Good day, ladies and gentlemen, and welcome to the Q3 2016 Hecla Mining Company Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today’s conference, Mr. Mike Westerlund, Vice President of Investor Relations. You may begin.

Thank you, operator. Welcome everyone and thank you for joining us for Hecla’s third quarter 2016 financial and operations results conference call. Our financial results news release that was issued this morning before the market opened, along with today’s presentation are available on Hecla’s website. On today’s call, we have Phil Baker, President and CEO; Lindsay Hall, Senior Vice President and Chief Financial Officer; Larry Radford, Senior Vice President, Operations; and Dean McDonald, Senior Vice President, Exploration. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and constitute forward-looking information under Canadian securities law as shown on Slide 2. Such statements include projections and goals which involve risks detailed in our Form 10-K, Form 10-Q and in the forward-looking disclaimer included in the earnings release and at the beginning of the presentation. These risks could cause results to differ from those projected in the forward-looking statements. In addition, in our filings with the SEC, we are only allowed to disclose mineral reserves which are ore deposits that we can economically and legally extract or produce. Investors are cautioned about our use of terms such as measured, indicated and inferred resources, which are not reserves and we urge you to consider the disclosures that we make in our SEC filings. With that, I will pass the call to Phil Baker.

Thanks, Mike, good morning, everyone. Hecla’s record setting third quarter performances the direct result of our strategy that investing through the downturn. Year-ago when we are considering our plans for 2016, the conventional wisdom was to reduced capital spending, sell assets and pay down debt, even at under investing and reducing production. We start to our strategy is continuing to invest, continuing to explore, continuing to generate returns and continuing to grow production. As a result, we’ve seen the upswing in metals prices when coupled with production gains generate record sales and significant free cash flow, which intern is growing our cash position. In addition, we’ve demonstrated financial discipline by limiting share issuances. So our performance is improving on a per share basis. Let’s focused on some of these key elements. On the top left of Slide 4, you can see that silver production is up 67% quarter-over-quarter. And in the bottom left, you can see gold production is up 19% coming as a result of our strategy of investing and improving the operations of mines. And into new mines in the case of San Sebastian in Mexico. Starting in the top right quadrant of Slide 5, the production in price growth has translated into 225% increase in operating cash flow over the last year’s third quarter demonstrating our operating leverage. Moving to the upper left quadrant, you can see the 82% growth in our trailing 12 month adjusted EBITDA. This is a key credit metric to $234 million, which is almost a record for the company. Our debt is now about 2 times or 12 month trailing adjusted EBITDA. We are better credit risk today then we will - we put in our debt. In the bottom left quadrant you can see the impact of the strong cash flow,…

Lindsay. Thanks, Phil, and good morning, everyone. I’m really pleased with our third quarter results. This is a third consecutive quarter of increasing revenues, net income, operating cash flows and cash balances. Net income per share amounted to $0.07 and we reported $0.22 per share on an operating cash flows after working capital changes. On Slide 9, you can see our quarter-over-quarter growth of silver production of 67% to 4.3 million ounces in the third quarter. Gold production also increased 19% to 52,000 ounces. Revenue was 71% higher than in the same period of 2015 contributing to record quarterly revenues of $179 million with third quarter operating cash flow amounting to $87 million, a 225% increase over the same quarter in 2015, and which $43 million was reinvested at our operating mines. Clearly, all four our mines are meeting or exceeding our expectations. The free cash flow is being generated allow each mine to use those cash flows to further enhance efficiencies and fund their organic growth opportunities. And then what is happen, when that is happening, you can see the real excitement of each of our mines. Our cash cost after by-product credits the silver ounce of 368 is reduced from 752 in the third quarter of 2015, mainly due to the addition of low cost production at San Sebastian, but also increase silver production to both Greens Creek and Lucky Friday as a result of mining higher grade material at each mine. Our gold cash cost after by-product credits was $915 per ounce an increase over the prior year period as a result of expensing stripping costs and other associated contractor costs during the period. This is first quarter of operations in the East Crown Pillar pit. When comparing the second quarter of 2016 to the third quarter…

Thanks Lindsay. As you can see on slide 16, all four of our mines are performing well producing more metals than they did a year ago. Greens Creek had another excellent quarter with silver production up 23% over the prior year period, producing 2.4 million ounces at a cash cost after by-product credits of $4.80 for silver ounce. The Casa Berardi gold production increased quarter over quarter to 32,000 ounces at a cash cost after by-product credits of $915 per gold ounce, which was higher due to the cost of stripping the East Mine Crown Pillar pit vein expenses instead of being capitalized. Lucky Friday production of almost 900,000 ounces was up 6% over last year and the cash cost after by-product credits of $9.07 per silver ounce was lower than last year. Both due to the mining of higher grade material this year. And finally, San Sebastian produced 1 million ounces of silver at a cash cost after by-product credits of negative $4.03 per silver ounce, and the mine was not in production in the third quarter of 2015. We hosted an Investor Day in Toronto and New York a couple weeks ago, and if you’ve not had a chance to use our webcast, I encourage you to listen into it. We explain at detail many initiatives and the innovations at each of our mines that I think you will find very interesting. Now, let’s spend a couple of minutes on each operation. In the case of Greens Creek, the higher production was due to higher grades. The silver grade continues to be higher than normal but will become more in line with the life of mine grades in the upcoming years. Greens Creek continues to generate strong cash flow through improvements made in tonnage and recovery. The top…

Thanks, Larry. So far you’ve heard Phil, Lindsey, and Larry talk about Hecla’s current financial and production strengths. Now I want to focus your attention on the exploration successes at three of Hecla’s mean projects. But in particular recent drill results at San Sebastian, a list of drill intersections for San Sebastian and our other projects are provided in the appendix of the Q3 earnings release. Many of which are high grade and I encourage you to look at them, because they give an idea of where we are headed for future resources. The San Sebastian property provides many opportunities to find new high grade resources to extend mine life. We have clearly defined mineralized structural trends as shown in Slide 22 consisting of multiple styles of mineralization that are open a long strike and a depth, because of recent successes and this potential. We will spend about $4.5 million in 2016, which is one of our largest exploration budgets at San Sebastian in recent years, and we would expect to spend similar amounts in 2017 as we aggressively evaluate the potential of the property. In the plan view of San Sebastian new pit drilling of the Middle and North veins may expand or even link the current Middle and North vein pits. As defined in the green expansion areas once resource models and economic studies are completed. Recent drilling successes at the West, Middle, North, and Western and Eastern extensions of the Francine vein will be discussed in more detail. Particularly exciting is the recent discovery and expansion of a high grade resource about 1,200 to 2,400 feet to the West of the Middle vein open pit as shown in Slide 23. We talked a bit about this last quarter, but recent definition drilling has expanded the high grade…

Thanks, Dean. And we often get asked what we’re going to do with the excess cash flow that you’re currently generating on Slide 30. You can see that we want to maximize shareholder value by prioritizing our cash investments generate the highest returns to do that. Our strategy is to invest in the business first, because the returns on investment are highest - are the highest of all our options. For example investing in the surface in Casa is expected to return with 90% internal rate of return, we started with San Sebastian is north of 1000%. The investment and recoveries at Greens Creek yielded and more than 600% nevertheless goes on. We will also look at M&A opportunities to increase the size and scale of the company and finally there’s debt reduction share buybacks and dividends all of these are things that we’re considering, but our focus is really on investing consistently with the strategy slide to show you that beginning on the presentation. And so with that, operator will open the line for questions.

[Operator Instructions] And our first question comes from the line of Chris Terry with Deutsche Bank. Your line is now open.

Hi, guys.

Hi, Chris.

Hi, Phil. Yes, on a good quarter. Just a few questions from me, on the Casa Berardi costs and have been through the details around the increase stripping program just from an accounting sense going forward. Can you just give a few more data also on the expensing versus capitalizing of that operation maybe over the next few years?

Yes. So just to be clear all of that’s happened is when we gave our guidance we failed to change the treatment of the expensing - the treatment of the stripping of the pit, and we used frankly the Canadian convention of capitalizing the expenditures in doing the guidance. As we prepared the financial statements for this quarter, we realized that for U.S. GAAP treatment is different. You expensive as soon as you start production in the pit. So that’s all that happened is just - there’s no additional stripping that we’re doing. There’s nothing that has changed other than we’re moving it from one bucket from a capitalized expense bucket to an operating expense bucket. With that, I’ll let Lindsey or Larry, I guess, Lindsay maybe once you start out as to what the impact is going forward.

Yes, I think, Chris, still explain the Spencer’s of capital, same dollars being spent. So in the future nothing really changes too much, but as you saw this quarter, and you see our annualized cost for 2016 or run in the range of $750. What is pretty important is that it’s a per ounce calculation that we’re talking about going up this quarter. But as you know stripping doesn’t necessarily mirror exactly what production of the ounces will be in that particular quarter. So while we had the same dollars in the third quarter as the second quarter we produced less ounces, and Larry will talk about what stripping just doesn’t necessarily to fall production of ounces, which is the denominator in this calculation.

Yes, we started ramping up or we started producing ore in July, and ramping up through August, we’ve pretty well all the way ramped up in September. So at the end of the fourth quarter, I expect full production out of the open pit, so we’ll get the benefit of the ounces along with stripping.

Okay.

The stripping costs per year, guys what are we spending on stripping per year, isn’t that they have that off top their head.

I can give you some pretty rough numbers, next quarter we’ll move a total of 2.4 million ounces that are in ways at a cost per ton of about $2 a ton.

Okay.

Okay. Thanks for your color. And then just strategically in terms of all of M&A. How do you look at Hecla’s key advantage in terms of operating versus building or doing both i.e., with M&A and getting into earlier stage projects like you’ve just done with Montanore whether you look at companies that are already in operation. How does your team assess what pick was the best skill set is in terms of those two opportunities.

Well, we clearly have a history of operating mines, right. So there’s no doubt that we can come in and we can take mines and make improvements incremental improvements. We do within the organization have people whose background includes building new mines. So we’re prepared to do that, where as you can see with Montanore and Rock Creek, so we think we can do both, but clearly what we have the most history and track record on is building - is an operating existing mines, but we’re evaluating those. Aiming new that needs to be built, we will be cautious and make sure that we don’t overextend from our capabilities.

Great. Thanks for the color.

Sure. Thanks, Chris.

And our next question comes from the line of Heiko Ihle with Rodman & Renshaw. Your line is now open.

Hi, Heiko.

Hey, guys. Congratulations on the free cash flow on the quarter, it’s nice to see mining companies and mining management team once again focus on actually creating cash flow rather than just surviving, and waiting prices to raise. At Lucky Friday with the with the #4 shaft, can you walk us through the amount of capital still need to be spend, I mean it seems like most of the heavy stuffs already done, I mean a big work is done. But I’m just trying to quantify actual money that still needs to be spending at the site?

Sure, I’ll let, Larry and Lindsey answer that but in order of magnitude we have spent in excess of $210 million. The remaining $250 million of the remaining amount is relatively small. The work that’s being done at this point is the equipping of the shaft, so it’s no longer excavating it’s putting the steel and the other components to the shaft into it still a lot of work that’s involved, but it’s not the high capital dollars. Larry you want to add to that.

Just that we’re getting towards the end of this project, we expect to begin commissioning in late December and complete the mobilization of the contractor in the first part of the year. So we’re nearly at the end of this Lindsay you got the actual spend there.

Well, I think the spend - what I’m looking at the spend for the fourth quarter is similar to the spend of the third quarter.

Okay. But just, I mean the actual contractor charges are fairly consistent month on month, and…

[Indiscernible]

Yes, I think that’s all in.

That’s all in.

We’re basically pretty close to our original target for this project?

So if you look at Slide 11, Heiko, the $7 million spend in Q3. So it will be something similar to that in Q4.

Okay. That’s very helpful and frankly last time we model. So okay perfect. You mentioned the acquisition of Montanore in the release, obviously that is very small and very long term in the grand scheme of things not that big picture right now. That’s said, would you be open to another Casa Berardi, right now. I mean prices obviously are far away from where that used to be, but have to be gone up too much too fast, so you are looking or you always missing around there, just maybe walk through - I know it builds on the last guys question a little bit.

So Heiko, before I answer your question on just comment on Montanore. I mean we see Montanore and Rock Creek as being tremendous value creators for Hecla right now, despite its still number of years future production, and there are other companies that have projects that are similar stage, and there’s a huge amount of value that is attributed to those assets. When we acquired Rock Creek, we’re quite about it. We didn’t talk too much about it, because we wanted to get Montanore into the fold as well. Now that we have both these assets in the fold, we’re going to be making sure the market recognizes the value that these assets have, because they are consistent with everything that we’re trying to do in the company of having long lived low cost assets, assets that will allow you to invest and improve and grow over time, and so these assets really fit that. So first that. The second with respect to acquiring things look, we’re always looking at attempting to acquire assets against the strategy of a long lived low cost asset, when prices are certainly something that we look at, but we don’t try to time the market. We don’t know if prices are going to be higher, if they’re going to be lower, we don’t know what the long-term outlook is for prices. But what we do know is that, it’s long lived and it’s low cost, it will be able to survive whatever the price cycles is, and to the extent prices go higher, and then you will reap that benefits. So yes, we are certainly looking considering at new assets similar to the ones that we have.

Fair enough. All those conclude with, I’ve been both to Rock Creek and Montanore, and I agree with your assessment that there is a lot of long-term potential there, so just from firsthand actually being there.

Thank you, Heiko.

Thank you.

And our next question comes from the line of [Anthony Tarantino] [ph] with [indiscernible] Your line is now open.

Hi, Anthony.

Hi, good morning everyone.

Good to have you on the call.

Yes. Great to be back on. So with a follow-up a little further on Rock Creek and Montanore. Where are you in the permitting process for those two properties?

You know it’s - the permitting process is one that is long and drawn out, but we’re happy to say that the previous owners de-risk the projects significantly. So we’re getting towards the final stages today, having said that’s, it’s probably a few years before in the case of Rock Creek that’s done, in the case of Montanore might be faster than that. Specifically where we are with Rock Creek is the final yes, so it’s been issued final supplemental EIS has been issued a draft of it. It’s - there is, there were comments that were provided to the four Service. Those are being evaluated and the final is being prepared, and we would expect sometime in the first-half of next year, so that to be issued. Montanore could be as soon as that as well.

Okay. That’s good to hear, and would be as it was mentioned earlier with the commissioning of the #4 Shaft project. What would you expect Lucky Friday silver production to be in 2017?

We haven’t given guidance for that. What we have done is discussed how we are changing the design of the mine, and Larry encouraged you to go to our investor day presentation a few weeks ago. In that change in the design, we’re going to do a just a descending front at the Lucky Friday. And as a result of that, it will take us a bit longer to get to the full length of the high grade zone at the Lucky Friday, but it will allow us not to leave a pillar. So we’ll give more guidance on production for 2017 early next year, but it will be similar to where it was today.

Okay. And at San Sebastian, would you be able to estimate at this time the capital cost of transitioning from open pit to underground mining.

Now, we haven’t done the engineering, but it’s not large. There is we’re talking about a ramping system to take us underground, and that will probably go out of either the current open pits or out of the old workings from when we operated San Sebastian before. So it’s not a major expenditure.

Okay. Very good. All right, thank you very much, and congratulations on the great results.

Thanks a lot.

And our next question comes from the line of [Mark Mihajlovic] [ph] with RBC Capital Markets. Your line is now open.

Yes. Thanks and good morning everyone. So couple questions for me.

Hi, Mark.

Yes. Can you just remind me what the timeline for accessing underground mineralization at San Sebastian?

We haven’t announced what that is, but in likelihood before the end of 2017.

Again, how long do you think that the watering takes?

The watering, well, that’s assuming we go from the existing workings. Larry, any comment on that, it’s not something we really talked too much about.

We haven’t talked a lot about it. The - we are right now, the water in the old underground workings, and then once we get that done, we’ll obviously have to do an inspection to understand how much if any of the ground has to be rehab. So there is a lot of work to be done here, before we have a definitive plan as a development plan, but as Phil mentioned, there is other options. We can ramp down from surface. We can ramp out of the middle vein pit their options. The reason that we like the option of coming off the old workings is that the permit for that underground never expired, and so we consider this a continuation of the old permit, and although there will be some connections to surface one or the other, and that’s certainly going to require a level of permitting. We’re crossing our fingers and hoping we can come off the old work and just keep it simple.

Okay. Thanks for the color guys. So can you give a breakdown of the 4 feet at Casa between open pit and underground, and again how much - how you expect that to evolve going forward as the open pit hits full throughput.

Yes. Larry let me ask you to answer that question and I’ll [Multiple Speakers]

For the third quarter, the underground produced about 182,000 tonnes and the metric tonnes, thank you. And the surface was about 52,000 tonnes. The grade from the underground was 5.5 grams per tonne, and the surface material was 2.4 grams per tonne, and the recoveries were fairly close. That was in a ramp up mode. The pit can feed about 25,000 metric tonnes a month. And so, we’re actually in like I say, we’re in full production now. So it’s a bit of a contest between the underground and open pit to get the - to get their feed in the mill. And fortunately in the fourth quarter, we’ve had - we’ve got some high grade Stope. So we’ll probably push a bit of the open pit feed into next year.

Thank you. Thanks a lot and I guess sticking with Casa obviously, you moved roughly 7 million or 8 million from what you thought would be capitalized into the expense line, which again we’ve seen happen at a number of operations in different accounting treatments and no big difference there. But you did end up keeping the overall capital guidance the same at 150. So I was just wondering if you had some color what the incremental capital you’d be spending on.

Yeah, it’s just a lot of little things, there’s nothing in particular. Frankly, we’ve been going through looking at stuffs that we’re planning to spend in 2017 and moving that into 2016 and then we’ll move stuffs in 2018 into ‘17, there’s not any one sort of large item, it’s pieces of equipment. I can tell you, there’s a couple of middle orders that we’ll be bringing in, just a variety of things, but nothing - there isn’t anything in particular and there isn’t any one particular property that’s getting the attention. Larry, anything you want to add to that?

No, I think that’s a good summary.

Okay, thanks.

Thanks and just one last quick one. You guys did very well on the unit mining cost at San Sebastian, down to about 60 bucks of ton from over 90 in the previous quarter, so just wondering what’s driving that or is that a lower strip as you move out of the East Francine Vein? And secondly, is that a good run rate going forward?

Yeah, the pits at San Sebastian unlike say this Mine Crown Pillar pit are - there’s no facing them, they’re top to bottom and so you get the heavy striping up front and as you get deeper it just gets progressively less. So that’s a big factor. Obviously we have the Mexican peso at our - we got quite a tail wind, I think the evaluation was in the 25% range, something like that through the course of the year. So we’ve got a nice tail wind off of that. And candidly we have a very good culture of cost control at San Sebastian and so by and large the team that we had there when Hecla operated the mine previously and they just have a good culture of watching their expenses.

Okay, thanks guys.

Okay, thank you.

And our next question comes from the line of Eliot Glazer with WMC Smith and Company. Your line is now open.

Congratulations on a very nice production job as far this year. Looking to fourth quarter and looking to publish them was it looks like a fourth quarter gold production will be up about 7,000 ounces and silver production about 500,000 ounce, is that variable correct?

Somebody have those numbers in front of them, does that sound about right? Certainly the gold sounds right, but the silver I’m quested, but we’ll look at that. Do you have another question?

Yeah, looking at 2017, we’re not being specific just being directional, would expect silver production to be up?

Look, I think from where we are today, my expectation is that silver would be somewhat similar to where we are today. Maybe as we consistently say these mines have a range of production that they can have. So let’s use Greens Creek for an example, we say it’s a 7 million to 9 million ounce producing mine, so it will fall somewhere in that range of production. Clearly this year, we have toward the upper end of that range, so it’s going to be somewhere in between those two numbers. So when I look silver I see some variability that’s kind of consistent with where we are today, but some variability given each of the mines will produce at a different level. With respect to gold, Casa will have full production from the open pit. So we see gold production increasing generally. And then that percentage, so when you think about it on an equivalent basis, probably similar to where we are to up.

Okay, thanks a lot.

And sort of the way we think about things is, we’ve had this huge increase over last - since 2012. I want to say, it’s four times, three and a half call it, of total production today versus where we were in ‘12, maybe it’s three times, three to three and a half times. So we’re now at a place where we’re making sure that’s sustainable and then the objective would be as we get into the high grade zone Lucky Friday, seeing silver production increase and as we develop Rock Creek in Montana, we’ll see another big jump in the silver production.

And in terms of gold production looking out in the next couple of years?

Yes, so it’s going to be - we’re going to see some increase with the pits and then we’ll see sort of a consistent production and we’ll be looking at, okay, how do we grow that. We don’t have this clear plan as to how that grows at this point.

Okay, thanks very much.

You’re welcome.

And our next question comes from the line of Jessica Fung with BMO Capital Markets. Your line is now open.

Hi, Jessica.

Good morning, guys. So a lot of questions have already been answered and I’ve got a couple more. At San Sebastian, noticing that the grades that you guys are processing have come down in the quarter as expected because obviously you guys are being a little bit more selective. What should we be sort of modeling going forward? Do you expect to continue sort of processing reserve around average reserve grades or do you think it could decline through next year?

Well, again we haven’t given guidance for next year and frankly we’re still working through what next year’s going to look like in total. So I can’t give you that, but with respect to the end of this year, I think if you look at our guidance on Slide 7, you can back out the rate what we’ll have for the rest of the year and where we’ll end up next year, that’s still a work in progress.

Right, I’m wondering if - so without being really specific again, at San Sebastian you guys do have a nice diagram of potential pit extensions -

And going to the underground -

Yeah, so would that sort of be something that’s done in concerts towards the end of ‘17 or are you thinking maybe you could just mine from the extended pits kind of into 2018 and differ the underground.?

At this point we think we have to do the underground to maintain the production from San Sebastian. Now, we could get some more explorations success and as we develop the reserves, develop the mine plants and this is - where this is just in time mining, is what we’re doing here and I think it’s a fair way to describe it.

Okay and then moving on to Greens Creek, we noticed here this year your base metal grades dipped slightly in the quarter, is this something that you guys are selectively choosing to do or is this part of the mine plan.

This is just more what these various zones have. There’s not anything that we’re attempting to do with where we’re producing the tons. Larry, anything to add there?

No, not really, but we’ll see similar grades going forward, Lincoln in particular I’m talking about.

Yeah, so over the long-term, generally speaking base metals grades declined slightly and precious metals grades increased slightly.

Okay, perfect. All right, that’s it for me. Thank you very much.

Thanks, Jessica.

And I’m showing no further questions at this time. I would now like to turn the call back over to Mr. Phil Baker for closing remarks. Well, we appreciate all the interest in Hecla and let me just reiterate the comment Larry made about our investor day. That was roughly three hours of presentation materials, each of Larry reflects on this call presented as well as Luke Russell gave a pretty detailed report on Rock Creek in Montana. So I would encourage you to take a look at that and then also feel free to give Mike a call or me and we just appreciate your interest and support. Thanks, very much.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.