Executive Summary / Key Takeaways

• Hecla Mining ($HL-PB) stands as North America's leading silver producer, rooted in a 134-year history of resilience and operational adaptation across stable U.S. and Canadian jurisdictions.
• The company's core investment thesis is built upon the robust, free cash flow generating cornerstone assets, Greens Creek and Lucky Friday, which fund strategic growth initiatives and balance sheet strengthening.
• Recent performance highlights include record Q1 2025 sales of $261.3 million and a significant improvement in net leverage to 1.5x, driven by higher metal prices and strong operational execution, particularly at Lucky Friday and Greens Creek.
• Key strategic priorities involve optimizing the portfolio through a review of Casa Berardi, advancing the challenging but high-potential Keno Hill towards sustainable profitability, and disciplined investment in exploration and infrastructure, supported by enhanced financial flexibility from deleveraging and the removal of the silver-linked dividend component.
• While benefiting from jurisdictional stability and reserve depth, Hecla faces competitive pressures on cost efficiency and scale compared to larger peers, alongside specific operational and permitting risks at its growth assets, making disciplined execution and strategic clarity crucial for future value creation.

A Legacy Forged in Silver: Setting the Scene for Hecla's Strategic Evolution

Hecla Mining Company, with roots tracing back to the Silver Valley of Idaho in 1891, embodies a rare longevity in the volatile mining sector. Its 134-year journey is a testament to resilience, having navigated economic depressions, global conflicts, and commodity price cycles. This deep history has cultivated a culture of perseverance and operational adaptation, positioning Hecla today as North America's leading silver producer. Operating exclusively within the stable political and regulatory environments of the United States and Canada, Hecla distinguishes itself from many global peers who face higher geopolitical risks.

The company's business model centers on polymetallic mining, extracting silver, gold, lead, and zinc from its four operating mines: Greens Creek and Lucky Friday in the U.S., Keno Hill in Canada's Yukon Territory, and Casa Berardi in Quebec, Canada. This diversification across metals offers a degree of insulation against single-commodity price swings, although silver remains the primary focus and a key driver of revenue, contributing 45% of sales in Q1 2025.

Hecla's overarching strategy is built on four pillars: achieving operational excellence, optimizing its portfolio for maximum returns, intensifying financial discipline, and leveraging its leadership position in the North American silver market. Underpinning these pillars is a commitment to ESG leadership, recognizing that responsible environmental stewardship and strong stakeholder relationships are fundamental to long-term success and maintaining the social license to operate.

In the competitive landscape, Hecla competes with major precious and base metals miners like Pan American Silver (PAAS), Agnico Eagle Mines (AEM), Newmont Corporation (NEM), and Kinross Gold (KGC). While smaller in scale than giants like Newmont or Agnico Eagle, Hecla carves out its niche through its concentrated presence in Tier 1 North American jurisdictions and its unique portfolio mix. Compared to peers like PAAS, which also has significant silver exposure but operates more extensively in Latin America, Hecla's U.S. and Canadian focus offers a distinct jurisdictional advantage. However, competitive analysis indicates Hecla may lag some larger peers in overall cost efficiency and innovation speed, though its operational technologies are key to maintaining performance at its mines.

Hecla's operational capabilities are supported by specific technological and infrastructure investments aimed at enhancing safety, productivity, and sustainability. At the Lucky Friday mine, the company pioneered and implemented the Underhand Cut and Fill with Bench (UCB) mining method, which has been instrumental in improving safety and productivity in challenging underground conditions. Further investments at Lucky Friday include a service hoist to de-bottleneck hoisting capacity and a coarse ore bunker to improve operational flow by decoupling the mill from the mine. A significant ongoing project is the surface cooling infrastructure, designed to support consistent throughput as mining progresses to deeper levels and contribute to the mine's zero discharge goal. At Keno Hill, planned infrastructure includes a cemented tails batch plant, expected to be completed by mid-2025, which will facilitate a transition to the underhand mining method, aiming to improve safety and productivity. Water treatment upgrades and dry stack tailings facilities are also critical investments at Keno Hill to support increased mining rates and environmental compliance. These technological and infrastructure advancements, while not representing a single, revolutionary product technology, are crucial operational differentiators that support Hecla's ability to extract value from its complex orebodies and maintain its competitive standing by improving efficiency, safety, and environmental performance at the mine level.

Performance and Strategic Execution: Building Momentum from Cornerstone Strength

Hecla's recent financial performance reflects the impact of favorable metal prices and solid execution from its core operations, alongside strategic shifts aimed at optimizing the portfolio and strengthening the balance sheet. In the first quarter of 2025, the company generated record sales of $261.3 million, a significant increase from $189.5 million in the comparable 2024 period. This was primarily driven by higher average realized prices across most metals, particularly silver and gold, which offset lower gold sales volumes. Consolidated gross profit saw a substantial increase to $74.0 million in Q1 2025, up from $19.2 million in Q1 2024, leading to net income applicable to common stockholders of $28.7 million compared to a loss of $5.9 million in the prior year period.

The cornerstone assets, Greens Creek and Lucky Friday, continue to be the engines of Hecla's financial strength. In Q1 2025, Greens Creek delivered a gross profit of $48.5 million, benefiting from higher realized prices and strong by-product credits, resulting in exceptionally low cash costs ($4.08/oz Ag) and AISC ($0.03/oz Ag) after by-product credits. Lucky Friday also saw a significant increase in gross profit to $19.1 million, driven by higher sales volumes from a full quarter of production (compared to a partial quarter in Q1 2024 due to the prior year's fire-related suspension) and higher realized prices, although costs increased due to higher labor, contractor use, and profit sharing. These two mines generated robust free cash flow of over $40 million in Q1 2025, building on their impressive track record of over $800 million in free cash flow generated since 1986.

This strong performance from the core assets has been instrumental in improving Hecla's financial flexibility. The company has made significant progress in deleveraging, reducing its net leverage ratio to 1.5x at March 31, 2025, a notable improvement from 2.7x a year prior. This was achieved through a combination of improved EBITDA and strategic capital allocation, including the issuance of equity under its ATM program in prior periods and paying down the revolving credit facility.

At the end of Q1 2025, Hecla had $43.0 million drawn on its $225.0 million credit facility, leaving $175.0 million available, and held $23.7 million in cash. The company believes its liquidity is sufficient to meet obligations and fund planned activities for the next 12 months and beyond. A key strategic decision supporting this financial discipline was the elimination of the silver-linked component of the dividend policy, freeing up cash flow for reinvestment in organic growth and further deleveraging.

While the core assets performed strongly, the newer additions to the portfolio present a more complex picture. Keno Hill, acquired in 2022, is still in its ramp-up phase and has not yet reached commercial production. In Q1 2025, Keno Hill achieved a gross profit of $1.0 million, its first profitable quarter under Hecla's ownership, driven by higher sales volumes and prices. However, the operation continues to face significant challenges, including permitting delays (exacerbated by external events in the Yukon), power curtailments, workforce availability, and the need for substantial infrastructure investments to reach sustainable, profitable production levels (estimated at 500-600 tons per day to offset high fixed costs). Management has reiterated 2025 production guidance for Keno Hill at 2024 levels (2.7 million to 3.1 million ounces) to prioritize advancing permits and executing critical infrastructure projects, acknowledging that achieving higher throughput requires significant capital and continued stakeholder support.

Casa Berardi, the gold-focused asset in Quebec, is undergoing a strategic review. While it generated a gross profit of $5.3 million in Q1 2025 due to higher realized gold prices, it has a history of gross losses in recent years. The mine is transitioning to a surface-only operation focused on the 160 pit by mid-2025, with production from this pit expected to continue until 2027. However, this is forecast to be followed by a multi-year production hiatus (potentially until 2032 or later) while future pits are permitted, de-watered, and stripped. The strategic review is evaluating all alternatives, including potential divestment, joint ventures, or extending the underground, to maximize value from the asset, particularly in the context of current high gold prices.

Capital expenditures in Q1 2025 totaled $54.1 million, and the company estimates a range of $222.0 million to $242.0 million for 2025 (before lease financing), primarily focused on sustaining production at Greens Creek and Lucky Friday and advancing growth initiatives at Keno Hill and Casa Berardi. Exploration and pre-development expenditures are estimated at $28.0 million for 2025, with management indicating a desire to increase investment in exploration, particularly in Nevada (Midas, Hollister, Aurora), as financial flexibility improves, leveraging existing infrastructure for a hub-and-spoke approach to unlock potential value.

Outlook, Risks, and the Path Forward

Hecla's outlook for 2025 is one of disciplined execution and strategic focus. The company has reiterated its consolidated silver production guidance of 15.5 million to 17 million ounces, generally consistent with 2024 levels. Gold production is anticipated to decrease as Casa Berardi transitions to a surface-only operation. Consolidated costs per ounce are expected to see a modest increase, driven by higher labor and power generation costs. However, the diversified portfolio is expected to provide an advantage, with consolidated silver cash costs and AISC guidance remaining unchanged, while Greens Creek's cost guidance has been significantly lowered due to strong by-product credits.

The investment thesis hinges on the continued strong performance of Greens Creek and Lucky Friday, which are expected to generate the cash flow necessary to fund strategic investments and deleveraging. The successful ramp-up of Keno Hill remains a key growth driver, but its path to sustainable profitability is subject to significant risks, particularly related to obtaining necessary permits for infrastructure expansion and increased throughput, managing operational challenges like workforce and dilution, and maintaining strong relationships with the First Nation and Yukon government. The strategic review at Casa Berardi introduces uncertainty but also the potential for value realization, depending on the chosen path and future metal prices.

Key risks to the investment thesis include fluctuations in metal prices, which are beyond the company's control and can significantly impact profitability and cash flow. Operational risks, inherent in underground mining, can lead to production disruptions and cost increases, as seen with the Lucky Friday fire and Greens Creek maintenance issues. Permitting delays, particularly at Keno Hill and for future developments at Casa Berardi, could push back production timelines and impact the realization of future cash flows. Litigation related to environmental matters and past acquisitions also presents potential liabilities. Furthermore, broader macroeconomic factors, including potential tariffs or trade disputes, could impact shipping costs or demand for base metal by-products.

Despite these challenges, Hecla's position in stable North American jurisdictions, its long-life reserve base, and its focus on operational improvements and financial discipline provide a solid foundation. The strategic review of Casa Berardi and the measured approach to Keno Hill's ramp-up signal a pragmatic approach to portfolio management aimed at maximizing shareholder value.

Conclusion

Hecla Mining stands at a pivotal point, leveraging the consistent strength and cash flow generation of its cornerstone Greens Creek and Lucky Friday mines to navigate a period of strategic optimization and growth investment. The company's deep history in North American silver mining provides a foundation of experience and jurisdictional stability that differentiates it in the competitive landscape. While facing challenges in bringing Keno Hill to sustainable profitability and evaluating the future of Casa Berardi, Hecla's focus on financial discipline, deleveraging, and disciplined capital allocation positions it to enhance flexibility and pursue organic growth opportunities. The successful execution of infrastructure projects, securing necessary permits, and maintaining strong stakeholder relationships, particularly in the Yukon, are critical factors that will determine the pace and scale of future value creation. For investors, Hecla represents an opportunity to invest in a leading North American silver producer with significant operational leverage to metal prices, balanced by the need for patient capital as the company works to unlock the full potential of its portfolio and solidify its long-term growth trajectory.