Hecla Mining Company (HL) Q1 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Hecla Mining Company Financial and Operational Results Conference call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would like now to introduce your host for today’s conference, Mr. Mike Westerlund, Vice President of Investor Relations. Sir, you may begin.

Thank you, Operator. Welcome everyone and thank you for joining us for Hecla’s first quarter 2017 financial and operations results conference call. Our financial results news release that was issued this morning before market opened along with today’s presentation, are available on our 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 two. Such statements include projections and goals which are likely to involve risks detailed in our Form 10-K, Form 10-Q and in the forward-looking disclaimer included in the news 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 reserves which are mineral deposits that we can economically and legally extract to produce. Investors are cautioned about our use of terms such as measured, indicated and inferred resources, and we urge you to consider the disclosure that we make in our SEC filings. With that I will pass the call to Phil Baker.

Thanks, Mike, and hello, everyone. We’ve started 2017 with strong sales, net income and adjusted EBITDA, and are silver margins remain among the top in the industry. We’ve also seen a strong improvement in our cash cost and AISC after byproduct product credits. These positive metrics are driving an increase in our cash balance and lowered our net debt to adjusted EBITDA to a very solid 1.1 times. And our shares continue to outperform an average of our peers. Now for the remainder of 2017, our focus is on growing reserves and resources, investing in new technologies that should increase our productivity mine life and margins, advancing the underground at San Sebastian, optimizing the open pits at Casa Berardi, and finding a resolution to the Lucky Friday strike. Now, speaking of the strike, we are spending our Lucky Friday and companywide estimates for silver production cost until the strike is resolved and that’s on slide four. We’re also suspending capital guidance because of reduced spend at Lucky Friday. But the production and cost guidance for Greens Creek, San Sebastian and Casa Berardi remain unchanged as does the exploration and predevelopments estimates. I want to talk for a minute about the strike which isn’t primarily about economics but rather where people work, when they work and who they work with. With the old contract required resuming [ph] approval of the schedule and this approval can be removed in anytime. In the mine where people work is largely determine by the most senior miners who get to determine who is on their team. This is a system that in most industries largely stopped 30 years or 40 years ago. And while it has its benefits, we need for more flexibility to get the right people at the right place at the right time. Without this ability, to truly manage the mine is limited. And as we -- and as the way we mine changes, this flexibility where people work, when they work, who they work with is even more important. While we hate seeing our follow employees not working and on strike, we believe now is the time to make the change for what we think is going to be very long-term operation at the Lucky Friday. These changes will be part of the sharing that future. In the meantime, we are actively advancing a number of projects at the Lucky Friday that would have required the mine to shut down. Larry is going to talk about some of these in a minute. I am now going to pass the call over to Lindsay for a review of our financial performance for the quarter. Lindsay?

Thanks, Phil. For the three months ended March 31, 2017, we reported net income of $26.7 million or $0.07 per share. As shown on slide six, we reported $142 million in sales, a 9% increase over the same period of 2016 and cost of sales of $107 million which was higher due to more gold being produced at Casa Berardi, as broken out on the slide. Interest expense was $8.5 million, which is higher than the previous periods since we’re no longer capitalizing interest as construction of the number 4 Shaft is now completed. We also recorded a loss of $7.8 million, resulting from our base metals hedging activities of which $6.8 million was unrealized. During the quarter, we received approval from the tax authorities to treat the number 4 Shaft expenditures as being deductable for tax purposes, which results in a future tax benefit of some $15.1 million and reversal of a previously recorded AMT expense, AMT being alternative minimum tax of 10.7, both which are included in the total net benefit recorded of $29 million. We have removed this future benefit from our calculation of adjusted net income for the quarter. Strong commodity prices and expected production levels resulted in operating cash flows of $38 million, double the first quarter of 2016, while company-wide cash cost after byproduct credits for silver ounce declined 73% to $0.84 and the all-in sustaining cash after byproduct credits also declined to $7.60. Cash and cash like investments totaled $213 million for the first quarter. Turning to slide seven. As you can see on slide seven, the Company generated $16.6 million of free cash this quarter, the results of higher operating cash flows of $38 million and lower capital expenditures of $21.7 million. On slide eight, we also continued to deliver one of the highest silver cash margins in the industry, which was 95% of sales or $17.06 and the gold cash margin was being 27% of sales or $335 per ounce. On slide nine, you can see that we maintain a diversified revenue stream with gold at 40%, silver at 33%, and lead and zinc at a combined 27%. Greens Creek continues to be the dominant supplier of revenue and the primary beneficiary of higher zinc prices. On the left hand side of slide 10, our adjusted EBITDA on the last 12 months basis is up 112% over the past four quarters and the net debt to EBITDA has declined to a solid 1.1 times. This improving credit metrics picture is just a result that you would expect to occur as we continue to generate free cash flow. So, in summary, despite about a 25% decrease in silver production over the prior year, financially Hecla had a very good first quarter. We are generating strong free cash flow from operations and continue to benefit from our production of lead and zinc in addition gold and silver. Cash balance and undrawn revolver will allow us to continue to invest in our operations throughout any price cycle, a very comfortable position to be in. I’ll now pass the call to Larry to talk about operations.

Thanks, Lindsay. On slide 12, you can see Greens Creek had another excellent quarter, producing 1.9 million ounces of silver at a cost of sales of 44 million and a cash cost after byproduct credits of $0.65 per silver ounce. The all-in sustaining cost after byproduct credits was only $3.86 an ounce. The lower production relative to the prior year period is due to lower grades, which was expected and is a function of mine sequencing. The prices of our byproducts helped improve the cost numbers. In addition, the cost per ton has been impacted by our increased power cost, which is a primary driver of our focus on reducing power cost such as with our ventilation on demand system. We remain on track to meet our production and cost guidance. The teleremote LHD you can see on slide 13 is now in operation, allowing Mucking to continue during what would in the past have been shift change when the mine is idled and blasting was underway. Consequently, we are improving productivity. Our teams really likes the unit and the trainer commented that a much better than he can. Once the route is mapped by the machine, it can load the bucket, hold to a specific dumping point and dump the bucket, all by itself. Another innovation in the first quarter at Greens Creek is the first stage flotation reactor, which is being installed in the zinc circuit as you can see on slide 14. This is part of an ongoing initiative to generate increased value from Greens Creek. Commissioning is planned for the second quarter and is expected to improve both recoveries and payables by moving precious metals to the bulk concentrate for which we have better smelter terms. This project costs about $1.3 million and should pay back in six months to 12 months and generate a triple-digit return. Production at Lucky Friday was down 30% over the prior year period, mainly due to the strike by the United Steelworkers on March 13th. Despite lower production, the per ounce cash cost after byproduct credits were lower because of stronger base metals produced in the first quarter. The all-in sustaining cost after byproduct credits was also lower. The strike isn’t having a great impact on our financial performance as the cost of running the mine on care and maintenance is just about offset by the reduced capital spend. During the strike, we have not been idle as shown on slide 15. The salaried staffs have been conducting maintenance and testing and working on several necessary infrastructure projects including the ventilation change on the new 6,500 level and adding a pumping connection between the recently commissioned 4 Shaft and the Silver Shaft nearly a mile apart. These projects would have caused minor interruption, so it is best we take care of them now. Additional development and limited production are being considered should the strike prove to be prolonged. On slide 17, Casa Berardi gold production increased 18% over the prior year period as expected. We expect the mine to meet its estimated 150,000 to 165,000 ounce gold production target at a cash cost of $800 an ounce. The big story at Casa is the increased throughput by introducing open pit ore, more than a 100% since we acquired the mine. This required miner plan changes and the tons per month are now up 100% over where they were in 2013. So, we’re not stopping there. We continue to look at ways of increasing throughput further to lower costs and to increase cash flow. Slide 19 shows how the pit looked a year ago compared to how it looks today and the progress that we have made is clear. But in order to fully capture the value of record mill tonnage and recent exploration success, a site optimization process has begun. This optimization process should be completed by year-end and involves modeling of the mill, modeling of the open pits and a determination of the optimum open pit underground feet. In addition, we are advancing the automation of the 985 drift, which should be commissioned by the end of the year and will ultimately result in reduction of trucks, and the associated maintenance and personnel costs. San Sebastian continues to impress, as you can see on slide 20. In its first year of operations, it generated twice as much cash flow as was expected. In the first quarter, it generated $11.5 million of free cash flow from 751,000 ounces of silver at a cost of sales of $6.6 million, a cash cost after byproduct credits of negative $3.27 an ounce and an all-in sustaining cost after byproduct credits of $0.43 per silver ounce. Now, in the second year quarter the East Francine ores being exhausted, so we are now relying on Middle and North Vein and the grade as lower as expected. Work is ongoing to advance the new ramp as while we work to rehabilitate the historical workings as shown on slide 21. The team is on track to begin underground ore production by the end of 2017. I’ll now pass the call over to Dean.

Thanks, Larry. Let’s start by looking at the recent drilling successes at Hecla’s main projects, in particular at San Sebastian and Casa Berardi. A list of drill intersections for all our mines and projects are provided in the appendix of the Q1 earnings release, many of which are high grade. I encourage you to look at them because they give insights into where we should have future gains in reserves and resources. The San Sebastian property continues to generate exciting opportunities to find new high grade resources to extend mine life. On slide 23, you can see the current Middle, North and Francine vein pits in the yellow outlines. The surface projection of the new West Middle vein reserve, the new underground ramp under development, and the green ellipses we’re drilling is defining new reserves and resources. Of note, at the top of the diagram is the reason discovery of strongly anomalous precious metal veins to the north that will be targeted with more drilling later in the year. Slide 24 shows a longitudinal section of the Middle vein with over 8,000 feet of continuous mineralization. In-fill drilling on the West Middle vein improved grades and continuity within the current reserves as defined by the rectangle in the diagram, which in turn could improve the minable grade in this area and expand the currently designed mine stopes. Recent drilling to the west of this reserve has defined some high grade mineralized pods near the proposed production ramp and could provide additional tonnage without a lot of development. Drilling at the east end of the Middle vein recently returned to high grade intersections near surface. This mineralization is open along strike to the east and has potential up-dip to surface. This is also parallel and in close proximity to recently discovered mineralization along the East Francine vein. Drilling about a 1,000 feet east of the East Francine pit has intersected a high-grade mineralized vein as shown in the longitudinal on slide 25 that is 300 feet from surface and can be traced for 650 feet along strike and 550 feet down dip. It is open to the east and at depth and step-out drilling is continuing. During the quarter at Casa Berardi, we had 12 drills operating on the property of which 10 were working within the longitudinal shown on slide 26. Underground drilling was focused on expanding reserves and resources in the 118, 123 and 124 zones and exploration defined new resource is along extensions of the 121 zone and lower entered [ph] to the west. Four drills on surface completed both in-fill and exploration drilling of the 124, 134 and 160 zones. In addition, there were two surface rigs on the West Block property to the west of the mining leases. The red arrows in the longitudinal project the extension of many mineralized zone down plunge throughout the mine and show the huge potential at Casa Berardi. The plan map in slide 27 shows a series of the proposed and planned open pits along the Casa Berardi fault, which is where we’re so excited about the open pit potential along this trend. What is also promising is that the higher grade minerizaltion appears to extend from these areas to depth opening up the potential for additional underground mining on these bodies as well. The focus is now on the 134 zone to the east of the proposed principal pit as show in the slide 28. We have drilled broad zones of mineralization with the possibility of the new open pit. We’re following up on this success with more drilling over the next two months with the planned revised resource and possible pit design to follow. We plan to evaluate the entire Casa Berardi fault corridor from surface -- search for more pits and to test if we can combine them into larger, more productive pits. Elsewhere in the company, drilling at Greens Creek continues at the East Ore, 9A and Southwest Bench zones to define new reserves closer to surface and the mine portal as shown on slide 29. With this, I’ll pass the call back Phil.

Thanks, Dean. And Dean, for those of you who don’t know, Dean last week was awarded the A.O. Dufresne Exploration Achievement award by the CIM. And Dean, we just want to congratulate you for the receipt of that prestigious award. It’s an honor not only for you but also for the whole Company. So, thanks for that. Congratulations on achieving that.

Thanks.

I hope you get the sense that financially, operationally and exploration wise, things are going well despite the strike and the price declines that we’ve had seen over the last few weeks. And when we think about the strike at the Lucky Friday, the cost of that to us is about $1 million to $2 million a month of carrying cost, but it’s offset largely by the capital that we had planned to spend not being spent, which in aggregate was about $20 million. So, the net impact of this on us will be quite small. Now, last week, I was at Casa Berardi. And the thing that was interesting about that is that it’s doing exactly what we thought it would do. We’re discovering more ounces as Dean’s talked about. We have the operation of the first of what we think would be many pits at Casa where it gives us an increased ability of throughput and a lot more flexibility in operating the mine. And there is also lots of innovations that are improving productivity there. And speaking of the innovation, we have technology that’s being deployed across all the properties. So, this year at our annual meeting, we’re going to do that in Vancouver on May 25th, and the focus of the meeting is going to be on the new things that we’re doing, because we believe that this is not only an inflection point for Hecla’s productivity but really for the whole industry. So, I invite you to come up to Vancouver on the 25th, and see in more detail what we are doing. And with that operator, we will open the line for questions.

[Operator Instructions] Our first question comes from Chris Terry with Deutsche Bank. Your line is now open.

Just a couple of questions from me. First of all, I appreciate that at the moment, the guidance is still a little up in the air. But, is it fair to take the original guidance and make assumptions on a monthly basis and then just divided that through as to how production and costs might look once you start back up or is that too simpler in approach?

If I understand what you are saying, yes, I think that’s fine, so does Larry.

Okay. But there is no -- I appreciate that you have obviously taken the guidance away because it’s uncertain at this. But is there any other data points or upcoming events where there is some sort of timeline that you could provide or things that you see coming up?

No. Things are very uncertain as to when we might see the Lucky Friday go back into production. And so, unfortunately, we can’t give you any more guidance than that.

The second question I had just around San Sebastian looks it also coming together pretty well there. Just in terms of the next 12 months or so, are you able to just give a timeframe on when key decisions need to be made in terms of potentially a new mill or renewing the contract on the existing mill if you go down that route? Just some of the key things that are coming up, probably in the second half of the year or early into 2018?

Look, we’re -- we don’t have any plans to build a mill there at this time. We are looking at a variety of ways to take the existing resource and make it better. But, we are not there yet. So, the focus will be on extending the contract to lease the mill. And we will come to some conclusion on that over the course of second half of the year. We are not -- we think that that will be accomplished. It’s a good deal for both parties we think so.

And our next question comes from Brett Levy, Loop Capital. Your line is now open.

You mentioned that you -- some of your free cash flow or excess free cash flow to benefit, [ph] expand reserves, can you talk a little bit gold, silver, lead, zinc what might be the priority there, and then, also a little bit about jurisdictions and geographies in terms of where you might look, where you might not look.

Sure. Well, look, the priorities are at our existing operations because we see so much potential at them. We are -- if you look at where our spend is it’s really in three places, Casa Berardi, San Sebastian and Greens Creek. We have talked a bit about both those two properties and little bit about Greens Creek underground but we also have a surface program at Greens Creek that will get underway sort of towards the end of June. And then, we’ve got a few things that we’re doing in Northern Quebec and a few things that we’re doing in the Silver Valley area. And then for the most part we’re sort of monitoring other -- I guess we have some things in BC. [multiple speakers]. So, anything else, Dean, that you would mention?

No. But, I would say that when I look at the budget and the potential, it’s clearly skewed towards precious metals, and so, San Sebastian and Casa, it’s silver and gold.

Yes. Look, we’re a silver company primarily, and gold. We’ve been silver company 125 years, gold company for 40 years. And we like having the base metals as a byproduct. But that’s not the focus is on the base metals, focus is on the precious. So, as far as geographically, it’s really in the places that we’re in. But, we’re quite open to anything in the Americas. And then, there is the sort of the occasional one-off thing that we consider in some other parts of the world. But those are -- tend to be very specific and there is specific reasons why we might have an interest in those things.

And our next question comes from Anthony Sorrentino with Sorrentino Metals. Your line is now open.

With regard to the strike at Lucky Friday, it’s my understanding that the main issue of controversy is something called the bidding system that the -- that’s something the union wants to remain in effect and something that Hecla wants to change, and would you just go into a little more detail on that?

So, the bidding system Anthony is what I was describing as where the senior miner determines where they’re going to work within the mine and the development of the team that works with them. And that’s done by the miner as compared to just every mine that we can think of where it’s done by the company and making those determinations. So, yes, that’s a change that we think we need to make in order to really have this mine operate in the way that we think it can operate over the next what we hope is -- this is the mine’s 75th anniversary this year. We hope this mine can operate another 75 years. And we think it’s important to be able to manage the mine to be able to accomplish that.

Yes, okay. Thank you. Concerning exploration spending, I believe the Company is estimating to $20 million to $25 million in exploration spending. Could you give a breakdown of that by property excluding Lucky Friday?

So, for the part it’s $5 million at Casa, San Sebastian and Greens Creek roughly $4 million to $5 million for each of those and then everything else is sort of split to a small way everywhere else.

Yes. Casa is probably a bit more than the rest, but as Phil described, the core area which probably represents almost three quarters of the expenditures are Casa, San Sebastian and Greens Creek, elsewhere it’s in Northern Quebec, Northern British Columbia, Silver Valley.

Our next question comes from Kip Keen with S&P Global. Your line is now open.

Back to the bidding system and strike at Lucky Friday. I am just curious -- I know sort of a line in the sand on the bidding system. Either -- has there been any hybrid model that you just started with the union? Obviously they made a matter -- or they said it’s a matter of safety for them. And I can also appreciate that many mines do not operate on this model. But is there a line in the sand or are you negotiating potentially a different model that might meet some of the…

We are not aware of a mine that does operate with this system.

Sure. But in negotiations, are you looking at anything where you might -- you also need half way or some way, just curious how…

I am not sure how you have a half way on this issue.

Okay. And another issue that they have raised among few others was, the union raised is bonus triggers. Is that something where you guys can figure things out or are far on those talks?

With respect to the bidding and the schedule, those are ones where you would see they are on or off. With respect to everything else, one can negotiate those things.

And so, it’s hard to say at this point as you said whether or not -- when you might see some guidance as to results of the strike?

That’s correct. I don’t have anything else to add.

Our next question comes from John Bridges of J.P. Morgan. Your line is now open.

Perhaps on a happier note, at San Sebastian, you found another veins; I am curious what the initial intersections there and are you permitted to mine there? Do you have the land you need to mine there? Is everything good to go once you figure out what’s there?

So, with respect to the land, look, we have this concession that’s I think roughly 27 square miles, 25 square miles, and we have -- to the extent that we are able to drill and we have sort of excess to the land and we will be able to figure it out how to mine it. And it’s early days for this. But, I think as much as anything the take where I hope you have is that we’re -- we have been at this property for a long time; we keep learning more as we explore. And I think our enthusiasm to the property is as high as it has ever been. And we are encouraged by what we are seeing with this. Go ahead, Dean.

John, we -- it clearly is oriented parallel to the other veins. The first pass was broadly spaced reverse circulation drilling. And so, the grades are coming in and some of the intersections are in the appendices. What we are seeing is textures; the style of mineralization that’s similar to the other veins. And so, the fall up really now is with core drilling to get better definition of the veins and determinate if there is some continuity with the higher grade material.

So, have you got some intersections on that yet?

We have RC, we don’t have core yet.

I was just thinking if things are prolific, have your drilled finished lines across this because you keep on getting these positive surprises or the float that you’d have been able to sort of pin down anomalies with the fence line quite cheaply and quickly?

Well, we have, we’ve also gone through -- and part of our initial success was to go to RAB drilling, so we could get a proper geochem sample that rock. And so, the follow-up has been with fence drilling as you described. We’re also reviving our geophysical program to determine extensions to the veins that we currently know and then the RC drill is moving off to other anomalous normal areas from this geochem program where we suspect there are additional parallel veins.

And John, you can appreciate that we’re sort of on this treadmill where we’re mining this stuff pretty darn fast, and we’re needing to replace it. So, so much of this $4 million plus budget is really being focused on trends they had at the mill. And -- so, the idea of doing the fence line, I mean I can appreciate that and appreciate that it’s maybe not of a great expense, but it is -- it still is expensive and it still takes us away from trying to keep that mill full. So, frankly, the more regional work is taking the back seat to really just stepping out from what we know. Is that fair, Dean?

That’s a fair comment.

Okay. I know in some mines you have these alterations, heck a lot of around these veins, has anybody done any work on those things around from seeing the middle vein?

Yes. We certainly have, John. The alteration halos, we’re in sediments, and so it’s not very reactive. And so, the alteration halos are actually quite limited. The anomalous geochemistry is a bit broader, but it’s not the big carbonate systems that we see to the extent they’re at Casa Berardi. Where we have focused our efforts are looking at the veins and vein temperatures and using fluid inclusions and things like that to vector some of our exploration. And so, although we continue to do geochemistry, it’s the broad halo, alteration halos that one might suspect really aren’t present at San Sebastian.

Our next question comes from Lucas Pipes with FBR Capital Markets. Your line is open.

So, you’ve been fairly outspoken in the past about what technology changes can mean for the industry. And I wondered two things. First, does that factor into the deliberations with the Lucky Friday? And then, secondly, I think even on this call, you made some references about technology changes. What’s coming down the pipe? I would appreciate your perspective. Thank you.

Okay. Well, with respect to the negotiation with the union, it’s not really a particular driver, although it is in the back of our mind as new opportunities to improve productivity come along as to how to deploy people to deal with that. That’s not really so much the driver of that. With respect to the things coming down, I mean, I was at Casa and I was interested in seeing the control room that’s being constructed where we will have an operator that will be receiving digital data from throughout the mine and will be able to really see what’s happening in one spot. That’s an interesting technology. We have got a automated truck that’s coming in to operate on the 985 level. It’s just a whole slew of things that are happening at Casa and with this LHD that Larry talked about and the battery, equipment that we have at the Lucky Friday, and we are working on a continuous miner for the Lucky Friday. So, we just have a whole plethora of things that we are doing across the Company. And so, I again would encourage you to come to our annual meeting; I’ll give a presentation and then there is going to be some subject matter experts that we will have there to be able to talk specifically about some of the stuff that we are doing.

That’s very interesting. So, maybe a quick follow-up on the strike question. And one of your North American mining peers kind of in the right ZIP Code, that’s slightly different commodity, but they had a labor issue a few years ago. In what sense would you say what you’re going through right now is maybe similar or different? I’d be interested in kind of what the parallels are with your situation.

Yes. I think that situation if I understand it correctly was more related to economics than what we are talking about. I think theirs was a bonus system issue, and productivity issue as to how people got paid off their bonus. Ours is really less about that and more about this ability to put people in the mine where we need to put them.

And our next question comes from Matthew Fields with Bank of America. Your line is now open.

Thanks for all the color. I appreciate the uncertainty at Lucky Friday. I just want to talk about little longer term the cadence of sort of Hecla’s development projects. Can you just refresh us again on sort of updated maybe timing and ultimate development CapEx for Rock Creek, Montanore, the priority between the two of those? And the follow-up, is it important to term out your capital structure before you go ahead with those projects?

When you say term out the capital structure what do you mean?

Refi your 21 notes for longer dated bonds.

So, with respect to the timing of those things, again, it’s really in the hands at the moment of court and the case of Montanore. They’ve received the record of decision and we are just waiting for the judge to issue its ruling on the challenges to the record of decision. We feel reasonably good about that because the issues that are being litigated are very similar to issues that were already litigated for Rock Creek in the past. So, we think that that is -- looks very good. But either of us don’t know how the judge will rule. With respect to Rock Creek, we’re expecting a final record of -- supplemental record of decision or EIS in the course of this year. And so, that’s really the driver of when those things will take the next step where we go underground. As far as capital goes, we would expect to develop these sequentially and capital is call it plus or minus $400 million, but we’ve not engineered anything to be able say exactly what those will be. But, rest assured, we’ll do these sequentially, so we don’t have a big project that we’re trying to do at one time. With respect to the debt, I’m not sure that’s definitive on rolling in. And I think what drives that more is Lindsay coming in and saying, you know what, you’re just paying too much for your debt. And so, we’ll look for the opportunity to refinance that in order to reduce the cost of that debt sometime in the future. Up until recently, the call -- you can’t really buy it in the market, so you have to call it and the call provision was 103, I believe -- 105 rather. So, it’s not come down, so it makes it more palatable. But, we’ll continue to evaluate when it’s appropriate time to try to do something with that. The thing that’s encouraging to me is that the creditworthiness of Hecla today is better than creditworthy when we put the bonds in place. We’ve got Casa running and we’re on this path of continued throughput increases there and improved economics and we have all the other things that we’re doing at the other mine. So, I feel good about our ability to refinance that on our attractive terms.

Thanks. And just a follow-up when you are going forward with these two projects. That’s 400 total for the two of them?

No, each.

Each, right. Okay. And then, as you’re going forward because you don’t really have any assets rolling off like a lot of other mining companies, is there a kind of a net leverage or a debt level or kind of safety cushion that you would not want to go below as you’re spending this capital in the future?

Yes. When we think about it we think two times EBITDA is sort of a reasonable level for us to be in. And there’ll be times when prices are higher and we’ll have less and there’ll be times when prices are lower, we’ll have more. But over the long-term, it’s sort of that two times. Do you agree with that, Lindsay?

I would agree with that.

And remember, one of our objectives, long-term objectives is to become investment grade. So that is on the back of our mind continually is how do we get to that investment grade level. And so, we’re constantly thinking about improving the credit quality. So, when we talk about all these productivity improvements, part of that is just making our minds more valuable, having more margins, so that we have better credit quality.

Okay. And that two times EBITDA target, that’s net or gross, how you think about it?

I think about it but -- yes, it is.

At this time, I am showing no further questions. I would like to turn the call back over to Mr. Phil Baker for closing remarks.

Okay. Thanks very much for being on the call. I guess the thing I would want to emphasize is that we’ve had I think a fairly strong first quarter. We have enjoyed the higher prices, we have seen prices decline a little bit, but we are in a good shape to handle whatever sort of price environment we are in. We have hedged a bit of our lead and zinc which we do in order to give us visibility of cash flows. And so, we are comfortable with where we are with the capital programs and the exploration programs. We hope to work through resolving strike certainly over the remainder of the year. So, thanks very much. If you have any other questions, please give Mike a call or me. Thanks.

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