Hecla Mining Company (HL) Q4 2021 Earnings Report, Transcript and Summary

Thank you for standing by. This is your conference operator. Welcome to the Alexco Resource Corp. Full Year 2021 Results Conference Call. [Operator instructions] I would now like to turn the conference over to Paul Jones, Senior Vice President, Corporate Development. Please go ahead.

Good morning, ladies and gentlemen. Today is Monday, March 21, and I welcome you to the Alexco Resource fourth quarter and full year 2021 results conference call. This call is being webcast and a recording can be accessed through the Events and Webcasts section of our website at alexcoresource.com later today. Our website also contains our most recent news releases and our financial statements for the quarter ended December 31, 2021. All amounts referenced today are in Canadian dollars unless otherwise indicated. Today, our Chairman and CEO, Clynt Nauman will discuss our most recent results and he will be joined by our President, Brad Thrall and our CFO, Mike Clark during the question-and-answer period. Please be reminded that some statements made today may constitute forward-looking information within the meaning of applicable securities regulations. Past performance discussed today is not indicative of future results and our business involves several risks that could cause results to differ from projections. Investors are encouraged to review the disclosures pertaining to risks that can be found in our most recent regulatory filings available on our website and on SEDAR and EDGAR. I will now leave you with Clynt Nauman.

Thank you, Paul. Good morning, good afternoon and thank you to those who are joining our call today. I’m going to keep my comments brief this quarter. Our performance in Q4 and into the early parts of 2022 has been well short of expectations, as you have seen from our news release earlier this month. However, in a short time today, I want to assure you that we have weathered the most challenging issues, and we are cautiously optimistic that we will post improved operating conditions and performance as we move into the balance of 2022. Firstly, from a purely pragmatic viewpoint, while the impact of COVID was significant at site in December and extended into January, we were further impacted by serious supply chain issues with respect to critical spares in February, leading to reduced equipment availability and much slower underground progress. The fact of the matter is that we can and must do better, anticipating and overcoming these types of problems. As mentioned at the outset, I'm cautiously optimistic that the challenges we face recently are in the rearview mirror. And then we are well-positioned to deliver Canada's only primary silver mine to full production. [Technical difficulty] Bermingham and Flame & Moth, we’ve completed more than 2,300 meters of lateral development and are now in or at [indiscernible] deposits. Specifically, we currently have four ore headings on two levels available at our Flame & Moth deposit, and we continue with long-haul retreat mining at our first large stope in the Bermingham deposit. Our upgrades and investments in the district mill have been completed. And when we've had sufficient ore available, we’ve had several campaigns at and above our design capacity of 400 tonnes per day, all while meeting or exceeding our metallurgical MET [ph] model or silver recoveries. However, we are running approximately 3 to 4 months behind our schedule, which originally stores [ph] achieving design capacity in Q1 2022. Clearly, this has put pressure on our balance sheet. And in that regard, we have available to us a US$10 million prepayment revolving credit facility with concentrate Offtaker from which we have currently drawn US$5 million and can access the remaining US$5 million, if necessary. Accessing additional working capital is simply a function of our success in being able to deliver the targeted oil volumes to the move to generate revenue offsets. As we speak today, we do see improved ore availability and improved cycle times underground and improved delivery of ore to the mill. It is on us to maintain and increase this ore delivery in Q2 2022. Meantime, we are rescheduling our mine plan and anticipate being in a position to provide guidance for 2022 production in May, a couple of months from now. Meantime, we have onboarded and trained our own complete underground mining force as well as filled out with a team of highly motivated and skilled [technical difficulty] operators. I do commend our team for their dedication and steadfast commitment to the project. As a team, we have overcome a great number of obstacles, improving results I expect to see over the next few months is directly related to their efforts. Today, we also announced some short-term production guidance for Keno Hill. We now expect to produce between 75,000 and 100,000 ounces of silver in Q1 2022 and between 450,000 and 550,000 ounces of silver in Q2 2022. Furthermore, as I’ve previously mentioned, we anticipate being able to provide second half 2022 guidance in conjunction with our Q1 financial report on May 12. I would be remiss if I didn't take a brief moment to comment on the success that we've had on the exploration front. Specifically, after completing approximately 17,700 meters of drilling focused on the Bermingham Deeps, on January 18, we announced a 43% increase in Bermingham's indicated resource and a 70% increase to its inferred ounces. Bermingham now has over 47 million ounces of indicated mineral resources at a grade of 939 grams per tonne silver, with inferred resources up nearly 20 million ounces at a grade of 735 grams per tonne silver. By any measure, this is a stellar result. And in 2022, we will be conducting an additional 15,000 meter program to identify test areas exhibiting geological mineralization signals -- signatures similar to our Bermingham discovery, starting with targets adjacent to the current reserve area. Meantime, as we’ve previously mentioned, as part of rescheduling 2022 production at Bermingham, we will be looking at longer range development alternatives to reach the deeper levels of this deposit and potentially accessing this new deeper discoveries sooner rather than later. We made a lot of progress over the last 18 months, and I expect the next few quarters will be critical for Alexco and Keno Hill. Lastly, I wanted to take this opportunity to thank our shareholders also for their patience and support of Alexco as we delivered Keno Hill back to full production. With that brief statement, I'd like to ask the operator to open the call for questions.

Thank you. [Operator Instructions] The first question comes from Jake Sekelsky of Alliance Global Partners. Please go ahead.

Yes. Hey, guys. Thanks for taking my questions. So, you’ve obviously mentioned the ramp up has been delayed a bit due to COVID restrictions. I’m just curious if this has had any impact on your plans to work towards an updated mine plan around midyear. I mean, I’m just thinking working with consultants and other vendors. Have you seen a delay in that as well?

Yes. Hi, Jake. Thanks for the question. I will let Brad comment on this, too. But just firstly, it's still our intention, obviously, to turn out a new life of mine plan. But in the meantime, as you might appreciate, we are focused on trying to reschedule -- not put out new plans for simply, but reschedule production for the remainder of 2022. So that will be the first priority. And from that, and we will roll into a reformatting of the life of mine plan.

Yes. Maybe a little bit more, Jake. I mean we've actually started a little bit both internally as well as some external consultants just starting that process of an updated plan incorporating the Bermingham Deep. So, yes, it will be ways out still, but we have started some of that work.

Okay. Fair enough. And then on exploration, I saw that you guys outlined the 15,000 meter surface program. Is any of this in the targets that you've talked about in the past? Or are these all truly new adjacent targets to Bermingham?

Yes. The plan, Jake, is to start a more, I guess, reconnaissance type program in part. What we have found is that over the course of time, we’ve drilled about 150,000 meters in the district. Of that, only about 20% has ever been testing new targets. The rest has gone into infill drilling. Now we have a significant number of ounces in front of us, both from a reserve perspective and also a resource perspective. We have the runway to start looking at these numerous other targets in the district. And that’s where that 15,000 -- or the majority of that 15,000 meters is dedicated to. So, we know that Bermingham Excalibur [ph] trend is very productive. So, we will be doing some more work further to the west along that trend. We are going to start work down on the Husky Silver King trend, which is an equally attractive, very high grade, high fluid flow system that we have not really tested at all. We are going to go over to Lucky Queen. Probably briefly, there's obvious targets over there adjacent to development that’s already in place. We will come back to [indiscernible] which sits on the side of the whole road and have potential for a smaller by our count, smaller but high-grade deposit that’s very accessible and do those types of things. So, it's more a reconnaissance program. and it's based on the thesis that if we do 12,000 to 15,000 meters with drilling each and every year, over the course of time, we will find more of these Bermingham or Flame & Moth type discoveries, and we will have the runway to drill them out, infill drill them and permit them and get them into the production line. So that's -- it's a change of tactic for us. but it's certainly leveraging on the success that we’ve had in the past has brought us these several years of time to figure out where the next large deposit is going to be.

Okay. That’s helpful. And then just lastly, I mean, you’ve obviously seen a strong increase in base metal prices over the last few quarters. And I’m thinking more towards the end of this year. Has there been any thought into hedging out some of that exposure at these prices once the ramp up is complete? I’m just kind of curious with the [indiscernible]?

I mean it's a good point, and we haven’t actually been focused on that. I will draw your attention to the fact that ironically, there are deposits at Keno Hill, which have more base metals that [technical difficulty] and sometimes we’ve kicked around the possibility of taking another look at those. But I mean, it's a good point, something that certainly will take into consideration as we get back on to the production up here.

Got it. Okay. That’s all for me. Thanks again.

The next question comes from Joseph Reagor of ROTH Capital Partners. Please go ahead.

Hey, Clynton and team, thanks for taking my questions. I guess, first thing on the ramp up. You guys are pretty confident that in Q2, there's going to be a pretty sharp uptick in underground mining rates and then ore to the mill. I guess, one, is there anything different that you're going to do in Q2 other than just hopefully not having to have more core [ph] problems? And then two, if you do you have any other recurring issues, are there any external options you guys could look at to get that ramp up done?

Joe, I will take a shot at that. I guess several things that we are certainly focused on and that we feel put us in a much stronger position, certainly, equipment availability, trying to get ahead of the game and capital spares and on the maintenance group. I mean we are now -- right now, for the first time, quite honestly, at a point where we have essentially a fully staffed maintenance group and a fully staffed mine operations, the underground miners. So, it's taken us a long time to get to this point in terms of recruitment and retention. So that's a big part of it, for sure, is the qualified miners underground have to face on a day-to-day basis as well as the available specialists on the maintenance side equipment availability. And the other big point, obviously, is we now have a fully developed two sublevels at Flame & Moth, the 835 and the 815 and those levels will continue to open up. And we will continue to drive the ramp deeper at both the mines, which again will open up more levels. So, it's all about opening up more levels, which opens up more ore phases [ph], which gives us more flexibility. So then if we do have issues at a particular phase, we have other places to go.

Okay. And any external options if you need them? Is there any contract miners that you could hire in the area?

We have looked at contractors before. And actually, we did employ a contract miner for a shorter time period to help us get over a hump. That certainly is an option. We are just finishing, we are about 45 days away from finishing our second major [indiscernible] to surface using a contractor. But you're right, that is an option. That’s all is on the table and is available, but we haven’t made that decision yet.

Okay. Thanks. I will turn it over.

The next question comes from Nicolas Dion of Cormark Securities. Please go ahead.

Hey, guys. Glad to hear that things are looking up. I’m wondering if you can maybe provide what the development or the advance rates are in March, so we can kind of see how those are improving into Q2?

Yes. In terms of both the mines, again, [technical difficulty] we are just now resuming that the main access ramp and that was intentionally put on pause because we had multiple faces of -- at level access that Flame & Moth as well as a number of infrastructure projects that had to be still completed. So, our objective at both Flame & Moth and Bermingham is to shoot for 2.5 meters per day. which we think is a pretty reasonable achievable target. So, at Bermingham, the main access ramp is underway, and those are the type of numbers that we see sustainable as we finish up March and go into Q2. So that would equate to essentially 75 meters per month of primary waste development.

Okay. Do you have -- sorry, do you have more to add?

Yes, that would be per mine -- 75 meters per month per mine.

Got it. And do you have a target on the number ore phases you want available at Flame & Moth in order to achieve your run rate?

I think we are essentially there at 815, 835 and we are -- and as Clynt mentioned, we are reengineering that plan for that level. There's some opportunity for an increase in tonnes in that area based on some previous infill drilling that we did last year. And then once we resume the ramp, we will be going down to the next sublevel, which is the 795. And at Bermingham, we are less than 70 meters away from the 1120, which is one of the highest grades of the mine. So, I would hope by the end of Q2, we are going to have 4 or 5 phases of ore at Flame & Moth and we will have the 1120 at Bermingham ore product as well.

Okay, perfect. And then maybe just one more question on the balance sheet. Is there any additional flexibility in terms of noncore assets you can monetize? Or do you have any remaining equity positions that you could monetize?

Yes. Hi, Joe (sic) [Nicolas]. We are obviously looking at all the alternatives that we have at the present time. So, yes, we have offloaded our investment in Banyan up to this point and still have a significant retained interest there. So, yes, I mean, we are doing all the prudent things to focus our efforts 100% on getting to sustainable throughput here at Keno Hill.

Okay, great. Thanks. That’s it for me.

Our next question comes from Martin O'Malley of O'Malley [ph] Investments. Please go ahead.

Gentlemen, my question is your head grades fell dramatically in the fourth quarter of 2021, and I just wondered what was going on there?

Yes. That’s, Martin, -- that was by design. I mean that’s a transition period as we transitioned away from the Bellekeno and build out those remaining stockpile tonnes and we transitioned them to almost predominantly long-haul tonnes at the Bermingham mine. So long haul does have a higher level of dilution associated with it. This is our very first long haul that we've done at Bermingham. There is a learning curve that we are undergoing right now. So, we are taking on probably the higher amount of dilution than original design, which was 33%. So, the combination of kind of transitioning away from Bellekeno and into our first long haul. I would anticipate seeing that same trend for a bit in Q1 because of the ore drives that we have at Flame & Moth we're coming into the end of the first of those ore drives at 835, which means that the generally lower grade on the ends of these ore drives until we get into the higher grades into the middle of these things. So, it's not -- certainly not unexpected.

Thank you.

This concludes the question-and-answer session. I would like to turn the conference back over to Clynt Nauman for any closing remarks.

Thank you, operator. I look forward to keeping you all updated on our progress and look forward to speaking to many of you again soon. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.