All right. Hello everyone, and welcome to the Hecla Mining Company webcast. My name is Robert Blum, Managing Partner at Lytham Partners, and today, we've got a little bit of a combination, couple of, brief slides that we're gonna run through, and then we're gonna jump into a Q&A discussion with Mike Parkin, Vice President, Strategy and Investor Relations at Hecla. Quick reminder, Hecla trades under the ticker symbol HL, on the New York Stock Exchange. Mike, thank you so much for your participation here today. I'll turn it over to you.
Thanks, Robert. As you can see on your screen, we've got a few slides we'll go through. As for me, just a bit of background. I joined Hecla just about a year ago, and prior to that I worked on sell-side equity research platforms for about 18 years covering precious metals and joined Hecla last March. Just going to go through, you know, who Hecla is for those that are unfamiliar with the company. It's really been a story of transformation over the last year or so. Really kicked off with the new CEO, Rob Krcmarov, who joined us about a year and a half ago. We've really worked hard to transform this company, and metal prices have helped for sure fast track that to some degree/
It's a lot of, you know, work from the team and, you know, new initiatives that are kicking things off, that have allowed us to improve our financial flexibility and really focus to become the premier silver company in North America. Forward-looking statements, please, you know, go through these. I'm not gonna read them, you know, out here, but just to caution that some statements made may differ from actual results for reasons, you know, detailed on this slide, which you can also get from our financial filings as well as our presentations on our website. A little bit about Hecla at a glance. You're looking at a company with about a $13 billion market cap. We trade on the New York Stock Exchange under the ticker HL.
Fairly diverse shareholder base, you know, with about 22% retail, 78% institutional. Fairly large, you know, list of analysts covering us. Net debt is almost breakeven, and we're generating strong cash flows, so that could be improving fairly quickly. Who is Hecla? You know, I mentioned it in the opening remarks there, North America's premier silver company. We've been around for 135 years. We're the oldest precious metals company on the New York Stock Exchange. All our assets are based in the best jurisdictions of U.S. and Canada. That's both producing and our project pipeline. Really silver focused, and not on just revenues, but reserves as well, and I'll get to that in a sec. Reserve dominance in the space, what's that mean?
It's really, you know, the longevity of our assets are far better than the average in the silver space. We've got a lot of projects that we've got internally. We're not needing to do expensive M&A in this market. We're really, you know, we've freed up a lot of cash flow and generating strong cash flows at these metal prices and redeploying that, you know, for our shareholders into our pipeline and surfacing value through a number of initiatives. Cost excellence. When you're looking at, you know, investing, you should look at the cost structures. We're the lowest cost silver producer, and I'll get to that in a bit, in a sec as well. We are selling a gold mine, so if you look at January 26th news release, you'll see that our Quebec gold mine, Casa Berardi, is being sold to Orezone.
That deal is expected to close fairly soon, and that just further strengthens us as, you know, the silver, you know, premier silver company in North America. A map of where we operate. Producing assets, blue dots. Stars are our offices, head office in Northern Idaho, secondary office in Vancouver. You can see from the green dots, you know, listed here, a lot of exploration, you know, in various projects, and again, all in the U.S. and Canada. We're the largest silver producer in the United States as well as Canada, representing about 37% of the silver production in 2024. We're getting some of those numbers updated in the coming weeks, so stay tuned from the Silver Institute for some new numbers on 2025 results. I spoke to, you know, reserve dominance.
You know, this really, you know, says it in spades. Our average reserve life is over 13 years. The industry average is under seven, so we're, you know, about double the industry average. I apologize, that dashed line is a little bit out of place. I forgot to update that. It's, you know, should be about one year lower than what it shows there. Silver mines are the solid bars. White, you know, bars are gold mines. You can see we're all silver now as we're selling that gold mine, Casa Berardi, whereas our peers in some cases have a lot of gold mines and the only other kind of pure silver company is First Majestic Silver.
Highest grades, our assets there in the oval, you know, on a silver equivalent grade along the bottom, very high grades which really allow you to support great margins in these metal prices. This is what it comes down to. If you're interested in silver, you want to invest in a silver company. Some call themselves silver companies, but are they? You know, when you look at some of our peers, Pan American and Coeur, you know, on fourth quarter results and pro forma for Coeur with the New Gold transaction that they've announced, their revenues are hovering right around 25%, whereas on a pro forma basis, you know, ex our Casa Berardi asset, we're, you know, approaching 75%. Even with it, we're still, you know, nearly 60%.
First Majestic is, you know, a good silver peer as well, but we also have high exposure to silver on our reserve base too. Really when it comes to silver, Hecla's one of your best opportunities to invest in. How did we do in 2025? You can see a lot of green check marks on the screen. You know, met silver production guidance, gold production guidance, cost guidance. Capital, we were, you can see from the little footnote, we were off by a few million. You know, almost in line. We had this huge transformational year. Big reduction in debt, big swing up in free cash flow, return on invested capital improved nicely, and our safety record showed a dramatic improvement year-over-year as well.
Again, you know, if you're interested in exposure to silver and cash flows, you know, Hecla's got it in spades. We're the lowest cost silver producer last year, again in 2024. Our guidance would suggest that positioning could hold again for 2026. It really gives maximum margin exposure to it. There's other slides here, but I'm gonna, you know, end this here and go back to our prepared discussion with Robert.
All right. Perfect, Mike. Thank you so much for that overview there. Let's dive into a number of sort of macro drivers here that I certainly would love getting your opinion on. You know, let's talk again specifically about silver and investors debate whether it's sort of primarily a monetary metal or an industrial metal, especially now with sort of the electrification and grid build-out. In your view, what's the most important factors to consider on how silver actually trades and why?
Well, it's, I think in this market today, you know, it's kind of a combination of both monetary and industrial. You know, in a bull market, definitely that monetary angle I think takes precedence. You know, when you generally are looking at times where the U.S. dollar's weakening or U.S. real rates are turning negative, that's generally, you know, a good environment for precious metals, gold and silver alike. You know, that's what we're seeing. You know, we saw a phenomenal year in the metals in 2025. Some volatility in recent weeks with the Iranian war kicking off and driving some volatility in oil and then also just kind of a direction on where inflation's going. That U.S. real rate, you know, direction's a little bit in the fuzziness zone right now.
Ultimately I think the foundation of what makes a great precious metals market isn't really changing. There's a little bit of confusion and lack of clarity in the near term. Ultimately we see still a constructive, you know, market for precious metals for this year. We'll continue to watch for, you know, further events to proceed and support that. With respect to the industrial metal, you're right. You know, silver does have a huge component of its supply and demand function, you know, in terms of demand tied to industry. Where I feel that is more supportive and a bigger role is in terms of a floor price. You know, it's a market that has been in deficit for a number of years now. That, you know, is not likely to change.
You're seeing, you know, growth, significant growth in industrial demand for silver. It's a bit of a unique metal where it's got just fantastic properties for electrical applications, whether it be solar panels or EVs, data centers, et cetera. It's hard to replace that. You know, you could replace it with gold, but that costs even more. There is substitution risk to some degree, but really, you know, you're seeing a fairly fixed mine supply. It's, in our view, a really good time for silver, you know, in the near term. Even over the long term, we're seeing a very constructive market, you know, dynamics for, you know, good, healthy silver prices for many years to come.
You know, on that topic of sort of the industrial side of the equation area, we're seeing China, the U.S., Europe, all sort of pursuing different policies. You're seeing more localization of supply chains, et cetera. You know, what do you sort of see these sort of the shifts that are taking place, and how it relates to sort of the long-term demand, in sort of this sort of strategic metals fragmented world that we're living in here today?
That's certainly been a major factor over the last, you know, couple of years, not only, you know, in silver, but other, you know, minerals and metals. I think ultimately, you know, it's a global market, so where silver's produced isn't necessarily the only factor. We are seeing it support an ease in terms of doing business. You're seeing, for instance, in the U.S. and Canada, policy announcements in a lot of engagement with various levels of government around how can they support the industry in terms of infrastructure to bring, you know, final production home domestically. Also, what can they do to help in terms of bringing on new production, whether it be, you know, fast track of permit processes, addition of infrastructure.
You're seeing, you know, new groups get announced in both countries that are helping with financing of projects. There is, you know, a good kind of tailwind for the metals market. It still takes time to bring a new asset into production. You still have to do a lot of that base work. There's no real kind of skimping on that. It does ensure, you know, an efficient review and advancement of the processes, and we've certainly benefited from that. In Hecla's case, we've had three projects on the FAST-41 U.S. program last year.
We got those permits. We're able to advance those projects this year. It's still gonna maybe shift ultimately around where certain products are being produced based off where that silver or other metals is available. For the mining itself, it's certainly a nice tailwind to see, you know, further support from government agencies to support the industry.
All right. Very good. Yeah, you talked about your low-cost basis there, right? Talk about where costs are sort of macro here over the last. You know, we sort of had this bit of a boom here lately. On the flip side, you've got energy prices increasing and not gonna speculate on where they're gonna be here in the next, you know, couple of months or years even. You know, when you think about labor availability, equipment lead times, you know, servicing costs, things of that sort, you know, what's your sort of outlook here on where we're at today and where maybe there could be some bottlenecks into the future?
Yeah, certainly, you know, there'd be two buckets I would, like, break companies into. Open pit operators and underground operators are generally the two, and then there's maybe a third bucket you could think of in terms of where does a company, you know, get its, you know, power from because it's a very power-intensive industry. You know, you're crushing and grinding rock. You're hauling it. We have the benefit of being hooked up to grid and largely hydropower at our asset base. We're, you know, the mining operations remaining in the portfolio, so exit Casa Berardi gold mine, which is a combination open pit underground in Northern Québec. We will be, you know, just underground mining.
The fleets are fairly small in terms of size, you're not looking at those dump trucks the size of a house. Our exposure to oil is fairly minimal. We do have some backup generation capacity, but it's not our primary power source. Again, that reliance on oil is, you know, far less than some of our peers. Our biggest, you know, cost would be labor. You hit on that. That is something that makes up the bulk of that. You know, if you broke it down into a pie chart, it would be about half the pie and, you know, that does have cost pressures every year. Your workforce expects a raise from time to time.
That's you know something we're always you know working to try to keep in check as much as possible, and some of that can be shifting from expensive contractors to in-house miners. I'd say the biggest challenge right now is around skilled trades. That is one component that is you know significantly tight. It's been tight for years, not unique to mining. You know really any manufacturing is finding it tough to find pipe fitters, welders, electricians, plumbers, et cetera, and any heavy industry generally uses that same basket. That's probably about the one area of the cost input which has got a bit of a scarcity component to it, so it's something that you know really solid recruitment helps with. Also where you operate you know we're not in the middle of nowhere.
You know, we're in good jurisdictions, safe jurisdictions. Then that longevity of our assets, because of the reserve life, gives people comfort that they're gonna be, you know, potentially able to work at this asset for, you know, many, many years to come. The fact that our company's been around for so long, those all kind of play into, you know, strategic advantages that help us retain employees.
Certainly something we're hearing from many others as it relates to labor here as well, so not unique for sure. Let's come back to sort of Hecla here. When you sort of set the company's strategy, right? You've talked about sort of some sales and sort of aligning towards silver here. You know, talk about sort of the, you know, your North Star in a way, right? Jurisdiction, quality, mine life, exploration upside. You know, when you sort of look, where are you sort of looking to move this company going forward?
Yeah. You know, last year was really transformational in terms of the balance sheet and our financial limitations of past being, you know, put away and, you know, put in the past, and we've got, you know, growing cash. That's becoming really a non-event in discussions with investors now. We've decided to focus on silver. We've really looked at the medium and long-term viability of being silver-focused, and you know, we don't see concerns there. We see a very healthy market for silver demand over the long term, so we've decided to stay silver-focused unlike some of our peers which are shifting more gold. You know, we're still remaining and always known for our premier jurisdictional exposure. You know, are you gonna see us jump into Africa? Probably not.
You know, there are certain countries in Africa that are maybe better than others, but you know, our shareholders like us for that low risk, you know, jurisdictional profile. You shouldn't expect us to change things there. We are advancing our project pipeline. Those could come to becoming cash flowing assets in the medium term. There's a couple examples in that portfolio that have that potential. From an M&A perspective, it is mining. You're always working with a depleting asset base, so you always need to backfill that project pipeline. You could see us active with M&A, but it doesn't necessarily mean we need to buy a producing, fully priced asset. It could be an early stage asset that we see, you know, good upside in.
It's really just low jurisdiction, low cost profile, and silver focus, and a balance sheet that is in great shape to support that business, both in the good times like we're in today, as well as, you know, an eventual bear market because it is a cyclical cycle. You know, we're really set up nicely to kind of weather, you know, any storm that comes when it comes.
Yeah. That was sort of where I was gonna go with my next question here, which is, you know, how do you sort of balance, right, working through different cycles, right? Maybe it's cycles from a administrative standpoint here, you know, macro cycles, recession, higher inflation, weak or strong dollar, et cetera. You know, shifting demand maybe within sort of the industrial side of the equation here. You know, what are the levers that you guys are sort of looking to adjust to ensure that there can be stability across, you know, both sides of that equation?
One was our debt. We felt our debt level was too high, so we've addressed that last year. We've still got a little bit of debt on the balance sheet, but it's fairly small relative to our market cap. That's one thing that's, you know, a smart idea. You know, very solid capital allocation programs, you know, anchored in return on invested capital metrics really helps protect the business from, you know, getting over your ski tips. What really comes down to is your asset quality. We, you know, it was in that slide, that bubble chart where it showed a number of our assets versus our peers. Grade is king.
You know, if you've got high grade, you have that resiliency, but, you know, just through a natural occurrence of having, you know, great grade, which translates usually into low costs, and you saw that as well. We're the lowest cost silver producer. If, you know, the market turns at some point, you know, our cost structure shouldn't change dramatically in a, you know, low price environment or a high price environment. We should remain that low cost producer, and that probably explains why we've been around for 135 years. There is a resistance to temptation to change that.
What I mean by that is when you see very elevated metal prices, and you've seen it recently at the start of this year, when companies update their reserves and resources, there's always a desire to chase that higher metal price and suck in lower quality tons into your reserve base and into your mine plans. We saw that in the silver space especially where, you know, grades, you know, dropped, cutoff grades dropped, and it was all on the assumption of higher metal prices. We did not do that at Hecla. You know, we took them up a little bit to reflect the higher costs that, you know, impact our operation year over year.
What that really does is, you know, by bringing in those lower quality tons into your mine plan, you're not maximizing your cash flow for shareholders, but we are. You know, we are maintaining those elevated grades. We're maintaining, you know, that low cost and maximum margin potential for our shareholders, and that's where you saw the difference really between Hecla and a lot of our peers. That's not something that we're looking to change. Shareholders can, you know, breathe a sigh of relief in that respect that we're not looking to bring in marginal tons when metal prices are great.
Given that comment there, is the thought process that within your pipeline you have, you know, what you need to sort of move forward or you believe it's there, or should we still be looking at some of the opportunistic M&A, assuming it meets some of the criteria that you just mentioned there?
Bit of both. You know, probably one of our nearest term opportunities is the Nevada portfolio. We've got Midas, which has an existing mill on care and maintenance. It's got an existing tailings facility. It's got very, very good grade historical production, and it's already got an existing resource of very high grade. What we're trying to do there is delineate through an ongoing exploration program that we kicked off last year to grow that resource into a critical mass that would warrant the restart of the operation. The benefit of all that infrastructure, as well as a number of the permits that come with that, is that the capital intensity of it will be relatively low.
You know, if you were looking to compare that to a fresh build up from the ground up, you know, project of similar scale, you'd be talking multiple times the capital required to replicate the similar situation. If you didn't have the permits, you'd be years and years extra beyond our potential. We're looking at potentially restarting that asset in about five years, couple more years of exploration, some capital investment period, you know, advancing permitting along the way, and then potentially restarting. High grade gold, silver, you know, that again supports the potential for low costs, and could be our, you know, our fourth producing asset. There's stuff like that in the portfolio, and we've got two other projects in Nevada with very much the same kind of characteristics. That's Hollister and Aurora.
We'll be drilling those as well this year. Then from an M&A perspective, you know, as we're advancing that, depleting, you know, reserves, you know, we're always looking at backfilling that pipeline. If you think of it as a pyramid with different levels representing the advancement of the stage of the projects, you're trying to you know, put new blocks back in at the bottom of that pyramid or, you know, somewhere in that lower level of the pyramid to fit in and advance through the drill bit. That's really where you create value for shareholders.
If you buy the tip of the pyramid where it's a producing asset, largely, you know, you're paying full value or very close to it or certainly closer to it than if you're buying something that's in that lower, you know, level of the pyramid, which, yes, is maybe further away from production but has that ability to really create more value for your shareholders by you advancing it, you know, through those levels.
All right, Mike, I've got about a minute left here. What should investors look for over the next couple of years, and any predictions on, pricing you'd care to weigh in on?
Sure. Well, we've got quite a few initiatives. Keno Hill is our newest mine. It's in ramp-up phase. Over a couple years it should be achieving its, you know, max throughput that it's permitted for, 440 tons per day. I think you'll have much better clarity on, you know, where we're going in Nevada with those three projects, certainly Midas, hopefully. We didn't touch on it, but we have a tailings reprocessing project at Greens Creek that could be, you know, a substantial value-surfacing initiative. We're doing some metallurgical work right now. It's advancing quite well. Our partner's working with us on that, so that should have, you know, better clarity in terms of its potential. Really we've got quite a few things that are pretty exciting for shareholders to pay attention to.
Potentially, you know, swimming in cash and having to think about shareholder returns. As a price prediction, I don't think I'll stick my neck out. That's my prior role. I applaud you for the attempt. I would leave it as, you know, I think, you know, a number of brokers are very positive on the precious metal space in the over the near term. We certainly, you know, agree with that. We think there's a very good backdrop with just some intermediate noise here with some of the recent, you know, global events happening. Ultimately I think as that kind of, you know, brings some clarity, you know, to the situation of what's happening with those situations, you know, we could see, you know, us move back into a good market for precious metals.
All right. Very good. Well, Mike, thank you so much. I did try. Thank you so much for the time here today. Thank you to everyone here for watching as well. If there are any questions, I'm sure you can get in touch with Mike here and the team at Hecla, or if I can help in any way assist in making a connection, please send me an email. That's Blum, B-L-U-M, @lythampartners.com. Again, we have additional presentations, fireside chats coming up throughout the day, so please stick around. Again, Mike, thanks so much for your time. Greatly appreciate it.
Thanks, Robert, for having me. I very much appreciate it.
Mike, thank you very much for your participation today in the Lytham Partners.