헤클라 마이닝(HL) 2026년 3분기 실적 콘퍼런스 콜: 사상 최대 현금흐름 및 가이던스 상향

주요 핵심 요약

• 헤클라 마이닝(Hecla Mining)은 2026년 3분기에 분기 기준 역대 최대인 2억 300만 달러의 영업활동 현금흐름과 1억 5,100만 달러의 잉여현금흐름을 기록했다.
• 계속영업이익은 2분기 1억 1,800만 달러(주당 0.18달러)에서 1억 5,000만 달러(주당 0.22달러)로 증가했다. 계속영업 조정 EBITDA는 전분기 대비 6%, 전년 동기 대비 40% 이상 증가한 2억 1,100만 달러를 기록했다.
• 헤클라는 420만 온스의 은을 생산했다. 그린스 크릭이 190만 온스 이상, 럭키 프라이데이가 약 130만 온스, 키노 힐이 분기 역대 최대인 96만 3,000온스를 기여했다.
• 당사는 분기 말 기준 6억 9,200만 달러의 현금, 약 6억 8,000만 달러의 순현금을 보유했으며, 금융리스 외 장기 부채는 없다. 총 유동성은 약 12억 달러다.
• 헤클라는 2026년 은 생산 원가 가이던스를 개선하고, 통합 은 생산량 가이던스의 하단을 상향 조정했으며, 계획된 자본 지출을 축소했다.
• 경영진은 키노 힐, 마이더스 가동 재개 가능성, 그린스 크릭의 자체 프로젝트에 힘입어 연간 2,000만 온스 이상의 은을 생산하겠다는 중기 목표를 유지했다.

주요 재무 데이터

3분기 매출은 전분기에서 8월 초로 이월된 그린스 크릭 정광 선적 시점의 수혜를 입었다. 이익에는 주로 유가증권의 실현 및 미실현 이익에서 발생한 공정가치 평가이익 3,600만 달러 증가분도 포함되었다. 이러한 요인들은 매출원가, 세금, 탐사 및 사전 개발 지출의 증가로 일부 상쇄되었다.

사업 및 영업 실적

그린스 크릭

그린스 크릭은 190만 온스 이상의 은과 약 1만 2,000온스의 금을 생산했다. 생산량은 주로 계획된 제련소 정비로 인해 전분기 대비 감소했다.

이 광산은 1억 5,500만 달러의 영업활동 현금흐름과 해당 사업장 역대 최대인 1억 4,700만 달러의 잉여현금흐름을 창출했다. 현금 원가는 은 온스당 마이너스 0.11달러였으며, 부산물 매출 차감 후 총 유지 원가는 온스당 마이너스 3.25달러였다.

헤클라는 현재 건식 적재 광미로 배출되는 은과 금을 회수하기 위한 황철석 정광 회수 설비 구축을 추진하고 있다. 평균 매장량 품위 기준으로 경영진은 전면 가동 후 연간 100만~120만 온스의 은과 1만~1만 5,000온스의 금이 추가 생산될 것으로 추정한다. 엔지니어링, 인허가 및 최종 승인 결과에 따라 임시 설비를 활용한 간헐적 생산은 이르면 2027년 말에 시작될 수 있으며, 2028년 말에는 전면 가동에 도달할 가능성이 있다.

9월 30일 기준 건식 적재 광미 시설에는 약 5,100만 온스의 은과 약 60만 온스의 금이 함유된 약 1,070만 톤의 잔재물이 포함되어 있는 것으로 추정된다. 당사는 제3자 위탁 처리, 제련소 또는 정광 딜러 대상 직접 판매, 현장 처리 등 세 가지 잠재적 방안을 검토하고 있다. 약 5,500 건조 메트릭 톤 규모의 시험용 물량이 4분기에 선적 및 출하될 예정이다.

럭키 프라이데이

럭키 프라이데이는 2분기에 기록한 역대 최대치인 150만 온스와 비교해 약 130만 온스의 은을 생산했다. 전분기 대비 생산 감소는 고품위 광석 포켓의 고갈에 따른 것이다.

부산물 매출 차감 후 현금 원가는 온스당 7.31달러, 총 유지 원가는 온스당 27.68달러였다. 이 광산은 8,800만 달러의 영업활동 현금흐름과 6,700만 달러의 잉여현금흐름을 창출했다.

실버 샤프트 프로젝트는 2026년 4분기에 시운전될 것으로 예상된다. 경영진은 시운전 직후 지하 작업 환경이 개선되기 시작해 광산의 15년 매장량 수명을 뒷받침할 것이라고 밝혔다.

키노 힐

키노 힐은 35% 이상의 은 품위 향상과 분기 역대 최대 채굴 속도에 힘입어 분기 최대인 96만 3,000온스의 은을 생산했다. 영업활동 현금흐름은 500만 달러였으며, 잉여현금흐름은 마이너스 200만 달러였다.

헤클라는 허가된 광미, 폐석 및 수처리 용량을 보존하기 위해 처리량을 줄일 예정이다. 처리량은 4분기에 일일 약 300톤으로 감소한 후 2027년 1월부터 추가 축소될 것으로 예상된다.

경영진은 채굴 및 처리가 더욱 선별적으로 이루어짐에 따라 은 생산량 감소 폭이 처리량 감소 폭보다 상대적으로 적을 것으로 예상한다. 저품위 광석은 향후 처리를 위해 적치될 예정이다. 다만 광산의 높은 고정비 구조로 인해 인허가 기간 동안 매출은 감소하고 톤당 원가는 상승할 전망이다.

마이더스 및 탐사

헤클라는 네바다주 마이더스 사업의 가동 재개를 계속 평가하고 있다. 기존 인프라에는 일일 약 1,200톤 용량의 제련소와 약 15년 저장 용량의 광미 시설이 포함된다.

3분기 탐사 및 기업 개발 지출은 총 1,660만 달러를 기록했다. 경영진이 2027년 탐사 예산 증액을 검토 중이지만 연간 가이던스는 5,500만 달러로 유지된다.

키노 힐에서 헤클라는 4대의 시추기를 운용하고 있다. 시추 작업을 통해 플레임 & 모스 및 버밍엄 딥의 광화작용 구간이 확장되었다. 그린스 크릭에서는 노스웨스트 웨스트 광량 인근에서 황화물 광화작용이 확인되었으며, 네바다 시추는 마이더스, 오로라, 홀리스터에서 계속되었다.

경영진 가이던스

• 그린스 크릭의 2026년 생산량 가이던스는 은 800만~830만 온스, 금 5만 1,000~5만 5,000온스로 유지된다.
• 그린스 크릭의 매출원가 가이던스는 1~3분기 실적과 4분기 현장 발전 비용 증가 전망을 반영하여 1,000만 달러 증가한 2억 5,000만 달러로 상향되었다.
• 그린스 크릭의 현금 원가 가이던스는 은 온스당 마이너스 13.00달러~마이너스 12.50달러로 개선되었다. 부산물 매출 차감 후 총 유지 원가 가이던스는 온스당 마이너스 5.50달러~마이너스 5.00달러로 개선되었다.
• 럭키 프라이데이의 연간 은 생산량 가이던스는 하단을 520만 온스로 상향 조정하면서 범위가 축소되었다. 매출원가 가이던스는 1억 4,000만 달러로 유지된다.
• 럭키 프라이데이의 현금 원가 가이던스는 온스당 8.50~9.00달러로 개선되었다. 부산물 매출 차감 후 총 유지 원가 가이던스는 온스당 24.50~25.50달러로 범위가 좁혀졌다.
• 경영진은 중기적으로 연간 2,000만 온스 이상의 은을 생산한다는 목표를 계속 유지하고 있다. 키노 힐의 주요 영업적 제약 요소가 2029년 중반에서 후반 사이에 완화되어 처리량이 일일 440톤으로 회복될 가능성이 있다고 보고 있다.

리스크 및 관전 포인트

키노 힐의 허가된 광미 용량은 잔여 용량이 약 20만 톤에 불과해 주요 고정 제약 요소로 작용하고 있다. 폐석 적치 및 수처리 용량도 추가적인 불확실성을 유발한다. 인허가나 인프라 지연, 임시 폐석 적치 제한, 전력 공급 감소, 은 가격의 급격한 하락 등은 추가 감산이나 유지·보수(가동 중단) 상태로 이어질 수 있다.

그린스 크릭의 황철석 및 광미 프로젝트는 엔지니어링 결과, 야금 시험, 인허가, 제3자 위탁 처리 여력, 최종 투자 승인에 좌우된다. 경영진은 또한 명시된 64억 달러 규모의 광미 내 원상태 금속 가치에 막대한 운송, 처리, 판매 비용이 제외되어 있으며 광물 자원량이나 매장량 추정치가 아니라고 조언했다.

인건비는 헤클라 비용의 약 50%를 차지한다. 경영진은 현재의 인력 경쟁이 원가 구조에 실질적인 영향을 미치지 않았지만 지속적으로 모니터링해야 할 요인이라고 밝혔다.

애널리스트 Q&A 하이라이트

자본 배분: 경영진의 최우선 과제는 자체 성장, 탐사 및 원자재 가격 하락기의 대응력을 지원하기 위한 충분한 유동성을 확보하는 것이다. 다만 로버트 크르츠마로프 CEO는 이사회가 2027년 상반기에 더 실질적인 자본 환원 논의를 진행할 가능성이 높다고 밝혔다. 잠재적 옵션에는 배당금 지급이나 자사주 매입이 포함되며, 은 연동 배당금은 가능성이 낮은 것으로 설명됐다.

M&A 기준: 헤클라는 은 사업 중심과 상대적으로 안전한 관할 구역에 계속 주력할 방침이다. 경영진은 상세한 리스크 평가를 전제로 프레이저 연구소(Fraser Institute) 지수 상위 3분의 1에 속하는 국가를 검토할 수 있다고 밝혔다. 투자가치와 기준을 충족하는 매력적인 인수 기회가 있다면 검토하겠지만, 자체 성장이 여전히 기본 전략이다.

키노 힐 전망: 경영진은 즉시 유지·보수(가동 중단) 상태로 전환하기보다 인력을 유지하면서 현재 허가 범위 내에서 영업을 계속하는 것을 선호한다. 회사는 처리량 축소 기간이 약 3년 동안 지속될 것으로 예상하며, 연간 2,000만 온스 이상의 중기 생산 목표에는 변동이 없다고 밝혔다.

키노 힐 탐사: 경영진은 약 15년의 추정 매장량 수명을 감안할 때 현재 광산에 추가적인 매장량 확보가 필요하지 않다고 전했다. 대신 광산 인근 시추 작업은 기존 개발 구역에서 접근 가능한 고품위 광석에 집중하고 있으며, 영업 측면에서는 희석률을 낮추고 제련소 투입 광석의 품질을 개선하는 데 주안점을 두고 있다.

그린스 크릭 광미 전략: 경영진은 세 가지 처리 방식이 유연성을 제공하며 병행하여 사용될 수 있다고 밝혔다. 또한 이 기술이 현재 제련소 투입 광석용으로 개발 중인 황철석 정광 회수 설비와 유사할 것이기 때문에, 향후 현장 처리 가능성이 헤클라의 전문성 영역을 벗어나는 것으로 보지 않는다.

실적발표 컨퍼런스 콜 전문

---

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Hello, everyone. Thank you for joining us, and welcome to the Q3 2026 Hecla Mining Company Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Mike Parkin, Vice President of Strategy and Investor Relations. Mike, please go ahead.

Michael Parkin

Thank you, Hillary. Good morning, and thank you for all for joining us for Hecla's Third Quarter 2026 Results Conference Call. I'm Mike Parkin, Vice President of Strategy and Investor Relations. Our earnings release that was issued yesterday along with today's presentation are available on our website.

On the call with us today is Rob Krcmarov, President and Chief Executive Officer; Russell Lawlar, Senior Vice President and Chief Financial Officer; Carlos Aguiar, Senior Vice President and Chief Operating Officer; [ Brian Erickson ], Vice President of Operations; Kurt Allen, Vice President, Exploration; as well as other members of our management team. At the conclusion of our prepared remarks, we will be available to answer your questions.

Now turning over to Slide 2, cautionary statements. Any forward-looking statements made today by the management team come under the Private Securities Litigation Reform Act and involve risks as shown on this slide in our earnings release and in our 10-Q filing with the SEC. These and other risks could cause results to differ from those projected in the forward-looking statements.

Non-GAAP measures are cited on this call and related slides are reconciled in these slides or in the back of the news release. Please note, as we discuss financial figures and projections throughout this presentation and in the earnings release, we are referring to our continuing operations.

I will now pass the call over to Rob.

Robert Krcmarov

Thank you, Mike, and good morning, everyone. Turning to Slide 3. Hecla in the third quarter of 2026 is from a position of real strength. And I'm speaking of financial strength, a position today that marks the strongest balance sheet in the company's very long history. And so the attributes shown on this slide that define us as North America's premium silver producer, they haven't changed. What has changed is the confidence with which we can now invest in what comes next.

So I'm going to have our team discuss some really remarkable developments that are coming out of our substantial project pipeline further solidifies our market positioning. And so a little bit more on that in a minute.

So turning to Slide 4. This was another very strong quarter for Hecla, even though a couple of the headline numbers moved in a different direction than last quarter. I want to spend a moment walking through why because I think the underlying story here is a very good one.

Revenue from continuing operations was $334 million compared to the record $411 million we reported in the first quarter. Two things are driving that change. And it's worth being clear about both because neither of them is a production problem.

First, metal prices pulled back from the highs we saw early in the year. So I remain very confident in the outlook for silver and gold prices.

Second, part of the gap was simply timing. A meaningful amount of silver constraint, mostly at Greens Creek was produced but not yet sold as of quarter end. Had that concentrate shift with the quarter, revenue would have been noticeably higher on top of an already strong quarter. So that inventory shipped in early August, and you'll see it sharp in our third quarter results. Those of you who followed us for some time know the lumpy sales pattern at Greens Creek.

Adjusted EBITDA from continuing operations was $199 million, more than double the $94 million we generated a year ago. Operating cash flow was -- sorry -- to continue. Just going to reemphasize, I've got some numbers mixed up from the previous quarter, and I apologize everyone. Income from continuing operations was $160 million or $0.22 a share, up from $118 million or $0.18 a share in the second quarter. Adjusted EBITDA from continuing operations was $211 million. That's up 6% over the quarter and up more than 40% on a year ago.

Operating cash flow from continuing operations was a record $203 million. Free cash flow was recut at $151 million, which is nearly true to what we generated in the third quarter last year. And Greens Creek led the way with a site record of $147 million.

The balance sheet is the strongest it's ever been. We finished the quarter with almost $700 million in cash and no long-term debt up from finance leases. We've also put in place a new $500 million revolving credit facility it's undrawn other than a small amount of letters of credit, and it comes with a $100 million [indiscernible] option. So if you add it all up, we have about $1.2 billion of liquidity, and that gives us real options, the flexibility to keep investing in the projects and the assets that make the most sense on our own time line rather than being dictated to by the silver price as in the past.

On the operating side, we produced 4.2 million ounces of silver within 1% in the second quarter. Greens Creek produced over 1.9 million ounces on Friday produced nearly 1.3 million ounces which is what we planned after coming out of the high-grade pocket that drove second quarter, that record in the second quarter.

In Keno Hill contributed almost 1 million ounces, and that shows what this asset can do, and that's why we keep investing and derisking its future. So wait on Keno Hill, that record came from running the mill close to its permanent limit. And our current permits can't support that for long. So we're choosing to suppress throughput to stay within permit limits. And Carlos will give you the numbers and the timing on that in a minute.

Civil production should fall by less than throughput, and that's because we'll be more selective in both the mine and the mill. I want to be clear, Keno Hill carries a high fixed cost base. So through the permitting period at current prices, you should expect lower revenue and higher cost per tonne. That said, I still see real value in that ground, and that's why we have four drills turning there.

We also made some positive changes to our 2026 guidance. We raised the bottom end of our consolidated silver production range. We improved our silver cash cost and all-in sustaining cost guidance, and we lowered our capital investment guidance.

Turning to Slide 5. This slide shows where we want to take company. Our medium-term goal is to be a silver producer of more than 20 million ounces a year. A potential restart at Midas is part of that, and so is Keno Hill getting to its permanent mill rate. once the permitting and infrastructure work is done. All of it depends on exploration success, development and permitting.

Closer in, we have two organic opportunities at Greens Creek. One is the pyrite concentrate circuit we told you about last quarter, and the other is the dry stack turnings, which now has more than one potential path forward.

Of the three projects on the next slide have in common is low capital intensity. Our path for any of these investments is a return that clears our investment thresholds by a healthy margin and early indications on the pyrite circuit are encouraging on that front.

I am constructive on silver and gold, even so, I'd rather build cash now so we can keep these projects moving whatever the price does. And that's why the balance sheet has been such a priority for us.

I'll turn it over to Brian to walk through the latest progress on [indiscernible]. Brian, over to you.

Brian Erickson

Thanks, Rob. Turning to Slide 6. So work continues to advance on all three organic projects Rob discussed and as shown on this slide, and they share one important attribute, each is expected to be low in capital spend. These projects build on infrastructure we already have. They follow permitting paths that are already established and well understood, and we already have the operating expertise in-house. That allows us to produce potentially high-margin production and cash flow growth while reducing many of the exploration and development risks on [ Hariton ] greenfield projects.

Starting with the Greens Creek pyrite concentrate circuit. We're advancing engineering on a new circuit at the mill that will recover additional silver and gold, the current reports to the dry stack tailings facility, producing a marketable pyrite concentrate that is shown to be in high demand. This work is at a scoping level, incorporating some advanced design and preliminary cost estimates are underway.

At average reserve grades, we continue to estimate that the circuit could add potentially 1 million to 1.2 million ounces of silver and 10,000 to 15,000 ounces of gold in annual production once fully ramped up on top of things because existing output. Early indications continue to point to a robust return on capital that meets our investment thresholds while also reducing the rate at which we add tailings to the storage facility, which would be expected to lower future tailings storage capacity related investment.

With a favorable benefit to cost ratio and what we believe is low technical risk. This project is well suited to an accelerated engineering and execution path subject to permits and final investment approval.

Under that path, we expect to begin intermittent pyrite production of concentrate as early as late '27 using temporary equipment. With potential to reach full capacity with the completion of the new circuit expected in late 2028. These estimates remain preliminary and are subject to changes in engineering advances, but we're very excited about this project.

Second is the Greens Creek [ Tails ] reprocessing project. Now looking at the middle age on the slide. I want to spend a little extra time because the scope of what we're evaluating has broadened. As of September 30, the dry stack tailings facility held an estimated 10.7 million tons of material containing roughly 51 million ounces of silver, nearly 600,000 ounces of gold in additional critical minerals.

At quarter end metals prices, that represents in its situ gross metal value of approximately $6.4 billion. That's a gross figure before transportation processing and sales [indiscernible], which we expect to be significant and it is not amend our resource to reserve. So think of it as at a measured scale. We're evaluating the potential of three pathways forward with this.

First pathway is the one we've been working on for a few years, a multiphase metallurgical program with a third party. Phase 3 testing was completed in August and the metallurgical results are pending and expected any week now. That's a key milestone that should help shape our next steps, including the potential to advance to a pilot plan tested in Phase 4. This pathway depends on our potential partners securing a suitable processing facility, which they are working on.

Early indications point to a potentially low capital intensity path for equity to achieve initial cash flows with first cash flows potentially in about 3 years based on our current understanding today. So that timing is subject to a number of factors, largely outside of our control and could change.

What is new this quarter is that we are now evaluating two additional pathways. One of the new potential pathways is a direct sale of the dry stack material. Following interest from third-party smelters and concentrate dealers, we're evaluating whether this material could qualify as low-grade feedstock that we can sell directly. And this is moving from concept to action.

In the fourth quarter, we expect to load a test parcel from Greens Creek of approximately 5,500 dry metric tons of this low-grade feedstock for shipment and sale to a third-party smelter. This remains early stage, and there's no assurance that lead the commercial shipments next year and beyond, but it is an important first step, and we'll look to update the market as we learn more.

The third pathway self-processing, this would potentially involve an on-site processing facility, which could require new or amended permits. We expect to begin metallurgical evaluation of the self-processing concept in the first quarter of 2027 and to initial results potentially available by spring of '27 to help determine next steps.

These pathways for the Greens Creek tailings are not mutually exclusive. Our path forward could include more than one of them and we're evaluating combinations of two or more. That flexibility is real strength because it gives us multiple ways to capture value and generate cash flows from material we already have on site.

And as with pyrite concentrate, reprocessing all or part of the tailings could reduce the space needed for tailings storage and help lower Greens Creek's long-term reclamation liability. We expect to provide further details in coming quarters as the evaluation work advances.

Finally, the Midas Restart Project in Nevada also continues to advance and it shares that same low capital intensity attribute. Midas has permitted infrastructure, including a mill with approximately 1,200 tonnes per day of milling capacity, a tailings facility with roughly 15 years of storage capacity and other surface infrastructure. All of which could help reduce the time and capital required for a restart.

We're working to expand the existing high-grade gold and silver resource to the scale needed to support a restart, and we continue to evaluate a hub and spoke bottle that we bring ore from Midas and potentially other regional sources such as Hollister, which is well within trucking distance through the existing mill.

Drilling resumed at Hollister this quarter after a multiyear pause, and Kurt will touch on the latest Nevada exploration results in a few minutes.

In summary, three capital projects at three different stages with one common thread. Low capital intensity and the potential for high margins. We'll keep you updated as the work advances. I'll now turn the call over to Carlos for the operations review.

Carlos Aguiar

Thank you, Brian. Turning to Slide 8. Greens Creek produced 1.9 million ounces of silver and nearly 12,000 ounces of gold in the third quarter, lower than the second quarter, primarily due to higher term plant maintenance during the quarter. Cost applicable to sales were $76 million, reflecting the higher sales volume from the timing of shipments noted by Rob earlier. Free cash costs of negative $0.11 per ounce in AISC of negative $3.25 per ounce, but after by-product credits.

Cash flow from operations was $155 million free cash flow was a new side level quarterly record of $147 million. As Rob mentioned, the concentrate inventory we carried at the end of the second quarter, cheaper in early August and is reflected in these results.

Looking ahead, we have additional stable maintenance planning in the fourth quarter. We remain confident in achieving production guidance at our flagship operation, which is -- which we are maintaining a 8 million to 8.3 million ounces of silver and 51,000 to 55,000 ounces of gold.

We are raising our cost applicable to sales guidance by $10 million to $250 million, reflecting actual results over the first 9 months and higher expected on-site power generation cost in the fourth quarter. this increase in total dollars. On a per ounce basis, guidance has improved, driven by our strong first 9 months in [indiscernible] product credits. We now expect cash costs of negative $13 to nearly $12.50 per ounce, an [indiscernible] of negative $5.50 to negative $5 per ounce, both after byproduct credits.

Turning to Slide 9. Lucky Friday produced nearly 1.3 million ounces of silver as planned, but the mined-out of the high-grade ore pocket that drove record second quarter production of 1.5 million ounces. Cost applicable to sales were $34 million. Cash costs were $7.31 per ounce and [indiscernible] $27.68 per ounce, both after by product credits. But were up from the second quarter, reflecting lower production volume and higher sustaining capital spending. Cash flow from operations was $88 million and free cash flow was $67 million.

The [ Silver Valley ] project is expected to be commissioned in the fourth quarter of 2026. We expect it to begin improving underground working conditions shortly after commissioning. Supporting the mine's 15-year reserve mine life.

For the full year, we have tightened our super production guidance by raising the low end of the range to 5.2 million ounces be cost applicable to sales with no change at $140 million. We have also improved our cost guidance. We now expect cash costs of $8.50 to $9 per ounce, down from 9% to 9.75%, and we have lowered the high end of our 86 range to $25.50 per ounce from $26. For a new range of $24.50 to $25.50 per ounce, both opted by product credit.

Turning to Slide 10. At Keno Hill produced a record 963,000 ounces of silver in the third quarter. we soon benefited from a new silver grade that improved more than 35%, and we work through the lower grade zone we discussed earlier this year and from a new quarterly record mining rate.

Cash flow from operations was $5 million and free cash flow was negative $2 million, reflecting continued capital investment in working capital outflows. However, you shouldn't expect that mining great to repeat. In September, the meal range loss to its permitting grade, but the capacity under our [ coring ] waste rock, tailings and water permits at support that rate over time. Beginning in the fourth quarter, we are choosing to suppress [indiscernible] to present that capacity and stay within permitting limits. We expect [ Troca ] to step down to approximately 300 tonnes per day in the fourth quarter with further suppression beginning in January 2027 to a level significantly below third quarter 2026.

As Rob noted, we expect silver production to decline proportionally less and top as we mine and process more selectively. In practical terms, at [indiscernible] prices, you should expect lower revenue and higher cost per ton at Keno Hill this period. given the high fixed cost nature of the asset. We have been speaking to this strategy for a few quarters now, or we believe is the best path forward.

While we wait on permits, the team is focused on what we can control. We are putting in place tighter great control to reduce dilution and that work is underway. We are also planning to be more selective about what was to the mill, and we are preparing to stockpile lower grain materials so we can process it later once we have the permitted capacity.

As these steps come together, we expect hydro grade and better margin on every ton we process while keeping the lower grade tons of able for later. The permitting and infrastructure work we are doing now is what should allow the mine to reach its potential.

I will not turn the call over to Russel for the finance outlook.

Russell Lawlar

Thank you, Carlos. Turning to Slide 12, let me take you through our financial results. As Mike noted, everything I'll cover here reflects results from our continuing operations.

Hecla provides an investment opportunity like no other. Not only are our mines in the best jurisdictions and we have very -- a very low cost profile in long mine lives. We also offer exposure to silver that is best in class with 69% of our third quarter revenues coming from silver, with gold making up 15% and the remaining coming from base metals.

Revenues during the quarter inclusive of environmental services were $395 million. with $372 million coming from our mining operations, which is up 17% from last quarter. The increase is primarily due to timing of shipments at Greens Creek, as we've already discussed.

With these revenues, we remain the purest silver mid-cap multi-asset producer. And as we've already discussed, our project pipeline is pointing to growing our exposure to silver for our shareholders.

As we move to Slide 13, I'll go into further details on the financial performance during the quarter. Income from continuing operations was $150 million or $0.22 per share compared with $118 million or $0.18 per share last quarter. In addition to the higher revenue, income benefited from a $36 million increase in fair value adjustments primarily related to realized and unrealized gains on marketable securities. That was partly offset by $41 million of higher cost applicable to sales on the higher volumes sold, $22 million of higher tax expense on better profitability and a $6 million increase in exploration and predevelopment expenses programs ramped up, including new programs at Hollister and [ Aurora ].

Our margins remained strong. We realized $63.62 per ounce of silver sold and with an AISC of $14.34 per ounce, that drove a margin of $4.28 per ounce or 77% of the realized price of silver. AISC was higher than the second quarter, mainly because of lower production at Greens Creek and Lucky Friday, lower byproduct credits, primarily related to less gold production and higher sustaining capital, mostly at Lucky Friday. These non-GAAP figures of AISC and cash costs exclude Keno Hill, which remain in a state of pre-commercial production.

As we presented last quarter, we have substantially less exposure to oil than many of our peers in the industry. The starting point is the nature of our ore bodies at our operations. which are high grade and high-value underground mines where we mine less tons to extract the value. And as a result, we consume less diesel.

The second factor is all of our operations source their power from local utilities where diesel prices do not impact the price. From time to time, Greens Creek will generate power. However, this isn't normally for prolonged periods of time and doesn't move the cost structure materially when we do.

Cash provided by operating activities was a record $203 million, up 16% from the prior quarter, helped by favorable working capital changes and higher payable ounces sold. Consolidated free cash flow was a record $151 million, surpassing the previous record of $144 million set in the first quarter. At the site level, before exploration and corporate costs, Greens Creek generated a record $147 million in Lucky Friday generated $67 million, while Keno Hill was slightly negative due to working capital movements weighing on cash flow. This is primarily related to the collection of payment from two shipments of concentrate that slipped to October.

Turning to the balance sheet. We ended the quarter with $692 million in cash, up from $483 million at the end of the second quarter, that increase reflects our strong cash flow generation as well as $64 million of proceeds from the [ sale ] of investments. We have no long-term debt outside of finance leases, and we entered into a new $500 million revolving credit facility undrawn other than $3.4 million of letters of credit, plus a $100 million accordion option together with our cash, that brings our total liquidity to approximately $1.2 billion.

We've moved from a net debt position of approximately $144 million a year ago to a net cash position of approximately $680 million today, which gives us the strongest balance sheet we've had in Hecla's history.

I'll now turn the call to Kurt to go through exploration.

Kurt Allen

Thank you, Russell. We invested $16.6 million in exploration and corporate development this quarter. The 2026 guidance remains at $55 million with the success we've had this year, we're looking to grow our budget next year.

Turning to Slide 15. I'll start at Keno Hill where drilling ramped up through the quarter. We now have four drills turning, and we expect [ Gulf 4 ] to run through the end of the year. that's already paying off at the flame and month. We're drilling in the favorable basal court site along strike with the Lightning vein has identified a new mineralized extension with over 350 feet at dip length located 900 feet southwest of the existing resource.

Three or four holes encountered significant mineralization. [ K24, K26, 944 ] returned 26.1 ounce per ton silver and 14% in zinc, over 8.5 feet. [ Ball K26, 951 ] returned 6.5 ounce per ton silver and 3.5% zinc over 16.1 feet. This new extension is open to the northeast towards the existing resource into the Southwest along strike, and we will continue follow-up drilling in the fourth quarter.

Turning to Slide 16. At Birmingham Deep, we continue to extend the high-grade trend that points toward the historic [ Hectorcalume ] mine, which produced roughly 96 million ounces of silver historically. Southwest step out hole [ K26, 940 ] returned 25.7 ounce per ton silver and 4.2% led over 10 feet on the football vein and whole [ K26, 942 ] stepped out a further 165 feet and a strongly mineralized rock with assays pending.

Together with whole 945 to the Northeast, the known strike length of this trend is now 1,300 feet, a 500-foot increase over the second quarter.

On the Birmingham Main Vein 2, whole 940 also intersected 61.1 ounce per ton silver and 3.8% bled over 5.3 feet, extending that vein about 260 feet to the Southwest.

Turning to Slide 17 and moving to Greens Creek at the West or offset target, about 500 feet from the Northwest West resource, three of five holes intersected significant sulfide mineralization. Holes PS 511, 512 and 513 encountered 6, 11 and 8.3 feet, respectively, defining sulfide mineralization over 300 feet of strike with assays pending. These results support the concept that this area could post a meaningful extension to the existing mineralized at Greens Creek.

At Greens Creek, all four holes this year intersected the target horizon with strong alteration and abundant pyrite, including 90 to semi-massive pyrite in whole [ PS 509]. In the underground, three rigs continue to define and step out from existing resources with good results, including 63.6 ounce per tonne silver over 14.1 feet in the 200 South zone.

Turning to Slide 18. In Nevada, at minus hold DMC 494 returned 0.73 ounce per tonne gold and 2.9 ounces per tonne silver over 1.4 feet. Confirming a second narrow high-grade vein following our second quarter discovery and hold DMC 481. Step-out holes on both veins, all intersected the structure with assays pending on all but one. These results confirm the prospectivity of the Southwest Pediment area, an important part of our evaluation of a potential restart of Midas.

Drilling also began at Aurora, where [ Braley ] Peak showed intense alteration and at Polaris where it showed banded courts veins with evidence of boiling, suggesting we need to drill test deeper on these targets. At Hollister, drilling began at the South and [ Excalibur ] targets with assays pending, drilling at both Aurora and Hollister will continue in the fourth quarter.

I'll now turn the call back to Rob for closing remarks.

Robert Krcmarov

Thank you, Kurt. Turning to Slide 19 and to start, safety improved again, but we're continuing to work to improve it further. Our total reportable injury frequency rate, or TRIFR, improved again from 1.51% to 1.57% in the quarter, and that's the right direction. I think we can still better because as always said, a safe mine is a productive mine.

Q3 was a quarter of record cash flow and continued strong financial results. It builds on a record that has helped us pay down debt and move into a position of real financial strength, the kind that lets us keep investing in our robust organic project pipeline for years to come and serve as value for our shareholders. We have almost $700 million in cash, no long-term debt and about $1.2 billion in liquidity.

Without question, that's the strongest balance sheet in this company's history. And our pipeline continues to advance with the power concentrate circuit progressing at Greens Creek, new potential paths forward for the dry stack tailings and Midas potentially heading towards a restart. And all of these have lower capital intensity as the common thread.

At Keno Hill, we're working through the permits and the infrastructure that will support the mine reaching its potential. We do believe in robust precious metals market, and we think silver has a very bright future, and we're working to grow the exposure to the metal for our shareholders.

I really hope you can feel the enthusiasm we have inside our company for the project pipeline. We think Hecla is the most compelling way to get exposure to silver in this sector. And perhaps the last word on guidance. We've tightened our production range, improved our silver cash costs and all-in sustaining costs and we've lowered our capital investment, all while generating record free cash flow. So with another solid quarter behind us, we're well positioned to achieve our 2026 guidance, and we look forward to keeping you updated.

I will now ask the operator to open the line for questions.

Operator

[Operator Instructions] Your first question comes from the line of [ Harrison Reynolds ] from RBC Capital Markets.

질의응답

Unknown Analyst

Congratulations on the good quarter for Hecla. Looking at the balance sheet now $700 million in cash and credit facility up to $600 million. What are the latest thoughts and the best use of capital from here, including your assessment of the current valuation shares you're trading at between organic investment, returning capital to shareholders and potentially M&A from here? And on M&A, what would your criteria look like between jurisdiction commodity focus stage and size?

Robert Krcmarov

Russell, why don't you start with the balance sheet.

Russell Lawlar

Yes, as it relates to the balance sheet, frankly, and as we've communicated in the past, we're working towards building a cash balance that's capable of providing for our future liquidity needs. Brian talked quite a lot on those growth projects that will require capital. There's -- they're not huge capital intensity, but we also want to make sure we can fund those. Kurt has spoken about the exploration that he's working on, right? So we expect good things to come from that. So we want to make sure we're able to fund that.

Additionally, we want to make sure we have sufficient liquidity just on our balance sheet as it relates to being able to whether blow prices and other things like that. But as we do build that balance sheet as we see focus come in as it relates to these growth projects that Brian spoke about, exploration programs, that kind of thing. We'll continue to evaluate capital returns. And when we find that it's the right time, then we would actually act on that.

And I'll ask Rob maybe to take the M&A portion of that.

Robert Krcmarov

Okay. And thanks for your question, Harrison. On M&A, one of the things I'll point you to is we have exceptionally long mine lives. They're not quite but almost all the peer average. And so we have visibility over the horizon. I think the other thing to note is that we're kind of unique in our space in that we have more silver exposure than the majority of our peers. And so we want to preserve that. You asked about the criteria. So we want to stay a silver company. We also want to stay in relatively safe jurisdictions. We're currently in Canada and the U.S. I mean you have to go where the scarce quality assets are.

And so does that mean that we're going to be here forever? Probably not. We'll probably look at other jurisdictions, but we do a proper detailed analysis on what a relative lease safe jurisdiction looks like.

So as a rule of thumb, I've said anything in the top 1/3 of the [ Fraser ] Institute Index, we take a look at that country, but we wouldn't just use it as a tick-box we would do a thorough risk assessment and understand whether we are comfortable with those risks, whether we can mitigate some of them or whether it's simply not for us.

Our M&A appetite right now, as I said, it's -- we already have a future that's with plotted out of plus 20 million ounces and investing in our organic projects that we already own, we already control. We understand that deeply. That's our path forward. But if something comes along, we have time. We can be thoughtful and diligent and thorough we have time. If something compelling comes along that meets our investment criteria, we will act. But again, I'll just point you to our practices for organic growth. Obviously, M&A is a tool that's available to us. Would you just be very disciplined about how we do that.

Unknown Analyst

That's great detail. Separately, I wanted to ask on Keno Hill. Could you frame up the outlook for processed grades a bit more there? It's obviously a very high-grade deposit. Wondering under the lower throughput than greater set activity plan, what are the goalposts for process grades into Q4 and over the next couple of years until the permit amendments come in?

Robert Krcmarov

Well, I'll start. There's a few things that pulled down the grade in the first half. We had less output from the bear zone, which is obviously a high-grade zone. We also had a dilution because we were mining some remnant areas that comes at a higher cost and lower grade. And we moved into the Arctic zone. And then we also -- plus there was also a sequencing at Birmingham and [ Flame & Moth ]. Those issues have since been mitigated, and so mill grade went from about 19 ounces per tonne in Q2 to about 26% in Q3. I expect that the grade will be maintained at roughly reserve grade. Any comment on that, Brian or Carlos?

Carlos Aguiar

But we expect silver production to decline by proportionally less because we expect to be more selective, not only on mining but also in processing. We will be focused on reducing dilution and prioritizing higher grade areas in mining and processing, while we stop biting lower very material for late process. So actual production will depend on grade mine in a mail, and we provide a specific silver ounce production guidance in February.

Operator

Your next question comes from the line of Wayne Lam from TD Securities.

Wayne Lam

Congrats on the good quarter. If I think back to early last year, you guys had already flagged some of the permitting constraints at Keno Hill and the potential to scale back or put a pause in operations.

So I guess two questions. Number one, with the silver price kind of back to -- is there potential to reevaluate a potential move to care and maintenance, given Keno Hill with slightly negative free cash flow this quarter at a $63 silver price?

And then number two, the Yukon seems to be quite a hot bed for development lately, and it seems like the province is keen to accelerate projects forward. So just wondering, is there something more project-specific at Keno that's holding up the permits?

Robert Krcmarov

I'll answer the care and maintenance question first. Our plan is to basically keep running within the current permits while we build our infrastructure. But as we point out on our 10-Q, it says the delays at any step restrictions on temporary waste stockpiling or reduced power from upon energy that can force further curtailment or halt.

And so if permits or infrastructure delayed or silver falls material, we could consider care and maintenance, but our preference is to keep the workforce. We can see the finish line roughly 3 years out, we've got a workforce that has increasingly understood the ore body and is becoming better and more efficient at mining it.

And so while it's not a huge burden on us, I think the optimum power forward is to keep it running for as long as we can and get through to the get through to mid- to late 2029 when we can see things really some of the constraints being removed and seeing the full potential coming out of Keno Hill.

On the Yukon, I mean we are the only significant operating public -- run by a public company mine in the Yukon. We already have strong support from the government. We've got a much better relationship with the First Nation [indiscernible] and so I think all stakeholders would like to see us be successful. We've had our stakeholders come out to site and visit us. And we're pretty proud of what we've accomplished there, particularly both in terms of the mining that we're doing, the responsible mining, but also the rehabilitation activities that we've done through ERDC, which is our rehabilitation unit, which is actually funded by the government.

Now the rehabilitation and the reclamation that they've been doing, it's highly visible to the community. Anyone who by the highway can see it improving week by week and month by month. Patrick, you've been up in the Yukon recently? Any comments there?

Patrick Malone

So I think you summarized it well. The relationships are solid. Permitting is moving forward. It is a deliberate process. We are planning on filing our project proposal by the end of the year, which is the first step in the [ Yeso ] review, the Federal review. And there's nothing specific that is delaying any of that that's currently in process. We're just working our way through that process.

Wayne Lam

Okay. Great. And then -- maybe just on the tailings reprocessing project. It seems like the results from environmentals has gone decently well with the Greens Creek material. So just wondering why you guys are now evaluating multiple avenues outside of that? And in particular, if you were to go down the route of building your own facility, isn't that something that could maybe be seen as outside the scope of expertise for Hecla and add quite a bit on time line to realization?

Robert Krcmarov

[indiscernible] why don't you take that.

Unknown Executive

Yes. So we mentioned the third party we've been working with, and we've got a long relationship with them. And certainly, their technology seems to be working out well in the studies that we've done. The other two pads really do just give us optionality. You think about that site. If you could shift tails off as a low-grade concentrate, it definitely helps the environmental aspects of closure for that site and some of the long-term expansion costs on the sales facility.

As far as reprocessing, that's essentially what we're building at the mill. We're building a pyrite concentrate, which is a circuit, which is what we would do with the tails facility. So we're making a pyrite concentrate as well within our wheelhouse because we're already going to be doing that. So those studies will get started. Again, we should have some metallurgical results. We're a little bit worried about the oxidation of that material. But we need to determine what the metallurgical results are and how it will float. But I don't think there's really any significant technical concerns there.

The other thing it gives us optionality to look at all three because potentially, there is a combination of three options for addressing the tailings facility to monetize that. So I think all of them are still viable paths. And I think over the next year, 6, 8 months, we'll start to really narrow in on what we're going to do. And I guess, from a capital standpoint, the cost of building a pyrite circuit at the mill will give us indications for costs for building reprocessing facility should we do that. So we'll have a lot of information coming in, in the next several months that will guide our path forward.

Robert Krcmarov

Yes. So just to circle back to your initial concern, Wayne, about stepping out of our wheelhouse, we're not stepping out of our wheel house. So the pyrite concentrate circuit, that's proven technology, very low technical risk, that's what we're doing on material that we're producing presently. And essentially, all we're doing is mirroring that and looking at putting in a port concentrate circuit for the existing tails. As Brian said, we need to do some drilling and characterization and see how much oxidation has happened. But we're not really straying into new areas that we're not familiar with at all.

Wayne Lam

Okay. Great. And then -- maybe just last one. Following up on the capital returns. Rob, when you joined, obviously, the company was in a much different position on balance sheet and the silver-linked dividend was eliminated. So just wondering if there's potential for you guys to institute some type of attributable linked returns program at some point.

And I mean, it's Russell's comment. I think we understand on future capital needs, but with the balance sheet growing as is, maybe you'll even be in a position soon to build [ Libby ] on a stand-alone basis at some point.

Unknown Executive

That's the joke, by the way.

Robert Krcmarov

You had me pause, but thank you. On the capital returns, obviously, at the rate that we've been building cash on the balance sheet, there will come a point probably sometime in the first half of next year that we have to seriously look at returns.

What that looks like, whether it's if there's a dislocation in how we value our assets compared to where the market values the assets, we look at share buybacks. I don't know about doing silver-linked dividend. That's never really worked for anyone, not in the gold space, not in our space. So probably unlikely, but dividends, we will consider that. I expect we're going to have a much more robust discussion at the Board in the first half of next year.

Operator

Your next question comes from the line of [ Tosin Gala ] from Jefferies. Please go ahead.

Unknown Analyst

Guys congrats on the quarter. My name is [ Tosin Gala ], I'm asking on behalf of [indiscernible] tariff adjustment. Maybe I'll start with Greens Creek. At Greens Creek [indiscernible] rate but lower year-on-year. And 3Q AC was approximately, I think, of $5 per house up the year to the average. I just wanted to ask how much of the video temporary related to maintain some mining question. vessels indicative of the cost upgrade profile entering into 2027.

Robert Krcmarov

I'm sorry, I found it very, very hard to hear. Did anyone hear that, I'd be able to answer that?

Unknown Executive

Could you just -- you're a bit quiet. Could you repeat your question?

Unknown Analyst

Yes. So saying Greens Creek, throughput and silver grade booked lower year-on-year and 3Q was approximately $5 above the year-to-date average. How much of the variance was temporary related to maintenance and mine sequence. And that was indicative of the cost and with profile entering into 2027.

Russell Lawlar

I think, [ Tosin ] your question, if I heard that at least the first half of that was Green Street grades this year are lower than they were last year. And so Brian Erickson sitting here with us as our GM there for a long time.

I think that my perspective on Greens Creek is that Greens Creek is the complexity of Greens Creek is what creates a lot of the value at Greens Creek. And the grades at Greens Creek will fluctuate. Sometimes they'll be higher, sometimes they'll be lower. I don't know if you have any comment on that, Brian.

And then secondly, my -- you mentioned throughput as well, [ Tosin ], and I see throughput in 2025 was higher than 2026. And I think maybe, Brian, you could speak a bit to that as it relates to some of the projects we did earlier in the year.

Brian Erickson

Yes, I think [ Brussels ] is correct and the silver, it fluctuates up through the grades pretty significantly, and we obviously, at times, see surprises if they are very good. And sometimes we go through lower grade zones. So it's nothing unexpected.

As to the throughput, yes, it is a bit lower that site. I think we've communicated has gone through some pretty significant mill work in the last couple of years, which will continue into next year. that's definitely affecting production. But nothing I'm concerned about longer term.

Unknown Executive

And the sustaining infrastructure repairs that we are doing in the missile is to be prepared for the next years of the life of Greens Creek.

Unknown Analyst

And maybe just one additional question on Keno Hill. Realistically speaking, I mean can Keno Hill commercial production at reduced operating rates. And what was the slowdown for the company's ton target of 20 million ounces of [indiscernible] production?

Russell Lawlar

So [ Tosin ], again, I'm going to restate at least a little bit that I heard, and I apologize again because I'm having a hard time hearing you, but I think you started with commercial production at Keno Hill. And the criteria for commercial production in Keno Hill is well defined in our 10-Q. What I would say is that with the suppression of production that we've talked about, we wouldn't expect to see that commercial production happen until later this decade or early next. What I would say on that though is well is that doesn't actually impact the -- any of the accounting of the costs. So all that is, is just a mining term that we use under U.S. GAAP.

Unknown Analyst

Right. And I mean, what does that slowdown mean for the company's medium-term target of 20 million ounces?

Russell Lawlar

What does that have to do with the impact on getting to an ounce target. Is that what you're suggesting?

Robert Krcmarov

To the $20 million. We flagged that the $20 million is -- we expect to achieve that in the medium term. And so again, this slowdown is the production, while we organize the investments in infrastructure and get the critical permits that we need.

Probably around about mid-2029, then we should be relatively unconstrained and be able to ramp production back up to 440 tonnes per day. Longer term, beyond that, the mill is actually rated at beyond 600 tonnes per day. But that would require another phase of investment and another phase of permitting. So that's longer term.

So the incremental reduction in production at Keno Hill, we expect that to last roughly 3 years and then you'll see that increase beyond what we've basically been producing throughout its history, actually. So no impact to our 20 million-ounce a year target, again, flagging that, that's in the medium term.

Operator

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

Cosmos Chiu

Maybe my first question is going back to Keno Hill. Yesterday, you talked in detail about the tailings capacity constraints. Is that something new? It's certainly something newer to me. I know you kind of touched on it in your Q2 MD&A. But previous to that, it was more talking about the permitted capacity of 440 tonnes per day, courts, mining license, water license. Are these all sort of interrelated? And if the tailings capacity constraint is not new to you, is the mid 2029 sort of timeline view? Is that why you to kind of curtail your throughput starting in Q4?

Robert Krcmarov

No, it's not new. And yes, they are all interrelated. So again, just to recap, I think one of the new things is we've quantified that we've got 200,000 tonnes of tailings left. So that's what we have to play with.

We need to obviously get the permits to increase tailings capacity. As we're mining, we're also generating waste, so there is a limit on that. And then we're also -- as we're doing more development and more mining, we're generating more water. And so we need to treat that water to the same standards that we agreed to. So it's all -- a lot of it's permitting related. Nothing really new here. Patrick, can you add some more color?

Patrick Malone

Yes. So as Rob said, there are sort of three constraints that are currently in place. It's tailings capacity, waste rock capacity and ability to handle water that we encounter through our water treatment plants. Those aren't new constraints. What we -- I think we have provided is a little more clarity on how we're planning to manage those constraints until we receive our permits, which we expect mid-2029.

Cosmos Chiu

Great. And then Patrick or maybe Rob, as you mentioned, there's three different constraints, tailings capacity, waste rock and water treatment, which is the biggest constraint? Are they all sort of about the same?

Patrick Malone

I would say that the tailings is a fixed constraint in that we know how much we have permitted capacity ahead of us. The other two are a bit more variable. They depend on things which are, to some degree, a bit outside of our control. We're not sure when we will in counter water, we have models. We think that we know what's ahead of us, but there is a bit of uncertainty around that. But tailings is a hard constraint, and that's what we're using to base our plan on currently.

Cosmos Chiu

Great. And then also at Keno Hill. And Rob, it was great to hear that you have four drills on site, and there's exploration success at Keno Hill. But I guess my question is, could you maybe talk me through the rationale in terms of drilling in the near term at Keno Hill. It's great, flame and moth feet to the southwest of the existing resources. But you have this kind of near-term or intermediate-term constraint on milling capacity.

So do you need to find more [indiscernible]? Or what's the return on this? Or are you trying to find higher-grade ounces so that you can actually feed it into the mill at a lower capacity?

Robert Krcmarov

High-grade ounces is always the target. And that's where Kurt and his team have been having a lot of success. You have a look at that Birmingham dips as we head down plunge, the grades get even higher.

We're also targeting -- and again, most of our exploration in the district is near mine. We're working in and around the existing ore bodies. We're not really going out to any of 17 targets that could have more than 50 million-ounce potential. We're really sticking close to where we have existing developments, so we can basically monetize any wins there.

Again, in the medium term, we're excited by that area along strike continuing to step up from Birmingham to the north, I guess it is, where you have the convergence of the historic [ hectare adamant ]. There's just a handful of holes there, and that's really where everything is pointing to us that they could be larger resources available -- sorry, I should have referred to you.

Unknown Executive

No, I think you covered it well. I think the one of the goals at the Birmingham towards the Hecla [ callumen ] is that we think that the fluid source for both those deposits are probably the same. And so there could be a big price between those two deposits. All of our drilling has been focused near mine near the Birmingham, near Flame & Moth trying to increase resources and reserves at the operating mines.

Robert Krcmarov

If you picked up on an important point, Cosmos, and that's the high-grade point. It's not just finding high grade. It's actually mining high grade by reducing dilution. And so that's going to be a focus of us. We're looking at various options that we were talking about. Brian, can you talk about the mechanical cutting and stuff? .

Brian Erickson

Yes. We're obviously giving guidance. We're going to reduce tonnage there, but it's -- we're not resting on that. We've been working for a number of years to reduce the mining widths and reduce that dilution. We've got some testing underway at the mill to determine potential opportunities to reduce dilution and thinning or feed. So there's a lot of work going on this. We'll update you as we get some highlights from some of this stuff this work we're doing.

Cosmos Chiu

I guess, Rob, to ask you more directly, do you need to find more ounces, even if it's near mine when you have this constrained near term to 300 tonnes per day?

Robert Krcmarov

I don't think we need to find more ounces. We've already got a reserve life that's -- I think it's like about 15 years or something like that. And we're yet to develop the Birmingham dex, which is higher grade. We don't need more ounces. What we need to do is get the throughput. It's got high fixed costs, as you know. And so that denominator is a little bit low. And so once we unconstraint it and we can develop faster, we can mine faster. We generate more water. We can treat that water. We can place the tailings and the waste. You'll see it start to approach its full potential under the 440 limit from around about 2029 onwards.

Cosmos Chiu

Great. And then, Rob, maybe one last question. It's great to see that in an industry where everyone else is talking about inflation and input costs being higher, and we've seen a number of companies increased their on sustaining cost guidance for 2020. You've actually gone in the other direction and you've decreased it, which is great.

But maybe can you talk about how much of that is attributable to byproduct credits. And could you maybe talk about labor input costs? Are you seeing any pressure especially, say, in the Silver Valley because I've heard Silver Valley competition has been pretty high in terms of labor, in terms of cost and whatnot. Could you maybe touch on all that, Rob, or maybe Russell?

Russell Lawlar

Yes. Yes, Cosmos, I certainly can take that. And I agree with you that it's great that we're able to improve our all-in sustaining costs. And that took place for really a few reasons. One was byproduct credits, right? When we came into the year, we had to make assumptions as it related to specifically gold and zinc and one of the things that sometimes people forget about is the large byproduct credit that Greens Creek does have in zinc. And both of those have been more favorable than the assumptions that we made, and that's part of what we're seeing during the year.

And then also, keep in mind, our sustaining capital also went down slightly, so that also improved our own sustaining costs.

From the perspective of kind of just production costs and we do see about 50% of our cost comes from labor. And that will be something, as we see competition for miners, whether that's in the Silver Valley or elsewhere, that will be something that we're going to have to keep up with.

I think in the current term, you can see in our cost structure, we've not been impacted significantly, but it will be something that we'll have to keep in mind as we go forward.

Operator

This completes the time allotted for questions. If you have any additional questions, please reach out to Mike Parkin via the contact link on the website.

I will now turn the call back to Rob Krcmarov, President and CEO, for closing remarks.

Robert Krcmarov

Well, thank you. And just to pick up on that point, I do encourage you, I know that we've run out of our allocated time, but your questions are important to us. So please do reach out after this call. And so thank you all for the thoughtful questions today, and thanks for joining us this morning.

I'm going to leave this with you. We're in the strongest financial position this company has ever been in. We're well positioned to achieve our 2026 guidance, and we're putting that strength to work for our shareholders, and we look forward to updating you again next quarter. Thanks, and have a great day.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.