UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 1-8491
HECLA MINING COMPANY
(Exact Name of Registrant as Specified in its Charter)
Delaware
77-0664171
(State or other jurisdiction of
incorporation or organization)
(I.R.S. EmployerIdentification No.)
6500 Mineral Drive, Suite 200
Coeur d’Alene, Idaho
83815-9408
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (208) 769-4100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.25 per share
HL
New York Stock Exchange
Series B Cumulative Convertible Preferred
Stock, par value $0.25 per share
HL-PB
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No __
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No __
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Shares Outstanding August 3, 2023
Common stock, par value
$0.25 par value per share
617,339,547
Hecla Mining Company and Subsidiaries
Form 10-Q
For the Quarter Ended June 30, 2023
INDEX*
Page
PART I.
FINANCIAL INFORMATION
3
Item 1.
Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income - Three Months Ended and Six Months Ended June 30, 2023 and 2022
Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2023 and 2022
4
Condensed Consolidated Balance Sheets - June 30, 2023 and December 31, 2022
5
Condensed Consolidated Statements of Changes in Stockholders' Equity – Three Months Ended and Six Months Ended June 30, 2023 and 2022
6
Notes to Condensed Consolidated Financial Statements (unaudited)
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19
Overview
Consolidated Results of Operations
20
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)
34
Financial Liquidity and Capital Resources
41
Contractual Obligations, Contingent Liabilities and Commitments
44
Critical Accounting Estimates
Off-Balance Sheet Arrangements
Guarantor Subsidiaries
45
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
48
Item 4.
Controls and Procedures
49
PART II.
OTHER INFORMATION
Legal Proceedings
Item 1A.
Risk Factors
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
50
Signatures
51
*Items 2, 3 and 5 of Part II are omitted as they are not applicable.
2
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)
(Dollars and shares in thousands, except for per-share amounts)
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
Sales
$
178,131
191,242
377,631
377,741
Cost of sales and other direct production costs
107,754
115,907
233,304
221,679
Depreciation, depletion and amortization
32,718
38,072
71,720
73,370
Total cost of sales
140,472
153,979
305,024
295,049
Gross profit
37,659
37,263
72,607
82,692
Other operating expenses:
General and administrative
10,783
9,692
22,853
17,986
Exploration and pre-development
6,893
11,200
11,860
24,008
Ramp-up and suspension costs
16,323
5,242
27,659
11,447
Provision for closed operations and environmental matters
3,111
1,472
4,155
2,373
Other operating (income) expense, net
(4,262
)
1,945
(4,284
4,408
Total other operating expenses
32,848
29,551
62,243
60,222
Income from operations
4,811
7,712
10,364
22,470
Other income (expense):
Interest expense
(10,311
(10,505
(20,476
(20,911
Fair value adjustments, net
(2,558
(16,428
623
(10,463
Net foreign exchange gain (loss)
(3,850
4,482
(3,742
2,444
Other income
1,376
1,470
2,768
2,975
Total other expense
(15,343
(20,981
(20,827
(25,955
Income before income and mining taxes
(10,532
(13,269
(3,485
Income and mining tax expense
(5,162
(254
(8,404
(5,885
Net loss
(15,694
(13,523
(18,867
(9,370
Preferred stock dividends
(138
(276
Net loss applicable to common stockholders
(15,832
(13,661
(19,143
(9,646
Comprehensive income (loss):
Change in fair value of derivative contracts designated as hedge transactions
5,232
65,348
11,748
32,183
Comprehensive income (loss)
(10,462
51,825
(7,119
22,813
Basic loss per common share after preferred dividends
(0.03
(0.02
Diluted loss per common share after preferred dividends
Weighted average number of common shares outstanding - basic
604,088
539,401
602,077
538,943
Weighted average number of common shares outstanding - diluted
Cash dividends declared per common share
0.00625
0.0125
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Operating activities:
Non-cash elements included in net loss:
74,610
73,656
Adjustments of inventory to net realizable value
7,518
754
(623
(14,185
Provision for reclamation and closure costs
5,328
3,271
Stock-based compensation
2,688
2,525
Deferred income taxes
4,585
(1,290
Foreign exchange loss (gain)
3,807
(3,442
Other non-cash items, net
1,574
982
Change in assets and liabilities:
Accounts receivable
28,564
19,199
Inventories
(18,121
(8,352
Other current and non-current assets
(15,063
(894
Accounts payable, accrued and other current liabilities
143
17,119
Accrued payroll and related benefits
(9,543
278
Accrued taxes
(85
(5,683
Accrued reclamation and closure costs and other non-current liabilities
(2,135
3,524
Cash provided by operating activities
64,380
78,092
Investing activities:
Additions to properties, plants, equipment and mineral interests
(105,911
(55,807
Proceeds from sale of investments
—
2,487
Proceeds from disposition of properties, plants and equipment
80
730
Purchases of investments
(21,899
Net cash used in investing activities
(105,831
(74,489
Financing activities:
Proceeds from sale of common stock, net
25,888
Acquisition of treasury stock
(2,036
(3,677
Borrowing of debt
56,000
Repayment of debt
(25,000
Dividends paid to common and preferred stockholders
(7,808
(7,027
Credit facility fees paid
(74
Repayments of finance leases
(4,765
(3,333
Net cash provided by (used in) financing activities
42,279
(14,111
Effect of exchange rates on cash
1,217
(1,321
Net (decrease) increase in cash, cash equivalents and restricted cash
2,045
(11,829
Cash, cash equivalents and restricted cash at beginning of period
105,907
211,063
Cash, cash equivalents and restricted cash at end of period
107,952
199,234
Supplemental disclosure of cash flow information:
Cash paid for interest
18,812
18,749
Cash paid for income and mining taxes, net
6,152
11,888
Significant non-cash investing and financing activities:
Addition of finance lease obligations and right-of-use assets
16,092
5,051
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except shares)
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
106,786
104,743
Accounts receivable:
Trade
15,595
45,146
Other, net
15,121
10,695
Inventories:
Concentrates, doré, stockpiled ore, and metals in transit and in-process
34,624
37,303
Materials and supplies
59,989
53,369
Other current assets
27,040
16,471
Total current assets
259,155
267,727
Investments
20,778
24,018
Restricted cash
1,166
1,164
Properties, plants, equipment and mineral interests, net
2,615,747
2,569,790
Operating lease right-of-use assets
9,901
11,064
Deferred tax assets
2,703
21,105
Other non-current assets
36,009
32,304
Total assets
2,945,459
2,927,172
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities
81,653
84,747
25,993
37,579
4,036
4,030
Finance leases
11,213
9,483
Accrued reclamation and closure costs
9,693
8,591
Accrued interest
14,404
14,454
Other current liabilities
4,348
19,582
Total current liabilities
151,340
178,466
110,236
108,408
Long-term debt including finance leases
559,817
517,742
Deferred tax liability
118,611
125,846
Other non-current liabilities
12,619
17,743
Total liabilities
952,623
948,205
Commitments and contingencies (Notes 4, 7, 8, and 10)
STOCKHOLDERS’ EQUITY
Preferred stock, 5,000,000 shares authorized:
Series B preferred stock, $0.25 par value, 157,776 shares issued and outstanding, liquidation preference — $7,889
39
Common stock, $0.25 par value, authorized 750,000,000 shares; issued June 30, 2023 — 613,682,159 shares and December 31, 2022 — 607,619,495 shares
153,334
151,819
Capital surplus
2,289,607
2,260,290
Accumulated deficit
(430,606
(403,931
Accumulated other comprehensive income, net
14,196
2,448
Less treasury stock, at cost; June 30, 2023 — 8,537,067 and December 31, 2022 — 8,132,553 shares issued and held in treasury
(33,734
(31,698
Total stockholders’ equity
1,992,836
1,978,967
Total liabilities and stockholders’ equity
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(Dollars are in thousands, except for share and per share amounts)
Three Months Ended June 30, 2023
Series BPreferredStock
CommonStock
Capital Surplus
AccumulatedDeficit
AccumulatedOtherComprehensive Income (Loss), net
TreasuryStock
Total
Balances, April 1, 2023
$39
$152,536
$2,273,793
$(410,995)
$8,964
$(32,180)
$1,992,157
(15,694)
Stock-based compensation expense
1,498
Incentive compensation units distributed (936,845 shares)
234
(234)
(1,554)
Common stock ($0.00625 per share) and Series B Preferred Stock ($0.875 per share) dividends declared
(3,917)
Common stock issued under ATM program (2,080,060 shares)
521
13,482
14,003
Common stock issued for 401(k) match (174,514 shares)
43
1,068
1,111
Other comprehensive income
Balances, June 30, 2023
$153,334
$2,289,607
$(430,606)
$14,196
$(33,734)
$1,992,836
Three Months Ended June 30, 2022
Balances, April 1, 2022
$136,657
$2,036,417
$(353,007)
$(61,621)
$(29,942)
$1,728,543
(13,523)
837
Incentive compensation units distributed (901,215 shares)
225
(225)
(1,756)
(3,518)
Common stock issued for 401(k) match (143,200 shares)
36
928
964
Common stock issued to directors (98,310 shares)
25
392
417
Common stock issued to pension plans (1,190,000 shares)
298
5,272
5,570
Balances, June 30, 2022
$137,241
$2,043,621
$(370,048)
$3,727
$(31,698)
$1,782,882
Six Months Ended June 30, 2023
Balances, January 1, 2023
Incentive compensation units distributed (1,435,193 shares)
359
(359
Common stock ($0.0125 per share) and Series B Preferred Stock ($1.75 per share) dividends declared
Common stock issued under ATM program (4,253,334 shares)
1,063
24,825
Common stock issued for 401(k) match (374,137 shares)
93
2,163
2,256
Six Months Ended June 30, 2022
Balances, January 1, 2022
136,391
2,034,485
(353,651
(28,456
(28,021
1,760,787
2,108
Incentive compensation units distributed (1,789,042 shares)
447
(447
Common stock issued for 401(k) match (321,110 shares)
1,811
1,891
137,241
2,043,621
(370,048
3,727
1,782,882
7
Note 1. Basis of Preparation of Financial Statements
The accompanying unaudited interim condensed consolidated financial statements of Hecla Mining Company and its subsidiaries (collectively, “Hecla,” “the Company,” “we,” “our,” or “us,” except where the context requires otherwise) have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required annually by accounting principles generally accepted in the United States of America (“GAAP”). Therefore, this information should be read in conjunction with Hecla Mining Company’s consolidated financial statements and notes contained in our annual report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”). The consolidated December 31, 2022 balance sheet data was derived from our audited consolidated financial statements. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the three- and six-month periods ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
Note 2. Business Segments and Sales of Products
We discover, acquire and develop mines and other mineral interests and produce and market (i) concentrates containing silver, gold, lead and zinc, (ii) carbon material containing silver and gold, and (iii) doré containing silver and gold. We are currently organized and managed in five segments: Greens Creek, Lucky Friday, Keno Hill, Casa Berardi and Nevada Operations.
General corporate activities not associated with operating mines and their various exploration activities, as well as idle properties and environmental remediation services in the Yukon, Canada, are presented as “other.” The nature of the items that reconcile income (loss) from operations to income before income and mining taxes are not related to our reportable segments.
The following tables present information about our reportable segments sales for the three and six months ended June 30, 2023 and 2022 (in thousands):
Three Months EndedJune 30,
Six Months EndedJune 30,
2023
2022
Net sales to unaffiliated customers:
Greens Creek
95,891
92,723
194,502
178,813
Lucky Friday
42,648
35,880
91,758
73,920
Keno Hill
1,581
Casa Berardi
36,946
62,639
87,944
124,740
Nevada Operations
687
959
268
Other
378
887
Income (loss) from operations:
30,414
27,803
61,655
62,389
10,526
5,528
25,096
14,299
(9,920
(16,683
(9,366
(572
(23,059
(3,271
(5,510
(9,728
(10,920
(21,963
(11,333
(15,319
(25,725
(28,984
The following table presents total assets by reportable segment as of June 30, 2023 and December 31, 2022 (in thousands):
Total assets:
569,367
582,687
561,012
571,510
326,796
276,096
710,027
681,631
463,520
466,722
314,737
348,526
Our sales for the three and six months ended June 30, 2023 are comprised of metal sales as described below, and $0.4 million and $0.9 million, respectively, of revenue from our environmental remediation services in the Yukon.
Sales by metal for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
Silver
79,489
70,050
161,022
136,382
Gold
62,924
82,018
138,010
159,186
Lead
21,657
21,314
47,059
40,878
Zinc
25,903
31,176
58,846
66,814
Less: Smelter and refining charges
(12,220
(13,316
(28,193
(25,519
177,753
376,744
Sales of metals for the three and six months ended June 30, 2023 included net gains of $8.2 million and $9.1 million, respectively, on financially-settled forward option contracts for silver, gold, lead and zinc. Sales of metals for the three and six months ended June 30, 2022 included net gains of $11.3 million and $6.6 million, respectively, on such contracts. See Note 8 for more information.
Note 3. Income and Mining Taxes
Major components of our income and mining tax benefit (provision) for the three and six months ended June 30, 2023 and 2022 are as follows (in thousands):
June 30,
Current:
Domestic
(270
(446
(1,798
(2,549
Foreign
(847
(1,346
(2,021
(3,087
Total current income and mining tax provision
(1,117
(1,792
(3,819
(5,636
Deferred:
(8,582
(2,150
(13,923
(7,241
4,537
3,688
9,338
6,992
Total deferred income and mining tax provision
(4,045
1,538
(4,585
(249
Total income and mining tax provision
The income and mining tax benefit (provision) for the three and six months ended June 30, 2023 and 2022 varies from the amounts that would have resulted from applying the statutory tax rates to pre-tax income due primarily to the impact of taxation in foreign jurisdictions, non-recognition of net operating losses and foreign exchange gains and losses in certain jurisdictions.
For the three and six months ended June 30, 2023, we used the annual effective tax rate method to calculate the tax provision. Valuation allowances on Nevada, Mexico and certain Canadian net operating losses were treated as discrete adjustments to the tax calculation including losses incurred by the acquired Alexco Resource Corp. ("Alexco") entities, which were acquired on September 7, 2022.
Note 4. Employee Benefit Plans
We sponsor three defined benefit pension plans, two of which cover substantially all U.S. employees. Net periodic pension cost for the plans consisted of the following for the three and six months ended June 30, 2023 and 2022 (in thousands):
Service cost
949
1,566
1,898
3,131
Interest cost
1,993
1,369
3,986
2,738
Expected return on plan assets
(3,107
(3,363
(6,214
(6,726
Amortization of prior service cost
125
128
250
256
Amortization of net loss
(47
512
(94
1,024
Net periodic pension (benefit) cost
(87
212
(174
423
9
For the three and six months ended June 30, 2023 and 2022, the service cost component of net periodic pension cost is included in the same line items of our condensed consolidated financial statements as other employee compensation costs. The net benefit related to all other components of net periodic pension cost of $1.0 million and $2.1 million for the three and six months ended June 30, 2023, respectively, and $1.4 million and $2.7 million for the three and six months ended June 30, 2022, respectively, is included in other (expense) income on our condensed consolidated statements of operations and comprehensive (loss) income.
Note 5. Loss Per Common Share
We calculate basic loss per common share on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted income per share is calculated using the weighted average number of shares of common stock outstanding during the period plus the effect of potential dilutive common shares during the period using the treasury stock and if-converted methods.
Potential dilutive shares of common stock include outstanding unvested restricted stock awards, deferred restricted stock units, warrants and convertible preferred stock for periods in which we have reported net income. For periods in which we report net losses, potential dilutive shares of common stock are excluded, as their conversion and exercise would be anti-dilutive.
The following table represents net loss per common share – basic and diluted (in thousands, except income (loss) per share):
Numerator
Denominator
Basic weighted average common shares
Dilutive restricted stock units, warrants and deferred shares
Diluted weighted average common shares
Basic loss per common share
Diluted loss per common share
For the three and six months ended June 30, 2023 and 2022, all outstanding unvested restricted stock units, deferred restricted stock units, warrants and convertible preferred stock were excluded from the computation of diluted loss per share, as our reported net loss would cause their conversion and exercise to have an anti-dilutive effect on the calculation of diluted loss per share.
Note 6. Stockholders’ Equity
At-The-Market Equity Distribution Agreement
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. 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 our share price, our cash resources, customary black-out restrictions, and whether we have any material inside information. The agreement can be terminated by us at any time. Any sales of shares under the equity distribution agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form S-3. As of June 30, 2023 we had sold 8,113,533 shares under the agreement for proceeds of $43.2 million, net of commissions and fees of $0.7 million. During the three months ended June 30, 2023, we sold 2,080,060 shares under the agreement for proceeds of $14.0 million, net of commissions and fees of $0.2 million. During the six months ended June 30, 2023, we sold 4,253,334 shares under the agreement for proceeds of $25.9 million, net of commissions and fees of $0.4 million.
Stock-based Compensation Plans
The Company has stock incentive plans for executives, directors and eligible employees, comprised of performance shares and restricted stock. Stock-based compensation expense for restricted stock unit and performance-based grants (collectively "incentive compensation") to employees and shares issued to non-employee directors totaled $1.5 million and $2.7 million for the three and six months ended June 30, 2023, respectively, and $1.3 million and $2.5 million for the three and six months ended June 30, 2022, respectively. At June 30, 2023, there was $9.5 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.7 years.
10
The following table summarizes the grants awarded during the six months ended June 30, 2023:
Grant date
Award type
Number granted
Grant date fair value per share
June 21, 2023
Restricted stock
1,230,223
$5.05
Performance based
314,778
$3.54
In connection with the vesting of incentive compensation, employees have in the past, at their election and when permitted by us, chosen to satisfy their minimum tax withholding obligations through net share settlement, pursuant to which the Company withholds the number of shares necessary to satisfy such withholding obligations and pays the obligations in cash. As a result, in the six months ended June 30, 2023, we withheld 404,514 shares valued at approximately $2.0 million, or approximately $5.03 per share.
Common Stock Dividends
The following table summarizes the dividends our Board of Directors have declared and we have paid during 2023 pursuant to our dividend policy:
Quarter
Prior Quarter Realized Silver Price
Silver-linked component
Minimum component
Total dividend per share
First
22.03
$0.0025
$0.00375
$0.00625
Second
22.62
Accumulated Other Comprehensive Income (Loss), Net
The following table lists the beginning balance, quarterly activity and ending balances, net of income and mining tax, of each component of “Accumulated other comprehensive income (loss), net” (in thousands):
Changes in fair value of derivative contracts designated as hedge transactions
AdjustmentsFor Pension Plans
TotalAccumulatedOtherComprehensiveIncome (Loss), Net
Balance January 1, 2023
9,162
(6,714
Changes in fair value of derivative contracts
8,665
Gains and deferred gains transferred from accumulated other comprehensive income
(2,149
Balance March 31, 2023
15,678
8,964
7,445
(2,213
Balance June 30, 2023
20,910
Balance January 1, 2022
(4,675
(23,781
(31,798
Gains transferred from accumulated other comprehensive income
(1,367
Balance March 31, 2022
(37,840
(61,621
61,939
3,409
Balance June 30, 2022
27,508
Note 7. Debt, Credit Agreement and Leases
Our debt as of June 30, 2023 and December 31, 2022 consisted of our 7.25% Senior Notes due February 15, 2028 (“Senior Notes”), our Series 2020-A Senior Notes due July 9, 2025 (the “IQ Notes”) and any drawn amounts on our $150 million Credit Agreement, which is described separately below. The following tables summarize our long-term debt balances, excluding interest and borrowings under the Credit Agreement, as of June 30, 2023 and December 31, 2022 (in thousands):
11
Senior Notes
IQ Notes
Principal
475,000
36,434
511,434
Unamortized discount/premium and issuance costs
(4,186
332
(3,854
Long-term debt balance
470,814
36,766
507,580
35,614
510,614
(4,640
(4,248
470,360
36,006
506,366
The following table summarizes the scheduled annual future payments, including interest, for our Senior Notes, IQ Notes, and finance and operating leases as of June 30, 2023 (in thousands). Operating leases are included in other current and non-current liabilities on our condensed consolidated balance sheets. The amounts for the IQ Notes are stated in U.S. dollars (“USD”) based on the USD/Canadian dollar (“CAD”) exchange rate as of June 30, 2023.
Twelve-month period ending June 30,
Finance Leases
Operating Leases
2024
34,438
2,322
10,534
2,248
2025
38,604
9,532
1,283
2026
6,932
1,276
2027
4,772
1,229
2028
505,131
4,157
1,129
Thereafter
6,050
642,883
40,926
35,927
13,215
Less: effect of discounting
(3,476
(3,174
32,451
10,041
Credit Agreement
On July 21, 2022, we entered into a revolving credit facility (the "Credit Agreement") with various financial institutions (the “Lenders”), Bank of Montreal and Bank of America, N.A. as letters of credit issuers, and Bank of America, N.A., as administrative agent for the Lenders and as swingline lender, to replace our prior credit agreement. The Credit Agreement is a $150 million senior secured revolving facility, with an option to be increased in an aggregate amount not to exceed $75 million. Any revolving loans under the Credit Agreement have a maturity date of July 21, 2026. Proceeds of the revolving loans under the Credit Agreement may be used for general corporate purposes. The interest rate on the outstanding loans under the Credit Agreement is based on the Company’s net leverage ratio and is calculated at (i) Term Secured Overnight Financing Rate ("SOFR") plus 2% to 3.5% or (ii) Bank of America’s Base Rate plus 1% to 2.5% with Base Rate being the highest of (i) the Bank of America prime rate, (ii) the Federal Funds rate plus .50% or (iii) Term SOFR plus 1.00%. For each amount drawn, we elect whether we draw on a one, three or six month basis or annual basis for SOFR. If we elect to draw for greater than six months, we pay interest quarterly on the outstanding amount.
We are also required to pay a commitment fee of between 0.45% to 0.78750%, depending on our net leverage ratio. Letters of credit issued under the Credit Agreement bear a fee between 2.00% and 3.50% based on our net leverage ratio, as well as a fronting fee to each issuing bank at an agreed upon rate per annum on the average daily dollar amount of our letter of credit exposure.
Hecla Mining Company and certain of our subsidiaries are the borrowers under the Credit Agreement, while certain of our other subsidiaries are guarantors of the borrowers’ obligations under the Credit Agreement. As further security, the Credit Agreement is collateralized by a mortgage on the Greens Creek mine, the equity interests of subsidiaries that own the Greens Creek mine or are part of the Greens Creek Joint Venture and our subsidiary Hecla Admiralty Company (the “Greens Creek Group”), and by all of the Green Creek Group’s rights and interests in the Greens Creek Joint Venture Agreement, and in all assets of the joint venture and of any member of the Greens Creek Group.
At June 30, 2023, we had net draws of $31 million outstanding at an interest rate of 7.76%, and $6.8 million of outstanding letters of credit. Letters of credit that are outstanding reduce availability under the Credit Agreement.
We believe we were in compliance with all covenants under the Credit Agreement as of June 30, 2023.
Note 8. Derivative Instruments
12
General
Our current risk management policy provides that up to 75% of five years of our foreign currency, lead and zinc metals price and silver and gold price exposure may be covered under a derivatives program with certain other limitations. Our program also utilizes derivatives to manage price risk exposure created from when revenue is recognized from a shipment of concentrate until final settlement.
These instruments expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price exceeds the spot price of the hedged commodity or foreign currency and (ii) price risk to the extent that the spot price or currency exchange rate exceeds the contract price for quantities of our production and/or forecasted costs covered under contract positions.
Foreign Currency
Our wholly-owned subsidiaries owning the Casa Berardi operation and Keno Hill operation are USD-functional entities which routinely incur expenses denominated in CAD. Such expenses expose us to exchange rate fluctuations between the USD and CAD. We have a program to manage our exposure to fluctuations in the USD exchange rate for these subsidiaries' future operating and capital costs denominated in CAD. The program utilizes forward contracts to buy CAD, some of which are designated as cash flow hedges. As of June 30, 2023, we have a total of 507 forward contracts outstanding to buy a total of CAD $527.2 million having a notional amount of USD$396.6 million for Casa Berardi, Keno Hill, and some corporate Canadian expenses. The CAD contracts that are related to forecasted cash operating costs at Casa Berardi from 2023-2026 have a total notional value of CAD$353 million and have CAD-to-USD exchange rates ranging between 1.2755 and 1.37380. The CAD contracts that are related to forecasted capital expenditures at Casa Berardi from 2023-2026 have a total notional value of $62.3 million at an average CAD-to-USD exchange rate of 1.35. The CAD contracts that are related to forecasted costs and capital hedges at Keno Hill from 2023-2024 have a total notional value of $93.0 million at an average CAD-to-USD exchange rate of 1.36. The CAD contracts that are related to forecasted cash operating costs at Casa Berardi are designated as cash flow hedges.
As of June 30, 2023 and December 31, 2022, we recorded the following balances for the fair value of the contracts (in millions):
December 31,
Balance sheet line item:
3.4
1.1
2.0
0.4
Current derivative liabilities
1.4
4.0
Non-current derivative liabilities
0.8
3.6
Net unrealized losses of $0.7 million related to the effective portion of the hedges are included in accumulated other comprehensive income (loss) as of June 30, 2023. Unrealized gains and losses will be transferred from accumulated other comprehensive income (loss) to current earnings as the underlying operating expenses are recognized. We estimate $0.9 million in net unrealized losses included in accumulated other comprehensive income (loss) as of June 30, 2023 will be reclassified to current earnings in the next twelve months. Net realized losses of $1.1 million and $2.0 million on contracts related to underlying expenses which have been recognized were transferred from accumulated other comprehensive income (loss) and included in cost of sales and other direct production costs for the three and six months ended June 30, 2023, respectively. Net gains of $2.4 million and $3.1 million for the three and six months ended June 30, 2023, respectively, related to contracts not designated as hedges and no net unrealized gains or losses related to ineffectiveness of the hedges are included in fair value adjustments, net on our consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2023, respectively.
Metals Prices
We are currently using financially-settled forward contracts to manage the exposure to:
The following tables summarize the quantities of metals committed under forward contracts at June 30, 2023 and December 31, 2022:
13
Ounces/pounds under contract (in 000's)
Average price per ounce/pound
(ounces)
(pounds)
Contracts on provisional sales
2023 settlements
1,845
1,709
8,433
24.35
1,946
1.31
1.00
Contracts on forecasted sales
441
29,377
1.51
0.99
2024 settlements
75,178
0.98
2025 settlements
12,897
N/A
0.96
3,124
18,629
11,960
21.55
1,795
1.38
37,533
75,618
1.34
45,856
We recorded the following balances for the fair value of the forward contracts as of June 30, 2023 and December 31, 2022 (in millions):
Contracts in an asset position
Contracts in a liability position
Net asset (liability)
7.3
1.2
0.1
(12.1
(2.5
Net realized and unrealized gains of $26.7 million related to the effective portion of the contracts designated as hedges were included in accumulated other comprehensive income (loss) as of June 30, 2023, and are net of related deferred taxes. Unrealized gains and losses will be transferred from accumulated other comprehensive income (loss) to current earnings as the underlying forecasted sales are recognized. We estimate $19.0 million in net realized and unrealized gains included in accumulated other comprehensive income (loss) as of June 30, 2023 would be reclassified to current earnings in the next twelve months. The realized gains arose due to cash settlement of zinc contracts prior to maturity in 2022 and during the second quarter of 2023 for net proceeds of $17.4 million and $7.6 million, respectively. We recognized a net gain of $8.2 million, including a $3.3 million gain transferred from accumulated other comprehensive income (loss), and a net gain of $11.3 million, during the three months ended June 30, 2023 and 2022, respectively. We recognized a net gain of $9.1 million, including a $6.3 million gain transferred from accumulated other comprehensive income (loss), and a net gain of $6.6 million, during the six months ended June 30, 2023 and 2022, respectively. These gains and losses were recognized on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which are included in sales. The net losses and gains recognized on the contracts offset gains and losses related to price adjustments on our provisional concentrate sales due to changes to silver, gold, lead and zinc prices between the time of sale and final settlement.
Credit-risk-related Contingent Features
Certain of our derivative contracts contain cross default provisions which provide that a default under our Credit Agreement would cause a default under the derivative contract. As of June 30, 2023, we have not posted any collateral related to these contracts. The fair value of derivatives in a net liability position related to these agreements was $2.3 million as of June 30, 2023, which includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at June 30, 2023, we could have been required to settle our obligations under the agreements at their termination value of $2.3 million.
Note 9. Fair Value Measurement
Fair value adjustments, net is comprised of the following (in thousands):
Gain (loss) on derivative contracts
3,022
(689
4,008
(893
Unrealized loss on equity securities investments
(5,579
(15,739
(3,385
(9,639
Gain on disposition or exchange of investments
69
Total fair value adjustments, net
(2,557
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Accounting guidance has established a hierarchy for inputs used to measure assets and liabilities at fair value on a recurring basis. The three levels included in the hierarchy are:
Level 1: quoted prices in active markets for identical assets or liabilities;
Level 2: significant other observable inputs; and
Level 3: significant unobservable inputs.
The table below sets forth our assets and liabilities that were accounted for at fair value on a recurring basis and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category (in thousands).
Description
Balance atJune 30,2023
Balance atDecember 31,2022
InputHierarchy Level
Assets:
Cash and cash equivalents:
Money market funds and other bank deposits
Level 1
Current and non-current investments:
Equity securities - mining industry
Trade accounts receivable:
Receivables from provisional concentrate sales
Level 2
Restricted cash balances:
Certificates of deposit and other deposits
Derivative contracts - current and non-current derivatives assets:
Foreign exchange contracts
5,404
1,518
Metal forward contracts
8,675
1,309
158,404
177,898
Liabilities:
Derivative contracts - current derivatives liabilities and other non-currentliabilities:
2,198
7,548
14,643
22,191
Cash and cash equivalents consist primarily of money market funds and are valued at cost, which approximates fair value, and a small portion consists of municipal bonds having maturities of less than 90 days, which are recorded at fair value.
Current and non-current restricted cash balances consist primarily of certificates of deposit, U.S. Treasury securities, and other deposits and are valued at cost, which approximates fair value.
Our non-current investments consist of marketable equity securities of companies in the mining industry which are valued using quoted market prices for each security.
Trade accounts receivable from provisional concentrate sales are subject to final pricing and valued using quoted prices based on forward curves for the particular metals.
We use financially-settled forward contracts to manage exposure to changes in the exchange rate between USD and CAD, and the impact on CAD-denominated operating and capital costs incurred at our Casa Berardi operation and the Keno Hill operation (see Note 8 for more information). The fair value of each contract represents the present value of the difference between the forward exchange rate for the contract settlement period as of the measurement date and the contract settlement exchange rate.
We use financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments that have not reached final settlement. We also use financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our forecasted future sales (see Note 8 for more information). The fair value of each forward contract represents the present value of the difference between the forward metal price for the contract settlement period as of the measurement date and the contract settlement metal price.
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At June 30, 2023, our Senior Notes and IQ Notes were recorded at their carrying value of $470.8 million and $36.8 million, respectively, net of unamortized initial purchaser discount/premium and issuance costs. The estimated fair values of our Senior Notes and IQ Notes were $470.0 million and $35.8 million, respectively, at June 30, 2023. Quoted market prices, which we consider to be Level 1 inputs, are utilized to estimate fair values of the Senior Notes. Unobservable inputs which we consider to be Level 3, including an assumed current annual yield of 7.6%, are utilized to estimate the fair value of the IQ Notes. See Note 7 for more information.
Note 10. Commitments, Contingencies and Obligations
Johnny M Mine Area near San Mateo, McKinley County and San Mateo Creek Basin, New Mexico
In August 2012, Hecla Limited and the U.S. Environmental Protection Agency (the “EPA”) entered into a Settlement Agreement and Administrative Order on Consent for Removal Action (“Consent Order”) regarding the Johnny M Mine Area near San Mateo, McKinley County, New Mexico. Mining at the Johnny M Mine was conducted for a limited period of time by a predecessor of Hecla Limited, and the EPA had previously asserted that Hecla Limited may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) for environmental remediation and past costs incurred by the EPA at the site. Under the Consent Order, Hecla Limited agreed to pay (i) $1.1 million to the EPA for its past response costs at the site and (ii) any future response costs at the site under the Consent Order, in exchange for a covenant not to sue by the EPA. In December 2014, Hecla Limited submitted to the EPA the Engineering Evaluation and Cost Analysis (“EE/CA”) for the site which recommended on-site disposal of mine-related material. In January 2021, the parties began negotiating a new consent order to design and implement the on-site disposal response action recommended in the EE/CA. Based on the foregoing, we believe it is probable that Hecla Limited will incur a liability for the CERCLA removal action and we have accrued $10.1 million, primarily representing estimated current costs to design and implement the remedy, which are subject to change as fieldwork is performed. During the three months ended June 30, 2023, the accrual was increased by $1.1 million to $10.1 million reflecting scope of work refinement and updated cost estimates. It is possible that Hecla Limited’s liability will be more than $10.1 million, and any increase in liability could have a material adverse effect on Hecla Limited’s or our results of operations or financial position.
The Johnny M Mine is in an area known as the San Mateo Creek Basin (“SMCB”), which is an approximately 321 square mile area in New Mexico that contains numerous legacy uranium mines and mills. In addition to Johnny M, Hecla Limited’s predecessor was involved at other mining sites within the SMCB. The EPA appears to have deferred consideration of listing the SMCB site on CERCLA’s National Priorities List (“Superfund”) by removing the site from its emphasis list, and is working with various potentially responsible parties (“PRPs”) at the site in order to study and potentially address perceived groundwater issues within the SMCB. The EE/CA discussed above relates primarily to contaminated rock and soil at the Johnny M site, not groundwater and not elsewhere within the SMCB site. It is possible that Hecla Limited’s liability at the Johnny M Site, and for any other mine site within the SMCB at which Hecla Limited’s predecessor may have operated, will be greater than our current accrual of $10.1 million due to the increased scope of required remediation.
In July 2018, the EPA informed Hecla Limited that it and several other PRPs may be liable for cleanup of the SMCB site or for costs incurred by the EPA in cleaning up the site. The EPA stated it has incurred approximately $9.6 million in response costs to date. On May 2, 2022, Hecla Limited received a letter from a PRP notifying Hecla Limited that three PRPs will seek cost recovery and contribution from Hecla Limited under CERCLA for certain investigatory work performed by the PRPs at the SMCB site. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site, including the relative contributions of contamination by the various PRPs.
Carpenter Snow Creek and Barker-Hughesville Sites in Montana
In July 2010, the EPA made a formal request to Hecla for information regarding the Carpenter Snow Creek Superfund site located in Cascade County, Montana. The Carpenter Snow Creek site is located in a historical mining district, and in the early 1980s Hecla Limited leased 6 mining claims and performed limited exploration activities at the site. Hecla Limited terminated the mining lease in 1988.
In June 2011, the EPA informed Hecla Limited that it believes Hecla Limited, and several other PRPs, may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA stated in the letter that it has incurred approximately $4.5 million in response costs and estimated that total remediation costs may exceed $100 million. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site, including the relative contributions of contamination by various other PRPs.
In February 2017, the EPA made a formal request to Hecla for information regarding the Barker-Hughesville Mining District Superfund site located in Judith Basin and Cascade Counties, Montana. Hecla Limited submitted a response in April 2017. The
16
Barker-Hughesville site is located in a historic mining district, and between approximately June and December 1983, Hecla Limited was party to an agreement with another mining company under which limited exploration activities occurred at or near the site.
In August 2018, the EPA informed Hecla Limited that it and several other PRPs may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA did not include an amount of its alleged response costs to date. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning past or anticipated future costs at the site and the relative contributions of contamination by various other PRPs.
Greens Creek and Lucky Friday Environmental Issues
On May 24, 2023, our Greens Creek subsidiary resolved a previously issued Notice of Violation ("NOV") alleging violations of the Resource Conservation and Recovery Act. Terms of settlement included paying a fine of $0.1 million.
On July 12, 2022, our Lucky Friday mine received a NOV from the EPA alleging violations of the Clean Water Act between 2018 and 2021 relating primarily to concentration levels of zinc and lead in the mine’s permitted water discharges. Currently, the EPA has not initiated any formal enforcement proceeding against our Lucky Friday subsidiary. In civil judicial cases, the EPA can seek statutory penalties up to $59,973 per day per violation and, in administrative actions, the EPA can seek administrative penalties up to $23,989 per day per violation with a maximum administrative penalty of $299,989 for all alleged violations. The EPA typically pursues administrative penalties. At this time, we cannot reasonably assess the amount of penalties the EPA may seek, or predict the terms of any potential settlement with the EPA.
Litigation Related to Klondex Acquisition
On May 24, 2019, a purported Hecla stockholder filed a putative class action lawsuit in the U.S. District Court for the Southern District of New York against Hecla and certain of our executive officers, one of whom is also a director. The complaint, purportedly brought on behalf of all purchasers of Hecla common stock from March 19, 2018 through and including May 8, 2019, asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks, among other things, damages and costs and expenses. Specifically, the complaint alleges that Hecla, under the authority and control of the individual defendants, made certain material false and misleading statements and omitted certain material information regarding Hecla’s Nevada Operations. The complaint alleges that these misstatements and omissions artificially inflated the market price of Hecla common stock during the class period, thus purportedly harming investors. The Court granted our Motion to Dismiss the lawsuit, without prejudice, in February 2023, and the plaintiffs filed an amended complaint in March 2023 which repeats the same claims. We have filed a Motion to Dismiss the amended complaint. We cannot predict the outcome of this lawsuit or estimate damages if plaintiffs were to prevail. We believe that these claims are without merit and intend to defend them vigorously.
Related to this class action lawsuit, Hecla has been named as a nominal defendant in a shareholder derivative lawsuit which also names as defendants certain current and past (i) members of Hecla’s board of directors and (ii) officers of Hecla. The case was filed on May 4, 2022 in the Delaware Chancery Court. In general terms, the suit alleges breaches of fiduciary duties by the individual defendants, waste of corporate assets and unjust enrichment, and seeks damages, purportedly on behalf of Hecla.
Debt
See Note 7 for information on the commitments related to our debt arrangements as of June 30, 2023.
Other Commitments
Our contractual obligations as of June 30, 2023 included open purchase orders and commitments of approximately $16.5 million, $20.8 million, $10.5 million, $3.5 million and $2.3 million for various capital and non-capital items at Greens Creek, Lucky Friday, Keno Hill, Casa Berardi and Nevada Operations, respectively. We also have total commitments of approximately $35.9 million relating to scheduled payments on finance leases, including interest, primarily for equipment at our Greens Creek, Lucky Friday, Casa Berardi, and Keno Hill units, and total commitments of approximately $13.2 million relating to payments on operating leases (see Note 7 for more information). As part of our ongoing business and operations, we are required to provide surety bonds, bank letters of credit, and restricted deposits for various purposes, including financial support for environmental reclamation obligations and workers compensation programs. As of June 30, 2023, we had surety bonds totaling $193.2 million and letters of credit totaling $6.8 million in place as financial support for future reclamation and closure costs, self-insurance, and employee benefit plans. The obligations associated with these instruments are generally related to performance requirements that we address through ongoing operations. As the requirements are met, the beneficiary of the associated instruments cancels or returns the instrument to the issuing
17
entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure of the sites. We believe we are in compliance with all applicable bonding requirements and will be able to satisfy future bonding requirements as they arise.
Other Contingencies
We also have certain other contingencies resulting from litigation, claims, EPA investigations, and other commitments and are subject to a variety of environmental and safety laws and regulations incident to the ordinary course of business. We currently have no basis to conclude that any or all of such contingencies will materially affect our financial position, results of operations or cash flows. However, in the future, there may be changes to these contingencies, or additional contingencies may occur, any of which might result in an accrual or a change in current accruals recorded by us, and there can be no assurance that their ultimate disposition will not have a material adverse effect on our financial position, results of operations or cash flows.
Note 11. Developments in Accounting Pronouncements
Accounting Standards Updates Adopted
In March 2020, ASU No. 2020-04 was issued which provides optional guidance for a limited period of time to ease the potential burden on accounting for contract modifications caused by reference rate reform. In January 2021, ASU No. 2021-01 was issued which broadened the scope of ASU No. 2020-04 to include certain derivative instruments. In December 2022, ASU No. 2022-06 was issued which deferred the sunset date of ASU No. 2020-04. The guidance is effective for all entities as of March 12, 2020 through December 31, 2024. The guidance may be adopted over time as reference rate reform activities occur and should be applied on a prospective basis. Certain of our derivative instruments reference London Interbank Offered Rate ("LIBOR") based rates and have been amended to eliminate the LIBOR-based rate references prior to July 1, 2023. We do not expect a significant impact to our financial results, financial position or cash flows from the transition from LIBOR to alternative reference interest rates, but we will continue to monitor the impact of this transition until it is completed.
Note 12. Subsequent Events
On July 10, 2023, we completed the acquisition of ATAC Resources Ltd. ("ATAC"), a Canadian publicly traded company, for total consideration of approximately $18.8 million through the issuance of 3,676,904 shares of Hecla common stock to ATAC shareholders based on the share exchange ratio of 0.0166 Hecla share for each ATAC common share. As part of the acquisition, we also acquired 5,502,956 units consisting of (i) shares of Cascadia Minerals Ltd. (“Cascadia”) representing a 19.9% stake, and (ii) full warrants with a five-year term for a C$2 million cash investment in Cascadia. Cascadia will be managed by the former management of ATAC, who will explore specific properties in the Yukon and British Columbia. We have the right to appoint two directors to Cascadia’s board.
Forward-Looking Statements
Certain statements contained in this Form 10-Q, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk, are intended to be covered by the safe harbor provided for under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Our forward-looking statements include our current expectations and projections about future results, performance, results of litigation, prospects and opportunities, including reserves and other mineralization. We have tried to identify these forward-looking statements by using words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “feel,” “plan,” “estimate,” “project,” “forecast” and similar expressions. These forward-looking statements are based on information currently available to us and are expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.
These risks, uncertainties and other factors include, but are not limited to, those set forth under Part I, Item 1A. – Risk Factors in our 2022 Form 10-K. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to Hecla Mining Company or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
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.
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. We began ramp-up of the Keno Hill mill during the second quarter of 2023 and expect to operate at full production levels by year-end and to reach 2.5 million ounces of silver in 2023. Based upon jurisdictions in which we operate, 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.
Second Quarter 2023 Highlights
Operational:
Financial:
Year to date 2023 Highlights
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 2023 because of a series of macro-economic factors, there has been significant volatility in the financial and commodities markets, including the precious metals market. We believe the outlook for precious metals fundamentals in the medium- and long-term are favorable. Refer to “Markets” and see Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2022 ("2022 Form 10-K"), 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 (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 continued to experience significant volatility period over period. 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.
Sales by metal for the three and six months ended June 30, 2023 and 2022 were as follows:
(in thousands)
Less: smelter charges
Sales of products
Sales by metal for the three and six months ended June 30, 2023 and 2022, and the approximate variances attributed to differences in metals prices, sales volumes and smelter terms, were as follows:
Base metals
Less: smelter and refining charges
Total sales of products
Three months ended June 30, 2022
52,490
Variances - 2023 versus 2022:
Price
10,012
3,827
(5,213
1,128
9,754
Volume
(574
(23,608
283
(337
(24,236
Smelter terms
1
305
993
Three months ended June 30, 2023
47,560
Six months ended June 30, 2022
107,692
4,935
4,737
(15,068
(1,708
(7,104
19,704
(25,913
13,280
(3,251
3,820
2,285
2,287
Six months ended June 30, 2023
105,905
The fluctuations in sales for the three and six months ended June 30, 2023 compared to the same periods in 2022 were primarily due to the following two reasons:
Silver –
London PM Fix ($/ounce)
24.19
22.64
23.37
23.30
Realized price per ounce
23.67
20.68
23.12
22.45
Gold –
1,978
1,872
1,933
1,873
1,969
1,855
1,928
1,867
Lead –
LME Final Cash Buyer ($/pound)
0.97
1.03
Realized price per pound
1.02
Zinc –
1.15
1.78
1.29
1.74
1.13
1.44
1.26
1.61
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 $4.2 million for the three and six months ended June 30, 2023, respectively, and net negative price adjustments to provisional settlements of $15.7 million and $14.8 million for the three and six months ended June 30, 2022, respectively. 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.
Silver -
Ounces produced
3,832,559
3,645,454
7,873,528
6,970,162
Payable ounces sold
3,360,694
3,387,909
6,965,188
6,075,170
Gold -
35,251
45,719
74,822
87,361
31,961
44,225
71,580
85,278
Lead -
Tons produced
13,323
13,331
26,559
24,194
Payable tons sold
10,895
11,685
23,408
20,739
Zinc -
17,284
16,766
33,079
31,712
11,474
10,858
23,333
20,805
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.
21
Sales, total cost of sales, gross profit (loss), Cash Cost, After By-product Credits, per Ounce (“Cash Cost”) (non-GAAP) and AISC (non-GAAP) at our operating units for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands, except for Cash Cost and AISC):
Total Silver (2)
Nevada Operations and Other (3)
Total Gold
Three Months Ended June 30, 2023:
140,120
1,065
38,011
(63,054
(32,190
(1,581
(96,825
(42,576
(1,071
(43,647
Gross profit (loss)
32,837
10,458
43,295
(5,630
(6
Cash Cost (1)
1.33
6.96
3.32
1,658
AISC (1)
5.34
14.24
11.63
2,147
Three Months Ended June 30, 2022:
128,603
(60,506
(30,348
(90,854
(61,870
(1,255
(63,125
32,217
5,532
37,749
769
(486
(3.29
3.07
(1.14
1,371
3.10
9.91
8.08
1,605
287,841
1,846
89,790
(129,342
(66,724
(197,647
(105,574
(1,803
(107,377
65,160
25,034
90,194
(17,630
(17,587
1.23
5.64
2.70
1,725
4.51
12.48
10.21
2,286
252,733
125,008
(110,143
(59,613
(169,756
(124,038
(125,293
68,670
14,307
82,977
702
(987
(285
(2.09
4.54
(0.07
1,440
2.47
11.27
7.75
1,680
While revenue from zinc, lead and gold by-products is significant, we believe that identification of silver as the primary product of Greens Creek, Lucky Friday and Keno Hill is appropriate because:
22
Accordingly, we believe the identification of gold, lead and zinc as by-product credits at Greens Creek, Lucky Friday and Keno Hill 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 Keno Hill 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 the Casa Berardi or Nevada Operations 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 $15.8 million for the three months ended June 30, 2023, compared to a net loss applicable to common stockholders of $13.7 million in the comparable period in 2022. The following were the significant drivers of changes in net loss applicable to common stockholders compared to 2022:
We reported a net loss applicable to common stockholders of $19.1 million for the six months ended June 30, 2023, compared to a net loss applicable to common stockholders of $9.6 million in the comparable period in 2022. The following were the significant drivers of changes in net loss applicable to common stockholders compared to 2022:
23
24
Dollars are in thousands (except per ounce and per ton amounts)
(49,976
(46,877
(101,800
(85,094
(13,078
(13,629
(27,542
(25,049
Tons of ore milled
232,465
209,558
465,632
421,245
Production:
Silver (ounces)
2,355,674
2,410,598
5,128,533
4,840,380
Gold (ounces)
16,351
12,413
31,235
23,815
Zinc (tons)
13,255
13,396
25,737
25,890
Lead (tons)
4,726
5,184
9,928
10,067
Payable metal quantities sold:
2,155,419
2,266,001
4,447,454
4,038,392
13,008
10,552
25,654
18,474
8,960
8,495
18,204
16,587
3,750
4,251
7,906
7,314
Ore grades:
Silver ounces per ton
12.8
14.0
13.6
13.9
Gold ounces per ton
0.10
0.08
0.09
Zinc percent
6.5
%
7.2
6.2
6.9
Lead percent
2.5
3.0
2.6
2.9
Total production cost per ton
194.94
197.84
196.77
194.98
Cash Cost, After By-product Credits, per Silver Ounce (1)
AISC, After By-Product Credits, per Silver Ounce (1)
Capital additions
8,828
14,668
15,486
17,760
The $0.6 million increase in gross profit for the three months ended June 30, 2023 compared to the same period in 2022 was primarily due to higher realized prices for all metals except zinc in addition to higher gold production as a result of higher gold grades, partially offset by higher cost of sales and other direct production costs reflecting more ore mined and processed.
The $3.5 million decrease in gross profit for the six months ended June 30, 2023 compared to the same period in 2022 was primarily due to higher cost of sales and other direct production costs reflecting more ore mined and processed and cost increases in consumables, labor, maintenance and contractor costs, which were partially offset by higher realized prices for silver and gold and higher gold production as a result of higher gold grades.
Capital additions decreased by $5.8 million and $2.3 million in the three and six months ended June 30, 2023, respectively, primarily due to less mine development and drilling expenditure in 2023 compared to the same periods in 2022.
The charts below illustrate the factors contributing to the variances in Cash Cost, After By-product Credits, Per Silver Ounce for the second quarter and first six months of 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:
Cash Cost, Before By-product Credits, per Silver Ounce
25.20
22.21
23.36
22.01
By-product credits
(23.87
(25.50
(22.13
(24.10
Cash Cost, After By-product Credits, per Silver Ounce
AISC, Before By-product Credits, per Silver Ounce
29.21
28.60
26.64
26.57
AISC, After By-product Credits, per Silver Ounce
26
The increase in Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the three and six month periods ended June 30, 2023 compared to the same period in 2022 was primarily due to lower by-product credits in 2023.
27
(23,211
(21,486
(47,289
(42,719
(8,979
(8,862
(19,435
(16,894
94,043
97,497
189,346
175,222
1,286,666
1,226,477
2,549,130
2,114,335
8,180
8,147
16,214
14,127
3,338
3,370
6,651
5,822
1,134,640
1,121,712
2,440,652
2,021,166
7,121
7,434
15,479
13,425
2,466
2,362
5,080
4,217
14.3
13.2
14.1
12.7
9.1
8.8
9.0
8.5
4.2
3.9
3.8
248.65
211.45
229.56
227.30
AISC, After By-product Credits, per Silver Ounce (1)
16,317
11,501
31,024
21,153
Gross profit increased by $4.9 million and $10.7 million for the three and six month periods ended June 30, 2023, respectively, compared to the same periods in 2022, due to higher realized prices for silver and the impact of mining and processing more high grade material, partially offset by higher total cost of sales attributable to higher labor costs reflecting the new collective bargaining agreement entered into in January 2023, higher consumables and maintenance costs and higher depreciation, depletion and amortization reflecting higher sales volumes.
Capital additions increased by $4.8 million and $9.9 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022, primarily due to expenditures on key projects including the installation of a new service hoist and coarse ore bunker, increased development, and pre-production drilling to achieve a sustained ore production rate for the annual throughput goal of 425,000 tons, which is expected to start in the fourth quarter of 2023.
28
The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, Per Silver Ounce:
22.30
21.65
21.67
23.74
(15.34
(18.58
(16.03
(19.20
29.58
28.49
28.51
30.47
29
The increase in Cash Cost, After By-product Credits, per Silver Ounce for the three month and six month periods ended June 30, 2023 compared to the same periods in 2022 was due to higher operating costs. The increase in AISC, After By-product Credits, per Silver Ounce for the three month and six month periods ended June 30, 2023 compared to the same periods in 2022 was due to higher operating costs and higher sustaining capital additions. Both Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the three and six month periods ended June 30, 2023 compared to the same periods in 2022 were further compounded by lower by-product credits reflecting lower lead prices during the six months ended June 30, 2023 and lower zinc prices during the three and six months ended June 30, 2023.
We acquired our Keno Hill operations as part of the Alexco acquisition on September 7, 2022, and have focused on development activities to prepare the mine to go into production during the third quarter of 2023. We began ramp-up of the mill during the second quarter and prioritized processing of lower grade stockpiled material during the ramp-up phase. During the three and six months ended June 30, 2023, Keno Hill recorded $1.6 million in sales and total cost of sales, respectively, related to the concentrate produced and sold. During the three and six months ended June 30, 2023, $9.4 million and $15.3 million, respectively, of site specific ramp up costs were included in the line item "Ramp-up and suspension costs" and $1.0 million and $1.5 million, respectively, of site specific exploration costs were included in the line item "Exploration and pre-development" on our condensed consolidated statement of operations and comprehensive (loss) income. During the three and six months ended June 30, 2023, Keno Hill recorded capital additions of $3.5 million and $20.6 million, respectively.
Three and Six Months Ended June 30,
(1,320
(261
12,064
184,264
691
65,627
20.2
4.1
30
(32,304
(46,411
(81,266
(92,733
(10,272
(15,459
(24,308
(31,305
Gross loss
318,704
401,618
747,858
787,771
18,901
33,306
43,587
63,546
5,956
8,379
11,601
15,447
18,555
33,672
45,381
66,738
4,899
196
11,345
9,250
0.07
0.02
97.69
113.07
103.58
115.46
Cash Cost, After By-product Credits, per Gold Ounce (1)
AISC, After By-product Credits, per Gold Ounce (1)
20,816
8,093
37,902
15,901
Casa Berardi's operations were suspended for 20 days in June 2023, due to wildfires in Quebec which resulted in the Quebec Ministry of Natural Resources and Forests closing certain forest lands and access roads. No production or sales took place during the suspension period. Gross loss increased by $6.4 million and $18.3 million for the three and six month periods ended June 30, 2023, respectively, compared to the same periods in 2022. This increase was due to processing higher volumes of lower grade ore tonnage from both the underground and surface operations, higher costs related to mill maintenance and optimization activities, higher underground maintenance costs resulting from repairs and replacements of major components for the production fleet, and higher fuel and other consumables costs, compared to the same periods in 2022. Suspension costs amounted to $2.2 million for the three and six month periods ended June 30, 2023.
Total capital additions increased by $12.7 million and $22.0 million for the three and six months ended June 30, 2023, respectively, compared to the same period in 2022, primarily due purchases of new surface fleet equipment as the mine transitions from an underground to an open pit operation and the construction of tailings storage facilities. Underground mining is expected to stop in mid-2024 at which point Casa Berardi is expected to produce gold only from the 160 open pit, and at lower levels than historic production. We expect production from the 160 pit to halt in 2027. We expect a gap in production from 2028 to 2030 when no ore is mined and our focus will be on investing in infrastructure and equipment, stripping and permitting the two expected new open pits, Principal and West Mine Crown Pillar. From 2028 to 2030 there is not expected to be any cash flow from Casa Berardi to offset its operating and capital expenses, and instead our liquidity and capital resources are expected to come from our other operating units. We expect to resume mining at Casa Berardi in 2030, and significant free cash flow is expected after 2030.
31
The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, Per Gold Ounce:
Cash Cost, Before By-product Credits, per Gold Ounce
1,666
1,377
1,731
1,446
(8
Cash Cost, After By-product Credits, per Gold Ounce
AISC, Before By-product Credits, per Gold Ounce
2,155
1,611
2,292
1,686
AISC, After By-product Credits, per Gold Ounce
32
The increase in Cash Cost After By-product Credits, per Gold Ounce, for the three and six month periods ended June 30, 2023 compared to the same periods for 2022 was primarily due to a combination of higher production costs and lower gold production. The lower production for the three and six month periods ended June 30, 2023 combined with increased sustaining capital also negatively impacting AISC, After By-product Credits, per Gold Ounce.
688
960
(590
(1,133
(843
(127
(122
(717
(1,017
Gross (loss) profit
(29
(57
398
544
65
110
6,363
The gross loss of $29 thousand and $57 thousand for the three and six months ended June 30, 2023, respectively, 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 and six months ended June 30, 2023 and were focused on target generation through detailed modeling and analysis of geological mapping and sampling. Exploration core drilling also began during the second quarter at our Aurora Project.
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.
33
Corporate Matters
Income Taxes
During the three and six months ended June 30, 2023, an income and mining tax provision of $5.2 million and $8.4 million, respectively, resulted in an effective tax rate of -49.0% and -80.3%, respectively. This compares to an income and mining tax provision of $0.3 million and $5.9 million during the three and six months ended June 30, 2022, which resulted in an effective tax rate of -1.9% and -168.9%, respectively. 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 change in the effective tax rate during the three and six months ended June 30, 2023 compared to the comparable periods in 2022 is primarily related to the reported consolidated loss as well as the incurred 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.
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 and six month periods ended June 30, 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 and 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)
Keno Hill (6)
Corporate (2)
Total Silver
63,054
32,190
96,825
(22,318
Treatment costs
10,376
4,187
113
14,676
Change in product inventory
(1,242
1,546
304
Reclamation and other costs
263
(250
Exclusion of Keno Hill cash costs
(1,433
Cash Cost, Before By-product Credits (1)
59,373
28,694
88,067
722
285
1,007
Sustaining capital
8,714
9,081
18,483
AISC, Before By-product Credits (1)
68,809
38,060
11,471
118,340
By-product credits:
(20,923
(5,448
(26,371
(28,458
(6,860
(14,287
(21,147
Total By-product credits
(56,241
(19,735
(75,976
Cash Cost, After By-product Credits
3,132
8,959
12,091
AISC, After By-product Credits
12,568
18,325
42,364
Divided by ounces produced
2,356
1,287
3,642
Cash Cost, Before By-product Credits, per Ounce
24.18
By-product credits per ounce
(20.86
Cash Cost, After By-product Credits, per Ounce
AISC, Before By-product Credits, per Ounce
32.49
AISC, After By-product Credits, per Ounce
35
Nevada Operations and Other (4)
42,576
1,071
43,647
(10,399
351
(951
(219
Exclusion of Nevada Operations and Other costs
(944
31,485
219
9,025
40,729
(144
31,341
40,585
(32,717
15,027
(647
(206
119,552
1,226
159,069
(76,120
43,432
82,949
Three Months Ended June 30, 2022 (5)
60,506
30,348
90,854
(22,491
8,778
4,803
13,581
(1,102
503
(599
(1,005
(256
(1,261
53,548
26,536
80,084
705
282
987
8,110
99
22,877
68,921
34,928
9,791
113,640
(32,828
(8,227
(41,055
(20,364
(8,271
(14,543
(22,814
(61,463
(22,770
(84,233
(7,915
3,766
(4,149
7,458
12,158
29,407
2,410
3,636
(23.17
31.25
61,870
457
(793
(209
45,866
209
7,597
53,672
(188
45,678
53,484
37
152,724
(37,950
14,038
(1,392
(1,470
125,950
1,196
30,474
167,312
(84,421
41,529
82,891
129,342
66,724
197,647
(47,238
20,745
9,464
30,322
(2,856
(863
(3,719
134
(658
(524
119,823
55,232
175,055
1,444
570
2,014
15,355
16,865
594
32,814
136,622
72,667
23,447
232,736
(44,928
(12,264
(57,192
(53,744
(14,802
(28,586
(43,388
(113,474
(40,850
(154,324
6,349
14,382
20,731
23,148
31,817
78,412
5,129
2,549
7,678
22.80
(20.10
30.31
38
105,574
1,803
107,377
(24,482
818
(3,368
(436
Exclusion of Casa Berardi cash costs (3)
(2,851
(1,629
75,429
436
24,041
99,906
(271
75,158
99,635
(71,720
31,140
(7,087
(960
250,484
2,450
56,855
332,642
(154,595
95,889
178,047
Six Months Ended June 30, 2022 (5)
Corporate and other(2)
110,143
59,613
169,756
(41,943
17,892
8,480
26,372
5,436
(402
5,034
(1,872
(619
(2,491
106,550
50,178
156,728
1,410
564
1,974
20,624
13,671
147
34,442
128,584
64,413
18,133
211,130
(61,479
(14,204
(75,683
(38,947
(16,237
(26,379
(42,616
(116,663
(40,583
(157,246
(10,113
9,595
(518
11,921
23,830
53,884
4,840
2,114
6,954
22.54
(22.61
30.36
124,038
915
(1,356
(419
91,873
419
14,878
107,170
(354
91,519
106,816
64
40
293,794
(73,248
27,287
3,678
(2,910
248,601
2,393
49,320
318,300
(157,600
91,001
160,700
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 June 30, 2023, we had $106.8 million in cash and cash equivalents, of which $17.6 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 in each of the first and second quarters of 2023 and $3.4 million in each of the first and second quarters of 2022. Our dividend policy has a silver-linked component which ties the amount of declared common stock dividends to our realized silver price for the preceding quarter. Another component of our common stock dividend policy anticipates paying an annual minimum dividend.
For illustrative purposes only, the table below summarizes potential dividend amounts under our dividend policy.
Quarterly Average Realized Silver Price ($ 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
$0.01
$0.025
$0.010
$0.04
$0.055
$0.06
$0.075
$0.10
$0.115
$0.035
$0.14
$0.155
$0.045
$0.18
$0.195
$0.22
$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 June 30, 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 June 30, 2023, we sold 2,080,060 shares under the agreement for proceeds of $14.0 million, net of commissions and fees of $0.2 million. During the six months ended June 30, 2023, we sold 4,253,334 shares under the agreement for proceeds of $25.9 million, net of commissions and fees of $0.4 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 and beyond. 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.
42
We currently estimate a range of approximately $225 to $235 million will be spent in 2023 on capital expenditures, primarily for equipment, infrastructure, and development at our mines, including $105.9 million already incurred as of June 30, 2023, before any lease financing. We also estimate exploration and pre-development expenditures will total approximately $33.0 million in 2023, including $11.9 million already incurred as of June 30, 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):
Cash and cash equivalents held in U.S. dollars
89.2
86.8
Cash and cash equivalents held in foreign currency
17.6
17.9
Total cash and cash equivalents
106.8
104.7
Marketable equity securities - non-current
20.8
24.0
Total cash, cash equivalents and investments
127.6
128.7
Cash and cash equivalents increased by $2.1 million in the first six months of 2023. Cash held in foreign currencies represents balances in Canadian dollars and Mexican Pesos. The value of non-current marketable equity securities decreased by $3.2 million.
Cash provided by operating activities (in millions)
64.4
78.1
Cash provided by operating activities for the six months ended June 30, 2023 of $64.4 million represented a $13.7 million decrease compared to the $78.1 million provided compared to the same period for 2022. The decrease was due to a net working capital outflow of $16.2 million for the six months ended June 30, 2023 reflecting higher vendor and 2022 incentive compensation payments, partially offset by higher income adjusted for non cash items in the six months ended June 30, 2023 compared to the same period for 2022, reflecting higher realized prices and higher production costs.
Cash used in investing activities (in millions)
(105.8
(74.5
During the six months ended June 30, 2023, we invested $105.9 million in capital expenditures, an increase of $50.1 million compared to the same period in 2022. The variance was primarily due to $20.6 million invested at Keno Hill during the six months ended June 30, 2023 and increased spending at Casa Berardi and Lucky Friday. During the same period in 2022, we invested $21.9 million in marketable securities of mining companies and generated proceeds of $2.5 million upon disposal of an investment.
Cash provided by (used in) financing activities (in millions)
42.3
(14.1
During the six months ended June 30, 2023, we had net draws on our revolving credit facility of $31 million outstanding at an interest rate of 7.76%. During the six months ended June 30, 2023 and 2022, we paid cash dividends on our common and preferred stock totaling $7.8 million and $7.0 million, respectively. We issued stock under our ATM program described above for net proceeds of $25.9 million in the six months ended June 30, 2023. We made repayments on our finance leases of $4.8 million and $3.3 million in the six months ended June 30, 2023 and 2022, respectively.
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 June 30, 2023 (in thousands):
Payments Due By Period
Less than 1 year
1-3 years
4-5 years
More than5 years
Purchase obligations (1)
53,551
Credit facility(2)
31,842
1,684
1,095
34,621
Finance lease commitments (3)
16,464
8,929
Operating lease commitments (4)
2,559
2,358
Senior Notes (5)
68,876
539,569
IQ Notes (6)
Total contractual cash obligations
134,935
128,187
551,951
821,123
We record liabilities for costs associated with mine closure, reclamation of land and other environmental matters. At June 30, 2023, our liabilities for these matters totaled $119.9 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).
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.
At June 30, 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.
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:
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
As of December 31, 2022
Parent
Guarantors
Non-Guarantors
Eliminations
Consolidated
Assets
69,889
20,152
14,702
4,959
147,103
10,922
162,984
Properties, plants, equipment and mineral interests - net
1,913
2,288,199
279,678
Intercompany receivable (payable)
(159,442
(598,248
303,433
454,257
Investments in subsidiaries
2,128,366
(2,128,366
355,631
20,870
43,241
(330,087
89,655
2,401,316
1,878,076
651,976
(2,004,196
Liabilities and Stockholders' Equity
Current liabilities
(93,660
134,016
13,939
124,171
Long-term debt
506,364
11,378
0
Non-current portion of accrued reclamation
101,900
6,508
Non-current deferred tax liability
113,876
11,970
9,645
6,720
1,378
Stockholders' equity
1,510,186
618,181
(2,128,367
Total liabilities and stockholders' equity
As of June 30, 2023
68,684
37,128
974
19,169
127,939
5,261
152,369
(36
2,607,407
8,376
(182,742
(747,029
565,779
363,992
2,252,883
(2,252,883
404,118
19,215
15,724
(368,500
70,557
2,562,076
2,044,660
596,114
(2,257,391
27,850
122,990
5,008
(4,508
538,579
21,238
108,191
2,811
6,718
3,090
1,666,912
585,971
Unaudited Interim Condensed Consolidating Statements of Operations
46
Revenues
9,057
368,574
Cost of sales
(1,966
(231,338
(233,304
Depreciation, depletion, amortization
(9,735
(12,450
(668
(22,853
(185
(10,169
(1,506
(11,860
Equity in earnings of subsidiaries
(16,762
16,762
Other (expense) income
14,571
(53,309
(1,776
(7,843
(48,357
Income (loss) before income taxes
(5,020
(10,412
(3,950
8,919
(Provision) benefit from income taxes
(13,848
(2,400
7,844
Net income (loss)
(18,868
(12,812
16,763
Income (loss) applicable to common stockholders
(19,144
Changes in comprehensive income (loss)
(7,120
47
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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 June 30, 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).
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 June 30, 2023, metals contained in concentrate sales and exposed to future price changes totaled 1.845 million ounces of silver, 7,100 ounces of gold, 775 tons of zinc, and 3,825 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 $10.7 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 and six months ended June 30, 2023, we recognized a net foreign exchange loss of $3.9 million and $3.7 million, respectively, compared to a net foreign exchange gain of $4.5 million and $2.4 million for the three and six months ended June 30, 2022 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 June 30, 2023 would have resulted in a change of approximately $9.9 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.
Item 4. Controls and Procedures
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 June 30, 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 June 30, 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
Item 1. Legal Proceedings
For information concerning legal proceedings, refer to Note 10 of Notes to Condensed Consolidated Financial Statements (Unaudited), which is incorporated by reference into this Item 1.
Item 1A. Risk Factors
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.
Item 4. Mine Safety Disclosures
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in exhibit 95 to this Quarterly Report.
Item 5. Other Information
Item 5(c) During the three months ended June 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
Hecla Mining Company and Wholly Owned Subsidiaries
Form 10-Q – March 31, 2023
Index to Exhibits
Exhibit
Number
2.1
Arrangement Agreement dated as of April 5, 2023, by and among Hecla Mining Company, Alexco Resource Corp. and ATAC Resources Ltd. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on April 6, 2023 (File No. 1-8491) and incorporated herein by reference.
3.1
Restated Certificate of Incorporation of the Registrant. Filed as exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on May 26, 2023 (File No. 1-8491) and incorporated herein by reference.
3.2
Bylaws of the Registrant as amended to date. Filed as exhibit 3.2 to Registrant’s Current Report on Form 8-K filed on May 26, 2023 (File No. 1-8491) and incorporated herein by reference.
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95*
Mine safety information listed in Section 1503 of the Dodd-Frank Act.
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. **
101.SCH
Inline XBRL Taxonomy Extension Schema Document **
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document **
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document **
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document **
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document **
104
Cover Page Interactive Data File (embedded within the Inline XBRL document) **
* Filed herewith
** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
Items 3, 5(a), and 5(b) of Part II are not applicable and are omitted from this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
(Registrant)
Date:
August 9, 2023
By:
/s/ Phillips S. Baker, Jr.
Phillips S. Baker, Jr., President,
Chief Executive Officer and Director
/s/ Russell D. Lawlar
Russell D. Lawlar, Senior Vice President,
Chief Financial Officer