Greens Creek Strong Output, Higher Byproducts Cut Hecla's AISC Guidance in Q2 2026

Drivers behind reduced AISC guidance (and whether broader cost pressures exist)

1) What drove the lower AISC guidance?

Management explicitly tied the improved (lower) AISC outlook to three main operational economics drivers: higher Greens Creek production, larger byproduct contributions, and better unit cost performance, plus (for Lucky Friday) improved cost control. ¹

A. Higher Greens Creek production (notably stronger silver), keeping AISC down

From an AISC perspective, management emphasized that Greens Creek’s “great first half” translated into very strong silver production and that this is part of why AISC guidance improved. ¹
They also provided actual quarter detail indicating strong results at Greens Creek: 2.1 million ounces of silver and over 14,000 ounces of gold in Q2 (with both AISC and cash costs reported after byproduct credits). ²
For the full year, Greens Creek expectations were raised to 8.0 to 8.3 million ounces of silver (an improvement over prior guidance). ²

Why this matters for AISC: when fixed/semifixed costs are spread over higher attributable production and grade/throughput run well, unit costs generally fall—especially when the cost base is offset by byproduct credits (discussed next). This is consistent with management’s framing that the AISC improvement is “Greens Creek specifically” and that Greens Creek’s production/ore value has been strong. ¹

B. Larger byproduct credits (gold, zinc), improving “AISC after byproduct credits”

Management highlighted that gold byproduct is “huge” at Greens Creek and that they had outperformed on gold versus conservative assumptions used early in the year for guidance. ¹
They also pointed out that zinc is a very strong byproduct that is sometimes overlooked, and that this additional byproduct value supports the cost structure (again in the context of “AISC … after byproduct credits”). ¹

Quarterly and full-year reporting supports the magnitude of the byproduct effect: Greens Creek showed negative cash costs (negative $17.11/oz) and negative AISC (negative $10.71/oz) in Q2, both after byproduct credits. ²
For the full year, Greens Creek guided negative cash costs (negative $12.50 to negative $12.0/oz) and negative AISC (negative $4.25 to negative $3.75/oz), also explicitly after byproduct credits—and both were improvements vs prior guidance. ²

Why this matters for AISC: AISC is effectively “cost net of byproduct credits” in their presentation. When realized byproduct prices and/or realizations are higher than what was assumed, AISC can decline even if operating costs are flat.

C. Better unit costs and cost control (Greens Creek “online”; Lucky Friday improved cost control)

For Greens Creek, management said “as produced costs are essentially online” while production and byproducts were strong—implying that the AISC improvement was not primarily driven by a sudden operational cost collapse, but rather by production/byproduct strength against a relatively stable cost base. ¹

For Lucky Friday, management said they observed “better cost control in general for the mine as a whole.” ¹ They also noted that profit share came off because silver price has come off, but they still maintained an overall favorable cost outlook due to the strong first-half production. ¹

Quarterly cost detail for Lucky Friday reinforces that the company is achieving specific unit-cost outcomes: Q2 included AISC of $17.8/oz (after byproduct credits) and cash costs of $3.95/oz. ²

Full-year unit-cost tightening at Lucky Friday also aligns with improved economics: the company stated it tightened silver production guidance and provided updated cost applicable to sales expectations (i.e., cost guidance improved/managed alongside output). ²

Bottom line on the AISC guidance change

Putting management’s commentary together, the AISC guidance reduction was driven by:

• Greens Creek first-half outperformance in silver, with full-year silver guidance improved. ¹²
• Byproduct value exceeding conservative assumptions, especially gold (and also zinc as an important byproduct). ¹
• Stable-to-improving unit economics, with Greens Creek “as produced costs” online and Lucky Friday benefiting from better overall cost control. ¹

2) Are there broader cost pressures?

Energy/fuel pressure appears muted in their cost structure

Management directly addressed macro cost pressure risk from fuel and oil prices, arguing it is far less impactful for Hecla because:

• Their high-grade underground mines require fewer tonnes per ounce (lower diesel consumption per ounce). ³
• They source electricity primarily from local utilities primarily from renewable hydro power, which management said is not priced off crude oil or natural gas, making power costs less sensitive to fuel spikes. ³
• They quantified the effect: fuel was only about 3% of consolidated cost structure in the referenced quarter. ³

This implies that (at least as of the discussion in the excerpt) Hecla does not see broad energy-driven cost pressure as a dominant near-term driver of margins or AISC. ³

Capital/timing items are distinct from “cost pressure”

The excerpt also notes capital spend timing: management expected capital spend in the last half of the year to be more than the first half due to seasonality (weather/construction progress) and equipment deliveries. ⁴
That is an expected phasing item rather than a sign of operating cost pressure affecting AISC, but it’s relevant context for understanding near-term financial statement variability. ⁴

No explicit “cost pressure” narrative in the guidance driver explanation

In the guidance driver discussion, management emphasized positive operational factors (production/byproduct/value capture and cost control) rather than warning about worsening input costs. ¹
So, based strictly on the provided excerpts, there is no clear evidence of broad cost pressure being cited as a cause of higher AISC or a constraint on the guidance reduction—aside from the general acknowledgement that some guidance byproduct price assumptions may differ from realized outcomes (i.e., conservatism and realization effects, not deteriorating cost inputs). ¹

Conclusion

Hecla’s reduced AISC guidance was primarily driven by Greens Creek’s stronger production, stronger-than-assumed byproduct credits (especially gold; also zinc), and better unit economics/cost control (Greens Creek costs “essentially online” and Lucky Friday showing “better cost control”). ¹²

On broader cost pressures, the excerpts suggest fuel/energy inflation is comparatively less impactful to Hecla’s cost structure because of high-grade underground operations and hydro-based electricity; fuel was cited as ~3% of consolidated costs, indicating limited exposure to fuel-driven volatility relative to peers. ³