Hecla Mining Co (HL) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter end 2014 Hecla Mining Company earnings conference call. My name is Crystal and I will be your operator for today. (Operator Instructions)

I would now like to turn the call over to your host for today, Mr. Mike Westerlund. Please proceed, sir.

Thank you, operator. This is Mike Westerlund, Hecla's Vice President of Investor Relations. Welcome, everyone, and thank you for joining us for Hecla's fourth-quarter and year-end 2014 financial and operations results conference call.

Our exploration news release that was issued last Thursday and the financial results news release that was issued this morning before market's open, along with today's presentation, are available on Hecla's website. On today's call, we have Phil Baker, Hecla's President and CEO; Jim Sabala, Senior Vice President and Chief Financial Officer; Larry Radford, Hecla's Senior Vice President, Operations; and Dean McDonald, Senior Vice President, Exploration.

Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and constitute forward-looking information under Canadian securities laws, as shown on slide 2. Such statements include projections and goals, which are likely to involve risks detailed in our Form 10-K and in the forward-looking disclaimer included in the earnings and exploration releases and at the beginning of the presentation. These risks could cause results to differ from those projected in the forward-looking statements.

In addition, in our filings with the SEC, we are only allowed to disclose mineral deposits that we can economically and legally extract or produce. Investors are cautioned about our use of terms such as measured, indicated, and inferred resources and we urge you to consider the disclosures that we make in our SEC filings.

With that, I will pass the call to Phil Baker.

Thanks, Mike, and hello, everyone. When I look back over 2014, the five keywords I think best describe the year are strength, execution, growth, confidence, and optimism.

Hecla is the strongest it's been since I joined the Company, a direct result of having 3 mines that are executing well, producing a record 34.5 million silver equivalent ounces and a record $0.5 billion in revenue, as you can see on slide 3. This production growth, combined with our low costs generated a strong increase in operating cash flow, the third most in our history, and a 29% increase in adjusted EBITDA, allowing us to end the year with $210 million in cash, within $3 million of where we started the year. And we achieved this with the second-highest level of capital investment in our history and lower gold and silver prices.

There are not many precious metals companies in this environment that can grow production, invest for the future, and maintain cash. I think it's a testament to both the assets and Hecla's people.

And that's why despite the weakness recently in the price of silver and other metals, we are confident that we can execute our business plan with its low-cost mines, diversified revenues across four metals, the hedging programs for lead and zinc, and a strong balance sheet. And while metal prices are lower, we continue to invest capital in our mines -- first because we can afford to.

And second, it's in this period of low prices that you get the most bang for the buck. The best opportunity to increase mine life, production, productivity, and reduce operating risk at the lowest cost.

The biggest line item in our capital program -- and has been for a number of years -- is Lucky Friday's foreshaft, our largest growth project in our history and a key part of our growth strategy over the next few years. It's on time and on budget, with the excavation expected to be completed by the end of the year and the shaft fully functioning by the third quarter of next year.

We have also continued to invest in exploration and development with great results. We grew our silver reserves for the ninth straight year, despite using $17.25 per ounce silver, which is $2.75 an ounce less than we used last year and about 25% less than average silver price our peers used last year.

And I'm sure we're going to be among the lowest this year with our silver price assumption. The reserve growth also takes into account our production, a record 11.1 million ounces of silver. So how did we replace and grow at a lower silver price assumption?

Well, part of the reason was the 10% increase in grade, or an increase of 1.4 ounces per ton at the Lucky Friday, which is worth approximately $25 per ton when you consider just the silver. For a number of years now, we expected the grade to increase as we increased drill density and that is happening. And we're not going to be surprised if we see the grade continue to increase in the future.

One final thing to remember is this higher grade applies to the whole reserve, not just the new reserves we add. Our gold reserves stayed relatively steady, using 12 -- $1,225 per ounce for the calculation. Greens Creek's grade increased because the 200 South, and Casa's grade decreased because of additional open pit reserves.

When I look forward, based on our increase of measured and indicated resource tons and grade, I'm optimistic we can continue to grow our reserves and have better grades in the future, not just at the Lucky Friday. We are also optimistic about Greens Creek, too.

But the growth and improved quality of resources is not just happening at the mines. The San Sebastian product in Mexico has had great exploration results. Recall that when we mined gold and silver there from 2001 to 2005, the Francine Vein was the highest grade mine in Mexico.

The discovery of the East Francine Vein, which is just a faulted offset of the Francine Vein, with near surface high quality resources, including indicated resource grading about 81 ounces per ton silver equivalent or over an ounce per ton gold equivalent. In fact, the measured and [in cade] resource there is now within 20 million ounces of some of our peers' [measuring in cade] resource for the entire company.

Dean will talk in a moment about these discoveries and the work we're doing to further grow the resource and bring San Sebastian back into production.

We achieved strong production and financial results last year and substantially advanced our exploration programs, despite the price environment. We're doing very well at these prices and are confident in our plans for this year. Specifically as indicated on slide 4 and in our news release, we expect production and expenditures to be as follows.

Silver production of 10.5 million ounces at a cash cost after byproduct credits per silver ounce at $6, worth 35 million silver equivalent ounces when you take into account all 4 metals we produce. This is around 500,000 gold equivalent ounces. You can see our price assumptions on slide 4.

Of this, we expect approximately 7.3 million ounces silver at Greens Creek at a cash cost after byproduct credits of approximately $4.50 per silver ounce and 3.2 million ounces from the Lucky Friday at a cash cost after byproduct credits of approximately $8.75. We expect Company-wide gold production of approximately 185,000 ounces, of which we expect Casa Berardi to produce 130,000 ounces at a cash cost of about $825 per ounce.

Capital expenditures, excluding capitalized interest of $145 million, is slightly higher than what we had in 2014. We also expect predevelopment and exploration expenditures to be a combined $18 million this year, which is comparable to 2014 levels.

We expect to fully fund all of this capital and exploration expenditures with our adjusted EBITDA this year, the same goal that we had in 2014 and we far exceeded it. We will make that same commitment this year and do our best to exceed it again.

Now let me turn the call over to Jim for the fourth-quarter and year-end financial review.

Thank you, Phil. The fourth quarter set a number of new records for Hecla: most quarterly silver production -- up 29% over last year's fourth quarter; most gold revenue; most profit from a gold operational unit, with total gold production up 16% over last year, all as set forth on slide 6. Our improved production drives the financial metrics, with adjusted EBITDA increased 25% over a year-ago quarter and cash cost after byproduct credits per silver decreased 38% and for gold, decreased 23% per ounce.

And on slide 7, you can see this trend continues with the annual results, with silver production of 11.1 million ounces, up 24% over last year, a Company record. And gold production of 187,000 ounces, up 56%. On a silver equivalent basis, Hecla produced 34.5 million ounces, another Company record.

The record silver equivalent production resulted in record revenue of $500 million and strong cash flow, measured as either adjusted EBITDA up 29% or operating cash flow of $83 million, the third best in our history, despite including the final payment of $55 million on the basin litigation as shown on slide 8, which puts that obligation forever behind us.

With the Lucky Friday at full production all year, we saw consolidated silver cash costs after byproduct credits declining 30% to below $5 per ounce, which is what we expected to happen. Gold cash costs also declined as a result of improvements we have made at Casa Berardi, completion of disruptive capital projects, and a weaker Canadian dollar.

On slide 9, you can see a few of the items impacting our earnings, including foreign exchange gains of $11.5 million due to the weakness of the Canadian dollar and gains on base metal forward contracts of $9.1 million. In addition, we had an income tax benefit of $5.2 million in 2014, which came about in spite of reporting positive income before income taxes as a result of book versus tax differences for certain items in Canada and the United States.

The solid production improvement combined with a careful attention to cost by our operators have allowed us to continue to report industry-leading load per ounce cash cost, after byproduct credits, and strong margins. As shown on slide 10, silver operations continued to deliver a strong cash margin through the year of 74% of sales or $13.65. The gold cash margin is 35% of sales or $4.36.

We are known as a silver company, with the largest portion of our reserves in silver and more than 100 years' history producing silver. However, as you can see on slide 11, Hecla now offers the investor a truly diversified revenue stream, with 40% of our revenue from gold, 31% from silver, 17% from zinc, and 12% from lead in 2014.

As the Lucky Friday grows and as San Sebastian comes into production, you should see this mix swing back towards silver again. But it is this mix that gives us such great economics in every price environment. We also have diversification among 3 distinct mines in the United States and Canada, with 49% of revenue coming from Greens Creek, 18% from Lucky Friday, and 33% from Casa Berardi.

On slide 12, you can see our hedging program for lead and zinc continues to be successful, smoothing out revenues in times of price volatility. In fact, since 2010, we have seen a net gain of about $34 million as a result of our hedging program.

We currently have 31% of our zinc exposure for the next 2 years hedged. We can go up to 60% for 3 years, so we have good optionality if the expected supply squeeze due to mine shutdowns materializes and the price goes up.

Last year, we said we would operate within our adjusted EBITDA and we met this goal as you can see on slide 13, where the adjusted EBITDA for 2014 was $174.4 million compared to our largely discretionary expenditures on $155 million. If metals prices move significantly in the coming quarters, we could adjust discretionary expenditures and modify our business plan as appropriate. And as we've shown in 2014, capital and exploration expenditures are two of the levers we can pull if we need to.

By the way, we have generated -- we could have generated even more cash at the end of the year, which is what some investors are strictly focused on. But we see the most value for shareholders coming from investing in these long-lived mines to generate returns and reduce risks. We are long-term thinkers and we don't view starving the assets or hiding their growth potential as a value-creating proposition for shareholders.

Finally on slide 14, we show our liquidity trend. We finished the quarter on the back of strong operating results, with the contribution from all three of our mines and excellent liquidity. We have $210 million in cash and cash equivalents, which is within $2 million of the balance at the beginning of the year.

Consequently, with our available $100 million credit facility, which we have just extended for another 2 years for a total of 4 years, we have a total of over $300 million in total liquidity available to the Company.

We're happy with the debt in our capital structure and with our net debt to EBITDA ratio of 1.7, as shown on slide 15. We believe not all debt is created equal and we see this debt as good debt. It is long term, has a comparatively low coupon of 6 7/8%, and no maintenance covenants. In addition, as mentioned earlier, we extended our credit facility for two additional years for the total of four years.

And with that, I will turn the call over to Larry now for a review of operations during the fourth quarter and full year. Larry?

Thanks, Jim. I've been in operations for over 30 years, including Goldstrike, and I can tell you that Greens Creek is a world-class silver mine.

Over the past 25 years, Greens Creek has produced the 4 metals you see at the top of slide 17, including 192 million ounces of silver, 1.5 million ounces of gold, 1.4 million tons of zinc, and 0.5 million tons of lead.

2014 annual production was right on the 25-year average, which is what you want to see in a long-term asset. What makes it particularly impressive is that we have managed to increase tonnage to offset the gradual grade reduction, staying at the long-term average over the period.

Greens Creek had another excellent quarter, producing 2.5 million ounces at a cash cost after byproduct credits per silver ounce of $2.74. The increase in silver ounces produced as a result of higher silver grades due to mine (inaudible) and has contributed to lower costs, which are very low by industry standards. The costs continue to be helped by the availability of hydropower, which lasted throughout the entire year.

The planned expansion at the Greens Creek tailings facility continues to work its way through the permitting process. All federal permits have been obtained and the Company has completed minor state permits to allow construction to commence.

This $44 million capital program will take 3 1/2 years to complete and will provide tailings capacity through 2026, which is sufficient for the current reserve. With the results we are having in 200 South and elsewhere in the mine, we are confident we will need to expand the tailings again in the future.

Lucky Friday is definitely back, as you can see on slide 18. 2014 production increased 122% over 2013 and cash costs after byproduct credits fell 50% to $9.44 per silver ounce.

Regarding our primary growth initiative, the #4 shaft project on slide 19, we are at the 7,580 feet level and the shaft is more than 75% complete based on the current scope of the project. We are on track for completion of this $215 million budgeted project in 2016. The #4 shaft project is designed to give us access to higher grade ore zones once the associated development is completed, which should increase silver production at Lucky Friday in 2018.

On slide 20, you can see that Casa Berardi produced 39,385 ounces of gold in the fourth quarter at a cash cost after byproduct credits of $635 per gold ounce. The production increase in the fourth quarter was due to higher grades -- due to a higher grade stope being mined in December and higher recoveries due to lower gold encapsulation than predicted.

The 36% increase in production from the third quarter contributed to the lower cash cost after byproduct credits per ounce and was partly the result of completion of the West mineshaft deepening project. This completion should improve mine operations by providing additional access to the 118 and 123 zones for transporting ore and waste from underground. It will also help with exploration.

And with that, I will now pass the call over to Dean.

Thanks, Larry. During the fourth quarter, we had active exploration programs underground at Greens Creek and Casa Berardi and on surface at San Sebastian. Those results have been summarized in the January 21 and February 12 press releases announcing some spectacular drill results and new reserves and resources.

The strong intersections in these releases highlight the bright future of our operations and at the San Sebastian project. And I encourage you to read those press releases.

Overall, exploration resulted in record high silver reserves for the ninth straight year, up about 2% to 173 million ounces as shown in slide 22. What makes this achievement even more significant was it happened during a period of declining exploration budgets and we used $17.25 as our silver price. Our silver peers used an average of $22.61 in 2013 for their reserve calculations.

So when they report their performances on reserves in the coming days, we would expect you will see reductions in their reserves. It is also noteworthy that we have basically maintained our level of gold reserves at 2.1 million ounces using $1,225 per ounce gold.

Slide 23 shows how we have consistently grown silver reserves over the past 11 years. In 2004, we had reserves of 45 million ounces. Today, our reserves have increased to 173 million ounces, net of 114 million ounces mined over that time.

This means we have added a total of 240 million ounces silver over the past 11 years. And with the growth in resources and high conversion rates we have seen, we are confident we can continue to increase silver reserves in the future.

We had a very successful exploration drilling program in Mexico at San Sebastian during 2015. And this is exciting to see how quickly the project has become so robust, with significant increases and resources during the year.

Total silver equivalent indicated resources increased 46% to 37.7 million ounces and inferred resources increased 18% to 34.9 million ounces over last year's levels. On slide 24, you can see the newly defined veins and the gentle terrain that we expect will allow for easy development.

The 3D isometric view of the San Sebastian veins shown in slide 25 demonstrates how the mineralized veins flatten near surface. In the first 328 feet, this near surface mineralization contains silver equivalent indicated resources of 16.2 million ounces at an average grade of 0.11 ounces per ton gold and 11.3 ounces per ton silver, with additional inferred resources and exploration opportunities along trend of these veins for more near surface mineralization. You can see the pricing assumptions on the slide.

Metallurgical testing of these mineralized zones suggests they are amenable to cyanide leaching. A preliminary economic assessment is underway with AMC consultants to review various combinations of shallow pits and underground mining. An M3 engineering and technology core is refining potential mill designs.

Permitting and direct infrastructure studies continue to be advanced and we are working towards a construction decision this year. There are high-grade near surface resources on the East Francine Vein that we believe are clearly economic at current prices if a toll milling arrangement could be made and could generate significant near-term cash flows for the Company.

At Greens Creek, we continued an 11-year trend of replacing production with new reserves and continued to deliver high-grade drill intersections from our drill programs. Drilling during the fourth quarter is shown on slide 23.

The plan view on the left side shows the areas of definition or infield drilling and the plan view on the right shows the areas of exploration drilling at Greens Creek. On the left, definition drilling defined resources so they can be converted to reserves in the Northwest West and Deep 200 South. And the red arrows define the trends these resources are extending, which could help to increase the reserves in the future.

The right diagram shows where exploration drilling has identified new mineralization in the Gallagher Fault Block and Deep 200 South areas. The red arrows in this diagram identify the mineralization trends that should continue to add new resources and extend the mine life.

Slide 27 shows the longitudinal of the Casa Berardi mine. Although we have plans to reactivate exploration in the East Mine later in 2015, I want to focus on the exploration in the West Mine that is defined by the hatched red box on the left side of the slide. We continued defining new resources in the 118, 123, and 124 zones in the last quarter, but I would like to describe a recent exploration success in the next slide.

A detailed isometric view in slide 28 of the West Mine shows the location of recent exploration success, with some deeper drill holes on the down plunge extension of the 113 zone. That drilling has defined two strongly mineralized zones and the first assay intervals are shown on the slide, including an interval of 0.46 ounces per ton gold, over 14.8 feet. Subsequent drilling has expanded the dip and strike of the mineralized zones and further assays are pending, although we plan to follow up with more drilling in this area in the coming months.

The completion of the 985 drift in 2015 is expected to provide the exploration platform to better define the 113 zone and examine deeper extensions of the 123 zone. There are plans for up to six drills being active underground and another two on surface at Casa Berardi and we continue to build on the strong reserve base there.

With that, I will pass the call back to Phil for some closing remarks.

Thanks, Dean. So 2014 was a great year for Hecla as we executed our plans. All three assets are performing well, with the record silver production, strong gold production, low cash costs, and our key growth initiative, the #4 shaft is on track and on budget.

Financially, record revenues, stable cash position, strong operating cash flow. We were happy with the strength of our balance sheet and our diversified revenues and our base metals hedging. And we are happy with the fact that we have these long-term bonds.

In exploration, we increased our silver reserves, kept gold reserves flat using lower prices for our calculations. The resource increases give us comfort that we will continue to increase reserves and extend mine life in the future. And we've made tremendous advances at our San Sebastian project and are working towards that construction decision.

We're well positioned and optimistic going into 2015. We saw considerable weakness in the silver price yesterday and if price weakens further, we have levers that we can pull to slow down expenditures. If prices strengthen, we're well positioned to benefit from the gains.

And we are investing a prudent amount of capital to extend our mine lives, increase production, or reduce risk. We can afford to do it. We think that's the best way to create shareholder value. And I'll look forward to reporting these reports -- these results to you in the future.

And with that, operator, we will open the line for questions.

(Operator Instructions) Jorge Beristain, Deutsche Bank.

Hey, good morning, guys, and congratulations on the good results. I guess my question is really more about Berardi. We did see a bit of a head fake there, with a very strong sequential drop in unit costs up in Canada.

I was just wondering if you could break down how much of that is currency related, how much is grade related. And then based on your year-ahead guidance for 2015, it would seem that you are basically looking for full-year average costs to be very similar to where they were in 2014.

So I'm just trying to understand what is -- what are you giving up or what is dissipating in terms of that nice cost tailwind that you have in the fourth quarter that you are now expecting to go up in coming quarters, again up in Canada? Thanks.

Let me ask Jim and Larry to take that question.

Sure. First, the easy one, which just involves math, is the impact of the Canadian exchange rate. The result is almost pro-rata whatever you assume the change is.

To give you an idea, if we look at the rate at the end of 2013, it was 0.9349. And if we look at it at the end of 2014, it was 0.862. And so if you take the 2013 cost and you apply that delta in exchange rate, you get an impact of about $74 an ounce.

So when you compare the actual results that we posted versus the 2013 average, about $74 is a result of the Canadian exchange rate and the balance is a result of operational improvements that we made over the year.

No doubt about it, the fourth quarter was absolutely a great quarter for Casa Berardi and the reason for that is volume. If you look at the production level, I think which was about 38,000 ounces, that's continued improvement of what we've done before. And really the absolute knock-it-out-of-the-park quarter that we had for Casa Berardi at a run rate which is above the guidance that we are providing for next year.

So what I'm saying is part of it, foreign exchange, a lot of it just a result of the great fourth quarter, and we've brought guidance in for 2015 at a level which is fairly consistent with what we saw for 2014. Larry? Anything else?

Yes, the grades for 2015 should be -- stay very similar to 2014 over the course of the year. So that's one of the reasons we're looking for similar cost per ounce. That said, the mine, I think, is running very well. It's running in a very stable fashion and our continuous improvement initiatives are starting to take root.

And Jorge, I guess the last thing I would mention is we view this mine as being 125,000 ounce to 150,000 ounce producer. We will not push it to try to exceed that. We need to have everything in balance and so we see the right place for this thing to be producing is 130,000 ounces for 2015.

Thanks. But just to follow up, what I'm getting at is that I think your full-year guidance is up $825 an ounce cash cost for 2015. I think it was $824 for 2014, but you are carrying about a $74 per ounce currency tailwind now into 2015.

So I'm just wondering are you looking at costs to be higher by that amount because of greater volume or are you just being very conservative and that's kind of a bogey that you are carrying into next year?

I think it's all three. There is an element of conservatism, but it wouldn't be all of that tailwind that we have. And I don't know if it would be a third, a third, a third, but it certainly is an element of conservatism. Jim, Larry, anything to add?

No.

Okay. Thanks, guys.

John Bridges, JPMorgan.

Hello, everybody. Thanks for the call. Congratulations on the results. The percentage of Canadian dollar exposure at [Sir Casali] -- is there a number that we can stick in our models?

Well, the best place to go, John, would be to our cash cost reconciliation, which is in the press release and in the 34 documents. And for Casa Berardi itself, it will lay out what the cast costs are and they're virtually all Canadian dollars. And typically Casa Berardi, to give you an example in 2014, the cash costs before by product credits was about $106 million.

Okay.

So John, when you think about our total costs that we spend, operating costs, it's a little over $300 million, so a third of that is at Casa.

Okay. Okay, great. San Sebastian -- I know you are working on modeling and so on, but what is your range of outcomes you're looking at in terms of capital cost for that? You know, the cheap one building the mine and then doing toll treatment. And then another case, where you would be able to build your own mill. What sort of range are we thinking about?

Look, if we toll mill somewhere, not a huge cost. We would have to absorb the transportation costs and the toll milling charge. So it would -- you could expect very little capital.

To the extent that we build a mill, I don't know. In order of magnitude, $100 million-ish? Does that sound about right, Larry?

Yes. It would probably be a little bit under that, I think.

Okay. And then really big picture, you've actually got a nice portfolio of projects there -- well, in particular, San Sebastian in front of you. Just thinking -- stepping out a bit further in this environment, where the silver price is low and presumably you are having visits from people trying to sell you things on a pretty regular basis, do you see potential just to buy into very early stage things just to put your feet on things for the very long term for the Company?

We of course have done that to a degree and we will continue to look at those opportunities. The expenditure required to get that exposure is pretty small. So we are willing to consider those things.

What do you think of the quality on things being offered? We've heard from other players that there really aren't many good ones out there.

That is correct. There's a lot of things, a lot of work that's been done assuming a much higher price environment. And much of that, it just cannot hold together at these sorts of levels or at future expected prices.

So we're not going to spend a lot of time worrying about those things. We will focus on the things that look like they will have legs at a more reasonable price.

And then, of course, you've got all that territory around Lucky Friday, which you can use as another [feeler].

That's right.

Okay, cool. Many, many thanks. Very much appreciate it. Well done.

Anthony Sorrentino, Sorrentino Metals.

At Lucky Friday, you're looking for cash costs in 2015 of $8.75 per ounce and that's -- even though you're expecting the production to be about the same, 3.2 million ounces. So I just wanted to know how -- why you're expecting the cash cost per ounce to drop 2015 versus 2014 at Lucky Friday.

I will let either Jim or Larry take that call.

Sure. Jim will start and then turn it over to Larry. And Anthony, it's really a case of the mine hitting its strides and having continuous improvement. If we look at 2014 for the whole year, we were at $9.44. And so we are expecting to see some improvement there.

And when we look at the fourth quarter, production was a little bit lower due to a sand cycle that we found ourselves in that occurs from time to time. So we are really just looking at great performance out of Lucky Friday and continuous improvement in 2015. Larry?

Yes, I think you've said it well. We are opening up more stopes now. We were -- fundamentally, we are trying to distribute the daily tonnage amongst more fronts and by doing that, we should get out of some of the start-stop cycles that Jim mentioned.

Okay. You are estimating 2015 capital expenditures at $145 million. Would you give a breakdown of that by property?

Yes, Jim, do you have that handy?

Sure. We would expect at Greens Creek to be about $40 million, Lucky Friday to be about $60 million, which includes #4 shaft, and Casa to be the remainder, which is about $45 million.

Okay. Thank you very much and congratulations on the good financial and exploration results.

Vitali Mossounov, Scotiabank.

Hey, guys. Congratulations on a strong quarter. At Greens Creek, I guess from time to time, you benefit quite a bit from hydroelectric power. What kind of availability are you pricing into 2015 and what exactly did you see in 2014? How much did you benefit from that?

Well, it was almost all hydro in 2014 and we are not assuming as much hydro -- I don't remember -- Larry, do you remember what percentage is hydro?

Yes, it's 72%. Obviously, we are quite early in the year right now.

It becomes a function of the dams -- how much water have been put into the dams. So it could -- that could change.

Do you have a sense of cost if that was to go from 72% to something like 92% or 100%? How much are we talking about dollar-wise?

Well, it's still quite -- relatively small for Greens Creek. Larry or Jim, you want to give the specific -- because it could -- yes, about 10% -- about 10% of the total cost is power.

I can take that, Phil. When we look at it, we have to look at the interrelationship of two things. One is the cost of diesel fuel. And of course, everybody knows what has been happening with fuel prices here the last two, three months.

But if we look historically -- to give you an idea of the impact from year to year, it was in 2014 that we spent a total for fuel and electricity together of about $12.7 million. And as indicated, that was when we had 100% availability.

To give you a couple other benchmarks in 2013, we spent a total of $18 million on lower availability. I don't have the exact availability at my fingertips. So it shows at about a $5.5 million, $6 million delta on the cost between one year from another. And if you look at it historically, you'll see that's same sort of change.

Okay, great. Thanks very much.

Matthew Fields, Bank of America.

Just real quick on the nitpicky side, what was the $6.5 million add back in your EBITDA for a provision for closed operations related to?

Yes, that's related to a property in New Mexico called Johnny M that was operated by a predecessor company acquired 30 years ago. And it's for the cleanup of that site. And it would be something that would take place over a number of years and so we are just -- we did a study and costed it out and we thought we should accrue for that.

So will this be a repeating charge over the next [four years] --

No, no, it was just merely booking the expected cost of doing that work.

So it's a one-time charge to you guys?

Correct.

Okay. Next, at San Sebastian, it sounds like -- obviously you are not giving us the full sort of plan here, but it sounds like you're leaning towards starting out on the surface reserves and maybe doing some kind of tolling arrangement with the mill.

Obviously the lower expenditure, like you mentioned earlier, but what would that do -- what's the cash cost impact of having a tolling arrangement with a mill?

Yes, really the question -- the way to really look at this is the East Francine 4 is such high grade that the real driver is the value of the rock. It's high. The tolling cost, the mining cost on a relative basis, they're going to be fairly small.

So if we can work out an arrangement that makes sense, then we will do that. Otherwise, it will become part of the overall development of San Sebastian. And we might decide to do that anyway. So you're just going to have to wait to see where we end up in that analysis.

Okay. And then conceptually, what -- obviously, the 4 shaft at Lucky Friday is the big catalyst here for to you maybe step function up in your earnings, but what are the risks can you talk about of operating at such a big depth, mining at 8,500 feet down?

Well, look, the issues you have just mining at depth are ventilation, just having adequate ventilation, having -- dealing with the heat and finally the rock mechanics. We think we have developed very good plans with respect to all three of those things, so we feel quite comfortable with our plans, which at this point only go down to about 8,200 feet below the surface and that's out 30 years. So we have quite a bit of time to further refine, further improve how we operate the property.

Once the 4 shaft is complete, what we will be focusing on is developing the 7,500 level and getting into higher grade ore that occurs around that level and giving ourselves more working faces to operate from, more flexibility. And we are able to manage -- there's not going to be a huge difference between operating at that level and operating where we are now, which is I guess about as deep as 6,200 feet, 6,300 feet.

So is it reasonable to assume that the higher grade effects on your cost will be more of a driver in cash cost than the increased cost of mining at a deeper level?

Yes, that's our expectation. When we look at the long-term plans, we see costs that are below where we've operated in the past. Net more production gives us better economics than driving cost down.

Okay. Thanks very much.

Misha Levental, Cowen.

I was just wondering if you were engaged in any hedging programs for the Canadian dollar?

We are not.

No. And also, could you provide a breakout of the total cost per ton for Casa Berardi? Do you guys have those numbers available for cost per ton mining, processing, SG&A for 2014?

We do. I don't know if you have them on hand, Jim, or if you want to give him a call afterwards.

It's on page 12 of the press release.

Yes, but not all -- that's just total cost per ton. He was asking for the breakout, right?

Yes.

Yes.

We've got to handle that off line.

We've got mining and milling and the -- so the only other part would be the G&A and I don't know what that is off the top of my head.

Okay. And --

Jim, maybe you can give him a call.

Okay, yes, we can take that off line. And I guess finally, sorry if I missed it, but what do you expect throughput to be at Lucky Friday in 2015?

It's going to be roughly the same as this year. Do you -- Jim or Larry, do you remember what the exact number is?

It is a 900 short tons per day.

About 325,000 tons.

Okay. Perfect. All right, so we will just handle the cost per ton stuff off line. Well, that's it for me. Thank you very much.

Garrett Nelson, BB&T Capital Markets.

You provided the breakdown of 2015 CapEx guidance by mine, but of the $145 million, what's the split between maintenance and development CapEx?

Yes, certainly the biggest portion of development CapEx is the Lucky Friday 4 shaft, which is about $40 million. With respect to the other mines, do you guys have an estimate of what you think those are? Larry?

Yes, it will take me just a second here.

Yes, on average, Garrett, I think you can think of the mines as on average needing to spend $20 million to $30 million on maintenance capital. We are certainly a little bit beyond that, at particularly Casa, but part of that is really catching up on some of the capital expenditures that they had in the past.

Got it, okay. And then what does the cash cost guidance assume in terms of byproduct zinc and lead volumes?

Jim, do you have those numbers?

In terms of the costs that we are assuming, it's $0.90 zinc and $0.95 lead.

So for both the Lucky -- but he was asking about the volumes.

Okay. They would both be comparable with this year, a little bit lower because we had higher throughput this year. But they are pretty comparable with 2014.

Okay, that's great. That's all I had.

Your question on development, it's about $20 million for Greens Creek and $20 million for Casa.

Got it, okay. Thanks a lot.

And with no further questions, I would like to turn the call back over to Mr. Phil Baker for closing remarks.

Okay, well, thanks very much for being on the call. We are proud of the results that we had for 2014 and we think we are well positioned for 2015 and happy to take questions. You can call Mike or I all day today. Thanks very much.

Ladies and gentlemen, that concludes today's presentation. You may now disconnect. Have a great day.