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Analyst: U.S. Miner's 'Nevada Guidance Lowered, Longer-Term Outlook Unclear'
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The company's cost cutting efforts are addressed in a CIBC report.

In a June 6 research note, CIBC analyst Cosmos Chiu reported that Hecla Mining Co. (HL:NYSE) lowered 2019 guidance for its Nevada assets "but offered few insights into a longer-term solution for the operations."

The new Nevada numbers for the year are 60,000 ounces (60 Koz) of gold production at an all-in sustaining cost (AISC) of $1,750 per ounce (1,750/oz), down from 78 Koz.

Chiu noted the revised numbers are better than CIBC's expectation of 38 Koz ounces at an AISC of about $2,000/oz but they may be unachievable given that the company only produced 10 Koz in Q1/19 and is expected to yield about the same amount in Q2/19. Consequently, CIBC now models the Nevada operations bringing in 52 Koz total in 2019 at an AISC of about $1,850/oz.

With respect to its Nevada operations, Chiu pointed out, Hecla plans to close Hollister and limit new development at Fire Creek to help reduce the companywide capital expense by $12 million to $138 million. "Mining in 2019 will focus on predeveloped ore at Fire Creek's Spiral 2 and remnant stopes at Midas," he added.

Also regarding cost cutting but at the corporate level, Chiu indicated, Hecla expects to lower its 2019 exploration budget by $9 million and general and administrative expenses budget by $4 million.

Looking forward, "a potential impairment of the Nevada operations will be assessed at the end of Q2/19, but Hecla does not expect it to be significant," Chiu wrote.

CIBC has an Underperformer rating and $1.25 per share target price on Hecla and will maintain those until the miner "can demonstrate a longer-term plan to reduce debt and improve the outlook in Nevada."


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Disclosures from CIBC, Hecla Mining Company, Earnings Update, June 6, 2019

Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Analysts employed outside the U.S. are not registered as research analysts with FINRA. These analysts may not be associated persons of CIBC World Markets Corp. and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Hecla Mining Company (HL)
• Hecla Mining Company is a client for which a CIBC World Markets company has performed investment banking services in the past 12 months.
• CIBC World Markets Inc. has received compensation for investment banking services from Hecla Mining Company in the past 12 months.
• CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Hecla Mining Company in the next 3 months.

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