Hecla Mining Co (HL) 2015 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the Q4 and year-end 2015 Hecla Mining Company earnings conference call.

(Operator Instructions)

I would now like to introduce your host for today's conference, Mr. Mike Westerlund. Sir, you may begin.

Thank you very much, 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 2015 financial and operations results conference call.

Our exploration news release that was issued last week and the financial news release that was issued this morning before market opened 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 law as shown on slide 2. Such statements include projections and goals which are likely to involve risks detailed in our Form 10-K, Form 10-Q and in the forward-looking disclaimer included in the earnings and exploration releases and at the beginning of this 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 or 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. Hello everyone.

When I look back over 2015 I'm proud of what we've achieved in a challenging price environment which is a direct reflection of the quality of our team and projects and our decisions to continue making capital investments during what we believe was a temporary malaise in the precious metals market. In short, we did what we said we would do.

During the year we said we were working to optimize our mines and Casa had its highest quarterly gold production since we acquired the asset. Greens Creek set a record for annual silver production since we've owned it. We've upgraded the ventilation system at the Lucky Friday with only a slight decrease in annual production.

Our goal now is to further grow silver production by more than 15% in 2016 and gold production by about 10% and to continue to work to make our mine production more consistent. We also said we would start up our fourth mine, San Sebastian, by year-end and we did that ahead of schedule. The veins are extraordinarily high grade as we thought and it will start kicking off cash this quarter.

In January the feed grade averaged 0.23 ounces per ton gold and 29.4 ounces per ton silver. And I'm pleased to note that the mill is handling the high grade just fine and we shipped the first dore in January.

I was in Mexico with Larry three weeks ago and saw firsthand how well things are going down there. And on this slide you can see a photo from me with some dore bars.

We set a record with silver production of 11.6 million ounces and also produced 189,000 ounces of gold and our silver equivalent production totaled 37.5 million ounces which is also a record. We finished the year with $155 million in cash and during the year with the second highest level of capital investment in our history and lower gold and silver prices. We grew our silver reserves for the 10th straight year despite using $14.50 per ounce silver, which is one of the lowest silver prices used to calculate reserves in our industry this year, and that's after producing the record silver production.

Our gold reserve stayed relatively steady with an $1,100 per ounce price used for the calculation which is $125 per ounce less than last year. These strong reserves are a testament to the strength of our assets and the quality of our team and when you look at our resources we are optimistic that we can continue to grow our reserves in the future.

Now looking at slide 4, in 2015 we achieved strong production and financial results during a year of weaker silver, gold and lead prices. In 2016 we expect significant growth in silver and gold, that 15% and 10% for gold increase as a result of the startup of San Sebastian and the pit at Casa Berardi. These are projects that will deliver triple-digit or close to triple-digit returns.

These projects combined with our existing operations put our estimate of 2016 silver production at 13.5 million to 14 million ounces at a cash cost after byproduct credits per silver ounce of $6. Now we expect company-wide gold production of approximately 207,000 ounces of which we expect Casa to produce 135,000 ounces at a cash cost of $700, almost a 10% reduction in cash costs over last year. We expect to produce 39 million to 40 million silver equivalent ounces or about 0.5 million gold equivalent ounces.

We expect to invest about $150 million in capital expenditures excluding capitalized interest which is in line with what we did in 2015. And what are the big items? Well we expect to finish the 4 Shaft which is the largest capital project in our history which will add more than 25 years of life to the Lucky Friday and provide access to the higher grades that we see at depth.

We'll continue work on Greens Creek tailings facility which adds 10 years of tailings capacity to this flagship mine. And we've decided to go ahead with the East Mine Crown Pillar pit at Casa Berardi. And Larry is going to talk more about this, but we're excited about the prospect of filling our mill at our Quebec mine and extending its mine life.

We also expect predevelopment and exploration expenditures of a combined $15 million this year which is down $22 million from last year. Now we're willing to spend down our balance sheet by about $50 million again this year as we continue to invest in extending our mine lives and making our operations more consistent and improving margins. With $155 million in cash at year-end we believe we can afford to do this and maintain adequate liquidity.

But we also have taken several austerity measures. Our senior management has taken a 10% pay cut and I've taken a 20% pay cut and we're not doing this because of liquidity issues. We just think it's the right thing to do during these times of price weakness.

Additionally, we've initiated a planned company-wide reduction of nonlabor costs of about $25 million for the year. So with that I'm going to turn it over to Jim to talk about the fourth-quarter and the year-end financials.

Thanks, Phil. As you can see on slide 6 in the fourth quarter we had a very strong production and that has softened the impact of weaker metals prices. In fact, the results are quite remarkable when you consider the fact that silver, gold, lead and zinc were down 11%, 9%, 17% and 31% respectively compared to 2014's fourth quarter.

All of our mines performed exceptionally well during the period, leading to an increase in silver production of 13% to 3.6 million ounces and our gold production also increased 10% to just over 60,000 ounces. No doubt it was a record quarter for us. As mentioned earlier the improving production helped offset the weakness in metals prices, allowing us to report good financial results.

On slide 6 we summarize the key financial statistics for the fourth quarter of 2015 compared to last year's comparable quarter. Revenue was down just 5% due to lower metals prices, operating cash flow increased 13% while cash cost per ounce after byproduct credits for silver increased 21% due to lower byproduct credits. Our gold per ounce cost decreased 7% due to the weaker Canadian dollar and also a solid performance.

On slide 7 you can see this trend continues with silver production of 11.6 million ounces, up 5% over last year and gold production of 189,000, up 1%. Phil has given estimates for 2016 which shows additional growth in expected silver production to 13.5 million to 14 million ounces and 207,000 ounces of gold, increases of around 15% and 10% respectively.

The 2015 financial results echoed the fourth-quarter results with lower metals prices leading to annual revenue, decreasing 11% to $443.6 million and adjusted EBITDA decreasing 33% to $116.8 million, operating cash flow increasing 13% to $106.4 million and cash cost after byproduct credits per silver ounce increased $0.22 to $5.85 while gold per ounce cost declined 6% to $772 compared to 2014 due to the weaker Canadian dollar. However, operating cash flow did increase 28% to $106.4 million due to the funding of an environmental settlement in 2014.

On slide 8 our strong production performance helped us to beat our 2015 guidance for silver and gold production and cash cost after byproduct credits. We also spent less than our guidance on capital and exploration.

On slide 9 you can see a few of the unusual items impacting our earnings for 2015 including foreign-exchange gains of $24.6 million due to the weakness of the Canadian dollar and gains on our base metals forward contracts of $8.3 million. The largest impact came from the income tax provision of $56.3 million in 2015 which is largely due to a non-cash increase in the US valuation allowance against net operating loss carryforwards as a result of this year's lower metal prices. This was partially offset by a decrease in the Mexican valuation allowance related to net operating losses which are expected to be utilized as a result of San Sebastian's bring profits.

Solid production improvement combined with careful attention to cost by our operators have allowed us to continue to report industry-leading low per ounce cash cost after byproduct credits and strong margins. We have benefited from the strong US dollar and our production from Canada and Mexico.

As shown on slide 10, silver operations continued to deliver a strong cash margin through the year at 62% of sales or $9.72. The gold cash margin is 67% of sales or $378. Both silver and gold margins also benefited when compared to third quarter because of the higher production volumes of both metals.

As you can see on slide 11 Hecla offers the investor a truly diversified revenue stream with 41% of our revenue for gold, 31% from silver, 17% from zinc and 11% from lead. We also have a diversification among three distinct mines with 51% of the revenue coming from Greens Creek, 15% from Lucky Friday and 34% from Casa Berardi. And of course the startup of San Sebastian provides additional diversification and another jurisdiction, enhancing our low-risk profile given it is a high-grade, low-cost operation.

On slide 12 we show our liquidity trend. We finished the quarter on the back of strong operating results with a contribution from our three mines and excellent liquidity. We have $155 million in cash and cash equivalents.

Consequently we have over $250 million in total liquidity available to the Company including our revolving credit agreement. In addition, our current universal shelf registration statement expires this month and we have filed a new one which gives us financial flexibility to potentially offer equities via market financing if we feel it is necessary to bolster our liquidity.

We are happy with our capital structure and with a net debt to EBITDA ratio of 3.1 we feel this debt allows us tremendous flexibility in times of low metals prices. It is long term, it is interest-only, has a low coupon of 6 7/8% and no maintenance covenants.

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

Thanks Jim. On slide 15 Greens Creek had another excellent quarter, producing 2.6 million ounces at a cash cost after byproduct credits per silver ounce of $4.18. The increase in silver ounces produced is a result of higher recovery and of higher silver grades due to mine sequencing while cost per ounce is up due to lower byproduct values.

The cost continued to be helped by the availability of hydropower which lasted throughout the year. The expansion of the Greens Creek tailings facility continues and 2015 capital spend on the project was $20.7 million. This is an investment in the future of Greens Creek, providing another 10 years of tailings storage capacity.

Production at Lucky Friday for the quarter was a 32% improvement over the prior-year period as you can see on slide 16. The higher volume of 986,000 ounces of silver during the quarter led to cash cost after byproduct credits per ounce that were 15% lower than Q4 of 2014.

Regarding our primary growth initiative the 4 Shaft Project on slide 17, we are on the 8,500 level and the Shaft Project is more than 90% complete. We are on track for a completion of this $225 million budgeted project in the fourth quarter with about $20 million left to be spent this year.

The 4 Shaft Project is designed to give us access to higher-grade ore zones once the associated development is completed.

On slide 18 you can see that Casa Berardi produced 42,282 ounces of gold in the fourth quarter at a cash cost after byproduct credits of $591 per gold ounce. The production increase in the fourth quarter was due to higher grades with a higher-grade stope being mined in December and higher recoveries due to lower gold encapsulation. The 45% increase in production over the third quarter contributed to the lower cash cost and was helped by the weakening Canadian dollar.

But what's really exciting about Casa Berardi is the plan to go ahead with the East Mine Crown Pillar pit. We are excavating in it already as you can see on slide 18. It is considerably easier to excavate during the winter because the near surface material can be quite saturated.

As you can see on slide 19 we have begun the excavation. On slide 20 you can see the plan at Casa quite simply is to fill the mill. By advancing the East Mine Crown Pillar surface pit we should increase the flexibility of operations by gaining an additional ore source, albeit lower grade.

In a report prepared for the Company's use by Mine Development Associates dated June 26, 2015, the project is estimated to have a net present value at a discount rate of 12% of CAD37.5 million and a internal rate of return of 90% using a gold price of $1,225. We expect it to begin producing ore by year-end, adding about 5,000 ounces of gold this year and about 30,000 ounces next year and estimate the pit will have a 5.5 year life.

We expect to take the mill to 3,100 short tons per day from its current approximately 2,300 tons per day for the life of the mine started in 2017. The estimated capital for this project is $39 million of which we plan on investing $19 million this year.

There are additional synergies as well. For example, we plan on using some of the clay being excavated from the pit as tailings dam construction material, potentially saving a couple million dollars on the tailings dam project.

Our San Sebastian mine started production in December is now fully operational. On slide 21 you can see the high-grade East Francine pit and the sample of the ore. We are mining from three pits with the highest-grade pits currently supplying the ore.

We expected the ramp-up to go smoothly and it has. In January the feed grade averaged 0.26 ounces per ton gold and 32.4 ounce per ton silver. And I'm pleased to note that the mill is handling the high grade just fine.

The focus in 2016 will be to maximize cash flow and to invest in opportunities to extend the life of either the surface pits or to go underground. I will now hand it over to Dean.

Thanks, Larry. On February 16 we announced year-end contained proven and probable reserves of 175 million silver ounces which is the 10th year in a row that we've had increased silver reserves. Measured and indicated silver resources of 161 million ounces and inferred resources of 362 million ounces include the acquisition of the Rock Creek mine and are the largest in our history.

Gold reserves essentially stayed constant. Our explorations are driven by the discovery of high-grade deposits near our existing operations. And I urge you to read that press release.

As you can see from slide 23, Hecla reserve price assumptions of $14.50 per silver ounce and $1,100 per gold ounce are some of the lowest commodity prices used in the industry. These prices represent a 16% and 10% decrease for silver and gold respectively from year-end 2014 reserve price assumptions.

In contrast, our silver peers used an average of $16.25 per ounce at year-end 2015 for their reserve calculations and generally announced silver reserve reductions. It is also noteworthy that we have basically maintained our level of gold reserves at 2.1 million ounces, using $1,100 per ounce gold.

What makes this achievement even more significant was it happened during a period of declining exploration budgets. Why use such conservative prices? Because our projects are higher grade than our peers and can withstand a lower price environment.

Let's take a look. As shown at the left in slide 24, the increase in silver reserves at Hecla using a lower silver price assumption stands out in our industry in comparison to silver reserve decreases at Pan American, Newmont and Coeur to name a few and they are still using higher silver price assumptions than we are.

The same goes for gold. In slide 25 you can see how we stack up with lower price assumptions compared to some larger gold companies.

Another way to show the remarkable resilience of silver reserves at Hecla is to consider slide 26 where we look specifically at reserves in the last four years. Even though the silver price used at year-end 2012 has dropped from $26.50 per ounce to $14.50 per ounce at year-end 2015, which is a 45% drop, production has been replaced and reserves have grown steadily.

To take it a step further, in the longer term slide 27 shows how we've consistently grown silver reserves over the past 10 years. In 2006 we had reserves of 50 million ounces. Today our reserves have increased to 175 million ounces net of 119 million ounces mined over that time.

This means we have added a total of 294 million ounces over the past 10 years and only 17% of that addition is related to acquisitions. With the growth in resources and the high conversion rates we have seen, we expect to increase silver reserves in the future.

At Greens Creek we had an anomaly from our 11-year trend of increasing silver reserves with a slight drop of 5.2 million ounces, or 5.6% of the total reserve in the last year. However, as shown in slide 28, there is some large high-grade resources that are being infill drilled which should cause resources to move from inferred to indicated category in 2016.

Infill drilling has been completed on the Northwest West Zone and resource models are currently being updated with this information. When a new life of mine plan is finalized later in the year much of this resource should convert into reserves.

Large inferred resources in the East Ore and 200 South Zones should be upgraded by drilling to indicated category in 2016 and most of these resources should be incorporated into the life of mine plan by 2017. Although we had a decline in reserves in the past year at Greens Creek we anticipate significant resources will convert to reserves in the next two years.

As you can see from past quarterly releases, we continue to deliver high-grade drill intersections from our drill programs at Greens Creek and there are obvious mineralization trends that remain open to identify new resources in the coming years. The red arrows in this diagram identify the mineralization trends that should continue to add new resources and extend the mine life.

At Casa Berardi we have up to seven drills operating underground and on surface. Strong drilling results continue to upgrade resources in the core 118, 123 and 124 Zones and identify new mineralization in the 117, 123, 124 and Lower Inter Zones. The continued strong results into 2016 have confirmed our expectations of the great exploration potential at Casa Berardi.

Drilling has just started at San Sebastian and there are good prospects of expanding and upgrading resources to prolong mine life there. With that I will pass the call back to Phil for some closing comments.

Thanks, Dean. This is our 125th anniversary but we're not looking backwards, we're looking forwards.

We have mines that have demonstrated they can survive low prices but we're adding production that's going to allow us to take advantage of higher prices. So we think this is an exciting time for Hecla.

With that, operator, we will open the line for questions.

(Operator Instructions) Matthew Fields, Bank of America Merrill Lynch.

Hey guys. I just wanted to before asking a question say you know the announcement about compensation cuts is not one that the analyst community takes lightly. And I know that it's not an easy decision for you so hopefully your stakeholders take notice.

Thanks.

But going onto the shelf registration that was filed about 45 minutes ago, is that more of a housekeeping of keeping it up to date or has there been sort of a change of view with regards to potential equity proceeds?

There's not been a change of views. We want to maintain our flexibility to be able to do anything that can make sense, so we've done various filings to put us in a position to do that. Our plans do not include any particular path in terms of raising new capital.

Okay. And then the $25 million of non-payroll-related cost reductions you outlined, can you discuss what those are and how do you add up to $25 million?

It's really simple. It's the nonwage costs that we have in the Company, both in terms of operating cost as well as capital. And it's just 5% of those costs.

And we've just made a concerted effort to focus on vendors and focus on equipment suppliers to find ways of reducing 5% of the cost. We think that's pretty reasonable. If you look in our sector and you look at sectors that are similar to ours you seen even greater cost reductions than that, so what we think it's something we can achieve.

And that's OpEx and CapEx?

Correct.

Okay. And then can you just remind us again about the sort of economics behind the number 4 Shaft once that comes into play? Is there supposed to be some level of production growth from 3 million to some new level of production if the 3 million ounces does a new level at Lucky Friday? (multiple speakers)

Yes, so what happens is we get into higher-grade material. You might remember a quarter or two ago we showed the sort of material. And at that level there was I think like 50 or 60 feet of it and as we go deeper we'll see 500, 600 feet of that higher-grade material.

So when we hit that higher-grade material then we would expect to see the production rate go up, the number of ounces not tons, and with that cost will come down. And it will be someplace in the 4 million to 5 million ounce range that you'll see production move to over the course of the next few years as we develop to those deeper levels.

And you had said cost could come down sort of towards where Greens Creek is now, that type of level?

Yes, I think certainly lower than where we are today. I don't have a number in my -- that I guess I'm willing to say we would be at. But certainly significantly lower than where we are today.

Okay, and then last question, Greens Creek costs were 391 for the and the guidance is $6 per ounce. Can you give us some guidance on sort of what's making that change? Is it grades, is it some kind of movement there? I know the production is a little lower but is that really all it is?

That's all it is. It's just really production. And it's as a result of lower grades.

I mean we had higher-than-expected grades in 2015. I don't remember what our original guidance was but it wouldn't have been dissimilar to what our guidance is for 2016. So when we get these pleasant increases in grade it just goes to the bottom line.

Okay, I think that's all my questions. Thank you guys so much.

Jorge Beristain, Deutsche Bank.

Hey, good afternoon guys. Jorge Beristain, Deutsche Bank. My first question I guess is just for Jim.

I just wanted to reclarify about that equity raise. I understand it's just a normal course, it sounds like a refiling of something that had lapsed. But there's something coming across the wires that says Bank of Montreal has a $75 million equity distribution agreement with you guys, so I just wanted to verify is this an erroneous news article?

No, no, it's not erroneous. That's just an ATM that gives us the ability to have all of our options open to us.

We have no commitment to do anything. Jim, anything you want to add to that?

Okay, so you could actually -- so this just gives you the ability to bleed stock into the market at your choosing if you saw the opportunity?

That's correct. So it's a bit like the reverse of a stock buyback.

Okay, so it's a little more specific than your earlier release which was kind of indicating it could be debt or equity?

Correct.

I think the key is Jorge is we've seen tremendous volatility in all commodities. You look at what's happening in the oil and gas, coal, base metals markets.

And while we're confident we have more than enough liquidity to do what we have on our plate today, we may choose to have some insurance against this downside volatility that we see or we may have some acquisition opportunity. So it gives us the flexibility as Phil indicated to do something without doing some huge underwriting without the immediate use of proceeds.

Understood. My second question was for Phil. I do laud the idea of executive management and the Board sharing in a little bit of the pain I guess that shareholders have suffered in the last few years in the metals and mining sector.

I just wanted to understand how that came about? And would there be any sort of clawbacks? In other words, if silver or gold prices went up in the future does the pay immediately go up or do you view this as more of a structural reset that is occurring?

So if you could just talk about how the idea came to be and if it would be again variable to go up in the future. Thanks.

I guess two comments. First, management, a large portion of our pay and it varies based upon the position you're in is in equity and tied to equity. So we were already participating in the downside with our shareholders.

So we know exactly what they're experiencing. But we decided that it was important to show our employees, our vendors, our shareholders that we take seriously reducing cost and so we elected to make these reductions for this limited group of people.

It's a one-year arrangement or if the Board should decide to do something different it's at their discretion. We've not even talked about unwinding it earlier than that but obviously that's something they could decide to do.

So that's really the extent of it. It was something that we talked about in the budgeting process. And we made the determination to do it effective January 1.

But without further extension by the Board this would just automatically reset back to the prior levels in 2017?

Correct.

Okay, thanks very much.

Dan Rollins, RBC Capital Markets.

How's it going? I was wondering if we might just focus on the surface reserves at Casa.

Obviously 5.5 years within the East Mine Crown Pillar, you also have the Principal pit. I was wondering if you could just give a rough idea of how many ounces or tons are sort of sitting on the surface right now at Casa?

So I will look to Larry and Dean if you guys can remember what that is offhand. So do you have another question --

Maybe while we're waiting, do you guys see the ability to bring in the Principal pit post the East Mine Crown Pillar being exhausted in 5.5 years? Or is there something that --

In fact, the ultimate plan is to do four pits. And so yes, we will do these in sequence.

And what other pits are out there? I see on this schematic and what I've known from being to this site in the last few years there is only really two major pits. Is there some additional (technical difficulty) being developed?

Certainly those are the two major ones and then there's two smaller ones.

Okay.

And to answer your question, the surface ore is going to deliver about 6.8 million short tons all pits. And there is a small one called the 160 that's included in that.

And what's that running about a gram a ton, gram and a half?

The East Mine Crown Pillar will be a little under 3 grams.

That's very helpful. And then just on Lucky Friday, obviously last year you had some challenges with the fans. You never really got to steady-state on your unit cost.

I think last year including your refining cost you did around 266 a ton. It looks like you have a pretty big drop there this year. What are you thinking on a mine site unit cost structure should be going forward now that you are at steady-state?

So the cost per ton?

Yes.

A little north of 150.

150, right.

So a little north (technical difficulty) this year.

Yes.

And then could you give us an update on how your negotiations with the union currently are proceeding or if they've started?

Nothing has started.

And then I'm not too familiar, when was the last time the contract was renewed?

Six years ago.

Six years ago. Okay. And you're looking to put something similar in place regarding term?

We've not made any sort of decisions on how to proceed. That's all being considered as we speak.

Okay, perfect. That's all the questions I have. Thanks very much.

Trevor Turnbull, Scotiabank.

Hi, Phil, how are you? I just wanted to follow up on some of the stuff that Dan was asking. So for the East Mine Crown Pillar study that is just for the one pit, that doesn't encompass all four pits that you were talking about?

That's correct.

You were talking on the slide it says 39 million in total capital, the majority of that getting spent in 2016. Is the rest of it fairly spread out or is there a big chunk in 2017 for additional stripping or anything like that?

Trevor, it does feed out over a couple of years. The actual funding that we will have for it during 2016 is about $19 million.

It's one of the real benefits. We've been looking at it for over a year and we found ways to stage the capital to match it with the cash flow. So the big lump this year is $19 million and it will feed out over a couple of years.

And then 2017 and 2018 do you remember what those --

I don't have those off the top of my head.

Okay. And just respect, and thank you for that Jim, with respect to the assumptions it was mentioned I think the gold price, what kind of Canadian dollar are you looking at for the study?

About [CAD1.33] if I recall.

Okay. And then I had a quick question about San Sebastian.

In reporting you gave some detail on what happened in January. I was just curious, is San Sebastian essentially ramped up or is it still getting to the throughput that you're looking for there?

It's essentially ramped up. There's maybe another 10% in the throughput but we're really close.

Okay. And looking extrapolating from what you had there it looks like the grades are really good.

And kind of looking at the guidance and what you achieved in January, does that mean that things are a bit running ahead of plan and that we should expect things maybe to come down a bit from what we saw in January? Or is guidance more on the conservative side?

We would expect to see things come down. The East Mine Crown Pillar is the highest-grade portion -- I'm sorry, East Francine, is the -- sorry -- is the highest-grade pit of the three pits.

And so we would expect to see that come down. But we think we'll achieve the 3 million ounces at San Sebastian and we'll be looking at it closely at the end of the first quarter and see if there's the opportunity to raise guidance.

Okay great. And then just one last kind of housekeeping question, you talked about the nonwage cost savings and all that. When it comes to things like G&A, do you have any guidance for that what we should forward in the year?

It's going to be very similar to last year. Maybe there's a small percentage that's going to go down but it's not going to be material.

Okay, great. Thank you very much, guys.

Garrett Nelson, BB&T Capital Markets.

Hi everyone. You had a really great quarter at Casa Berardi.

It looks like it operated at close to 170,000 ounce annual run rate in the fourth quarter driven by the higher ore grades and mill throughput. Can you help us with how to think about the production guidance for 2016, the 135,000 ounces in terms of the quarterly output and how we should be thinking about grade and throughput this year?

Well I think if you look at the last two years we've always, three years in fact, the fourth quarter always seems to have had the higher production. But I don't have that right in front of me. Do you remember --

The annual production for the last two years has been in the 130,000 ounce range. So I think we're guiding basically where we've been finishing. It was a bit unique in the fourth quarter that we took five very high-grade stopes and for reference in the first quarter this year we'll only have one of those.

And the other thing we'll have is the gold from the pit in the fourth quarter of this year. So in terms of weighting it I would certainly weight it in the second half of the year and more in the fourth quarter from that 130,000, 135,000 ounces. Jim, is there something you want to add?

No.

Okay.

Okay, and on the pit and the 30,000 additional ounces of production that you're expecting in 2017, can you give us a better idea of the expected cash cost on those incremental ounces?

Geez --

We don't have the guidance out for 2017. I think let us get the mine up and running and we'll provide information on that as we move along.

Okay, is it safe to assume with the additional ounces the per ounce cost would probably come down a bit versus 2016?

Well, the interesting thing is that although it's not the highest grade, it will be roughly half the grade coming out of the underground. The recovery is going to be quite good because it is off side.

And then the other consideration is that in the mill it's just a variable cost that we're going to see the fixed costs are already recovered obviously. So yes, I think it's going to be a good project.

All right great. Thanks.

Lucas Pipes, FBR Capital Markets.

Hey, good afternoon everybody. So good job on 2015 and I wanted to zero in a little bit on the CapEx side.

So you came in quite a bit lower than originally guided. Could you remind us what drove that performance? And then could this have any read through for 2016?

Well, we were at -- where were we at the original guidance --

Last year at 115.

Yes, and so there were some things that got deferred into 2016 and those are reflected in our guidance for 2016. So I wouldn't read any more into it than that.

Got it. So it wasn't equipment or FX that drove that?

I guess there was probably a little bit of savings in Canada but that wasn't a big driver.

The total budget there if I recall was about $50 million for the year. So you take the delta in FX and it had some impact on it but it bled out over the entire year.

I think one of the things that we do tend to find more than anything is while we budget things lean and tight you don't always get everything done that you want to get done. And over the course of the year I think if you look at it historically the last three or four years we tend to underspend the capital by about a similar percentage.

Got it. Thank you. Then a follow-up on the announcement regarding the equity.

On the M&A side, any changes to your thoughts there? Could you remind us what you think could be interesting in this environment in terms of size, geography, any updated thoughts on that?

Well, nothing has changed at this point. We are still looking at projects that are in the Americas primarily. There's the occasional thing that we will consider in other parts of the world but it's not the focus of our efforts.

We are open to both gold and silver. Ideally silver but there aren't a lot of quality silver opportunities. So gold gets more attention than silver does because there is an inventory of opportunities in gold.

Certainly we think we have the capacity to bring some operating expertise to a variety of assets. So we're very much focused on how can we leverage what we already do.

Got it. And you have a very strong reserve profile that you highlighted again today, especially under your conservative assumptions.

Is that a metric that we should be thinking about as we think about potential targets for you that they have a long reserve life? Or how important is that to you relative to some of the other metrics you could be looking at?

I think reserve life and cost structure is the two top criteria for us. We think you need to have the long-lived reserve so you can take advantage of price cycles. Otherwise you just sometimes end up in the kind of wrong place at the time.

So get a long mine life and you've got to have a low enough cost structure where you can survive the downturns. So it's really those two things that are more important than anything else. But you've got to consider all the other metrics at the same time.

Got it. Well I appreciate the color and good luck.

Thanks.

Chris Terry, Deutsche Bank.

Hi guys. I just got a question on San Sebastian. I think when you did the initial feasibility it was over 18 months.

Now that you've started mining how are you thinking about extensions into 2018 and beyond? Are you more confident or how are things panning out?

We're still 2016 and 2017.

Yes, so have you thought further into 2018 or some of the drilling that you've done there indicated that there might be some further extensions?

As you said the original plan was 18 months which is probably slightly longer than that at this point. But we're certainly not into 2018.

Okay. So just keep it as is per the feasibility study.

The second question I had when you give guidance I guess it's quite unusual not to give a range as such. So do we think about your guidance for 2016, is that your best expectation or is that something that you're aiming to beat in terms of the overall numbers?

You always hope you can beat this stuff. But it's our best estimate at this point.

And we've given you a bit of a range in the total because what tends to happen is one tends to be a bit better and another tends to fall off. It's hard to get all of the mines going at the same time.

Okay, thanks very much.

John Bridges, JPMorgan.

Hi, good day everybody. Congratulations on the results. I was just wondering, Jim, with your announced retirement, how many more of these quarterlies are you going to be doing?

How many what?

How many more of these quarterly calls?

As long as Phil wants me to talk I'll be talking, John. I've always had a problem shutting up than never talking.

But he has one more quarter. He'll do the first quarter. And then his plan is to retire at the annual meeting.

Okay. I just didn't want to miss your last one. So I'll be here in three months time.

Lord willing.

Yes, absolutely, for all of us.

Any question John?

No, I just wanted to -- I didn't want to miss Jim's last quarterly.

Okay, very good. Thanks.

I'm showing no further questions at this time. I would now like to turn the call over to Mr. Phil Baker for closing remarks.

Okay, well thanks very much for peoples' participation in the call. I do hope you consider the reserve position that Hecla has. I do think that it makes us stand out in many ways with our low price assumptions and the fact that we're able to grow slightly silver and maintain gold and use so much lower prices than other companies.

The other thing that seems to stand out to me is the fact that we're growing production and that has been our view all along is let's invest and see our production grow. We're willing to use our balance sheet to do that. And if we continue to have these nice prices that we've seen over the first few weeks and we see that for the year that we'll really see a benefit for that additional production growth.

We're happy to answer any questions that you might have that you didn't get answered. Feel free to give Mike a call or me.

And with that we will end the call. Thanks so much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program.

You may all disconnect. Everyone have a great day.