Hecla Mining Company (HL) Q2 2022 Earnings Report, Transcript and Summary

Good morning, my name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Hecla Mining Company Earnings Call. [Operator Instructions] Thank you. Anvita Patil, you may begin your conference.

Thank you, operator, and welcome everyone. Thank you for joining us for Hecla's second quarter 2022 financial and operations results conference call. I am Anvita Patil, Hecla's Vice President of Investor Relations and Treasurer. Our financial results news release that was issued this morning, along with today's presentation, are available on Hecla's website. On today's call, we have Phil Baker, Hecla's President and CEO; Lauren Roberts, Hecla's, Senior Vice President and Chief Operating Officer; and Russell Lawlar, Hecla's Senior Vice President and Chief Financial Officer. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on Slides 2 and 3 and in our earnings release and in our 10-K and 10-Q filings with the SEC. These and other risks could cause results to differ from those projected in the forward-looking statements. Reconciliations of the non-GAAP measures cited in this call and related slides are found in the slides or the news release. With that, I'll pass the call to Phil.

Thanks, Anvita. Good morning, everyone, and thank you for joining our call. I'm going to start on Slide 4, you know, I'm always a little bemused when someone says that we are in unusual times, but I do think this time it is characterized these times is quite unusual. When we had our conference call three months ago, I spoke about the risks facing the world and Hecla such as inflation, COVID the impact of the Russian-Ukrainian war, rising interest rates, and supply chain disruptions and none of those risks have gone away. And added to the list are increased China-Taiwan tensions and metals prices which have declined. And for Hecla, our realized silver price is 12.5% lower this quarter than it was last quarter. And of course, we have a recession, those that could go lower. When I look at margins and capital projects that are going on across our industry, there is a fair amount of stress for companies with these projects. And when we look at our gold mine, we see those margins are shrinking as costs rise in the gold price has declined. But for Hecla, when we look at the quality of our silver mines, the strong production, low costs, the amount of capital we need to spend, the strength of our balance sheet, it's allowing us to focus on how we grow silver production. And I'm very confident that lower silver prices will lead to higher silver prices, significantly higher prices. So, that's the context that we are looking at the quarter and the rest of the year. We are investing in our mines and acquiring new ones because we have the organization and the financial capability to grow production earnings and cash flow and we believe shareholders are going to benefit from the growth of that, investing in our three mines and acquiring Alexco. So, what are the drivers of our growth? And there are three. Increasing grade at the Lucky Friday, coupled with the new mining method the underhand close bench method, or as we call it the UCB method. The pending Alexco acquisition and increasing throughput at Greens Creek. So, first the Lucky Friday. I've been underground twice this past quarter at the Lucky Friday, and I'm really struck by the opportunity the UCB has on a safer and more productive environment. And we still have not really started optimizing the method. All we have been doing for the last two years is implementing the new methods because of its safety and productivity, we're trying to implement it as quickly as we can. So, some of the things we're doing is we're investing in another hoisted surface, a service hoist to move people and materials to the main hoist can whole rock to the surface. We're tearing down the old storage facility that stockpiles, the ore before it goes to the mill. It was super small, so that essentially when the mine was shut down, the mill was too. And that wasn't a problem in the past because the mill had so much more capacity than the mine could catch up. So, we're building a new facility that allows materials to be stored for a few days until the mill is able to process it, and this is great because it seems like it's not going to be that long before the mining rate will exceed the mill's ability to process it. We also have purchase new bigger equipment. When I was underground, I saw six-yard letters which are physically about 30% bigger than what they were replacing. And we're on track with all of these investments, we're yielding results in fact the mine tonnes in the second quarter, set a new record at the Lucky Friday. So, for the Lucky Friday is on a path to be a 5 million ounce producer next year and close to 6 million a year after that, and yet we still have not optimized the new mining method. So, tonnage could continue to increase, which is going to require further optimization of hoisting and milling, so stating for what's happening at this 80-year-old mine whose best production cost and cash flows on the way. So, this year, we are making a roughly $60 million investment, of which $40 million is in the second half of the year. So, we've spent $20 million of the $60 million. The second driver of growth is Keno Hill, probably the highest grade multi-million ounce silver reserve in the world. And as part of that acquisition, we bought another 5% of the company for $4 million which took our interest to 9.9%, and then we've loan them $20 million in July. And we did this financing to Alexco to help them have a singular focus on development, and we've also shifted some equipment that we had available at the Lucky Friday in Nevada. So, we wouldn't have to wait for that equipment from a third party down the line. So, Lauren is going to outline our plan for when we take over to develop the mine. And then the third driver of silver growth is increasing Greens Creek throughput. And we're not talking about large increases but incremental improvements of 5% to 10% over the next couple of years. And so, we're really focused on this peak because these kinds of productivity gains really generate triple-digit type returns because they're low capital projects that are building upon a capital base that's been put in place over the last 35 years. So, Lucky Friday, Keno Hill, and combined with the small increase at Greens Creek productivity really could increase our silver production to a sustainable 17 million to 20 million ounces of silver a year in the next few years. And this would - I think make Hecla the fastest growing silver miner with about 30% growth in production, and would make us one of the two or three largest silver mining companies. We're already the largest silver producer in the United States, and I think we will likely become Canada's largest silver producer. So, after Russell and Lauren speak and before the questions, I'm going to talk about our capital cost guidance, but let me pass it on to Russell now.

Thank you, Phil. Turning to Slide 6, we saw revenues of over $191 million, 34% from silver, 40% from gold, and lead and zinc contributed about 26%. Greens Creek had about half the revenue well Casa Berardi was over 30%, and Lucky Friday just under 20%. We generated $40 million of cash flow from operations and free cash flow of almost $6 million. We ended the quarter with $198 million in cash and available liquidity of $335 million and a net leverage ratio of 1.4 times, which is well below the target of 2 times. Turning to Slide 7. I'll speak more on the margin and cash flow generation of our operations. The green portion of the bars in the chart on the bottom left is the quarterly margin, and over the past eight quarters, our silver margin has continued to average 60% of the silver price realized. Since June 2020, we've generated almost $240 million in free cash flow, and this is after investing $88 million in exploration and pre-development. Last quarter, we spoke about capital allocation and the fact that our first priorities are to invest capital to derisk the mines, lower costs or expand the resource. This is exactly what we'll be doing with the capital we've accumulated will be investing in all of our current operating mines, as well as at Keno Hill to derisk that mine, lower the cost and expand the resource. As a result of these investments being made to the operations and the current price environment, we anticipate seeing the balance of our cash come down in the last half of this year. Turning to Slide 8, we have not been immune to the inflation, the industry has seen, however, as our mines, especially our silver mines are small but high grade. The impact of Hecla has been less than others in the industry. At the time of the guidance, earlier this year across the board inflation assumptions were 5%. However, year-to-date, we have seen costs of key inputs like cyanide increased 30%, and steel and ground support by 14%. The skilled labor market remains constrained with wage increases and reliance on contractors. All these factors manifest themselves into overall higher costs of 15% to 20% over our guidance. While the impact of inflation is offset to a degree by our byproduct credits at the silver mines, the Casa Berardi mine is more exposed to inflationary pressures due to more tons moved there versus our other mines. The chart on the right highlights the components of our production cost with labor and contractors making up more than 50% of the costs, fuel is a smaller part of the production cost because we are relying on hydropower. But higher consumables and other costs have played a factor and the increase in cost guidance you saw in our release this morning. With that, I'll pass the call to Lauren.

Thanks, Russell. I will start on Slide 10. Greens Creek produced 2.4 million ounces of silver in the second quarter consistent with production in the first quarter. The strong production was driven by higher grades and coupled with strong byproduct prices resulted in favorable costs. The cash cost was negative $3.29 per silver ounce and the ounce sustaining cost was $3.48 per ounce. These results beat guidance and generated margins exceeding $12 per silver ounce produced. This best-in-class mine has generated more than $80 million in free cash flow in the first half of the year and $266 million in the past six quarters. With a strong first half behind us, we are affirming the production guidance of 8.6 million to 8.9 million ounces and are reducing the cost guidance. Cash cost and all-in sustaining cost guidance are expected to be in the range of $0 to $1.75 per ounce and $5.50 to $7.50 per ounce, respectively. Slide 11, you can see that the Lucky Friday mine also had a strong production quarter and set two new records. The mill achieved a record quarterly throughput of 1,071 tons per day and the mine produced a record 102,500 tons of ore in the quarter. Quarter-over-quarter silver production increased by 38% to 1.2 million ounces, while ASIC decreased to $9.91 per silver ounce a reduction of 39% over the first quarter. Lucky Friday continued its free cash flow generation with $10.4 million of positive free cash flow for the quarter, this quarter also marked six consecutive quarters of positive free cash flow from the mine, with $45 million generated cumulatively. We are reiterating production guidance of 4.3 million to 4.6 million ounces of silver, cost guidance is being increased to reflect the consumables associated with higher throughput, inflationary pressure on key inputs, and elevated contractor usage due to the tight labor market. As a result, we are increasing the cash cost guidance for the mine to $1.75 to $3.50 per ounce and ASIC to $9.75 to $11.75 per ounce. This quarter highlights the UCB mining that's success in managing seismicity and improving productivity at the mine. This change in mining method underpins our production expansion at the Lucky Friday, and makes it attractive to invest in new fleet and improved infrastructure. As we continue to optimize UCB and plan for higher silver grades as we mine deeper, we believe this mine's best decade is ahead of us. Turning to Slide12. The Casa Berardi mine produced just over 33,000 ounces of gold at an all-in sustaining cost of $1,641 per ounce. Gold production was 10% higher than the first quarter as consistent mill performance coupled with higher throughput, recoveries, and grades led to higher production. ASIC declined 9.3% over the first quarter, primarily due to higher production. We are reiterating production guidance of 125,000 to 132,000 ounces of gold. But we're increasing our cash cost guidance to $12075 to $13075 per ounce and ASIC guidance to $15.50 to $17.75 per ounce. We expect the cost over the second half of the year to be like the first as we don't see the labor market and inflationary pressures easing for the rest of the year. Casa Berardi's costs are more exposed to these headwinds in our silver mines because of the greater volume of material mined and processed and the lack of significant byproduct credits. The increased ASIC guidance also reflects an increase in capital spending associated with the design change in the planned expansion of the tailing storage facility. We announced the acquisition of Alexco in July and expect the transaction to be completed in early September, with the goal of sustaining mill feed at about 400 tons per day, we are planning ramp-up and development, and infill - ramp-up development and infill drilling Bermingham and Flame & Moth deposits in 2022 and 2023. Slide13 highlights some of the work we have at the Bermingham deposit, where the focus will be on the Bear zone. The area under the elapse shows the work we've planned to execute and the footage of the development and drilling that we intend to complete. Moving to Slide 14. This image shows our work plans in the upper Lightning zone of the Flame & Moth deposit. Concurrent with this scope of work in both mines, we plan to build out the supporting infrastructure and work on improvements to the processing facility. With that, I'll pass the call back to Phil for closing remarks.

Okay. So, Slide 15 is our guidance slide. I think that Russell covered the inflationary pressure and Lauren, the specifics on the production in the operating costs guidance. So, I'm just going to focus on the capital across the company and probably in the grand scheme of things, our capital increase is minor but to us a $15 million to $25 million increase in capital. So, the norm, and why do I say that our capital in the past three years has averaged about $107 million, and rarely have we increased guidance. So, let me elaborate on why we are increasing it. We're doing it for a few reasons. First, in certain cases, we've made the decision to accelerate expenditures that we would have made in future periods, and an example of this is the additional drill contractor that we're bringing in at the Lucky Friday, that's going to allow us to have 18 months of data from creative production drilling for mine planning rather than what we have right now, which is 12 months. And by the way, I'd like overtime for us to have three years of data so that we can accurately give investors a three-year outlook. At Greens Creek, an example of this is rehabbing a bridge that was scheduled for 2023 that we're moving to '22 to avoid distractions as we try to increase throughput. And some of the changes are due to expansions in scope of risk mitigations, and the tailings lift redesign at Casa that Lauren mentioned is a good example of that. And like the rest of the industry, we're not immune to the inflationary pressure on capital. And then Lauren mentioned the development and definition drilling at Keno Hill and some of that is happening now with the funds we have financed to Alexco, we'll see how much progress they make, and after we close the acquisition we'll give an update on how much we will spend through the end of the year. So, since we have the balance sheet financial strength to invest in our business to grow production, reduce risks, lower costs, and generate returns, we will be - in doing that, we will be prepared when metals prices, and particularly silver prices are substantially higher. And so, before we go into Q&A, let me just talk about our ESG program. In May, we published our sustainability report, and then I'd encourage you to take a look if you're having already. What you'll find is that in addition to Hecla being part of the solution to climate change by producing the metal of the world needs to generate solar energy among other uses. We are already net zero for Scopes 1 and 2 greenhouse gas emissions. I also want to mention that, Ted Crumley, our longstanding Chairman retired and the Board elected Cassie Boggs who's been on the Board for about six years as our Chair of the Board, and she has a breadth of experience in our industry. She was a partner at Baker McKenzie when I first met her she later was part of Barrick's corporate development team. And finally, she was General Counsel to an investor in the mining business RCF, and so she's retired from these activities and I'm confident that she is going to provide extraordinary leadership to the Board. And finally, most and maybe most importantly, I want to thank the Hecla family of employees. And it is a family, earlier this quarter, we've recognized a family who had - has had a member of their family as an employed for more than 100 years. So I want to thank the Hecla family and all Hecla employees for their commitment and dedication to our values of safety first that makes Hecla the company it is. With that, David, I'd like to open the call to questions.

[Operator Instructions] And we'll take our first question from Lucas Pipes of B Riley Securities. Your line is now open.

Thank you very much and good morning everyone. Thank you also for the presentation. It's very helpful. And when I look at the outlook cost, outlook for the full year for the three operations. It seems like in the case of Lucky and Casa, you will have fixed cost leveraged kind of driving those unit costs in the second half of this year. Wanted to just make sure I'm not missing anything there. And then if you could maybe speak on your confidence of higher volumes in the back half? Would appreciate your perspective on that. Thank you.

So, before you jump off Lucas, let me make sure, I'm understanding your question. Can you just repeat it or maybe restate it? Just to make sure.

Yes. So, when I look at the full-year guidance for 2022, that's Slide 10, 11, and 12 of the deck. And I look at kind of year-to-date production versus full-year, and I look at year-to-date cost of sales and I look at [technical difficulty] on a unit basis. In the case of Lucky Friday and Casa, the full-year guidance is on the cost side is the low year-to-date levels and it appears to me that's driven by volume is picking up in the back half of the year. So, I just wanted to - want to make sure that's correct? And if that's correct, what's driving for example increased volumes in the back half of the year? And Casa to lead to what I believe is greater fixed cost absorption. So, would appreciate your perspective on that.

Okay. Well, look, I guess the way I'll answer, and I'll let you guys jump into this is that we will at Casa have more costs than what we had in the first half of the year. All of the mines either almost exactly the same as the first half or slightly more. All of the mines have a level of increased throughput and so that contributes to it. And all of the mines, generally speaking, are going to have increased costs - unit cost per ounce, Lauren?

Yes, I'll speak on the production side, Lucas. So, at Lucky Friday, you would have seen the significant ramp-up in Q2. We expect similar performance in Q3 and Q4. So back half compared to the first half, it is more heavily weighted on production, then that's just us ramping up the UCB method and continuing to refine it.

And you can see that in the guidance that, if you double what we have produced you don't quite get to our guidance. So, there is a little bit more production.

Correct. And then at Casa Berardi, it is heavily weighted to Q4 and that's production sequence in the underground mine accessing some higher grade stopes.

Okay, that's helpful. And then on Slide 8, you show kind of inflation assumption guidance right 5% where it started, and then - break out where the increase has been, first half of this year versus [technical difficulty]. Obviously, like there. Most of these things, we really don't control. So, it's a reflection of the environment we're in. But on the labor side, I wanted to just touch on that a bit, is the 10% an annualized rate or what you've seen since the beginning of the year?

It's essentially what we've seen compared to our guidance. Right. So, if you think about when we set the guidance at the end of the last year, then we added an inflationary rate of 5%, and that 10% increase is compared to what we [technical difficulty] 15% from last year.

Got it, got it. And are you seeing on the labor side continued pressure like, is there further upside pressure? And if so, where specifically? Is it also...

Well, I mean, I think, yes, I think the short answer is, yes. There is continued pressure and that's reflected by the fact that we're having to use more contractors than what we had in our plan.

Yes, that's exactly right. Phil. The competition for skilled trades, so these would be full cycle miners, mechanics, and electricians, is quite intense in the marketplace and we are supplementing with contractors while we source our own people.

That's helpful. And what are - can you maybe speak to Hecla's initiatives to training programs, things like that would maybe ease the skilled labor shortage in the quarter. So, maybe years to come. This is a long-term issue.

Look, it's always an issue in trying to source employees at the mines. So, at Greens Creek, we've had a long-term training program with the local college there as we try to primarily focused on diesel training, but we're doing things with basically community colleges trying to get people that we need. And we have a whole lot of young folks that are coming into the mining industry and what you find is that they either take to it or they cycle out pretty quickly. Is that fair Lauren?

That's exactly right. I'll just add to what you said, Phil. On the Casa Berardi, we actually operate in conjunction with the local educational institutions. We operate, what we call our stope school, and they will take conduct these in, it's co-funded in part by the government and various mining companies. And then as those candidates finished their technical and exponential training, we pull them into the mines. And we have a cadre graduating shortly. And I think Casa will pull four out of that particular class. We're working to do something similar with mechanics at Casa Berardi. But to Phil's point, we are bringing in a lot of very young people and training them in place and that takes time. But ultimately, if we're going to continue to be successful, as an industry, we've got to welcome in a new generation and we did lose eight-generation of skilled people in the last downturn in the market. And so, this - and COVID took a bunch more out. Folks that were ready to retire or may ready to make a change for one reason or another. So, then...

It also provides an opportunity because we have new technology that we're bringing in, people will - that don't have the same level of experience will embrace that new technology may be easier than others will.

Exactly. And Phil, it's 100% correct. They come and they take to it like a duck to water, and they're very enthusiastic and happier they stay about 90 days and they move on. There is kind of no in between.

And next, we'll go to Michael Siperco with RBC Capital Markets. Your line is open.

Yes, thanks very much. Thanks for taking my questions. You mentioned a few things around the subject. I'm wondering if we can go into a little bit more detail in terms of the expanded scope of activities, adding to CapEx at Lucky Friday. You mentioned the service hoist, can you talk about what else that CapEx involves in the back half of the year? What kind of projects you're investing in? And what that might look like into 2023? Are you thinking that elevated spending sort of continues to support your target of 5 million ounces and beyond?

Well, yes, the three major projects that immediately come to mind are the service hoist. The course ore bunker and the tails and those are projects that will largely be completed in 2023. So, there will be - So, we'll continue to make that elevated spending in '23. And then there is also additional equipment. We have some equipment that has come in, but we'll have additional equipment that will come in, in 2023. That's my recollection of those things, Lauren.

Yes, that's correct.

So, are these investments, maybe going back a year when you were planning, or are these investments or the way you think about them required to get to that 5 million ounces a year target? Or are these supporting potential for production numbers beyond that?

No, these would - for the most part, these were things with the exception of the tailings, these were things that you didn't absolutely have to do, but if you're going to have a derisk mine that is going to meet the plan, then you better make these investments. So, that you don't have these upsets. And then it really puts you in a position to further optimize the mine. I think if you didn't make these investments, the ability to do more than what we had in the plan is limited.

Yes, that's correct. It would be limited and eventually, you would hit a cap that you couldn't move through. So, these investments that we're making, notably, I would say the service hoist and the course or bunker these will allow us to take advantage of the latent capacity that was in the mill. Without these two projects, we would not be able to take the mill to its full potential. And of course, the mill is going to need to go to the full potential because the UCB mining method is going to allow us to deliver that amount of ore. So, it's an integrated system. We have to view it as an integrated system. But this short answer is, no we didn't have to do any of these things to get to 5 million ounces. Because 5 million ounces really driven by the grade. It's getting beyond that this sets us up to do.

Okay, great. Makes sense. And then maybe one other from me. And I don't know how much more you'll be able to add to what you said. But for Keno Hill, it's been about a month since you announced the deal, you're on the ground with the financing and the equity stake. Is there anything new that you've learned over the last 30 days or so? Or any change to your thinking on the work program post deal close? I know you said you provide an update, but is there any kind of preview that you can offer at this point?

Well, look, I think the short answer is we have been very engaged on Keno for a long time, and particularly, sort of the March-April time frame. And so, as a result of that, there is not many things that we're not aware of. And with these guys have been very, very cooperative and very open, and they're even participating on our bi-weekly call with all of our operations. They go first and then they drop off. But, so no, the short answer is, no. Nothing - no surprises, we'll just see how quickly they can develop. I mean they have a shortage of equipment. So, their development rate is not going to be as high as we are anticipating. We will have, once we are fully equipped and are on the ground. Anything to add, Lauren?

No, I would say no surprises. The one comment I would add is how enthusiastic the Alexco team is to be joining the Hecla family.

Yes, I guess. Yes, we talked about labor issues. We think that we've got a workforce that wants to work for Hecla. These are guys that are and gals that are committed to the project and so they're excited about that's coming on. And there is a team of people in Vancouver and we're looking forward to those - a large portion of those guys coming over as well. So, they really - I think there is an opportunity where they still a lot of needs that we have for people.

And next, we'll go to Trevor Turnbull with Scotiabank. Your line is open.

Yes. Thank you. I wanted to ask a little bit about the provisional price loss that you guys had. I thought that you had short-term hedges Kind of to guard against these big swings related to provisional pricing. And I just wondered if you could talk a little bit about what you do to mitigate the commodity price volatility in the short term. Not so much the longer-term hedging. But just this provisional price volatility that we tend to get?

So, the short answer to that is, Trevor, we have hedged the Greens Creek exposure, but we have not hedged the Lucky Friday, and we've had a change, and the terms on the Lucky Friday, and so we're actually rethinking if there is some hedging that we should do. Of that, given what you've just seen in this quarter.

Okay. And then I'm just kind of a housekeeping question about it, is that the money that related to this, the $16 million, was that included in the $116 million cost of goods sold in your direct production costs?

I'm going to have to let Russell answer that question.

No, it's actually a reduction of revenue.

Oh, it's a reduction of revenue. Okay, perfect. That's all I had. Thank you.

Thanks, Trevor.

Next, we'll go to Joseph Reagor with ROTH Capital Partners. Your line is open.

Hi, Phil and team, thanks for taking the call. So, on the - the guide you guys gave what the inflationary impact and the higher costs. Should we think about that as you guys accounting for further expectations of inflation or just what you've seen retroactively this year?

We are reacting to what we've seen retroactively and applying that to the second half of the year.

Okay. So, if inflation were to continue to run hot then there is potentially further upside for the cost estimates? Or are they kind of loss-making?

Yes, I think it - No. Look, I think that's right. Because you don't know how much further they right run. So, we're not going to try to guess.

Okay, fair enough. I just want to make sure from a modeling standpoint. And then given all these pressures, is there an expectation that once things in the world settle out a bit and supply chain issues resolve themselves, however, long that may take that you guys can start to see some increase in reduction in costs again? Or do you think that these cost increases are sticky?

Look, I think cost increases are always sticky. But yes, what we will do is work to reduce the costs. I mean, we've been on a program in the last 18 months, focused on that, we've had some outside help as we've worked through that. I suspect that we'll do another exercise along those lines when the opportunity comes to really try to push the cost down. And what I'm talking about the things like renegotiating long-term contracts with the suppliers. Lauren, anything to add?

No, I think the direct inputs, our reagents, steel, fuel those kinds of things, one would like to believe as pressures relax those prices come down. They always do seem to go down a bit slower than they go up. They should move with the commodities and difficult to predict when that's the issue.

Yes, fair enough. Okay and then just big picture, you're working on the Alexco acquisition. How long do you feel you would need to digest that one before you would consider anything else if there was an opportunistic moment?

I will suggest to you that because we have been engaged on Alexco for the better part of this year, the ability to have that operating with a capacity to look at other things will happen quite quickly. We're not in any rush to do anything else. We think there is a lot of opportunity to optimize our existing assets and will - and clearly, it's going to take about a year to - by the end of 2023 before we're in production there. But we've got the capacity to consider other things.

Okay. Next, we'll go to Heiko Ihle with H.C. Wainwright & Co. Your line is now open.

Thanks for taking my questions. I appreciate it. Mostly that's been covered. But I just want to go back to that rule set in your release, we heard saying, the company has seen the impact of inflationary pressures and labor constraints at all of its operations. I'm just breaking that out a little bit. I mean you've gotten into decent amount of color in your release but labor-wise, I mean walking through the streets, it just seems like every business has openings right now, the U.S. is about 1.8 vacancies, every job in general. Are you having a hard time filling qualified workers? Or is it just the money issue? And if you are having a hard time, what do you think the prior workers are going to?

So, the answer is, it is a - we have vacancies that we are having difficulty filling and we're having these contractors to provide us with those workers and it's primarily, and mechanics electricians. And then I guess also some miners.

The highly skilled miners, full cycle, guys.

Yes. So, it's in all of those locations every other week when we have our meeting we're told how many shortfalls we have. And I don't know I'm just buying memory, I remember 20 odd people.

It's roughly 28 mines, round numbers.

So, where are those people? Look, it just depends on the market for Greens Creek, then these are for the most part people that are flying in and so they're flying someplace else, where? We don't know. In the case of Lucky Friday, they're competing with the Spokane housing market and other industrial applications for these mechanics and electricians. And for Casa, there is other mines in the area and so people are sort of popping around.

Yes, well, you mentioned mechanics, electricians, highly skilled miners. What - can you quantify maybe the impact on labor rates that you're seeing for those types of professionals, you mean today versus out 12, 24 to 36 months ago? [indiscernible] numbers?

I mean I'm not able to off self my head.

Well, we've been making incremental adjustments with the market. I don't have an aggregate number, Heiko.

But, yes, I mean absolutely costs have increased, as we indicated, 10% increase on top of the 5%, we had already filled into our assumptions.

Fair enough. And then just lastly, you state some supply chain uncertainties you've sort of hinted a little bit more of it on this call with the delay and equipment delivery schedules to '23. What equipment is giving you the hardest time? And what is the plan B, I mean is there like a bottleneck in particular that you want to point out? Or, yes, I guess what's your plan B is what I'm saying?

Well, for the most part, we don't have an issue with our plans, with the equipment, it really becomes a question of reliability. It's not that we can't do what we need to do it's the risk that we have in achieving our goals.

Yes, and manifests itself, Heiko, we have standards for how many - at which how many hours do we rebuild the machine versus replace a machine? And, if the machine is not an addition to support a production increase, then the way it manifests itself as lower availability and higher hourly operating costs. And so, you see it on the cost side, but it doesn't impact production. Where we have machines available or required for production expansion such as at the Lucky Friday, we've been getting those machines. We placed our orders quite some time ago, and in fact, for the Lucky Friday have already - quite some time ago actually ordered all the machines we need for '23. So, we got ahead of it quickly. The impact we had was the machines we ordered in '21 that should have delivered in '21 did not deliver until '22. And so that kind of offset the schedule and that was the Q1 impact you saw at Lucky Friday.

And those with six yards that I talked about, which are amazing, machine...

There are big machines when you put them in the Lucky Friday, I agree.

Having covered capital goods on past Slides. Those are big machines all throughout in general. Thank you all so much for your time, appreciate it. I'll get back in the queue.

I show there are no further questions. I will now turn the call back over to Phil Baker for any additional or closing remarks.

So, I just would like to remind you that we do have these one-on-one times of slide it out if you'd like to speak to one of us, we are happy to do that for any interested parties, and certainly, if there's questions that come up otherwise that you need to call us on, please reach out to Anvita and she'll help you get the information that you need. And we look forward to coming back to you after closing, which we anticipate to be early in September, and we'll give you guidance as to what our costs will be, our capital expenditures will be at Keno Hill for the remainder of the year at that time. So, thanks very much, look forward to talking to you later.

This concludes today's conference call. You may now disconnect.