Hecla Mining Company 2026 Q2 Earnings Call

Good morning. Thank you all for joining us for Hecla's second quarter 2026 results conference call. I'm Mike Parkin, Vice President of Strategy and Investor Relations. Our earnings release that was issued yesterday, along with today's presentation, are available on our website. On the call with us today is Rob Krcmarov, President and Chief Executive Officer, Russell Lawlar, Senior Vice President and Chief Financial Officer, Carlos Aguiar, Senior Vice President and Chief Operating Officer, Brian Erickson, Vice President — Operations, Kurt Allen, Vice President – Exploration, along with other members of our management team. At the conclusion of our prepared remarks, we will be available to answer any questions you might have. Turning to slide two. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act of 1995 and involve risks as shown on this slide, in our earnings release, and in our 10-Q filing with the SEC.

These other risks could cause results to differ from those projected in the forward-looking statements. Non-GAAP measures cited in this call and related slides are reconciled in the slides or news release. Please note, as we discuss financial figures and projections throughout this presentation and in the earnings release, we are referring to our continuing operations. I will now pass the call over to Rob.

Thank you, Mike. Good morning, everyone. Turning to slide three. Hecla enters the third quarter of 2026 from a position of real strength. I'm speaking to financial strength, a position today that marks the strongest balance sheet in the company's very long history. The attributes shown on this slide that define us as North America's premier silver producer, they haven't changed. What has changed, though, is that we have confidence with which we can now invest in what comes next. I'm eager to have our teams discuss some remarkable developments that are coming out of our substantial project pipeline, which further solidifies our market positioning. More on that in a minute. Turning to slide four. This was another very strong quarter for Hecla, even though a couple of headline numbers moved in different direction than last quarter.

I want to spend a moment walking through why, because I think the underlying story here is a good one. Revenue from continuing operations was $334 million, compared to the record $411 million we reported in the first quarter. Two things are driving that change, it's worth being clear about both because neither of them is a production problem. First, metal prices pulled back from the highs we saw early in the year, although I do remain confident in the outlook for silver and gold prices. Second, part of the gap was simply timing. A meaningful amount of silver concentrate, mostly at Greens Creek, was produced but not yet sold as of quarter end. Had that concentrate shipped within the quarter, revenue would've been noticeably higher on top of an already strong quarter.

That inventory shipped in early August, you're going to see it show up in our third quarter results. Those of you who have followed us for some time know the lumpy sales pattern at Greens Creek. The adjusted EBITDA from continuing operations was $199 million, more than double the $94 million we generated a year ago. Operating cash flow was $175 million and free cash flow was $136 million. Our second-best quarter on record and very close to the record $144 million we posted last quarter. Every single one of our mines generated free cash flow again this quarter, with Greens Creek and Lucky Friday each setting new site-level quarterly free cash flow records at $130 million and $88 million respectively. Our balance sheet is simply the best it's been in our long history.

We ended the quarter with $483 million in cash, no long-term debt outside of capital leases, and an essentially fully undrawn $225 million revolving credit facility with a $75 million accordion. A balance sheet this strong gives us real optionality, the flexibility to keep investing in the projects and the assets that make the most sense for this business on our own timeline, rather than being dictated to by our balance sheet. On the operating side, we produced 4.2 million ounces of silver, up 8% from the prior quarter, Lucky Friday delivered new quarterly production record of one and a half million ounces of silver. I'm especially pleased with our safety performance. Our consolidated total recordable injury frequency rate, or TRIFR for short, improved to 1.57, that's a meaningful improvement from the 2.07 reported for the first quarter.

That's the kind of improvement that reflects real deliberate commitment by our teams. Frankly, it matters more to me than any financial metric on this slide. We also conducted our annual safety day in early June with senior leadership visiting every site to reinforce safe working practices. Turning to slide five. Our medium-term pathway to 20-plus million-ounce silver producer is advancing, and it's anchored by the Keno Hill ramp up and a potential Midas restart, with further potential upside from Keno Hill expansion and from Aurora and Hollister in later years Near return, we've got two organic opportunities at Greens Creek that I'm really excited to give you more detail on today. Both are the kind of high-return, low-capital intensity projects that we look for.

Our bar for any of these organic investments is a return on invested capital that clears our cost of capital by a healthy margin, early work on both suggests that they can. I'll turn it over to Brian now to walk you through those. Brian, over to you. Thanks, Rob.

Good morning, everyone. Turning to slide six. I'll start with the Greens Creek pyrite concentrate circuit. It's a project we're going to share considerably more detail about today. To summarize, we're advancing engineering and metallurgical studies on a new processing circuit at the Greens Creek mill, that if the studies pan out, would produce marketable pyrite concentrate stream from mill tailings that currently goes to the dry stack tailings facility. Still pretty early-stage work, but I want to be clear about our conviction. The relative simplicity of the project, combined with the potential returns we're seeing at this stage of the study, give us confidence that this moves towards execution, not an evaluation for its own sake. Once fully ramped up, we expect the new circuit could add approximately 1 to 1.2 million ounces of silver and 10,000 to 15,000 ounces of gold in additional annual production.

This is on top of Greens Creek's existing output, while also reducing the volume we're adding to the tailings facility. Early engineering and metallurgical work points to the potential robust return on capital that would meet our investment thresholds. It's expected to be a low capital intensity project, with CapEx currently estimated at about $40 million to $60 million, anticipated mostly for mill components, storage building sizing upgrades, and some ship loader work to support the additional tonnage. Additional operating costs to run the new circuit are also expected to be relatively low in terms of the overall increase to our annual spend and are currently estimated as an incremental $10 million to $15 million per annum. When you put all this together, you can see the potential for impressive NPV upside at current metals prices.

Currently, we're targeting first production between the fourth quarter of 2027 and the first half of 2028, with a ramp-up period of roughly a year. We'll continue to firm up the economics as engineering advances, we'll keep you updated. I want to stress these numbers are subject to change as we advance through more engineering studies, but we're very excited about the potential for this project in terms of production, but more importantly, in potential future cash flows. Second, I'll discuss the Greens Creek Tailings Reprocessing Project. This remains one of the more compelling opportunities in the portfolio. The dry stack tailings facility Over 600,000 ounces of gold as well as other metals. At June 30th, 2026, metals prices, this represents an in-situ value of roughly $6.1 billion. I must emphasize this before any recovery processing capital costs.

We're working with a vendor who specializes in this new technology and are set to commence phase 3 metallurgical test work this month, which we expect to complete in the quarter. That work, together with confirming a suitable processing facility, is expected to determine how we move forward. As with the pyrite concentrate, potentially reduce Greens Creek long-term reclamation liability, potentially meaningful added benefit the potential cash flows could generate. If this project proves viable, we would expect it to be an additional low-cost intensity project that dovetails well with the Pyrite Concentrate Project. Finally, the Midas restart project in Nevada also continues to advance. We're continuing to evaluate the hub and spoke model that would bring ore from Midas and potentially Hollister or other regional sources through the existing permitted mill.

We're also evaluating remaining mineralization in the old mine under the existing mill as a potential additional ore source. Kurt will touch on the latest Midas exploration results in a few minutes. I'll now turn the call over to Carlos for an operations review.