We're very pleased this afternoon to host Phil Baker, the President and CEO of Hecla Mining. They just produced 14 million ounces of silver, and are aiming to bump to 20. I better let Phil give the talk.
Okay, thanks, John, and glad to be on the John's conference, something we look forward to every year. You know, number one, it's because John is, you know, well-respected in the space, and number two, it's because he gives us plenty of time to have a good conversation and have the ability to tell what's going on at Hecla. And as I talk, I am gonna talk about some things that are forward-looking, and they are subject to the cautions that you'll find in our 10-K, 10-Q, and other filings, so I encourage you to review those. Look, you know, Hecla is a long-standing silver producer.
We have been committed to producing silver for 100 years, and nothing has changed for Hecla in the last, you know, in the time that I've been here. And in fact, the commitment's even stronger because I, you know, and I hope I get to this later, but we're in a new world for silver, and that world has changed as a result of this energy transition, the desire for more renewable energy, and photovoltaics are certainly one of the key things needed for this, the energy transition. And we continue to see significant growth in the photovoltaics.
I wanna say it's about a 30% increase in the number of gigawatts deployed last year over 2022, and that results in an additional, call it, 40-50 million ounces of silver in a market that is a billion-ounce market. So it is very meaningful. And so if there's anything that I hope you take away from my talk, it's the importance that silver has in the energy transition, and as a result, the importance that you know Hecla has in delivering that silver. And we're doing that by being really the largest producer in the United States. We produce not quite 45% of all of the silver mined in the U.S., and we're on a path to do something similar in Canada. This year will be the largest.
I would imagine next year, year after, we would be close to 40% in Canada. As far as globally, we produce about 1% of the total global supply of silver. It makes us the third-largest primary silver producer, 'cause remember that silver is primarily a byproduct. And while in the past that's been viewed as a negative, it's really quite an interesting fact when you think about as the demand for silver continues to increase, presumably the price will increase, and yet the supply reaction will not be there because it is, you know, two-thirds a byproduct. You know, Hecla is very, very focused on, you know, having long-lived operations.
You know, if there's anything we have focused on, it's having district-scale land packages with great geologic potential, and the ability to grow and learn, learn the geology, learn how to operate. And so we have a total of 20 mines and projects in the company, four of which are operating properties, Keno Hill, Greens Creek, Casa Berardi, and the Lucky Friday. The other 16 are exploration development projects. I would venture to say, I hadn't really thought about this directly, but I'd venture to say almost every one of them has a resource on them. In fact, I can't think of one that does not have a resource. So these are mineralized properties, and they're ones that we're committed to exploring over time.
And we're able to do that because of the strength of our four assets. They generate a significant amount of free cash flow, and then we reinvest that cash flow in exploration, we reinvest it in capital in order to grow. And that capital reinvestment that we have made has allowed us to double... we will double our production from 2018 to 2026. We'll go from 10 to almost 20 million ounces in that, you know, eight-year period of time. And we'll be able to sustain production really with no acquisitions, no new projects for, you know, easily another decade, and I suspect, I suspect beyond that.
The reason we're able to do those things really comes down to the quality of the assets that we have, the jurisdictions those assets are in, and, you know, our focus on continuous improvement. At each of our operations, there is one or more improvements that we have made to the operations. I think about Greens Creek and the automated drilling that we do, and the impact that has had on reducing the overbreak, which is really a real factor that has allowed us to increase the throughput at Greens Creek. I think about the Lucky Friday, the new mining method, a patented mining method that we've developed at the Lucky Friday, that has fundamentally changed that operation.
Before I go, I'm gonna go have six to seven slides that just sort of gives you an overview, in addition to that first one that I did. But, you know, I wanna really start in that overview with our safety and our commitment to safety, and it's not by accident that we have significantly reduced our All-In Injury Frequency Rate. It's not by accident that we're continuing to look at how we significantly improve our performance, not just the statistics, but it's really improving the culture of the operation, and it's not without cost.
I mean, you look at Keno Hill, and we have said at Keno, we are going to operate this at a rate that we're confident that we can operate it safely and that we can drive the safety performance. We're not going to push the operation faster than what we're able to do from a safety standpoint, nor from an environmental standpoint. We have lots of challenges at a new operation like Keno to meet the environmental standards that have been set and to meet our own environmental standards. It's interesting as we sit and look at things that we wanna improve; many of those things environmentally are not things that are being regulated or considered by the Yukon government. We are the largest silver producer in the United States, not quite 50%.
The United States produces about 4% of the total. So when I said 1% earlier, and I've misstated, it's actually 2% of world production Hecla produces. You can see 14 million ounces in 2022. You know, 2023, it was just slightly more than that, and you'll see this year us in the neighborhood of 17 million ounces. And, you know, this is off the really highest quality reserve base in the space, and the highest quality, you know, not only in terms of where the tons that we have, the ounces that we have, and the grade, but also the jurisdictions that we're in. You know-
If you were permitted in Western Montana, how much of the 330 million ounces of resources could you add to reserves? How much of that's mineable?
Well, it's all mineable, but the recoveries are gonna be about 60%. So, you know, the recovered ounces would be about 60% of that.
So it'd be around-
In terms of the reserve
... 3:30, but it would-
Yeah
... put you almost on par with Pan Am.
Oh, absolutely. Absolutely. And, it, you know, it has for us, you know, a 30-year mine life and beyond. There's conceivably, additional layers to this, this, that, that mineralization that just have not been explored. But, you know, what you can see is the quality of what we have, and that's, that's really the underlying, you know, that's the, that's the fundamental advantage that we have, is the quality of these, these assets. And as a result of that, it- you, you have this cost curve where Hecla is the lowest cost, producer, and, and it gives us a significant amount of cash flow. Where does that cash flow go? It goes back into innovating and improving these operations in order to have this growth that we have. It goes into the exploration, where we can extend the mine lives.
It goes into the fourteen other, sixteen other exploration projects that we have. And we believe that doing that is more important than just about anything else, because we think that long term, you're gonna see significantly higher silver prices. And we believe that. You know, when I joined the company in 2001, the price of silver was $4.10. We've been right and well rewarded for having done that, and as have our shareholders. And then the sort of final overview slide is just our dividend policy. You know, very different than anyone else's because we tie our dividend to the price of silver. And the way we think about it is we're giving you a return on the ounces that we produce.
You know, and so at $20 silver, the return that we're giving, the dividend return that we're giving, is 4% of those ounces that we produce, and you can see that it ratchets up as the silver price increases. Nobody else has a dividend policy like this in the silver space. I think Newmont had something similar, I don't know if they still do, in the gold space. So I'll talk about each of the operations, and I'll just start with Greens Creek. It's the world's eleventh largest silver mine. It's, you know, been a mine that has been operating since 1987, and it's been just really the foundational asset of Hecla. But the thing, one of the things to remember is its first decade, it was a cash consumer.
It took time to figure this mine out and to turn it into what it has been. From 1997 till 2008, Rio Tinto was the operator. It did well, but since we've owned it, owned 100% of it, we've been able to increase the recoveries, we've been able to increase the throughput, and we're continuing to make those sorts of improvements. You know, we'll be producing roughly 9 million ounces this year, and we'll have a cash cost that's an all-in sustaining cost that's slightly higher, primarily because of just somewhat lower gold or silver production and, you know, the fact that we've got more capital that we're putting in primarily for the tailings facility. You can see the mill throughput that we've had.
You can see the recoveries that I just mentioned. And here's that cash flow generation that's this mine has generated, you know, almost $2 billion since 2006. So it has been just a great asset for Hecla. And when we look at the Lucky Friday, and when we look at Keno Hill, and we look at Casa, we see all of these assets having similar trajectory. Maybe not the level, because this is, you know, a bigger mine than those other mines, but the similar kind of trajectory where with increasing cash flows. So that's Greens Creek. Greens Creek is our base operation and will be for a long time to come. But Lucky Friday has been a mine that Hecla has operated for 80+ years.
And, you know, just in just the last, you know, three years or so, we developed this new mining method, the UCB, that we've now patented, and that will be the second new mining method this mine has developed. And it's had to develop these mines because it is a very, very deep mine with a huge amount of seismicity. And you've got to figure out how to manage the seismicity. And so in 1987, they developed a mining method to deal with the issues of the day, which was in another vein system than what we're currently mining. The issues that we've had over the last decade has been the, the, the inability to know when seismic events would happen. We would get indications of it, but we wouldn't actually know when those were occurring.
What we've done with this new mining method is we have determined when those seismic events are gonna occur. We essentially determine the timing of an earthquake, and when the ground closes microseconds after we've blasted. As a result of that, you can see our production in 2023 was 3 million ounces. That's roughly the sort of level of production that this mine has historically had for a full year, and that was only for seven months. Why was it only seven months? Because we had a fire, and that fire took a month to put out, and then it took another four months to build infrastructure around where that fire occurred.
That was all done, completed the first of January, and we should be at full production by the end of the first quarter, and we should see this mine produce in excess of five million ounces. Cash costs approaching where Greens Creek's cash costs are. And I don't think this is gonna be the end of the growth in this mine, but at this point, we're viewing this as a five million-plus ounce producer for, you know, more than a decade into the future. And I'll show a little bit about the exploration. In fact, here it is, the exploration that we're doing. We are looking to the east on this vein system, the Lucky Friday expansion area, and we're quite optimistic that there is the opportunity to see this thing can grow dramatically.
If it can do that, then the real key is, what is the hoisting capacity? How do we continue to increase that capacity? We're currently at a little over 1,100 tons a day. The target is 1,200. We think the hoisting capacity limitation is about 1,500 or maybe 1,600 tons a day. So we have quite a bit more room to go to continue to grow within the Lucky Friday. I think you'll see that happen whether we have the exploration success or not. Just to put that into context, this area that you see right here and that's colored is about 18, 19 years of production. You can see this area, that we mined it from 1997 to 2023. So this is a half a mile across. This is a mile and a half, basically, vertically.
This is a huge, huge system, and we think with the exploration that we're doing, that we'll find more. I've talked about the Underhand Closed Bench method. Basically, the way this method works and it, it's really a function of a bunch of different technologies, but primarily the blasting technologies that allow you to precisely time when the blasts happen and to be certain that they have occurred, that has allowed this method to come into being, and it's been, these blasting technologies have really been about 15, they're about 15 years old. But what we do is we have an open cut, this yellow area that you have here, and we then drill vertical holes that you see here.
And then when we blast that, a microsecond after we blast it, the ground closes about a foot to maybe even as much as 18 inches. There's very little seismic activity that happens after that, but a little bit occurs in that first 12 hours, and then after that, we're able to come in, and we come in, and this is now swelled up into that open cut. We then remove that material, we then backfill it, and then we mine under that now backfilled open cut, and it's... there's almost no drilling and blasting that needs to be done. It's rubblized material, and all we're doing is mucking. We then backfill that, then we open the third cut, and once that's open, then we repeat the process with these vertical holes.
This allows us to, you know, increase the throughput rate from about 850 tons a day to now almost 1,200 tons, and I think we'll continue to do it in the future. What drove this was the safety. What we had was a situation where we would have to pull miners out of the stopes. So the stopes were shut down 25% of the time. We'd have to pull people out of the stopes in order to allow the seismic event to happen. We knew it was on a path to occur, but now we no longer have to do that. We now can operate basically 24/7 in every stope. And as a result of that, you see, you know, almost double the amount of silver production.
So let's talk about Keno, which is our newest asset, and, you know, we couldn't be more excited about the potential of this asset to sort of fit the mold of Greens Creek, of Lucky Friday, Casa, of being a long-lived, low-cost, operation. This is a historic mining district of Canada, the second largest mining district in the, in the country. We have wanted to acquire this going back to 2007. It's got, you know, 80+ sq mi of, of ground, lots of potential, and the exploration that we're doing has been phenomenal. I'll talk more about that in a moment. We also acquired another property called, that was the company ATAC, the Rackla property primarily, which gives us another 650 sq mi, and there's known mineralization and resources on, that. We should produce around 3 million ounces.
We should spend about $30-$34 million in capital, and we should spend, roughly speaking, call it $17-$18 million, maybe even $20 million a quarter during this phase of getting this thing into, into full production. But again, our focus is on safety, our focus is on the environmental, having it meet our environmental requirements. We did release a technical report. The reserves have grown. When we first acquired this, I think the ounces were somewhere around 35 million ounces of silver. We're now up to 55 million ounces. We've got a mine life of about 11 years. You can see the sort of grade this thing has. To put that into context, Lucky Friday, Greens Creek are both about 14 ounces per ton. When Greens Creek started, it was actually at a similar grade.
It was at about 26 ounces per ton with a seven-year mine life. So we look at this, and we think this looks a lot like Greens Creek did. Again, from the standpoint of you're in a very, very prospective district, you've got high grade that you're starting with, and you're gonna need to figure out how to make this thing work well, and when you do, then you're gonna have significant silver production for a long time. This just gives you a sense of, you know, we're in this small area that we're currently operating in. Eventually, you'll see us over the next 11 years put in all of this development, mine this, and we're finding more. Flame & Moth is another deposit. That was Bermingham.
So, I've got an exploration slide toward the end, so I'll talk about that, the exploration there. Casa Berardi has been our gold mine. It has been very good for us. It's done a couple of things. One is, on a relative basis, silver has underperformed gold, so this has given us cash flow that has helped stabilize the company. It's been a good cash flow generator. We're gonna have a period of time where that cash flow is gonna be, you know, minimal, and then we'll have a period of time where we'll have some investment to make as we strip two very high-grade pits, pits that are almost twice the grade of what we're mining today, about 3 g, 3.1 g, which is a very high-grade, open-pit gold property.
You know, this year we'll produce a little less than 100,000 ounces. You know, costs are, you know, not low. As I said, we'll make it maybe a slight investment this year, 2024, 2025. I would expect that we'll see cash flow that more than repays this investment that we make. And-
When you switch from underground to open pit, how much does the mining workforce get smaller?
So when you consider the total number of people that were there in January of 2023, we were at about 1,100 employees and contractors. I would expect by December of 2024, we'll be about 500.
You're losing contractors, underground miners, and camp workers.
Well, we don't have a camp, so we are losing the underground miners, although many of them have moved to the surface and learned new skills to operate equipment at the surface. And we've certainly lost lots of contractors, and we'll lose more. You know, we did buy a large portion of the fleet necessary to operate at the surface. We bought equipment that was large enough to do the pre-strip that we're gonna need to do for those two new pits. So we're in pretty good shape for the future of this mine without having to make a huge capital investment.
What town-
Realize the 160 pit.
Do the people live in at the camp?
Pardon me?
Where do the people live?
La Sarre.
Thank you.
And that's about an hour and a half away. Realize the 160 pit, so the pit that we're mining today, will, once we're completed mining it, it will be the place that the tailings for the other two pits go. So we'll have no new tailings construction requirements, which is a huge cost, you know, on the sort of, gumbo sort of soil that you have here in the Abitibi. So we got three different phases. You know, the completion of the 160 pit, the investment on the stripping for the high-grade pits, and then the operating of those pits. Long mine life here as well, and you can see 14-year mine life. You can see the ounces of gold that we produce, about 1 million ounces of gold from the open pits.
We'll mine the underground at least to the middle of this year. There's some potential that it will go beyond that, but we're only gonna do that if we've got margin in those underground ounces. So moving from those to the Montana asset that you asked about, it's 50 mi due north from the Lucky Friday. We have taken a different approach after all these years of our predecessors and then us sort of stepping into their shoes. We've said, "Okay, we need to just ask for the permits in order to do exploration." So that's what we're doing, is we're gonna do exploration on these assets, and that is not a heavy lift from a permitting standpoint. Just a couple of comments on the balance, you know, the financials.
You can see the revenues. The split is now 39% from silver, 36% from gold. I would expect in 2024 for this to be over 50% silver. You can see the sort of margins that we have. You can see that our leverage went up, and it went up primarily because of two things. The Lucky Friday fire probably cost us about $70 million. We should get about $50 million of that back in insurance proceeds, and we'll use that to repay debt. And then, of course, the investment that we've made in Keno Hill. I'll skip over just to our guidance. Should be around 17 million this year and up to 20 million in 2026.
Then, my thought is, beyond that, we probably have maybe 10%-20% potential increase in the silver production as a result of further improvements at the Lucky Friday and at Keno. Those have not been engineered, and that's just my guess, based on the experience that I've had and what I've seen us be able to do in innovating the assets. So just a couple of comments about the silver market. Silver is really quite a unique metal. You know, for the majority of history, it has been a monetary metal and one that was used by governments. Now, it's a monetary metal that's used by individuals, and you know, I don't think that's gonna change.
You've seen significant increase in the investment demand for silver over the course of the last 23 years. You can see on this line, it's actually the largest growth factor. What's happened while it's been growing, you've seen photographic demand almost go to zero, and you've seen industrial demand also grow. And the most interesting thing on the industrial demand is this photovoltaic demand. It represents 25% of the total industrial demand, and it's growing and growing rapidly. It has increased substantially, you know, 12% annual growth rate from 2013 to 2022. And as I said, the gigawatts installed last year compared to the year before implied about 40 million more ounces.
It takes 500,000 ounces of silver for 1 GW of solar. So, and that is growing, and it's growing, while there's been thrifting in the past, that is growing dramatically because the newest technologies are actually photovoltaic technologies are actually using more silver. So we have this 1.2 billion-ounce silver market, and we got a supply of 1 billion ounces. And it is very difficult for industry to develop, you know, find and then develop new mines. I know you've had-
You said 1 GW needs 500,000 ounces.
Correct. So the world installed 380 GW last year. So you've got, you know, you have guys that have come on here in this conference and have talked about their projects, and there's interesting projects, but none of them, I would venture to say, that are not already in construction and or production, are going to impact the rest of this decade. I would suggest to you that all of them, we're sitting here in 2024, it's hard to envision them being in production by 2030, and that's when you're gonna have the biggest growth in the photovoltaic. And I think you'll have good investment demand, I think you'll have good electronics just generally because of the nature of of silver. I'll skip through these.
The point of all that is the deficit that we have. So here's the actual, it's 290 million ounces. There's probably at least 100, maybe even 200 million-ounce deficit in 2023. And so the message that we have at Hecla and the message that we have at the Silver Institute, which I'm the chairman of, for a couple of years, is the need for silver for this energy transition, the need for silver for all these other applications. And so with that, I'll go to exploration for just a moment. We'll spend $25 million this year. The focus will be on Greens Creek and Keno Hill.
And Greens Creek, the thing that's really quite interesting to me are these, these three areas that are very close to, to where we're operating at Greens Creek, and then Cliff Creek and Mammoth, which are more distal. Cliff Creek has been known for some time. The problem has been accessing it from the surface. We've got, you know, we're, we're focused on that. It's taken us a couple of years to do the mapping in order to, to be able to put the drills on there. You'll see drills this year on Cliff Creek. Mammoth was a land package that we didn't own, and we acquired that this year. So these two things are sort of game changers for the exploration program at Greens Creek, while these closer, potential has, has the opportunity to just extend the mine life.
And then you have this Keno Hill district, and it's just, it really is mind-blowing sort of, sort of district. The historic production was 200 million ounces at 40 ounces per ton, and we're starting with a $6.5 million budget. I would anticipate that if we have continued success like we have seen, for example, this 54 ounces per ton silver over 39 feet, this very, very deep hole that puts us 1,000 feet below the deepest hole we have at 87 ounces over 6 ft, and realize the recovery of the 0.6 ft, rather, the recovery of the core was extraordinarily bad in that area, which is typical. Where you have the bad ground is where you have the high grade, and we didn't give any credit to the to that non-recovered core.
I think you'll see this—this will turn out to be a much wider, bigger system. But no one expected, outside of Hecla, to see this deep. The theory was, the conventional wisdom was, that once you got down to about this level, there was no deep roots to this system, and that was fundamentally the reason why we were interested in this going back to 2007. So I think with that, I wanna just end with these two slides, you know, our commitment to safety. You can see how our All-In Injury Frequency Rate has declined dramatically. We saw a ramp up, variety of reasons for that.
We're very focused on continuing to drive this down, but we're even more focused on this. This is a trailing indicator, looking at leading indicators to identify hazards and avoid those hazards. And then the last thing I'll end with is this, the impact that we have on the communities that we're in. We are long-term, very, very supportive company in these communities. We are the largest private employer in each of the communities that we operate in, and we're committed to their success. And I can tell you that those local communities are committed to Hecla as well. So, John, with that, I'll stop in case you have any other questions.
Once again, people on the webcast can submit questions through the question box. So Phil, you have 15% of your revenue from zinc and 10% from lead last year. In the LME and Shanghai warehouses, in less than the last 12 months, the zinc inventories have quintupled, and the lead inventories have risen fourfold, albeit from low levels, and they're getting closer to ten-year highs. What's your interpretation of the supply build-up in zinc and lead?
So it's interesting with the, with, with both those metals, but particularly zinc. You, you saw zinc really reach a, you know, a low price, you know, a few weeks ago. We seem to be sort of working our way out of that. I, I think, I think that was kind of the message of, you know, the last sort of six months or a year, was this increasing, you know, decreasing demand for zinc that seems to have abated, to a, to a degree, because we are we are seeing, you know, the the, the zinc price now starting to, to rise again.
Now, world steel output was unchanged last year. That's one end market for zinc. The EVs, if they have aluminum skins, do not have zinc. Where do you think the supply and balance is in zinc and lead?
You know, I'm not sure. What I can tell you, I think that is more interesting is the demand that China has for silver concentrates. So if you look at the price talk that's happening for the treatment charges for silver, it is $0.14. So it is... You know, frankly, they can just go, it's probably more economic to go buy bullion and import it than... Yeah, there's VAT issues, but generally speaking, it's - there's not a huge difference. So that's the lowest that I have seen. You know, it's in the past, it's been even as much as $1 for those treatment charges, so to see this $0.14-
That's because they have more smelters and less mine output.
Well, what it suggests is more silver demand in country, to me. That's the-
Last week, Glencore reopened a zinc smelter in Germany that they had idled two years ago at the onset of the Ukraine war. How much of your silver reports to a lead concentrate where the smelter terms are favorable, as opposed to a zinc concentrate, where the smelter terms have been onerous, 30% kept by the smelter?
Well, well, John, we don't produce a lead con, we produce a silver con. But so that silver con does go with other lead cons and gets processed, and almost all of our silver reports to the silver con. Very little reports to the zinc-
The zinc smelters are not-
We don't get really paid for the zinc or for the silver and the zinc, so we try to avoid having any go into the zinc con. What we will do is have it go into a precious metals con, where we do get paid for that silver. Some people call that a bulk con, but we call it a precious metals con.
Agnico in Eastern Canada has 4 mills that are not full but running, then they got 4 mills scattered around that are idle. Maybe half or more of the public junior companies in Canada dream of selling out to Agnico. But in Western Canada, Phil, everybody wants to be your friend. Victoria Gold, Banyan Gold, Metallic Minerals, Dolly Varden Silver, maybe one or two others hope for you to knock on their door. But you've got four operating mines and 16 exploration and development projects. Does Hecla have the manpower for one or two more assets, and would you want silver or gold, or does it matter? Does the rate of return matter most?
No. Look, our preference, all things being equal, is to have silver assets. And we've been quite clear that we are prepared to go wherever there is silver to be found. So we're, you know, beyond Canada and the United States, we certainly look at Mexico, Peru, Bolivia, Argentina. All of those are countries that have assets that we would consider. Now, having said that, you know, our preference would be to just stay in the U.S. and Canada, but you can't do that and add silver assets to the mix. So we're prepared to go to those places. We also are prepared to do gold assets in the U.S. and Canada, and particularly in the places that we operate. So are we prepared to do more in the Yukon?
Are we prepared to do more in Nevada and in Alaska and the Abitibi? Yeah, we're prepared to do that, but silver takes priority over those opportunities.
Looking at 2024, with the benefit of 2 million ounces more output, that's almost $50 million in revenue, then gold and silver prices are a little bit higher, and you've got the $50 million insurance refund you're expecting. So is it a slam dunk in 2024 for Hecla to have positive net income, not cash costs, but net income to increase the equity account?
You know, nothing's ever a slam dunk, John. Is there a reasonable likelihood? Yeah, there certainly is. You know, at today's prices, you know, the sort of income that we have in cash flow generation is pretty substantial, particularly the cash flow generation.
MAG Silver reported , $48 million of net income for last year. SilverCrest reports a net income. Some of the project companies, when, if they ever get built, should produce that net income. Do you think that Hecla is too complex or spends too much on exploration? Is there a simplification strategy to improve profitability?
So I-
Higher metals prices or higher output?
Now, look, We believe we generate most value for shareholders by growing the silver production that we have, with the long-term objective of being investment grade. So if you look at our credit metrics, we actually would qualify for investment grade, but we don't get there because of the size that we are. So we want to continue to grow in order to improve those metrics. And then our long-term goal is to be an S&P 500 company, and because we believe this energy transition's not gonna stop, we think you'll see higher silver prices. And with our continued increase in the production of silver, if we get those Montana assets that would, you know, basically increase our production 50%, we think that we would ultimately be an attractive company to add to the S&P 500.
Realize they only have two mining companies on the S&P. So yes, is profitability and earnings important? It is, but it's important in the context of where we view the silver market and the fact that there's the opportunity to really be the premier investment vehicle for investors that are interested in silver.
From the question box, in the next two to three years, what will be the source of expansion? Organic, in-house, or external acquisitions? You've already said you'll grow from 14-20 million ounces internally.
That's right. We're prepared to acquire assets as well.
But primarily in silver?
Yep.
Well, at the moment, you're blessed to merely operate in the U.S. and Canada. This may never come to fruition, but Obrador proposed a ban on open pit, new open pits in Mexico. He made 20 constitutional amendment proposals in that speech, not just one, so I don't know how seriously to take it. Guatemala proposes to revise all mining licenses. The verb in Spanish was revisar. Chile proposed two, not two constitutions, but stayed with the 1980s constitution of Pinochet. But the first one they rejected as something called quasi-nationalism, or a state within a state, which is in the constitutions of Bolivia and Ecuador. That basically gives the indigenous, the right to rule within the country in their areas, budgets, legislature, laws, permits. Then, Panama, and my assistant, Alicia, screens the press for me in Spanish to help us read these things.
The debate in Panama was partly a constitutional argument that the executive doesn't have the right to make a deal or make a permit, or an assumption that the executive is crooked, and they want the courts, the legislature, the indigenous community, and a national referendum to approve the project at each stage. So one of the objections was not the First Quantum, but to their executive branch. But the presumption of corruption is a great way to tear up the contracts in their minds. So the rules change in so many different places. Do you think it's a blessing that you're only in North America, and is it a good way to save time by skipping Latin America?
So in 2008, Hecla was the largest gold producer in Venezuela, and we elected to sell those Venezuelan assets, and at that same year, we acquired the portion of Greens Creek that we didn't already own. If you look at what we have done since, we've had activity in Mexico. We've had an operating property in that period of time. But we have primarily been in the United States. We acquired Casa Berardi, we've acquired the Nevada assets, we've acquired assets in the, in the Yukon. And so we would, we would love to continue to grow in those, those places. But we do recognize that fundamentally, if silver is going to do what we think it will do, you know, have this demand and this continued deficit, that we need to have exposure to silver in other places.
And we think the fact that we have so much of our value, so much of our cash flow, so much of our focus in the United States and Canada gives us room to have some in these other jurisdictions. We will not do something that fundamentally changes us to being a Latin American or an Asian or, you know, some other jurisdiction as the focus. The focus will continue to be U.S. and Canada, but we're prepared to go to these other places, and we have teams of people that can do that. Our VP of operations has worked for us for 27 years. Seventeen of those have been in Latin America. So we have expertise. We have the ability to manage it. Is that our first choice?
No, it's not our first choice, but every place has its difficulties. I mean, you talked about having sort of a nation within a nation. To a certain extent, that's what's happened with First Nations in Canada, and with the sort of direction many things are going towards in the U.S. So there's an element of that in North America as well, and we recognize that, and we are able to work with it and make it work.
In the areas where you operate, do you have locations where you have difficulty getting skilled employees or buying necessary supplies or services?
You know, it's an issue, yes, but it's not a big issue. We are the preferred employer. Every place we operate, we're the highest paying employer. We're the longest, you know, lasting employer. You know, to have a mine like what we have in Casa Berardi in La Sarre, there are other companies that people can go to, but they're gonna have to, for the most part, do fly in, fly out. So people that wanna go home and be there with their family, that's where they go to work. You know, Juneau, where it's the capital of Alaska, it's, you know, it has. Like everywhere, it has its pros and cons, but it is attractive in attracting a workforce.
There's a great deal of exploration on the East-West trend, east of Detour Mine into Quebec, past Casa Berardi, Maple Gold Mines, Wallbridge Mining, other companies. Does that benefit Hecla because they bring power lines, roads, infrastructure, services, or does that make it harder because they try to poach your employees from Greens Creek, excuse me, from Casa Berardi?
Yeah, no, it's... We're a long way from... There's other places they would go to get their workforce besides Casa Berardi, number one. But number two, it is a big benefit, not for the reasons you described, but for the knowledge. You know, it's these guys identifying mineralization and why that mineralization is there, and then us taking that knowledge and applying it to our land package. That's what's really, really interesting and really where it provides a real opportunity. And so we watch them very closely, in part where we certainly would be interested in continuing to expand our land position there, but more importantly, to understand what's happening geologically.
In terms of the silver deficit that the World Silver Survey calculates, where does the 100 or 200 million ounces of silver come from when the market's in deficit?
Sure. I mean, it's above ground stocks. Well, the one thing I will say about silver is we're never gonna run out of silver, right? There will always be... You know, if you think about all the silver that's been mined in history, it just becomes a question of at what price are people willing to take both known and unknown above ground stocks of silver and put it into the marketplace. There's a study that the Silver Institute is doing to answer that question, in these periods of time when we've had, you know, prices go up dramatically, what has been the reaction of the market? And, I don't know what the outcome of that's gonna be, but my sense is as the price rises, people actually hold the silver more dear than they do prior to that happening.
So, you know, I'm very optimistic that we'll have the silver we need, but it'll come at a higher price. And certainly for the development of mines, you need higher prices, you know, in order to generate the returns that investors require.
Well, sometimes I observe, dealers that'll pay more than the exchange price to buy physical silver, and silver in old coins sells for about a 50% premium. Sometimes I have a hard time convincing myself that the exchange traded price is correct. Do you think there's a better way to sell Hecla's silver?
Well, realize, John, that what we produce is not silver-
It's a concentrate.
... in its final form. We produce a concentrate. And so for us to take the physical is a very complicated and expensive process that we don't think is value added for our, for our shareholders. I mean, 'cause essentially we'd be buying that—you know, we'd be tolling it with the smelters, and it creates its own set of challenges when you start to look at tax implications of it, and so it's not something that we're, you know, prepared to—
The lead smelter terms are very favorable right now.
Yeah. Yeah.
Once again, oh, someone's asking, "What keeps you awake at night, Phil?
What keeps me awake? Well, I actually sleep pretty, pretty well. Yeah, you know, I guess long term it's, you know, getting the workforce that we need. And it's, you know. And by that I mean the skilled trades that we need, the skilled engineers and geologists that we need, just because you don't have enough people going into those businesses or those majors. I do think that there's starting to become a realization of the need for minerals, and people are. You know, there's a little bit of this underlying buzz that they need that we need those things, and as a result, there's more kids that are interested in it.
I had a call just from an MBA student at Stanford who said their Stanford MBA—this guy had had no mining connection whatsoever, but he said he recognizes for this energy transition that you're gonna need metals. And, and so he was saying there is no sort of focus on that at Stanford. Would I and others be willing to come speak there? So there is, you know, slowly an understanding of the significance of the metal, but that's what—metals. That's what keeps me up is, you know, are we gonna have the people? And, you know, frankly, people are gonna have a great opportunity. There, you know, if you look at the demographics of our industry, quite a few folks, you know, are my age or in that sort of range.
So, there's gonna be lots of opportunities for people to do fun, exciting things, you know, in a robust price environment for a long period of time.
Phil, I'm looking forward to all the progress, and it sure is good to have the insurance check coming in rather than the mine disruption dragging you down this year.
Yep. Nope, we're looking forward to that, and we have already received a fair bit of it, and you know, we would expect to see the rest of it before the end of the year.
Who's the insurance company that paid the claim?
It's Factory Mutual, and don't feel too sorry for them. They've gotten, well... The premiums they've received over the course of the decade that we've been with them have been substantial, and they're in, they're in good shape.
Super. Phil, thank you. Good luck, and it's great to see everything going a little better this year.
Okay, well, as always, John, we enjoy, you know, as I said, having a longer period of time in which we can sort of give the full story to folks that-
Thank you, everyone-
Take advantage of your conference.
... who participated today. Thank you very much, everyone. Bye-bye.