Hecla Mining Q3 2026 Earnings Call Transcript

Hecla Mining (NYSE:HL) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Hecla Mining reported a decline in revenue to $334 million due to lower metal prices and timing issues with silver concentrate shipments, but emphasized strong underlying performance.

Adjusted EBITDA rose to $211 million, marking a 6% increase quarter-over-quarter and over 40% year-over-year, with record free cash flow of $151 million.

The company maintains a strong balance sheet with $700 million in cash, no long-term debt, and $1.2 billion in liquidity, supported by a new $500 million revolving credit facility.

Operational highlights include silver production of 4.2 million ounces, with notable contributions from Greens Creek and Lucky Friday; however, Keno Hill faces throughput limitations due to permitting constraints.

Strategic initiatives focus on low capital intensity projects such as the pyrite concentrate circuit at Greens Creek, and potential pathways for tailings reprocessing.

Hecla raised the lower end of its consolidated silver production guidance and improved cost guidance while lowering capital investment projections.

Future outlook involves achieving over 20 million ounces of silver production annually, with ongoing exploration and potential restart at Midas contributing to this goal.

Management expressed optimism about silver price trends and reiterated a focus on organic growth, with disciplined consideration for M&A opportunities.

Full Transcript

Rob Krcmarov (Chief Executive Officer)

This was another very strong quarter for Hecla Mining, even though a couple of the headline numbers moved in a different direction than last quarter. I want to spend a moment walking through why, because I think the underlying story here is a really 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, and 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 earlier in the year, though I remain very 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 with the quarter, revenue would have been noticeably higher on top of an already strong quarter. So that inventory shipped in early August and you’ll see it show up in our third quarter results.

Those of you who followed us for some time know the lumpy sales pattern at Greens Creek. Adjusted EBITDA from continuing operations was 199 million, more than double the 94 million we generated a year ago. Operating cash flow was. I’m sorry. Okay, sorry to continue. I’m just going to re-emphasize. I got some numbers mixed up from the previous quarter and I apologize, everyone. Income from continuing operations was 150 million or $0.22 a share, up from 118 million or $0.18 a share in the second quarter. Adjusted EBITDA from continuing operations was 211 million.

That’s up 6% over the quarter and up more than 40% on a year ago. Operating cash flow from continuing operations was a record 203 million. Free cash flow was a record at 151 million, which is nearly triple what we generated in the third quarter last year. And Greens Creek led the way with a site record of 147 million. The balance sheet is the strongest it’s ever been. We finished the quarter with almost $700 million in cash and no long-term debt. Apart from finance leases, we’ve also put in place a new $500 million revolving credit facility. It’s undrawn, other than a small amount for letters of credit, and it comes with a $100 million accordion option. So if you add it all up, we have about $1.2 billion of liquidity. And that gives us real options, the flexibility to keep investing in the projects and the assets that make the most sense on our own timeline, rather than being dictated to by the silver price.

As in the past. On the operating side, we produced 4.2 million ounces of silver within 1% of the second quarter. Greens Creek produced over 1.9 million ounces. Lucky Friday produced nearly 1.3 million ounces, which is what we planned after coming out of the high-grade pocket that drove its second quarter. That record in the second quarter. And Keno Hill contributed almost a million ounces. And that shows what this asset can do. And it’s why we keep investing and de-risking its future.

So a word on Keno Hill. That record came from running the mill close to its permitted limit. And our current permits can’t support that for long. So we’re choosing to suppress throughput to stay within permit limits. And Carlos will give you the numbers and the timing on that in a minute. Silver production should fall by less than throughput. And that’s because we’ll be more selective in both the mine and the mill. I want to be clear. Keno Hill carries a high fixed cost base.

So through the permitting period, at current prices, you should expect lower revenue and higher cost per tonne. That said, I still see real value in that ground. And that’s why we have four drills turning there. We also made some positive changes to our 2026 guidance. We raised the bottom end of our consolidated silver production range. We improved our silver cash cost and all-in sustaining cost guidance. And we lowered our capital investment guidance. Turning to Slide 5. This slide shows where we want to take the company. Our medium-term goal is to be a silver producer of more than 20 million ounces a year. A potential restart at Midas is part of that. And so is Keno Hill getting to its permitted mill rate once the permitting and infrastructure work is done.

All of it depends on exploration success, development and permitting. Closer in. We have two organic opportunities at Greens Creek. One is the pyrite concentrate circuit we told you about last quarter. And the other is the dry stack tailings, which now has more than one potential path forward. What the three projects on the next slide have in common is low capital intensity. Our bar for any of these investments is the return that clears our investment thresholds by a healthy margin. And early indications on the pyrite circuit are encouraging. On that front, I am constructive on silver and gold. Even so, I’d rather build cash now so we can keep these projects moving whatever the price does. And that’s why the balance sheet has been such a priority for us.

I’ll turn it over to Brian to walk through the latest progress on each. Brian, over to you.

Brian Erickson

Thanks, Rob. Turning to slide six. So work continues to advance on all three organic projects Rob discussed and shown on this slide. They share one important attribute. Each is expected to be low in capital spend. These projects build on infrastructure we already have. They follow permitting paths that are already established and well understood. And we already have the operating expertise in-house that allows us to produce potentially high-margin production and cash flow growth while reducing many of the exploration and development risks inherent in greenfield projects.

Starting with the Greens Creek pyrite concentrate circuit, we’re advancing engineering on a new circuit at the mill that will recover additional silver and gold that currently reports to the dry stack tailings facility, producing a marketable pyrite concentrate that is shown to be in high demand. This work is at a scoping level incorporating some advanced design and preliminary cost estimates are underway. At average reserve grades, we continue to estimate that the circuit could add potentially 1 to 1.2 million ounces of silver and 10 to 15,000 ounces of gold in annual production once fully ramped up, on top of existing output.

Early indications continue to point to a robust return on capital that meets our investment thresholds while also reducing the rate at which we add tailings to the storage facility, which would be expected to lower future tailings storage capacity-related investment with a favorable benefit-to-cost ratio and what we believe is low technical risk. This project is well suited to an accelerated engineering and execution path, subject to permits and final investment approval.

Under that path—excuse me—we expect to begin intermittent pyrite production of concentrate as early as late ’27 using temporary equipment, with potential to reach full capacity with the completion of the new circuit expected in late 2028. These estimates remain preliminary and are subject to changes as engineering advances, but we’re very excited about this project. Second is the Greens Creek tails reprocessing project. Now we’re looking at the middle image on the slide. I want to spend a little extra time because the scope of what we’re evaluating has broadened. As of September 30, the dry stack tailings facility held an estimated 10.7 million tons of material containing roughly 51 million ounces of silver, nearly 600,000 ounces of gold, and additional critical minerals. At quarter-end metals prices, that represents an in-situ gross metal value of approximately 6.4 billion.

That’s a gross figure before transportation, processing, and sales costs, which we expect to be significant. And it is not a mineral resource or reserve. So think of it as at a measured scale. We’re evaluating the potential of three pathways forward with this. First pathway is the one we’ve been working on for a few years, a multi-phase metallurgical program with a third party. Phase three testing was completed in August and the metallurgical results are pending and expected any week now. That’s a key milestone that should help shape our next steps, including the potential to advance to a pilot plant test in Q4. This pathway depends on our potential partner securing a suitable processing facility, which they are working on.

Early indications point to a potentially low capital intensity path for Hecla Mining to achieve initial cash flows, with first cash flows potentially in about three years based on our current understanding. Today though, that timing is subject to a number of factors largely outside of our control and could change. What is new this quarter is that we are now evaluating two additional pathways. One of the new potential pathways is a direct sale of the dry stack material. Following interest from third-party smelters and concentrate dealers, we’re evaluating whether this material could qualify as low-grade feedstock that we can sell directly. And this is moving from concept to action. In the fourth quarter we expect to load a test parcel from Greens Creek of approximately 5,500 dry metric tons of this low-grade feedstock for shipment and sale to a third-party smelter.

This remains early stage and there’s no assurance that leads to commercial shipments next year and beyond. But it is an important first step and we’ll look to update the market as we learn more. The third pathway is self-processing. This would potentially involve an on-site processing facility, which could require new or amended permits. We expect to begin metallurgical evaluation of the self-processing concept in the first quarter of 2027, with initial results potentially available by spring of ’27 to help determine next steps. These pathways for the Greens Creek tailings are not mutually exclusive. Our path forward could include more than one of them, and we’re evaluating combinations of two or more.

That flexibility is a real strength because it gives us multiple ways to capture value and generate cash flows from material we already have on site. And as with pyrite concentrate reprocessing, all or part of the tailings could reduce the space needed for tailings storage and help lower Greens Creek’s long-term reclamation liability. We expect to provide further details in coming quarters as the evaluation work advances. Finally, the Midas restart project in Nevada also continues to advance, and it shares that same low capital intensity attribute. Midas has permanent infrastructure including a mill with approximately 1,200 tons per day of milling capacity, a tailings facility with roughly 15 years of storage capacity, and other surface infrastructure, all of which could help reduce the time and capital required for a restart.

We’re working to expand the existing high-grade gold and silver resource to the scale needed to support a restart, and we continue to evaluate a hub-and-spoke model that would bring ore from Midas and potentially other regional sources such as Hollister, which is well within trucking distance, through the existing mill. Drilling resumed at Hollister this quarter after a multi-year pause, and Kurt will touch on the latest Nevada exploration results in a few minutes.

In summary, three capital projects at three different stages with one common thread: low capital intensity and the potential for high margins. We’ll keep you updated as the work advances. I’ll now turn the call over to Carlos for the operations review.

Carlos

Thank you, Brian. Turning to slide 8, Greens Creek produced 1.9 million ounces of silver and nearly 12,000 ounces of gold in the third quarter, lower than the second quarter primarily due to high utility maintenance during the quarter. Costs applicable to sales were $76 million, reflecting the higher sales volume from the timing of shipments noted by Rob earlier, with cash cost of negative $10.11 per ounce and AISC of negative $3.25 per ounce, both after by-product credits.

Cash flow from operations was $155 million, and free cash flow was a new, cycle-level quarterly record of $147 million. As Rob mentioned, the concentrate inventory we carried at the end of the second quarter shipped in early August and is reflected in these results. Looking ahead, we have additional stable maintenance planned in the fourth quarter. We remain confident in achieving production guidance at our flagship operation, which we are maintaining at 8 to 8.3 million ounces of silver and 51,000 to 55,000 ounces of gold. We are raising our costs applicable to sales guidance by $10 million to $250 million, reflecting actual results over the first nine months and higher expected onsite power generation costs in the fourth quarter.

This increase in total dollars, on a per-ounce basis, guidance has improved driven by our strong first nine months and higher by-product credits. We now expect cash cost of negative $13.00 to negative $12.50 per ounce and AISC of negative $5.50 to negative $5.00 per ounce, both after by-product credits. Turning to Slide 9, Lucky Friday produced nearly 1.3 million ounces of silver as planned as the mine moved out of the high-grade ore pocket that drove record second-quarter production of 1.5 million ounces. Costs applicable to sales were $34 million. Cash costs were $7.31 per ounce and AISC was $27.68 per ounce, both after by-product credits. Both were up from the second quarter reflecting lower production volume and higher sustaining capital spending.

Cash flow from operations was $88 million and free cash flow was $67 million. The surface cooling project is expected to be commissioning in the fourth quarter of 2026. We expect it to begin improving underground working conditions shortly after commissioning, supporting the mine’s 15-year reserve mine life. For the full year, we have tightened up our silver production guidance by raising the low end of the range to 5 to 5.2 million ounces, with costs applicable to sales with no change at $140 million.

We have also improved our cost guidance. We now expect cash cost of $8.50 to $9.00 per ounce, down from $9.00 to $9.75, and we have lowered the high end of our AISC range to $25.50 per ounce from $26.00, for a new range of $24.50 to $25.50 per ounce, both after by-product credits. Turning to Slide 10, Keno Hill produced a record 963,000 ounces of silver in the third quarter. The result benefited from a mill silver grade that improved more than 35% as we worked through the lower grade we discussed earlier this year and from a new quarterly record milling rate. Cash flow from operations was $5 million and free cash flow was negative at $2 million, reflecting continued capital investment and working capital outflows. However, you shouldn’t expect that milling rate to repeat in September.

The mill ran close to its permitting rate, but the capacity under our current waste rock, tailings, and water permits cannot support that rate over time. Beginning in the fourth quarter, we are choosing to suppress throughput to preserve that capacity and stay within permitting limits. We expect throughput to step down to approximately 300 tons per day in the fourth quarter, with further suppression beginning in January 2027 to levels significantly below third quarter 2026.

As Rob noted, we expect silver production to decline proportionally less than throughput as we mine and process more selectively. In practical terms, at current metal prices, you should expect lower revenue and higher cost per ton at Keno Hill in this period given the high fixed-cost nature of the asset. We have been speaking to this strategy for a few quarters now, which we believe is the best path forward while we wait on permits. The team is focused on what we can control. We are putting in place tighter grade controls to reduce dilution, and that work is underway. We are also planning to be more selective about what goes to the mill, and we are preparing to stockpile lower-grade material so we can process it later once we have the permitted capacity.

As these steps come together, we expect higher grade and better margin on every ton we process while keeping the lower-grade tons available for later. The permitting and infrastructure work we are doing now is what should allow the mine to reach its potential. I will now turn the call over to Russell for the finance update.

Russell Lawlar (Senior Vice President, Chief Financial Officer and Treasurer)

Thank you, Carlos. Turning to Slide 12, let me take you through our financial results. As Mike noted, everything I’ll cover here reflects results from our continuing operations. Hecla provides an investment opportunity like no other. Not only are our mines in the best jurisdictions and we have a very low-cost profile and long mine lives, we also offer exposure to silver that is best in class, with 69% of our third quarter revenues coming from silver, with gold making up 15% and the remaining coming from base metals.

Revenues during the quarter inclusive of environmental services were $395 million, with $372 million coming from our mining operations, which is up 17% from last quarter. The increase is primarily due to timing of shipments at Greens Creek, as we’ve already discussed. With these revenues, we remain the purest silver mid-cap multi-asset producer and, as we’ve already discussed, our project pipeline is pointing to growing our exposure to silver for our shareholders.

As we move to Slide 13, I’ll go into further details on the financial performance during the quarter. Income from continuing operations was $150 million, or $0.22 per share, compared with $118 million, or $0.18 per share, last quarter. In addition to the higher revenue, income benefited from a $36 million increase in fair value adjustments, primarily related to realized and unrealized gains on marketable securities. That was partly offset by $41 million of higher costs applicable to sales on the higher volumes sold, $22 million of higher tax expense on better profitability, and a $6 million increase in exploration and pre-development expense as programs ramped up, including new programs at Hollister and Aurora.

Our margins remain strong. We realized $63.62 per ounce of silver sold, and with an AISC of $14.34 per ounce, that drove a margin of $49.28 per ounce, or 77% of the realized price of silver. AISC was higher than the second quarter mainly because of lower production at Greens Creek and Lucky Friday, lower by-product credits primarily related to less gold production, and higher sustaining capital, mostly at Lucky Friday. These non-GAAP figures of AISC and cash costs exclude Keno Hill, which remains in a state of pre-commercial production.

As we presented last quarter, we have substantially less exposure to oil than many of our peers in the industry. The starting point is the nature of our ore bodies at our operations, which are high-grade and high-value underground mines where we mine less tons to extract the value, and as a result we consume less diesel. The second factor is all of our operations source their power from local utilities, where diesel prices do not impact the product price.

From time to time, Greens Creek will generate power; however, this isn’t normally for prolonged periods of time and doesn’t move the cost structure materially when we do. Cash provided by operating activities was a record $203 million, up 16% from the prior quarter, helped by favorable working capital changes and higher payable ounces sold. Consolidated free cash flow was a record $151 million, surpassing the previous record of $144 million set in the first quarter. At the site level, before exploration and corporate costs, Greens Creek generated a record $147 million and Lucky Friday generated $67 million, while Keno Hill was slightly negative due to working capital movements weighing on its cash flow.

This is primarily related to the collection of payment from two shipments of concentrate that slipped to October. Turning to the balance sheet, we ended the quarter with $692 million in cash, up from $483 million at the end of the second quarter. That increase reflects our strong cash flow generation as well as $64 million of proceeds from the sale of investments. We have no long-term debt outside of finance leases, and we entered into a new $500 million revolving credit facility, undrawn other than $3.4 million of letters of credit, plus a $100 million accordion option.

Together with our cash, that brings our total liquidity to approximately $1.2 billion. We moved from a net debt position of approximately $144 million a year ago to a net cash position of approximately $680 million today, which gives us the strongest balance sheet we’ve had in Hecla’s history. I’ll now turn the call to Kurt to go through exploration.

Kurt

Thank you. Thank you, Russell. We invested 16.6 million in exploration and corporate development this quarter. The 2026 guidance remains at 55 million. With the success we’ve had this year, we’re looking to grow our budget next year. Turning to Slide 15, I’ll start at Keno Hill where drilling ramped up through the quarter. We now have four drills turning and we expect all four to run through the end of the year. That’s already paying off at the Flame and Moth where drilling in the favorable basal quartzite along strike with the Lightning Vein has identified a new mineralized extension with over 350 ft of dip length located 900 ft southwest of the existing resource. Three of four holes encountered significant mineralization.

Hole K26944 returned 26.1 ounce per ton silver and 14% zinc over 8.5 ft. Hole K26951 returned 6.5 ounce per ton silver and 3.5% zinc over 16.1 ft. This new extension is open to the northeast toward the existing resource and to the southwest along strike, and we will continue follow-up drilling in the fourth quarter. Turning to Slide 16, at Birmingham Deep we continue to extend the high-grade trend that points toward the historic Hector-Calumet mine, which produced roughly 96 million ounces of silver historically. Southwest step-out hole K26940 returned 25.7 ounce per ton silver and 4.2% lead over 10 ft on the Footwall vein, and hole K26942 stepped out a further 165 ft into strongly mineralized rock with assays pending. Together with hole 945 to the northeast, the known strike length of this trend is now 1,300 ft, a 500 ft increase over the second quarter.

On the Birmingham Main Vein 2, hole 940 also intersected 61.1 ounce per ton silver and 3.8% lead over 5.3 ft, extending that vein about 260 ft to the southwest. Turning to Slide 17 and moving to Greens Creek, at the west offset target about 500 ft from the northwest resource, three of five holes intersected significant sulfide mineralization. Holes PS511, 512, and 513 encountered 6, 11, and 8.3 ft respectively, defining sulfide mineralization over 300 ft of strike with assays pending. These results support the concept that this area could host a meaningful extension to the existing mineralized zone at Greens Creek.

At Zinc Creek, all four holes this year intersected the target horizon with strong alteration and abundant pyrite, including 9 ft of semi-massive pyrite in hole PS509. In the underground, three rigs continue to define and step out from existing resources with good results, including 63.6 ounce per ton silver over 14.1 ft in the 200 South zone. Turning to Slide 18 in Nevada, at Midas, hole DMC494 returned 0.73 ounce per ton gold and 2.9 ounce per ton silver over 1.4 ft, confirming a second narrow high-grade vein following our second quarter discovery in hole DMC481. Step-out holes on both veins all intersected the structure, with assays pending on all but one. These results confirm the prospectivity of the southwest pediment area, an important part of our evaluation of a potential restart of Midas.

Drilling also began at Aurora, where Brawley Peak showed intense alteration, and at Polaris where it showed banded quartz veins with evidence of boiling, suggesting we need to test deeper on these targets. At Hollister, drilling began at the South and Excalibur targets with assays pending. Drilling at both Aurora and Hollister will continue in the fourth quarter. I’ll now turn the call back to Rob for closing remarks.

Rob Krcmarov (Chief Executive Officer)

Thank you, Kurt. Turning to Slide 19. And to sum up, safety improved again, but we’re continuing to work to improve it further. Our total reportable injury frequency rate, or TRIFA, improved again from 1.51 to 1.57 in the quarter. And that’s the right direction. I think we can still do better because, as I’ve always said, a safe mine is a productive mine. Q3 was a quarter of record cash flow and continued strong financial results. It builds on a record that has helped us pay down debt and move into a position of real financial strength. The kind that lets us keep investing in our robust organic project pipeline for years to come and serve value for our shareholders. We have almost $700 million in cash, no long-term debt, and about $1.2 billion in liquidity. Without question, that’s the strongest balance sheet in this company’s history.

And our pipeline continues to advance, with the pyrite concentrate circuit progressing at Greens Creek, new potential paths forward for the dry stack tailings, and Midas potentially heading towards a restart. And all of these have low capital intensity as the common thread. At Keno Hill, we’re working through the permits and the infrastructure that will support the mine reaching its potential. We do believe in a robust precious metals market and we think silver has a very bright future, and we’re working to grow the exposure to the metal for our shareholders.

You know, I really hope you can feel the enthusiasm we have inside our company for the project pipeline, and we think Hecla is the most compelling way to get exposure to silver in this sector. And perhaps the last word on guidance: we’ve tightened our production range, improved our silver cash costs and all-in sustaining costs, and we’ve lowered our capital investment, all while generating record free cash flow. So with another solid quarter behind us, we’re well positioned to achieve our 2026 guidance, and we look forward to keeping you updated. I will now ask the operator to open the line for questions.

OPERATOR

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one. Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality. Please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Harrison Reynolds from RBC Capital Markets.

Your line is open. Please go ahead.

Harrison Reynolds (Analyst at RBC Capital Markets)

Hi, good morning, everyone, and congratulations on a good quarter for Hecla. You know, looking at the balance sheet now, $700 million in cash and credit facility up to 600 million. You know, what are the latest thoughts on the best use of capital from here, including your assessment of the current valuation? Shares are trading at between organic investment, returning capital to shareholders and potentially M&A from here, and on M&A, what would your criteria look like between jurisdiction, commodity focus, stage and size?

Thank you.

Rob Krcmarov (Chief Executive Officer)

Russell, why don’t you start with the balance sheet?

Russell Lawlar (Senior Vice President, Chief Financial Officer and Treasurer)

Sounds good. Yeah. Good morning, Harrison. Yeah. As it relates to the balance sheet, frankly, and as we’ve communicated in the past, we’re working towards building a cash balance that’s capable of providing for our future liquidity needs. Brian talked quite a lot on those growth projects that will require capital. They’re not huge capital intensity, but we also want to make sure we can fund those. Kurt had spoken about the exploration that he’s working on, right, so we expect good things to come from that, so we want to make sure we’re able to fund that.

Additionally, we want to make sure we have sufficient liquidity just on our balance sheet as it relates to, you know, being able to weather low prices and other things like that. But as we do build that balance sheet, as we see focus come in as it relates to these growth projects that Brian spoke about, exploration programs, that kind of thing, we’ll continue to evaluate capital returns, and when we find that it’s the right time, then we would actually act on that.

And I’ll ask Rob maybe to take the M&A portion of that.

Rob Krcmarov (Chief Executive Officer)

Okay, thanks. And thanks for your question, Harrison. On M&A, one of the things I’ll point you to is we have exceptionally long mine lives — not quite, but almost double the peer average — and so we have visibility over the horizon. I think the other thing to note is that, you know, we’re kind of unique in our space in that we have more silver exposure than the majority of our peers, and so we want to preserve that. You asked about the criteria. So we want to stay a silver company. We also want to stay in relatively safe jurisdictions. We’re currently in Canada and the U.S. I mean, you have to go where the scarce quality assets are. And so does that mean that we’re going to be here forever? No, probably not. We’ll probably look at other jurisdictions, but we do a proper detailed analysis on what a relatively safe jurisdiction looks like. So as a rule of thumb, I’ve said anything in the top third of the Fraser Institute index, we would take a look at that country, but we wouldn’t just use it as a tick box.

We would do a thorough risk assessment and understand whether we are comfortable with those risks, whether we can mitigate some of them, or whether it’s simply not for us. Our M&A appetite right now — as I said, you know, we already have a future that we’ve plotted out to plus 20 million ounces, and investing in our organic projects that we already own, we already control, we understand them deeply — that’s our path forward. But if something comes along, we have time. You know, we can be thoughtful and diligent and thorough. We have time. If something compelling comes along that meets our investment criteria, we will act.

But again, I just point you to our preferences for organic growth. Obviously, M&A is a tool that’s available to us; we’d just be very disciplined about how we do that.

Harrison Reynolds (Analyst at RBC Capital Markets)

That’s great detail. Thank you. Separately, wanted to ask on Keno Hill, could you frame up the outlook for processed grades a bit more there? It’s obviously a very high-grade deposit, and wondering, under the lower throughput and greater selectivity plan, what are the goalposts for process grades into Q4 and over the next couple of years until the permit amendments come in?

Rob Krcmarov (Chief Executive Officer)

Well, I’ll start. There were a few things that pulled down the grade in the first half. We had less output from the Bear zone, which is obviously a high-grade zone. We also had dilution because we were mining some remnant areas — that comes at a higher cost and lower grade. And we moved into the Arctic zone. And then we also — plus there was also sequencing at Birmingham and Flame and Moth. Those issues have since been mitigated, and so mill grade went from about 19 ounces per tonne in Q2 to about 26 in Q3.

I expect that the grade will be maintained at roughly reserve grade. Any comment on that, Brian or Carlos?

Harrison Reynolds (Analyst at RBC Capital Markets)

Got it. Thank you for the detail on both of those and thanks for taking my questions.

OPERATOR

Your next question comes from the line of Wayne Lam from TD Securities. Your line is open. Please go ahead.

Wayne Lam (Analyst at TD Securities)

Yeah, thanks. Morning, guys, and congrats on a good quarter. If I think back to early last year, you guys had already flagged some of the permit constraints at Keno Hill and the potential to scale back or put a pause in operations. So I guess two questions. Number one, with the silver price kind of back to 50 bucks, is there potential to reevaluate a potential move to care and maintenance, given Keno was slightly negative free cash flow this quarter at a $63 silver price? And then number two, the Yukon seems to be, you know, quite a hotbed for development lately and seems like the province is keen to accelerate projects forward.

So just wondering, is there something more project-specific at Keno that’s holding up the permits?

Rob Krcmarov (Chief Executive Officer)

I’ll answer the care and maintenance question first. Our plan is to basically keep running within the current permits while we build that infrastructure. But, as we point out in our 10Q, delays at any step, restrictions on temporary waste stockpiling, or reduced power from Yukon Energy could force further curtailment or a halt. And so if permits or infrastructure are delayed or silver falls materially, we could consider care and maintenance. But our preference is to keep the workforce intact.

We can see the finish line roughly three years out. We’ve got a workforce that has increasingly understood the ore body and is becoming better and more efficient at mining it. And so, while it’s not a huge burden on us, I think the optimum path forward is keep it running for as long as we can and get through to, you know, mid to late 2029 when we can see some of the constraints being removed and seeing the full potential coming out of Keno Hill in the Yukon.

I mean, we are the only significant operating mine run by a public company in the Yukon. We already have strong support from the government. We’ve got a much better relationship with the First Nation of Na-Cho Nyäk Dun. And so I think all stakeholders would like to see us be successful. We’ve had our stakeholders come out to site and visit us, and we’re pretty proud of what we’ve accomplished there, particularly both in terms of the responsible mining that we’re doing, but also the rehabilitation activities that we’ve done through ERD, which is our rehabilitation unit, which is actually funded by the government.

Now, the rehabilitation and the reclamation that they’ve been doing is highly visible to the community. Anyone who drives by the highway can see it improving week by week and month by month. Patrick, you’ve been up in the Yukon recently. Any comments there?

Patrick

I think you’ve summarised it well. The relationships are solid. Permitting is moving forward. It is a deliberate process. We are planning on filing our project proposal by the end of the year, which is the first step in the YESAB review, the federal review. And there’s nothing specific that is delaying any of that that’s currently in process. We’re just working our way through that process.

Wayne Lam (Analyst at TD Securities)

Okay, great. And then maybe just on the tailings reprocessing project. It seems like the results from environmental work have gone decently well with the Greens Creek material. So just wondering why you guys are now evaluating multiple avenues outside of that. And in particular, if you were to go down the route of building your own facility, isn’t that something that could maybe be seen as outside the scope of expertise for Hecla Mining and add quite a bit on timeline to realization?

Rob Krcmarov (Chief Executive Officer)

Ron, why don’t you take.

Ron

Yeah, so, you know, we mentioned the third party we’ve been working with and we’ve got a long relationship with them. And certainly their technology seems to be working out well in the studies that we’ve done. The other two paths really do just give us optionality. You know, you think about that site: if you can ship raw tailings off as a low-grade concentrate, it definitely helps the environmental aspects of closure for that site and some of the long-term expansion costs on the tailings facility.

As far as reprocessing, you know, that’s essentially what we’re building at the mill. We’re building a pyrite concentrate circuit, which is what we would do with the tailings facility. So, you know, we’re making a pyrite concentrate as well within our wheelhouse because we’re already going to be doing that. So those studies will get started again. We should have some metallurgical results. You know, we’re a little bit worried about the oxidation of that material, but we need to determine what the metallurgical results are and how well it’ll float.

But I don’t think there’s really any significant technical concerns there. The other thing, you know, it gives us optionality to look at all three because potentially there is a combination of three options for addressing the tailings facility to monetize that. So I think all of them are still viable paths. You know, I think over the next six to eight months, we’ll start to really narrow in on what we’re going to do. And I guess from a capital standpoint, the cost of building a pyrite circuit at the mill will give us indications for costs for building reprocessing facilities, should we do that.

So we’ll have a lot of information coming in in the next several months that’ll guide our path forward. Yeah, so just to circle back to your initial concern, Wayne, about stepping out of our wheelhouse: we’re not stepping out of our wheelhouse. The pyrite concentrate circuit, that’s proven technology, very low technical risk. That’s what we’re doing on material that we’re producing presently, and essentially all we’re doing is mirroring that and looking at putting in a pyrite concentrate circuit for the existing tailings. As Brian said, we need to do some drilling and metallurgical characterization to see how much oxidation has happened.

But we’re not really straying into new areas that we’re not familiar with at all.

Wayne Lam (Analyst at TD Securities)

Okay, great, thanks. And then maybe just last one, following up on the capital returns. Rob, when you joined, obviously the company was in a much different position on the balance sheet, and the silver-linked dividend was eliminated. So just wondering if there’s potential for you guys to institute some type of attributable-linked returns program at some point. And, I mean, it’s a Russell comment I think we understand on future capital needs, but, you know, with the balance sheet growing as is, maybe you’ll even be in a position soon to build Libby on a standalone basis at some point.

That’s a joke, by the way.

Rob Krcmarov (Chief Executive Officer)

You had me pause, but thank you. On the capital returns, obviously, at the rate that we’ve been building cash on the balance sheet, there will come a point, probably sometime in the first half of next year, that we have to seriously look at returns. What that looks like, whether it’s—if there’s a dislocation in how we value our assets compared to where the market values the assets, we look at share buybacks. I don’t know about doing a silver-linked dividend.

That’s never really worked for anyone, not in the gold space, not in our space. So probably unlikely, but, you know, dividends—we will consider that. I expect we’re going to have a much more robust discussion at the board in the first half of next year.

Wayne Lam (Analyst at TD Securities)

Okay, great. Thanks for taking my questions and congrats on a great quarter.

Rob Krcmarov (Chief Executive Officer)

Thanks, Wayne.

OPERATOR

Your next question comes from the line of Tosin Jayeola from Jefferies. Your line is open. Please go ahead.

Tosin Jayeola (Analyst at Jefferies)

Guys, congrats on the quarter. My name is Tosin Jayeola, and I’m asking on behalf of Fahad Tariq at Jefferies. Maybe I’ll start with Greens Creek. At Greens Creek, throughput and silver grades were lower year on year, and 3Q AISC was approximately, I think, $5 per ounce above the year-to-date average. I just wanted to ask how much of the variance was temporary—related to maintenance and mine sequencing—versus indicative of the cost and grade profile entering into 2027.

Rob Krcmarov (Chief Executive Officer)

I’m sorry, I found it very, very hard to hear. Did anyone hear that? Tosin, could you just—you’re a bit quiet—could you repeat your question?

Tosin Jayeola (Analyst at Jefferies)

Yeah, so I was saying at Greens Creek, throughput and silver grades were both lower year on year, and 3Q AISC was approximately $5 per ounce above the year-to-date average. How much of the variance was temporary—related to maintenance and mine sequencing—versus indicative of the cost and grade profile entering into 2027?

Russell Lawlar (Senior Vice President, Chief Financial Officer and Treasurer)

I think, Tosin, your question—if I heard it—at least the first half of that was: Greens Creek grades this year are lower than they were last year. And so, you know, Brian Erickson, sitting here with us, he was our GM there for a long time. I think that, you know, my perspective on Greens Creek is that the complexity at Greens Creek is what creates a lot of the value of Greens Creek. And the grades at Greens Creek will fluctuate. Sometimes they’ll be higher, sometimes they’ll be lower.

Right. I don’t know if you have any comment on that, Brian. And then secondly, you mentioned throughput as well. Tosin, and, you know, I see, you know, throughput in 2025 was higher than 2026. And I think, you know, maybe Brian, you could speak a bit to that as it relates to some of the projects we did earlier in the year.

Brian Erickson

Yeah, I think Russell’s correct. And silver, you know, it fluctuates up through the grades pretty significantly. And we obviously at times see surprises that are very good; sometimes we go through lower-grade zones. So it’s nothing unexpected. As to the throughput, yeah, it is a bit lower. That site, I think we’ve communicated, has gone through some pretty significant mill work in the last couple of years, which will continue into next year. That’s definitely affecting production. But, you know, nothing I’m concerned about longer term, and the sustaining infrastructure repairs that we are doing in the near facility is to be prepared for the next years of the life of Greens Creek.

Tosin Jayeola (Analyst at Jefferies)

Right, thanks. And maybe just one additional question on Keno Hill. Realistically speaking, can Keno achieve commercial production at a reduced operating rate, and what does the slowdown mean for the company’s medium-term target of 20 million ounces of annual production?

Russell Lawlar (Senior Vice President, Chief Financial Officer and Treasurer)

So, Tosin, again I’m going to restate at least the little bit that I heard, and I apologize again because I’m having a hard time hearing you. But I think you started with commercial production at Keno Hill, and the criteria for commercial production at Keno Hill is well defined in our 10Q. What I would say is that with the suppression of production that we’ve talked about, we wouldn’t expect to see that commercial production happen until later this decade or early, early next.

What I would say on that though as well is that doesn’t actually impact any of the accounting of the costs. So all that is is just a mining term that we use under US GAAP.

Tosin Jayeola (Analyst at Jefferies)

Right. And what does that slowdown mean for the company’s medium-term target of 20 million ounces?

Russell Lawlar (Senior Vice President, Chief Financial Officer and Treasurer)

What does that have to do with the impact on getting to an ounce target? Is that what you’re suggesting?

Rob Krcmarov (Chief Executive Officer)

To the 20 million: we flagged that the 20 million is, you know, we expect to achieve that in the medium term. And so, again, this slowdown is the suppressed production while we organize the investments in infrastructure and get the critical permits that we need—probably around about mid-2029—then we should be relatively unconstrained and be able to ramp production back up to 440 tonnes per day. Longer term, beyond that, the mill is actually rated at beyond 600 tonnes per day.

But that would require another phase of investment and another phase of permitting, so that’s longer term. So the incremental reduction in production at Keno Hill, we expect that to last roughly three years, and then you’ll see that increase beyond what we’ve basically been producing throughout its history, actually. So no real impact to our 20 million ounces a year target, again flagging that that’s in the medium term.

OPERATOR

Your next question comes from the line of Cosmos Chu from CIBC. Your line is open. Please go ahead.

Cosmos Chu (Analyst)

Hi. Thanks, Rob and team. Maybe my first question is going back to Keno Hill. Yesterday you talked in detail about the tailings capacity constraints. Is that something new? It’s certainly something newer to me. I know you kind of touched on it in your Q2 MD&A, but previous to that it was more talking about the permitted capacity of 440 tons per day, quartz mining license, water license. Are these all sort of interrelated? And if the tailings capacity constraints are not new to you, is the mid-2029 timeline new?

Is that why you’ve had to curtail your throughput starting in Q4?

Rob Krcmarov (Chief Executive Officer)

No, it’s not new, and yes, they are all interrelated. So again, just to recap, I think one of the new things is we’ve quantified that we’ve got 200,000 tonnes of tailings left. So that’s what we have to play with. We need to obviously get the permits to increase tailings capacity. As we’re mining, we’re also generating waste, so there is a limit on that. And then as we’re doing more development and more mining, we’re generating more water, and so we need to treat that water to the same standards that we agreed to.

A lot of it’s permitting related. Nothing really new here. Patrick, can you add some more color?

Patrick

Yeah. So as Rob said, there are three constraints that are currently in place: tailings capacity, waste rock capacity, and the ability to handle water that we encounter through our water treatment plants. Those aren’t new constraints. What we have provided is a little more clarity on how we’re planning to manage those constraints until we receive our permits, which we expect mid-2029.

Cosmos Chu (Analyst)

Great. And then Patrick, or maybe Rob, as you mentioned, there’s three different constraints: tailings capacity, waste rock, and water treatment. Which is the biggest constraint? Are they all about the same?

Patrick

I would say that tailings is a fixed constraint in that we know how much permitted capacity we have ahead of us. The other two are a bit more variable; they depend on things which are, to some degree, a bit outside of our control. We’re not sure when we will encounter water. We have models, we think that we know what’s ahead of us, but there is a bit of uncertainty around that. Tailings is a hard constraint, and that’s what we’re using to base our plan on currently.

Cosmos Chu (Analyst)

Great. And then also at Keno Hill—and Rob, it was great to hear that you got four drills on site and there’s exploration success at Keno Hill—but could you maybe talk me through the rationale in terms of drilling in the near term at Keno Hill? It’s great, Flame & Moth 900 feet southwest of these existing resources, but you have this near- or intermediate-term constraint on milling capacity. So do you need to find more ounces, or what’s the return on this?

Or are you trying to find higher-grade ounces so that you can actually feed it into the mill at a lower capacity?

Rob Krcmarov (Chief Executive Officer)

High-grade ounces is always the target, and that’s where Kurt and his team have been having a lot of success. If you have a look at Birmingham Deeps, as we head down plunge, the grades get even higher. We’re also targeting—and again, most of our exploration in the district is near-mine. We’re working in and around the existing ore bodies. We’re not really going out to any of Kurt’s 17 targets that could have more than 50 million ounce potential. We’re really sticking close to where we have existing developments so we can basically monetize any wins there, again in the medium term.

We’re excited by that area along strike, continuing to step out from Birmingham to the north, where you have the convergence of the historic Hector-Calumet. There are just a handful of holes there, and that’s really where everything’s pointing to us that there could be larger resources available. Kurt, sorry, I should have deferred to you.

Kurt

No, I think he covered it well. I think one of the goals at the deep Birmingham towards the Hector-Calumet is that we think that the fluid source for both those deposits is probably the same, and so there could be a big prize between those two deposits. All of our drilling has been focused near-mine, near the Birmingham, near Flame & Moth, trying to increase resources and reserves at the operating mines.

Rob Krcmarov (Chief Executive Officer)

But you picked up on an important point, Cosmos, and that’s the high-grade point. It’s not just finding high grade, it’s actually mining high grade by reducing dilution, and so that’s going to be a focus for us. We’re looking at various options that we were talking about. Brian, can you talk about the mechanical cutting and stuff?

Brian Erickson

Yeah. We’re obviously giving guidance we’re going to reduce tonnage there, but we’re not resting on that. We’ve been working for a number of years to reduce the mining widths and reduce that dilution. We’ve got some testing underway up at the mill to determine potential opportunities to reduce dilution in the ore feed. So there’s a lot of work going on on this. We’ll update you as we get some highlights from some of this work we’re doing.

Cosmos Chu (Analyst)

I guess, Rob, to ask it more directly, do you need to find more ounces, even if it’s near-mine, when you have this constrained near term to 300 tons per day?

Rob Krcmarov (Chief Executive Officer)

I don’t think we need to find more ounces. We’ve already got a reserve life that’s, I think it’s about 15 years or something like that, and we’re yet to develop the Birmingham Deeps, which is higher grade. We don’t need more ounces. What we need to do is get the throughput. It’s got high fixed costs, as you know, and so that denominator is a little bit low. And so once we unconstrain it and we can develop faster, we can mine faster, we generate more water, we can treat that water, we can place the tailings and the waste, you’ll see it start to approach its full potential under the 440 limit from around about 2029 onwards.

Cosmos Chu (Analyst)

Great. And then, Rob, maybe one last question. It’s great to see that in an industry where everyone else is talking about inflation and input costs being higher, and we’ve seen a number of companies increase their sustaining cost guidance for 2026, you’ve actually gone the other direction. You’ve decreased it, which is great. But maybe can you talk about how much of that is attributable to byproduct credits? And could you maybe talk about labor input costs?

Are you seeing any pressure, especially in the Silver Valley? Because I’ve heard Silver Valley competition has been pretty high in terms of labor and cost and whatnot. Could you maybe touch on all that, Rob? Or maybe Russell? Russell?

Russell Lawlar (Senior Vice President, Chief Financial Officer and Treasurer)

Yeah, yeah, Cosmos, I certainly can take that. And I agree with you that it’s great that we’re able to improve our all-in sustaining costs. That took place for really a few reasons. One was byproduct credits. When we came into the year, we had to make assumptions as it related to specifically gold and zinc, and one of the things that sometimes people forget about is the large byproduct credit that Greens Creek does have in zinc. Both of those have been more favorable than the assumptions that we made, and that’s part of what we’re seeing during the year.

And then also keep in mind, our sustaining capital also went down slightly, so that also improved our all-in sustaining costs. From the perspective of production costs, we do see about 50% of our cost comes from labor, and that will be something—as we see competition for miners, whether that’s in the Silver Valley or elsewhere—that we’ll have to keep up with. I think in the current term, you can see in our cost structure we’ve not been impacted significantly, but it will be something that we’ll have to keep in mind as we go forward.

OPERATOR

This completes the time allotted for questions. If you have any additional questions, please reach out to Mike Parkin via the Contact Us link on the website. I will now turn the call back to Rob Krcmarov, President and CEO, for closing remarks.

Rob Krcmarov (Chief Executive Officer)

Well, thank you. And just to pick up on that point, I do encourage you—I know that we’ve run out of our allocated time—but your questions are important to us, so please do reach out to Mike after this call. And so thank you all for the thoughtful questions today, and thanks for joining us this morning. I’m going to leave this with you: we’re in the strongest financial position this company has ever been in. We’re well positioned to achieve our 2026 guidance, and we’re putting that strength to work for our shareholders. And we look forward to updating you again next quarter. Thanks and have a great day.

OPERATOR

This concludes today’s call. Thank you for attending. You may now disconnect.

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