the exploration spend, building on the developing resources of the El Bronco, El Tigre, and El Toro veins.

Nevada exploration is targeted at 25% of the total, with the majority spent at Midas. At Hollister, exploration of the Hatter Graben is expected to be advanced by further developing the decline in order to test a portion of the Hatter Graben resource and explore additional Hatter Graben veins further to the south. At Fire Creek and Aurora, any drilling programs will occur later in the year following further target definition.

Almost 10% of the exploration budget is targeted for Kinskuch in an effort to expand the 2018 discoveries that established a strike length of 2.2 miles of silver, zinc, and lead mineralization offsetting drillhole intercepts such as 9.3 oz/ton silver, 6.5% zinc, and 2.3% lead over 8.

Contacts

Russell Lawlar

Treasurer

Jeanne DuPont

Senior Communication Coordinator

800-HECLA91 (800-432-5291)

Investor Relations

Email: hmc-info@hecla-mining.com
Website: www.hecla-mining.com

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Author: dmnnewswire