Hecla Mining Company (HL) Q2 2026 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for joining us, and welcome to the Q2 2026 Hecla Mining Company Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Mike Parkin, Vice President of Strategy and Investor Relations. Mike, please go ahead.

Thanks, Hilary. Good morning, and thank you all for joining us for Hecla's second quarter 2026 results conference call. I'm Mike Parkin, Vice President of Strategy and Investor Relations. Our earnings release that was issued yesterday along with today's presentation are available on our website. On the call with us today is Rob Krcmarov, President and Chief Executive Officer; Russell Lawlar, Senior Vice President and Chief Financial Officer; Carlos Aguiar, Senior Vice President and Chief Operations Officer; Brian Erickson, Vice President of Operations; Kurt Allen, Vice President of Exploration, along with other members of our management team. At the conclusion of our prepared remarks, we will be able -- we will be available for -- to answer any questions you might have. Turning to Slide 2. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on this slide in our earnings release and in our 10-Q filing with the SEC. These and other risks could cause results to differ from those projected in the forward-looking statements. Non-GAAP measures cited in this call and related slides are reconciled in the slides or news release. Please note, as we discuss the financial figures and projections throughout this presentation and in the earnings release, we are referring to our continuing operations. I will now pass the call over to Rob.

Thank you, Mike, and good morning, everyone. Turning to Slide 3. Hecla ended the third (sic) [ second ] quarter of 2026 from a position of real strength. And I'm speaking to the financial strength, a position today that marks the strongest balance sheet in the company's very long history. And the attributes shown on this slide that define us as North America's premier silver producers, they haven't changed. What has changed, though, is that we have confidence with which we can now invest in what comes next. So I'm eager to have our teams discuss some remarkable developments that are coming out of our substantial project pipeline, which further solidifies our market positioning. More on that in a minute. Turning to Slide 4. This was another very strong quarter for Hecla, even though a couple of headline numbers moved in a different direction than last quarter. And I want to spend a moment walking through why because I think the underlying story here is a good one. Revenue from continuing operations was $334 million compared to the record $411 million we reported in the first quarter. Two things are driving that change, and it's worth being clear about both because neither of them is a production problem. First, metal prices pulled back from the highs we saw early in the year. although I do remain confident in the outlook for silver and gold prices. And second, part of the gap was simply timing. A meaningful amount of silver concentrate mostly at Greens Creek was produced but not yet sold as of quarter end. Had that concentrate shipped within the quarter, revenue would have been noticeably higher on top of an already strong quarter. That inventory shipped in early August, and you're going to see it show up in our third quarter results. Those of you who have followed us for some time know the lumpy sales pattern at Greens Creek. The adjusted EBITDA from continuing operations was $199 million, more than double the $94 million we generated a year ago. Operating cash flow was $175 million and free cash flow was $136 million. Our second best quarter on record and very close to the record $144 million we posted last quarter. Every single one of our mines generated free cash flow again this quarter. with Greens Creek and Lucky Friday each setting new site level quarterly free cash flow records at $130 million and $88 million, respectively. Our balance sheet is simply the best it's been in our long history. We ended the quarter with $483 million in cash, no long-term debt outside of capital leases and an essentially fully undrawn $225 million revolving credit facility with a $75 million accordion. The balance sheet, this strong gives us real optionality, the flexibility to keep investing in the projects and the assets that make the most sense for this business on our own time line rather than being dictated to by our balance sheet. On the operating side, we produced 4.2 million ounces of silver up 8% from the prior quarter. And Lucky Friday delivered new quarterly production record of 1.5 million ounces of silver. And I'm especially pleased with our safety performance. Our consolidated total recordable injury frequency rate or TRIFR for short, improved to 1.57, and that's a meaningful improvement from the 2.07 reported for the first quarter. That's the kind of improvement that reflects real deliberate commitment by our teams. And frankly, it matters more to me than any financial metric on this slide. We also conducted our annual Safety Day in early June with senior leadership visiting every site to reinforce safe working practices. Turning to Slide 5. Our medium-term pathway to 20-plus million ounce silver producer is advancing, and it's anchored by the Keno Hill ramp-up and a potential Midas restart with further potential upside from Keno Hill expansion and from Aurora and Hollister in later years. And nearer term, we've got 2 organic opportunities at Greens Creek that I'm really excited to give you more detail on today. Both are the kind of high return, low capital intensity projects that we look for. Our bar for any of these organic investments is a return on invested capital that clears our cost of capital by a healthy margin and early work on both suggest that they can. I'll turn it over to Brian now to walk you through those. Brian, over to you.

Thanks, Rob. Good morning, everyone. Turning to Slide 6. I'll start with the Greens Creek pyrite concentrate circuit. It's a project we're going to share considerably more detail about today. To summarize, we're advancing engineering and metallurgical studies on a new processing circuit at the Greens Creek mill. But if the studies pan out, we would produce marketable pyrite concentrate stream from mill tailings that currently goes to the dry stack tailings facility. Still pretty early stage work, but I want to be clear about our conviction. Relative simplicity of the project, combined with the potential returns we're seeing at this stage of the study give us confidence that this moves towards execution, not an evaluation for its own sake. Once fully ramped up, we expect the new circuit could add approximately 1 million to 1.2 million ounces of silver and 10,000 to 15,000 ounces of gold in additional annual production. This is on top of Greens Creek's existing output while also reducing the volume we're adding to the tailings facility. Early engineering and medical -- sorry, metallurgical work points to the potential robust return on capital that would meet our investment thresholds. It's expected to be a low capital intensity project with CapEx currently estimated at about $40 million to $60 million anticipated mostly for mill components, storage building, sizing upgrades and some ship loader work to support the additional tonnage. Additional operating costs throughout the new circuit are also expected to be relatively low in terms of the overall increase to our annual spend and are currently estimated at an incremental $10 million to $15 million per annum. When you put all this together, you can see the potential for impressive NPV upside at current metals prices. Currently, we're targeting first quarter or first production between the fourth quarter of 2027 and the first half of 2028 with the ramp-up period of roughly a year. We'll continue to firm up the economics as engineering advances, and we'll keep you updated. I want to stress, these numbers are subject to change as we advance through more engineering studies but we're very excited about the potential for this project in terms of production, but more importantly, in potential future cash flows. Second, I'll discuss the Greens Creek tailings reprocessing project. This remains one of the more compelling opportunities in the portfolio, the dry stack tailings facility [indiscernible] over 600,000 ounces of gold [indiscernible]. At June 30, 2026, metals prices, this represents an in situ value of roughly $6.1 billion, I must emphasize is supporting recovery processing capital cost. We're working with a vendor who specializes in new technology and set to commence Phase 3 metallurgical test work this month, which we expect to complete in the quarter. That work together with confirming a suitable processing facility is expected to determine how we move forward. And as with pyrite concentrate potential to reduce Greens Creek reclamation liability potentially meaningful added benefit to the potential cash flows it could generate. If this project proves viable, we would expect it to be an additional low-cost intensity project that dovetails well with the pyrite concentrate project. Finally, the Midas restart project in Nevada also continues to advance. We're continuing to evaluate the hub and spoke model that would bring ore from Midas and potentially Hollister or other regional sources through the existing permitted mill. We're also evaluating remaining mineralization in the old mine under the existing mill as a potential additional resource. Kurt will touch on the latest Midas exploration results in a few minutes. I'll now turn the call over to Carlos for an operations review.

Thank you, Brian. Turning to Slide 8. Greens Creek produced 2.1 million ounces of silver and over 14,000 ounces of gold in the second quarter, in line with our expectations. Cost applicable to sales were $50 million, with cash costs of negative $17.11 per ounce, and AISC of negative $10.71 per ounce, both after byproduct credits. Exceptional results this quarter driven by very strong byproduct revenue. Cash flow from operations was $139 million, and free cash flow was a new site level record of $130 million. As Rob mentioned it, a portion of the concentrate produced this quarter hadn't yet been sold at the end of the last quarter, which is what drove the gap between our strong production and the revenue we recognized. That inventory was shipped in early August and will be reflected in the third quarter financials. For the full year, we now expect Greens Creek to produce 8 million to 8.3 million ounces of silver, an improvement over prior guidance and 51,000 to 55,000 ounces of gold of cost applicable to sales of $240 million, with cash costs of negative $12.50 to negative $12 per ounce and AISC of negative $4.25 to negative $3.75 per ounce, both after byproduct credits involved an improvement to prior guidance. Turning to Slide 9. Lucky Friday had an outstanding quarter, producing a record 1.5 million ounces of silver on higher mill grade. Cost applicable to sales were $35 million with cash costs of $3.95 per ounce and AISC of $17.8 per ounce, both after byproduct credits. Cash flow from operation was $104 million, and free cash flow was a new site level record of $88 million. The Surface Cooling project is on track for completion by September. For the full year, we have tightened out our silver production guidance to 4.9 million to 5.2 million ounces with cost applicable to sales of $140 million. Cash costs are now expected to be lower at $9 to $9.75 per ounce, and AISC expected to be modestly higher at $20.50 to $26 per ounce reflecting higher planned sustaining capital investment. Turning to Slide 10. At Keno Hill, we produced 625,000 ounces of silver in the second quarter, up from 0.5 million ounces in the first quarter. Cash flow from operation was $18 million and free cash flow was nearly $15 million, the fifth consecutive quarter of positive free cash flow at Keno. We are taking a deliberate approach at Keno Hill. Rather than push for tonnage growth ahead of the site development and permitting work that needs to happen first, we are running the mine at a sustained lower rate while we focus our efforts there and continue to generate positive free cash flow, work that we believe supports a ramp to meaningfully higher tonnage rate in later years. Our updated full year guidance is 2.2 million to 2.6 million ounces of silver reflecting our focus on permitting and site build-out in the nearer term. I do want to highlight some good news on the permitting front. We received the permit to expand our tailings storage facility at Keno Hill this quarter. That approval reflecting strong working relationships we have built with both the Yukon government and our First Nation partners the NND. And it's an important piece of the foundation supporting our longer-term plans for the site. I now turn the call over to Russell for the finance update.

Thank you, Carlos. Turning to Slide 12, let me...

Sorry, Russell, if I could just -- Russell, if I could just jump in. I'm aware that Brian dropped out. He's been dialing in from Yukon. So I just want to repeat a part that might be important that was missed. At the time, Brian was talking about the 51 million ounces of silver and the 600,000 ounces of gold and the many other metals that are locked in. I just want to point out that we are working with a vendor who specializes in this technology. And they are set to commence Phase 3 metallurgical test work this month, which we expect to complete in the quarter. So that worked together with confirming a suitable processing facility is expected to determine how we move forward. So I just wanted to complete the record on that because I'm aware that it was lost in transmission. So over to you, Russell. Thanks.

Thanks, Rob. I'm going to start on Slide 12. As Mike noted, everything I'll cover here reflects the results from our continuing operations. Mine revenue during the quarter was $323 million, with silver accounting for 68% of that total while gold was 14% and the remaining from our base metal byproducts. Net income from continuing operations was $118 million or $0.18 per share and adjusted EBITDA was $199 million. Our margins remain exceptional. We realized 90% of the realized silver price as margin during the quarter. Consolidated free cash flow was $136 million, nearly matching last quarter's record of $144 million with all 3 mines contributing. Turning to the balance sheet. We ended the quarter with $483 million in cash, no long-term debt outstanding outside of capital leases and essentially a fully undrawn credit facility. We've moved from a net debt position of nearly $270 million a year ago to a net cash position of roughly $472 million today, the strongest balance sheet in Hecla's history. Turning to Slide 13. We've all watched oil prices and fuel prices climb on the back of current world events, and I want to spend a moment on why this is far less impactful for Hecla than it is much of our peer group. The starting point is the nature of our ore bodies. Our mines are high-grade underground mines. Because of the greatest high, we process far fewer tonnes to produce each ounce. We don't run large diesel haul truck fleets that define low-grade open pit operations so our diesel consumption per ounce is structurally low. That is the primary reason fuel is only about 3% of our consolidated cost structure this quarter. It's a function of these operations. The second piece is where our electricity comes from. Power is our largest energy input and we source it from local utilities primarily from renewable hydro power. Hydro power isn't priced off crude oil or natural gas, so when fuel market spike on geopolitical shocks, the cost of that energy actually runs our mines and mills don't move with them. Put those 2 things together, high-grade ore that keeps our fuel intensity low and a power base anchored in hydro that is decoupled from volatile fuel markets and you get a cost structure that is far more predictable and far more insulated from energy price swings than most of our peers can claim. In an environment of rising and uncertain fuel prices, that translates directly into more resilient margins and it carries the added benefit of a lower carbon footprint for the metals we produce. As we turn to Slide 14, you'll see this slide has been updated for our Q2 results and outlook changes and projects our 2026 after-tax free cash flow across a range of metal prices. A $50 silver and $3,500 gold, we project about $500 million of consolidated free cash flow for the full year, with these prices below current spot prices. At elevated prices of $75 silver and $4,500 gold above current prices, we see the potential to generate nearly $700 million in free cash flow. At the top end of the range, we're showing today $100 per ounce silver and $5,500 gold. We see the potential to generate nearly $800 million of annual free cash flow. That's obviously a bullish scenario, but it shows the kind of operating leverage our platform has across a wide range of prices. This shows how our business has the ability to produce substantial cash flow across a wide range of price environments. I'll now pass the call to Kurt to go through exploration.

Thank you, Russell. Turning to Slide 16. Our 2026 exploration and predevelopment budget of $55 million remains at an all-time record for the company, representing about 4.5% of projected revenue. We've structured that across 3 priority areas: $24 million at our near mine programs, which carry the lowest risk and highest return in our targeting -- adding 1 to 2 years' worth of resources for conversion to reserves. $16 million in Nevada across Midas, Aurora and Hollister, targeting a resource of 0.5 million to 1.5 million ounces of gold equivalent aimed at forming the basis for a potential Midas restart. And $10 million in early stage and generative exploration. I'm pleased to share some exciting results from our recent exploration release, which came out last week on the 29th of July and is available on our website. Turning to Slide 17. At Keno Hill, we've extended a high-grade silver trend to 800 feet of strike length, and it remains open in both directions. The extension brings us closer to the historic Hector Calumet mine which produced over 96 million ounces of silver during its operating life. You can see the old working is on the right side of this image. Recent exploration highlights include 10.2 feet at 62.7 ounce per ton silver or nearly 2 kilograms per metric ton, 10.1 feet at 44.6 ounce per ton silver and 8 feet at 22.4 ounce per ton silver. These exceptional results support our long-term vision for Keno Hill as an asset with the potential for generating -- for generational mining. We are following up on these results and are planning to have a further update later this year. Turning to Slide 18. In Nevada, our drilling around the Pogo-Sinter gap at Midas has identified 2 new Midas style high-grade gold silver veins and the system remains open. This adds to the picture Brian described earlier around the broader Midas hub-and-spoke opportunity. The new veins discovered are very similar in style to what was mined very successfully previously at Midas. Beyond these results, I want to flag the 2 additional exploration programs are ramping up this quarter. Drilling at Hollister has been underway for several weeks. And at Aurora, my favorite project, we're on track to begin drilling in mid-August. Aurora is a past producer of extremely high-grade mineralization with historic results grading above 2-ounce per ton gold, which is equivalent to more than 60 grams per tonne. Like Midas, it has a permitted mill at the site. There would be investment needed to make this a viable operating site again. But we'll focus on that with -- depending on what the drill bit tells us before we get there. This could provide -- this could prove to be a major value surfacing opportunity for the company, and I really look forward to the results from the initial holes, which we could have this fall. So stay tuned. I'll now turn the call back to Rob for closing remarks.

Thank you, Kurt. So turning to Slide 19. Let me leave you with a few thoughts before we open the line for questions. This was a quarter of continued strong financial results, building on a track record that has helped us delever and move into a position of real financial strength, the kind that lets us keep investing in our robust project pipeline for years to come and surface value for our shareholders. The underlying business has never been stronger. We're making disciplined investments in our asset base to set it up for continued success. Our safety performance improved meaningfully this quarter. And as I said at the top of the call, our balance sheet is without question, the strongest it's been in this company's history. We believe in a robust precious metals market, and we think silver has a very bright future. At today's prices, we're already generating substantial free cash flow. And as Russell just said at the top end of the price scenarios we showed you today, this platform can generate nearly $800 million in annual free cash flow. So that's the kind of operating leverage we have now, and we're working hard to capture it for our shareholders. I really do hope that you share the enthusiasm that we have through our project pipeline and the excitement it's bringing advances and we believe Hecla remains the most compelling way to gain exposure to silver in this sector, and we look forward to continuing to execute and to keeping you updated throughout the year. I will now ask the operator to open the line for questions.

[Operator Instructions] Your first question comes from the line of Heiko Ihle from H.C. Wainwright.

Congratulations on a good quarter. Obviously, metal prices have gone down a little bit. I mean I assume there is some sort of bonus structure for staff by asset related to metal pricing. I just want to see, is there any way for us to extrapolate this into a cost per ounce or cost per tonne by a dollar change in the underlying silver price? Or how do you guys model this out?

I'll hand that one over to Russell.

Yes. Yes. No problem, Heiko. I would say the most direct tied to silver price is the profit share at Lucky Friday. And if you go back late last year, you'll see as we guided, we had our prices in lower prices because the guidance obviously came out lower in the year as prices went up, you saw our prices escalate. This year, we intentionally built higher prices when we came into January, February, we were at high price -- high silver prices. And so we intentionally built high prices into that profit share. As the year has come down, we have seen that cost abate. And so in the guidance that we've issued now, we've used robust prices, but not, say, the $90 silver that we used at the beginning of the year. I'm thinking -- trying to figure out a way to convey directly how much that would be per ounce. And frankly, I would have to kind of get back to you on that. I don't have a direct number for you right now. But I think it's generally isolated to Lucky Friday, and you can see it as you look at the cost performance of Lucky Friday over the past kind of year or so.

Yes. I think if you guys come up with some sort of -- I don't want to say formula, but yes, almost like a formula for the analyst community. I think that might be quite helpful. Completely -- question. Yes, of course, longer-term capital investment, any color on what we should model for longer-term capital? And maybe you can't really answer that question, but I'll try it differently. If you can, are there any large-scale investments at any of the other assets coming on in 2027 and 2028 that may not be obvious for us.

I can continue...

Thanks for the question.

Go ahead, Rob.

Okay. Go ahead, Russell. Okay. In terms -- Sorry, this is awkward because we're in separate offices. I'll just start, Russell, maybe you can fill in the gaps, if you don't mind? In terms of CapEx, we don't really have any huge expansions going on in the near future. What we do have is the Nevada restart, we estimate that's going to be pretty low CapEx given that we already own the mill. The CapEx for the pyrite concentrate project, that's really quite low, particularly in the context of the phenomenal returns that it's expected to generate. The cooling project at Lucky Friday, that's almost finished. And so I would say nothing really major coming up. Anything to add, Russell?

The only thing I'll add to that Rob is we're building -- yes. Yes, a little bit to add to that. The only thing that I'll add is that we're building tails at Greens Creek, Lucky Friday over the next couple of years. And then Keno Hill, there's tailings that we'll be building in the near term and then kind of more intermediate term, but also Keno Hill will continue to invest in the infrastructure to bring that mine production up.

Cool. Thank you both, and I'll get back in queue. And again, good quarter. I appreciate it.

Your next question comes from the line of Cosmos Chiu from CIBC.

Thanks, Rob and team. And congrats on hitting asset level record free cash flows at Greens Creek and Lucky Friday. But I guess my question is, I'm looking at the asset level. And as Russell mentioned, $130 million from Greens Creek, $88 million from Lucky Friday and additional 14-ish from Keno Hill. But I cannot seem to reconcile that down to your corporate level free cash flow of $136 million. So when compared to, say, Q1 last quarter, Greens Creek was actually lower, Lucky Friday was actually lower as well, but the corporate level was higher. So I guess if you can help me reconcile how I can come up with corporate level and then that will help me in terms of trying to figure out how to better utilize or best utilize the asset level free cash flow numbers.

I can jump in on that one, Rob. Yes, I was looking at this as well. So it's a good question, Cosmos. If you think about our -- the way we think about our mine site free cash flow, we actually look at the -- looking at Page 3 of our earnings release, where we reconcile free cash flow to cash flow from the operations. And what we do for mine site is we actually add back the exploration expense that was incurred at that site because exploration expense is an expense that we allocate from a corporate perspective, and it's not really related to the core of the operation in the current period. And so as you think about free cash flow at the corporate level in Q1 versus Q2, what you'll see is the exploration expense did go up Q1 over Q2, and that is included in our corporate consolidated free cash flow number. That's one. And then the other is just corporate expenses that are not included in those Q1 corporate cash and cash outflows, I'll say, that it's not included in Q1. So it's essentially timing. It's working capital timing.

Okay. Okay. Maybe switching gears a little bit here in terms of Keno Hill. As you mentioned, Q2 production was about 600,000 silver ounces and as you mentioned in the MD&A, you're working through a lower grade zone. I guess my question is, looking at your revised guidance for the year, 2.2 million to 2.6 million, midpoint is about 2.4 million. So that's about 600,000 ounces annualized times 4. So I'm just trying to figure it out. You're working through a lower grade portion in Q2. If you're getting out of it, I would have thought that guidance, at least the midpoint could be higher than what's annualized for Q2. That's number one. And I guess, number 2 is the 600,000 ounces like a sustainable level? Is that what we're looking at? Again, I'm just trying to wrap my head around it.

Well, we are projecting the third quarter being a really similar -- yes. Rob, go ahead.

No, no, go ahead, please, Carlos.

Okay. We are projecting to be the third quarter really similar to the second quarter. Definitely, we are in the new zones, we are in development of the new zones at Keno Hill. And that the projection that we can report today, it's going to be really similar to the second quarter for the remainder of the year.

I guess my question is...

Yes. As Carlos said, look at Q3 looking very similar to Q2. The key point is that we expect to meet our revised guidance at the end of this year. And so what happens in between, we just don't have that level of detail disclosed yet. Go ahead, please expand on your question.

Yes. No, I'm just trying to wrap my head around the sustainable rate, but I think you've answered my question in terms of the new guidance, Rob. And then I guess my other question on Keno Hill is with the lower guidance for the year, does that impact potential timing of commercial production or does it really matter.

So we've outlined our 5 criteria for commercial production. We've only met one, which is the silver recoveries. What we're focused on right now is getting the permits that we need and investing in the infrastructure and working our way through that. I would say that if we can receive those permits, the critical ones by mid-2029 and we can execute on the key infrastructure projects over the next 2 or 3 years and the tailings expansion could be advanced far enough in 2029 to permit the mill to resume normal production levels. We expect to begin ramping up to higher production levels by the end of roughly 2029. So this is a ramp-up that's been taking a little bit longer than what was initially thought. But we understand what permits we need. We understand the infrastructure that we need to invest in, and we're working to resolve the permits and complete those investments. We are buoyed by the fact that the exploration results that Kurt talked about, you saw the 96 million ounces adjacent at the Hector Calumet. You can see the expansion as we've continued to get high-grade extensions to boom deep. As Kurt said, this is a generational mine that's going to be hopefully in production for a very, very long time, and we just need to get it through this permitting and an investment phase. And it is free cash flow positive today and it has been for the last several quarters.

That's great to hear. And maybe one last question. Rob, sounds great in terms of the different growth projects that you have in the pipeline. I want to focus on the pyrite concentrate circuit, I guess, as you've mentioned, 1 million to 1.2 million ounces of silver per year 10,000 to 15,000 ounces of gold per year. Is that before or after sort of payability? And if it's before, what's the market like for your particular type of pyrite concentrate and is it fairly clean? If I want to just model out what this could mean in terms of value because you've given me the other parameters, $40 million to $50 million CapEx, if I had it correct, you gave me some operating numbers as well, but I'm just trying to figure out the production numbers.

Well, the quality is very high. In fact, we've had extremely high demand from multiple inquiries, I guess. I'll hand it over to Russell, and maybe he can give you a little bit more color on that.

Thanks, Rob. As we think about the pyrite concentrate, one thing I do want to point out is you -- I think Brian laid it out well, unfortunately, he kind of -- his line was interrupted a little bit during that. And I think Rob came in and kind of cleared some of that up. But we're still working on this project. It's incredibly, I'll say, perspective. We're very high on it. We think it's going to be a very good project. But we're still working on some of the engineering, and we're still nailing down some of the costs. So what I don't want to do is put out a return on invested capital number now while we're still in those stages while we're putting those numbers together. What I would say is that we have a return on capital criteria, which we presented at our Investor Day earlier this year of 12% to 15% on return on invested capital. This project, we would expect would exceed that substantially. And if you go back and you look, and I think it's in our earnings release or our Q or maybe both, we expect that we would get roughly maybe 1 million ounces of silver a year from this project. Yes, that would increase our recoveries. And we would reduce the amount that goes to the tails, which is also cost savings. And the investment will be relatively modest, along with from a capital perspective. And the fact is we're already producing 3 concentrates at this mine. So as a result, the operating costs, we don't expect would go up substantially either. And so from a return on expected capital, we just -- we think it's going to be very, very robust. Does that [indiscernible] for you?

Yes. But I guess going back to my first question, the 1 million to 1.2 million ounces that you outlined, that's before payability factors, right? So if I want to guesstimate some kind of model on my own, I would have to kind of, again, I can do it on my own guesstimate some kind of payability factor to apply to the 1 million to 1.2 million ounces?

I would say -- yes. I mean go ahead and apply payability because, again, like I said, kind of on the front end of this, we're still working through that in some of these details.

Your next question comes from the line of Josh Wolfson from RBC Capital Markets.

Just looking at Lucky Friday and the great performance. I think the company had noted this was in the plan. I'm wondering what was sort of the driver of these high grades. And I guess the commentary that it was not expected to be sustained just going -- looking at the outlook for the second half of the year.

I'll hand it over to Carlos in a minute. But basically, Josh, this was scheduled high grade. It's just a matter of timing. We just went through a high-grade zone this quarter. And again, we don't expect to maintain those high grades. It will probably revert back to the main.

Yes, Yes, it's correct, it was part of the timing, even we were expecting to have a fraction of that high grade at the end of the second quarter. And so at the end of the first quarter -- sorry -- so we had the most significant portion of the high grade in the second quarter and then that was the reason, right, which was planned. And of course, we are not expecting to see that kind of level for the remainder of the year, but definitely it was planned. It was just a matter of timing.

Okay. And then just looking at the cooling project in September, is there anything we should be thinking about in terms of what that means for a tie-in, if that will impact productivity or throughput? And then similarly, once the project is completed, how should we be thinking about the outlook for the mine?

Well, this project was really designed to -- go ahead.

Keep going Rob.

Okay. This project was really primarily designed to set up the long-term future as we get into deeper levels and set ourselves up. We already have a long reserve life ahead of us. It's very difficult to quantify productivity improvements, but it just stands to reason that when you're working in a fairly hot mine, you're going to be less productive when the conditions are not great compared to when the workers are comfortable. I can't really quantify that, but you just know inherently that logically, it makes sense that there should be better productivity.

Got it. Great. And then maybe just last question. The commentary on Keno and looking at sustaining profitability, similar kind of outlook there. Should we be expecting more stable grades and throughput levels to what was achieved in the first half? Or is there still going to be some degree of improvement ahead of this -- the 2029 permitting milestone.

Well, just related to the growth -- go ahead, Carlos.

Well, we are projecting a similar grade and throughput in the third quarter. And with a potential to have some benefit in the last quarter. But it's going to be mostly -- second half of the year is going to be slightly better than the first half.

Okay. And that -- the driver for that was going to be -- which of the factors?

It's going to be a probably better grade.

Your next question comes from the line of Kevin O'Halloran from BMO Capital Markets.

Just digging into the guidance update, it was great to see the AISC guidance come down. Can you give us a sense of the drivers of that? Was it higher silver production from Greens Creek and Lucky Friday larger byproduct contribution, better unit costs? And then maybe any broader thoughts on any cost pressures that you're seeing.

Go ahead, Russell.

Yes. No problem. Thanks, Kevin. Yes, as we think about -- yes, I would say from an AISC perspective, Greens Creek, it really shows the value of that ore that comes out of Greens Creek, right? So 2 or 3 things on Greens Creek specifically. First, they had a great first half of the year, right? In terms of the silver production, so silver ounces were very, very strong. The gold byproduct is huge. And I made a comment in a different question. I think it was to Heiko earlier on the prices that we used in our guidance for Lucky Friday cost will in a similar sense, we have to make an estimate as it relates to the prices that we used for byproducts at the beginning of the year what would be realized versus what we estimate. And so we tend to be a little bit conservative on that. I'd have to go back, frankly, and look to see exactly what those were there in our year-end release. And so we've outperformed on the gold for sure. The Zinc has been a very strong -- the price of zinc has been very strong. And one of the things that people do sometimes oversee is the fact that Greens Creek has an incredible zinc byproduct as well. So that's Greens Creek. As produced costs are essentially online. They're doing well. And then from Lucky Friday's perspective, we've seen a better cost, I'll say, better cost control in general for the mine as a whole. We have seen that profit share that I highlighted earlier come off a little bit just because the price of silver has come off. But then again, they had a fantastic first half of the year from a production perspective. So you kind of wrap all of that up, and that's the reason the AISC guidance is better. I would highlight that we do expect capital spend in the last half of the year to be more than we did in the first half of the year. That's a couple of reasons. The third quarter tends to be kind of a full quarter of better weather as we relate to construction, construction projects are underway that kind of thing. And then we just tend to see more equipment deliveries. We order equipment seems to be earlier in the year and it kind of comes in later in the year. So I would expect the third and the fourth quarter to have more capital spend. And you can see that if you look at our capital spend in the first 6 months versus our guidance.

Great. Yes, that's helpful. Maybe another one for you, Russell. Could you remind us of the tax losses that you have in the U.S. and Canada? And how should we be thinking about the effective tax rate going forward?

I can. So our effective tax rate, one of the things that I would like to highlight as it relates to taxes is our operations in the United States and Canada and as a result, just because -- and I'm going to highlight the United States as a result of the -- frankly, the tax regime in the United States, it's lower than most of the other jurisdictions around the world. And so you should see less cash taxes paid from Hecla than many of our peers. Number two, during the quarter, and you'll see this -- we highlighted it in our earnings release. During the quarter, we did a little bit of tax work to combine our Nevada U.S. group with our kind of main U.S. group that includes Lucky Friday and Greens Creek. And as a result of that, we actually can utilize the expenses in Nevada against the income that's being generated from Greens Creek and Lucky Friday. So you actually see a little bit lower tax rate as a result of that. And we will see, obviously, less cash taxes paid. We expect to utilize our NOLs, both on a state and a federal basis for the year. And so therefore, we did make a cash tax payment in the first quarter. I was just trying to look that up, and I frankly don't have it in front of me. But you would see that at this point, that would be the taxes that we expect to pay.

Okay. That's great. And then maybe shifting gears back to the pyrite circuit at Greens Creek. Are there any permitting requirements that you would have to secure for that? And any space constraints on surface at the plant there that you would have to work around? And then maybe as a follow-up, as you're doing the technical and the costing work, when should we expect to see some of those details announced? And should we be expecting any changes to the resource or the reserve with the higher recoveries from circuit?

In terms of permitting, I don't really know the answer to that question. It's basically simply an extension to the existing circuit. So I imagine permitting would be minimal, maybe something at the load-out bay. I don't really know Carlos or Matt, could you add any color on that?

Yes. You are right. For the pyrite, there's minimum permitting required and we are not expecting any significant delays [indiscernible] permitting. So for that project, I don't see any issue, but there's some minimum required.

Yes. And in terms of reserves, it's an interesting question because there's almost certainly some material that was stuck in resources. And now that we have the means to process pyritic ore at a profit, I would expect that there may be some of that converting into reserves, but I can't quantify that right now.

Okay. Great. We'll keep an eye on for that. That's all for me.

Your next question comes from the line of Dalton Baretto from Canaccord.

Rob, I'm sure you've seen that the Trail smelter in BC is undergoing like an $800 million upgrade to process, germanium and gallium. I'm just wondering, has Greens Creek ever been assayed for germanium and gallium. Is that something you're looking at and is there a plan to monetize those if it does exist?

I think there could well be some germanium or gallium actually in the tailings project. I don't really know. I'm going to -- I'll defer to Brian. Brian, if you're still on the call, could you answer that, please?

Yes, I'm on. Can you guys hear me?

Yes.

Okay. Yes, there is, and we've looked at that as part of both ore production and the tailings reprocessing and pyrite concentrate. It's pretty minor, but certainly, that's a conversation we need to have with smelters on what the recoveries could be on that and the payability.

Great. And then just sort of a similar question, I guess, on Lucky Friday. A couple of its neighbors down in the Silver Valley there are banging the drum on antimony and downstream processing there. Is that something you guys are looking at as well? Could you be part of that if there was a central antimony plant?

Lucky Friday doesn't really have any significant antimony compared to our neighbors. So we have looked at that.

Great. And just a final one on that sort of Silver Valley thematic there. There's lots of these single asset guys there now that are either up and running or moving towards first production. And there's probably a case to be made for consolidation there. Is that something that Hecla would be interested in or look at all?

We're primarily excited by the inherent upside in our own assets. So at Lucky Friday in particular. There hasn't been any meaningful exploration there since about 2011. And so that's something that we're kicking off at present. We continue to monitor all of our neighbors, I guess, and if there's a compelling value proposition, we will consider it, but we're more excited about the potential on what we already own and understand and where we already have our own infrastructure, which is in top shape.

Your next question comes from the line of Eric Winmill from Scotiabank.

A lot of mine have been answered, but just a quick question on Aurora. I know it's still early days, but there's a mill on site there? Do you think it makes the most sense if you find a resource to process it on site? Or would it be part of maybe kind of hub and spoke system here at Midas? And if you do it at Aurora, any cost to refurb the mill there?

Do you want to do it? Go ahead. At Aurora -- thanks for your question, Eric. At Aurora, it's too far by road. We had processed some loaded carbon previously. But to take ore from Aurora to Midas, it's probably not going to happen. We do have about a 600 tonne per day mill that's on site. It's actually -- it's not in great condition, I have to say, certainly not as good as Midas. And so that's why they're going to require reinvestment or potentially a new mill that remains to be determined. Really, it's -- let the drill bit do the talking. As Kurt said, he's very excited about this. I went out to this project in the late spring, and I actually understand why he's excited, there's legacy open pits. There's legacy underground production workings and adits. And then the best target that Kurt's focused on hasn't had a single drill hole on it, and you can actually see it from the side of the hill. So I'm very excited to see what he's going to yield.

Okay. Fantastic. That's very helpful. One more, if you don't mind. Just on Midas and what you're seeing here in the Sinter offset. Presumably, that's on the south side of the main fault there, right? But it looks like some sort of an offset. Is it very similar to what you're seeing in the main Midas mine? Or any additional commentary would be helpful.

Yes. It's similar to the Midas mine. It's more broken up than what we see at Midas. Midas had very narrow really high-grade veins within a 6-, 7-foot, 8-foot wide zone. And so it's similar to that in that respect. The offset is very similar to the Sinter discovery that we had in 2021.

Your next question comes from the line of Alex Terentiew from National Bank.

A lot of good questions asked here and most of mine are taken, but I've got a couple of follow-ups here. So first, maybe just on Midas. I mean, obviously, there's a lot of some exciting exploration there. You guys have talked quite a bit about a lot of existing infrastructure that you can quickly turn back on. Can you just remind me, maybe kind of walk me through the process of what we should expect over the next 1 or 2 years? I'm just trying to get a better sense of when we could see Midas become a formal project go ahead that you're going to make a production decision there, and we could see the first gold from that?

I'll hand that one over to Matt.

Thanks Rob. So to answer your question, Alex, we're actively studying. Obviously, Kurt is drilling and identifying the resource and we get that all firmed up. And my worst nightmare is if Kurt finds that resource and turns to me and says let's put it into production tomorrow, and I don't have that ready. So we've already started geotechnical assessments of the rock. We've started on a hydro geo -- hydrogeologic assessment for inflows and geochemistry. We've also started on some of the mine design and what it would take to refurbish the mill. So those numbers are all ongoing. But obviously, we're not going to invest in any of that until we decide we've been able to firm up with in the ground. So the timing will be very related on exploration success, but we're being prepared now to have that information ready if he gets that -- assuming the drill identifies the resource that we're really looking for. Does that help?

Okay. Yes, yes. No, I guess that helped. I mean, even if the resource proves itself to support a restart, I would expect and still this is a best case, call it, 2, 3 years away from first order, does that kind of make sense still, best case scenario?

It's probably in that range. But again, a lot of unknowns out there, but yes, that's probably a reasonable thought.

Okay. Any permitting constraints or any...

Permitting constraints. Okay. So in terms of permitting constraints, we're in the process of reviewing what we have available. In general, we have a lot of that -- those permits in hand, some will require modifications, some will require some updates, but that's in general, we're in a much better spot than what we would be if it was just a greenfield site.

Okay. Great. And then just one last question...

Alex, when you think about project -- sorry, Alex, when you think about project development, the normal course is you define a resource, you do your studies and stuff like that. But we're in a unique situation in that we already own some of the key infrastructure. And so what we're trying to do is be agile here and run parallel streams. So Kurt is obviously trying to define the critical mass of resources that we need to get this in the production. Matt's trying to work on all the background engineering study work that needs to happen. So it's really about being agile. In terms of 2 or 3 years, I would suggest it will probably be a little bit longer than that. In terms of key permits, if, for example, conceptually, we want to put a portal to access the new discoveries that Kurt and his team have made. That's probably almost certainly going to require a new permit. But the mill with the tailings facility, all the key ones, we already have them in hand.

Yes, that makes a lot of sense, Rob. I guess we're just going to look at these projects and see all the infrastructure. And I think that these things can be turned on relatively fast, but always forget that there's quite a bit of more work behind the scenes that has to get done. And I just got one more question just on Keno Hill. I mean, obviously, this mine has been running for a few years. You're talking about certain permits, but hopefully by mid-2029. I just want maybe a bit more color on the work that's being done there or what's needed for these permits. Is some of this more of a time series data collection that is just frankly, no matter what you do, it's just going to take some time to prove things up for whether it's environmental or water purposes? Or I'm just trying to see if there's anything that can be done to expedite that process.

Not really. I mean permitting takes its course. It's up to us to provide the engineering and the design criteria that basically informs the permit. And then the regulators take as long as they need, they obviously need to consult with the First Nations group as well. But we do know the sequence. And really, it is -- as we've said previously, it is focused on making sure that we have sufficient water treatment capacity that we have sufficient tailings capacity and waste dump capacity as well. We understand the sequence we -- but in terms of the timing, it's very hard to pin down. We're going as fast as we can, but it's not entirely in our hands.

This concludes the time allocated for questions. If you have any additional questions, please reach out to Mike Parkin via the contact us link on the website. I will now turn the call back to Rob Krcmarov, President and CEO, for closing remarks.

Well, thank you all for the thoughtful questions today, and thanks for joining us this morning. I'll just leave you with this. We are in the strongest position this company has ever been, and we're putting that strength to work in the right places for our shareholders and for the long-term value of this business. We do look forward to updating you again next quarter. So thanks, everyone, and have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.