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Edited Transcript of HL earnings conference call or presentation 7-Nov-19 3:00pm GMT

Q3 2019 Hecla Mining Co Earnings Call

COEUR D'ALENE Nov 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Hecla Mining Co earnings conference call or presentation Thursday, November 7, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Lauren Martin Roberts

Hecla Mining Company - Senior VP & COO

* Michael Westerlund

Hecla Mining Company - VP of IR

* Phillips S. Baker

Hecla Mining Company - President, CEO & Director

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Conference Call Participants

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* Adam Philip Graf

B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD

* Cosmos Chiu

CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst

* Dalton Baretto

Canaccord Genuity Corp., Research Division - Analyst

* Heiko Felix Ihle

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst

* Jacob G. Sekelsky

Roth Capital Partners, LLC, Research Division - Director & Research Analyst

* John Charles Tumazos

John Tumazos Very Independent Research, LLC - President and CEO

* Lindsay A. Hall

Hecla Mining Company - Senior VP, CFO & Treasurer

* Matthew Wyatt Fields

BofA Merrill Lynch, Research Division - Director

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the Hecla Mining Company Third Quarter Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Mike Westerlund, Vice President of Investor Relations.

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Michael Westerlund, Hecla Mining Company - VP of IR [2]

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Thank you, operator. Good morning, everybody. Thank you for joining us for Hecla's Third Quarter 2019 Financial and Operations Results Conference Call. Our financial results news release that was issued this morning before market open, along with today's presentation and the Casa Berardi East Mine exploration press release from Tuesday are available on our website.

On today's call, we have Phil Baker, President and CEO; Lindsay Hall, Senior Vice President and Chief Financial Officer; Lauren Roberts, Senior Vice President and Chief Operating Officer; Kurt Allen, Director of Exploration; Keith Blair, Chief Geologist; and Larry Radford, Chief Technical Officer.

Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and constitute forward-looking information under Canadian securities law, as shown on Slide 2 and 3. Such statements include projections and goals, which are likely to involve risks detailed in our Form 10-K, Form 10-Q and in the forward-looking disclaimer included in the earnings and exploration releases and at the beginning of this presentation. These risks could cause results to differ from those projected in the forward-looking statements. In addition, during this call, we may disclose non-GAAP financial measurements. You can find reconciliations of these measurements to their nearest GAAP measurements in the accompanying presentation, which is available on our website at www.hecla-mining.com.

Finally, in our filings with the SEC, we are only allowed to disclose mineral deposits that we can reasonably expect to economically and legally extract or produce. Investors are cautioned about our use of terms such as measured, indicated and inferred resources, which are not reserves and we urge you to consider the disclosures that we make in our SEC filings.

With that, I will pass the call to Phil Baker.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [3]

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Thanks, Mike, and good morning, everyone. As you can see on Slide 4, the third quarter was an eventful quarter for Hecla. We reversed the [outspend] generating $29 million of cash flow. So as a result of that, we were able to reduce our net revolver borrowing by $26 million.

We generated about $70 million of adjusted EBITDA. We reached an agreement with the union, a tentative agreement with the union at the Lucky Friday. We expanded Casa Berardi's East Mine's high-grade mineralization. And that mineralization could have material effect on future production, potentially as early as 2021. And we made great progress on San Sebastian's Hugh Zone and El Toro, where decisions on both could be made next year. So let me take a moment and tell you where things stand with the union. We're glad there is a tentative agreement between the union's negotiating committee and the company that can be put before the membership for a vote. While neither side got all that it wanted, we think this agreement is consistent with agreements at other North American mines, unionized or not, and puts the Lucky Friday on a path towards long-term success. We don't know when or even if this will be brought to a vote by the membership, but we hope it's soon. Lucky Friday being fully operational will be good for our workforce or shareholders in the Silver Valley community. It's just a good thing for everyone.

Now, this quarter came in largely as expected. We expected to generate this amount of cash flow and EBITDA due to our visibility of how these mines operate. With the exception of Nevada, we have operated these assets for 6 to 61 years. We know generally what to expect in most of the issues we must deal with. An example of an issue are shipments at Greens Creek. There is always a quarter or two every year where we have a timing issue. This quarter, we had a timing issue, because a customer declared force majeure, which delayed our ability to nominate a ship and then weather issues delayed it coming into our port at Greens Creek. And so, the concentrate didn't depart until October. In response to that, we sold the concentrates to a seller -- to a trader. We received the cash and we recognized deferred revenue. But it didn't show up as revenue, it was deferred. So, it will show up in the fourth quarter and Lindsay is going to talk more about this.

So what do we expect for the rest of the year? Well, our production and cost estimates haven't changed. And we still expect no revolver debt at the end of the year. We also expect sometime between now and the middle of next year to refinance the senior notes which have been trading just below par since our last earnings call. Significantly better than where they traded after our Q1 earnings. The improvement in the bond market for us and the bond market in general, combined with our stabilized financial performance and progress on alternatives to the bond market gives us confidence that we can refinance with a reasonable deal. So refi expectations are unchanged.

Now, as you can see on Slide 5, the share prices above where it was after the first quarter news release. And we believe this shows along, of course, with higher metals prices, that like the bond market, the equity market has recognized the turnaround that's underway. Our share price has risen over 80% since our June Nevada announcement was made. And we hope this continues, particularly if we continue to deliver on our plans.

And before I turn the call over to Lindsay, I'd like to thank Larry Radford for his service to Hecla. He advanced Greens Creek, Casa Berardi, San Sebastian, Lucky Friday, to all become mines with great futures. And, Larry, you've been helpful in the transition to Lauren. And so, we wish you well in retirement.

Now, I'll turn the call over to Lindsay.

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Lindsay A. Hall, Hecla Mining Company - Senior VP, CFO & Treasurer [4]

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Thanks, Phil, and good morning, everyone. We're happy with the quarterly performance for the assets and the resulting strengthening of the balance sheet. The $55 million of third quarter cash flow provided by operating activities was higher than the first and second quarters; and after deducting $26 million of quarterly cash expenditures for the quarter, resulted in us generating $29 million of free cash flows before financing transactions and $24 million after. This was accomplished in a number of ways. Firstly, we you may recall that we projected our second half would be stronger than the first, particularly for gold production. And in Q3, we have produced 16,500 more ounces than the second quarter of this year. This combined with higher metal prices added almost $30 million more revenue than this year's second quarter. The cost of sales is about $10 million less than Q2.

As Phil mentioned, in this quarter we sold two parcels of lead and zinc concentrate out of the Greens Creek mine and receive cash in the quarter, but will record the sale during the fourth quarter. The sales recognition was deferred as the ship carrying the concentrate arrived late into Greens Creek port due to weather, resulting in its departure a couple of days after September 30. Hence, the reason for -- on the balance sheet, you see a line item called deferred revenue of $20 million.

As you can see on Slide 8, silver margins are up over last year's Q3, 46%, because of higher prices and lower cost per ounce due to the byproducts. Gold margins are almost up the same amount due to higher prices. But the most telling thing is improvement of margin over the past 3 quarters, when gold margins were essentially eliminated. This reflected in our EBITDA and cash generation. Casa, we knew we do it -- we would improve. That was the plan. But for Nevada, we had to take the step of slowing down activity until we develop a new more achievable plan. This quarter's increase in the margin demonstrates progress towards our leverage goal of 2 times net debt-to-EBITDA. Clearly, we are not there yet on the last 12 months basis, but with this quarter and what we expect in Q4, we are certainly headed in the right direction.

Looking forward, we expect the strong fourth quarter, which should lead to full repayment of the revolver and some cash on the balance sheet. Subsequent to the end of the quarter, we purchased additional puts for forecasted production of gold and silver in the second quarter of 2020 establishing a solid flow of revenues into the near future. All of these initiatives are focused on ensuring that when we enter into the financial markets to refinance the existing $500 million, we do so from a financial position. As an example, the revolvers are forecasted to be paid down by year-end, and protected needs for liquidity purposes, our revolver is no more than $150 million, essentially freeing up $100 million of available capacity that we currently have with the banks, which could be reconstituted as a term loan. This again provides another potential option available to us, if we choose to refinance the portions of bonds -- portion of the bonds rather than refinance the fair amount through the capital markets.

As well with our debt-to-EBITDA ratio is improving, and the tentative agreement of Lucky Friday, we anticipate refinancing the bonds on a timely basis and an appropriate cost of funds. Lastly, as you can see at the bottom of the chart of the slide that our bonds are performing much better than they were in June, so it was the strong third quarter, and we anticipate the strong fourth quarter as well, setting us up for 2020.

I will now pass the call to Lauren.

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Lauren Martin Roberts, Hecla Mining Company - Senior VP & COO [5]

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Thank you, Lindsay, and good morning, everyone. I've been on the job a COO for a little over 3 months, I spend time at all the mines, I would like to offer my perspective on each. Starting with Greens Creek, the mine is performing very well. The new mine plan we detailed with 43-101 in April of this year reflects the continuous improvement culture at Greens Creek. We saw the opportunity to reduce development and better utilize people and equipment with the new mine sequence that advances the high-grade zones and increases cash flow.

Result is an increase in the mines value, while we continue to extend the mines life. This is important because Greens Creek represents about 40% of the revenue and is a consistent generator of free cash flow, I see that continuing. In the third quarter, the mine produced 2.5 million ounces of silver and over 13,000 ounces of gold. Casa Berardi is another important mine for the company as shown on Slide 12. The revised technical report earlier this year outlines the longer expected mine life and the importance of both underground and open pit production. The mine produced 36,500 ounces of gold in the third quarter, and had a higher level of capital than usual including 6.3 million for a tailings pond expansion and about 2.5 million on equipment purchases.

We've talked about the mill issues this year. I think the team at Casa did an excellent job of nearly doubling the throughput of the plan over the past few years with very minimal capital investment. With our throughput target insight, we will turn our attention to improving the mills reliability through enhanced operations and maintenance practices. Over time, we would expect these improved practices to lead to incremental throughput recovery and cost gains. Don't forget the drilling at Casa, which is very exciting with outstanding results at the 148 and 160 zones producing the high-grade intersections and good width in our existing infrastructure as you can see on Slide 13. I expect we'll be talking about them more in the coming quarter.

Moving on to San Sebastian; I was very impressed with this operation. We have the excellent miners there and the site looks great. There are 2 exciting opportunities to extend mine life. In the existing mine, there are sulfide zones underlying the oxides. We're in the process of conducting test stoping and milling of one of these areas called the Hugh Zone. You can see a photo on Slide 14 of the first long-hole stope panel for about a month ago. The contractors have done a great job so far with this more efficient mining method, which is new to the property. We processed about 13,000 tons of bulk sample ore at a third-party mill in the third quarter and recoveries are in line with our expectations. We need to complete our work to determine if there is a business case here, look for more information early in the New Year. We also have an oxide discovery called El Toro about 1.5 miles from the mine, which is looking very promising.

The Lucky Friday produced the limited amount of ore during the quarter as per plan, but the higher production than the prior year period help to asset to minimize this financial impact. The workforce is composed mainly of our salaried staff and we are extremely proud of what the team is accomplished. As Phil mentioned, we've reached a tentative agreement with the union and waiting for ratification vote. We expect a significant increase in production over the next few years as a Lucky Friday ramps up the full production and make some capital investments that have been on hold. I just got back from Sweden to see the RVM machine, which is on the test mine. We are learning a lot and we'll take the time we need in this testing phase to make the modifications, so when we bring at Lucky Friday in 2020, we can minimize field changes.

I worked 10 years in the underground mines in Nevada, I was especially keen to see those operations. The decision to curtail spending and to focus on near-term cash generation was a good one, because it sets us on a stronger financial path. We plan to mine out the developed oxide ores, which we expect and continue into the second or third quarter next year depending on ongoing delineation work. I expect to take a further pause as we assess permitting needs, enhanced our understanding of the ore body and secure tolling agreements for the refractory ores. I worked at Hecla when Greens Creek was put on pause, it was a best thing for that mine and I expect that will be the best thing for Nevada operations. Midas will conclude mining to develop resource this year. We'd like to get the Hatter Graben development going again once funds are available, and we look for opportunities to move our man and machines there as Fire Creek winds down.

Back to Phil?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [6]

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Thanks, Lauren. Let's go to Slide 17, before we go to Q&A, I want to emphasize Hecla's commitment to the environment and the health and safety of our employees. The 2 awards that the Lucky Friday when exemplifies that commitment. Our environmental program there was recognized by the State of Idaho for efforts to prevent pollution. We're making a real difference there and reducing our impact on the environment.

And I'm most proud of the mine winning the Sentinels of Safety, which is an award that's been an existence since 1925. To win this award, you can't have a lost time accident or even our restricted work incident, and then you have to have the best injury incident rate as reported to the Mine Safety and Health Administration. So I mean, this is a very rigorous set of requirements and it is based on the data given to MSHA. So it's incredibly hard to win and, in fact, in Hecla's history we never won it before. And at the Lucky Friday, they had no reportable to 0. And as a result of that they won this award and so my hats off to the team there for the efforts that they made and also to the culture that they've developed there. If you'll go to Slides 35 to 46 later, you can see more aspects of what we do in the ESG area.

So, with that, operator, I'm happy to open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Heiko Ihle with H.C. Wainwright.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [2]

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Hey, guys. Thanks for taking my questions. [On lucky] Friday, I mean, so you're saying that the ramp-up takes about a year. I mean, I understand that the cash costs, looks like they are probably going to keep going down quarter by quarter. But do you just have an idea of how long it takes to really see meaningful production and maybe the timing for the ramp-up throughout the year as well?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [3]

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Well, it all -- it became a function of if and when the union ratifies the contract and as we prepare the mine for people to come back to work. So that will be the jumping-off point, is when that occurs. And then it will take roughly a year from that time. If you go back and look at 2013, you can -- from the time we start, you can get a sense of how the ramp-up occurs.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [4]

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Fair enough. Then I'll phrase the question, my next one a little differently. How much did it cost last time something like this was ramped-up?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [5]

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Geez, I don't recall. But we'll make further investments in the mine. We want to improve the 2 Shaft. There is an upgrade that we're going do to the electrical system there. And then, there are other investments that we'll make. And so, we want to put the mine on to a firm-footing and we'll take the time necessary and spend the money necessary. But it's not a huge amount of investments. Most of these investments are investments that are less than $5 million, $6 million.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [6]

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Fair enough. And then, something completely different, and I got this question from a client a couple of weeks ago, and so I figured I'm going to pose it to you guys on this call. The dividend, at what metal price do you think we should see the dividend go up and at what metal price should we expect you guys to maybe cut the dividend a little bit? I mean, I understand it's a -- a $0.01 is not a whole lot of money. I'm just purely curious.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [7]

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I don't think there is any intention of cutting the dividend. It would be significantly lower prices to see us put in the position where we would do that. As far as the dividend going up, we have a policy that automatically causes the dividend go up. Is it possible that policy will change? I think so at some point. I think the Board will consider that. But in the meantime, our real focus is on strengthening the balance sheet and putting ourselves in position to refinance the existing bonds.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [8]

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Fair enough. Thanks for taking my questions and congratulations on Lucky Friday yet again.

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Operator [9]

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Your next question comes from the line of Jake Sekelsky with Roth Capital Partners.

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Jacob G. Sekelsky, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [10]

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Hey, Phil and team. Thanks for taking my question. Just going back to Lucky Friday and kind of building on Heiko's question, are you guys able to give us any additional color on the agreement? I mean, I guess, what I'm wondering here is where concessions were made and what kind of caused this breakthrough negotiation?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [11]

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Yeah, look, it was just an ongoing negotiation with the negotiating committee of the union. We both made concessions. And at the end of the day, we're able to reach an agreement. But the key thing is going to be ratification by the members. And we'll wait to see if and when they do that.

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Jacob G. Sekelsky, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [12]

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Understood. That's helpful. Okay. And then, switching over to Nevada, I mean, obviously, throughout the year, we've kind of been shifting from production and development, more towards exploration of it there. Is it a trend we should continue to expect into 2020? I'm just trying to get a handle on how you're viewing Nevada in the context of the portfolio for next year and, I guess, what we should expect as far as the near-term production target over there? Thanks.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [13]

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Sure. Sure, Jake. In Nevada, the intention is to continue to mine the currently developed ore. And that will be mined sometime -- out sometime in the middle of next year as we've previously disclosed. And then, in the meantime work on plans on how to go forward, including how to deal with refractory ore. So, we're certainly in conversations with places that we could mill that refractory ore. And, yeah, so at this point, we don't have firm plans. We're still working through things and just stay tuned, because we'll be putting back together. Question?

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Jacob G. Sekelsky, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [14]

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Okay. And is that something you think we should see by the end of the year or more into Q1 or is there not much visibility in that?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [15]

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It will be in Q1, when we announce all of our plans for 2020.

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Jacob G. Sekelsky, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [16]

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Okay, perfect. And then, just lastly, on the metals hedging program, prices have picked up a bit since you guys put the initial contracts on. Do you guys have any other plans to layer more on these modestly higher prices for the second half of 2020? Or are you comfortable with what you have in place now?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [17]

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We'll continue to look at the cost of putting on new contracts. And to the extent we find it attractive, you can see us do that. We haven't done anything to limit our upside in what we've done with our puts. And we think we're in a very good position with the protection on the downside to be able to deliver the cash flow that we're anticipating. Lindsay, anything to add?

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Lindsay A. Hall, Hecla Mining Company - Senior VP, CFO & Treasurer [18]

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No, Phil said it all.

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Jacob G. Sekelsky, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [19]

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Got it, okay. That was all for me and congrats on the positive cash flow this quarter.

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Operator [20]

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Your next question comes from the line of Matthew Fields with Bank of America.

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Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [21]

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Hi, everyone. Just wanted to get some clarity on timing on Lucky Friday, I appreciate that it has to go back to the union for ratification then there is probably some other procedural steps, staff's going back into the mine maybe have to be rehired some or existing -- the old guys coming back, and then 1 year ramp-up. Can you just walk us through the different mile posts of how that everything gets sort of timed out from here going forward?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [22]

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Well, it's not been finalized by any means. But the essence of it is -- there is a roster of people that were employees at the time of the strike. And that roster is about 200 people out of -- at the time they were 250, so you had people that have retired or they've quit, and so they've dropped off the roster. So we'll be anticipating those 200 people coming back to work over the course of time during 2020 as we ramp up. And we'll work out with those plans are as we get -- as the union ratifies the agreement, and as we do the capital projects that we have and as we plan out the training. Lauren anything to add to that?

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Lauren Martin Roberts, Hecla Mining Company - Senior VP & COO [23]

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I think, it will be our goal to bring back people as rapidly as we can and ramp-up production as quickly as we can.

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Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [24]

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Yeah. I mean, is it just rough estimate at this point, I know, that there is not a lot of clarity. But like is it first production in June of 2020? Or is it like first production back in December of 2020? Can you just give us a rough idea of when everything going to --

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [25]

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Well, Matt, remember, it's in production now, right. We can never start to producing, so --

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Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [26]

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At the old levels?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [27]

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Yeah, it will take a full year to get to full production. And so it will be a relatively slow ramp-up in the beginning that will accelerate over the second half of that year whenever that year starts.

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Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [28]

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Okay. Great. Thanks. And then, my second question is just some of your high yield precious metal peers have taken advantage of the popping in precious metals prices and their corresponding stock price is to opportunistically raise some equity to help with balance sheet risk. And it seems like it's been sort of received positively by both equity and debt holders. Your stocks reacted positively to the gold and silver price. Is that something you're willing to do opportunistically to kind of help refinancing -- basically take refinancing risk of the table?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [29]

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Sure. We're willing to consider all options to successfully refinance the bonds.

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Matthew Wyatt Fields, BofA Merrill Lynch, Research Division - Director [30]

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Okay. That's it for me. Thanks.

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Operator [31]

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

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [32]

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Hi, thanks, Phill, Lindsay and Lauren. Maybe first off on Lucky Friday here, I know timing is still very uncertain at this point in time, as you mentioned. But I see who remember there was a vote that happened earlier on 2018 for something completely different for a third-party arbitration that didn't go through. But what was the timing then in terms of that vote. And can we draw comparisons to what's happening now in terms of timing?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [33]

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Yeah. My recollection is took the better part of a month or 6 weeks. Sounds right, Larry?

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Lauren Martin Roberts, Hecla Mining Company - Senior VP & COO [34]

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Sounds right. Yeah.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [35]

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Yeah. Still it's about a month or 6 weeks to implement, because remember they have all of these members that are working in other places that they -- the balance get [mailed] to them. They then get returned and then they get counted.

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [36]

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For sure. And then, when you talk about majority in your press release in terms of the ratification, that just a simple majority, all you need is 50% plus 1.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [37]

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That's my understanding.

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [38]

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Okay. And then in terms of, again, maybe too early to ask at this point in time, but Phil, as you mentioned some of the CapEx that's need in terms of the restart shouldn't be to significant. And so when it does happen, when you do restart the operations? Should we expect Lucky Friday to be free cash flow positive fairly quickly and what are we talking about maybe 1 or 2 quarters of neutral or negative free cash flow followed by positive free cash flow? Is there any kind of color you can give us at this point in time?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [39]

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No, look I think certainly the first year will be a negative free cash flow, I would expect the net investment in the mine and then the following year to be either neutral or slightly positive. And after that you're off to the raises.

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [40]

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For sure. And then maybe switching gears a little bit here in terms of the financial options available to you. You talked about the equity raise in the last question. But I guess, my question is, do you still have the ATM available? Is there still active? Did you using in Q3, I don't think you did look at your financial statements? And how do you see that ATM potentially fitting into your overall financial strategy?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [41]

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Yeah. The ATM is active, it's relatively small. I think there is $40 million or $50 million available under it, so it's certainly possible something that we can utilize.

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [42]

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For sure. And then maybe one last question here in terms of Casa Berardi. I think, you sort of touched on it for the company as a whole. But if I look what you've done so far (inaudible) ounces year-to-date in terms of production, guidance is 146,000 ounces, you need a better Q4. Could you maybe give us some more color in terms of is that a combination of grade and throughput, or just grade or just throughput?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [43]

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Primarily grade. And it's -- that's always been the plan that there would be better fourth quarter -- the whole second half of the year for Casa is better and remember we also had a shortfall in tons in the first part of the year. So, that's part of the reason, second so much better. So --

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Cosmos Chiu, CIBC Capital Markets, Research Division - Executive Director of Institutional Equity Research & Equity Research Analyst [44]

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Yeah. For sure. Thanks, Phil, and congrats again on getting the tender of labor agreement in place.

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Operator [45]

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Your next question comes from the line of Adam Graf with B. Riley.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [46]

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Hey, guys. Just a couple of quick questions here on Nevada and then Greens Creek. On Nevada, I don't know if you have the numbers in front of you, but could you tell us how many tons are mined in the third quarter from each of the mines for the mining cost per ton, again at each of the mines?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [47]

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Yeah. We'll come back to you on that, because I just haven't aggregated in the room with me at the moment.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [48]

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And then at Greens Creek with the delay there maybe if you can give us anymore -- on the cause there and who was the company that you're mentioning?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [49]

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Force majeure, well, it's well known, it's tech, right? They had the incident at the trail smelter, and so they caught -- they played force majeure 25% of their contracts. So as a result of that, we didn't know exactly what the shipping would be, and so we weren't able to nominate a ship until late in the quarter and then whether held up the ship. And so as a result, we ended up doing the deal with trader where we sold the metal, we got the revenue, but unfortunately, we are not able to account for this revenue. So it's accounted for deferred revenue and then that were show-up in Q4.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [50]

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And given the current zinc TC environments, were you -- did you have to pay effectively spot TCs, I know they're significantly higher than your contracts that you had with tech.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [51]

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We -- it was -- give the where prices were in the fact that we, whenever we sell the product, we sell forward for that short period of time. We actually made that better than we would have otherwise.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [52]

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And -- great. And then just finally, just my own curiosity on the Sentinels of Safety award, I've never heard some of the details. And I was curious, are there years where that awarded never given out?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [53]

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Yeah. There's different categories, and answer is yes. If they -- if people do not meet that than it's not awarded.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [54]

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Well, that's interesting. And it's just from my own curiosity. I appreciate that. Great. Congratulations.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [55]

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Thank you. Yeah, I'm pretty proud of that.

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Operator [56]

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Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research.

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John Charles Tumazos, John Tumazos Very Independent Research, LLC - President and CEO [57]

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Thank you for taking my question. I want to congratulate Larry Radford on his retirement. Wish him all the best. And I want to thank all the Hecla team for your service as a company. It's not an easy thing to dig a mine.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [58]

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Thanks, John.

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John Charles Tumazos, John Tumazos Very Independent Research, LLC - President and CEO [59]

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Thank you. Forgive me, I was into the Kinross at 8:30, and 8:00, and then WestRock containerboard and ArcelorMittal steel and I might have missed some details. But I'm surprised that your stock is off today, when you're announcing the good news of the Lucky Friday potential restart, and you got 9 drills at Casa Berardi, and the lost got smaller and you repay some of the revolver. Do you think the market is disappointed that it might take a year or 2 to get Lucky Friday coining cash or do you think people are disappointed that your CapEx and exploration, though? Or are you not doing financing -- refinancing this quicker? Why are we seeing -- I think, this is a good release, but just tell me what's going on?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [60]

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Yeah, John, we would agree this is actually a very good release. To be honest with you, I think it becomes program trading that's based of the fact that our revenue line was not what the market expected. And as a result, the net income was not what they expected. And that's only caused by the fact that the ship was delayed at Greens Creek. I think if you hadn't had that occurred and I think the market would have -- you wouldn't have had this program trading now. Is that fair, Mike Westerlund?

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Michael Westerlund, Hecla Mining Company - VP of IR [61]

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Yeah, that is a combination of weaker price, leads to computer selling. You see a huge volume right off at the open. And I think a lot of it is computer trading.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [62]

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Yeah, so, well, look, we are pretty confident that as we talk to people and walk them through the quarter that you'll see the tone about the stock improve. And we're definitely on track with what we expect it to be on. We're definitely can see that by the end of the year we will not have any revolver debt drawn. We can definitely see that we're in a good position to do the refinancing of the bonds at a very reasonable interest rate.

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John Charles Tumazos, John Tumazos Very Independent Research, LLC - President and CEO [63]

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Could you walk us through the lower CapEx and the lower exploration expense? Maybe some people are thinking you're cutting too much meat from the bonds. It looks like the exploration results are better as you spend less money, basically, (inaudible) within Casa Berardi. I've never thought there was a correlation between dollars and results. I think that's [with smart] and good luck.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [64]

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Well, I will -- I got sitting in here Kurt and Keith and they're shaking their head. But, look, we have not actually cut back on our capital -- in fact, the guidance that we've given for both capital and exploration is unchanged. We made that change earlier in the year. And so, we think we're at the right levels and it's a level that allows us to generate free flow. I mean, you think about it, we generated $29 million of free cash flow for the quarter. I over the last two days have been looking at other people's releases. And, frankly, relative to our peers, I'm not able to find one that's produced much more than we have. Clearly, not everybody has reported, so I'm not able to make that assessment. But there are companies with market caps that are a third or more higher than ours that had less free cash flow for the quarter. So, I think as time goes and we have (technical difficulty) to talk to people and we are planning over the course of the next number of weeks, we'll see the tone improve.

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Operator [65]

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

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Dalton Baretto, Canaccord Genuity Corp., Research Division - Analyst [66]

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Thank you. Good morning, guys. I apologize if I missed this earlier in the call, but, Phil, can you comment on the nature of the agreement with the union at Lucky Friday? Just specifically, I'm wondering, do you now have the ability to nominate people where you want them to go?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [67]

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We do, we do. And, look, this contract is consistent with other mines, the way other mines in North America operate. We'll have the same capabilities that other mines and -- throughout the U.S., Canada, how they operate.

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Dalton Baretto, Canaccord Genuity Corp., Research Division - Analyst [68]

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Well, that's great. That's a big win for you guys. Can you talk about maybe -- what you gave up to get that?

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [69]

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Look, I think this is a win for everybody. And as a first thing, I'll say it's -- the quid pro quo that we put to them was generally a better compensation package for them. We have -- particularly, for the skill trades, we had a lot of difficulty attracting skilled tradesman. This helps alleviate that. And that would the primary thing. But we ended up giving concession on holidays and medical benefits. There is just a variety of things. Having said that, we see this contract as positioning the Lucky Friday to be able to operate. It's now operated 75 years. We think it will operate certainly decades more. And this contract sets us up to be able to do that. We weren't sure we would have been able to do that under the old contract.

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Dalton Baretto, Canaccord Genuity Corp., Research Division - Analyst [70]

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That's great. Congrats, guys. That's a good agreement.

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Operator [71]

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I would now like to turn the conference back Mr. Phil Baker.

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Phillips S. Baker, Hecla Mining Company - President, CEO & Director [72]

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Thanks, operator. Well, we appreciate you participating on the call. We know this is a busy day with lots of people reporting. Obviously, if you didn't have your question answered or you'd like to talk more to us, feel free to give Mike or I a call. Thanks very much. Have a great day.

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Operator [73]

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Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.