Hecla Mining Co

NYSE:HL

Earnings Call Analysis

Enhanced Financial Performance and Production Outlook

In a display of strong financial health, the company has generated impressive free cash flow, underpinning investments in capital, exploration, and shareholder dividends. The flagship Greens Creek mine produced 2.3 million ounces of silver this quarter, expecting to reach 10 million ounces annually. Despite higher cash and all-in sustaining costs due to lower gold production and prices, the capital spend remains on target. Gold production at another mine reached 24,000 ounces, lowering cash cost guidance due to operational efficiencies. A fire at Lucky Friday suspends the operation, with a January restart expected, at a recovery cost of $10 million. Keno Hill's development promises a strong future, bolstered by potential high-grade resource growth.

Leadership and Operational Excellence

The company announced the retirement of Lauren Roberts at the end of the year and the introduction of Carlos Aguiar as Vice President of Operations. Aguiar's 27 years with the company signals both stability and a commitment to operational excellence, with every operation under his direction showing significant improvement. Such changes in leadership are important as they can herald a new chapter of growth and improvement in the company's operations.

Financial Performance and Growth Prospects

In recent years, revenue grew by 27%, silver reserves by 79%, and silver production by 37%. The goal is to double silver production by 2025, potentially reaching up to 20 million ounces, marking a period of aggressive growth. Acknowledging the extraordinary free cash flow generation of $767 million from operating mines over five years highlights their robust operating margins and points towards a bullish future for investors.

Production Challenges and Safety Considerations

Keno Hill's production has been slowed due to delays in commissioning key plants, but the grade of the ore has exceeded expectations. However, safety concerns at Keno Hill, with a higher all-injury frequency rate, have taken center stage, necessitating a methodological review of processes to enhance safety, standardize activities, and ensure a strong 2024 production outlook.

Strong Silver Production Guidance

With a solid balance sheet and a strategic focus on maintaining liquidity and leverage ratio, even amidst temporary setbacks like suspension of production at Lucky Friday, the company expects the leverage ratio to normalize below 2x once Lucky Friday resumes production and Keno Hill matures. On the strength of its silver mines, the company boasts nearly $600 million of free cash flow since 2020, with Greens Creek contributing significantly to this success and a heightened silver production guidance to up to 10 million ounces for the year, albeit with increased cash cost guidance due to lower expected byproduct credits from zinc.

Transition and Cost Guidance at Casa Berardi

As Casa Berardi transitions to a fully open pit operation by mid-2024, the mine produced 24,000 ounces of gold in the recent quarter and is on track to meet production and sustaining cost guidance. An upgrade to the gravity circuit, expected to improve mill recovery, and the commissioning of new open pit equipment will help lower cash cost guidance to $1,600 to $1,800 per ounce.

Planned Recovery of Lucky Friday

Lucky Friday’s production is suspended due to a fire, with plans to establish a secondary egress and ventilation bypass. The reopening of the mine is expected in January of the next year, with an estimated restart cost of about $10 million. The mine’s safety has been recognized with a national award, indicating good governance despite the setback.

Developing Safety and Production at Keno Hill

Enhanced production at Keno Hill hinges on improving the safety culture, given recent incidents and a safety review that could lead to changes in procedures. Almost 900,000 ounces were produced in the past year, and a strong emphasis from senior management on embedding the right safety and operational practices could set the stage for substantial production in 2024.

Exploration Successes and Silver Demand

Exploration has yielded high-grade results with an estimated net smelter return (NSR) value in excess of $700 per ton. The company’s leadership underlined the increasing demand for silver tied to solar energy expansion, suggesting that the inevitability of higher silver prices will benefit the company as mine production alone is unlikely to meet the dramatic increase in demand predicted over the next seven years.

Addressing Inflation and Supply Concerns

From the company's perspective, inflationary pressures have reduced, and while some capital and operating costs may still experience inflation, it is not as pronounced as before. The company reports no significant challenges in acquiring necessary equipment and materials, indicating operational resilience in light of global supply chain pressures.

Earnings Call Transcript 2023-Q3

[Operator]

Thank you for standing by, and welcome to the Q3 2023 Hecla Mining Company Earnings Conference Call. I would now like to welcome Anvita Patel, VP, Investor Relations and Treasurer, to begin the call. Anvita Patil over to you.

[Anvita Patil, executive]

Good morning, Andy, and thank you all for joining us for Hecla's Third Quarter 2023 Financial and Operations Results Conference Call. I'm Anvita Patil, Hecla's Vice President of Investor Relations and Treasurer. Our financial results news release that was issued yesterday, along with today's presentation, are available on Hecla's website. On today's call, we have Phil Baker, Hecla's President and Chief Executive Officer; Lauren Roberts, Hecla's Senior Vice President and Chief Operating Officer; Russell Lawlar, Hecla's Senior Vice President and Chief Financial Officer; and Carlos Aguiar, Hecla's Vice President of Operations. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on Slide 2 in our earnings release and in our 10-K and 10-Q filings with the SEC. These and other risks could cause results to differ from those projected in the forward-looking statements. Non-GAAP measures cited in this call and related slides are reconciled in the slides of the news release. I want to remind you, if you would like to have a call with the management, you can do so by using the link under the section virtual investor event in our earnings release that was issued yesterday. With that, I'll pass the call to Phil.

[Phillips S. Baker, executive]

Thanks, Anvita. Good morning, everyone. Thanks for joining the call. Before I get to the slides, I want to just remind you that Lauren is going to be retiring at the end of the year, and I just want to thank Lauren for his tenure at Hecla. During his time, there's been a lot of accomplishments that he has -- the company has done and that he has led, but what really stands out to me is that when he arrived at Hecla, we were still at the Lucky Friday focused on cutting the rock using a mechanical mining. But we began the steps that led to the new mining method at the Lucky Friday. And without his support knowledge leadership, I doubt the UCB would have been developed, we wouldn't have a patent for a new mining method. So thanks, Lauren, for all that you've done. I'd also like to introduce Carlos Aguiar, he's our Vice President of Operations; and Carlos is from Mexico, and he became a U.S. citizen 2 years ago and has been with the company a total of 27 years. 17 of those years has been working for us in Latin America in both Mexico and Venezuela. He has 9 years of experience as a GM for us at both San Sebastian and Lucky Friday mines. And he also knows Casa Berardi. He really started the mill modifications. And I've known Carlos now for about 20 years. I first met him on a tour of the mill in Venezuela, and his leadership abilities and commitment to operational excellence has really been reflected in the consistent improving results that he's achieved everywhere that he's worked. Every operation has seen significant improvement with him at the helm. So you're going to enjoy getting to know him. And with that interaction, I'll start with Slide 3. I want to take a moment to just step back and discuss our performance from a longer-term perspective. We typically do this. It's the way we look at the business is on a long-term basis. And over the past 5 years, you've seen our revenues grow 27%, silver reserves, 79%, silver production, 37%. And as we work toward producing up to 20 million ounces by 2025, it means that we will close to double our silver production since 2018. And maybe more impressively is that next number, the $767 million of free cash flow that our 3 operating mines have generated. And this, of course, has resulted in the strong share performance. And it's the quality of our assets. These are assets that have long reserve lives, high grades, low cost, consistent performance and significant exploration potential, which allows you to have this performance over time. And I'll suggest to you that Greens Creek checks all 5 of those boxes, long reserve life, high-grade, low-cost, consistent performance and significant exploration potential. Lucky Friday at this point, checks 4 of the 5 Casa Keno Hill checks 3 of them, but all the mines check the long lives. So we are focusing on setting up the mines for the long term, pushing for continuous improvement and allowing innovation to fundamentally improve them. So they all end up I'm convinced all of them will end up checking all 5 of the boxes. So with that context, for the quarter, let me move to Slide 4. And I'll start with the Lucky Friday, which will not have production until early 2024 as we block off the lower part of the 2 shaft and build a new secondary escape way and ventilation bras. And this 3-month project is going well. At the same time, we are still advancing other projects and completing our equipment purchases. We actually have 10 pieces of equipment on surface that are ready to go underground. And we expect to ramp back up to full production in Q1 and Cesky Friday continue in 2024, the production growth and the free cash flow that we saw before the fire. Now at Keno Hill, production has been slowed due to the delay in the Shotcrete Plant commissioning just yesterday in the Cement Rockville plant scheduled to be completed later this month. Their completion puts us in a position to advance development and production faster. And the grade of the ore has even been better than what our block model had predicted. However, we're concerned with the safety culture at Keno Hill, our all injury frequency rate at Keno is around 4, which is not acceptable. If you look at Greens Creek and Lucky Fred, they're both less than 1. In the last 2 months and more recently in the last 2 weeks, we've had some near misses that didn't result in an injury or damage to equipment that they could have. And that's not acceptable to us. As a result, I've tasked Carlos and his team to methodically review all our process and procedures to get safety right because we know that excellent safety not only prevents injury but also standardizes activities, which increases predictability and production. And so the safety review of Keno will likely be to changes in our processes scheduled equipment the way we mine and to make the mine safer when we'll reengineer certain processes. With the mine just starting up and with its expected long mine life, we must get off on the right foot on safety. So we're going to take whatever time is needed to do that. Greens Creek had another consistent and strong operational quarter, and we are increasing silver production guidance at the mine. Greens Creek has already generated over $100 million of free cash flow for the year. Now Casa Berardi had a very good quarter, progressing on the transition that we're making for becoming only an open pit mine, reporting cash costs and all-in sustaining costs that are well within guidance and building infrastructure that sets the mine up for success in the next decade. Earlier this year, we saw the need to make the fundamental changes, which we began implementing just this past quarter, and we're already seeing the benefits of that. As a company, silver production guidance is only slightly lower. Midpoint of guidance is just 400,000 ounces less silver. Silver costs are unchanged. Gold has unchanged other than a little lower cash cost. And finally, the safety performance at our mines with the exception of Keno Hill has been one of the best in the industry with an all-in all injury frequency rate consistently lower than the U.S. national average. So with that, I'll pass the call on to Russ.

[Russell Lawlar, executive]

Thanks, Phil. I'll start on Slide 6. As we think about the year so far, we would Lucky Friday down for most of the third quarter, silver accounted for 38% of revenues with silver operations generating more than $120 million of free cash flow. With strong gold production of 39,000 ounces, gold accounted for 36% of revenues and base metals contributed 25%. We are on a path of more than half of our revenues coming from silver. A strong balance sheet and financial flexibility have always been key priorities with the goal of maintaining a leverage ratio of less than 2x and maintaining significant liquidity. In the third quarter, we saw our leverage ratio increased to 2.2x due to the Lucky Friday suspension of production and our continued investment at Keno Hill. Although we expect our leverage ratio will remain elevated next quarter, we see this increase as temporary. Our liquidity is that equated $165 million. However, I expect our leverage ratio will be less than 2x, and our liquidity will grow substantially once the Lucky Friday is back into production and Keno Hill matures. Now I'll turn to Slide 7 to highlight some of the key attributes of our silver mines, especially now that we're going through a period of investment. Our silver mines have consistently provided strong margins. This is shown in the graph on the left, where over the past 4 years, this margin has been near or above 50% and has translated into consistent free cash flows. The chart on the right highlights just how strong this free cash flow generation is from our silver mines, where since 2020, Lucky Friday and Greens Creek have generated more than $800 million of cash flow from operations and even more impressive is the nearly $600 million of free cash flow. These strong margins and the resulting free cash flow generation allow us to invest both capital and exploration at these mines as well as in our broad exploration portfolio, in addition to returning capital to our shareholders in the form of dividends. And now I'll turn the call to Lauren.

[Lauren Roberts, executive]

Thanks, Russell. I'd like to just make a few comments on my time with Hecla. I began with Hecla a summer intern in 1988 and became a full-time employee in 1989. I spent a little under 8 years with Hecla could not have asked for a better start to my career. So when the opportunity to rejoin Hecla presented itself some 2 decades later, it was a very easy decision for me to return home. The chance to give something back was very important to me and it's been a really rewarding 4 years. So I'd just like to thank the Hecla family for that. With that, I'll start on Slide 9. Greens Creek, our flagship mine turned in another strong and consistent quarter, producing 2.3 million ounces of silver, in line with the prior quarter's 2.4 million ounces. The mine has already produced 7.5 million ounces in the first 3 quarters of the year and remains on track to achieve its throughput target of 2,600 tonnes per day by the end of the year. Cash costs and all-in sustaining costs per silver ounce were $3.04 and $8.18, respectively, and were higher than the second quarter because of lower gold production and lower gold prices. Capital spend for the quarter was $12 million higher than the previous quarter and as planned, due to equipment purchases and seasonal surface projects. The mine generated $28 million in free cash flow in the quarter and has already generated more than $100 million in free cash flow this year. We're increasing silver production guidance to 9.8 million to 10 million ounces for the year. Due to mine sequencing, zinc production is expected to be somewhat lower, increasing our cash cost and all-in sustaining cost per ounce guidance due to lower expected byproduct credits. Capital guidance is unchanged at $47 million to $50 million. Greens Creek truly is a premier silver mine, the 11th largest in the world, and I want to congratulate the team on delivering excellent and consistent results at this truly world-class asset. Turning to Slide 10. I'm excited to report that we've been executing well on our plan to transition Casa Berardi to a fully open pit operation by mid-2024. The mine produced approximately 24,000 ounces of gold at a cash cost of $1,475 and an all-in sustaining cost of $1,695. Mill throughput was lower than the previous quarter due to a planned upgraded gravity circuit. We're optimizing that circuit now and expect it to enhance overall plant recovery. The first phase of the in-house open pit fleet was commissioned this quarter, resulting in record tons moved. With the execution of our plans on track and good performance on cost control, we are lowering our cash cost guidance to $1,600 to $1,800 per ounce. The mine remains on track to achieve its production and all-in sustaining cost guidance. Carlos was General Manager of Lucky Friday mine until just a few months ago when he was promoted to Vice President of Operations. The progress and consistency we've seen from Electric Friday over the past few years was largely a result of Carlos and his team. And as I will be retiring at the end of the quarter, I'll hand him the reins to discuss the remainder of the operations.

[Carlos Aguiar, executive]

Thanks, Lauren, and good morning, everyone. I will start on Slide 11. However, before we discuss the progress made at Lucky Friday, I want to congratulate our team on Lucky Friday for receiving the 2023 Mine Safety and Health Technology Metal Section Innovation Award for the UCB mining method. In addition, we also received a U.S. pattern in the third quarter. In others, we report a file of the Lucky Friday in the #2 shop, which is also the secondary egress. The fire was distinguished in September. However, the operations of the mine are suspended for the remaining of the year until the second egress is established. Our mitigation plans include driving around vertical scale way and a tenace to bypass the damage portion of the shaft. The ramp in a larger way race will serve as a secondary rest with vein rates that are in a bypass for grant. To explain our mitigation plans in more detail, I will turn to Slide 12. I will start with the graphic on the left. First, I want to highlight that the Lucky Friday has that started the service. The silver shaft, which in the left graphic is the left of the 2 shafts and the #2 shaft. Silver shop is our main production shop. It is a circular concrete line shop, it moves people, equipment, materials and is critical for our operations of Lucky Friday. This is the shaft where the service lays was installed earlier this year and is unaffected by the 5. To the right of the silver shaft, [ etographic ] is the #2 shaft with a fire occur about highway down. This shaft provides ventilation an emergency and alternative way to lead the mine. Between the 2 shafts is the new 850 foot [indiscernible] we are driving for ventilation show in future. The graphic on the right shows the plan in future to reestablish the secondary egress. The plants comprise an extension of 1,600-foot rid of ramp. And from this ramp, we win installed a 290-foot vertical scale rate, basically a latter with landing. Once complete, infrastructure will lower the mine to resume production. Is gateway is the critical path to production and is on schedule with 35% of the ramp and 10% of the rates completed. The ventilation raise war has just begun. These mitigation plans are expected to cost about $10 million, and we expect the mine to restart production in January of next year. We have properties and business interruption insurance with an underground sub limit up to $50 million. I will now move to Slide 13. As Phil mentioned earlier, the set performance Keno Hill has not been to Hecla standards. So I am on my way with my team to assess what needs to be done to get safely where it needs to be. With the mine just starting, this is a critical time to establish the culture we won at Keno Hill easier now than later. [indiscernible] produced almost 900,000 ounces a year, 700,000 in the third quarter. I expect in the fourth quarter, we will produce between 800,000 and 1 million ounces. We have the Shotcrete Plant Commission office and a dry at the porter, expanded camp facilities, 8,000 feet of development, tenor headings and the modified secondary crusher. We are in a good position for a strong 24 if we can get the safety right. Slide 14 shows 2 of our critical projects, the secondary crusher on the left and the chocolate plan of the ride. With that, I will pass the call back to Phil.

[Phillips S. Baker, executive]

Thanks, Carlos. So on Slide 15, just a little bit on the exploration and Keno. With the tons we mine, we've been really pleased with Keno’s grade at 33 ounces per ton. The rock has an NSR value in excess of $700. And our exploration team is finding more in a number of deposits, but we'll just talk about Birmingham. So let me orient you on this slide, that Birmingham has a number of zones, Bayer, Arctic, Northeast, dip, and we're going to be mining here for a long time. The images that you see are only of the bear and the image on the left is the bear vein and on the right is the footwall vein. And there's a third vein that is not shown called the main vein. I've got to think about names of veins is a little bit confusing. So you got the bear zone with the bear vein, the footwall vein and the main bank. So looking at the image on the left, to the Northeast outside the current design stopes, we are identifying another mineralized shoot in the ready clips. Creek appears high enough to have the potential to add to our resources. The best hole is about 163 ounces over 7 feet. So if you look at the right image, and this is the footwall vein, this is within the currently planned stopes. And we have 36 feet and 36-ounce and 17 feet to 56. And we don't yet have the results on the main vein drilling. The point is there is the likelihood to continue to grow high-grade resources at Keno. We could not be more excited about the exploration results that we're having and the potential that we have in the future. So Slide 16 summarizes our production cost guidance for the year, and we are reiterating our consolidated cost guidance for silver, but lowering the silver production guidance slightly, as I previously mentioned, gold cash costs are a little lower. Capital is unchanged. Also on this slide, you can see the ramp-up costs for Keno and Lucky Friday's suspension costs for the year. Exploration is unchanged. And as we look ahead to 2025, we think we're still on track to produce up to 20 million ounces. So if you go to Slide 17 and before I open the call for questions, I want to end our prepared remarks focusing on the expected increase in solar energy last year, globally, 269 gigawatts of solar was installed and the International Energy Agency estimates that in 7 years, the world is going to install about twice as many solar panels this year, about 500 gigawatts. And that's not an unreasonable estimate. It's a 9% growth rate, and that actually compares to a 12% growth rate that we've had over the last 10 years. Now it takes 0.5 million ounces of silver for every gigawatt installed. So last year, that was 140 million ounces or 12% of the total demand for silver in 2030, with 498 gigawatts solar, we're going to use 100 million ounces more or almost 250 million ounces, which would be 21% of the demand if overall demand doesn't grow. And that's not likely there's other uses for silver that will see increased demand. Now to put the 100 million ounces of demand in context, the production for every year of 2 more -- is 2 more of the largest mines in the world that produce silver. They're actually not silver mines. It's not a silver mine, but it produces about 50 million ounces or it's 10 Greens Creek, which is the 11th largest silver mines Clearly, the additional demand for silver that we have over the next 7 years is not going to be met by more mine production. Even if there's discoveries of silver, you're not going to be able to get a permit or constructed in that 7-year time frame. So that's going to come from the -- to meet that demand, it's got to come from aboveground supply, which is going to require substantially higher prices to be mobilized. Finally, I'm going to be the chairman of [indiscernible] the next 2.5 years. And as a result of that, I was invited to speak at the LBMA conference 3 weeks ago. And what I was struck by from that conference is that very well respected, knowledgeable market participants are thinking about silver in the same way they have for the past 4 years, primarily as torque gold. And I would just encourage you to think about silver differently because the demand for silver is so tied to changing our energy sources. It's not going to behave as it has in the past. So while gold goes up, I'm sure silver will. And while copper goes up, I'm sure silver will. But if solar demand is, as I have outlined, then a higher silver price regardless of what gold and copper do is inevitable. And with that, what I'd like to do is, Anvita, you said you got a question from one of the analysts that's traveling. And why don't you tell me what that question is.

[Anvita Patil, executive]

That's right, Phil. So we have a question from Mike Barkley of National Bank is in Canada, so we'll send along this question. The question is, what are management's thoughts on potential time line to get Keno Hill operating the Hecla standards of practice?

[Phillips S. Baker, executive]

Well, I think the -- I'll make some comments, then I'll turn it to Lauren and Carlos. But I think fundamentally, we will never reach our standard of practice. It's a continuous improvement effort and so it will take some time. But to get to -- you'll never get there, basically. But we're going to send -- Carlos and his team is going to go there and they're just going to make sure that we are -- have all the processes in place, all the procedures. We're going to make sure that there's an understanding at the site of the importance of safety and to follow the practices and procedures. That's that really is the starting point. And then it's how do you engineer out risks. Fortunately, with the infrastructure that we're putting in, we're in a very good place to see that happen. But with that, I'll turn it over to the 2 of you. Lauren, anything to add?

[Lauren Roberts, executive]

Sure. I'll start, and then I'll pass it to Carlos. I think the way to think about Keno in the past year, we've been very focused on the initial mine development and building out the infrastructure. And that phase is essentially coming to a close now. And as Phil suggests, there was an evolution of our process even within that phase of the work. And now we need to turn our focus to our operational practices and delivering against our operational commitments. And to that end, Carlos and a group of people from our corporate tech services team are heading up there this week to begin that process. Carlos, can you fill in the details?

[Carlos Aguiar, executive]

Yes, we are getting close, and we are making progress that sets our priority, and we are making sure that we have the right people at the right time, in the right place with all the materials and equipment in place. So it's going to take some time. We still don't know. We're going to -- we are expecting to complete the initial assessment before the end of the year. And then after that, we are going to execute the plan. I guess what I will suggest to you is we will have substantial production from Keno in 2024. We will give you exactly what we think we'll have when we give the guidance for 2024 early in the new year. So any other questions Anvita before we take it from the operator. Operator, you can open the call for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Heiko Ihle with HC Wainwright.

[Heiko Ihle, analyst]

I'll also join Phil and thanking Lauren for all he's done for the firm. I didn't realize you were at the firm since you were a summer intern.

[Lauren Roberts, executive]

Yes, it started a long time ago, Heiko.

[Heiko Ihle, analyst]

Well. Just a little bit on the e-mail in question. But I mean there's been some infrastructure delays at Keno Hill. We're not concerned about it, especially since it seems like drilling site continues to go quite well. But can you provide some color on what exactly you're seeing? And then also the time lines and anticipated costs to remediate the issues that you're still being faced with?

[Phillips S. Baker, executive]

Look, I think the short answer is it's a variety of things. It's not just one thing. And so that goes to the culture that's developing at the site. And we're just in the -- if you think about it, we've only been operating for about 5 months and so as a result, and you have people that are coming from all over Canada, from different mines, they've had different set of expectations, different set of practices, they will describe the same thing and use different words describing the same thing. And so it becomes a communication issue. So it is not -- there's not a sort of -- one thing that we need to do, it is really about the culture. Do you guys add to that?

[Carlos Aguiar, executive]

Yes, I agree, Phil. Keno is rather unique in the sense that it's effectively a melting pot of the Canadian mining districts from East to West. So there's really no critical mass of miners or supervision from any one area. And as a consequence, we need to build the culture from scratch the way we, as Hecla want the culture to be and that's going to take us a little bit of time, but the production will come along with that evolution in the culture. And as the culture comes together, the production will improve. So it's a normal process actually at the beginning of a mine, a bit unique at Keno given the diversity of people there.

[Lauren Roberts, executive]

But it's behaviors and its behaviors from the miners and their supervisors and throughout the organization, and it's changing the attitude so that the behaviors change.

[Heiko Ihle, analyst]

Completely different one. You maintained your capital guidance. Can you provide some color on what you're seeing in regards to inflation for expenses as in where are we compared to what you were expecting? And just in general, what you're seeing in regards to cost inflation, which line items are better, which may be a little bit worse than you had expected. And on that same token, any bottlenecks for availability of anything?

[Phillips S. Baker, executive]

I will turn it over to Lauren and Russell and Carlos. I mean from my perspective, the inflationary pressure is reduced. There's no doubt that there's probably some items within the capital and the operating costs that are feeling inflationary pressure, but it's not like what we had previously.

[Russell Lawlar, executive]

For sure. It's just inflation tends to be a sticky thing, Heiko, so it comes quickly and it abates slowly. But we're not seeing the big increases that we did. I would say things are relatively flat. Fuel is starting to moderate. So we're not seeing any big changes now. I would guess in terms of supply; we are able to get the equipment we need and the materials that we need. Some items are longer lead than they were pre-COVID. Things like transformers are very slow, very long lead. But even those items are beginning to shorten in terms of lead time. Probably the most challenging aspect is skilled trades, and I think everybody in the industry is facing that same challenge. And it's a bit of a generational thing. We are seeing the older guys starting to retire and fewer folks coming in. So we're hiring relatively inexperienced people and training. We've seen this for probably a couple of decades back, but we're experiencing that.

[Operator]

Our next question comes from the line of Michael Siperco with RBC Capital Markets.

[Michael Siperco, analyst]

Maybe shifting gears to Lucky Friday. So you've outlined the 3 key items that -- or it sounds like the 3 key items that you need to complete to bring the mine back into production. Based on the commentary, though, it looks like maybe you're about 15% done on the work that you need to do across those 3 items. Is that fair? Or how should we look at the timing and effort required to get that rehab work done?

[Phillips S. Baker, executive]

The short answer is what we will be done very early in January unless we have some major surprise. Carlos?

[Carlos Aguiar, executive]

As today, we have between 35% and 40% of the project completed. And then as you said, we are expecting to restart the mining starting in early 2024.

[Russell Lawlar, executive]

And in fact, Carlos and I were underground yesterday looking at the progress, and we are slightly ahead of schedule in some areas. So we were pleased with what we saw.

[Michael Siperco, analyst]

So has the bypass been -- the rate has been started yet? Just based on the commentary, it's not exactly.

[Russell Lawlar, executive]

Both rigs have started and the ramp is what percent it 35% complete. So yes, both going.

[Lauren Roberts, executive]

[indiscernible] contractor, Michael, it's a contractor that has come on, that was mobilized on the better part of a month ago and mobilized on the escapeway first, and it's more recently been mobilized on the ventilation. We realize the ventilation raise doesn't have to be done to go back into production. The critical path is the escape way. We have enough ventilation. Without the ventilation rate for a period of time.

[Michael Siperco, analyst]

That was going to be my follow-up question on that. So the escapeway is the critical path, and you're comfortable with, say, -- I suppose we have 2 months or so to get that done and to get Lucky back into production by, say, February? Is that a fair way to look at it?

[Phillips S. Baker, executive]

January. [indiscernible] February, we've something unexpected has happened.

[Michael Siperco, analyst]

And then just on the insurance, can you share if or when you think you'll have visibility into what will be covered? Do you anticipate that entire $25 million you outlined in terms of costs at Lucky being covered plus business continuity? Is that the right way to look at it?

[Phillips S. Baker, executive]

Well, what we'll say is it will certainly be no more than $50 million. And like any time you have a claim with an insurance company, there's a process and we're in that process. And what the outcome is going to be, I'm not able to predict, but we're very confident that we will get a large portion of costs and business interruption up to $50 million. Russell, anything to add?

[Russell Lawlar, executive]

It's a work in progress, obviously, as we work through getting the Lucky Friday back in, we're engaged with the insurance company, and we're just working through the process at the moment. As more infill comes to lighters as that becomes clear, then we can tell the market.

[Michael Siperco, analyst]

Should we be thinking about this as a 6-month process? Or would this be something that would be wrapped up in line with when Lucky comes back into production?

[Phillips S. Baker, executive]

It depends on who you ask within Hecla as to the answer to that question.

[Russell Lawlar, executive]

Look, I think, Michael, just to be safe, think more in terms of 6 months than immediately, but I think they should pay us immediately. I would agree with that. I think that from a conservativity standpoint should push it out into the future a little bit, but that could change at any time as we're working through the process.

[Operator]

Our next question comes from the line of Lucas Pipes with B. Riley Securities.

[Lucas Pipes, analyst]

Lauren, I would like to add my congratulations. I wanted to start my questions with -- Phil, what you mentioned on the silver solar side. What would be a substitute for silver in a PV solar panel?

[Phillips S. Baker, executive]

Ultimately, it would be copper is the substitute for it. The problem is the processes for building the solar is -- you got to use silver given those processes. And then secondly, the performance and the durability of the solar panels is substantially less with copper. Is there a price in which the industry would change? Yes, I'm sure there is. But at the same time, you're seeing copper prices increase and the availability of copper. So it's certainly nothing that anyone is projecting to occur in the next decade. The other thing to mention is that there are new processes on the new plants that are being built, they're all being built with processes that require even more silver. And they require that because it's not only cheaper to build, but it's also has greater efficiency and realize these solar panels are somewhere around 25% to 30% efficiency using silver. And so with these new processes, it gets to the upper end of that.

[Lucas Pipes, analyst]

From your vantage point as a silver supplier, does it make any difference to you whether these solar panels are built in Asia or near shore to the U.S., for example?

[Phillips S. Baker, executive]

Practically speaking, it doesn't matter from just thinking about supply chain, it would be great to see it build in U.S. or countries friendly to the U.S. friendly or maybe is a better way of saying that without the potential disruption in sales coming from China because China does, I don't know, 80%, 90% of all the silver panels.

[Lucas Pipes, analyst]

Lucas PipesWould you have conversations about offtake agreements or supply agreements with potential customers?

[Phillips S. Baker, executive]

Yes. Remember what we produce is a concentrate that goes to the smelters. And unfortunately, there are no smelters that can -- whether or not very many smelters in the U.S., and there's none that can really process our material. In Canada, there's a few smelters that can process it. But frankly, we have to ship the material really to Korea and Japan to get it processed. And so we're a step away from that ultimate customer. It goes into the smelter. We don't receive the metal back where we pay a fee treatment charge for processing that material.

[Lucas Pipes, analyst]

To go back to Keno, can you remind us what exactly caused the slowdown in the infrastructure development?

[Phillips S. Baker, executive]

I think the cause of the slowdown is in part where we're located in Yukon, getting people and materials there. That's probably been the biggest challenge that we've had, you got to get things aligned where you got the camp space expanded. And so you now have the room to bring the people in to do the work. Lauren, [indiscernible].

[Lauren Roberts, executive]

Well, we bring the contractors and almost 25% of our total workforce at the same time. So that causes us some delays on the execution of the projects. But the good news, Lucas, is we're essentially done with those infrastructure projects. There's some cleanup that we'll be doing during the course of November on some of the projects. The rock fill will plant will be completed at the end of this month. We're done with the crusher with the exception of some electrical work that will happen during the course of November. So all of that is behind us. And when we look at capital for next year, it's substantially less than what we have. And while we're not done with the budget, and we're not prepared to give guidance as to what capital will be, it is a lot less.

[Lucas Pipes, analyst]

And when would you expect to demobilize some of the contractors and [indiscernible].

[Lauren Roberts, executive]

Some of it is happening as we speak, but primarily in December.

[Operator]

Our next question comes from the line of Steven Green with TD Securities.

[Stheven Green, analyst]

Just a quick one on Greens Creek. You upped the guidance a bit this year. You also beat guidance a bit last year. It appears to be grade driven. Can you confirm that? And is this positive rate reconciliation you're getting or just in some progress stocks?

[Phillips S. Baker, executive]

It is great driven, and it is slightly higher realized it didn't take much additional grade to have a pretty material impact. Gold, in particular, has been the grade reconciliation has been higher, and that's something that we have had to deal with for the life of the mine. It's a fairly negaty gold distribution. And of course, we've had lower grade base metals. And so as a result of that, we've had lower -- it's an odd thing. You produce more gold, produce more silver but because you have lead and zinc per ounce and gold per ounce, you end up having higher cost per ounce. But because you got more ounces for it to be applied again. But yes, it is a slightly positive grade reconciliation. Anything to add, Lauren?

[Lauren Roberts, executive]

No, that's accurate.

[Stheven Green, analyst]

And we're a couple of months away from 2024 now. And I think your previous long-term guidance suggested a slightly lower grades, silver gains at least in 2024. How is that looking now? And is this recent outperformance, do you expect that to lead into next year as well?

[Phillips S. Baker, executive]

Yes. Look, I think generally speaking, you will see over the course of the next decade, slightly decreased grades at Greens Creek. And it's just a function of trying to maximize the NPV of the asset. So yes, expect lower grades. Part of the way we're trying to offset that is increased throughput. And so that's why you've seen us move to try to get to this 2,600 tonnes a day. To put that in context, when we took over operatorship of Green Creek when we purchased the portion we did now in 2008, the throughput was roughly 20, 100, maybe a little less tonnes per day. So we're now at 2,600, and we've gone from maybe 1/4 of the tons being long hole to very, very little of it. It is a huge accomplishment within the mine. And then in the mill, it's much more than anyone ever thought that, that mill would be able to do. So it's been quite an accomplishment that these guys have done at Greens Creek. They're always looking for a way to improve the operation. And so I wouldn't be surprised if they don't find ways for improvement. But generally speaking, we should see somewhat lower production as the grade declines. Just remember, on recoveries, recoveries have gone up dramatically. I'm trying to remember the numbers, but it's 5%, 6% --

[Lauren Roberts, executive]

It's a lot. And even the move from 2,300 to 2,600 tonnes a day, we saw no meaningful degradation in recovery.

[Phillips S. Baker, executive]

And so just don't get too enthusiastic over what these guys can do. Let's start with what the grade and the numbers would suggest. But this is a great team that works up at Greens Creek.

[Operator]

[Operator Instructions]. I would now like to turn the call over to Phil Baker for closing remarks.

[Phillips S. Baker, executive]

Well, thanks for the questions. We really enjoy the engagement that we have with you. And so I'll remind you that we have the opportunity, if anybody wants to have a one-on-one call with one of us, we have time set up to do that. So please take advantage of that. I also want to just thank the teams, the people that Hecla has, that it's really made Hecla a unique silver producer. And again, I want to thank Lauren for his service to us. And with that, have a great day.

[Operator]

I would like to thank our speakers for today's presentation, and thank you all for joining us. This now concludes today's call, and you may now disconnect.