Executive Summary / Key Takeaways

• Strategic Transformation Underway: Hecla Mining is undergoing a significant strategic recalibration, focusing on operational excellence, portfolio optimization, and rigorous financial discipline to unlock value from its world-class assets in stable North American jurisdictions. This includes optimizing Keno Hill for sustainable profitability and evaluating strategic alternatives for Casa Berardi.
• Robust Financial Performance & Deleveraging: The company delivered record Q2 2025 sales of $304 million, net income of $58 million, and record adjusted EBITDA of $133 million, driving a substantial improvement in its net leverage ratio to 0.7x. Aggressive debt reduction, including a $212 million partial redemption of senior notes and repayment of IQ notes, underscores a commitment to balance sheet strength.
• Technological Edge & Operational Efficiency: Hecla leverages innovative mining methods like underhand closed bench mining at Lucky Friday and integrates generative AI in drilling, enhancing efficiency and resource recovery. These technological differentiators contribute to cost leadership in core operations and support long-term value creation.
• Undervalued Silver Leader with Growth Potential: As North America's largest silver producer, Hecla offers unparalleled exposure to the metal with an industry-leading 14-year reserve life. Despite its strong fundamentals and Tier 1 jurisdictional focus, the company trades at a discount to peers, presenting a compelling reevaluation upside as organic growth projects in Nevada and Montana advance.
• Focused Organic Growth & Risk Mitigation: Future growth is centered on its robust project pipeline, particularly the optimized ramp-up of Keno Hill to 440 tonnes per day by 2028 and targeted exploration in Nevada. While permitting delays and cost inflation remain risks, management's proactive engagement with stakeholders and disciplined capital allocation aim to de-risk these initiatives.

A Legacy Forged in Silver: Hecla's Strategic Evolution

Hecla Mining Company, with a storied history dating back to its incorporation in 1891, stands as North America's premier silver producer. Over its 134-year legacy, Hecla has consistently demonstrated a commitment to innovation and operational excellence, evolving its business model to encompass the discovery, acquisition, development, and operation of polymetallic mines. These operations yield concentrates of silver, gold, lead, zinc, and copper, alongside doré, primarily serving custom smelters, metal traders, and third-party processors. The company's strategic footprint is exclusively within the stable, low-risk jurisdictions of the U.S. and Canada, a critical differentiator in an increasingly volatile global mining landscape.

The broader precious metals market is currently experiencing favorable tailwinds, with a positive medium- to long-term outlook driven by lower interest rate expectations, persistent geopolitical uncertainty, and global growth projections. Furthermore, the burgeoning demand for silver from green technology and renewable energy sectors positions Hecla to capitalize on significant structural shifts. Against this backdrop, Hecla's overarching strategy is built on four core pillars: achieving operational excellence, optimizing its portfolio, intensifying financial discipline and shareholder returns, and maintaining its leadership in the silver market. This strategic framework is deeply rooted in a commitment to ESG leadership, ensuring responsible environmental stewardship, strong community partnerships, and robust relationships with Indigenous communities.

Hecla's competitive advantage is significantly bolstered by its technological prowess and operational innovation. At its Lucky Friday mine, the company pioneered and implemented the underhand closed bench mining method, a testament to its innovative culture. This method enhances safety and productivity in deep underground environments. Across its operations, Hecla has boosted throughput and recoveries at Greens Creek, while also integrating advanced technologies like generative AI into its drilling programs. The application of AI in drilling is designed to improve geological understanding, optimize drill targeting, and enhance resource definition, leading to more efficient exploration and development. These technological differentiators contribute to cost leadership in core operations and are foundational to the company's long-term growth strategy, providing a competitive moat by enabling more efficient extraction and processing of complex polymetallic ores.

In the competitive landscape, Hecla distinguishes itself from larger, globally diversified miners like Newmont Corporation (NEM) and Barrick Gold Corporation (GOLD) through its specialized focus on high-grade, polymetallic deposits predominantly in North America. While Newmont and Barrick benefit from immense scale, broader geographic reach, and significantly greater resources for innovation, Hecla's regional expertise and adaptable mining processes often translate to lower operating costs in specific projects. For instance, Hecla's TTM Gross Profit Margin of 23.09% and EBITDA Margin of 23.68% compare to Newmont's 35% and Barrick's 38% Gross Profit Margins, respectively, indicating that while Hecla's margins are respectable, the larger players benefit from economies of scale. However, Hecla's industry-leading average reserve mine life of 14 years, double the silver industry peer average of 7 years, provides exceptional stability and long-term value creation potential, allowing for strategic, multi-decade investments. This longevity, coupled with its Tier 1 jurisdictional focus, gives Hecla the best jurisdictional risk ranking among its peers, a crucial factor for discerning investors.

Against Agnico Eagle Mines Limited (AEM), which focuses on safe, low-cost gold operations primarily in Canada, Hecla offers a broader mix of metals, potentially providing more diversified revenue streams and greater operational resilience. Agnico's TTM Gross Profit Margin of 41% and Debt/Equity Ratio of 0.06 are stronger than Hecla's, reflecting its streamlined, gold-centric operations. However, Hecla's polymetallic expertise allows it to extract value from complex deposits that might be less attractive to single-metal producers. Compared to Pan American Silver Corp (PAAS), a direct rival in silver production, Hecla's diversified mine portfolio offers operational flexibility. While Pan American's TTM Gross Profit Margin of 19% is lower than Hecla's, its strategy of aggressive exploration might offer faster growth in shared segments. Hecla's current valuation metrics, trading at approximately $1.60 per silver equivalent ounce of total resources (the lowest among mid-cap peers) and 1.3x NAV (at the low end of the peer range), suggest a significant undervaluation given its asset quality and jurisdictional security.

Operational Momentum and Strategic Portfolio Adjustments

Hecla's recent financial performance reflects a company gaining significant operational momentum while strategically recalibrating its portfolio. The second quarter of 2025 was exceptional, marked by record sales of $304 million, a 24% increase year-over-year. This robust revenue generation translated into a net income applicable to common shareholders of nearly $58 million and a record adjusted EBITDA of $133 million.

Cash from operations surged to over $160 million, culminating in a record quarterly free cash flow of $104 million. These figures underscore the effectiveness of the company's operational excellence initiatives and its ability to capitalize on favorable metal prices.

Greens Creek, the company's flagship asset, continues to be a consistent cash flow generator. For the three months ended June 30, 2025, Greens Creek reported metal sales of $122 million, a 27.54% increase year-over-year, and a gross profit of $63 million. Its Cash Cost, After By-product Credits, was an impressive negative $11.91 per silver ounce, with AISC at negative $8.19 per silver ounce. This strong performance was primarily driven by higher realized prices for silver and gold, coupled with increased sales volumes across most metals. Management maintained its silver production guidance for 2025 (8.1-8.8 million ounces) while increasing gold production guidance and reducing cost guidance, anticipating continued strong gold by-product credits. Capital additions for the quarter were $8.4 million, with full-year sustaining capital guidance of $48-51 million.

Lucky Friday, another cornerstone operation, achieved a new quarterly milling record of over 114,000 tons in Q2 2025, surpassing its previous record. Silver production remained consistent at 1.3 million ounces. The mine's gross profit increased by $0.4 million for the quarter, driven by higher sales volumes and improved silver and zinc prices. However, Cash Cost, After By-product Credits, was $6.19 per silver ounce, and AISC was $19.07 per silver ounce, reflecting higher contractor, consumables, maintenance, and profit-sharing costs. The company is implementing cost control initiatives to reduce reliance on high-cost contractors. Lucky Friday's 2025 production guidance remains at 4.7-5.1 million silver ounces, with capital investment expected to increase in the coming quarters to enhance surface cooling infrastructure and support its zero-discharge goal.

Keno Hill, Hecla's primary growth opportunity in Canada, is undergoing a strategic recalibration. In Q2 2025, Keno Hill produced just over 750,000 ounces of silver at a milling rate of just under 300 tonnes per day, delivering its first positive free cash flow quarter under Hecla's ownership at $2.7 million, followed by another profitable quarter in Q2 2025 with a gross profit of $0.2 million. The company has revised its production target to 440 tonnes per day (from an initial 550-600 tpd baseline) to optimize returns through improved ore quality control, overbreak reduction, and cost control. This measured ramp-up is anticipated to achieve 440 tonnes per day by 2028, supported by systematic capital deployment including a cemented tailings plant (expected completion by year-end 2025), waste dump upgrades, mine development, tailings capacity expansion, and water treatment infrastructure enhancements. The 2025 silver production is projected to remain comparable to 2024 levels (2.7-3.1 million ounces) to prioritize stakeholder engagement and advance critical infrastructure.

Casa Berardi, a gold-producing asset, is subject to an ongoing strategic review to maximize shareholder value. In Q2 2025, Casa Berardi's metal sales increased by 44.04% year-over-year to $85 million, yielding a gross profit of $34 million. Gold production rose 37% to over 28,000 ounces, driven by higher underground and surface ore grades. Cash costs and AISC significantly improved, decreasing by over $600 per ounce from the prior quarter to $1,578 and $1,669 per gold ounce, respectively. The mine's underground operations are expected to cease by mid-2025, with a planned transition to a surface-only operation focused on the 160-pit. A production hiatus of approximately five years is anticipated between 2027 and 2032 for the development of new, higher-grade open pits (Principal and West Mine Crown Pillar). The 2025 gold production guidance is 76,000-82,000 ounces, with costs expected to improve in the second half as the stripping ratio declines and contractor reliance eases.

Financial Discipline and Growth Pipeline

Hecla's commitment to financial discipline is evident in its aggressive deleveraging strategy. As of June 30, 2025, the company boasted $296.6 million in cash and cash equivalents, with $179.3 million available under its $225 million credit facility. This strong liquidity position facilitated a significant reduction in debt. A partial redemption notice was issued on August 1, 2025, for $212 million of the outstanding $475 million Senior Notes due 2028. Additionally, the CAD 50 million IQ Notes were fully repaid on July 9, 2025. These actions, partly funded by the At-The-Market (ATM) financing facility which raised $174.1 million by selling 29.01 million shares (and an additional $42.1 million post-quarter end), have dramatically improved the company's net leverage ratio to 0.7x, down from 1.5x in Q1 2025 and 2.7x a year prior. This planned debt reduction is expected to lower annual interest expense by approximately $16 million, freeing up capital for reinvestment in high-return organic growth opportunities.

The company's growth pipeline is robust, with significant exploration potential in Nevada and Montana. In Nevada, Hecla is investing over $3.3 million in 2025 for a targeted exploration program at high-grade properties like Midas and Hollister. Midas, with its historical production of 2.2 million ounces of gold and 27 million ounces of silver, boasts a fully permitted mill and ample tailings capacity, positioning it as a potential "hub-and-spoke" center for new vein discoveries. Active drilling at Midas has already yielded new gold-bearing structures. Hollister, historically North America's third-highest-grade underground gold mine, offers complementary potential within trucking distance of Midas. In Montana, the Libby Exploration Project, a material asset with an inferred resource of approximately 180 million ounces of silver and 1.7 billion pounds of copper (at a 0.7% copper grade), recently secured placement on the Federal Permitting Improvement Steering Council's FAST-41 permitting dashboard, which will streamline federal approvals. While Libby represents a significant capital investment (estimated at $1 billion), Hecla is open to partnering with a copper-focused entity to unlock its value while maintaining focus on its precious metals core.

Risks and Outlook

Despite a compelling investment thesis, Hecla faces several pertinent risks. The inherent volatility of metals prices (silver, gold, lead, zinc, copper) remains a primary concern, as financial results are directly impacted by market fluctuations beyond the company's control. Cost inflation, particularly in energy, reagents, explosives, steel, and labor, continues to pressure operating margins. Permitting delays, especially at Keno Hill and Casa Berardi, pose significant challenges to development timelines and production ramp-ups. Keno Hill, in particular, has faced operational hurdles such as workforce availability, dilution, limited camp space, and power curtailments due to turbine failures at Yukon Energy's hydroelectric plant. A 6-day power outage is anticipated in August 2025 for repairs. If these operational and permitting challenges persist or metal prices decline, Keno Hill's profitability could be jeopardized, making care and maintenance a potential option.

Furthermore, the evolving landscape of tariffs and trade disputes, while immaterial to Hecla's sales to date, presents a future risk. Reciprocal tariffs from countries like Japan and South Korea, where Hecla sells its products, could increase export costs or lead to renegotiated agreements. Similarly, tariffs on imported materials could raise operational expenses. The realization of deferred tax assets in Nevada, Mexico, and certain Canadian jurisdictions also carries uncertainty, with valuation allowances in place due to the likelihood of not utilizing future tax benefits.

Looking ahead, Hecla's 2025 guidance reflects a measured approach to growth and operational stability. Consolidated silver production is expected to remain consistent with 2024 levels, ranging from 15.5 million to 17 million ounces. Gold production is anticipated to decrease due to Casa Berardi's transition to open-pit mining. A modest increase in consolidated cost per ounce is projected, driven by higher labor and power generation costs. Capital investments are expected to slightly increase compared to 2024, primarily to sustain production at Greens Creek and Lucky Friday, while advancing growth initiatives at Keno Hill and Casa Berardi. Management's strategic recalibration, disciplined capital allocation, and focus on organic growth in stable jurisdictions position Hecla to capitalize on favorable precious metals fundamentals and unlock long-term value for its shareholders.

Conclusion

Hecla Mining Company is charting a course for sustainable value creation, leveraging its deep historical roots and a renewed strategic focus. Underpinned by a commitment to operational excellence, disciplined capital allocation, and a robust organic growth pipeline, the company is actively transforming its portfolio. The recent record financial performance, aggressive debt reduction, and strategic optimization of assets like Keno Hill underscore a clear path towards enhanced profitability and shareholder returns.

Hecla's unique competitive advantages—its industry-leading reserve life, exclusive focus on Tier 1 jurisdictions, and innovative mining technologies—position it as a compelling investment in the silver sector. While challenges such as permitting complexities and cost pressures persist, management's proactive approach to de-risking operations and fostering strong stakeholder relationships provides a solid foundation. As Hecla continues to execute its strategy, unlock the potential of its exploration assets, and maintain its leadership in the silver market, its current undervaluation presents a significant opportunity for investors seeking exposure to a resilient and strategically positioned precious metals producer.