Good day and thank you for standing by. Welcome to the Q2 2021 Hecla Mining Company Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Anzal Patel. Thank you. Please go ahead.
Thanks, and welcome, everyone. Thank you for joining us for Hecla's 2nd Quarter 2021 Financial and Operations Results Conference Call, Q2, Kautil Hetla's Assistant Treasurer. Our financial news results, beliefs that were issued this morning along with today's presentation are available on Hetla's website. Today's call, we have sir Baker Hetler, President and CEO Lauren Roberts, Vice President and Chief Operating Officer and Russell Lawler, Hetler, Senior Vice President and Chief, Investor. Any forward looking statements made today by the management team come under the Private Securities Litigation Reform Act and the involved risks as shown on Slides 23 earnings release and in our 10 Q and 10 ks filings with the SEC.
Call. These and other risks could cause results to differ from those projected in the forward looking statements. Reconciliations of non GAAP measures cited during this call and related slides are also found in those documents. With that, I'd like to turn the call back
over to Phil Bakker. Thanks, India, We reported our 2nd highest revenues, profit cash flow from operations and adjusted EBITDA and our history and as we capitalize on the higher commodity prices with our continued production and focus on cost management. We reported record realized silver margin of $19.60 per ounce of silver As silver was our dominant revenue contributor at 40% for the quarter. At Greens Creek and for the company, we've now lowered our cash costs All in sustaining cost guidance again for the year and Lauren is going to speak to that in a minute. Our financial position continues to strengthen and along with it our financial Our cash position has increased almost 2.5 times from the prior year to $181,000,000 as a result of our free cash flow generation.
Financial strength is not new to this quarter and even for the past few years. This is now our 39th consecutive quarter of paying a dividend. And the dividend that we just announced that we'll pay in September will make it 10 years. And we have now returned the $72,000,000 in common dividends. In the 1st 6 months of 2021, we paid 16% of our free cash dividends.
And as the silver price increases, shareholders have the ability to participate in the incremental free cash flow generation with our silver linked dividend. And at the same time, we'll be maintaining our minimum dividend payment. On the next slide, I want to take a moment to talk about ESG Because we published earlier this quarter our 2020 sustainability report, which is entitled Small Footprint, Large Benefit. And If you haven't taken a look at this, I would encourage you to do so. Key understanding Hecla's ESG, And this is on the next slide, is the fact that our mines are very small underground mines that have been the economic generator or driver of communities For generations, and when I say small mines, I mean small tonnage.
The large companies in our industry will mine as many tons in a day as we do in a year. When I say economic drivers for communities, we've been the largest private employer for 30 plus years at all three of our operations. Because we're small, we use very little energy and most of it is hydro. So our greenhouse gas emissions are extraordinarily low I think the best in the industry. I know that in 2020, we produced almost 2.5x more silver equivalent ounces Per ton of emission peers.
And the amount of water we use per silver equivalent ounces It's 63% of what an average person consumes in a day. So the environmental impact of HEK, I think Shout out to Scott Hoch from Meyer and his son. And The jobs that we provide are jobs that provide more than a living wage. These are jobs that sustain and build communities and particularly during the pandemic. The Alaska Chamber recognized this and named our Greens Creek operation as the large business of the year for the leadership work that we did in 2020 during the pandemic.
And it's not just providing jobs. We support communities and special needs through multiple programs that we partially fund through our charitable foundation. Looking at safety, our culture is safety culture has gone across all of our operations. With Casa, we're already being awarded The Quebec Maritime's Mine Safety Award. This is the first time in that mine's 30 year history to win the award.
The metals that we mine are essential in this transformation of renewable energy and Hecla produces 40% of the silver. And on Montana assets, America's 3rd largest undrawn deposits with significant silver resources, both metals
Thanks, Bill. Moving to Slide 7, propelled by sterling production sales from our silver mines at higher prices, silver accounted for 40% of our revenues in the 2nd quarter, followed by gold at 37%, while zinc and lumber at 23%. Our operations produced 3,500,000 ounces of silver at an all in sustaining cost of $7.54 per ounce, of the U. S. Silver production in 2020.
Gold production totaled 59,000 ounces at an ongoing cost of $14.19 for a cash margin of $406 per ounce. With these margins on both silver and gold, we expect to see continued strong free cash flow generation. As we turn to Slide 8, starting in the upper left hand corner, we ended the quarter
quarter of
the 181st quarter 2021. Moving to the right, with our increasing cash position, we delivered a net debt to adjusted EBITDA ratio of 2 times, well below our target of 2 times, while providing liquidity position of $411,000,000 In the bottom left, you can see that our realized silver margins have continued to This margin combined with positive working capital management translates into free cash flow. This is reflected in the Chirag quadrant, which shows over the past 15 months, We generated a total free cash flow of $175,000,000 and the current program continue our free cash flow generation aided by low cost and high margins. With that, I'll pass the call to Lauren to go through operations.
Thanks, Russell. I'll start on Slide 10. At the Greens Creek Mine, we produced 2,600,000 ounces of silver and 12,900 ounces at an all in sustaining cost of $0.68 per ounce for the quarter. The mine generated $63,500,000 in free cash flow in the quarter, The 4th highest since Hecla acquired full ownership of the mine as it continues to benefit from higher silver, lead and zinc prices. In the trailing 15 months, Greens Creek generated $255,000,000 in free cash flow by operating safely and consistently throughout the pandemic.
Our workforce is nearly 90% vaccinated, and we are taking measured steps to return to normal operations. We are lowering further the cash cost and all in sustaining cost guidance due to byproduct credits, lower production costs and more favorable smelter terms. Updated cash cost guidance for Greens Creek is lowered to negative $1 to $1 per ounce And all in sustaining costs are lowered to $3.25 to $4 per ounce. We also are increasing gold production Operating at historical production rates after a successful ramp up money. The mine produced 913,000 ounces of silver Generated positive free cash flow of $14,000,000 in the quarter.
We're tightening the cash cost guidance for the mine to $7.50 to $8.50 per ounce And all in sustaining costs are estimated at $14.25 to $16.25 per ounce. And we remain on track to increase metal production to approximately 5,000,000 ounces in 2023. No significant planned outlay is required to achieve this goal As the increase is driven by improving grade as we mine deeper. We continue to test and optimize a new mining method, which better manages the seismicity It has the potential to increase productivity at the mine. Year to date, approximately 75% of the production has come from the new method.
As with any change in method, there's a learning curve, but we are really encouraged by the results to date. At the Casa Berardi mine shown on Slide 12, we produced 31,300 ounces of gold in the 2nd quarter at an all in sustaining cost of $14.34 per ounce. Our focus on optimizing production has delivered results as we continue to see higher throughput, availability and recovery in the mill. Our production states dryer costs in the 2nd quarter due to costs associated with the increased volume, contractor costs related to maintenance and optimization activities and higher underground mobile maintenance costs. Reduction guidance to 28,000 to 132,000 ounces of coal for the year and our updated cash cost guidance for the mine is $1,000 to $11.25 per ounce.
All in sustaining costs are expected to be in the range of $1200 to $13.25 per ounce. We remain focused on reducing and optimizing cost at the mine after seeing the positive results on optimizing production and throughput. In the trailing 15 months, Casa Berardi has generated a positive free cash flow of $68,400,000 and our ongoing business improvement activities are expected to reduce costs and increase cash flow further over the next 2 years. With that, I would like to return the call to Phil.
Okay. Let's go to Slide 14. And this takes the cost and production guidance So that Lauren went through mine by mine and shows what it is on a consolidated basis for 2020 1 through 2023 as far as production. So you can see how we've increased the gold production guidance 191,000 to 198,000. We've lowered our silver cash cost and all in sustaining cost guidance.
And so now the cash cost guidance is between $1 $2 and the all in sustaining costs are estimated to be $9 to $11 per ounce of silver. So at current prices, we would expect to generate roughly $15 per ounce of free cash flow from our silver operations. We're also increasing our gold and all in sustaining cost at Casa Berardi slightly as Lauren mentioned. Our capital expenditures are expected to increase slightly and that reflects the repurchases of royalties that We're outstanding in Nevada and at Casa Berardi Operations. These were put in place before Hecla owned them, of these assets, and we did that in the Q2.
Earlier in the quarter, we announced an increase in our exploration expenditures $40,000,000 and predevelopment to $8,500,000 We will update our exploration activities in early September. And before I open the line for questions, I just want to thank our employees for the commitment to safe operations they've had during this pandemic and being able to deliver very strong operational and financial results. And so with that operator, I'd like to open questions.
On your telephone. Your first question from the line of Heiko Ihle with H. C. Wainwright.
Hey, Phil and team, thanks for taking my questions. I hope you guys are all Staying safe and well.
We are.
Good. In the release, you talk about the lower treatment charges and you're one of the first to really put it black on white like that. And it's nice to hear miners talk about it, but it leads to just a sort of follow-up from an analyst point of view. In your all in sustaining reconciliation, it looks like your TDCs have gone from $23,200,000 in $420,000,000 to $15,500,000 in Q1 'twenty one and now $13,600,000 I assume the answer is yes. But just to make sure, are you seeing the same thing going forward in Q3 and beyond?
Or are there actually even more improvements?
I'll let Ross answer the question.
Yes Heiko, Essentially happened is, a lot of our concentrate is sold at benchmark terms and that gets Negotiated on an annual basis. The treatment charge, especially for zinc concentrates dramatically deep from last year to this year. And so you're seeing a large change, most notably at Greens Creek because it has quite a lot of zinc concentrated and concentrate exposed to the zinc concentrate benchmark term. So I would say for the rest of the year, we'll likely see it kind of like what we've seen for the first half of the year with the exception, if you recall in the first quarter. We highlighted there was one shipment that was made at kind of better than normal terms.
And So we highlighted that a quarter ago so that kind of folks don't carry that benefit forward. But I would suggest we'll see the treatment charges kind of continue Kind of the Q2 2021 rate essentially. There are also some concentrate parcels that are So the benchmark, so we can move a little bit based on that around numbers that should be roughly what we've seen in Q2.
Got it. That actually helps you given that Q2 was lower, right?
Well, I mean, those there's factors such as the concentrate mix that shift zinc versus lead, etcetera. So there's factors there too. It should be good.
And you can get a pretty good Feel on the second half of the year from just looking at our guidance.
Yes. Fair. Navios has made pretty decent progress with Huttigravan, Tahoe Sure. And then these doing at Midas. Any idea how much money you've invested in the area this year thus far?
And is there a breakdown of The money that's been spent in Nevada that you're willing and able to provide, maybe just a little bit of granularity?
Well, yes, we can Russell has done a little bit of work on that recently. So go ahead, Russell, what you were talking to me about.
Yes, essentially from Nevada, the perspective of Nevada, we've essentially become cash flow neutral On the operational perspective, that's obviously Hatter Graben, the development and the exploration. And I'm thinking about maybe a quarter to a third of that is the $40,000,000 that we've guided here would probably be spent in Nevada. And so we will from an operational perspective, we'll kind of cover the cost that we have as well as some of the exploration costs, but we will invest in Nevada from that
So the point is, Heiko, that The cash flow negative that we generated early on in Nevada, we have recouped that The exception of the expenditures that we're now taking in exploration and the ramp development. So we're pleased with how things have developed in Nevada.
Perfect. And I promise Russell didn't make
me ask that question because you just worked on it. So just so you know. I'll get back in queue. Thank you, guys.
Thanks Heiko.
Your next line is Mike Jalonen with Bank of America.
Good morning, Phil and Russell. Just had a question, Bill. Great news on workforce, nearly 9%. And what about Lucky Friday and Casa Brody? What are their rates at?
They're quite a bit lower in Case of CAST product vaccination. It's really about The availability of the vaccine in Quebec. And so that's they're working
they're about 50 was donated
and it's increasing. In the case of Lucky Friday, it's not similar to the national average, the U. S. National average. Is that around 50%?
Yes. Yes. I mean, when you consider vaccinations and people that have had COVID. What kind of steps is HIKO taking to encourage Lucky Friday employees to get vaccinated? Well, it's It's been an ongoing education process.
That's the primary thing that we're able to do. And then we have all the protocols that people have And until we have further vaccination, it's really difficult to remove these protocols. And that's one of the reasons why at Greens Creek, I think the vaccination rate is so high is we had this quarantine period that people were required to go through. With the vaccination rate as high as it is, we're not having to do the same quarantine. Lauren, anything you want to add to this?
I would say at Lucky Friday, Mike, we've done some Work to encourage folks just through making vaccinations available at the mine site. I mean, Anybody who does get vaccinated, you know, gets a little bit of an appreciation. So we've gone through those. But I would also say reiterate what Phil said, it's pretty consistent with certainly the Idaho average rate and we really haven't seen any spot impairment impact for our met decrawls we put in place And we would anticipate that to continue going forward.
Okay. Well, thank you for that. Good luck. All right. Thanks.
There are no further questions. Call over to Phil Baker.
Okay. Well, thanks very much. I just want to remind folks that we have available the ability And that's open to Just shareholders, analysts, just interested in Hecla. We'd be happy to have these 1 on 1 calls. And so, I'll be hearing from you.
And if It doesn't work out for today. Certainly, talk to Russell and we can set something up for some time next week. So thanks. Have a good day.
This concludes today. Thank you for participating. You may now disconnect.