HECLA MINING CO/DE/ (HL) Q2 2026 Earnings Call Transcript

Hello, everyone. Thank you for joining us, and welcome to the Q2 2026 Hecla Mining Company Earnings Conference Call. I will now hand the conference over to Mike Parkin, Vice President of Strategy and Investor Relations. Mike, please go ahead.

Thanks, Hilary. Good morning, and thank you all for joining us for Hecla's second quarter 2026 results conference call. I'm Mike Parkin, Vice President of Strategy and Investor Relations. Our earnings release that was issued yesterday along with today's presentation are available on our website. On the call with us today is Rob Krcmarov, President and Chief Executive Officer; Russell Lawlar, Senior Vice President and Chief Financial Officer; Carlos Aguiar, Senior Vice President and Chief Operations Officer; Brian Erickson, Vice President of Operations; Kurt Allen, Vice President of Exploration, along with other members of our management team. At the conclusion of our prepared remarks, we will be available to answer any questions you might have. Turning to Slide 2. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on this slide in our earnings release and in our 10-Q filing with the SEC. These and other risks could cause results to differ from those projected in the forward-looking statements. Non-GAAP measures cited in this call and related slides are reconciled in the slides or news release. Please note, as we discuss the financial figures and projections throughout this presentation and in the earnings release, we are referring to our continuing operations. I will now pass the call over to Rob.

Thank you, Mike, and good morning, everyone. Turning to Slide 3. Hecla ended the second quarter of 2026 from a position of real strength. And I'm speaking to the financial strength, a position today that marks the strongest balance sheet in the company's very long history. And the attributes shown on this slide that define us as North America's premier silver producers, they haven't changed. What has changed, though, is that we have confidence with which we can now invest in what comes next. So I'm eager to have our teams discuss some remarkable developments that are coming out of our substantial project pipeline, which further solidifies our market positioning. More on that in a minute. Turning to Slide 4. This was another very strong quarter for Hecla, even though a couple of headline numbers moved in a different direction than last quarter. I want to spend a moment walking through why because I think the underlying story here is a good one. Revenue from continuing operations was $334 million compared to the record $411 million we reported in the first quarter. Two things are driving that change, and it's worth being clear about both because neither of them is a production problem. First, metal prices pulled back from the highs we saw early in the year, although I do remain confident in the outlook for silver and gold prices. And second, part of the gap was simply timing. A meaningful amount of silver concentrate, mostly at Greens Creek, was produced but not yet sold as of quarter end. Had that concentrate shipped within the quarter, revenue would have been noticeably higher on top of an already strong quarter. That inventory shipped in early August, and you're going to see it show up in our third quarter results. Those of you who have followed us for some time know the lumpy sales pattern at Greens Creek. The adjusted EBITDA from continuing operations was $199 million, more than double the $94 million we generated a year ago. Operating cash flow was $175 million and free cash flow was $136 million. Our second best quarter on record and very close to the record $144 million we posted last quarter. Every single one of our mines generated free cash flow again this quarter, with Greens Creek and Lucky Friday each setting new site level quarterly free cash flow records at $130 million and $88 million, respectively. Our balance sheet is simply the best it's been in our long history. We ended the quarter with $483 million in cash, no long-term debt outside of capital leases and an essentially fully undrawn $225 million revolving credit facility with a $75 million accordion. The balance sheet this strong gives us real optionality, the flexibility to keep investing in the projects and the assets that make the most sense for this business on our own timeline rather than being dictated to by our balance sheet. On the operating side, we produced 4.2 million ounces of silver, up 8% from the prior quarter. Lucky Friday delivered a new quarterly production record of 1.5 million ounces of silver. And I'm especially pleased with our safety performance. Our consolidated total recordable injury frequency rate, or TRIFR for short, improved to 1.57, and that's a meaningful improvement from the 2.07 reported for the first quarter. That's the kind of improvement that reflects real deliberate commitment by our teams. And frankly, it matters more to me than any financial metric on this slide. We also conducted our annual Safety Day in early June with senior leadership visiting every site to reinforce safe working practices. Turning to Slide 5. Our medium-term pathway to a 20-plus million ounce silver producer is advancing, and it's anchored by the Keno Hill ramp-up and a potential Midas restart with further potential upside from Keno Hill expansion and from Aurora and Hollister in later years. And nearer term, we've got two organic opportunities at Greens Creek that I'm really excited to give you more detail on today. Both are the kind of high return, low capital intensity projects that we look for. Our bar for any of these organic investments is a return on invested capital that clears our cost of capital by a healthy margin and early work on both suggests that they can. I'll turn it over to Brian now to walk you through those. Brian, over to you.

Thanks, Rob. Good morning, everyone. Turning to Slide 6. I'll start with the Greens Creek pyrite concentrate circuit. It's a project we're going to share considerably more detail about today. To summarize, we're advancing engineering and metallurgical studies on a new processing circuit at the Greens Creek mill. But if the studies pan out, we would produce a marketable pyrite concentrate stream from mill tailings that currently goes to the dry stack tailings facility. It's still pretty early stage work, but I want to be clear about our conviction. The relative simplicity of the project, combined with the potential returns we're seeing at this stage of the study give us confidence that this moves towards execution, not an evaluation for its own sake. Once fully ramped up, we expect the new circuit could add approximately 1 million to 1.2 million ounces of silver and 10,000 to 15,000 ounces of gold in additional annual production. This is on top of Greens Creek's existing output while also reducing the volume we're adding to the tailings facility. Early engineering and metallurgical work points to the potential robust return on capital that would meet our investment thresholds. It's expected to be a low capital intensity project with CapEx currently estimated at about $40 million to $60 million anticipated mostly for mill components, storage building, sizing upgrades and some ship loader work to support the additional tonnage. Additional operating costs throughout the new circuit are also expected to be relatively low in terms of the overall increase to our annual spend and are currently estimated at an incremental $10 million to $15 million per annum. When you put all this together, you can see the potential for impressive NPV upside at current metals prices. Currently, we're targeting first production between the fourth quarter of 2027 and the first half of 2028 with a ramp-up period of roughly a year. We'll continue to firm up the economics as engineering advances, and we'll keep you updated. I want to stress these numbers are subject to change as we advance through more engineering studies but we're very excited about the potential for this project in terms of production, but more importantly, in potential future cash flows. Second, I'll discuss the Greens Creek tailings reprocessing project. This remains one of the more compelling opportunities in the portfolio. The dry stack tailings facility contains a significant inventory of metals, including over 600,000 ounces of gold in situ. At June 30, 2026, at current metals prices, this represents an in situ value of roughly $6.1 billion. I must emphasize that we need to ensure that potential recovery and processing capital costs are supportive of moving forward. We're working with a vendor who specializes in new technology and are set to commence Phase 3 metallurgical test work this month, which we expect to complete in the quarter. That work together with confirming a suitable processing facility is expected to determine how we move forward. As with the pyrite concentrate project, there is potential to reduce Greens Creek reclamation liability, which would be a potentially meaningful added benefit to the potential cash flows it could generate. If this project proves viable, we would expect it to be an additional low-capital-intensity project that dovetails well with the pyrite concentrate project. Finally, the Midas restart project in Nevada also continues to advance. We're continuing to evaluate the hub and spoke model that would bring ore from Midas and potentially Hollister or other regional sources through the existing permitted mill. We're also evaluating remaining mineralization in the old mine under the existing mill as a potential additional resource. Kurt will touch on the latest Midas exploration results in a few minutes. I'll now turn the call over to Carlos for an operations review.

Thank you, Brian. Turning to Slide 8. Greens Creek produced 2.1 million ounces of silver and over 14,000 ounces of gold in the second quarter, in line with our expectations. Cost applicable to sales were $50 million, with cash costs of negative $17.11 per ounce, and AISC of negative $10.71 per ounce, both after byproduct credits. Exceptional results this quarter driven by very strong byproduct revenue. Cash flow from operations was $139 million, and free cash flow was a new site level record of $130 million. As Rob mentioned, a portion of the concentrate produced this quarter hadn't yet been sold at the end of the last quarter, which is what drove the gap between our strong production and the revenue we recognized. That inventory was shipped in early August and will be reflected in the third quarter financials. For the full year, we now expect Greens Creek to produce 8 million to 8.3 million ounces of silver, an improvement over prior guidance, and 51,000 to 55,000 ounces of gold, with cost applicable to sales of $240 million, cash costs of negative $12.50 to negative $12 per ounce and AISC of negative $4.25 to negative $3.75 per ounce, both after byproduct credits, an improvement to prior guidance. Turning to Slide 9. Lucky Friday had an outstanding quarter, producing a record 1.5 million ounces of silver on higher mill grade. Cost applicable to sales were $35 million with cash costs of $3.95 per ounce and AISC of $17.8 per ounce, both after byproduct credits. Cash flow from operations was $104 million, and free cash flow was a new site level record of $88 million. The Surface Cooling project is on track for completion by September. For the full year, we have tightened our silver production guidance to 4.9 million to 5.2 million ounces with cost applicable to sales of $140 million. Cash costs are now expected to be lower at $9 to $9.75 per ounce, and AISC expected to be modestly higher at $20.50 to $26 per ounce reflecting higher planned sustaining capital investment. Turning to Slide 10. At Keno Hill, we produced 625,000 ounces of silver in the second quarter, up from 0.5 million ounces in the first quarter. Cash flow from operations was $18 million and free cash flow was nearly $15 million, the fifth consecutive quarter of positive free cash flow at Keno. We are taking a deliberate approach at Keno Hill. Rather than push for tonnage growth ahead of the site development and permitting work that needs to happen first, we are running the mine at a sustained lower rate while we focus our efforts there and continue to generate positive free cash flow, work that we believe supports a ramp to meaningfully higher tonnage rate in later years. Our updated full year guidance is 2.2 million to 2.6 million ounces of silver reflecting our focus on permitting and site build-out in the nearer term. I do want to highlight some good news on the permitting front. We received the permit to expand our tailings storage facility at Keno Hill this quarter. That approval reflects the strong working relationships we have built with both the Yukon government and our First Nation partners the NND. And it's an important piece of the foundation supporting our longer-term plans for the site. I now turn the call over to Russell for the finance update.

Thank you, Carlos. Turning to Slide 12, let me...

Sorry, Russell, if I could just — Russell, if I could just jump in. I'm aware that Brian dropped out. He's been dialing in from Yukon. So I just want to repeat a part that might be important that was missed. At the time, Brian was talking about the 51 million ounces of silver and the 600,000 ounces of gold and the many other metals that are locked in. I just want to point out that we are working with a vendor who specializes in this technology. They are set to commence Phase 3 metallurgical test work this month, which we expect to complete in the quarter. That work together with confirming a suitable processing facility is expected to determine how we move forward. So I just wanted to complete the record on that because I'm aware that it was lost in transmission. So over to you, Russell. Thanks.

Thanks, Rob. I'm going to start on Slide 12. As Mike noted, everything I'll cover here reflects the results from our continuing operations. Mine revenue during the quarter was $323 million, with silver accounting for 68% of that total while gold was 14% and the remaining from our base metal byproducts. Net income from continuing operations was $118 million or $0.18 per share and adjusted EBITDA was $199 million. Our margins remain exceptional. We realized 90% of the realized silver price as margin during the quarter. Consolidated free cash flow was $136 million, nearly matching last quarter's record of $144 million with all three mines contributing. Turning to the balance sheet, we ended the quarter with $483 million in cash, no long-term debt outstanding outside of capital leases and essentially a fully undrawn credit facility. We've moved from a net debt position of nearly $270 million a year ago to a net cash position of roughly $472 million today, the strongest balance sheet in Hecla's history. Turning to Slide 13, we've all watched oil prices and fuel prices climb on the back of current world events, and I want to spend a moment on why this is far less impactful for Hecla than it is for much of our peer group. The starting point is the nature of our ore bodies. Our mines are high-grade underground mines. Because of the grades, we process far fewer tonnes to produce each ounce. We don't run large diesel haul truck fleets that define low-grade open pit operations so our diesel consumption per ounce is structurally low. That is the primary reason fuel is only about 3% of our consolidated cost structure this quarter. It's a function of these operations. The second piece is where our electricity comes from. Power is our largest energy input and we source it from local utilities primarily from renewable hydro power. Hydro power isn't priced off crude oil or natural gas, so when fuel markets spike on geopolitical shocks, the cost of the energy our mines and mills use doesn't move with them. Put those two things together — high-grade ore that keeps our fuel intensity low and a power base anchored in hydro that is decoupled from volatile fuel markets — and you get a cost structure that is far more predictable and far more insulated from energy price swings than most of our peers can claim. In an environment of rising and uncertain fuel prices, that translates directly into more resilient margins and it carries the added benefit of a lower carbon footprint for the metals we produce. As we turn to Slide 14, you'll see this slide has been updated for our Q2 results and outlook changes and projects our 2026 after-tax free cash flow across a range of metal prices. At $50 silver and $3,500 gold, we project about $500 million of consolidated free cash flow for the full year, with these prices below current spot prices. At elevated prices of $75 silver and $4,500 gold above current prices, we see the potential to generate nearly $700 million in free cash flow. At the top end of the range, we're showing today $100 per ounce silver and $5,500 gold. We see the potential to generate nearly $800 million of annual free cash flow. That's obviously a bullish scenario, but it shows the kind of operating leverage our platform has across a wide range of prices. This shows how our business has the ability to produce substantial cash flow across a wide range of price environments. I'll now pass the call to Kurt to go through exploration.

Thank you, Russell. Turning to Slide 16. Our 2026 exploration and predevelopment budget of $55 million remains at an all-time record for the company, representing about 4.5% of projected revenue. We've structured that across three priority areas: $24 million at our near mine programs, which carry the lowest risk and highest return in our targeting — adding one to two years' worth of resources for conversion to reserves; $16 million in Nevada across Midas, Aurora and Hollister, targeting a resource of 0.5 million to 1.5 million ounces of gold equivalent aimed at forming the basis for a potential Midas restart; and $10 million in early stage and generative exploration. I'm pleased to share some exciting results from our recent exploration release, which came out last week on the 29th of July and is available on our website. Turning to Slide 17. At Keno Hill, we've extended a high-grade silver trend to 800 feet of strike length, and it remains open in both directions. The extension brings us closer to the historic Hector Calumet mine which produced over 96 million ounces of silver during its operating life. You can see the old working on the right side of this image. Recent exploration highlights include 10.2 feet at 62.7 ounce per ton silver, or nearly 2 kilograms per metric ton; 10.1 feet at 44.6 ounce per ton silver; and 8 feet at 22.4 ounce per ton silver. These exceptional results support our long-term vision for Keno Hill as an asset with the potential for generational mining. We are following up on these results and are planning to have a further update later this year. Turning to Slide 18. In Nevada, our drilling around the Pogo-Sinter gap at Midas has identified two new Midas-style high-grade gold-silver veins and the system remains open. This adds to the picture Brian described earlier around the broader Midas hub-and-spoke opportunity. The new veins discovered are very similar in style to what was mined very successfully previously at Midas. Beyond these results, I want to flag two additional exploration programs that are ramping up this quarter. Drilling at Hollister has been underway for several weeks. And at Aurora, my favorite project, we're on track to begin drilling in mid-August. Aurora is a past producer of extremely high-grade mineralization with historic results grading above 2-ounce per ton gold, which is equivalent to more than 60 grams per tonne. Like Midas, it has a permitted mill at the site. There would be investment needed to make this a viable operating site again, but we'll focus on that depending on what the drill bit tells us before we get there. This could prove to be a major value-surfacing opportunity for the company, and I really look forward to the results from the initial holes, which we could have this fall. So stay tuned. I'll now turn the call back to Rob for closing remarks.

Thank you, Kurt. So turning to Slide 19. Let me leave you with a few thoughts before we open the line for questions. This was a quarter of continued strong financial results, building on a track record that has helped us delever and move into a position of real financial strength, the kind that lets us keep investing in our robust project pipeline for years to come and surface value for our shareholders. The underlying business has never been stronger. We're making disciplined investments in our asset base to set it up for continued success. Our safety performance improved meaningfully this quarter. And as I said at the top of the call, our balance sheet is without question the strongest it's been in this company's history. We believe in a robust precious metals market, and we think silver has a very bright future. At today's prices, we're already generating substantial free cash flow. And as Russell just said at the top end of the price scenarios we showed you today, this platform can generate nearly $800 million in annual free cash flow. So that's the kind of operating leverage we have now, and we're working hard to capture it for our shareholders. I really do hope that you share the enthusiasm that we have through our project pipeline and the excitement it's bringing. We believe Hecla remains the most compelling way to gain exposure to silver in this sector, and we look forward to continuing to execute and to keeping you updated throughout the year. I will now ask the operator to open the line for questions.

The first question comes from Heiko Ihle of H.C. Wainwright.

Congratulations on a good quarter. Obviously, metal prices have gone down a little bit. I assume there is some sort of bonus structure for staff by asset related to metal pricing. I just want to see, is there any way for us to extrapolate this into a cost per ounce or cost per tonne by a dollar change in the underlying silver price? Or how do you guys model this out?

I'll hand that one over to Russell.

Yes. No problem, Heiko. I would say the most direct tie to silver price is the profit share at Lucky Friday. If you go back late last year, you'll see as we guided, we had our prices in lower prices because the guidance obviously came out lower in the year; as prices went up, you saw our costs escalate. This year, we intentionally built higher prices when we came into January and February because we were at high silver prices. And so we intentionally built high prices into that profit share. As the year has come down, we have seen that cost abate. And so in the guidance that we've issued now, we've used robust prices, but not, say, the $90 silver that we used at the beginning of the year. I'm trying to figure out a way to convey directly how much that would be per ounce. Frankly, I would have to get back to you on that. I don't have a direct number for you right now. But I think it's generally isolated to Lucky Friday, and you can see it as you look at the cost performance of Lucky Friday over the past year or so.

I think if you guys come up with some sort of — I don't want to say formula, but almost like a formula for the analyst community, I think that might be quite helpful. Completely — question. Yes, of course, longer-term capital investment, any color on what we should model for longer-term capital? And maybe you can't really answer that question, but I'll try it differently. If you can, are there any large-scale investments at any of the other assets coming on in 2027 and 2028 that may not be obvious for us?

I can continue...

Thanks for the question.

Go ahead, Rob.

Okay. In terms of CapEx, we don't really have any huge expansions going on in the near future. What we do have is the Nevada restart; we estimate that's going to be pretty low CapEx given that we already own the mill. The CapEx for the pyrite concentrate project is quite low, particularly in the context of the strong returns that it's expected to generate. The cooling project at Lucky Friday is almost finished. And so I would say nothing really major coming up. Anything to add, Russell?

The only thing I'll add is that we're building tailings at Greens Creek and Lucky Friday over the next couple of years. And then Keno Hill, there's tailings that we'll be building in the near term and then more intermediate term. Keno Hill will also continue to invest in the infrastructure to bring that mine production up.

Cool. Thank you both, and I'll get back in queue. And again, good quarter. I appreciate it.

Your next question comes from the line of Cosmos Chiu from CIBC.

Thanks, Rob and team. Congrats on hitting asset level record free cash flows at Greens Creek and Lucky Friday. But I guess my question is, I'm looking at the asset level. And as Russell mentioned, $130 million from Greens Creek, $88 million from Lucky Friday and additional $14-ish from Keno Hill. But I cannot seem to reconcile that down to your corporate level free cash flow of $136 million. So when compared to, say, Q1 last quarter, Greens Creek was actually lower, Lucky Friday was actually lower as well, but the corporate level was higher. So I guess if you can help me reconcile how I can come up with corporate level and then that will help me in terms of trying to figure out how to better utilize or best utilize the asset level free cash flow numbers.

I can jump in on that one, Rob. Yes, I was looking at this as well. So it's a good question, Cosmos. If you think about the way we think about our mine site free cash flow, we actually look at Page 3 of our earnings release, where we reconcile free cash flow to cash flow from operations. What we do for mine site is we actually add back the exploration expense that was incurred at that site because exploration expense is an expense that we allocate from a corporate perspective, and it's not really related to the core of the operation in the current period. So as you think about free cash flow at the corporate level in Q1 versus Q2, what you'll see is the exploration expense did go up Q1 over Q2, and that is included in our corporate consolidated free cash flow number. That's one. The other is just corporate expenses that are not included in those site-level cash outflows — essentially timing. It's working capital timing.

Okay. Maybe switching gears a little bit here in terms of Keno Hill. As you mentioned, Q2 production was about 600,000 silver ounces and as you mentioned in the MD&A, you're working through a lower grade zone. My question is, looking at your revised guidance for the year, 2.2 million to 2.6 million, the midpoint is about 2.4 million. That's about 600,000 ounces annualized times four. I'm just trying to figure it out. You're working through a lower grade portion in Q2. If you're getting out of it, I would have thought that guidance, at least the midpoint could be higher than what's annualized for Q2. That's number one. And number two, is the 600,000 ounces a sustainable level? I'm just trying to wrap my head around it.

We are projecting the third quarter being really similar to the second quarter. We are in the new zones, we are in development of the new zones at Keno Hill. The projection that we can report today is going to be really similar to the second quarter for the remainder of the year.

As Carlos said, look at the third quarter — it's looking very similar to the second quarter. The key point is that we expect to meet our revised guidance at the end of this year. What happens in between, we just don't have that level of detail disclosed yet.

No, I'm just trying to wrap my head around the sustainable rate, but I think you've answered my question in terms of the new guidance, Rob. And then I guess my other question on Keno Hill is with the lower guidance for the year, does that impact potential timing of commercial production or does it really matter?

So we've outlined our five criteria for commercial production. We've only met one, which is the silver recoveries. What we're focused on right now is getting the permits that we need and investing in the infrastructure and working our way through that. I would say that if we can receive those permits — the critical ones — by mid-2029 and we can execute on the key infrastructure projects over the next two or three years and the tailings expansion could be advanced far enough in 2029 to permit the mill to resume normal production levels, we expect to begin ramping up to higher production levels by the end of roughly 2029. This ramp-up has taken a little longer than initially thought, but we understand what permits we need. We're working to resolve the permits and complete those investments. We are buoyed by the exploration results that Kurt talked about; you saw the proximity to the 96 million ounces at Hector Calumet and high-grade extensions. This is a generational mine and we need to get it through this permitting and investment phase. It is free cash flow positive today and it has been for the last several quarters.

That's great to hear. Maybe one last question. Rob, sounds great in terms of the different growth projects that you have in the pipeline. I want to focus on the pyrite concentrate circuit. You've mentioned 1 million to 1.2 million ounces of silver per year and 10,000 to 15,000 ounces of gold per year. Is that before or after payability? And if it's before, what's the market like for your particular type of pyrite concentrate and is it fairly clean? If I want to model what this could mean in terms of value because you've given other parameters — $40 million to $60 million CapEx and operating numbers — I'm trying to figure out the production numbers.

The quality is very high. In fact, we've had extremely strong demand from multiple inquiries. I'll hand it over to Russell for more color.

Thanks, Rob. As we think about the pyrite concentrate, one thing I do want to point out is you should remember Brian's earlier comments — unfortunately his line was interrupted a little bit. We're still working on this project. We're very positive on it. We think it's going to be a very good project. But we're still working on some of the engineering and we're still nailing down some of the costs. So I don't want to put out a return on invested capital number now while we're still in those stages. What I would say is that we have a return on capital criterion, which we presented at our Investor Day earlier this year of 12% to 15% return on invested capital. This project, we would expect, would exceed that substantially. We expect roughly maybe 1 million ounces of silver a year from this project. That would increase our recoveries and reduce the amount that goes to the tails, which is also cost savings. The investment will be relatively modest from a capital perspective. And because we're already producing multiple concentrates at this mine, the operating costs for an additional circuit are not expected to increase substantially. So from a return on expected capital, we think it's going to be very robust. Does that work for you?

Yes. But going back to my first question, the 1 million to 1.2 million ounces that you outlined, that's before payability factors, right? So if I want to guesstimate some kind of model on my own, I would have to apply some payability factor to that 1 million to 1.2 million ounces?

I would say yes. Go ahead and apply payability because, again, at this early stage we're still working through those details.

Your next question comes from the line of Josh Wolfson from RBC Capital Markets.

Just looking at Lucky Friday and the great performance. I think the company had noted this was in the plan. I'm wondering what was the driver of these high grades? And I guess the commentary was that it was not expected to be sustained going forward. Can you elaborate?

I'll hand it over to Carlos in a minute. Basically, Josh, this was scheduled high grade. It's just a matter of timing. We went through a high-grade zone this quarter. We don't expect to maintain those high grades; it will probably revert back to the main trend.

Yes, it's correct. It was part of the timing. We were expecting to encounter a portion of that high grade at the end of the second quarter. We had the most significant portion of the high grade in the second quarter and that was the reason — it was planned. We are not expecting to see that kind of level for the remainder of the year, but definitely it was planned and it's a timing issue.

Okay. And then looking at the cooling project in September, is there anything we should be thinking about in terms of what that means for a tie-in, if that will impact productivity or throughput? And similarly, once the project is completed, how should we be thinking about the outlook for the mine?

This project was primarily designed to set up the long-term future as we get into deeper levels and to position the operation as we mine deeper. When you're working in a fairly hot mine, productivity is impacted by working conditions; improving cooling should help worker comfort and therefore productivity, although it's difficult to quantify precisely.

Got it. Great. Maybe last question. On Keno and looking at sustaining profitability, should we be expecting more stable grades and throughput levels similar to what was achieved in the first half? Or is there still going to be some degree of improvement ahead of the 2029 permitting milestone?

We are projecting a similar grade and throughput in the third quarter, with the potential for some benefit in the last quarter. The second half of the year is expected to be slightly better than the first half, primarily driven by improved grade.

Your next question comes from the line of Kevin O'Halloran from BMO Capital Markets.

Just digging into the guidance update, it was great to see the AISC guidance come down. Can you give us a sense of the drivers of that? Was it higher silver production from Greens Creek and Lucky Friday, larger byproduct contribution, better unit costs? And then any broader thoughts on any cost pressures that you're seeing?

Yes. From an AISC perspective, Greens Creek really shows the value of that ore. A few things: they had a great first half in terms of silver production; gold byproduct has been large; zinc prices have been very strong and Greens Creek has an important zinc byproduct. We tend to be conservative in the prices used for byproducts in our guidance, so we've outperformed on gold and zinc. Lucky Friday has seen better cost control generally and the profit share tied to silver has reduced as silver prices pulled back this year. Wrapping that up explains why the AISC guidance is better. I would highlight we do expect capital spend in the last half of the year to be higher than the first half because the third quarter tends to have better weather for construction and more equipment deliveries, so expect more capital spend in Q3 and Q4 versus Q1 and Q2.

Great. Maybe another one for you, Russell. Could you remind us of the tax losses that you have in the U.S. and Canada? How should we be thinking about the effective tax rate going forward?

Our operations in the United States and Canada benefit from relatively lower effective tax rates in those jurisdictions, particularly the United States. During the quarter, we did some tax structuring to combine our Nevada U.S. group with our main U.S. group that includes Lucky Friday and Greens Creek, which allows us to utilize expenses in Nevada against income generated in Greens Creek and Lucky Friday, and you can see a lower effective rate as a result. We expect to utilize our net operating losses on both a state and federal basis for the year, and therefore we expect less cash taxes paid relative to many peers. We did make a cash tax payment in the first quarter; I don't have the exact number in front of me on this call.

Okay. That's great. And then maybe shifting back to the pyrite circuit at Greens Creek. Are there any permitting requirements you would have to secure for that? Any space constraints on surface at the plant that you would have to work around? And as you're doing the technical and costing work, when should we expect to see some of those details announced? Should we expect any changes to resource or reserve with the higher recoveries from the circuit?

In terms of permitting, it is primarily an extension to the existing circuit, so we expect permitting to be minimal, possibly some minor permitting at the load-out bay. Carlos or others can add color on that.

For the pyrite project, minimal permitting is required and we are not expecting significant permitting delays. I don't see any major permitting issues for that project.

Regarding reserves, there is likely material that was previously categorized in resources that could convert to reserves once we have the means to process pyritic ore profitably, but I can't quantify that right now.

Your next question comes from the line of Dalton Baretto from Canaccord.

Rob, I've seen that the Trail smelter in BC is undergoing a large upgrade to process germanium and gallium. Has Greens Creek ever been assayed for germanium and gallium? Is that something you're looking at and is there a plan to monetize those if they exist?

I think there could well be some germanium or gallium in the tailings project. Brian, if you're still on the call, could you answer that please?

Yes, I can. We have looked at germanium and gallium as part of both ore production and the tailings reprocessing and pyrite concentrate work. The amounts are relatively minor, but it is certainly a conversation to have with smelters about potential recoveries and payability.

Great. A similar question on Lucky Friday: some neighbors in the Silver Valley are discussing antimony and downstream processing. Is that something you are looking at and could you participate in a central antimony plant?

Lucky Friday doesn't have significant antimony compared to our neighbors. We have looked at that, and we continue to monitor opportunities in the region. If there's a compelling value proposition for consolidation, we would consider it, but our focus remains on the potential within our own assets and infrastructure.

Great. Just a final one: with lots of single-asset companies in the Silver Valley moving toward production, is consolidation something Hecla would be interested in?

We're primarily excited by the inherent upside in our own assets, especially Lucky Friday. There hasn't been meaningful exploration there since about 2011, and we're kicking off more work. We monitor our neighbors and would consider a compelling transaction, but our priority is to develop what we already own.

Your next question comes from the line of Eric Winmill from Scotiabank.

A lot of mine have been answered, but just a quick question on Aurora. I know it's still early days, but there's a mill on site there? Do you think it makes the most sense to process on site if you find a resource, or would it be part of a hub-and-spoke system like Midas? And if you do it at Aurora, any cost to refurbish the mill there?

Aurora is too far by road to economically move ore to Midas on a routine basis. There is about a 600 tonne per day mill on site, but it's not in great condition and would require reinvestment or potentially a new mill; that remains to be determined. Let the drill bit do the talking. Kurt is excited about this project; there are legacy open pits and underground workings and some strong targets haven't been drilled yet. We look forward to the drill results.

One more, if you don't mind. On Midas and what you're seeing in the Sinter gap: is it very similar to what you saw in the main Midas mine, or are there important differences?

It's similar to the Midas mine. It's more broken up than what we see at Midas. Midas had very narrow, really high-grade veins within a six-, seven-, eight-foot wide zone. It's similar to that in that respect. The offset is very similar to the Sinter discovery we had in 2021.

Your next question comes from the line of Alexander Terentiew from National Bank.

A lot of good questions have been asked already, but a couple of follow-ups. First, on Midas: you have existing infrastructure you can quickly turn back on. Can you walk me through what to expect over the next one to two years? When could Midas become a formal project with a production decision and first gold?

I'll hand that one over to Matt.

Thanks, Rob. Alex, we're actively studying the project. Kurt is drilling and identifying the resource; once that is firmed up, we need to be ready to move quickly if the resource supports a restart. We've already started geotechnical assessments of the rock, hydrogeologic assessments for inflows and geochemistry, and some mine design and mill refurbishment planning. Those studies are ongoing, but we won't invest significantly until we have the resource defined that supports a restart. Timing will be very related to exploration success, but we are preparing now so that information is available if the drill results warrant rapid advancement.

Even if the resource proves sufficient to support a restart, best case this is two to three years to first production? Does that still make sense?

That's probably in the right range, but there are a lot of unknowns. Two to three years could be reasonable as a best-case assumption.

Any permitting constraints or additional color on permitting?

In terms of permitting, we're reviewing what permits we already have. In general, we have many of the permits in hand; some will require modifications or updates, but overall we're in a much better position than a greenfield site.

That makes sense. One more on Keno Hill. You mentioned mid-2029 as a target for some critical permits. Is some of this regulatory work more a time-series data collection process that takes time no matter what, or is there anything you can do to expedite it?

Permitting takes its course. It's up to us to provide the engineering and design criteria that inform the permits, and regulators take the time they need, including consultation with First Nations. We do know the sequence: ensuring sufficient water treatment capacity, sufficient tailings capacity and waste dump capacity. We understand what's needed, but timing is hard to pin down and not entirely in our hands. We're moving as fast as we can.

This concludes the time allocated for questions. If you have any additional questions, please reach out to Mike Parkin via the contact us link on the website. I will now turn the call back to Rob Krcmarov, President and CEO, for closing remarks.

Well, thank you all for the thoughtful questions today, and thanks for joining us this morning. I'll just leave you with this: we are in the strongest position this company has ever been, and we're putting that strength to work in the right places for our shareholders and for the long-term value of this business. We look forward to updating you again next quarter. Thanks, everyone, and have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.