Hecla Mining Company (HL)
Q1 2010 Earnings Call Transcript
April 28, 2010 1:00 pm ET
Don Poirier – VP, IR/Corporate Development
Phil Baker – President and CEO
Jim Sabala – SVP and CFO
Dean McDonald – VP, Exploration
Scott Hartman – VP, Operations
Mike Dexter – General Manager, Lucky Friday mine.
Anthony Sorrentino – Sorrentino Metals
John Bridges [ph]
Steven Butler [ph]
Chris Lichtenheldt – UBS
David Christie – Scotia Capital
Previous Statements by HL
» Hecla Mining Company Q4 2009 Earnings Call Transcript
» Hecla Mining Q3 2009 Earnings Call Transcript
» Hecla Mining Co. Q2 2009 Earnings Call Transcript
Good day, ladies and gentlemen and welcome to the Hecla Mining Company first quarter 2010 financial results. My name is Amelia, and I will be your coordinator for today.
At this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today’s conference. (Operator Instructions)
I would now like to turn the presentation over to your host for today’s call, Mr. Don Poirier.
Thank you. Welcome, everyone and thank you for joining us today on our first quarter Conference Call. Our call is being webcast today at www.hecla-mining.com.
Our news release from earlier today is available on the website and there's also a slide presentation on the same website that we will lead you through.
On today’s call, we'll have Phil Baker, Hecla's President and CEO and he's joined by Jim Sabala, our Senior Vice President and CFO, Dean McDonald, Vice President of Exploration, Scott Hartman, Vice President Operations and Mike Dexter, General Manager Lucky Friday mine.
Before we get started I need to remind you that any forward-looking statements made today by the management comes under the Private Securities Litigation Reform Act. It involves a number of risks that could cause results to differ from projections.
In addition to our filings at the SEC, we are allowed to disclose mineral deposits we can economically and legally extract or produce.
Investors are cautioned about our use of such terms as measured, indicated and inferred resources and we urge you to consider those disclosures provided in our SEC filings.
With that, it gives me great pleasure to introduce you to Phil Baker, Hecla's President and Chief executive officer.
Thanks, Don and we do have on the line today Scott Hartman, who is our Vice President of Greens Creek operations and Mike Dexter who is the Vice President of the Lucky Friday, so they will be available to answer your questions.
And thanks for joining the call. If you go to Slide 3 that's titled first quarter highlights, this first quarter is another strong quarter setting or approaching a number of new records because of the quality of the mines and our people.
We're on track to produce at least 10 million ounces with very low costs given our lead and zinc by-product production and the increase throughput of both mines. Of course, The Lucky Friday has a history of being a great operation having mined its 10 millionth ton over the past 68 years and this quarter despite increases in receivables, Capital Expenditures and exploration spending, we still increased the company’s net cash position of $11 million for the quarter.
So if you turn to Slide 4, low cash costs high margin. This shows the strength of the margins our mines generate and this chart shows the past nine quarters, so over two years the salmon color is our cash cost which if not the lowest in our industry is close to it. The blue bar is the margin which is calculated by subtracting our cash costs from the average market price.
So the last bar on the chart shows that the first quarter of 2010 where we generated almost $20 per ounce of margin and in seven of these last nine quarters we've had double digit margins with three quarters above $19 margin.
A key driver of that margin is our extremely low unit cost. You could see it on a per ounce basis here, how the cash cost has gone from $7.49 in Q4 ‘08 to negative $2 the last quarter of ‘09 and to negative $3 this quarter. So if we continue to see prices in the range that we're in now and are able to maintain our costs where we have them, I would expect to see operating cash flow in excess of $150 million for the year.
Now, there's a lot of factors that go into the margin generation grades, by-product volumes and prices and one is our throughput that drives our cost per ton, so if you go to Slide 5, high throughput at both operations.
In Greens Creek, the mill capacity and the right balance of recoveries to the final product we make is about 2,300 tons per day, so what we're trying to do in the mine is balance development, backfilling and production so we can consistently produce a 2,300 tons per day year in and year out and we're not there and it's not an overnight process to get there and this year, we're trying to average about 2,200 tons per day and so this quarter we're spot on and with that, milling and mining costs we’re about $64 per ton, about $3.50 per ton improvement over the last year’s first quarter,
And at the Lucky Friday, we've been constrained by mill capacity, so over the years we've made investment to eliminate the bottlenecks, and we've made tremendous progress evidenced by this new record at over a thousand tons per day. We're not projecting to stay at this level but stay tuned because we are looking for how we could make it sustainable.