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. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Anvita Patil. Thank you. Please go ahead.
Thanks, welcome, everyone. Thank you for joining us for Hecla's second quarter 2021 financial and operations results conference call. Patil, Hecla's Assistant Treasurer. Our financial news results release that was issued this morning, along with today's presentation, are available on Hecla's website. On today's call, we have Phil Baker, Hecla President and CEO, Lauren Roberts, Senior Vice President and Chief Operating Officer, and Russell Lawlar, Hecla Senior Vice President and Chief Financial Officer.
Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act, the involved risks are shown on slides two and three, earnings release, and in our 10-Q and 10-K filings with the SEC. These 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 will hand it to Phil Baker.
Thanks, Anvita. Everyone, thanks for joining our call. Hecla this quarter has delivered near record results on many fronts. We reported our second highest revenues, profit, cash flow from operations and adjusted EBITDA in our history. 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 and all-in sustaining cost guidance again for the year, Lauren's going to speak to that in a minute. Our financial position continues to strengthen, along with it, our financial flexibility.
Our cash position has increased almost 2.5x from the prior year to $181 million as a result of our free cash flow generation. Our financial strength is not new to this quarter, even for the past few years. This is now our 39th consecutive quarter of paying a dividend. The dividend that we just announced that we'll pay in September will make it 10 years. We have now returned $72 million in common dividends. In the first six months of 2021, we paid 16% of our free dividends. As the silver price increases, shareholders have the ability to participate in the incremental free cash flow generation with our silver-linked dividend. 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. 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. 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+ years at all three of our operations. We're small, we use very little energy, and most of it is hydro.
Our greenhouse gas emissions are extraordinarily low, and I think the best in the industry. I know that in 2020, we produced almost 2.5 x more silver equivalent ounces per ton of emission than our peers. The amount of water we use per silver equivalent ounces is 63% of what an average person consumes in a day. The environmental impact of Hecla thinks small. The social impact thinks big as the largest private employer in small towns. Last summer we had a summer intern with us, and that's, he's the fifth at Hecla. Shout out to Scott Hoffmeyer and his son. 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. 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 safety culture has gone across all of our operations with Casa Berardi already being awarded the Quebec Maritimes 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 to renewable energy, and Hecla produces 40% of the silver in our Montana assets, America's third-largest undiscovered deposit with significant silver resources, both metals that are key to green energy. With that, I'm going to pass it over to Russell to talk about the financial condition of the company.
Thanks, Phil. Slide seven. Propelled by a strong production of sales from our silver mines at higher prices, silver accounted for 40% of our revenues in the second quarter, followed by gold at 37%, while zinc and lead were at 23%. Our operations produced 3,500,000 oz Of silver at an all-in sustaining cost of $7.54 per ounce, resulting in a record margin of $19.60 per ounce. With production continuing to increase at Lucky Friday, Hecla accounted for more than 40% of the U.S. silver production in 2020. Gold production totaled 59,000 oz at an all-in cost of $1,419 per ounce, 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 eight, starting in the upper left-hand corner, we ended the quarter $180 first quarter 2021.
Moving to the right, with our increasing cash position, we delivered a net debt to adjusted EBITDA ratio of 2 x, well below our target of 2x , while providing a liquidity position of $411 million. In the bottom left, you can see that our realized silver margins have continued to increase as costs and byproduct credits drive the all-in sustaining cost down. Margins are now twice what they were a year ago and similar to the first quarter. This margin, combined with positive working capital management, translates into free cash flow. This is reflected in the chart quadrant, which shows over the past 15 months, we've generated a total of free cash flow of $175 million and currently continue our free cash flow generation, aided by low costs 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 oz of silver and 12,900 oz at an all-in sustaining cost of $0.68 per ounce for the quarter. The mine generated $63.5 million in free cash flow in the quarter, the fourth 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 million 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 -$1 to $1 per ounce. All-in sustaining costs are lowered to $3.25- $4 per ounce. We also are increasing gold production guidance to 45,000 due to higher gram ore increased. Moving to slide 11, now it's operating at historical production rates after a successful ramp up in May. The mine produced 913,000 ounces of silver and generated positive free cash flow of $14 million in the quarter. We're tightening the cash cost guidance for the mine to $750- $850 per ounce. All-in sustaining costs are estimated at $1,425- $1,625 per ounce. We remain on track to increase metal production to approximately 5 ,000,000 oz 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 and 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 oz of gold in the second quarter at an all-in sustaining cost of $1,434 per ounce. Our focus on optimizing production has delivered results as we continue to see higher throughput, availability, and recovery in the mill. While production stayed strong, costs in the second quarter due to costs associated with the increased volume, contractor costs related to maintenance and optimization activities, and higher underground mobile maintenance costs.
Production guidance to 28,000 oz-132,000 oz of gold for the year, and our updated cash cost guidance for the mine is $1,000-$1,125 per ounce. All-in sustaining costs are expected to be in the range of $1,200-$1,325 per ounce. We remain focused on reducing and optimizing costs 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 $68.4 million, and our ongoing business improvement activities are expected to reduce costs and increase cash flow further over the next two years. With that, I would like to return the call to Phil.
Let's go to slide 14, and this takes the cost and production guidance that Lauren went through mine by mine and shows what it is on a consolidated basis for 2021 through 2023 as far as production. 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. Now the cash cost guidance is between $1 - $2, and the all-in sustaining costs are estimated to be $9 - $11 per ounce of silver. 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 all-in sustaining cost at Casa Berardi slightly, as Lauren mentioned.
Our capital expenditures are expected to increase slightly. That reflects the repurchases of royalties that were outstanding in Nevada and at Casa Berardi operations. These were put in place before Hecla owned them, these assets. We did that in the second quarter. Earlier in the quarter, we announced an increase in our exploration expenditures to $40 million and pre-development to $8.5 million. We will update our exploration activities in early September. 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. With that, operator, I'd like to go to questions.
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we go into roster. Your first question on the line is 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. You're one of the first to really put it black on white like that. 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 TCs have gone from $23.2 million in Q4 2020 to $15.5 in Q1 2021, and now $13.6. 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? To me, these are very stark differences.
I'll let Russell answer the question.
Yeah, Heiko, what essentially happened is a lot of our concentrate is sold at benchmark terms, that gets negotiated on an annual basis, that the treatment charge, especially for zinc concentrate, dramatically from last year to this year. You're seeing a large change, most notably at Greens Creek, because it has quite a lot of zinc concentrate and concentrate exposed to the zinc concentrate benchmark term. I would say for the rest of the year, we'll likely see it kind of look 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. We highlighted that a quarter ago so that folks don't carry that benefit forward.
I would suggest we'll see the treatment charges kind of continue as if kind of the Q2 2021 rate, essentially. There are also some concentrate parcels that are outside the benchmark, so it can move a little bit based on that, but around the numbers, it should be roughly what we've seen in Q2.
Got it. That actually helps you, given that Q2 was lower, right?
Well, yeah. There's factors such as the concentrate mix that shifts zinc versus lead, et cetera. There's factors there too that should be good.
You can get a pretty good feel in the second half of the year from just looking at our guidance.
Yep. Fair.
The reconciliation.
Yep. Nevada seems to have made pretty decent progress with Hatter Graben at Hollister and then the drilling at Midas. Any idea how much money you've invested in the area this year thus far? 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, yeah. Russell has done a little bit of work on that recently. Go ahead, Russell, with what you were talking to me about.
Yeah. Excuse me. Essentially from Nevada, the perspective of Nevada, we've essentially become cash flow neutral, I would say, from the operational perspective. Invested, obviously, Hatter Graben in the development and the exploration, I'm thinking about maybe a quarter to a third of that is the $40 million that we've guided here would probably be spent in Nevada. From an operational perspective, we'll kind of cover the costs that we have as well as some of the exploration costs, we will invest in Nevada from that perspective.
The point is, Heiko, that the cash flow negative that we generated early on in Nevada, we have recouped that, with the exception of the expenditures that we're now making in exploration and the ramp development. We're pleased with how things have developed in Nevada.
Perfect. I promise Russell didn't make me ask that question because you were just working on it. It's just so you know. I'll get back to you. Thank you, guys.
Thanks, Heiko.
If you'd like to ask a question, press star one. Your next line is Mike Jalonen with Bank of America.
Well, good morning, Phil and Russell. I just had a question, Phil. Great news on workforce, nearly 9%. What about Lucky Friday and Casa Berardi ? What are their rates at?
They're quite a bit lower. In the case of Casa Berardi mine vaccination, it's really about the availability of the vaccine in Quebec. They're working. Above 50 was vaccinated, and it's increasing. In the case of Lucky Friday, it's similar to the national average, the U.S. national average.
Is that around 50%?
Yeah. When you consider vaccinations and people that have had COVID.
Well, what kind of steps has Hecla taken to encourage Lucky Friday employees to get vaccinated?
It's been an ongoing education process. That's the primary thing that we're able to do. We have all the protocols that people have to take. Until we have a further vaccination, it's really difficult to remove those protocols. 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. Anybody who does get vaccinated gets a little bit of a gift in appreciation. We've gone through the ups. I would also say, reiterate what Phil said, it's pretty consistent with certainly the Idaho average rates, and we really haven't seen any spike or impact from it because we put in place, and we would anticipate that to continue going forward.
Okay. Well, thank you for that. Good luck.
All right. Thank you.
There are no further questions. I'll hand over to Phil Baker.
Okay. Well, thanks very much. I just want to remind folks that we have available the ability to do a one-on-one with us. Hopefully you saw the links. That's open to just shareholders, analysts, just interested in Hecla. We'd be happy to have these one-on-one calls. I look forward to hearing from you. If it doesn't work out for today, certainly talk to Russell, and we can set something up for some time next week. Thanks. Have a good day.
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