Q2 2022 Hecla Mining Co Earnings Call
Good morning, My name is David and I'll be your conference operator today.
At this time I'd like to welcome everyone to the Hecla Mining Company earnings call. Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply prestige Starkey followed by the number one on your telephone keypad, if you'd like to withdraw your question.
Star one once again, thank you and detailed the tall you may begin your conference.
Thank you operator and welcome everyone. Thank you for joining us for Hecla's second quarter, 2022 financial and operations results countries costs I'm going with that package Hecla's, Vice President of Investor Relations and Treasurer, Our financial results news release that was issued this morning, along with today's presentation are available on hecla's website.
On today's call, we have Phil Baker, Hecla's, President and CEO , Lauren Roberts, Hecla's, Senior Vice President and Chief operating Officer, and Russell Waller, Hecla's, Senior Vice President and Chief Financial Officer.
Any forward looking statements made today by the management team come under the private Securities Litigation Reform Act and involve risks as shown on slides two and three and in our earnings our earnings release and in our 10-K and 10-Q filings with the SEC.
These and other risks could cause results to differ from those projected in the forward looking statements reconciliations of non-GAAP measures cited in the skull and related slides are found in the slides or the news release with that I'll pass the call to Phil Thanks, and good morning, everyone and thank you for joining our call.
Start on slide four.
You know I'm always a little bemused when someone says that were in unusual times, but I do think this time. It is fair to characterize the east times is quite unusual.
When we had our conference call three months ago I spoke about the risks facing the world in hecla's, such as inflation Covid the impact of the Russian Ukrainian War rising interest rates and supply chain disruptions and none of those risks have gone away and added to the list are increased China, Taiwan tensions and.
Metals prices, which have declined in for Hecla.
Our realized silver price is 12, 5% lower this quarter than it was last quarter and of course, if we have recession news that that could go lower.
When I look at margins and capital projects that are going on across our industry. There is a fair amount of stress for companies.
With these projects.
And when we look at our gold mine Casa Berardi, we see those margins are shrinking.
As costs rise in the gold price has declined.
But for Hecla, when we look at the quality of our silver mines. The strong production low costs the amount of capital we needed to spend the strength of our balance sheet, it's allowing us to focus on how we grow silver production.
And I'm very confident that lower silver prices will lead to higher silver prices significantly higher prices. So that's the context that we are looking at the quarter and the rest of the year, we are investing in our minds and acquiring new ones, because we had the organization and the financial capability to grow production earnings and <unk>.
Cash flow and we believe shareholders are going to benefit from the growth that that investing in our three mines and acquiring a lexicon.
So what are the drivers of our growth and there are three increasing grade at the Lucky Friday, coupled with the new mining method. The underhand closed bench method or as we call. It the UCB method.
The pending <unk> acquisition, and increasing throughput at Greens Creek. So first the Lucky Friday I'm I've been underground twice this past quarter at the Lucky Friday, and I'm really struck by the opportunity to UCB has on a safer more productive environment.
And we still have not really started optimizing the method all we had been doing for the last two years is implementing.
The new method because of its safety and productivity, we're trying to implement it as quickly as we can so some of the things. We're doing is we're investing in another hoist at surface a service hoist to move people and materials to the main hoist can haul rock to the surface, we're tearing down the old storage facility that stockpiles the or bill.
It goes to the mill it was super small so that essentially when the mine was shut down the mill was too and that wasn't a problem in the past because the mill had so much more capacity than the mine could catch up. So we're building a new facility that allows material to be stored for a few days until the mill is able to process. It and this is great because it seems like it's not going to be.
That long before the mining rate will exceed the mill's ability to process it.
We also have purchased new bigger equipment I mean, when I was under ground I saw six yard loaders, which are physically about 50% bigger than what they were replacing.
And we're on track with all of these investments.
We're yielding results in fact, the mine turns in the second quarter set a new record at the Lucky Friday.
So to the Lucky Friday is on a path to be a 5 million ounce producer next year and close to $6 million a year.
After that and yet we still have not optimize the new mining method. So tonnage could continue to increase which is going to require further optimization of hoisting and milling. So stay tuned for what's happening at this 80 year old mine Who's best production costs and cash flows on the way. So this year, we are making.
A roughly $60 million investment of which $40 million in the second half of the year. So we've spent 20 of the of the.
60.
The second driver of growth as Keno Hill, probably the highest grade multi million ounce silver reserve in the world and as part of that acquisition. We bought another 5% of the company for $4 million, which took our interest to nine 9% and then we've loaned them $20 million in July .
And we did this financing to elect schedule to help them have a singular focus on development and we've also shifted.
Some equipment that we had available at the Lucky Friday in Nevada, So we wouldn't have to wait for that equipment from a third party.
On the line, so lauren's going to outline our plan for when we take over to develop.
The mine and then the third driver of silver growth is increasing Greens Creek through throughput and we're not talking about large increases, but incremental improvements of 5% to 10% over the next couple of years and so we're really focused on this because these kinds of productivity gains really generated triple digit type return.
Turns because they're low capital projects that are building upon.
Capital base, that's been put in place over the last 35 years.
So Lucky Friday, Keno Hill, and combined with the small increase at Greens creeks productivity really could increase our silver production to a sustainable 17 20 million to 20 million ounces of silver a year.
In the next few years.
And this would I think make hecla, the fastest growing silver miner with about 30% growth in production.
And would make us one of the two or three largest silver mining companies were already the largest silver producer in the United States and I think we will likely become Canada's largest silver producer.
So after Russell and Lorne speak in before the questions I'm going to talk about our capital cost guidance, but let me pass it onto Russell now Thank you Phil [noise].
Turning to slide six we saw revenues of over $191 million, 34% from silver, 40% from gold and lead and zinc contributed about 26% Greens Creek had about half the revenue while Casa Berardi was over 30% and Lucky Friday, just under 20%, we generated $40 million of cash.
So from operations and free cash flow of almost $6 million, we ended the quarter with $198 million in cash and available liquidity of $335 million and a net leverage ratio of one four times, which is well below the target of two times turning to slide seven and I'll speak more on the margins and cash flow generation of our operations.
The green portion of the bars in the chart on the bottom left is the quarterly margin and over the past eight quarters. Our silver margin has continued to average 60% of the silver price realized since June 2020, we've generated almost $240 million in free cash flow and this is after investing $88 million in exploration and pre development last quarter, we spoke about capital allocation.
<unk> and the fact that our first priorities are to invest capital to de risk the mines lower cost or expand the resource. This is exactly what we'll be doing with the capital. We've accumulated we'll be investing in all of our current operation operating mines as well as at Keno Hill to Derisk that mine lower the costs and expand the resource as a result of these investments being made.
The operations and the current price environment, we anticipate seeing the balance of our cash come down in the last half of this year.
Turning to slide eight we have not been immune to the inflation. The industry is seeing however is our minds, especially our silver mines are small, but high grade the impact of Hecla has been less than others in the industry at the time of the guidance earlier this year across the board of inflation assumptions were 5%. However year to date, we have seen cost of key inputs like cyanide increased 30.
Percent and steel and ground support by 14% the skilled labor market remains constrained with wage increases and reliance on contractors. All of these factors manifest themselves into overall higher costs of 15% to 20% over our guidance, while the impact of inflation is offset to a degree by our byproduct credits at the silver mines, our Casa Berardi mine.
Is more exposed to inflationary pressures due to more tons move there versus our other mines. The chart on the right highlights the components of our production costs with labor and contractors, making up more than 50% of the costs fuel is a smaller part of the production costs. Because we are aligned on hydro power, but higher consumables and other costs. It played a factor in the increase in <unk>.
Cost guidance you saw in our release this morning with that I'll pass the call to loyalty.
Thanks, Russell I'll start on slide 10.
Greens Creek produce two 4 million ounces of silver in the second quarter consistent with production in the first quarter. The strong production was driven by higher grades and coupled with strong byproduct prices resulted in favorable costs.
The cash cost was negative $3 29 per silver ounce and the all in sustaining cost was $3 48 per ounce.
These results beat guidance and generated margins exceeding $12 per silver ounce produced.
This best in class mine has generated more than $80 million in free cash flow in the first half of the year and $266 million in the past six quarters.
With a strong first half behind US we are affirming the production guidance of $8 six to $8 9 million ounces and are reducing the cost guidance.
Cash costs and all in sustaining cost guidance is are expected to be in the range of zero to $1 75 per ounce and $5 50 to 750 per ounce respectively.
Slide 11, you can see that the Lucky Friday mine also had a strong production quarter and set to new records the.
The mill achieved record quarterly throughput of 1071 tonnes per day and the mine produced a record 102500 tonnes of ore in the quarter.
Quarter over quarter silver production increased by 38% to $1 2 million ounces, while ASIC decreased to $9 91 per silver ounce a reduction of 39% over the first quarter.
Lucky Friday continued its free cash flow generation with $10 4 million of positive free cash flow for the quarter.
This quarter also marked six consecutive quarters of positive free cash flow from the mine with $45 million generated cumulatively.
We are reiterating production guidance of $4 three to $4 6 million ounces of silver.
Cost guidance is being increased to reflect the consumables associated with higher throughput inflate.
Inflationary pressure on key inputs and elevated contractor usage due to the tight labor market.
As a result, we are increasing the cash cost guidance for the mine to one.
$1 75 to $3 50 per ounce in ASIC to $9 75 to $11 75 per ounce.
This quarter highlights the UCB mining methods success in managing seismicity and improving productivity at the mine. This change in mining method underpins our production expansion at the Lucky Friday and makes it attractive to invest in new fleet and improved infrastructure.
As we continue to optimize UCB and plan for higher silver grades as we might deeper we believe this mines best decade has ahead of it.
Turning to slide 12, the Casa Berardi mine produced just over 33000 ounces of gold at an all in sustaining cost of $1641 per ounce.
Gold production was 10% higher than the first quarter as consistent mill performance, coupled with higher throughput recoveries and grades led to higher production.
<unk> declined nine 3% over the first quarter, primarily due to higher production.
We are reiterating production guidance of 125 to 132000 ounces of gold, but are increasing our cash cost guidance to 275% to 1300 75 per ounce and ASIC guidance to $15 50 to <unk> 75 per ounce.
We expect the costs over the second half of the year to be like the first as we don't see the labor market and inflationary pressures easing for the rest of the year.
Casa Berardi costs are more exposed to these headwinds in our silver mines because of the greater volume of material mined and processed and the lack of significant byproduct credits.
The increased AC guidance also reflects an increase in capital spending associated with a design change and the planned expansion of the tailing storage facility.
We announced the acquisition of <unk> in July and expect the transaction to be completed in early September .
With the goal of sustaining mill feed at about 400 tons per day, we are planning ramp up in development and infill ramp up development in infill drilling at Bermingham and flame and moth deposits in 2022 and 2023 <unk>.
Slide 13 highlights some of the work we have at the Bermingham deposit where the focus will be on the <unk>.
The area under the ups shows the work we plan to execute and the footage of the development and drilling that we intend to complete.
Moving to slide 14. This image shows our work plans in the upper lightening zone of the flame and moth deposit.
Concurrent with this scope of work and bulk minds, we plan to build out the supporting infrastructure and work on improvements to the processing facility.
With that I'll pass the call back to Phil for closing remarks, Okay. So slide 15 is our guidance slide.
I think that Russell covered the inflationary pressure and learn the specifics on the production and the and the operating cost.
Guidance, so I'm just going to focus on the capital.
Across the company and probably in the Grand scheme of things our capital increase is minor, but to us a 15% to $25 million increase in capital so out of the norm and why do I say that our our capital in the past three years has averaged about $107 million and rarely have we increased guidance. So let me elaborate on why we are increasing it.
We're doing it for a few reasons first in certain cases, we've made the decision to accelerate expenditures that we would've made in future periods and an example of this is the additional drill contractor that we're bringing in at the Lucky Friday, that's going to allow us to have 18 months of data from pre to production drilling.
For mine planning rather than what we have right now, which is 12 months and by the way I'd like over time for us to have three years of data. So that we can can accurately give investors a three year outlook.
At Greens Creek, and example of this as Rehabbing a bridge that was scheduled for 2023 that we're moving to 'twenty two to avoid to avoid distractions as we try to increase throughput.
And some of the changes are due to expansions in scope of risk mitigation and the tailings lift redesign at Casa that Lauren mentioned that good example of that.
Unlike the rest of the industry, we're not immune to the inflationary pressure on capital.
And then Lauren mentioned, the development and definition drilling at Keno Hill and some of that is happening now with the funds we have have finance to <unk>.
Let's see how much progress they make and after we closed the acquisition will give an update on how much we will spend through the end of the year.
So since we had the balance sheet financial strength to invest in our business to grow production reduce risks lower costs and generate returns.
We will be in doing that we will be prepared when metals prices and particularly silver prices are substantially higher.
And so before we go to Q&A, Let me just talk about our ESG program in May we published our sustainability report and then I'd I'd encourage you to take a look if you haven't already what Youll find is that in addition to hecla being part of the solution to climate change by producing the metal the world needs to generate solar energy.
Among other other uses we are already net zero for scopes, one and two of greenhouse gas emissions.
I also want to mention that Ted Crumbly, our long standing Chairman retired and the board elected Cassie bogs who's been on the board for about six years.
Our chair of the board and she has a breadth of experience in our industry.
She was a partner at Baker and Mckenzie when I first met her. She later was part of Barrick's corporate development team and finally, she was general counsel.
To an investor in the mining business, our CF and so she has retired from these activities and I'm confident that she was going to providing extraordinary leadership to the board and finally, most and maybe most importantly, I want to thank the hecla family of employees.
And it is a family or earlier this quarter we recognized.
Family, who had has had a member of their family as an employee for more than a 100 years. So I want to thank the accurate family and all hecla employees for their commitment and dedication to our values of safety <unk> that makes hecla. The company. It is with that David I would like to open the call to questions.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
And we'll take our first question from Lucas pipes with B Riley Securities. Your line is now open.
Thank you very much and good morning, everyone.
Thank you also for the presentation, it's very helpful.
When I look at the.
Outlook cost outlook for the full year for the three operations. It seems like in the case of Lucky and costs that youll have a fixed cost leverage.
Driving lower unit costs in the second half of this year.
Wanted to just make sure I'm not missing anything there and then.
If you could maybe speak to your confidence of higher volumes.
In the back half of what it would appreciate your perspective on that.
So before you before you jump off Lucas sit and make sure I'm understanding your question.
Can you just repeat it or maybe restate it.
So.
When I look at the full year guidance for 2022.
Okay.
Slide.
10, 11 12.
Zach.
And I look at.
Year to date production versus full year, and I look at year to date cost of sales and that looked at.
On a unit basis.
In the case.
Lucky Friday and Casa.
Our full year guidance.
On the cost unit cost side is is below year to date levels and it appears to me that's driven by volume picking up in the back half of the year.
So just wanted to make sure that's correct and if that's correct.
What's what's driving for example increased volumes in the back half of the year at Casa.
To lead to what I believe is greater fixed cost absorption. So would appreciate your perspective on that.
Okay, well look I guess, the way I'll answer and I'll, let you guys sort of jump into this is that we will at cassa have more costs than what we than what we had in the first half of the year.
All of the mines.
Either almost exactly the same as the first half or slightly slightly more.
All of the mines are.
Have a level of increased throughput.
So that contributes to it.
<unk>.
And all of the mines generally speaking.
<unk> going to have increased cost per unit cost per ounce Lorne.
Yeah I'll speak on the on the production side Lukas So at Lucky Friday, you would've seen the significant ramp up in Q2.
We expect similar performance in Q3, and Q4, so back half compared to first half. It is more heavily weighted on production then that's just us ramping up the UCB method and continuing to refine it and you can see that in the guidance that yes, we are.
If you double what we have produced you don't quite get to our guidance. So there is a little bit more production correct.
And then at Casa Berardi. It is it is heavily weighted to Q4.
That's production sequence in the underground mine accessing some higher grade stopes.
Okay.
That's helpful and then.
On slide eight you show.
Inflation assumption guidance right, 5% is where it started.
Take out where.
The increase has been.
First half of this year versus Sky obviously.
Obviously like there.
Most of these things you really don't control it.
It's a reflection of the environment we're in.
But on the labor side I wanted to.
Just touch on that a bit is the 10%.
And annualized rate or what you've seen since the beginning of the year.
Go ahead, Chris it's essentially what we've seen compared to.
<unk>.
Our guidance right. So if you think about when we set the guidance at the end of the.
Last year, then we added an inflationary rate of 5% and that 10% increase as compared to what we use so you could up 15% from last year.
Got it got it.
Are you seeing.
On the labor side continued pressure like.
Is there further upside pressure.
So where where specifically you said also.
Yes, I think the short answer is yes. There is continued pressure and that's and that's reflected by the fact that we're having to use more contractors than what we had in our plan. Yes, that's exactly right. So the competition for skilled trades. So these would be full cycle Myers Mccann.
Electricians is is quite intense in the marketplace and we are supplementing with contractors, while we source our own people.
That's that's helpful and what are.
Can you maybe speak to hecla initiatives too.
Training programs things like that that would maybe east.
Gil.
Labor shortage in the quarter. So it may be years to come.
Well this is what long term issue.
Look it's always an issue and trying to source.
Employees at the at the mines.
At Greens Creek, we have had a long term training program.
With the with the local college, there as we try to.
Primarily.
We have focused on diesel.
Training.
We're doing things with with basically community colleges trying to get get people that we need and we have all we have a whole lot of young folks that.
Coming into the mining industry in and what you find is that they either take to it or they cycle out pretty pretty quickly is that fair.
Sure.
That's exactly right.
I'll just add to what you said fill them at Casa Berardi, we actually operate.
In conjunction with the local.
Education, all institutions, we operate what we call a stope school.
Yeah.
They will take induct. These in its co funded in part by the government and various mining companies and then as those candidates finished their technical.
Technical and experiential training, we pull them into the mines and we have a cadre of graduating shortly and I think castle will pull for out of that out of that particular class. We're working to do something similar with mechanics at Casa berardi, but to Bill's point.
We are bringing in a lot of very young people.
And training them in place and that takes time, but ultimately if we're going to continue to be successful as an industry. We've got a welcome in a new generation and we did lose a you know a journey.
Generation of of skilled people in the last downturn in the market and so this is pre COVID-19 and Covid and Covid took a bunch more out.
Folks that were ready to retire or or or.
May be ready to make a change for one reason or another so it also provides an opportunity because we have new technology that we're bringing in exactly people will.
That don't have the same level of experience will embrace that new technology may be easier than others will exactly.
And it's 100% correct, it's they come and they take to it like adductor water and Theyre very enthusiastic and happier they stay about 90 days and they move on.
There's no in between.
Yes.
Okay.
Really appreciate the color.
Phil team best of luck. Thank you.
Thanks.
And next we'll go to Michael <unk> with RBC capital markets. Your line is open.
Yes, thanks, very much thanks for taking my questions.
You mentioned.
You mentioned, a few things around the subject I'm wondering if we can go into a little bit more detail in terms of the expanded scope of activities.
Adding to Capex at Lucky Friday, you mentioned the service hoist can you talk about what else that that capex involved in the back half of the year, what kind of projects you are investing in and what that might look like into 'twenty.
2023 or are you are you thinking that that elevated spending sort of continues to support your target of 5 million ounces and beyond.
Well, yes, the three major projects that immediately come to mind are the service hoist the courseware bunker in the tails.
And those are projects that will largely be completed in 2023. So there will be so we'll continue to make that elevated spending in 'twenty three.
And then there is also additional equipment, we have some equipment that has come in but.
We'll have additional equipment that will come in in 2023, that's my recollection of those things Lauren, Yes, Thats correct. Okay.
So so are these investments may be going back a year. When you are planning or these investments.
Or the way you think about them required to get to that 5 million ounce a year target or are these supporting potential for four production numbers beyond that.
No. These were for the most part these were things with the exception of the tailings. These were things that you didn't absolutely have to do but if youre going to have a.
Derisk mine that is going to meet the the plan then you better make these investments so that so that you don't have these upset.
And then it really puts you in a position to further optimize the mine I think if you didn't make these investments the ability to do more than what we had in the plan is limited yes.
That's correct it would be limited and eventually you would hit a cap that you couldnt move through so these investments that we're making notably I would say the service hoist and the course or bunker.
These will allow us to take advantage of the latent capacity that was in the mill.
Without these two projects, we would not be able to take the mill to its full potential and of course, the mill is going to need to go to the full potential because the UCB mining method is going to allow us to deliver that amount of ore. So it's an integrated system. We have to have to view it as an integrated system, but the short answer is no. We didn't have to do any of these things.
To get to 5 million ounces, because 5 million ounce is really driven by the grade.
It's getting beyond that that this sets us up to do.
Okay, Great makes sense and then maybe one other for me.
And I don't I don't know how much more you'll be able to add what you said, but for Keno Hill, it's been about a month since you announced the deal you are on the ground with the financing and the equity stake.
Is there anything new that you've learned over the last 30 days or so or any change to your thinking on the work program post deal close I know you said you would provide an update but is there is there any kind of preview that you can that you can offer at this point.
Well look I think the short answer is we have been very engaged on keno for a long time, and particularly sort of the March April timeframe and so as a result of that there's not many things that we're not aware of.
And we've these.
These guys have been very very cooperative and very open.
And they're even participating on our on our biweekly calls with all of our operations.
They go first and then they drop off but so no. The short answer is no nothing no surprises.
And we'll just see how quickly they can can develop I mean, they have a shortage of equipment. So their development rate is not going to be as high as we are anticipating we will have once we are fully equipped and enter our on the ground anything to add more no I would say no surprises.
The one.
Comment I would add is how enthusiastic.
<unk> team is to be joining the hecla family.
Yes, I guess I guess.
We've talked about labor issues we.
We think that we've got a workforce that wants to work for Hecla. There. These are guys that are and gals that are committed to the project.
And so they're excited about us coming on and there's a team of people in our in Vancouver, and we're looking forward to those large portion of those guys coming over as well. So they really are I think there is an opportunity where they fill a lot of needs that we have for people.
Okay perfect.
Thanks, very much I appreciate it.
Sure Michael.
We will go to Trevor Turnbull with Scotiabank. Your line is open.
Yes. Thank you.
I wanted to ask a little bit about the provisional price loss that you guys had.
I thought that you had short term hedges kind of to guard against these big swings related to professional pricing and I just wondered if you could talk a little bit about what you do to mitigate.
The commodity price volatility in the short term not so much the longer term hedging, but just this provisional price volatility that we tend to get.
So.
The short answer to that is Trevor we have hedged the Greens Creek exposure, but we have not hedged the lucky Friday, and we've had a change in the.
The terms on the Lucky Friday, and so we're actually rethinking if theres some hedging that we should do that given what you've just seen this quarter.
Okay.
And then I'm just kind of a housekeeping question about it is that the money that related to this the $16 million was that included in the 116 cost of goods sold and your direct production costs.
I'm going to have to let Russell answer that question, it's actually a reduction of revenue.
Whats your production revenue Okay perfect. That's all I had thank you.
Thanks Trevor.
Next we'll go to Joseph <unk> with Roth Capital Partners. Your line is open.
Hey, Phil and team Thanks for taking my calls.
So.
On the go.
Did you guys gave with the <unk>.
Inflationary impact and the higher costs.
Should we think about that as you guys.
Counting for further expectations of inflation or just.
What you've seen retroactively this year.
We are reacting to what we've seen retroactively and applying that to the second half of the year.
Okay. So if inflation were to continue to run hard.
Then there is potentially further decline so the cost estimates or are they kind of I think.
Look I think that's right Gabe.
Because you don't know how much further they might run.
So we're not going to try to guess.
Okay. Okay fair enough I, just want to make sure from a modeling standpoint.
Then.
Given all of these all of these pressures.
Is there an expectation that.
Once things in the world settle out a bit and supply chain issues resolve themselves. However, long that may take that you guys can start to see some creep.
And reduction in costs again or do.
Or do you think that the these cost increases are sticky.
Look I think our cost increases are always sticky.
But yes, what we will do is.
Work too.
Reduce the costs I mean, we've.
We've been on a program in the last 18 months.
Focused on that we've had some outside.
Help.
As we've worked through that I suspect that we'll do another exercise along those lines when the opportunity comes to to really try to push costs down and when I'm talking about things like renegotiating.
Our long term contracts with suppliers.
Yeah, Lorne any anything to add.
No I think.
The direct inputs, our reagents steel fuel those kind of things.
I would like to believe as pressures relax those prices come down they always do seem to go down a bit slower than they go up they should move with the commodities.
Yes.
Difficult to predict when that's the issue.
Yeah fair enough, Okay and then.
Just a big picture Youre working on the <unk> acquisition.
How long do you feel you would need to do.
Hi, Jeff that one before you would consider or anything else. If there was a.
An opportunistic moment.
Yes.
I will suggest to you that.
Because we have been engaged on <unk> for the better part of this year.
The ability to have that operating.
With with capacity to look at other things will happen quite quickly.
We're not in any rush to do anything else.
We think theres a lot of opportunity to optimize our existing assets and will and clearly it's going to take about a year to.
Two by the end of 2023 before were in production there, but we've got capacity to consider other things.
Okay. Thanks, I'll turn it over.
Okay next we'll go to HEICO, Eli with H C. Wainwright <unk> co. Your line is now open.
Hey, there thanks for taking my questions I appreciate it.
Most things have been covered but.
I don't want.
Wanted to go back to that route a sentence in the release, where youre, saying that the company is seeing the impact of inflationary pressures in labor constrains at all of its operations.
Breaking that down a little bit.
Gotten into a decent amount of color.
And you're in your release, but but labor wise I mean walking through the streets. It just seems like every business is openings right now in the U S is about 1.8 vacancies for every job in general.
Are you, having a hard time filling qualified workers or is this just a money issue and if you are having a hard time, where do you think the prior workers are going to.
So the answer is it is a we have vacancies that we are having difficulty filling and we're having to use contractors to provide us with those workers and it's primarily in mechanics electricians.
And then I guess also some miners the highly skilled miners cycle growth.
So it's in all of those locations every other week when we have our meeting we're told how many short shortfall, we haven't I don't know I'm just by memory I remember 20 odd.
People that we were sure it's roughly 2008 each mine.
For round numbers.
So where are those people look in it just depends on the on the market for Greens Creek then the these are for the most part people that are flying in and so they're flying someplace else, where we don't know when the case at the Lucky Friday, they are competing with the Spokane housing market.
And other industrial.
<unk> applications for these mechanics and electricians.
And for cassette Theres other mines in the area and so people are sort of hopping around.
Yeah.
I mean, you mentioned mechanics electricians highly skilled miners.
<unk>.
What can you quantify maybe the impact on labor rates that youre seeing for those types of professions mean today versus a 12 24 36 months ago.
Coffee numbers.
I mean, I'm not able to off the top my head.
We've been making incremental adjustments with the market I don't have an aggregate number heiko.
But yes I mean.
<unk> costs have.
They have increased.
As we indicated 10% increase.
On top of the 5% we had already already.
Put into our assumptions.
Fair enough.
And then just lastly, you state some supply chain uncertainties.
<unk> hinted a little bit more of it on this call.
With the delay in equipment delivery schedules to 'twenty three.
What equipment is giving you the hardest time and what is the plan b.
I mean is there is there is there like a.
Make a bottleneck in particular that you want to point out or yes, I guess I guess, what's your plan B is what I'm, saying.
Well for the most part we don't have a a issue with our plans with the equipment. It really becomes a question of reliability.
It's not that we can't do what we need to do it.
The risk that we have.
And achieving our goals.
Manifests itself HEICO in that.
We have standards or how many.
How many hours do we rebuild the machine versus replace a machine.
And.
If the machine is not an addition.
To support our production increase than the way it manifests itself as lower availability and higher hourly operating cost and so you see it on the cost side, but it doesn't impact production where.
Where we have machines available.
Our required for production expansion such as at the Lucky Friday, we've been getting those machines, we placed our orders.
Some time ago and in fact for the Lucky Friday have already for quite some time ago actually ordered all of the machines, we need for 'twenty. Three so we got ahead of it quickly the impact we had was.
Machines, we ordered in 'twenty one.
Should have delivered in 'twenty, one did not deliver until 'twenty two.
So that kind of offset the schedule and that was the Q1 impact you saw at Lucky Friday and those were the six yards I talk.
Gotcha.
<unk> machine there are big machine when you put them in the Lucky Friday I agree.
Yes.
Having covered capital goods on past life those are big machines.
I'll throw it in general.
Thank you all so much for your time I appreciate I'll get back in queue.
Okay, Thanks hiking cycle.
I show there are no further questions I will now turn the call back over to Phil Baker for any additional or closing remarks.
So I just would like to remind you that we do have this these one on one.
Times are slotted out if you'd like to two to speak to one of US we're happy to do that.
For any interested parties and.
And certainly if there's questions that come up or otherwise that you need to call us on please.
<unk> Zeta and she'll she'll.
Help you get the information that you need.
And we look forward to coming back to you after closing, which we anticipate to be early in September and we will give you.
Guidance as to what our costs will be our capital expenditures will be at.
Keno Hill for the remainder of the year at that time. So thanks very much look forward to talking to you later.
Okay.
This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
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