Hecla Mining Company (HL) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary highlights strong financial metrics, including record revenue and improved silver margins, coupled with reduced costs at key sites. The Q&A reveals optimism for future production improvements and strategic debt reduction. However, some uncertainties remain, such as permitting timelines and production guidance for Casa Berardi. Given the strong financial performance and strategic initiatives, the stock price is likely to see a positive movement, especially considering the market cap's moderate size.
Key Financial Performance
Record Sales $304 million, a record for the company. This represents a significant increase, but the year-over-year percentage change and reasons for the increase were not explicitly mentioned.
Net Income Nearly $58 million, applicable to common shareholders. The year-over-year change and reasons for the change were not provided.
Adjusted EBITDA $133 million, a record for the company. The year-over-year change and reasons for the increase were not detailed.
Cash from Operations Over $160 million. The year-over-year change and reasons for the increase were not specified.
Free Cash Flow $104 million, a record quarterly figure. The year-over-year change and reasons for the increase were not mentioned.
Silver Production 4.5 million ounces. The year-over-year change and reasons for the production level were not provided.
Gold Production Nearly 46,000 ounces. The year-over-year change and reasons for the production level were not detailed.
Silver Cash Costs Negative $5.46 per ounce after byproduct credits. The year-over-year change and reasons for the cost level were not mentioned.
All-in Sustaining Costs (Silver) $5.19 per ounce after byproduct credits. The year-over-year change and reasons for the cost level were not provided.
Casa Berardi Unit Costs Dropped by over $600 per ounce compared to the prior quarter. The year-over-year change and reasons for the cost reduction were not detailed.
Lucky Friday Milling Record Set a new quarterly milling record. The year-over-year change and reasons for the record were not mentioned.
Greens Creek Free Cash Flow $69 million. The year-over-year change and reasons for the free cash flow were not provided.
Keno Hill Free Cash Flow $2.7 million, marking its first positive free cash flow quarter under Hecla ownership. The year-over-year change and reasons for the free cash flow were not detailed.
Net Leverage Ratio Improved to 0.7x from 1.5x last quarter. The year-over-year change and reasons for the improvement were not mentioned.
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Operating Highlights
Semi-automation and advanced analytics: Implementation across operations to standardize systems and improve mine planning for efficiency gains.
Keno Hill Optimization: Revised production target to 440 tonnes per day, focusing on ore quality control and cost management. Achieved first positive free cash flow quarter under Hecla ownership.
Midas and Hollister Exploration: Active drilling at Midas revealed new gold-bearing structures, while Hollister shows potential for high-grade expansion.
Silver Market Leadership: Maintaining high-quality operations with 14+ year reserve lives, double the peer average, in low-risk jurisdictions.
Revenue Composition: 41% of revenue from silver sales, emphasizing strong silver exposure compared to peers.
Record Financial Performance: Achieved record sales of $304 million, net income of $58 million, and adjusted EBITDA of $133 million. Improved net leverage ratio to 0.7x.
Cost Efficiency: Silver operations delivered cash costs of negative $5.46 per ounce and all-in sustaining costs of $5.19 per ounce.
Casa Berardi Cost Improvements: Unit costs dropped by over $600 per ounce compared to the prior quarter.
Capital Allocation Strategy: Prioritized high-return projects and deleveraging, reducing $212 million of long-term debt.
Portfolio Optimization: Strategic review of Casa Berardi and disposal of non-core assets to focus on high-value projects.
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Risk or Challenges
Operational Constraints at Keno Hill: The primary near-term production constraint at Keno Hill is mining capacity. This has led to a strategic decision to revise production targets downward from 550-600 tonnes per day to 440 tonnes per day. This constraint could impact the company's ability to achieve optimal production levels and financial returns in the short term.
Capital Project Execution Risks: The ramp-up to optimized production levels at Keno Hill involves significant capital projects, including cement and tailings plant construction, waste dump upgrades, and water treatment infrastructure enhancements. Delays or cost overruns in these projects could hinder production timelines and financial performance.
Regulatory and Permitting Risks: The company’s operations, particularly at Keno Hill, rely on existing permitting frameworks. Any delays or issues in obtaining necessary permits for tailings storage and waste management could create bottlenecks and disrupt operations.
Debt and Financial Leverage: While the company has made progress in deleveraging, it still carries significant long-term debt. Any downturn in metal prices or operational setbacks could strain financial resources and impact the ability to service debt.
Market Price Volatility: The company’s financial performance is highly sensitive to fluctuations in silver and gold prices. A decline in metal prices could adversely affect revenue, margins, and free cash flow generation.
Strategic Execution Risks: The company is undergoing a strategic review of its Casa Berardi asset and portfolio optimization efforts. Poor execution or unfavorable market conditions could result in suboptimal asset sales or strategic decisions, impacting long-term value creation.
Supply Chain and Infrastructure Risks: The company’s operations depend on the timely availability of equipment, materials, and skilled labor. Any disruptions in the supply chain or infrastructure could delay projects and increase costs.
Exploration and Resource Replacement Risks: While the company has a strong reserve life, ongoing exploration is critical to replace depletion and grow resources. Failure to achieve exploration success could impact long-term production and financial stability.
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Guidance & Outlook
Keno Hill Optimization: Production target revised to 440 tonnes per day, down from 550-600 tonnes per day, focusing on improved ore quality control, overbreak reduction, and cost control. Expected to achieve this target by 2028. At $30 silver, the project delivers a 35% IRR over its reserve mine life, and at $25 silver, a 15% IRR. Exploration success could extend the mine life.
Casa Berardi Strategic Review: An update on the strategic review process is expected in the coming weeks. The review aims to optimize the portfolio and potentially dispose of non-core assets.
Deleveraging and Capital Allocation: The company has reduced long-term debt by $212 million and improved its net leverage ratio to 0.7x. Future interest savings of $16 million annually will be reinvested in operations, exploration, and balance sheet strengthening.
Exploration and Growth Potential: Active drilling at Midas has identified two new gold-bearing structures over 2 miles from existing development, indicating potential for a significant new deposit. The mill at Midas requires modest capital to restart.
Silver Market Leadership: The company maintains a 14-year average reserve mine life, double the peer average, and operates in low-risk jurisdictions. Silver exposure remains strong, with 41% of Q2 2025 revenue from silver sales.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What was driving the higher grades and outperformance at Greens Creek during the quarter?
A:The higher grades were due to good execution and having additional areas available with better grades. Similar grades are expected for the remainder of the year.
Q:What has changed at Keno Hill to enable reaching the 440 tonnes per day target?
A:The company has expanded operations at Flame and Moth, improved operational flexibility, and focused on reducing overbreak, controlling dilution, and ore control. However, they do not expect to reach 440 tonnes per day this year but anticipate an increase next year.
Q:Why did the company decide to retire a large amount of notes with significant term left on the debt?
A:The company believes that funds used for the Silver-Linked Dividend and debt servicing would be better invested in operations and portfolio opportunities. Reducing debt increases cash flow, which can be reinvested in assets like Nevada.
Q:What is the expected improvement in the stripping ratio at Casa Berardi, and how will it impact costs?
A:The stripping ratio is expected to decrease from around 15:20:1 to approximately 10:1 by the end of the year, with further reductions over the next 18 months. This will reduce costs as contract reliance decreases and the company transitions to its own fleet.
Q:What is the timeline and cost for permitting new pits at Casa Berardi?
A:Permitting is a lengthy process with review periods and back-and-forth discussions. The company previously indicated a 5-year permitting hiatus, with pre-stripping and dewatering occurring towards the tail end of that period. Costs for permitting are expected to be minimal.
Q:What drives the free cash flow increase at Keno Hill starting in 2028?
A:The increase is driven by a combination of higher grades, lower capital expenditures as major projects are completed, and increased throughput reaching 440 tonnes per day later in the decade.
Q:Will the unsold concentrate from Greens Creek be sold in the next quarter?
A:The unsold concentrate will eventually be sold, but it is uncertain whether it will be sold in the next quarter due to shipping schedules and inventory management.
Q:What is the ramp-up plan for Keno Hill to reach 440 tonnes per day?
A:The ramp-up will be gradual, with throughput expected to reach around 330 tonnes per day by 2027 and 440 tonnes per day by 2029 or 2030. Investments in tailings, water treatment, and infrastructure are required to support this growth.
Q:What is the risk of a hard stop at Keno Hill in 2028 due to tailings capacity?
A:The company needs additional tailings capacity by 2028 to maintain 440 tonnes per day. They are already working on permitting and plan to use cemented tailings underground to mitigate surface capacity risks.
Q:Is there an opportunity to extend operations at Casa Berardi beyond 2027?
A:The company has extended underground operations to the end of this year due to high gold prices and will evaluate further extensions based on market conditions.
Q:What is the company's current thinking on advancing the Montana assets?
A:The company is nearing the end of the permitting process and expects approval by October. They view the Montana assets, primarily copper-focused, as non-core and are open to partnering with a copper-focused company.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the timeline and costs for permitting new pits at Casa Berardi, stating that the process is not well-defined and involves review periods and back-and-forth discussions. Additionally, they did not provide clear guidance on production expectations for Casa Berardi in the second half of the year, citing an ongoing strategic review.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ATM facility
ESG
Greens Creek
IRR
LLC Research
Research Division
Senior VP
Slide approach
byproduct credit
cash ounce
condition
credit gold
discount
equity
expansion
flow ownership
life return
milling
mine Slide
operation cash
optimization review
optionality
ounce byproduct
ounce gold
ounce increase
portfolio optimization
production tonne
redemption note
reduction
sale cash
shareholder dilution
table
tailing plant
tonne cost
tonne day
week
HL Transcript
Hecla Mining Company (HL) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings call revealed strong financial performance with record revenue, net income, and EBITDA, alongside significant deleveraging efforts. Despite some concerns about inflationary pressures and exploration risks, the company's robust cash flow, cost efficiency, and strategic focus on exploration and growth potential indicate a positive outlook. The market cap suggests moderate sensitivity to news, supporting a prediction of a positive stock price movement in the 2% to 8% range over the next two weeks.
Hecla Mining Company (HL) Q2 2025 Earnings Call Transcript
Positive8-7
The earnings call summary highlights strong financial metrics, including record revenue and improved silver margins, coupled with reduced costs at key sites. The Q&A reveals optimism for future production improvements and strategic debt reduction. However, some uncertainties remain, such as permitting timelines and production guidance for Casa Berardi. Given the strong financial performance and strategic initiatives, the stock price is likely to see a positive movement, especially considering the market cap's moderate size.
Hecla Mining Company (HL) Q1 2025 Earnings Call Transcript
Unknown5-2
The earnings call presented mixed signals. Financial performance showed improvement with increased revenue and EBITDA, while free cash flow and leverage ratio improved. However, cost pressures, particularly at Lucky Friday, and operational challenges at Casa Berardi pose risks. The elimination of dividends to improve cash position may concern investors. The Q&A revealed planned downtimes and unclear responses on production curtailment, adding uncertainty. Given the market cap, the stock is likely to experience a neutral movement, with positive financial metrics balanced by operational risks and cost pressures.
Earnings call transcript: Hecla Mining Q4 2024 misses EPS forecast
Neutral2-14
HL Slides
HL Report
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