Q4 2024 Hecla Mining Co Earnings Call
Thank you for standing by my name is Kate and I will be your conference operator today at this time I would like to welcome everyone to the Q4 'twenty 'twenty four Hecla mining company earnings Conference call.
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 would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again, thank you.
Speaker Change: I would now like to turn the call over to N V <unk> VP Investor Relations and Treasurer. Please go ahead.
Speaker Change: Good morning, Kate and thank you all for joining us for Hecla's fourth quarter 'twenty 'twenty photo does conference call.
Monday, Tapajos, Vice President of Investor Relations, and Treasurer, and our earnings release that was issued yesterday along with Dr. Today's presentation are available on our website.
Speaker Change: And return on investment metrics with clear hurdle rates. This disciplined approach should strengthen our balance sheet and build financial flexibility and deliver consistent returns to our shareholders.
Speaker Change: Fourth our strategic focus on silver production in the U S and Canada continues to deliver exceptional value.
Speaker Change: With the largest silver reserves based in North America and operations concentrated in tier one jurisdictions, we're strongly positioned to meet growing demand from green technology and renewable energy sectors.
Speaker Change: Our expanding footprint in these stable regions combined with our industry leading cost structure.
Speaker Change: Hecla unmatched advantages in capturing new opportunities.
Speaker Change: And while providing investors.
Speaker Change: Unparalleled security of assets I think this distinctive market position really set us apart and warrants a premium valuation, particularly in today's complex and dynamic global environment.
Speaker Change: Of course.
Speaker Change: These pillars is our unwavering commitment to ESG leadership in the mining industry and our success depends on responsible environmental stewardship strong community partnerships and deepening relationships with first nations and in fact all stakeholders.
Speaker Change: So let me highlight our achievements in 2024, which is detailed on slide four.
Speaker Change: We delivered strong operational performance meeting, our consolidated silver production and cost guidance, while exceeding our gold production targets.
Strategic exploration program successfully maintained our Subaru reserve position the second highest in the company's history with particularly strong results at Keno Hill, where reserves increased by 17%.
Speaker Change: We achieved record revenues in 2024, driven by higher metal prices and solid contributions from all four operating months Mike.
Speaker Change: Most notably our cornerstone assets Greens Creek, and Lucky Friday generating $228 million in free cash flow and I think this robust performance and I want us to advance strategic investments and Kenai, who was development, while implementing targeted improvements at Casa Berardi and Russell will walk through the financial details in a moment.
Speaker Change: We've also evolved our approach to shareholder returns after careful consideration, we are maintaining our base and your dividend.
Speaker Change: One and a half since both supporting key priorities and that's investing in organic growth strengthening our balance sheet and delivering reliable and sustainable shareholder returns.
Speaker Change: I'll now hand, the call over to Russell for a detailed financial review. Thank you Rob I'll start on slide six our 'twenty 'twenty four strategy delivered on three key objectives, strengthening our balance sheet, reducing leverage and growing production. We achieved these goals despite operational challenges, which Carlos will detail. There looking ahead to 2025, we're taking the <unk>.
Speaker Change: Some steps to enhance our financial flexibility.
Speaker Change: A key strategic decision was the elimination of our silver linked dividend. All this wasn't an easy choice. We believe reinvesting in our organic growth opportunities will create substantially more shareholder value than dividend distributions is freed up cash flows will also accelerate our deleveraging initiatives.
Speaker Change: The strength of our core assets as evident in the $228 million of free cash flow generated by Greens Creek and Lucky Friday during the year. This performance continues a remarkable track record having delivered over $800 million free cash flow.
Speaker Change: This robust cash generation and associated EBITDA has enabled us to significantly improve our net leverage ratio from two seven to $1 six times, while simultaneously investing $215 million of capital across our portfolio.
Speaker Change: Turning to slide seven as Rob mentioned, we achieved record revenues of over $900 million during the year with 44% of that revenue coming from silver 34% from goal and the remaining from base metals. Additionally, we received a small amount of revenue from copper during the year.
Speaker Change: First time Hecla has received revenue from copper and deck.
Speaker Change: We also saw a realized price of silver appreciate nearly 23%, while our sustaining cost per ounce only increased 11 <unk>.
Speaker Change: Our margin per silver ounce to have expanded from 50% in 2023% to 54% in 2024.
Speaker Change: Israel Silver margin and higher revenue generated record adjusted EBITDA, which continue to improve our net leverage ratio.
Speaker Change: As noted on this slide we've made significant progress on strengthening our balance sheet deleveraging with that however.
Speaker Change: However, we're not satisfied with the progress made over time, we expect to deliver fully from the revolver of also having cash to match with the intention of bringing our net leverage ratio of two one times.
Speaker Change: Over a longer horizon, we expect to continue to reduce our debt on a gross basis to further free up cash flows to invest in organic growth within our operating people.
Speaker Change: Our strong asset base and the growing silver demand I'm confident that 2025 will prove to be another successful year in our strategy of strengthening our balance sheet investing in our assets and generating free cash flow.
Kurt: Now I'll pass the call to Kurt.
Kurt: Thank you Russell on the slide nine Green Scraper cornerstone mine foundation of our future.
Speaker Change: Greens Creek provides the stability and consistency in our cash flows and production.
Mine produced one 9 million ounces of silver in the fourth quarter.
Speaker Change: $8 5 million ounces of silver for the year.
Speaker Change: Fourth quarter production was impacted by with many issues and limited access to hide right high grade areas, but improvements in equipment and backfill rates in fourth quarter are expected to improve silver grades in the early 2025.
Speaker Change: The mine operates across seek songs in 45 areas, yielding five payable metals and maintaining consistent annual silver production of eight to 9 million ounces.
Speaker Change: For 2025 production is projected to be between 8.1 in $8 8 billion ounces.
Speaker Change: Driven by plant in Maine.
Speaker Change: Sequencing sequencing with lower precious metal grades and higher zinc content.
Speaker Change: Cost per ounce is expected to increase as it is impacted by the higher labor cost.
Speaker Change: Which is a trend we are seeing across.
Speaker Change: All our operations and industry wide.
Speaker Change: And how you powered cars as the Idaho power utility that provides by what could the mine undergoes maintenance.
Speaker Change: And lower Snowpack and precipitation levels right and the use of diesel powered for funds.
Speaker Change: We are also increasing the capital guidance as we commence engineering and construction for the next dry stacked tailings expansion to extend capacity drove 2040.
Speaker Change: Our exploration program has sustaining the mines 12 year reserve life.
Speaker Change: The mine generated 147 million in free cash flow in 'twenty 'twenty four countries too.
Speaker Change: It's impressive 2 billion in free cash flow since production began in 1986.
Speaker Change: We had over 30 years of operational success and substantial reserves ahead.
Speaker Change: The future of Greens Creek looks as strong for continued growth.
Speaker Change: Moving to slide 10.
Speaker Change: Lucky Friday had a record breaking operational gearing 'twenty 'twenty four with <unk>.
Speaker Change: As Tom nine meal, the most think produce in its 80 year history.
Speaker Change: In the Hague is silver and lead production since 2000.
Speaker Change: Notably these.
Speaker Change: These achievements were made while maintaining the beds sets. The all injury frequency rate of 1.4 for a full production year.
Speaker Change: The mine produced $4 9 million ounces of silver in 2024 week for delivering these strong results of $1 3 million ounces of silver produced at 1180 tons per day due to favorable mining sequence in higher grades.
Speaker Change: The all in sustaining costs for the year was $16 50 per ounce higher than guidance due to increased labor costs and contract or use.
Speaker Change: However.
Speaker Change: Contractor costs are expected to decrease in 2020.
Speaker Change: As positions continue to be filled.
Speaker Change: Free cash flow generation in 'twenty 'twenty four.
Speaker Change: 82 million, including 50 million from insurance receipts.
Speaker Change: As we look to 2025, we expect the mine to produce four point sailing to five one.
Speaker Change: 1 million ounces of silver with all in sustaining costs similar to 2024.
Speaker Change: The company's increase at increasing planned capital investment to enhance the mine surface cooling infrastructure.
Speaker Change: Key project to support consistent truckload as mining advance deeper into the group to the ore body over our 17 year reserve life and to Hell with the mines zero discharge goal.
Speaker Change: The mines are record setting performance after the 'twenty to 'twenty three secondary Escapeway fire highlights the strong management team and their ability to navigate challenges.
Speaker Change: As our second cornerstone operations the mine is well position it for another solid year in 2025.
Speaker Change: We drove those fresh cash flow stable production.
Speaker Change: In ongoing improvements.
Speaker Change: This is strategy combined with smart capital investment in a favorable geology position the mine for long term success.
Speaker Change: Turning to slide 11.
Speaker Change: Dino he met its 2024 production guidance.
Speaker Change: Losing two 8 million ounces of silver despite facing operation and social challenges.
Speaker Change: In fourth quarter truckload avid or H 250 short tons per day.
Speaker Change: That production was impacted by a 25 day shutdown related to the dry stack tailings facility per meeting and.
Speaker Change: 10 days of power curtailed links from Duke Energy Corporation.
Speaker Change: Power constraints are expected to continue into first quarter and we saw nice 2025 wind repairs to the hydroelectric turbine are scheduled for completion.
Speaker Change: We have developed a clear to face the strategy to achieve sustained and profitable production at Keno Hill.
Speaker Change: Phase one focuses on reaching and maintaining 440 short tonnes per day dropped by.
Speaker Change: By advancing critical infrastructure projects, including the cemented tailings backfill plan water treatment facilities. So I used that tails in mine development.
Speaker Change: Despite permitting delays these investments are key to future production growth.
Speaker Change: The phase two targets, increasing the truckload to approximately 600 short tons per day, which is crucial for profitability at these remote operation due to the mine's high fixed cost.
Speaker Change: This phase requires additional infrastructure investment and new permits.
Speaker Change: Beyond technical execution.
Speaker Change: Our success depends on continue to strain our partnership with first nation in the <unk> Golar Berman.
Speaker Change: As a responsible long term partner.
We are encouraged by the Duke in Premier's commitment to create efficiencies in the permitting process and support established mining partners. We are seeing positive momentum in our partnership with Duke and government.
Speaker Change: Premier has demonstrated strong support true.
Speaker Change: Working on allocating resources to address power infrastructure needs.
Speaker Change: Working on they have a lot of chatter with May your minds Department.
Speaker Change: Collaborate trudge two operational solutions.
Solutions.
Speaker Change: While challenges remain including per meaning for the phase two expansion positive momentum is building.
Speaker Change: For 2020 Fi Keno Hill expect silver production of two seven to $3 1 million ounces and quarterly production costs of 15 to 17 million.
Speaker Change: Production growth is anticipated in 2026, as we approach phase one target of 440 tons per day.
Speaker Change: A significant milestone in 'twenty 'twenty four less of an increase of 17% reserves to 65 million ounces.
Speaker Change: Highlighting the district's exceptional potential.
Speaker Change: <unk> will elaborate on these exploration resource sharply.
Speaker Change: While we face short term challenges.
Speaker Change: Our system Martiga prohibition doing faster absorber development, only stakeholder relationships and growing our resource base are building a solid foundation for <unk> long term success.
Speaker Change: Thirdly to slide 12.
Speaker Change: Gasometer R&D produced 87000 ounces in 2024.
Speaker Change: At our all in sustaining cost of $1990 per ounce.
Speaker Change: By mid 2020 Fi the mind to complete the transition to a surface only operation.
Speaker Change: Focus on the 160 paid which is expected to improve economics and generate stronger free cash flow at the strip ratio decreases.
Speaker Change: Looking ahead.
Speaker Change: Casa Berardi current production plan extends through 2027.
Speaker Change: Followed by a planned five year development period, focusing on permitting infrastructure the war.
Speaker Change: Auditing and pre stripping to develop two knee often pits that brings the ball in the west mine Crown pillar.
Speaker Change: While these future Pete's, perhaps significant free cash flow potential the extended production gap has prompted the company to amyloid as strategic alternatives for the asset as announced it previously in November last year.
Speaker Change: The review process is ongoing in our lab data we'd be probably later this year.
Speaker Change: I will hand, the call over to Kurt to discuss our exploration results.
Kurt: Thank you Carlos as you can see on slide 13. Since 2018, we've produced 99 million silver ounces and increased our silver reserves by 49 million ounces to $240 million. The second highest silver reserves in our 134 year history.
Kurt: As we mine more ounces every year, we are able to fill the silver reserve base through focused drilling during the year Keno Hill increased reserves by 17% Greens Creek nearly replace mining depletion at Casa Berardi replace production plus a small increase.
Kurt: Moving to slide 14, our exploration efforts at Keno Hill continued to demonstrate significant potential through both underground and surface drilling campaigns at the Birmingham deep target, we intercepted the widest silver bearing zone to date below the northeast ore zone evidence suggests proximity to a newly identified.
Kurt: Fight or shoot where the structure appears to be controlled by an interpreted vein intersection.
Kurt: Quite excited by these results.
Kurt: At the Inca vein, we delineated over 800 feet of mineralized strike length outstanding drill hole intercept results include 26.1 ounce per ton silver, 20.9% zinc and significant indium credits.
Kurt: And an impressive 14.3 feet with these.
Kurt: These results further validate our exploration model and continue to demonstrate the district's exceptional mineral potential.
Kurt: Slide 15, slide 15, compel presents compelling evidence of our latest discovery at depth in the Birmingham system. The slide shows two key views across section of the bear vein system and the longitudinal section of the footwall vein.
Kurt: Both sections are contrary to show silver grade times thickness values, highlighting the robust nature of the mineralization.
Kurt: At the Bermingham footwall vein, we've identified a significant new mineralized shoot that it extends down plunge from higher grade zones in the upper part of the vein runs parallel to the Arctic fault and dramatically exceeds previous expectations for the area.
Kurt: Intercepts received during the quarter show significant silver grades and widths in areas that were previously did as containing lower grade screener mineralization and include up to 53.8 ounce per ton silver over 15 three feet.
Kurt: Our latest drill hole located 140 feet further depth and a long plunge intercepted a wide zone of stringer morale mineralization over 55 feet that contains two strong veins with galina sphalerite and variable amounts of tetrahedrite.
Kurt: While assays are pending for our latest intercept the observed mineralization suggests further extension of the high grade shoot at depth. The structure remains open for expansion and significant potential for resource growth.
Kurt: These results continue to enhance our geologic understanding of the district and reinforce our confidence in its substantial mineral potential each new intercept not only adds to our resource base, but also improves our structural interpretation of this incredibly well endowed district.
Rob: And with that I will pass the call back to Rob.
Rob: Thanks, good as.
Rob: As we look ahead to 2025 and our gardens in Slide 16, we anticipate our silver production profile to remain generally consistent with 2024 with production of 15, and a half to 17 million ounces, while gold production is anticipated to decrease as Casa berardi.
Rob: Transitions to only open pit mining.
Rob: We anticipate a modest increase in consolidated cost per ounce driven by higher labor costs, both at Lucky Friday, and Greens Creek and power generation costs for a couple of months.
Finally, our capital investments position us to maintain stable production at our core assets, while advancing our growth initiatives.
Rob: Capital spend should slightly increase compared to 2024.
Rob: That's largely to sustain our production profile at Greens Creek and Lucky Friday.
Rob: While at Keno Hill, and Casa Berardi, and our investments are anticipated to bring future growth in production flows so with that Kate I'd like to open the call to questions.
Speaker Change: 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.
Speaker Change: We will pause for insurance a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Snake Golf with B Riley's Securities. Please go ahead.
Snake Golf: Thank you operator, and good morning, everyone guys. Congratulations on the nice progress here in Q4. My first question was that Cassa.
Snake Golf: Obviously, we're looking towards lower strip ratios and some stronger free cash flow in the second half, but I was wondering if you could outline the strategic review process and is there a targeted timeline in place would you look to an outright sale versus a stake sale what are there considerations. Thank you. Thank you very much.
Snake Golf: Well. Thanks for your question, Nick we're looking at all options and that does include a potential divestment in whatever shape or form. We're also looking at you know where you're looking at are improving their operating plans as you're aware right now we're anticipating about a foggy hiatus between the completion of production from the F 100.
Snake Golf: 60, Pitt and the commencement of production at and the principal pit.
Snake Golf: That is a long lead time.
Snake Golf: And without really knowing what the gold prices are going to look like in five years out but at current gold prices are the principal pit actually produces some very very healthy cash flows. So it's really a tradeoff between bringing valued forwards.
Snake Golf: Through a potential divestments or or waiting it out and proving our operating plans and looking at harvesting cash flows a little bit further down the road I expect we will.
Snake Golf: Have a better a more coherent view.
Snake Golf: In the second quarter.
Robert: Robert I appreciate all that color. My next question was just the net leverage ratio has declined pretty dramatically dramatically.
Robert: On the back of some stronger earnings and I think I heard you reference a new target, but I just didn't quite catch it.
Robert: So assuming.
Robert: Metal prices continue to be robust and you're able to pay down the revolver.
How should we think about.
Robert: Yes.
Robert: Chances of increased capital returns and versus maybe building some additional dry powder for some of the organic growth opportunities you mentioned.
Russell: Yes. Good morning. This is Russell.
Robert: As it relates to the new target.
Speaker Change: <unk> said in the past is that we have a ceiling essentially two times net leverage ratio, we breach that ceiling.
Speaker Change: We've been able to bring ourselves back in line, where we're below that now which and we've made significant progress on that deleveraging.
Speaker Change: We've always wanted to be under kind of a target of less than one time. So that I don't think there's anything new there necessarily and we're just approaching our target as it relates to cash generation cleared.
Speaker Change: Clearly getting off of the revolver building some cash on the balance sheet will be.
Speaker Change: One of our strategic priorities, but we also need to continue to invest in our business, both the capital and you'll see that in the guidance, we put out yesterday as well as the exploration because that is the future of our company. So there's a bit of a balancing act between.
Speaker Change: Paying off the revolver building cash in lung as well as investing in our in our business, but I would I would suggest we would build up our cash balance.
Speaker Change: While we're making those investments.
Speaker Change: Thus, we remove that silver linked dividend because we do think that.
Speaker Change: We have better opportunities internally, then with the cash that we generate and we weren't.
Speaker Change: Russell. Thank you so much for all that detail one more if I could what what's the timeline for the maintenance of the hydropower hydropower utility.
Speaker Change: How much does this change your cost guidance.
Speaker Change: In general in terms of timing of it'll be sometime middle of this year.
Speaker Change: But we also see currently.
Speaker Change: We actually are on are generated power at Greens Creek earlier, this year and even currently now so as a total and it's increased our cost about $5 million from an ounce produced basis.
Speaker Change: Just to give you a kind of a sense of scale.
Speaker Change: Got it got it well Russell Robyn.
Our team continued best of luck.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Joseph Reagor with Roth Capital Partners. Please go ahead.
Joseph Reagor: Hey, guys. Thanks for taking my questions and.
Speaker Change: Lots of fresh air to hear words like return on capital investment instead of growth.
Joseph Reagor:
Joseph Reagor: So on that note.
Joseph Reagor: The talk around costs.
Joseph Reagor: Is there a outcome that you would prefer.
Joseph Reagor: You're talking about possibilities, but is there a preferred outcome is an outright sell more favored because it help you delever the balance sheet or is it something where they.
Joseph Reagor: If you were to sell at that kind of hurts production of future. So you prefer to keep it.
Joseph Reagor:
Joseph Reagor: If we were presented with.
Joseph Reagor: With a compelling offer for an outright sale, we would use the proceeds to to continue to de lever that that is important to us.
The forecasting future cash flows as I said that that's potentially more than five or seven years out and well. That's attracted brought now we'd be gambling on what the gold price were to block out then.
Speaker Change: Yeah fair enough and on that five year gap I think it used to be more like a three year gap is that just permitting.
Joseph Reagor: Pushed it back into the two.
Speaker Change: Correct correct.
Speaker Change: Oh, yes.
Speaker Change: Yes, and Kevin Yeah, It's it's fair meeting betterment and he has been.
Speaker Change: Challenging our previous assumptions and we are planning to go back on track basis.
Speaker Change: That's the main reason is the permitting.
Ron Keno: Okay Fair enough and then Oh, Ron Keno.
Speaker Change: With the the power challenges to start the year.
Ron Keno: And I know, Rob you haven't been there yet, but it's on the to do list.
Ron Keno: Any thoughts about what needs to change there to get the asset to be cash flow positive like are there any really big things you've already identified.
Ron Keno: Yeah. So.
Ron Keno: The main thing is to continue our investments in the infrastructure right now we have a 10 minute limit that kept at a 440 tons per day, but that's not really the end game, we need to get to 600 tonnes per day, which and that's largely because of the high fixed cost that are on the.
Speaker Change: Carlos was talking about it's a remote location the costs are higher than we anticipated. So really the ultimate goal of 600 tonnes per day, but to get today we.
Speaker Change: We need to might be different additional infrastructure investment. So that's in the mill water treatment plant.
Speaker Change: <unk> power camp space, all that sort of stuff and they all rely on new permits and so permitting has been a has been a bit of a constraint, but we do see a pathway to getting to 600 tonnes per day.
Speaker Change: Okay and have you guys kind of run an internal trade off of potentially shutting it down temporarily until you get those permits versus continuing to operate it.
Speaker Change: Yes.
Speaker Change: I mean, we're always the value, adding investments and if it makes sense to put it on care and maintenance and pick up the ball on another day, we'll certainly consider that.
Speaker Change: But right now we've been encouraged by some of the discussions we've had with the Yukon government and.
Speaker Change: Then if we expect to see continued delaying permitting we'll reevaluate our position.
Speaker Change: Okay. Thanks, I'll turn it over but I have to say yes.
Speaker Change: I have been encouraged by some of the discussions with that.
Speaker Change: And the Reengagement with the head with the Yukon government not just the premium, but the mining minister Yukon power them. They all understand that we cannot be waiting indefinitely for payments.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks, Joe Your next question comes from the line of Kevin.
Speaker Change: O'halloran.
Kevin O'halloran: With BMO capital markets. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Hey, Rob and team thanks for taking my questions maybe.
Speaker Change: Maybe just picking up at keno kind of similar to the last one but on the on the permits whats right now your expected timing of receiving those permits and then.
Speaker Change: Maybe once you do have those permits what is the timing to get those infrastructure items bill like the water treatment in the backfill facilities.
Speaker Change: Let me just start out by talking about the payments and then I'll defer to Carlos about infrastructure, so I'm going to back up a bit here Kevin.
Speaker Change: We've made progress on the permitting but the challenges do remain.
Speaker Change: We met with a premier and his team in January and the Yukon government has acknowledged the need to keep the permitting on track and have responsible companies like hecla.
Speaker Change: He understands that we've been in business for 134 years and he understands that we've got a fantastic our environmental record over at Greens Creek and that we have the social license to be serious produces in the Yukon.
Speaker Change: And so.
Speaker Change: That commitments are being demonstrated through several key initiatives and so he is undertaking that will develop a charter with the major mines Department.
Speaker Change: There'll be an allocation of resources to address those infrastructure needs are.
Speaker Change: And really he instructed these departments, who have a more collaborative approach to finding some operational solutions and really try and create efficiencies in the permitting process for establish arthritis. Now obviously things had caused last year because of the heat bleach failure.
Speaker Change: At the at the Eagle.
Speaker Change: <unk>, which we obviously got an and so while we're encouraged by this positive momentum in the partnership with the Yukon government, we're going to continue to engage with the first nations and permitting still remains a significant risk in getting to that 600 tonnes per day that I spoke about.
Speaker Change: And you know, which is the critical threshold to getting to profitable production, but with the premier is a demonstrated support and he's encouraging words and the actions that he will be about to take even though we believe that we should be making some steady progress towards their goals.
Speaker Change: Yeah.
Speaker Change: So relating with projects, we are prioritizing the execution of projects in the next two years, which is which align probe and sustained a phase one which is the 440 tons per day.
Speaker Change: After that of course, we're going to reevaluate.
Speaker Change: Which should probably is going to take another two years to build up to that 600 tonnes per day Mark.
Speaker Change: Okay. Thanks, I appreciate the color there.
And maybe just on the cost that Kino can you give us a sense of the proportion of fixed costs like the.
Speaker Change: The cost of you reported this quarter what percentage roughly speaking do consider fixed versus variable.
Speaker Change: To give a specific percentage of that would be a challenging thing, but they are primarily fixed because if you think about the site itself, whether it being a remote operation you've got.
Speaker Change: You've got a charter you got a camp.
Speaker Change: People rotating in and out and those sorts of things and as a result, you will see higher fixed costs because of them.
Speaker Change: And as Rob had mentioned you know the way for us to overcome those will be higher throughput.
Yes.
Speaker Change: Okay that makes sense and then final one for me on the on the Lucky Friday Capex.
Speaker Change: About how much of that is being allocated to the cooling project is that all the growth capex.
Speaker Change: And then yes.
Speaker Change: Maybe as a follow on how much of that is the mine development.
Speaker Change: In terms of trying to get a sense of.
Speaker Change: What the normalized capital spend will be on future years.
Speaker Change: So the mine the mine development of the Lucky Friday is close to $20 million and a cool and surface coating system needs like $13 million for the next year.
Speaker Change: So once we once we complete these projects.
Speaker Change: In the next coming years is gonna be a reduction in the capital for the Lucky Friday.
Speaker Change: Okay sounds good thanks for taking my questions I'll pass it onto the next caller.
Speaker Change: Thank you Kevin. Your next question comes from the line of Heiko Ihle with H C. Wainwright. Please go ahead.
Speaker Change: Hey, Robin team, Thanks for taking my questions.
Speaker Change: Lucky Friday is seems to be running pretty well on all cylinders here, but I mean, ignoring the numbers for a second can you maybe provide a bit of color on what changes you expect to have a site in this quarter and beyond that could further improve efficiencies of production and maybe even quantify how much.
Speaker Change: Do you expect those into video Socs verse impact your production, we were essentially halfway through Q1 at this point.
Speaker Change: So heiko.
We're having a hard time hearing you understand but I think let.
Speaker Change: Let me restate. Your question you can tell me if I've got it right.
Speaker Change: Lucky Friday, Youre right Lucky Friday, it had a very good 2024 comes especially coming out of the fire we had.
Speaker Change: We've mentioned on the call here that.
Speaker Change: This is al.
Speaker Change: Highlight is a very good all of our groups. So we do expect Lucky Friday to continue to be successful.
Speaker Change: With future kind of a base and consistency and out into the future.
Speaker Change: I guess, where I'm a little bit I was struggling to pick up what your question was as it relates to.
Speaker Change: What do we expect kind.
Speaker Change: Kind of in the near term at Lucky Friday.
Speaker Change: Modify some of the efficiencies and production changes that we should expect to see in Q1, and maybe even beyond if you can.
Speaker Change: <unk>, what is being done and what has been getting done the last six weeks since the beginning of the year that may have not been impacted in the Q4 numbers.
Matt Blackman: Hi, This is Matt Blackman.
Speaker Change: That's really a challenging one as you know as we go deeper.
Speaker Change: Farther and farther away from our primary access it's going to be harder and harder to find efficiencies and improve cost that's not to say they won't be there, but I don't think you're going to see quantum level changes. This is going to be continuous improvement slow steady, let's make sure. It was.
Speaker Change: We see improvements from every change and also remember Lucky Friday hit record production. This last year, it's going to be trying to beat your own record every year it gets harder and harder.
Speaker Change: Fair enough.
Speaker Change: In your press release, it states that the cost the cost or the second half are going to be a little bit lower but maybe just a bit of color of where you expect to see is on a quarterly basis and by them and by that I mean, you know sort of what should the analyst community model Q1, I guess what we.
Speaker Change: Halfway through the quarter effectively tomorrow, and maybe even Q2 versus the remainder of the year.
Speaker Change: Numeric terms and quantifiable firms.
Speaker Change: Yeah, I think of all the I'll start and Carlos can jump in and supplement where necessary.
Speaker Change: They are clearly Casa berardi right now is both an underground operation and a surface operation rank.
Speaker Change: So.
Speaker Change: Mid mid year, what we expect is for that underground to come.
Speaker Change: Come to a completion because at that point, what we expect is that the surface mine.
Speaker Change: Mind will be able to fill the mill.
Speaker Change: And when that happens we will remove the cost from the underground.
Speaker Change: Yeah.
Speaker Change: And then the third from the surface perspective, the stripping ratio, where we're expecting that for that to come down as well so as such we should see less.
Speaker Change: Expenses from the surface, what I would say is that we don't give quarterly guidance and we don't do that.
Speaker Change: Intentionally because as we do move through 2025, just like through 2024 things things change and we'll manage those as they come.
Speaker Change: And so as a result, I would say from a quantification standpoint, yes, we were.
Speaker Change: Wouldn't be able to give you any quarterly numbers necessarily just that we would.
Speaker Change: <unk> for the costs to come down in the second half of the year as we see that underground come off and as we see the the surface.
Speaker Change: Expenses also be reduced as we see the strip ratio and the waste haulage come off and frankly.
Speaker Change: Activities will be focused on that on the floor where.
Speaker Change: In mind.
Speaker Change: Is there anything you'd like that but yeah, that's exactly right. The two conditions is the need.
Speaker Change: We need to meet in the second half of the year.
Speaker Change: The most significant is the albeit it is going to be capable to fit along the mail and Maximo Tropic.
Speaker Change: I'll try the question a touch differently than.
Speaker Change: If one goes to an open pit only operation how long how many quarters of impact do you think it has for the cost savings to be fully reflected in the numbers.
Speaker Change: So I would say.
Speaker Change: We see the underground come off if we see the underground come often in the middle of the year there will be some carry on expenses where we're.
Speaker Change: Determining how to go forward with the underground.
Speaker Change: It would be continuing.
Continuing to keep it open for exploration et cetera. Those decisions will continue to me so I would say you'll probably see.
Speaker Change: Fourth quarter that should be better than a third if you look at it from that perspective, because there will likely be a few carry on costs as it relates to the transition.
Speaker Change: In the third quarter.
Speaker Change: Yep, you got exactly where I was going with us. Thank you very much.
Speaker Change: Thank you.
Moderator: Your next question comes from the line of John Tumazos with John Tumazos Independent Research. Please go ahead.
John Tumazos: Hey, Rob.
Rob: Good to see you on board John.
John Tumazos: Thank you.
Speaker Change: As you're aware the state of Montana pass the special purpose of law.
Speaker Change: Related to your predecessor trying to toys.
Speaker Change: Progression of Martin Lore, and Rock Creek.
Speaker Change: Have you had a chance to meet with the Montana.
Speaker Change: And.
Speaker Change: What's the outlook for expediting those two projects ive been admiring them my entire adult life.
Speaker Change: Well good question and you're right to admire them.
Speaker Change: Always immediately to the phenomenal mineral endowment.
Speaker Change: $300 million.
Speaker Change: <unk>.
Speaker Change: Pounds silver.
Speaker Change: On a 3 billion pounds of copper at <unk>, 7%. So the size of the prize is really got my attention for sure in terms of the updates we're basically going through permitting.
Speaker Change: Our strategy at the moment, so the forestry services dropped.
Speaker Change: For the Libya exploration project, that's in the final week of public comment.
Speaker Change: It's been about 1500 comments received.
And really the next steps there is going to be 30 days for the forest service to respond to the comments then theres going to be a decision on the final issuance and if it's approved then a fancy will be issued and that'll be followed by a 45 day injection period, and a 30 day objection response period and.
Depending on the nature of any objections received by the Forestry service. The updated plan of operations for the project it could be approved in Q3.
Speaker Change:
Speaker Change: Oh, I haven't met with them personally, but obviously, we've had our team meeting with with the regulators.
Speaker Change: Frequently so we're in that we're in that comment.
John Tumazos: Comment period at the moment John.
Speaker Change: Concerning Casa Berardi.
John Tumazos: There's a great deal.
John Tumazos: Exploration activity as you know on the east West trend, maybe extending from Cochrane and due to our mine in Ontario.
John Tumazos: The way toward.
John Tumazos: And walbridge other companies' maple gold mines.
John Tumazos: The straws different projects.
John Tumazos: Do you think in our lifetimes, there my opinion major east West.
John Tumazos: Highway from Cochrane.
John Tumazos: Through the trend or north South highway.
John Tumazos: To improve access.
John Tumazos: Which would.
John Tumazos: Lower the cost of operation of SaaS severity.
John Tumazos: Is it worth.
John Tumazos: Maybe idling the mind or wait for better times, when the neighbors catch up and it becomes a more thriving mining district.
John Tumazos: It's an interesting concept and if we continue to.
So whole Casa berardi.
Speaker Change: We would certainly welcome the outcome, but I don't really know John I don't know where the.
Speaker Change: Whether there'll be an infrastructure investment and who would do it and what the timing would be but certainly like the way you're thinking about it.
Speaker Change: If I could ask one more and I'm not trying to take a swipe at.
Speaker Change: The planning a year or two ago.
Speaker Change: But the.
Speaker Change: The camp.
Speaker Change: Fixed costs.
Speaker Change: <unk>.
Speaker Change: In the Yukon were well known before the watsco buyout and the Wheaton precious metals biology.
Speaker Change: The stream.
Speaker Change: Are the cash costs in the mining cost twice as much as expected.
Also the silver price is better.
Speaker Change: Obviously like $10 an hour so it surprises me that we need 600 tons a day.
Speaker Change: And.
Speaker Change: 400 tons they can't.
Speaker Change: Do the job.
Speaker Change: Sure John.
Speaker Change: I'll jump in and.
Speaker Change: Carlos can supplement as well.
Speaker Change: As we looked at the projects, we knew that there would be a high fixed cost.
Speaker Change: Ravi had made the comment to the ramp up as has been.
Speaker Change: More challenging than we expected the infrastructure investment that we and we've made and continue to make frankly theres been some things that we are.
Speaker Change: We are doing that we didn't realize that we needed to do so I think from a cost perspective that is one of the things that we are.
Speaker Change: Should have dialed in a bit better.
Speaker Change: So the $10 an ounce good surprise on the silver prices.
Speaker Change: Well keep in mind.
Speaker Change: We're still currently in that ramp up phase right. So we're still currently.
Speaker Change: <unk> our infrastructure.
Speaker Change: Putting those types of things and.
Speaker Change: Certainly the.
Speaker Change: The increase in the silver price it's helpful right.
Speaker Change: But right now we're not even at 400 tonnes a day, we have to get things in place for us to get there.
Speaker Change: Okay.
Speaker Change: Your next.
Speaker Change: Comes from the line of Mike Parkin with National Bank. Please go ahead.
Mike Parkin: Thanks, guys for taking my questions.
Speaker Change: Kind of touched on it with.
Speaker Change: The Rock Creek.
Speaker Change: In terms of the huge mineral endowment Rob.
Speaker Change: Rob are you thinking.
Speaker Change: You want to get your feet a.
Speaker Change: A little bit more wet on the exploration potential of the.
Speaker Change: The American portfolio of exploration projects.
Speaker Change: Before you kind of review.
Speaker Change: Any potential sale there it seems you've got a plethora of projects.
Speaker Change: Potentially phenomenal market, we'd be selling into.
Speaker Change: Just your initial thoughts as you are.
Speaker Change: A few months into the new role.
Speaker Change: Yeah. Thanks for the question Mike.
Speaker Change: We're definitely not going to be throwing the baby out with the bathwater here.
Speaker Change: Intend spending some time down in Nevada in the spring and summer when the rocks are exposed in and stuff all of that.
Speaker Change: And so I'm excited about some of the opportunities.
Speaker Change: Our exploration budget for this year it is going to be <unk>.
Speaker Change: Trained.
Speaker Change: And let me just explain that a little bit.
Speaker Change: With basically intentionally maintained their exploration spending below what I think of the industry averages for companies of our size.
Speaker Change: And this is really a deliberate strategy and it's not a limitation you know we've got a pretty robust pipeline of quality targets across our portfolio. Many of them are in Nevada as you pointed out <unk>.
Speaker Change: We're taking a fairly measured approach to exploration investment and it really comes down to strategic capital allocation. So.
Speaker Change: You are aware the out months <unk> got a really substantial existing mine lots and that gives us the flexibility to time that exploration programs.
Speaker Change: Given our current funded.
Speaker Change: It is I guess with prioritize the capital for other critical investments like at Keno Hill at this doesn't diminish the quality of exploration targets I think that's.
Speaker Change: The key point is that our exploration drilling levels.
Speaker Change: They reflect careful capital allocation rather than any constraints on the opportunities and so as I said, we've got numerous potential targets and we will systematically evaluate them as our capital priorities evolve, but it's really a simple matter of optimizing our resource deployment in the current environment and I think that when we start generating more free cash flow I think theres going to be.
Speaker Change: A compelling argument for increasing our exploration investments and really advancing our best projects through stage gates and key decision points. So I'm quite excited about some of the projects in our portfolio.
Speaker Change: Others that we've already identified that we probably wont be keeping.
But really the game as you know is to constantly upgrade the portfolio.
Speaker Change: And not just have it covered fulfillment projects.
Speaker Change: Alright.
Speaker Change: And then just recently, we've seen BC announced like a fast track permitting process are you getting any.
Speaker Change: Kind of indications that Quebec might adopt kind of something similar through their government.
Speaker Change: It could possibly be a tailwind for cats.
Speaker Change: With respect to the timeline there in the future.
Speaker Change: Dan.
Speaker Change: I don't know the answer to that question Mike.
Speaker Change: We are actually in the processing process of hiring a VP sustainability and that person has extensive permitting experience and so we'll have a better answer for you fairly soon.
Speaker Change: Great.
Speaker Change: That's it for me guys. Thanks very much.
Speaker Change: Thanks, Mike.
Rob: I will now turn the call back to Rob for closing remarks.
Rob: Well, thanks, everyone for joining us on this call and we look forward to keeping you updated with our story as it evolves next quarter, Thanks and have a good day.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you and have a great day.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.