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Hecla Mining Co (NYSE:HL)
Q3 2019 Earnings Call
Nov 7, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning ladies and gentlemen and welcome to the Hecla Mining Company Third Quarter Financial Results Conference Call. [Operator Instructions]

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

Mike Westerlund -- Vice President of Investor Relations

Thank you operator. Good morning, everybody. Thank you for joining us for hecklers third quarter 29th 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 category East mine exploration press release from Tuesday are available on our website on today's call with Phil Baker president and CEO Lindsay Hall, Senior Vice President and Chief Financial Officer Laurin 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 two and three. such statements include projections and goals which are likely to involve risks detailed in our form 10 k form 10 two 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.

Phillips S.Baker -- Junior President and Chief Executive Officer

Thanks Mike and good morning everyone. As you can see on slide four the third quarter was an eventful quarter for Hecla. We reversed the outspend [Phonetic] 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 Berardis East Mines 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 Sebastians 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. Were glad there is a tentative agreement between the unions negotiating committee and the company that can be put before the membership for a vote.

Well, neither side got all that it wanted. We think this agreement is consistent with the agreements that other North American minds unionized or not, and puts the lucky Friday on a path of toward long term success. We don't know when or even if it will be brought to a vote by the membership but we hope that 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 Eva Due to our visibility of how these mines operate, with the exception of Nevada, we have operated these assets for six to 61 years. We know generally what to expect and most of the issues we must deal with an example of an issue our shipments at greens Creek, there's always a quarter to 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 didnt 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 didnt 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 havent 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 five the share prices above where it was after the first quarter news release. And we believe this shows along [Phonetic] of course with higher metals prices that like the bond market the equity market has recognized the turnaround thats under way. 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 Id 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 youve been helpful in the transition to Lauren. And so we wish you well in retirement.

Now I`ll turn the call over to Lindsay.

Lindsay A.Hall -- Senior Vice President and Chief Financial Officer

Thanks Phil and good morning everyone. Were 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 16500 more ounces than the second quarter of this year. This combined with higher metal prices added almost $30 million more revenue than this years 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 eight silver margins are up over last years 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 quarters increase in the margin demonstrates progress toward 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.

Lauren M.Roberts -- Senior Vice President and Chief Operating Officer

Thank you Lindsay and good morning everyone. I`ve been on the job a COO for a little over three 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 13000 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 36500 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. Were 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 13000 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?

Phillips S.Baker -- Junior President and Chief Executive Officer

Thanks Lauren. Lets go to Slide 17 before we go to Q&A I want to emphasize Heclas 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. Were making a real difference there and reducing our impact on the environment. And Im most proud of the mine winning the Sentinels of Safety which is an award thats been an existence since 1925. To win this award you cant 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 its incredibly hard to win and in fact in Heclas 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 will go to Slides 35 to 46 later you can see more aspects of what we do in the ESG area.

So with that operator Im happy to open the line for questions.

Questions and Answers:

Operator

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

Heiko Ihle -- H.C. Wainwright -- Analyst

Hey guys. Thanks for taking my questions.

Phillips S.Baker -- Junior President and Chief Executive Officer

Sure thing Heiko.

Heiko Ihle -- H.C. Wainwright -- Analyst

Great. Hey on Lucky Friday I mean so you are 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?

Phillips S.Baker -- Junior President and Chief Executive Officer

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.

Heiko Ihle -- H.C. Wainwright -- Analyst

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

Phillips S.Baker -- Junior President and Chief Executive Officer

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

Heiko Ihle -- H.C. Wainwright -- Analyst

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 am 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 is a a $0.01 is not a whole lot of money. I am just purely curious.

Phillips S.Baker -- Junior President and Chief Executive Officer

I dont 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.

Heiko Ihle -- H.C. Wainwright -- Analyst

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

Phillips S.Baker -- Junior President and Chief Executive Officer

Thanks Heiko.

Operator

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

Jake Sekelsky -- Roth Capital Partners -- Analyst

Hey Phil and team. Thanks for taking my question.

Phillips S.Baker -- Junior President and Chief Executive Officer

Sure Jake.

Lawrence P.Radford -- Senior Vice President and Chief Technical Officer

Just going back to Lucky Friday and kind of building on Heikos question are you guys able to give us any additional color on the agreement? I mean I guess what Im wondering here is where concessions were made and what kind of caused this breakthrough negotiation?

Phillips S.Baker -- Junior President and Chief Executive Officer

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 were able to reach an agreement. But the key thing is going to be ratification by the members. And well wait to see if and when they do that.

Jake Sekelsky -- Roth Capital Partners -- Analyst

Understood. Thats helpful. Okay. And then switching over to Nevada I mean obviously throughout the year weve kind of been shifting from production and development more toward exploration of it there. Is it a trend we should continue to expect into 2020? Im just trying to get a handle on how you are 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.

Phillips S.Baker -- Junior President and Chief Executive Officer

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 weve previously disclosed. And then in the meantime work on plans on how to go forward including how to deal with refractory ore. So were certainly in conversations with places that we could mill that refractory ore. And yeah so at this point we dont have firm plans. Were still working through things and just stay tuned because well be putting back together. Question?

Jake Sekelsky -- Roth Capital Partners -- Analyst

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?

Phillips S.Baker -- Junior President and Chief Executive Officer

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

Jake Sekelsky -- Roth Capital Partners -- Analyst

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?

Phillips S.Baker -- Junior President and Chief Executive Officer

Well 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 havent done anything to limit our upside in what weve done with our puts. And we think were in a very good position with the protection on the downside to be able to deliver the cash flow that were anticipating. Lindsay anything to add?

Lindsay A.Hall -- Senior Vice President and Chief Financial Officer

No. Phil said it all.

Jake Sekelsky -- Roth Capital Partners -- Analyst

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

Phillips S.Baker -- Junior President and Chief Executive Officer

Thanks. Thanks Jake.

Operator

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

Matthew Fields -- Bank of America -- Analyst

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 staffs going back into the mine maybe have to be rehired some or existing the old guys coming back and then one 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?

Phillips S.Baker -- Junior President and Chief Executive Officer

Well its 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 have quit and so they have dropped off the roster. So well be anticipating those 200 people coming back to work over the course of time during 2020 as we ramp up. And well 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?

Lauren M.Roberts -- Senior Vice President and Chief Operating Officer

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.

Matthew Fields -- Bank of America -- Analyst

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

Phillips S.Baker -- Junior President and Chief Executive Officer

Well Matt remember its in production now right. We can never start to producing so.

Matthew Fields -- Bank of America -- Analyst

At the old levels?

Phillips S.Baker -- Junior President and Chief Executive Officer

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.

Matthew Fields -- Bank of America -- Analyst

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 its 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 are willing to do opportunistically to kind of help refinancing basically take refinancing risk of the table?

Phillips S.Baker -- Junior President and Chief Executive Officer

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

Matthew Fields -- Bank of America -- Analyst

Okay. Thats it for me. Thanks.

Phillips S.Baker -- Junior President and Chief Executive Officer

Thanks Matt.

Operator

Your next question comes from the line of

Cosmos Chiu -- CIBC -- Analyst

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 didnt go through. But what was the timing then in terms of that vote. And can we draw comparisons to whats happening now in terms of timing?

Phillips S.Baker -- Junior President and Chief Executive Officer

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

Lawrence P.Radford -- Senior Vice President and Chief Technical Officer

Sounds right. Yeah.

Phillips S.Baker -- Junior President and Chief Executive Officer

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

Cosmos Chiu -- CIBC -- Analyst

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.

Phillips S.Baker -- Junior President and Chief Executive Officer

Thats my understanding.

Cosmos Chiu -- CIBC -- Analyst

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 thats need in terms of the restart should not 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?

Phillips S.Baker -- Junior President and Chief Executive Officer

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 are off to the raises.

Cosmos Chiu -- CIBC -- Analyst

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 dont think you did look at your financial statements? And how do you see that ATM potentially fitting into your overall financial strategy?

Phillips S.Baker -- Junior President and Chief Executive Officer

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

Cosmos Chiu -- CIBC -- Analyst

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 have done so far a400000a [Phonetic] ounces year-to-date in terms of production guidance is 146000 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?

Phillips S.Baker -- Junior President and Chief Executive Officer

Primarily grade. And its thats 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

Cosmos Chiu -- CIBC -- Analyst

For sure.

Phillips S.Baker -- Junior President and Chief Executive Officer

So thats part of the reason second so much better. So

Cosmos Chiu -- CIBC -- Analyst

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

Phillips S.Baker -- Junior President and Chief Executive Officer

Okay. Thank you.

Operator

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

Adam Graf -- B. Riley -- Analyst

Hey guys. Just a couple of quick questions here on Nevada and then Greens Creek. On Nevada I dont 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?

Phillips S.Baker -- Junior President and Chief Executive Officer

Yeah. Well come back to you on that because I just have not aggregated in the room with me at the moment.

Adam Graf -- B. Riley -- Analyst

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 are mentioning?

Phillips S.Baker -- Junior President and Chief Executive Officer

Force majeure well its well known its 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 did not know exactly what the shipping would be and so we were not 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 its accounted for deferred revenue and then that were show-up in Q4.

Adam Graf -- B. Riley -- Analyst

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

Phillips S.Baker -- Junior President and Chief Executive Officer

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.

Adam Graf -- B. Riley -- Analyst

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

Phillips S.Baker -- Junior President and Chief Executive Officer

Yeah. Theres different categories and answer is yes. If they if people do not meet that than its not awarded.

Adam Graf -- B. Riley -- Analyst

Well. Thats interesting. And its just from my own curiosity. I appreciate that. Great. Congratulations.

Phillips S.Baker -- Junior President and Chief Executive Officer

Thank you. Yeah Im pretty proud of that.

Adam Graf -- B. Riley -- Analyst

Yeah. Thanks Phil. Thanks guys.

Operator

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

John Tumazos -- John Tumazos -- Analyst

Thank you.

Phillips S.Baker -- Junior President and Chief Executive Officer

Hey John.

John Tumazos -- John Tumazos -- Analyst

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. Its not an easy thing to dig a mine.

Phillips S.Baker -- Junior President and Chief Executive Officer

Thanks John.

John Tumazos -- John Tumazos -- Analyst

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 Im surprised that your stock is off today when you are 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 two 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 whats going on?

Phillips S.Baker -- Junior President and Chief Executive Officer

Yeah John we would agree this is actually a very good release. To be honest with you I think it becomes program trading thats 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 thats only caused by the fact that the ship was delayed at Greens Creek. I think if you hadnt had that occurred and I think the market would have you wouldnt have had this program trading now. Is that fair Mike Westerlund?

Mike Westerlund -- Vice President of Investor Relations

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.

Phillips S.Baker -- Junior President and Chief Executive Officer

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

John Tumazos -- John Tumazos -- Analyst

Could you walk us through the lower capex and the lower exploration expense? Maybe some people are thinking you are cutting too much meat from the bonds. It looks like the exploration results are better as you spend less money basically indiscernible within Casa Berardi. I have never thought there was a correlation between dollars and results. I think thats with smarts [Phonetic] and good luck.

Phillips S.Baker -- Junior President and Chief Executive Officer

Well I will I got sitting in here Kurt and Keith and they are shaking their head. But look we have not actually cut back on our capital in fact the guidance that we have given for both capital and exploration is unchanged. We made that change earlier in the year. And so we think were at the right levels and its 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 peoples releases. And frankly relative to our peers Im not able to find one thats produced much more than we have. Clearly not everybody has reported so Im 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 Issues] to talk to people and we are planning over the course of the next number of weeks well see the tone improve.

John Tumazos -- John Tumazos -- Analyst

Thank you.

Operator

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

Dalton Baretto -- Canaccord -- Analyst

Thank you. Good morning guys.

Phillips S.Baker -- Junior President and Chief Executive Officer

Hello Dalton.

Dalton Baretto -- Canaccord -- Analyst

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?

Phillips S.Baker -- Junior President and Chief Executive Officer

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.

Dalton Baretto -- Canaccord -- Analyst

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

Phillips S.Baker -- Junior President and Chief Executive Officer

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.

Dalton Baretto -- Canaccord -- Analyst

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

Phillips S.Baker -- Junior President and Chief Executive Officer

Okay. Thanks Dalton.

Operator

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

Phillips S.Baker -- Junior President and Chief Executive Officer

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.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Mike Westerlund -- Vice President of Investor Relations

Phillips S.Baker -- Junior President and Chief Executive Officer

Lindsay A.Hall -- Senior Vice President and Chief Financial Officer

Lauren M.Roberts -- Senior Vice President and Chief Operating Officer

Lawrence P.Radford -- Senior Vice President and Chief Technical Officer

Heiko Ihle -- H.C. Wainwright -- Analyst

Jake Sekelsky -- Roth Capital Partners -- Analyst

Matthew Fields -- Bank of America -- Analyst

Cosmos Chiu -- CIBC -- Analyst

Adam Graf -- B. Riley -- Analyst

John Tumazos -- John Tumazos -- Analyst

Dalton Baretto -- Canaccord -- Analyst

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