# Hecla Mining Co: Form 10-Q for the period ended Mar 31, 2023

- Company: [Hecla Mining Co](/companies/hl.md) (CIK 719413)
- Form: 10-Q
- Filed: 2023-05-10
- Accepted by EDGAR: May 10, 2023, 06:01 ET
- Period: 2023-03-31
- Accession: 0000950170-23-019998
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/719413/000095017023019998/hl-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/719413/000095017023019998/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $199.5m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $164.6m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $34.9m | us-gaap:GrossProfit |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $5.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $10.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $3.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$3.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 600,075,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $40.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $54.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $3.9m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2023-01-01 to 2023-03-31 | $482.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-03-31 | $95.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $244.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $2.93bn | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $165.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $933.5m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-03-31 | $1.99bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 70,316 characters.

In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), “Hecla,” “the Company,” “we,” “us” and “our” refer to Hecla Mining Company and its consolidated subsidiaries, except where the context requires otherwise. You should read this discussion in conjunction with our consolidated financial statements, the related MD&A and the discussion of our Business and Properties in our 2022 Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Forward-Looking Statements” above for further discussion). References to “Notes” are Notes included in our Notes to Condensed Consolidated Financial Statements (Unaudited). Throughout MD&A, all references to losses or income per share are on a diluted basis.

### Overview

Established in 1891, we are the oldest operating precious metals mining company in the United States. We are the largest silver producer in the United States, producing over 45% of the U.S. silver production at our Greens Creek and Lucky Friday operations. We produce gold at our Casa Berardi operation in Quebec, Canada, and Greens Creek. In addition, we are developing the Keno Hill mine in the Yukon, Canada which we acquired on September 7, 2022, and which we expect will start producing silver in the third quarter of 2023. Based upon our operational footprint, we believe we have low political and economic risk compared to other mining companies whose mines are located in other parts of the world. Our exploration interests are located in the United States, Canada and Mexico. Our operating and strategic framework is based on expanding our production and locating and developing new resource potential in a safe and responsible manner.

### First Quarter 2023 Highlights

Operational:

- Produced 4.0 million ounces of silver and 39,717 ounces of gold. See *Consolidated Results of Operations* below for information on total cost of sales and cash costs and all in sustaining costs ("AISC"), after by-product credits, per silver and gold ounce for the three-month periods ended March 31, 2023 and 2022.
- Increased silver production at Lucky Friday and Greens Creek by 42% and 14%, respectively, compared to 2022.
- Advanced the development of the Keno Hill mine by 552 meters.

Financial:

- Generated sales of $199.5 million.
- Made capital expenditures of approximately $54.4 million, including $6.7 million at Greens Creek, $14.7 million at Lucky Friday, $17.1 million at Casa Berardi and $17.1 million at Keno Hill, partially offset by corporate and non-operating sites.
- Returned $3.9 million to our stockholders through dividend payments.
- Spent $5.0 million on exploration and pre-development activities.

### Outlook

Our financial results vary as a result of fluctuations in market prices primarily for silver and gold and, to a lesser extent, zinc and lead. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Beginning in 2020, with the onset of the COVID-19 pandemic, and continuing in 2022 because of a series of macro-economic factors, there has been significant volatility in the financial and commodities markets, including the precious metals market. Market sentiment improved beginning in late 2022 and we believe the outlook for precious metals fundamentals in the medium- and long-term are favorable. Refer to “Markets” and Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2022, for further discussion. Because we cannot control the price of our products, the key measures that management focuses on in operating our business are production volumes, payable sales volumes, Cash Cost, After By-product Credits, per Ounce (“Cash Cost”) (non-GAAP) and All-In Sustaining Cost, After By-product Credits, per Ounce (“AISC”) (non-GAAP), operating cash flows, capital expenditures, free cash flow and adjusted EBITDA. The average realized prices for all metals sold by us, except gold, were lower in the three months ended March 31, 2023 than in the comparable period last year. We have also experienced significant cost inflation across our operations, principally associated with higher energy prices, increased costs for other consumables such as reagents, explosives and steel, and labor and contractor costs.

### Consolidated Results of Operations

Sales by metal for the three month periods ended March 31, 2023 and 2022 were as follows:

*(in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Silver | $81,532 | $66,332 |
| Gold | 75,087 | 77,168 |
| Lead | 25,402 | 19,564 |
| Zinc | 32,943 | 35,638 |
| Less: smelter charges | (15,973) | (12,203) |
| Sales of products | $198,991 | $186,499 |

Sales by metal for the three month periods ended March 31, 2023 and 2022, and the approximate variances attributed to differences in metals prices, sales volumes and smelter terms, were as follows:

*(in thousands)*

|  | Silver | Gold | Base metals | Less: smelter and refining charges | Total sales of products |
| --- | ---: | ---: | ---: | ---: | ---: |
| **Three months ended March 31, 2022** | $66,332 | $77,168 | $55,202 | $(12,203) | $186,499 |
| Variances - 2023 versus 2022: |  |  |  |  |  |
| Price | (7,458) | 394 | (11,081) | (1,489) | (19,634) |
| Volume | 22,658 | (2,747) | 14,224 | (3,140) | 30,995 |
| Smelter terms | — | 272 | — | 859 | 1,131 |
| **Three months ended March 31, 2023** | $81,532 | $75,087 | $58,345 | $(15,973) | $198,991 |

The fluctuations in sales for the three months ended 2023 compared to the same period in 2022 were primarily due to the following two reasons:

- Lower average realized prices for all metals sold, except gold, during the three months ended March 31, 2023 compared to the same period in 2022. The table below summarizes spot prices and our realized prices for the commodities we sell:

|  |  | Three Months Ended March 31, 2023 | 2022 |
| --- | --- | ---: | ---: |
| Silver – | London PM Fix ($/ounce) | $22.56 | $23.95 |
|  | Realized price per ounce | $22.62 | $24.68 |
| Gold – | London PM Fix ($/ounce) | $1,889 | $1,874 |
|  | Realized price per ounce | $1,902 | $1,880 |
| Lead – | LME Final Cash Buyer ($/pound) | $0.97 | $1.06 |
|  | Realized price per pound | $1.02 | $1.08 |
| Zinc – | LME Final Cash Buyer ($/pound) | $1.42 | $1.70 |
|  | Realized price per pound | $1.39 | $1.79 |

Average realized prices typically differ from average market prices primarily because concentrate sales are generally recorded as revenues at the time of shipment at forward prices for the estimated month of settlement, which differ from average market prices. Due to the time elapsed between shipment of concentrates and final settlement with the customers, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices each period through final settlement. We recorded net positive price adjustments to provisional settlements of $2.1 million and $1.0 million for the three months ended March 31, 2023 and 2022. The price adjustments related to silver, gold, zinc and lead contained in our concentrate shipments were partially offset by gains and losses on forward contracts for those metals. See *Note 8* of *Notes to Condensed Consolidated Financial Statements (Unaudited)* for more information. The gains and losses on these contracts are included in revenues and impact the realized prices for silver, gold, lead and zinc. Realized prices are calculated by dividing gross revenues for each metal (which include the price adjustments and gains and losses on the forward contracts discussed above) by the payable quantities of each metal included in concentrate, doré and carbon material shipped during the period.

- Higher quantities of all metals sold, except gold in the three months ended March 31, 2023 compared to the same period in 2022, primarily due to higher production at Greens Creek and Lucky Friday, partially offset by lower gold production at Casa Berardi. See *The Greens Creek Segment, The Lucky Friday Segment, The Casa Berardi Segment* and *The Nevada Operations Segment* sections below for more information on metal production and sales volumes at each of our operating segments. Total metals production and sales volumes for each period are shown in the following table:

|  |  | Three Months Ended March 31, 2023 | 2022 |
| --- | --- | ---: | ---: |
| Silver - | Ounces produced | 4,041,878 | 3,324,708 |
|  | Payable ounces sold | 3,604,494 | 2,687,261 |
| Gold - | Ounces produced | 39,717 | 41,642 |
|  | Payable ounces sold | 39,473 | 41,053 |
| Lead - | Tons produced | 13,236 | 10,863 |
|  | Payable tons sold | 12,513 | 9,054 |
| Zinc - | Tons produced | 15,795 | 14,946 |
|  | Payable tons sold | 11,858 | 9,947 |

The difference between what we report as “ounces/tons produced” and “payable ounces/tons sold” is attributable to the difference between the quantities of metals contained in the concentrates we produce versus the portion of those metals actually paid for by our customers according to the terms of our sales contracts. Differences can also arise from inventory changes incidental to shipping schedules, or variances in ore grades which impact the amount of metals contained in concentrates produced and sold.

Sales, total cost of sales, gross profit (loss), Cash Cost, After By-product Credits, per Ounce (“Cash Cost”) (non-GAAP) and All-In Sustaining Cost, After By-product Credits, per Ounce (“AISC”) (non-GAAP) at our operating units for the three months ended March 31, 2023 and 2022 were as follows (in thousands, except for Cash Cost and AISC):

| Three Months Ended March 31, 2023: | Silver Greens Creek | Lucky Friday | Other | Total Silver (2) | Gold Casa Berardi | Nevada Operations and Other (3) | Total Gold |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Sales | $98,611 | $49,110 | $— | $147,721 | $50,998 | $781 | $51,779 |
| Total cost of sales | (66,288) | (34,534) | — | (100,822) | (62,998) | (732) | (63,730) |
| Gross profit (loss) | $32,323 | $14,576 | $— | $46,899 | $(12,000) | $49 | $(11,951) |
| Cash Cost (1) | $1.16 | $4.30 | $— | $2.14 | $1,775 | $— | $1,775 |
| AISC (1) | $3.82 | $10.69 | $— | $8.96 | $2,392 | $— | $2,392 |
| **Three Months Ended March 31, 2022:** |  |  |  |  |  |  |  |
| Sales | $86,090 | $38,040 | $— | $124,130 | $62,101 | $268 | $62,369 |
| Total cost of sales | (49,638) | (29,264) | — | (78,902) | (62,168) | — | (62,168) |
| Gross profit (loss) | $36,452 | $8,776 | $— | $45,228 | $(67) | $268 | $201 |
| Cash Cost (1) | $(0.90) | $6.57 | $— | $1.09 | $1,516 | $— | $1,516 |
| AISC (1) | $1.83 | $13.15 | $— | $7.37 | $1,764 | $— | $1,764 |

(1) A reconciliation of these non-GAAP measures to total cost of sales, the most comparable GAAP measure, can be found below in *Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).*

(2) The calculation of AISC for our consolidated silver properties includes corporate costs for general and administrative expense and sustaining capital.

(3) Other includes $509,000 of sales and $432,000 of cost of sales for the environmental services business acquired as part of the Alexco acquisition.

While revenue from zinc, lead and gold by-products is significant, we believe that identification of silver as the primary product of Greens Creek and Lucky Friday is appropriate because:

- silver has historically accounted for a higher proportion of revenue than any other metal and is expected to do so in the future;
- we have historically presented these units as a primary silver producer, based on the original analysis that justified putting the project into production, and believe that consistency in disclosure is important to our investors regardless of the relationships of metals prices and production from year to year;
- metallurgical treatment maximizes silver recovery;
- the Greens Creek and Lucky Friday deposits are massive sulfide deposits containing an unusually high proportion of silver; and
- in most of their working areas, Greens Creek and Lucky Friday utilize selective mining methods in which silver is the metal targeted for highest recovery.

Accordingly, we believe the identification of gold, lead and zinc as by-product credits at Greens Creek and Lucky Friday is appropriate because of their lower economic value compared to silver and due to the fact that silver is the primary product we intend to produce. In addition, we have not consistently received sufficient revenue from any single by-product metal to warrant classification of such as a co-product.

We periodically review our revenues to ensure that reporting of primary products and by-products is appropriate. Because for Greens Creek, Lucky Friday and San Sebastian we consider zinc, lead and gold to be by-products of our silver production, the values of these metals offset operating costs within our calculations of Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce.

We believe the identification of silver as a by-product credit is appropriate at Casa Berardi and Nevada Operations because of its lower economic value compared to gold and due to the fact that gold is the primary product we intend to produce there. In addition, we do not receive sufficient revenue from silver at Casa Berardi to warrant classification of such as a co-product. Because we consider silver to be a by-product of our gold production at Casa Berardi and Nevada Operations, the value of silver offsets operating costs within our calculations of Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce.

We reported a net loss applicable to common stockholders of $3.3 million for the three months ended March 31, 2023, compared to income of $4.0 million in the comparable period in 2022. The following were the significant drivers of changes in net loss applicable to common stockholders compared to the income in 2022:

- Consolidated gross profit decreased by $10.5 million at our operating units as illustrated in the table above. See *The Greens Creek Segment, The Lucky Friday Segment, The Casa Berardi Segment* and *The Nevada Operations Segment* sections below for a discussion on the key drivers by operating unit.
- General and administrative costs increased by $3.8 million, which reflects the personnel that joined the Company as a result of the September 7, 2022 Alexco acquisition, and compensation adjustments effective July 1, 2022.
- Exploration and pre-development decreased by $7.8 million primarily due to lower expenditures across our exploration portfolio.
- Ramp-up and suspension costs increased by $5.1 million primarily due to Keno Hill ramp-up activities following the Alexco acquisition
- Fair value adjustments, net gains decreased by $2.8 million primarily due to lower unrealized gains in our marketable equity securities portfolio.

### Greens Creek

| Dollars are in thousands (except per ounce and per ton amounts) | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Sales | $98,611 | $86,090 |
| Cost of sales and other direct production costs | (51,824) | (38,218) |
| Depreciation, depletion and amortization | (14,464) | (11,420) |
| Total cost of sales | (66,288) | (49,638) |
| Gross profit | $32,323 | $36,452 |
| Tons of ore milled | 233,167 | 211,687 |
| Production: |  |  |
| Silver (ounces) | 2,772,860 | 2,429,782 |
| Gold (ounces) | 14,885 | 11,402 |
| Zinc (tons) | 12,482 | 12,494 |
| Lead (tons) | 5,202 | 4,883 |
| Payable metal quantities sold: |  |  |
| Silver (ounces) | 2,292,035 | 1,772,391 |
| Gold (ounces) | 12,646 | 7,922 |
| Zinc (tons) | 9,244 | 8,092 |
| Lead (tons) | 4,156 | 3,063 |
| Ore grades: |  |  |
| Silver ounces per ton | 14.40 | 13.84 |
| Gold ounces per ton | 0.08 | 0.07 |
| Zinc percent | 6.0% | 6.6% |
| Lead percent | 2.6% | 2.8% |
| Total production cost per ton | $198.60 | $192.16 |
| Cash Cost, After By-product Credits, per Silver Ounce (1) | $1.16 | $(0.90) |
| AISC, After By-Product Credits, per Silver Ounce (1) | $3.82 | $1.83 |
| Capital additions | $6,658 | $3,092 |

(1) A reconciliation of these non-GAAP measures to total cost of sales, the most comparable GAAP measure, can be found below in *Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).*

The $4.1 million decrease in gross profit for the three months ended March 31, 2023 compared to the same period in 2022 was primarily due to lower realized prices for all metals except gold and higher production costs reflecting more ore mined and processed and cost increases in consumables, labor, maintenance and contractor costs, which were partially offset by higher sales volumes.

Capital additions increased by $3.6 million in the three months ended March 31, 2023 compared to the same period in 2022 primarily due to mine development expenditure.

The charts below illustrate the factors contributing to the variances in Cash Cost, After By-product Credits, Per Silver Ounce for the three months ended March 31, 2023 compared to the same period in 2022.

The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, per Silver Ounce:

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Cash Cost, Before By-product Credits, per Silver Ounce | $21.80 | $21.82 |
| By-product credits | (20.64) | (22.72) |
| Cash Cost, After By-product Credits, per Silver Ounce | $1.16 | $(0.90) |

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| AISC, Before By-product Credits, per Silver Ounce | $24.46 | $24.55 |
| By-product credits | (20.64) | (22.72) |
| AISC, After By-product Credits, per Silver Ounce | $3.82 | $1.83 |

The increase in Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the three months ended March 31, 2023 compared to the same period in 2022 was primarily due to lower by-product credits in 2023.

### Lucky Friday

| Dollars are in thousands (except per ounce and per ton amounts) | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Sales | $49,110 | $38,040 |
| Cost of sales and other direct production costs | (24,079) | (21,232) |
| Depreciation, depletion and amortization | (10,455) | (8,032) |
| Total cost of sales | (34,534) | (29,264) |
| Gross profit | $14,576 | $8,776 |
| Tons of ore milled | 95,303 | 77,725 |
| Production: |  |  |
| Silver (ounces) | 1,262,464 | 887,858 |
| Lead (tons) | 8,034 | 5,980 |
| Zinc (tons) | 3,313 | 2,452 |
| Payable metal quantities sold: |  |  |
| Silver (ounces) | 1,306,013 | 899,454 |
| Lead (tons) | 8,357 | 5,991 |
| Zinc (tons) | 2,614 | 1,855 |
| Ore grades: |  |  |
| Silver ounces per ton | 13.84 | 12.04 |
| Lead percent | 8.8% | 8.2% |
| Zinc percent | 4.1% | 3.6% |
| Total production cost per ton | $210.72 | $247.17 |
| Cash Cost, After By-product Credits, per Silver Ounce (1) | $4.30 | $6.57 |
| AISC, After By-product Credits, per Silver Ounce (1) | $10.69 | $13.15 |
| Capital additions | $14,707 | $9,652 |

(1) A reconciliation of these non-GAAP measures to total cost of sales, the most comparable GAAP measure, can be found below in *Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).*

Gross profit increased by $5.8 million for the three months ended March 31, 2023 compared to the same period in 2022, as the impact of increased sales quantities from mining and processing more high grade material in higher volumes offset the effects of lower realized prices.

Capital additions increased by $5.1 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to expenditures on key projects including the service hoist and coarse ore bunker, increased development, and pre-production drilling to achieve the annual throughput goal of 425,000 tons in the fourth quarter of 2023.

The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, Per Silver Ounce:

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Cash Cost, Before By-product Credits, per Silver Ounce | $21.03 | $26.63 |
| By-product credits | (16.73) | (20.06) |
| Cash Cost, After By-product Credits, per Silver Ounce | $4.30 | $6.57 |

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| AISC, Before By-product Credits, per Silver Ounce | $27.42 | $33.21 |
| By-product credits | (16.73) | (20.06) |
| AISC, After By-product Credits, per Silver Ounce | $10.69 | $13.15 |

The decrease in Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the three months ended March 31, 2023 compared to the same period in 2022 was due to higher silver production resulting from increased grades and volumes processed, partially offset by lower by-product credits as higher lead and zinc production did not offset lower prices.

### Casa Berardi

| Dollars are in thousands (except per ounce and per ton amounts) | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Sales | $50,998 | $62,101 |
| Cost of sales and other direct production costs | (48,962) | (46,322) |
| Depreciation, depletion and amortization | (14,036) | (15,846) |
| Total cost of sales | (62,998) | (62,168) |
| Gross loss | $(12,000) | $(67) |
| Tons of ore milled | 429,158 | 386,150 |
| Production: |  |  |
| Gold (ounces) | 24,686 | 30,240 |
| Silver (ounces) | 6,554 | 7,068 |
| Payable metal quantities sold: |  |  |
| Gold (ounces) | 26,826 | 33,066 |
| Silver (ounces) | 6,446 | 9,054 |
| Ore grades: |  |  |
| Gold ounces per ton | 0.07 | 0.09 |
| Silver ounces per ton | 0.02 | 0.02 |
| Total production cost per ton | $107.95 | $117.96 |
| Cash Cost, After By-product Credits, per Gold Ounce (1) | $1,775 | $1,516 |
| AISC, After By-product Credits, per Gold Ounce (1) | $2,392 | $1,764 |
| Capital additions | $17,086 | $7,808 |

(1) A reconciliation of these non-GAAP measures to total cost of sales, the most comparable GAAP measure, can be found below in *Reconciliation of Total Cost of Sales (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).*

Gross loss increased by $11.9 million for the three months ended March 31, 2023 compared to the same period in 2022. The increase was due to lower production and sales volumes and higher costs of sales resulting from increased production costs due to: (i) higher volumes of lower grade ore tonnage processed during period, (ii) mill contractor costs related to maintenance and optimization activities, (iii) higher underground maintenance costs resulting from repairs and replacements of major components for the production fleet and (iv) higher fuel and other consumables costs which have been negatively impacted by current inflationary pressures.

Total capital additions increased by $9.3 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to the tailings raise project and mining development costs.

The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, Per Gold Ounce:

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Cash Cost, Before By-product Credits, per Gold Ounce | $1,780 | $1,521 |
| By-product credits | (5) | (5) |
| Cash Cost, After By-product Credits, per Gold Ounce | $1,775 | $1,516 |

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| AISC, Before By-product Credits, per Gold Ounce | $2,397 | $1,769 |
| By-product credits | (5) | (5) |
| AISC, After By-product Credits, per Gold Ounce | $2,392 | $1,764 |

The increase in Cash Cost After By-product Credits, per Gold Ounce, for the three months ended March 31, 2023 compared to the same period for 2022 was primarily due to a combination of higher production costs and lower gold production. The lower production for the three months ended March 31, 2023 combined with increased sustaining capital also negatively impacting AISC, After By-product Credits, per Gold Ounce.

### Nevada Operations

| Dollars are in thousands (except per ounce and per ton amounts) | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Sales | $272 | $268 |
| Cost of sales and other direct production costs | (253) | — |
| Depreciation, depletion and amortization | (47) | — |
| Total cost of sales | (300) | — |
| Gross (loss) profit | $(28) | $268 |
| Payable metal quantities sold: |  |  |
| Gold (ounces) | 146 | 65 |
| Silver (ounces) | - | 6,363 |

The gross loss of $28 thousand for the three months ended March 31, 2023, was attributable to write downs of stockpiled material to net realizable value reflecting a lower gold price received for the processing and sale of refractory ore at a third party facility.

Exploration and pre-development activities continued in the three months ended March 31, 2023 and were focused on target generation through detailed modeling and analysis of geological mapping and sampling.

See *Item 1A. Risk Factors - Operation, Development, Exploration and Acquisition Risks* in our 2022 Form 10-K for a discussion of certain risks relating to our recent and ongoing analysis of the carrying value of the Nevada assets.

### Keno Hill

We acquired our Keno Hill operations as part of the Alexco acquisition on September 7, 2022. We expect Keno Hill to be in production during the third quarter of 2023. Keno Hill has not generated any revenue since we acquired it, due to being in development. During the three months ended March 31, 2023, $5.9 million of site specific costs were included in the line item "Ramp-up and suspension costs" and $0.4 million of site specific costs were included in the line item "Exploration and pre-development" on our condensed consolidated statement of operations and comprehensive (loss) income.

### Corporate Matters

#### Income Taxes

During the three months ended March 31, 2023, an income and mining tax provision of $3.2 million resulted in an effective tax rate of 4,699%. This compares to an income and mining tax provision of $5.6 million resulted in an effective tax rate of 58% for the comparable period in 2022. The comparability of our income and mining tax (provision) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) mining taxes; (ii) variations in our income before income taxes; (iii) geographic distribution of that income; (iv) foreign exchange rates including non-recognition of foreign exchange gains and losses; (v) percentage depletion; and (vi) the non-recognition of tax assets. The effective tax rate will fluctuate, sometimes significantly, period to period. The significant increase in the effective tax rate to 4,699% for the three months ended March 31, 2023 compared to 58% for the comparable period in 2022 is primarily related to incurring losses at the consolidated Alexco subsidiaries, which were acquired September 7, 2022, and the Nevada operations, for which no tax benefit is recognized due to uncertainty surrounding our ability to utilize these future tax benefits. Beginning with the three months ended March 31, 2022, we used the annual effective tax rate method to calculate the quarterly tax provision.

Each reporting period we assess our deferred tax balances based on a review of long-range forecasts and quarterly activity. A valuation allowance is provided for deferred tax assets for which it is more likely than not the related tax benefits will not be realized. We analyze our deferred tax assets and, if it is determined that we will not realize all or a portion of our deferred tax assets, we will record or increase a valuation allowance. Conversely, if it is determined we will ultimately more likely than not be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact our ability to realize our deferred tax assets. Valuation allowances are provided on deferred tax assets in Nevada, Mexico, and certain Canadian jurisdictions. For additional information, please see risk factors *Our accounting and other estimates may be imprecise* and *Our ability to recognize the benefits of deferred tax assets related to net operating loss carryforwards and other items is dependent on future cash flows and taxable income* in *Item 1A - Risk Factors* in our 2022 Form 10-K.

***Reconciliation of Total Cost of Sales to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP)***

The tables below present reconciliations between the most comparable GAAP measure of total cost of sales to the non-GAAP measures of (i) Cash Cost, Before By-product Credits, (ii) Cash Cost, After By-product Credits, (iii) AISC, Before By-product Credits and (iv) AISC, After By-product Credits for our operations and for the Company for the three month periods ended March 31, 2023 and 2022.

Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce are measures developed by precious metals companies (including the Silver Institute and the World Gold Council) in an effort to provide a uniform standard for comparison purposes. There can be no assurance, however, that these non-GAAP measures as we report them are the same as those reported by other mining companies.

Cash Cost, After By-product Credits, per Ounce is an important operating statistic that we utilize to measure each mine's operating performance. We use AISC, After By-product Credits, per Ounce as a measure of our mines' net cash flow after costs for reclamation and sustaining capital. This is similar to the Cash Cost, After By-product Credits, per Ounce non-GAAP measure we report, but also includes reclamation and sustaining capital costs. Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce also allow us to benchmark the performance of each of our mines versus those of our competitors. As a silver and gold mining company, we also use these statistics on an aggregate basis - aggregating the Greens Creek and Lucky Friday mines to compare our performance with that of other silver mining companies, and aggregating Casa Berardi and Nevada Operations for comparison with other gold mining companies. Similarly, these statistics are useful in identifying acquisition and investment opportunities as they provide a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics.

Cash Cost, Before By-product Credits and AISC, Before By-product Credits include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs, royalties and mining production taxes. AISC, Before By-product Credits for each mine also includes reclamation and sustaining capital costs. AISC, Before By-product Credits for our consolidated silver properties also includes corporate costs for general and administrative expense and sustaining capital costs. By-product credits include revenues earned from all metals other than the primary metal produced at each unit. As depicted in the tables below, by-product credits comprise an essential element of our silver unit cost structure, distinguishing our silver operations due to the polymetallic nature of their orebodies.

In addition to the uses described above, Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce provide management and investors an indication of operating cash flow, after consideration of the average price received from production. We also use these measurements for the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective.

The Casa Berardi, Nevada Operations and combined gold properties information below reports Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce for the production of gold, their primary product, and by-product revenues earned from silver, which is a by-product at Casa Berardi and Nevada Operations. Only costs and ounces produced relating to units with the same primary product are combined to represent Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce. Thus, the gold produced at our Casa Berardi and Nevada Operations units is not included as a by-product credit when calculating Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the total of Greens Creek and Lucky Friday, our combined silver properties. Similarly, the silver produced at our other two units is not included as a by-product credit when calculating the gold metrics for Casa Berardi and Nevada Operations.

| In thousands (except per ounce amounts) | Three Months Ended March 31, 2023 Greens Creek | Lucky Friday | Corporate (2) | Total Silver |
| --- | ---: | ---: | ---: | ---: |
| Total cost of sales | $66,288 | $34,534 | $— | $100,822 |
| Depreciation, depletion and amortization | (14,464) | (10,455) | — | (24,919) |
| Treatment costs | 10,368 | 5,277 | — | 15,645 |
| Change in product inventory | (1,615) | (2,409) | — | (4,024) |
| Reclamation and other costs | (129) | (409) | — | (538) |
| Cash Cost, Before By-product Credits (1) | 60,448 | 26,538 | — | 86,986 |
| Reclamation and other costs | 722 | 285 | — | 1,007 |
| Sustaining capital | 6,641 | 7,784 | — | 14,425 |
| General and administrative | — | — | 12,070 | 12,070 |
| AISC, Before By-product Credits (1) | 67,811 | 34,607 | 12,070 | 114,488 |
| By-product credits: |  |  |  |  |
| Zinc | (24,005) | (6,816) | — | (30,821) |
| Gold | (25,286) | — | — | (25,286) |
| Lead | (7,942) | (14,299) | — | (22,241) |
| Total By-product credits | (57,233) | (21,115) | — | (78,348) |
| Cash Cost, After By-product Credits | $3,215 | $5,423 | $— | $8,638 |
| AISC, After By-product Credits | $10,578 | $13,492 | $12,070 | $36,140 |
| Divided by ounces produced | 2,773 | 1,262 |  | 4,035 |
| Cash Cost, Before By-product Credits, per Ounce | $21.80 | $21.03 |  | $21.56 |
| By-product credits per ounce | (20.64) | (16.73) |  | (19.42) |
| Cash Cost, After By-product Credits, per Ounce | $1.16 | $4.30 |  | $2.14 |
| AISC, Before By-product Credits, per Ounce | $24.46 | $27.42 |  | $28.38 |
| By-product credits per ounce | (20.64) | (16.73) |  | (19.42) |
| AISC, After By-product Credits, per Ounce | $3.82 | $10.69 |  | $8.96 |

29

| In thousands (except per ounce amounts) | Three Months Ended March 31, 2023 Casa Berardi | Nevada Operations and Other (4) | Total Gold |
| --- | ---: | ---: | ---: |
| Total cost of sales | $62,998 | $732 | $63,730 |
| Depreciation, depletion and amortization | (14,036) | (47) | (14,083) |
| Treatment costs | 467 | — | 467 |
| Change in product inventory | (2,417) | — | (2,417) |
| Reclamation and other costs | (217) | — | (217) |
| Exclusion of Casa Berardi cash costs (3) | (2,851) | — | (2,851) |
| Exclusion of Nevada Operations and Other costs | — | (685) | (685) |
| Cash Cost, Before By-product Credits (1) | 43,944 | — | 43,944 |
| Reclamation and other costs | 217 | — | 217 |
| Sustaining capital | 15,015 | — | 15,015 |
| AISC, Before By-product Credits (1) | 59,176 | — | 59,176 |
| By-product credits: |  |  |  |
| Silver | (127) | — | (127) |
| Total By-product credits | (127) | — | (127) |
| Cash Cost, After By-product Credits | $43,817 | $— | $43,817 |
| AISC, After By-product Credits | $59,049 | $— | $59,049 |
| Divided by ounces produced | 25 | — | 25 |
| Cash Cost, Before By-product Credits, per Ounce | $1,780 | $— | $1,780 |
| By-product credits per ounce | (5) | — | (5) |
| Cash Cost, After By-product Credits, per Ounce | $1,775 | $— | $1,775 |
| AISC, Before By-product Credits, per Ounce | $2,397 | $— | $2,397 |
| By-product credits per ounce | (5) | — | (5) |
| AISC, After By-product Credits, per Ounce | $2,392 | $— | $2,392 |

30

| In thousands (except per ounce amounts) | Three Months Ended March 31, 2023 Total Silver | Total Gold | Total |
| --- | ---: | ---: | ---: |
| Total cost of sales | $100,822 | $63,730 | $164,552 |
| Depreciation, depletion and amortization | (24,919) | (14,083) | (39,002) |
| Treatment costs | 15,645 | 467 | 16,112 |
| Change in product inventory | (4,024) | (2,417) | (6,441) |
| Reclamation and other costs | (538) | (217) | (755) |
| Exclusion of Casa Berardi cash costs (3) | — | (2,851) | (2,851) |
| Exclusion of Nevada Operations and Other costs | — | (685) | (685) |
| Cash Cost, Before By-product Credits (1) | 86,986 | 43,944 | 130,930 |
| Reclamation and other costs | 1,007 | 217 | 1,224 |
| Sustaining capital | 14,425 | 15,015 | 29,440 |
| General and administrative | 12,070 | — | 12,070 |
| AISC, Before By-product Credits (1) | 114,488 | 59,176 | 173,664 |
| By-product credits: |  |  |  |
| Zinc | (30,821) | — | (30,821) |
| Gold | (25,286) | — | (25,286) |
| Lead | (22,241) | — | (22,241) |
| Silver | — | (127) | (127) |
| Total By-product credits | (78,348) | (127) | (78,475) |
| Cash Cost, After By-product Credits | $8,638 | $43,817 | $52,455 |
| AISC, After By-product Credits | $36,140 | $59,049 | $95,189 |
| Divided by ounces produced | 4,035 | 25 |  |
| Cash Cost, Before By-product Credits, per Ounce | $21.56 | $1,780 |  |
| By-product credits per ounce | (19.42) | (5) |  |
| Cash Cost, After By-product Credits, per Ounce | $2.14 | $1,775 |  |
| AISC, Before By-product Credits, per Ounce | $28.38 | $2,397 |  |
| By-product credits per ounce | (19.42) | (5) |  |
| AISC, After By-product Credits, per Ounce | $8.96 | $2,392 |  |

31

| In thousands (except per ounce amounts) | Three Months Ended March 31, 2022 (5) Greens Creek | Lucky Friday | Corporate (2) | Total Silver |
| --- | ---: | ---: | ---: | ---: |
| Total cost of sales | $49,638 | $29,264 | $— | $78,902 |
| Depreciation, depletion and amortization | (11,420) | (8,032) | — | (19,452) |
| Treatment costs | 9,096 | 3,677 | — | 12,773 |
| Change in product inventory | 6,538 | (905) | — | 5,633 |
| Reclamation and other costs | (850) | (361) | — | (1,211) |
| Cash Cost, Before By-product Credits (1) | 53,002 | 23,643 | — | 76,645 |
| Reclamation and other costs | 705 | 282 | — | 987 |
| Sustaining capital | 5,956 | 5,562 | 48 | 11,566 |
| General and administrative | — | — | 8,294 | 8,294 |
| AISC, Before By-product Credits (1) | 59,663 | 29,487 | 8,342 | 97,492 |
| By-product credits: |  |  |  |  |
| Zinc | (28,651) | (5,977) | — | (34,628) |
| Gold | (18,583) | — | — | (18,583) |
| Lead | (7,966) | (11,836) | — | (19,802) |
| Total By-product credits | (55,200) | (17,813) | — | (73,013) |
| Cash Cost, After By-product Credits | $(2,198) | $5,830 | $— | $3,632 |
| AISC, After By-product Credits | $4,463 | $11,674 | $8,342 | $24,479 |
| Divided by ounces produced | 2,430 | 888 |  | 3,318 |
| Cash Cost, Before By-product Credits, per Ounce | $21.82 | $26.63 |  | $23.10 |
| By-product credits per ounce | (22.72) | (20.06) |  | (22.01) |
| Cash Cost, After By-product Credits, per Ounce | $(0.90) | $6.57 |  | $1.09 |
| AISC, Before By-product Credits, per Ounce | $24.55 | $33.21 |  | $29.38 |
| By-product credits per ounce | (22.72) | (20.06) |  | (22.01) |
| AISC, After By-product Credits, per Ounce | $1.83 | $13.15 |  | $7.37 |

| In thousands (except per ounce amounts) | Three Months Ended March 31, 2022 (5) Casa Berardi | Total Gold |
| --- | ---: | ---: |
| Total cost of sales | $62,168 | $62,168 |
| Depreciation, depletion and amortization | (15,846) | (15,846) |
| Treatment costs | 458 | 458 |
| Change in product inventory | (563) | (563) |
| Reclamation and other costs | (210) | (210) |
| Exclusion of Nevada Operations costs | — | — |
| Cash Cost, Before By-product Credits (1) | 46,007 | 46,007 |
| Reclamation and other costs | 210 | 210 |
| Sustaining capital | 7,281 | 7,281 |
| AISC, Before By-product Credits (1) | 53,498 | 53,498 |
| By-product credits: |  |  |
| Silver | (166) | (166) |
| Total By-product credits | (166) | (166) |
| Cash Cost, After By-product Credits | $45,841 | $45,841 |
| AISC, After By-product Credits | $53,332 | $53,332 |
| Divided by ounces produced | 30 | 30 |
| Cash Cost, Before By-product Credits, per Ounce | $1,521 | $1,521 |
| By-product credits per ounce | (5) | (5) |
| Cash Cost, After By-product Credits, per Ounce | $1,516 | $1,516 |
| AISC, Before By-product Credits, per Ounce | $1,769 | $1,769 |
| By-product credits per ounce | (5) | (5) |
| AISC, After By-product Credits, per Ounce | $1,764 | $1,764 |

32

| In thousands (except per ounce amounts) | Three Months Ended March 31, 2022 (5) Total Silver | Total Gold | Total |
| --- | ---: | ---: | ---: |
| Total cost of sales | $78,902 | $62,168 | $141,070 |
| Depreciation, depletion and amortization | (19,452) | (15,846) | (35,298) |
| Treatment costs | 12,773 | 458 | 13,231 |
| Change in product inventory | 5,633 | (563) | 5,070 |
| Reclamation and other costs | (1,211) | (210) | (1,421) |
| Exclusion of Nevada Operations costs | — | — | — |
| Cash Cost, Before By-product Credits (1) | 76,645 | 46,007 | 122,652 |
| Reclamation and other costs | 987 | 210 | 1,197 |
| Sustaining capital | 11,566 | 7,281 | 18,847 |
| General and administrative | 8,294 | — | 8,294 |
| AISC, Before By-product Credits (1) | 97,492 | 53,498 | 150,990 |
| By-product credits: |  |  |  |
| Zinc | (34,628) | — | (34,628) |
| Gold | (18,583) | — | (18,583) |
| Lead | (19,802) | — | (19,802) |
| Silver | — | (166) | (166) |
| Total By-product credits | (73,013) | (166) | (73,179) |
| Cash Cost, After By-product Credits | $3,632 | $45,841 | $49,473 |
| AISC, After By-product Credits | $24,479 | $53,332 | $77,811 |
| Divided by ounces produced | 3,318 | 30 |  |
| Cash Cost, Before By-product Credits, per Ounce | $23.10 | $1,521 |  |
| By-product credits per ounce | (22.01) | (5) |  |
| Cash Cost, After By-product Credits, per Ounce | $1.09 | $1,516 |  |
| AISC, Before By-product Credits, per Ounce | $29.38 | $1,769 |  |
| By-product credits per ounce | (22.01) | (5) |  |
| AISC, After By-product Credits, per Ounce | $7.37 | $1,764 |  |

(1) Includes all direct and indirect operating costs related to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs and royalties, before by-product revenues earned from all metals other than the primary metal produced at each operation. AISC, Before By-product Credits also includes reclamation and sustaining capital costs.

(2) AISC, Before By-product Credits for our consolidated silver properties includes corporate costs for general and administrative expense and sustaining capital.

(3) During the three months ended March 31, 2023, the Company completed the necessary studies to conclude usage of the F-160 pit as a tailings storage facility after mining is complete. As a result, a portion of the mining costs have been excluded from Cash Cost, Before By-product Credits and AISC, Before By-product Credits.

(4) Other includes $509,000 of sales and $432,000 of cost of sales for the environmental services business acquired as part of the Alexco acquisition.

(5) Prior year presentation has been adjusted to conform with current year presentation to eliminate exploration costs from the calculation of AISC, Before By-product Credits as exploration is an activity directed at the Corporate level to find new mineral reserve and resource deposits, and therefore we believe it is inappropriate to include exploration costs in the calculation of AISC, Before By-product Credits for a specific mining operation.

### Financial Liquidity and Capital Resources

We have a disciplined cash management strategy of maintaining financial flexibility to execute our capital priorities and provide long-term value to our stockholders. Consistent with that strategy, we aim to maintain an acceptable level of net debt and sufficient liquidity to fund debt service costs, operations, capital expenditures, exploration and pre-development projects, while returning cash to stockholders through dividends and potential share repurchases.

At March 31, 2023, we had $95.9 million in cash and cash equivalents, of which $25.6 million was held in foreign subsidiaries' local currency that we anticipate utilizing for near-term operating, exploration or capital costs by those foreign subsidiaries. We also have USD cash and cash equivalent balances held by our foreign subsidiaries that, if repatriated, may be subject to withholding taxes. We expect that there would be no additional tax burden upon repatriation after considering the cash cost associated with the withholding taxes. We believe that our liquidity and capital resources from our U.S. operations are adequate to fund our U.S. operations and corporate activities.

Pursuant to our common stock dividend policy described in *Note 11* of *Notes to Consolidated Financial Statements* in our 2022 Form 10-K, our board of directors declared and paid dividends on our common stock totaling $3.8 million and $3.4 million, in the first quarters of 2023 and 2022, respectively. Our dividend policy has a silver-linked component which ties the amount of declared common stock dividends to our realized silver price for the preceding quarter. Another component of our common stock dividend policy anticipates paying an annual minimum dividend.

For illustrative purposes only, the table below summarizes potential dividend amounts under our dividend policy.

| Quarterly Average Realized Silver Price ($ per ounce) | Quarterly Silver-Linked Dividend ($ per share) | Annualized Silver-Linked Dividend ($ per share) | Annualized Minimum Dividend ($ per share) | Annualized Dividends per Share: Silver-Linked and Minimum ($ per share) |
| ---: | ---: | ---: | ---: | ---: |
| Less than $20 | $— | $— | $0.015 | $0.015 |
| $20 | $0.0025 | $0.01 | $0.015 | $0.025 |
| $25 | $0.010 | $0.04 | $0.015 | $0.055 |
| $30 | $0.015 | $0.06 | $0.015 | $0.075 |
| $35 | $0.025 | $0.10 | $0.015 | $0.115 |
| $40 | $0.035 | $0.14 | $0.015 | $0.155 |
| $45 | $0.045 | $0.18 | $0.015 | $0.195 |
| $50 | $0.055 | $0.22 | $0.015 | $0.235 |

The declaration and payment of dividends on our common stock is at the sole discretion of our board of directors, and there can be no assurance that we will continue to declare and pay common stock dividends in the future.

Pursuant to our stock repurchase program described in *Note 11* of *Notes to Consolidated Financial Statements* in our 2022 Form 10-K, we are authorized to repurchase up to 20 million shares of our outstanding common stock from time to time in open market or privately negotiated transactions, depending on prevailing market conditions and other factors. The repurchase program may be modified, suspended or discontinued by us at any time. Whether or not we engage in repurchases from time to time may depend on a variety of factors, including not only price and cash resources, but customary black-out restrictions, whether we have any material inside information, limitations on share repurchases or cash usage that may be imposed by our credit agreement or in connection with issuances of securities, alternative uses for cash, applicable law, and other investment opportunities from time to time. As of March 31, 2023 and December 31, 2022, 934,100 shares had been purchased in prior periods at an average price of $3.99 per share, leaving 19.1 million shares that may yet be purchased under the program. We have not repurchased any shares since June 2014.

As discussed in *Note 6* of *Notes to Condensed Consolidated Financial Statements (Unaudited)* pursuant to an equity distribution agreement dated February 18, 2021, we may offer and sell up to 60 million shares of our common stock from time to time to or through sales agents in “at-the-market” offerings. Sales of the shares, if any, will be made by means of ordinary brokers transactions or as otherwise agreed between the Company and the agents as principals. Whether or not we engage in sales from time to time may depend on a variety of factors, including share price, our cash resources, customary black-out restrictions, and whether we have any material inside information. The equity distribution agreement can be terminated by us at any time. Any sales of shares under that agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form S-3. During the three months ended March 31, 2023, we sold 2,173,274 shares under the agreement for proceeds of $11.9 million, net of commissions and fees of approximately $0.2 million.

As a result of our current cash balances, the performance of our current and expected operations, current metals prices, proceeds from potential at-the-market sales of common stock, and availability under our Credit Agreement, we believe we will be able to meet our obligations and other potential cash requirements during the next 12 months from the date of this report. Our obligations and other uses of cash may include, but are not limited to: debt service obligations related to the Senior Notes and IQ Notes; principal and interest payments under our Credit Agreement; deferral of revenues, care-and-maintenance and other costs related to addressing the impacts of COVID-19 on our operations; capital expenditures at our operations; potential acquisitions of other mining companies or properties; regulatory matters; litigation; potential repurchases of our common stock under the program described above; and payment of dividends on common stock, if declared by our board of directors. We currently estimate a range of approximately $190 to $200 million will be spent in 2023 on capital expenditures, primarily for equipment, infrastructure, and development at our mines, including $54.4 million already incurred as of March 31, 2023, before any lease financing. We also estimate exploration and pre-development expenditures will total approximately $33.0 million in 2023, including $5.0 million already incurred as of March 31, 2023. Our expenditures for these items and our related plans for 2023 may change based upon our financial position, metals prices, and other considerations. Our ability to fund the activities described above will depend on our operating performance, metals prices, our ability to estimate revenues and costs, sources of liquidity available to us, including the revolving credit facility, and other factors. A sustained downturn in metals prices, significant increase in operational or capital costs or other uses of cash, our inability to access the credit facility or the sources of liquidity discussed above, or other factors beyond our control could impact our plans.

We may defer some capital investment and/or exploration and pre-development activities, engage in asset sales or secure additional capital if necessary to maintain liquidity. We also may pursue additional acquisition opportunities, which could require additional equity issuances or other forms of financing. There can be no assurance that such financing will be available to us.

Our liquid assets include (in millions):

|  | March 31, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Cash and cash equivalents held in U.S. dollars | $70.3 | $86.8 |
| Cash and cash equivalents held in foreign currency | 25.6 | 17.9 |
| Total cash and cash equivalents | 95.9 | 104.7 |
| Marketable equity securities - non-current | 26.4 | 24.0 |
| Total cash, cash equivalents and investments | $122.3 | $128.7 |

Cash and cash equivalents decreased by $8.8 million in the first three months of 2023. Cash held in foreign currencies represents balances in Canadian dollars and Mexican Pesos, with the $7.7 million increase in the first three months of 2023 resulting from increases in CAD held following the Alexco acquisition. The value of non-current marketable equity securities increased by $2.4 million.

|  | Three Months Ended March 31, 2023 | March 31, 2022 |
| --- | ---: | ---: |
| **Cash provided by operating activities (in millions)** | **$40.6** | **$37.9** |

Cash provided by operating activities for the three months ended March 31, 2023 of $40.6 million represented a $2.7 million increase compared to the $37.9 million provided compared to the same period for 2022. The increase was due to working capital management activities generating $1.1 million of cash inflows in the three months ended March 31, 2023 compared to outflows of $7.4 million in the same period for 2022 primarily due to enhanced accounts receivable collection activities, partially offset by lower income adjusted for non cash items of $5.8 million in the three months ended March 31, 2023 compared to the same period for 2022, reflecting lower realized prices and higher production costs.

|  | Three Months Ended March 31, 2023 | March 31, 2022 |
| --- | ---: | ---: |
| **Cash used in investing activities (in millions)** | **$(54.4)** | **$(29.2)** |

During the three months ended March 31, 2023, we invested $54.4 million in capital expenditures, an increase of $33.0 million compared to the same period in 2022. The variance was primarily due to $17.1 million spend at Keno Hill during the three months ended March 31, 2023 and increased spending at Casa Berardi, Greens Creek and Lucky Friday. During the same period in 2022, we invested $10.9 million in marketable securities of mining companies and generated proceeds of $2.5 million upon disposal of an investment.

|  | Three Months Ended March 31, 2023 | March 31, 2022 |
| --- | ---: | ---: |
| **Cash provided by (used in) financing activities (in millions)** | **$5.0** | **$(7.2)** |

During the three months ended March 31, 2023 and 2022, we paid cash dividends on our common and preferred stock totaling $3.9 million and $3.5 million, respectively. We issued stock under our ATM program described above for net proceeds of $11.9 million in the three months ended March 31, 2023. We made repayments on our finance leases of $2.5 million and $1.7 million in the three months ended March 31, 2023 and 2022, respectively.

### Contractual Obligations, Contingent Liabilities and Commitments

The table below presents our fixed, non-cancelable contractual obligations and commitments primarily related to our Senior Notes, IQ Notes, credit facility, outstanding purchase orders, certain capital expenditures and lease arrangements as of March 31, 2023 (in thousands):

|  | Payments Due By Period Less than 1 year | 1-3 years | 4-5 years | More than 5 years | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Purchase obligations (1) | $50,910 | $— | $— | $— | $50,910 |
| Credit facility(2) | 1,074 | 2,149 | 1,398 | — | 4,621 |
| Finance lease commitments (3) | 8,812 | 10,494 | 1,350 | — | 20,656 |
| Operating lease commitments (4) | 2,652 | 2,557 | 2,417 | 6,307 | 13,933 |
| Senior Notes (5) | 34,438 | 68,876 | 539,569 | — | 642,883 |
| IQ Notes (6) | 2,322 | 38,604 | — | — | 40,926 |
| Total contractual cash obligations | $100,208 | $122,680 | $544,734 | $6,307 | $773,929 |

35

(1) Consists of open purchase orders and commitments of approximately $15.2 million, $29.4 million, $1.3 million, $1.4 million and $3.7 million for various capital and non-capital items at Greens Creek, Lucky Friday, Casa Berardi, Nevada Operations and Keno Hill, respectively.

(2) The Credit Agreement provides for a $150 million revolving credit facility. We had $6.7 million in letters of credit outstanding as of March 31, 2023. The amounts in the table above assume no additional amounts will be drawn in future periods, and include only the standby fee on the current undrawn balance and accrued interest. For more information on our credit facility, see *Note 7* of *Notes to Condensed Consolidated Financial Statements (Unaudited).*

(3) Includes scheduled finance lease payments of $11.8 million, $5.5 million, $1.1 million, and $2.3 million, respectively, for equipment at our Greens Creek, Lucky Friday, Casa Berardi, and Keno Hill.

(4) We enter into operating leases in the normal course of business. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease arrangements.

(5) On February 19, 2020, we completed an offering of $475 million in aggregate principal amount of our Senior Notes due February 15, 2028. The Senior Notes bear interest at a rate of 7.25% per year, with interest payable on February 15 and August 15 of each year. See *Note 7* of *Notes to Condensed Consolidated Financial Statements (Unaudited)* for more information.

(6) On July 9, 2020, we entered into a note purchase agreement pursuant to which we issued our IQ Notes for CAD$50 million (approximately USD$36.8 million at the time of the transaction) in aggregate principal amount. The IQ Notes bear interest on amounts outstanding at a rate of 6.515% per year, payable on January 9 and July 9 of each year. See *Note 7* of *Notes to Condensed Consolidated Financial Statements (Unaudited)* for more information.

We record liabilities for costs associated with mine closure, reclamation of land and other environmental matters. At March 31, 2023, our liabilities for these matters totaled $118.3 million. Future expenditures related to closure, reclamation and environmental expenditures at our sites are difficult to estimate, although we anticipate we will incur expenditures relating to these obligations over the next 30 years. For additional information relating to our environmental obligations, see *Note 10* of *Notes to Condensed Consolidated Financial Statements (Unaudited).*

### Critical Accounting Estimates

There have been no significant changes to the critical accounting estimates disclosed in *Management's Discussion and Analysis of Financial Condition and Results of Operations* in our 2022 Form 10-K.

### Off-Balance Sheet Arrangements

At March 31, 2023, we had no existing off-balance sheet arrangements, as defined under SEC regulations, that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

### Guarantor Subsidiaries

Presented below are Hecla’s unaudited interim condensed consolidating financial statements as required by Rule 3-10 of Regulation S-X of the Securities Exchange Act of 1934, as amended, resulting from the guarantees by certain of Hecla's subsidiaries of the Senior Notes and IQ Notes (see *Note 7* of *Notes to Condensed Consolidated Financial Statements (Unaudited)* for more information). The Guarantors consist of the following of Hecla's 100%-owned subsidiaries: Hecla Limited; Silver Hunter Mining Company; Rio Grande Silver, Inc.; Hecla MC Subsidiary, LLC; Hecla Silver Valley, Inc.; Burke Trading, Inc.; Hecla Montana, Inc.; Revett Silver Company; RC Resources, Inc.; Troy Mine Inc.; Revett Exploration, Inc.; Revett Holdings, Inc.; Mines Management, Inc.; Newhi, Inc.; Montanore Minerals Corp.; Hecla Alaska LLC; Hecla Greens Creek Mining Company; Hecla Admiralty Company; Hecla Juneau Mining Company; Klondex Holdings Inc.; Klondex Gold & Silver Mining Co.; Klondex Midas Holdings Limited; Klondex Aurora Mine Inc.; Klondex Hollister Mine Inc.; Hecla Quebec, Inc.; and Alexco Resource Corp. We completed the offering of the Senior Notes on February 19, 2020 under our shelf registration statement previously filed with the SEC. We issued the IQ Notes in four equal tranches between July and October 2020.

The unaudited interim condensed consolidating financial statements below have been prepared from our financial information on the same basis of accounting as the unaudited interim condensed consolidated financial statements set forth elsewhere in this report. Investments in the subsidiaries are accounted for under the equity method. Accordingly, the entries necessary to consolidate Hecla, the Guarantors, and our non-guarantor subsidiaries are reflected in the intercompany eliminations column. In the course of preparing consolidated financial statements, we eliminate the effects of various transactions conducted between Hecla and its subsidiaries and among the subsidiaries. While valid at an individual subsidiary level, such activities are eliminated in consolidation because, when taken as a whole, they do not represent business activity with third-party customers, vendors, and other parties. Examples of such eliminations include the following:

- ***Investments in subsidiaries***. The acquisition of a company results in an investment in debt or equity capital on the records of the parent company and a contribution to debt or equity capital on the records of the subsidiary. Such investments and capital contributions are eliminated in consolidation.
- ***Capital contributions***. Certain of Hecla's subsidiaries do not generate cash flow, either at all or that is sufficient to meet their capital needs, and their cash requirements are routinely met with inter-company advances from their parent companies. Generally on an annual basis, when not otherwise intended as debt, the boards of directors of such parent companies declare contributions of capital to their subsidiary companies, which increase the parents' investment and the subsidiaries' additional paid-in capital. In consolidation, investments in subsidiaries and related additional paid-in capital are eliminated.
- ***Debt.*** At times, inter-company debt agreements have been established between certain of Hecla's subsidiaries and their parents. The related debt liability and receivable balances, accrued interest expense (if any) and income activity (if any), and payments of principal and accrued interest amounts (if any) by the subsidiary companies to their parents are eliminated in consolidation.
- ***Dividends.*** Certain of Hecla's subsidiaries which generate cash flow routinely provide cash to their parent companies through inter-company transfers. On at least an annual basis, the boards of directors of such subsidiary companies declare dividends to their parent companies, which reduces the subsidiaries' retained earnings and increases the parents' dividend income. In consolidation, such activity is eliminated.
- ***Deferred taxes***. Our ability to realize deferred tax assets and liabilities is considered for two consolidated tax groups of subsidiaries within the United States: The Nevada U.S. Group and the Hecla U.S. Group. Within each tax group, all subsidiaries' estimated future taxable income contributes to the ability of their tax group to realize all such assets and liabilities. However, when Hecla's subsidiaries are viewed independently, we use the separate return method to assess the realizability of each subsidiary's deferred tax assets and whether a valuation allowance is required against such deferred tax assets. In some instances, a parent company or subsidiary may possess deferred tax assets whose realization depends on the future taxable incomes of other subsidiaries on a consolidated-return basis, but would not be considered realizable if such parent or subsidiary filed on a separate stand-alone basis. In such a situation, a valuation allowance is assessed on that subsidiary's deferred tax assets, with the resulting adjustment reported in the eliminations column of the guarantor and parent's financial statements, as is the case in the unaudited interim financial statements set forth below. The separate return method can result in significant eliminations of deferred tax assets and liabilities and related income tax provisions and benefits. Non-current deferred tax asset balances are included in other non-current assets on the consolidating balance sheets and make up a large portion of that item, particularly for the guarantor balances.

Separate financial statements of the Guarantors are not presented because the guarantees by the Guarantors are joint and several and full and unconditional, except for certain customary release provisions, including: (1) the sale or disposal of all or substantially all of the assets of the Guarantor; (2) the sale or other disposition of the capital stock of the Guarantor; (3) the Guarantor is designated as an unrestricted entity in accordance with the applicable provisions of the indenture; (4) Hecla ceases to be a borrower as defined in the indenture; and (5) upon legal or covenant defeasance or satisfaction and discharge of the indenture.

### Unaudited Interim Condensed Consolidating Balance Sheets

*(in thousands)*

| Assets | As of March 31, 2023 Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| Cash and cash equivalents | $54,365 | $31,522 | $10,052 | $— | $95,939 |
| Other current assets | 12,235 | 133,378 | 3,398 | — | 149,011 |
| Properties, plants, equipment and mineral interests, net | (38) | 2,579,385 | 8,218 | — | 2,587,565 |
| Intercompany receivable (payable) | (188,218) | (708,757) | 562,447 | 334,528 | — |
| Investments in subsidiaries | 2,267,701 | — | — | (2,267,701) | — |
| Other non-current assets | 389,556 | 21,303 | 20,979 | (338,729) | 93,109 |
| **Total assets** | $2,535,601 | $2,056,831 | $605,094 | $(2,271,902) | $2,925,624 |
| **Liabilities and Stockholders' Equity** |  |  |  |  |  |
| Current liabilities | $32,312 | $134,219 | $3,023 | $(4,201) | $165,353 |
| Long-term debt | 506,584 | 10,377 | — | — | 516,961 |
| Non-current portion of accrued reclamation | — | 107,880 | 1,928 | — | 109,808 |
| Non-current deferred tax liability | — | 121,081 | — | — | 121,081 |
| Other non-current liabilities | 4,548 | 6,721 | 8,995 | — | 20,264 |
| Stockholders' equity | 1,992,157 | 1,676,553 | 591,148 | (2,267,701) | 1,992,157 |
| **Total liabilities and stockholders' equity** | $2,535,601 | $2,056,831 | $605,094 | $(2,271,902) | $2,925,624 |

### Unaudited Interim Condensed Consolidating Statements of Operations

*(in thousands)*

|  | Three Months Ended March 31, 2023 Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| Revenues | $900 | $198,600 | $— | $— | $199,500 |
| Cost of sales and other direct production costs | (878) | (124,672) | — | — | (125,550) |
| Depreciation, depletion, amortization | — | (39,002) | — | — | (39,002) |
| General and administrative | (4,863) | (6,829) | (378) | — | (12,070) |
| Exploration and pre-development | (91) | (4,008) | (868) | — | (4,967) |
| Equity in earnings of subsidiaries | 2,015 | — | — | (2,015) | — |
| Other (expense) income | 4,953 | (20,038) | 2,473 | (5,230) | (17,842) |
| Income before income and mining taxes | 2,036 | 4,051 | 1,227 | (7,245) | 69 |
| Income and mining tax expense | (5,209) | (3,263) | — | 5,230 | (3,242) |
| Net income (loss) | (3,173) | 788 | 1,227 | (2,015) | (3,173) |
| Preferred stock dividends | (138) | — | — | — | (138) |
| Net income (loss) applicable to common stockholders | $(3,311) | $788 | $1,227 | $(2,015) | $(3,311) |
| Net income (loss) | (3,173) | 788 | 1,227 | (2,015) | (3,173) |
| Changes in comprehensive income (loss) | 6,516 | — | — | — | 6,516 |
| Comprehensive income (loss) | $3,343 | $788 | $1,227 | $(2,015) | $3,343 |

38

### Unaudited Interim Condensed Consolidating Statements of Cash Flows

*(in thousands)*

|  | Three Months Ended March 31, 2023 Parent | Guarantors | Non-Guarantors | Eliminations | Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| Cash flows from operating activities | $5,497 | $52,516 | $(28,184) | $10,774 | $40,603 |
| Cash flows from investing activities: |  |  |  |  |  |
| Additions to properties, plants, and equipment | — | (54,443) | — | — | (54,443) |
| Other investing activities, net | (40,113) | — | — | 40,113 | — |
| Cash flows from financing activities: |  |  |  |  |  |
| Dividends paid to common and preferred stockholders | (3,891) | — | — | — | (3,891) |
| Issuance of debt | 13,000 | — | — | — | 13,000 |
| Payments on debt | (13,000) | (2,135) | (329) | — | (15,464) |
| Other financing activity | 22,983 | 15,557 | 23,750 | (50,887) | 11,403 |
| Effect of exchange rate changes on cash | — | 171 | — | — | 171 |
| Changes in cash, cash equivalents and restricted cash | (15,524) | 11,666 | (4,763) | — | (8,621) |
| Beginning cash, cash equivalents and restricted cash | 69,890 | 21,202 | 14,815 | — | 105,907 |
| Ending cash, cash equivalents and restricted cash | $54,366 | $32,868 | $10,052 | $— | $97,286 |

39

## Market risk

As filed, 4,390 characters.

The following discussion about our exposure to market risks and risk management activities includes forward-looking statements that involve risks and uncertainties, as well as summarizes the financial instruments held by us at March 31, 2023, which are sensitive to changes in commodity prices and foreign exchange rates and are not held for trading purposes. Actual results could differ materially from those projected in the forward-looking statements. In the normal course of business, we also face risks that are either non-financial or non-quantifiable (See *Item 1A. – Risk Factors* of our 2022 Form 10-K).

#### Metals Prices

Changes in the market prices of silver, gold, lead and zinc can significantly affect our profitability and cash flow. Metals prices can and often do fluctuate widely and are affected by numerous factors beyond our control (see *Item 1A – Risk Factors – A substantial or extended decline in metals prices would have a material adverse effect on us* in our 2022 Form 10-K). We utilize financially-settled forward and put option contracts to manage our exposure to changes in prices for silver, gold, zinc and lead.

#### Provisional Sales

Sales of all metals products sold directly to customers, including by-product metals, are recorded as revenues when all performance obligations have been completed and the transaction price can be determined or reasonably estimated. For concentrate sales, revenues are generally recorded at the time of shipment at forward prices for the estimated month of settlement. Due to the time elapsed between shipment to the customer and the final settlement with the customer we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices until final settlement by the customer. Changes in metals prices between shipment and final settlement will result in changes to revenues previously recorded upon shipment. Metals prices can and often do fluctuate widely and are affected by numerous factors beyond our control (see *Item 1A – Risk Factors – A substantial or extended decline in metals prices would have a material adverse effect on us* in our 2022 Form 10-K). At March 31, 2023, metals contained in concentrate sales and exposed to future price changes totaled 3,350 million ounces of silver, 7,660 ounces of gold, 7,050 tons of zinc, and 8,225 tons of lead. If the price for each metal were to change by 10%, the change in the total value of the concentrates sold would be approximately $12.8 million. As discussed in *Note 8* of *Notes to Condensed Consolidated Financial Statements (Unaudited)*, we utilize a program designed and intended to mitigate the risk of negative price adjustments with limited mark-to-market financially-settled forward contracts for our silver, gold, zinc and lead sales.

#### Commodity-Price Risk Management

See *Note 8* of *Notes to Condensed Consolidated Financial Statements (Unaudited)* and *Item 7A. Quantitative and Qualitative Disclosures About Market Risk* in our 2022 Form 10-K for a description of our commodity-price risk management program.

#### Foreign Currency Risk Management

We operate or have mining interests in Canada, which exposes us to risks associated with fluctuations in the exchange rates between the USD and the CAD. We determined the functional currency for our Canadian operations is the USD. As such, foreign exchange gains and losses associated with the re-measurement of monetary assets and liabilities from CAD to USD are recorded to earnings each period. For the three months ended March 31, 2023 and 2022, we recognized a net foreign exchange gain of $0.4 million and loss of $2.0 million, respectively. Foreign currency exchange rates are influenced by a number of factors beyond our control. A 10% change in the exchange rate between the USD and CAD from the rate at March 31, 2023 would have resulted in a change of approximately $10.7 million in our net foreign exchange gain or loss. We do not hedge the remeasurement of monetary assets and liabilities. We do hedge some of our operating and capital costs denominated in foreign currency.

See *Note 8* of *Notes to Condensed Consolidated Financial Statements (Unaudited)* and *Note 9* of *Notes to Consolidated Financial Statements* in our 2022 Form 10-K for a description of our foreign currency risk management.

## Controls and procedures

As filed, 1,566 characters.

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as required by Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures, including controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated to our management (including our CEO and CFO), were effective as of March 31, 2023, in assuring them in a timely manner that material information required to be disclosed in this report has been properly recorded, processed, summarized and reported. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.

Part II - Other Information

Hecla Mining Company and Subsidiaries

## Risk factors

As filed, 210 characters.

*Item 1A. – Risk Factors* of our 2022 Form 10-K set forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results.

Filed May 10, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-019998. Last ingested by Listed: Oct 24, 2026, 14:56 ET. No prices; not investment advice.