Business Segments, Sales of Products and Significant Customers | Note 4: Business Segments, Sales of Products and Significant Customers 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, Keno Hill and Casa Berardi. Effective January 2024, we revised our internal reporting provided to our Chief Operating Decision Maker ("CODM") to no longer include any financial performance information for our Nevada assets ("Nevada"), reflecting the current status of Nevada being on care and maintenance. General corporate activities not associated with operating mines and their various exploration activities, idle properties and environmental remediation services in the Yukon, Canada, and the previously separately reported Nevada assets are presented as “Other". The presentation of the prior period information disclosed below has been revised to reflect this change. The Company regularly reviews its segment reporting for alignment with its strategic goals and operational structure as well as for evaluation of business performance and the allocation of resources by Hecla's President and Chief Executive Officer, who has been identified as our Chief Operating Decision Maker . The CODM evaluates the performance for all of our reportable segments based on segment gross profit or loss. For all segments, the CODM uses segment gross profit or loss to assess segment performance and allocate resources for each segment predominantly in the annual budget and forecasting process. The CODM considers budget to actual variances on a monthly basis when making decisions about allocating capital and personnel to the segments. Significant segment expenses that are components of total cost of goods sold and drive the financial performance of our reportable segments are (i) salaries, wages and other benefits, (ii) contractors, (iii) consumables (iv) change in product inventory and (v) other direct production costs. In further evaluating the operational performance of each segment, the CODM also considers the amount of metals production versus budget, and the grade of the metal processed. General corporate activities not associated with operating mines and their various exploration activities, as well as idle properties and environmental remediation services in the Yukon, Canada, are presented as “other.” The nature of the items that reconcile gross profit (loss) to income (loss) before income and mining taxes are not related to our reportable segments. The tables below present information about our reportable segments as of and for the years ended December 31, 2024, 2023 and 2022 (in thousands). Year ended December 31, 2024 Greens Creek Lucky Friday Keno Hill Casa Berardi Other Total Metal sales $ 421,574 $ 203,154 $ 74,962 $ 209,679 $ — $ 909,369 Environmental remediation services — — — — 20,556 20,556 Intersegment sales — — 3,834 — — 3,834 Reconciliation of sales 421,574 203,154 78,796 209,679 20,556 933,759 Elimination of intersegment sales — — ( 3,834 ) — — ( 3,834 ) Total consolidated sales 929,925 Cost of sales and other direct production costs Salaries, wages and other benefits 69,990 52,879 29,658 49,345 206 202,078 Contractors 6,135 14,154 22,960 23,982 19,696 86,927 Materials and consumables 93,223 39,957 28,648 55,867 625 218,320 Product inventory change 5,858 ( 2,628 ) ( 8,902 ) ( 3,269 ) — ( 8,941 ) Other direct production costs 39,471 1,281 13,216 24,854 — 78,822 Transfer to ramp-up and suspension costs (a) — ( 2,207 ) ( 26,754 ) — — ( 28,961 ) Depreciation, depletion and amortization 53,450 41,049 16,136 72,835 — 183,470 Gross profit (loss) $ 153,447 $ 58,669 $ — $ ( 13,935 ) $ 29 $ 198,210 Other operating expenses (b) 91,934 Income from operations 106,276 Other Expense: Interest expense ( 49,834 ) Fair value adjustments, net ( 2,204 ) Foreign exchange gain, net 7,552 Other income 4,426 Income before income and mining taxes $ 66,216 Capital additions $ 47,795 $ 49,592 $ 54,869 $ 60,704 $ 1,532 $ 214,492 Identifiable assets 564,334 587,945 413,982 687,080 727,719 2,981,060 (a) Total cost of sales in excess of sales value are transferred to ramp-up and suspension costs. (b) Other operating expense items include general and administrative, exploration and pre-development, ramp-up and suspension costs, provision for closed operations and environmental matters, write-down of property, plant and equipment and other operating (income) expense, net. Lucky Friday's income from operations for 2024 includes $ 50.0 million of business interruption and property damage insurance proceeds received during the respective periods related to the fire which suspended Lucky Friday's operations from August 2023 through January 8, 2024. The insurance proceeds received are recorded as part of "Other operating (income) expense, net" in our Consolidated Statements of Operations and Comprehensive Income (Loss). During 2024, the Company wrote down $ 14.6 million of property, plant and mine development which had no salvage value. Of this amount, $ 13.9 million is included in Lucky Friday's income from operations and is related to the remote vein miner machine for which (i) we no longer had a use following the success of the Underhand Closed Bench ("UCB") mining method, (ii) we had been unsuccessful in locating a buyer, and (iii) the vendor advised us during the period that it would discontinue support for the program. The write down is recorded as part of "Write down of Property, Plant and Mine Development" in our Consolidated Statements of Operations and Comprehensive Income (Loss). Year ended December 31, 2023 Greens Creek Lucky Friday Keno Hill Casa Berardi Other Total Metal sales $ 384,504 $ 116,284 $ 35,518 $ 177,678 $ 960 $ 714,944 Environmental remediation services — — — — 5,283 5,283 Intersegment sales — — — — — — Reconciliation of sales 384,504 116,284 35,518 177,678 6,243 720,227 Elimination of intersegment sales - Total consolidated sales 720,227 Cost of sales and other direct production costs Salaries, wages and employee benefits 68,183 43,142 21,569 51,201 3,029 187,124 Contractors 5,917 8,681 10,472 31,912 1,125 58,107 Materials and consumables 89,850 27,030 18,018 48,130 1,606 184,634 Product inventory change 4,266 8,014 ( 1,163 ) 2,913 269 14,299 Other direct production costs 37,684 ( 1,460 ) 12,138 23,376 1,207 72,945 Transfer to ramp-up and suspension costs (a) - ( 25,548 ) ( 29,793 ) ( 2,228 ) ( 1,036 ) ( 58,605 ) Depreciation, depletion and amortization 53,995 24,325 4,277 66,037 140 148,774 Gross profit (loss) $ 124,609 $ 32,100 $ — $ ( 43,663 ) $ ( 97 ) $ 112,949 Other operating expenses (b) 157,623 Loss from operations ( 44,674 ) Other Expense: Interest expense ( 43,319 ) Fair value adjustments, net 2,925 Foreign exchange loss, net ( 3,810 ) Other income 5,883 Loss before income and mining taxes $ ( 82,995 ) Capital additions $ 43,542 $ 65,337 $ 44,672 $ 70,056 $ 280 $ 223,887 Identifiable assets 569,369 578,110 362,986 683,035 817,604 3,011,104 (a) Total cost of sales in excess of sales value are transferred to ramp-up and suspension costs. (b) Other operating expense items include general and administrative, exploration and pre-development, ramp-up and suspension costs, provision for closed operations and environmental matters, write-down of property, plant and equipment and other operating (income) expense, net. Year ended December 31, 2022 Greens Creek Lucky Friday Keno Hill Casa Berardi Other Total Metal sales $ 335,062 $ 147,814 $ — $ 235,136 $ 420 $ 718,432 Environmental remediation services — — — — 473 473 Intersegment sales — — — — — — Reconciliation of sales 335,062 147,814 — 235,136 893 718,905 Elimination of intersegment sales — Total consolidated sales 718,905 Cost of sales and other direct production costs Salaries, wages and employee benefits 64,142 42,155 863 58,678 6,186 172,024 Contractors 7,550 11,384 482 52,715 3,835 75,966 Materials and consumables 81,538 29,868 459 54,896 5,135 171,896 Product inventory change ( 5,885 ) ( 2,302 ) - ( 186 ) ( 9,554 ) ( 17,927 ) Other direct production costs 36,462 1,789 496 21,833 ( 1,428 ) 59,152 Transfer to ramp-up and suspension costs (a) - - ( 2,300 ) - - ( 2,300 ) Depreciation, depletion and amortization 48,911 33,704 - 60,962 361 143,938 Gross profit (loss) $ 102,344 $ 31,216 $ — $ ( 13,762 ) $ ( 3,642 ) $ 116,156 Other operating expenses (b) 128,594 Loss from operations ( 12,438 ) Other Expense: Interest expense ( 42,793 ) Fair value adjustments, net ( 4,723 ) Foreign exchange gain, net 7,211 Other income 7,829 Loss before income and mining taxes $ ( 44,914 ) Capital additions $ 36,898 $ 50,992 $ 19,725 $ 39,667 $ 2,096 $ 149,378 Identifiable assets 582,687 571,510 276,096 681,631 815,248 2,927,172 (a) Total cost of sales in excess of sales value are transferred to ramp-up and suspension costs. (b) Other operating expense items include general and administrative, exploration and pre-development, ramp-up and suspension costs, provision for closed operations and environmental matters, write-down of property, plant and equipment and other operating (income) expense, net. The following are our long-lived assets by geographic area as of December 31, 2024 and 2023 (in thousands): 2024 2023 United States $ 1,684,890 $ 1,698,285 Canada 1,001,612 960,109 Mexico 7,617 7,856 Total long-lived assets $ 2,694,119 $ 2,666,250 Our products consist of metal concentrates and carbon material, which we sell to custom smelters, metal traders and third-party processors, and unrefined bullion bars (doré), which may be sold as doré or further refined before sale to precious metal traders. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer. For sales of metals from refined doré at Casa Berardi, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner. Refining, selling and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred. For sales of carbon materials, transfer of control takes place, the performance obligation is met, the transaction price is known, and revenue is recognized generally at the time of arrival at the customer's facility. For concentrate sales, which we currently have at Greens Creek, Lucky Friday, and Keno Hill, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment. Concentrates sold at Lucky Friday typically leave the mine and are received by the customer within the same day. However, there is a period of time between shipment of concentrates from Greens Creek and Keno Hill and their physical receipt by the customer, and judgment is required in determining when control has been transferred to the customer and the performance obligation has been met for those shipments. We have determined control is met, title is transferred and the performance obligation is met upon shipment of concentrate parcels from Greens Creek and Keno Hill because, at that time, 1) legal title is transferred to the customer, 2) the customer has accepted the parcel and obtained the ability to realize all of the benefits from the product, 3) the concentrate content specifications are known, have been communicated to the customer, and the customer has the significant risks and rewards of ownership of it, 4) it is very unlikely a concentrate parcel from Greens Creek will be rejected by a customer upon physical receipt, and 5) we have the right to payment for the parcel. Judgment is also required in identifying our concentrate sales performance obligations. Most of our concentrate sales involve “frame contracts” with smelters that can cover multiple years and specify certain terms under which individual parcels of concentrates are sold. However, some terms are not specified in the frame contracts and/or can be renegotiated as part of annual amendments to the frame contract. We have determined parcel shipments represent individual performance obligations satisfied at the point in time when control of the shipment is transferred to the customer. The consideration we receive for our concentrate sales fluctuates due to changes in metals prices between the time of shipment and final settlement with the customer. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement with the customer. Also, it is unlikely a significant reversal of revenue for any one concentrate parcel will occur. As such, we use the expected value method to price the parcels until the final settlement date occurs, at which time the final transaction price is known. At December 31, 2024, metals contained in concentrate sales and exposed to future price changes tota led 1.5 million ounces of silver, 2,000 ounces of gold, 39,150 tons of zinc, and 52,350 tons of lead. However, as discussed in Note 10 , we seek to mitigate the risk of price adjustments by using financially-settled forward contracts for some of our sales. Sales and accounts receivable for concentrate shipments are recorded net of charges for treatment, refining, smelting losses, and other charges negotiated by us with the customers, which represent components of the transaction price. Charges are estimated by us upon shipment of concentrates based on contractual terms, and actual charges typically do not vary materially from our estimates. Costs charged by customers include fixed treatment and refining costs per ton of concentrate and may include price escalators which allow the customers to participate in the increase of lead and zinc prices above a negotiated baseline. Costs for shipping concentrates to customers are recorded to cost of sales as incurred. Sales of metal concentrates and metal products are made principally to custom smelters, third-party processors and metal traders. The percentage of metal sales contributed by each segment is reflected in the following table: Year Ended December 31, 2024 2023 2022 Greens Creek 46.4 % 53.7 % 46.6 % Lucky Friday 22.3 % 16.3 % 20.6 % Keno Hill 8.2 % 5.0 % — Casa Berardi 23.1 % 24.9 % 32.7 % Other — 0.1 % 0.1 % 100 % 100 % 100 % Total sales for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Silver $ 413,980 $ 302,284 $ 265,054 Gold 318,256 274,613 298,910 Lead 87,223 72,726 83,384 Zinc 130,767 116,230 123,057 Copper 416 — — Less: Smelter and refining charges ( 41,273 ) ( 50,909 ) ( 51,973 ) Total metal sales 909,369 714,944 718,432 Environmental remediation services 20,556 5,283 473 Total sales $ 929,925 $ 720,227 $ 718,905 The following is metal sales information by geographic area based on the location of smelters and metal traders (for concentrate shipments) and the location of parent companies (for doré sales to metal traders) for the years ended December 31, 2024, 2023 and 2022 (in thousands): 2024 2023 2022 United States $ 41,079 $ 36,307 $ 21,938 Canada 457,423 375,092 406,600 Japan 44,561 52,744 51,375 Korea 181,372 127,590 107,828 China 183,644 103,534 136,514 Total, excluding gains/losses on forward contracts $ 908,079 $ 695,267 $ 724,255 Metal sales by significant product type for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Doré and metals from doré - Greens Creek, Casa Berardi $ 238,124 $ 211,321 $ 255,608 Carbon - Casa Berardi 7,670 4,333 2,607 Silver concentrate - Greens Creek, Lucky Friday, Keno Hill 493,584 356,941 329,165 Zinc concentrate - Greens Creek, Lucky Friday, Keno Hill 111,101 80,274 109,177 Precious metals concentrate - Greens Creek 57,600 42,398 27,698 Total, excluding gains/losses on forward contracts $ 908,079 $ 695,267 $ 724,255 Metal sales for 2024, 2023 and 2022 included net gains of $ 1.3 million and $ 19.7 million and net losses of $ 5.8 million, respectively, on derivative contracts for silver, gold, lead and zinc contained in our sales. See Note 10 for more information. Metal sales from continuing operations to significant metals customers as a percentage of total sales were as follows for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 Customer A - Casa Berardi 17.2 % 24.2 % 35.4 % Customer B - Greens Creek, Lucky Friday 28.1 % 11.8 % 23.9 % Customer C - Greens Creek 18.5 % 15.5 % 11.3 % Customer D - Greens Creek, Keno Hill 15.9 % 9.5 % 6.9 % Our trade accounts receivable balance related to contracts with customers was $ 31.5 million, $ 19.4 mil lion and $ 45.1 million at December 31, 2024, 2023 and 2022, respectively, and included no allowance for credit losses. Trade accounts receivable balances with significant metals customers as of December 31, 2024, 2023 and 2022 were as follows: 2024 2023 2022 Customer B 46.1 % 22.2 % 57.5 % Customer C 16.8 % 3.3 % 3.1 % Customer D 28.2 % — 2.1 % Customer E 7.2 % 24.2 % 3.2 % Customer F — — 15.9 % Customer G — — 11.8 % Customer H — 34.8 % — We have determined our contracts do not include a significant financing component. For doré sales and sales of metal from doré, payment is received at the time the performance obligation is satisfied. Payment for carbon sales is received within a relatively short period of time after the performance obligation is satisfied. The amount of consideration for concentrate sales is variable, and we receive payment for a significant portion of the estimated value of concentrate parcels within a relatively short period of time after the performance obligation is satisfied. Our environmental services remediation revenue is all generated by our ERDC subsidiary and all from one customer CIRNAC. Annually, ERDC and CIRNAC agree to detailed work plans ("DWP") covering the planned activities from April 1 to March 31, the Canadian government's fiscal year. All DWPs are a separate performance obligation, which are satisfied over time as the services are performed and CIRNAC approves the work performed. Payment terms are 30 days after receipt of an invoice by CIRNAC. CIRNAC has the ability to cancel the contract with or without cause by providing written notice to the Company. ERDC is owed for work performed as of the date of cancellation. As at December 31, 2024, 2023 and 2022, CIRNAC owed us $ 8.8 million, $ 3.6 million and $ 0.4 million, which is included as part of "Other Accounts Receivable" on our consolidated balance sheet. We do not incur significant costs to obtain contracts, nor costs to fulfill contracts which are not addressed by other accounting standards. Therefore, we have not recognized an asset for such costs as of December 31, 2024 and 2023. |