HECLA MINING CO/DE/ [HL] Filings

HECLA MINING CO/DE/ [HL] Filings

HECLA MINING CO/DE/ [HL-PB] Filings

10-Q 1 d514140d10q.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file

number 1-8491

HECLA MINING COMPANY

(Exact name of registrant as specified in its Charter)


Delaware		77-0664171
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

6500 Mineral Drive, Suite 200 Coeur d’Alene, Idaho		83815-9408
Address of Principal Executive Offices		Zip Code

208-769-4100

Registrant’s Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.25 per share	HL	New York Stock Exchange

Series B Cumulative Convertible Preferred Stock, par value $0.25 per share	HL-PB	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Shares Outstanding November 4, 2022
Common stock, par value $0.25 per share		606,270,618

Table of Contents

Hecla Mining Company and Subsidiaries

Form 10 – Q

For the Quarter Ended September 30, 2022

INDEX


	Page
PART I – Financial Information

Item 1 – Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income – Three Months Ended and Nine Months Ended – September 30, 2022 and 2021		4

Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2022 and 2021		5

Condensed Consolidated Balance Sheets – September 30, 2022 and December 31, 2021		6

Condensed Consolidated Statements of Changes in Stockholders’ Equity – Three Months Ended and Nine Months Ended – September 30, 2022 and 2021		7

Notes to Condensed Consolidated Financial Statements (Unaudited)		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23

Item 3. Quantitative and Qualitative Disclosures About Market Risk		60

Item 4. Controls and Procedures		61

PART II – Other Information

Item 1 – Legal Proceedings		61

Item 1A – Risk Factors		61

Item 4 – Mine Safety Disclosures		62

Item 6 – Exhibits		62

Signatures		64

*	Items 2, 3 and 5 of Part II are omitted as they are not applicable.

Table of Contents

Part I – Financial Information

Item 1. Financial Statements

Table of Contents

Hecla Mining Company and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)

(Dollars and shares in thousands, except for

per-share

amounts)


	Three Months Ended						Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Sales	$	146,339		$	193,560		$	524,080		$	622,395

Cost of sales and other direct production costs		104,900			112,542			326,579			318,917
Depreciation, depletion and amortization		32,992			45,790			106,362			138,918

Total cost of sales		137,892			158,332			432,941			457,835

Gross profit		8,447			35,228			91,139			164,560

Other operating expenses:
General and administrative		11,003			8,874			28,989			27,985
Exploration and pre-development		15,128			17,108			39,136			35,039
Care and maintenance costs		5,092			6,910			16,539			17,014
Provision for closed operations and environmental matters		1,781			7,564			4,154			12,297
Other operating expense		902			3,344			5,310			10,626

Total other operating expenses		33,906			43,800			94,128			102,961

(Loss) income from operations		(25,459	)		(8,572	)		(2,989	)		61,599

Other income (expense):
Interest expense		(10,874	)		(10,469	)		(31,785	)		(31,484	)
Fair value adjustments, net		(4,240	)		9,287			(14,703	)		(10,651	)
Net foreign exchange gain		5,667			3,995			8,111			24
Other income (expense)		1,853			247			4,828			(192	)

Total other (expense) income		(7,594	)		3,060			(33,549	)		(42,303	)

(Loss) income before income and mining taxes		(33,053	)		(5,512	)		(36,538	)		19,296
Income and mining tax benefit		9,527			4,533			3,642			3,924

Net (loss) income		(23,526	)		(979	)		(32,896	)		23,220
Preferred stock dividends		(138	)		(138	)		(414	)		(414	)

(Loss) income applicable to common stockholders	$	(23,664	)	$	(1,117	)	$	(33,310	)	$	22,806

Comprehensive income (loss):
Net (loss) income	$	(23,526	)	$	(979	)	$	(32,896	)	$	23,220
Change in fair value of derivative contracts designated as hedge transactions		(12,692	)		(6,267	)		19,491			(2,815	)

Comprehensive (loss) income	$	(36,218	)	$	(7,246	)	$	(13,405	)	$	20,405

Basic (loss) income per common share after preferred dividends	$	(0.04	)	$	—		$	(0.06	)	$	0.04

Diluted (loss) income per common share after preferred dividends	$	(0.04	)	$	—		$	(0.06	)	$	0.04

Weighted average number of common shares outstanding – basic		554,531			536,966			544,000			535,542

Weighted average number of common shares outstanding – diluted		554,531			536,966			544,000			541,769

Cash dividends declared per common share	$	0.00625		$	0.01		$	0.0125		$	0.02

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

Table of Contents

Hecla Mining Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Nine Months Ended
	September 30, 2022			September 30, 2021
Operating activities:
Net (loss) income	$	(32,896	)	$	23,220
Non-cash elements included in net (loss) income:
Depreciation, depletion and amortization		106,743			139,800
Write-down of inventory		2,159			6,524
Fair value adjustments, net		3,486			(7,978	)
Provision for reclamation and closure costs		4,789			7,821
Stock compensation		4,298			4,774
Deferred income taxes		(17,828	)		(17,886	)
Foreign exchange (gain) loss		(8,353	)		615
Other non-cash items, net		2,454			1,167
Change in assets and liabilities:
Accounts receivable		34,788			(3,798	)
Inventories		(19,472	)		22,372
Other current and non-current assets		(3,420	)		1,650
Accounts payable, accrued and other current liabilities		(21,708	)		(14,689	)
Accrued payroll and related benefits		1,679			(1,829	)
Accrued taxes		(2,652	)		2,730
Accrued reclamation and closure costs and other non-current liabilities		(297	)		2,489

Cash provided by operating activities		53,770			166,982
Investing activities:
Additions to properties, plants, equipment and mineral interests		(93,237	)		(80,210	)
Change in restricted cash		2,011			—
Proceeds from sale of investments		9,375			1,811
Proceeds from disposition of properties, plants and equipment		748			562
Purchases of investments		(30,540	)		—
Acquisitions, net		8,952			—
Pre-acquisition advance to Alexco		(25,000	)		—
Purchase of carbon credits		—			(200	)

Net cash used in investing activities		(127,691	)		(78,037	)
Financing activities:
Proceeds from sale of common stock, net		4,542			—
Acquisition of treasury stock		(3,677	)		(4,525	)
Dividends paid to common and preferred stockholders		(10,549	)		(17,169	)
Credit facility fees paid		(517	)		(108	)
Draw on revolving credit facility		25,000			—
Repayments of finance leases		(5,222	)		(5,598	)

Net cash provided by (used in) financing activities		9,577			(27,400	)
Effect of exchange rates on cash		(804	)		(471	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(65,148	)		61,074
Cash, cash equivalents and restricted cash at beginning of period		211,063			130,883

Cash, cash equivalents and restricted cash at end of period	$	145,915		$	191,957

Supplemental disclosure of cash flow information:
Cash paid for interest	$	37,179		$	37,173
Cash paid for income and mining taxes, net	$	13,061		$	10,299
Significant non-cash investing and financing activities:
Addition of finance lease obligations and right-of-use assets	$	9,692		$	4,006
Common stock issued to Alexco Resource Corp. shareholders	$	68,733		$	—
Common stock issued to settle acquired silver stream	$	135,000		$	—
Common stock issued to pension plans	$	5,570		$	22,250

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

Table of Contents

Hecla Mining Company and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except shares)


	September 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	144,669		$	210,010
Accounts receivable:
Trade		12,477			36,437
Other, net		12,846			8,149
Inventories:
Concentrates, doré, and stockpiled ore		40,985			25,906
Materials and supplies		51,020			41,859
Derivatives assets		7,190			2,709
Other current assets		14,733			16,557

Total current assets		283,920			341,627
Investments		13,299			10,844
Restricted cash		1,246			1,053
Properties, plants, equipment and mineral interests, net		2,553,974			2,310,810
Operating lease right-of-use assets		11,632			12,435
Deferred income taxes		45,562			45,562
Derivatives assets		20,794			2,503
Other non-current assets		4,202			3,974

Total assets	$	2,934,629		$	2,728,808

LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities	$	87,850		$	68,100
Accrued payroll and related benefits		26,385			28,714
Accrued taxes		7,344			12,306
Finance and operating leases		12,489			8,098
Accrued interest		5,184			14,454
Derivatives liabilities		5,774			19,353
Other current liabilities		5,765			99
Accrued reclamation and closure costs		10,594			9,259

Total current liabilities		161,385			160,383
Finance and operating leases		20,242			17,726
Accrued reclamation and closure costs		105,717			103,972
Long-term debt		530,745			508,095
Deferred tax liability		154,225			149,706
Derivatives liabilities		5,560			18,528
Other non-current liabilities		1,987			9,611

Total liabilities		979,861			968,021

Commitments and contingencies ( Notes 4 , 7 , 8, and 10 )
STOCKHOLDERS’ EQUITY
Preferred stock, 5,000,000 shares authorized:
Series B preferred stock, 25 cent par value, 157,776 shares issued and outstanding, liquidation preference – $7,891		39			39
Common stock, 25 cent par value, 750,000,000 authorized shares; issued September 30, 2022 – 603,702,910 shares and December 31, 2021 – 545,534,760 shares		150,839			136,391
Capital surplus		2,241,649			2,034,485
Accumulated deficit		(397,096	)		(353,651	)
Accumulated other comprehensive income (loss)		(8,965	)		(28,456	)
Less treasury stock, at cost; September 30, 2022 – 8,132,553 shares and December 31, 2021 – 7,395,295 shares issued and held in treasury		(31,698	)		(28,021	)

Total stockholders’ equity		1,954,768			1,760,787

Total liabilities and stockholders’ equity	$	2,934,629		$	2,728,808

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

Table of Contents

Hecla Mining Company and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(Dollars are in thousands, except for share and per share amounts)


	Three Months Ended September 30, 2022
	Series B Preferred Stock		Common Stock		Capital Surplus		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss), net			Treasury Stock			Total
Balances, July 1, 2022	$	39	$	137,241	$	2,043,621	$	(370,048	)	$	3,727		$	(31,698	)	$	1,782,882
Net loss		—		—		—		(23,526	)		—			—			(23,526	)
Common stock issued to Alexco Resource Corp. shareholders (17,992,875 shares)		—		4,498		64,235		—			—			—			68,733
Common stock issued to settle the acquired silver stream (34,800,990 shares)		—		8,700		126,300		—			—			—			135,000
Common stock issued for 401(k) match (422,860 shares)		—		106		1,472		—			—			—			1,578
Common stock issued under ATM program, net (1,176,861 shares)		—		294		4,248		—			—			—			4,542
Common stock dividends declared (0.0625 cents per common share)		—		—		—		(3,384	)		—			—			(3,384	)
Series B Preferred Stock dividends declared (87.5 cents per share)		—		—		—		(138	)		—			—			(138	)
Restricted stock units granted		—		—		1,773		—			—			—			1,773
Other comprehensive loss		—		—		—		—			(12,692	)		—			(12,692	)

Balances, September 30, 2022	$	39	$	150,839	$	2,241,649	$	(397,096	)	$	(8,965	)	$	(31,698	)	$	1,954,768


	Three Months Ended September 3 0 , 2021
	Series B Preferred Stock		Common Stock		Capital Surplus		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss), net			Treasury Stock			Total
Balances, July 1, 2021	$	39	$	136,065	$	2,024,645	$	(354,866	)	$	(29,437	)	$	(28,021	)	$	1,748,425
Net loss		—		—		—		(979	)		—			—			(979	)
Restricted stock units granted		—		—		1,472		—			—			—			1,472
Common stock dividends declared (1.125 cents per common share)		—		—		—		(6,040	)		—			—			(6,040	)
Series B Preferred Stock dividends declared (87.5 cents per share)		—		—		—		(138	)		—			—			(138	)
Common stock issued for 401(k) match (141,000 shares)		—		35		1,017		—			—			—			1,052
Common stock issued to pension plans (1,000,000 shares)		—		250		5,200		—			—			—			5,450
Other comprehensive loss		—		—		—		—			(6,267	)		—			(6,267	)

Balances, September 30, 2021	$	39	$	136,350	$	2,032,334	$	(362,023	)	$	(35,704	)	$	(28,021	)	$	1,742,975

Table of Contents


	Nine Months Ended September 30, 2022
	Series B Preferred Stock		Common Stock		Capital Surplus			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss), net			Treasury Stock			Total
Balances, January 1, 2022	$	39	$	136,391	$	2,034,485		$	(353,651	)	$	(28,456	)	$	(28,021	)	$	1,760,787
Net loss		—		—		—			(32,896	)		—			—			(32,896	)
Restricted stock units granted		—		—		3,881			—			—			—			3,881
Restricted stock units and performance stock units distributed (1,789,042 shares)		—		447		(447	)		—			—			(3,677	)		(3,677	)
Common stock issued for 401(k) match (321,110 shares)		—		186		3,283			—			—			—			3,469
Common stock issued to directors (98,310 shares)		—		25		392			—			—			—			417
Common stock issued to pension plans (1,190,000 shares)		—		298		5,272			—			—			—			5,570
Common stock issued to Alexco Resource Corp. shareholders (17,992,875 shares)		—		4,498		64,235			—			—			—			68,733
Common stock issued to settle the acquired silver stream (34,800,990)		—		8,700		126,300			—			—			—			135,000
Common stock issued under ATM program, net (1,176,861 shares)		—— —		294		4,248			—			—			—			4,542
Common stock dividends declared (1.25 cents per common share)		—		—		—			(10,135	)		—			—			(10,135	)
Series B Preferred Stock dividends declared ($2.625 per share)		—		—		—			(414	)		—			—			(414	)
Other comprehensive income		—		—		—			—			19,491			—			19,491

Balances, September 30, 2022	$	39	$	150,839	$	2,241,649		$	(397,096	)	$	(8,965	)	$	(31,698	)	$	1,954,768


	Nine Months Ended September 30, 2021
	Series B Preferred Stock		Common Stock		Capital Surplus			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss), net			Treasury Stock			Total
Balances, January 1, 2021	$	39	$	134,629	$	2,003,576		$	(368,074	)	$	(32,889	)	$	(23,496	)	$	1,713,785
Net income		—		—		—			23,220			—			—			23,220
Restricted stock units granted		—		—		2,930			—			—			—			2,930
Restricted stock units distributed (1,653,000 shares)		—		413		(413	)		—			—			(4,525	)		(4,525	)
Common stock dividends declared (3.125 cents per common share)		—		—		—			(16,755	)		—			—			(16,755	)
Series B Preferred Stock dividends declared ($2.625 per share)		—		—		—			(414	)		—			—			(414	)
Common stock issued for 401(k) match (524,000 shares)		—		131		3,324			—			—			—			3,455
Common stock issued to pension plans (4,500,000 shares)		—		1,125		21,125			—			—			—			22,250
Common stock issued to directors (207,000 shares)		—		52		1,792			—			—			—			1,844
Other comprehensive loss		—		—		—			—			(2,815	)		—			(2,815	)

Balances, September 30, 2021	$	39	$	136,350	$	2,032,334		$	(362,023	)	$	(35,704	)	$	(28,021	)	$	1,742,975

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

Table of Contents

Note 1.

Basis of Preparation of Financial Statements

The accompanying unaudited interim condensed consolidated financial statements of Hecla Mining Company and its subsidiaries (collectively, “Hecla,” “the Company,” “we,” “our,” or “us,” except where the context requires otherwise) have been prepared in accordance with the instructions to Form

10-Q

and do not include all information and disclosures required annually by generally accepted accounting principles in the United States (“GAAP”). Therefore, this information should be read in conjunction with Hecla Mining Company’s consolidated financial statements and notes contained in our annual report on Form

10-K

for the year ended December 31, 2021 (“2021 Form

10-K”).

The consolidated December 31, 2021 balance sheet data was derived from our audited consolidated financial statements. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the three- and nine-month periods ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

On September 7, 2022, the Company completed the acquisition of the remaining 90.1%

of Alexco Resource Corp. (“Alexco”) for non-cash consideration of

17,992,875

shares of Company common stock valued at $

68.7

million.

Total consideration for the acquisition, deemed to be an asset acquisition under GAAP, was

81.5

million of which $76.4 million was non cash including the fair value of the Company’s common stock issued and the fair value of the

9.9

Alexco investment held by the Company prior to the completion of the acquisition and previously accounted for as marketable equity securities of $7.7 million. Acquisition costs also included transaction costs of $5.1 million. The total consideration was allocated to the acquired assets and assumed liabilities based on their estimated fair values on the acquisition date, which primarily consisted of mineral interests of

236.6

million, a related deferred tax liability of

12.9

million, net liabilities of $7.2 million, and a silver stream liability

135

million. Immediately following the closure of the acquisition, we settled the silver stream liability with the stream holder for

34,800,990

shares of Company common stock.

The 2019 novel strain of coronavirus

(“COVID-19”)

was characterized as a global pandemic by the World Health Organization on March 11, 2020. We continue to take precautionary measures to mitigate the impact of

COVID-19,

including implementing operational plans and practices. As long as they are required, the operational practices implemented could continue to have an adverse impact on our operating results due to deferred production and revenues or additional costs. We incurred $0.4 million and $3.1 million in

COVID-19

mitigation costs during the nine months ended September 30, 2022 and 2021, respectively. We continue to monitor the rapidly evolving situation and guidance from federal, state, local and foreign governments and public health authorities and may take additional actions based on their recommendations. The extent of the impact of

COVID-19

on our business and financial results will also depend on future developments, including the duration and spread of the outbreak and the success of the current vaccination programs and the related impact on prices, demand, creditworthiness and other market conditions and governmental reactions, all of which are highly

uncertain.

During the three months ended September 30, 2022, the Company recorded an out-of-period adjustment to correct an immaterial error related to the period ended June 30, 2022. This adjustment increased income taxes related to other comprehensive loss

by $12,649 for the three months ended September 30, 2022 to correct the previously recorded tax effect of changes in the fair value of derivative contracts designated as hedge transactions. This adjustment is non-cash, had no impact on net loss applicable to common shareholders and increased accumulated other comprehensive loss for the three months ended September 30, 2022 by $12,649.

Note 2.

Business Segments and Sales of Products

We discover, acquire and develop mines and other mineral interests and produce and market (i) concentrates, containing silver, gold, lead and zinc, (ii) carbon material containing silver and gold, and (iii) doré containing silver and gold. We are currently organized and managed in four segments: Greens Creek, Lucky Friday, Casa Berardi and Nevada Operations.

General corporate activities not associated with operating mines and their various exploration activities, as well as discontinued operations, exploration and development projects and idle properties, are presented as “other.” Interest expense, interest income and income and mining taxes are considered general corporate items, and are not allocated to our segments.

The following tables present information about our reportable segments for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Table of Contents


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net sales to unaffiliated customers:
Greens Creek	$	60,875		$	84,806		$	239,688		$	296,978
Lucky Friday		28,460			29,783			102,380			98,550
Casa Berardi		56,939			56,065			181,679			185,098
Nevada Operations		—			22,906			268			41,593
Other		65			—			65			176

	$	146,339		$	193,560		$	524,080		$	622,395

Income (loss) from operations:
Greens Creek	$	1,378		$	26,572		$	63,768		$	127,605
Lucky Friday		4,269			6,187			18,568			24,247
Casa Berardi		(5,226	)		(6,233	)		(8,497	)		4,944
Nevada Operations		(8,917	)		(12,077	)		(30,879	)		(35,558	)
Other		(16,963	)		(23,021	)		(45,949	)		(59,639	)

	$	(25,459	)	$	(8,572	)	$	(2,989	)	$	61,599

The following table presents identifiable assets by reportable segment as of September 30, 2022 and December 31, 2021 (in thousands):


	September 30, 2022		December 31, 2021
Identifiable assets:
Greens Creek	$	594,811	$	589,944
Lucky Friday		534,114		516,545
Casa Berardi		692,833		701,868
Nevada Operations		467,532		468,985
Other		645,339		451,466

	$	2,934,629	$	2,728,808

Following the acquisition of Alexco (see

Note 1

), our sales for the three and nine month periods ended September 30, 2022 are comprised of metal sales as described below and $65,000 of environmental services revenue.

Sales by metal for the three- and nine-month periods ended September 30, 2022 and 2021 were as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Silver	$	45,924		$	61,890		$	182,306		$	232,414
Gold		69,289			94,984			228,475			282,471
Lead		16,033			18,082			56,912			56,198
Zinc		28,051			30,273			94,865			89,501
Less: Smelter and refining charges		(13,023	)		(11,669	)		(38,543	)		(38,189	)

	$	146,274		$	193,560		$	524,015		$	622,395

Sales included net gains of $1.6 million and $8.1 million for the

three-and

nine-month periods ended September 30, 2022, respectively, on financially-settled forward contracts for silver, gold, lead and zinc contained in our sales. Sales included net gains of $5.0 million and $4.5 million for the

three-and

nine-month periods ended September 30, 2021, respectively, on such contracts. See

Note 8

for more information.

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Note 3.

Income and Mining Taxes

Major components of our income and mining tax benefit (provision) for the three and nine months ended September 30, 2022 and 2021 are as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021

Current:
Domestic	$	253		$	(2,176	)	$	(2,296	)	$	(7,489	)
Foreign		(1,085	)		(1,578	)		(4,172	)		(4,690	)

Total current income and mining tax provision		(832	)		(3,754	)		(6,468	)		(12,179	)
Deferred:
Domestic		8,156			3,213			915			8,226
Foreign		2,203			5,074			9,195			7,877

Total deferred income and mining tax benefit		10,359			8,287			10,110			16,103

Total income and mining tax benefit (provision)	$	9,527		$	4,533		$	3,642		$	3,924

The income and mining tax benefit (provision) for the three and nine months ended September 30, 2022 and 2021 varies from the amounts that would have resulted from applying the statutory tax rates to

pre-tax

income due primarily to the impact of taxation in foreign jurisdictions and

non-recognition

of net operating losses and foreign exchange gains and losses in certain jurisdictions.

For the three-month and nine-month periods ended September 30, 2022, we used the annual effective tax rate method to calculate the tax provision, a change from the discrete method used for the three- and nine-month periods ended September 30, 2021, due to reversal of a valuation allowance in the fourth quarter of 2021. Valuation allowances on Nevada, Mexico and certain Canadian net operating losses were treated as discrete adjustments to the annual effective tax rate method calculation, partially causing the increase in the income tax rate for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021.

Note 4.

Employee Benefit Plans

We sponsor three defined benefit pension plans covering substantially all U.S. employees. Net periodic pension cost for the plans consisted of the following for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Service cost	$	1,566		$	1,455		$	4,697		$	4,365
Interest cost		1,369			1,248			4,107			3,744
Expected return on plan assets		(3,363	)		(2,313	)		(10,089	)		(6,939	)
Amortization of prior service cost		128			99			384			297
Amortization of net loss		512			1,125			1,537			3,375

Net periodic pension cost	$	212		$	1,614		$	636		$	4,842

For the three- and nine-month periods ended September 30, 2022 and 2021, the service cost component of net periodic pension cost is included in the same line items of our condensed consolidated financial statements as other employee compensation costs. The net benefit related to all other components of net periodic pension cost of $1.4 million and $4.1 million, respectively, for the three- and nine-month periods ended September 30, 2022, and net expense of $0.2 million and $0.5 million for the three- and nine-month periods ended September 30, 2021, respectively, is included in other (expense) income on our condensed consolidated statements of operations and comprehensive income (loss).

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In May 2022 and October 2022, we contributed $5.6 million and $4.2

million, respectively, in shares of our common stock to two of our defined benefit plans. In January 2021 and September 2021, we contributed

$16.8

million and $5.4 million, respectively, in shares of our common stock to three of our defined benefit plans. We do not expect to be required to make additional contributions to our defined benefit pension plans in 2022, but may elect to do so.

Note 5.

(Loss) Income Per Common Share

We calculate basic (loss) income per common share on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted income per share is calculated using the weighted average number of shares of common stock outstanding during the period plus the effect of potential dilutive common shares during the period using the treasury stock and

if-converted

methods.

Potential dilutive shares of common stock include outstanding unvested restricted stock awards, deferred restricted stock units, warrants and convertible preferred stock for periods in which we have reported net income. For periods in which we report net losses, potential dilutive shares of common stock are excluded, as their conversion and exercise would be anti-dilutive.

The following table represents net (loss) income per common share – basic and diluted (in thousands, except income (loss) per share):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Numerator
Net (loss) income	$	(23,526	)	$	(979	)	$	(32,896	)	$	23,220
Preferred stock dividends		(138	)		(138	)		(414	)		(414	)

Net (loss) income applicable to common shares	$	(23,664	)	$	(1,117	)	$	(33,310	)	$	22,806

Denominator
Basic weighted average common shares		554,531			536,966			544,000			535,542
Dilutive restricted stock units, warrants and deferred shares		—			—			—			6,227

Diluted weighted average common shares		554,531			536,966			544,000			541,769

Basic (loss) income per common share	$	(0.04	)	$	—		$	(0.06	)	$	0.04
Diluted (loss) income per common share	$	(0.04	)	$	—		$	(0.06	)	$	0.04

For the three month periods ended September 30, 2022 and 2021, respectively, and the nine month period ended September 30, 2022, all outstanding restricted stock units, warrants and deferred shares were excluded from the computation of diluted loss per share, as our reported net losses for those periods would cause their conversion and exercise to have no effect on the calculation of loss per share. For the nine months ended September 30, 2021, the calculation of diluted income per common share included (i) 2,496,622 restricted stock units, (ii) 1,578,293 warrants to purchase one share of common stock and (iii) 2,152,578 deferred compensation stock units that were dilutive.

Note 6.

Stockholders’ Equity

At-The-Market

Equity Distribution Agreement

Pursuant to an equity distribution agreement dated February 18, 2021, we may offer and sell up to 60 million shares of our common stock from time to time to or through sales agents. Sales of the shares, if any, will be made by means of ordinary brokers transactions or as otherwise agreed between the Company and the agents as principals. Whether or not we engage in sales from time to time may depend on a variety of factors, including share price, our cash resources, customary

black-out

restrictions, and whether we have any material inside information. The agreement can be terminated by us at any time. Any sales of shares under the equity distribution agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form

S-3.

As of September 30, 2022 we had sold 1,176,861 shares under the agreement for proceeds of $4.5 million, net of commissions and fees of approximately $0.1 million. All of the sales occurred during September 2022.

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Stock-based Compensation Plans

The Company has stock incentive plans for executives, directors and eligible employees, comprised of performance shares and restricted stock. Stock-based compensation expense for restricted stock unit and performance-based grants (collectively “incentive compensation”) to employees and shares issued to

non-employee

directors totaled $1.8 million and $4.3 million for the three and nine months ended September 30, 2022, respectively, and $1.5 million and $4.8 million for the three and nine months ended September 30, 2021, respectively. At September 30, 2022, there was $8.4 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.8 years.

The following table summarizes the grants awarded during the nine months ended September 30, 2022:


Grant date	Award type	Number granted	Grant date fair value
June 21, 2022	Restricted stock	1,103,801	$ 4.43
June 21, 2022	Performance based	322,799	$ 3.78
June 28, 2022	Directors retainer	98,310	$ 4.24
September 30, 2022	Restricted stock	121,826	$ 3.94

In connection with the vesting of incentive compensation, employees have in the past, at their election and when permitted by us, chosen to satisfy their minimum tax withholding obligations through net share settlement, pursuant to which the Company withholds the number of shares necessary to satisfy such withholding obligations and pays the obligations in cash. As a result, in the first nine months of 2022, we withheld 737,258 shares valued at approximately $3.7 million, or approximately $4.99 per share. In the first nine months of 2021, we withheld 574,251 shares valued at approximately $4.5 million, or approximately $7.88 per share.

Common Stock Dividends

The following table summarizes the dividends our Board of Directors have declared and we have paid during 2022 pursuant to our dividend policy:


Quarter	Realized Silver Price	Silver-linked component	Minimum component	Total dividend per share
First	$24.68	$0.0025	$0.00375	$0.00625
Second	$20.68	$0.0025	$0.00375	$0.00625

Note 7.

Debt, Credit Facility and Leases

Our debt as of September 30, 2022 and December 31, 2021 consisted of our 7.25% Senior Notes due February 15, 2028 (“Senior Notes”) and our Series

2020-A

Senior Notes due July 9, 2025 (the “IQ Notes”) and any drawn amounts on the New Credit Agreement, which is described separately below. The following tables summarize our long-term debt balances, excluding interest and borrowings under the New Credit Agreement, as of September 30, 2022 and December 31, 2021 (in thousands):


	September 30, 2022
	Senior Notes			IQ Notes		Total
Principal	$	475,000		$	35,194	$	510,194
Unamortized discount/premium and issuance costs		(4,868	)		419		(4,449	)

Long-term debt balance	$	470,132		$	35,613	$	505,745

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	December 31, 2021
	Senior Notes			IQ Notes		Total
Principal	$	475,000		$	38,051	$	513,051
Unamortized discount/premium and issuance costs		(5,552	)		596		(4,956	)

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