Hecla Reports Quarterly Net Income of $22.5 Million

 

COEUR D’ALENE, ID - Hecla Mining Company President and Chief Executive Officer Phillips S. Baker, Jr., said,  “We had one of the best quarters in our hundred-year history generating strong cash flow that increased our current cash balance by $27 million to $85 million. The main driver is the record revenue from acquiring the remainder of the Greens Creek mine which doubled Hecla’s silver production and almost tripled zinc production and increased lead production. In the U.S., Hecla is now the largest silver producer and the second and third largest producer of zinc and lead, respectively. Combined, the Greens Creek and Lucky Friday mines provide Hecla with appreciable scale of production and, with higher metals prices, have increased cash flow to these record levels.”

This quarter Hecla produced 2.7 million ounces of silver compared to 2.5 million ounces of silver in the third quarter of 2008. Higher production volumes at both mines, as well as higher silver grades at the Lucky Friday mine, were the primary reasons for increased silver production in the third quarter compared to the same period a year ago. By-product metal production totaled 16,815 ounces of gold, 20,616 tons of zinc and 11,200 tons of lead in the third quarter of 2009. On average, by-product metal production increased 5.7% in the third quarter of 2009 compared to the second quarter of 2009 and 12.2% compared to the third quarter of 2008. Hecla’s third quarter production of lead and zinc was the highest quantity ever produced by the company in a quarterly period. The Greens Creek mine in Alaska produced 1.8 million ounces of silver during the third quarter of 2009 at an average cash cost per ounce of negative ($0.48) after by-product credits, compared to silver production of 1.8 million ounces at an average cash cost per ounce of $3.79 for the comparable prior year period and $2.14 per ounce in the second quarter of 2009. The decrease in cash costs in the third quarter compared to the same period in 2008 results from higher realized prices for by-product credits, higher throughput, increased availability of hydroelectric power, lower diesel use and lower unit prices for some process consumables.

Milled tonnage averaged 2,228 tons per day or 9% higher than the same period a year earlier. Mine development, production and back-fill activities continue to be well-synchronized, providing better flexibility to manage the mine at higher rates of production compared to historical rates of production. Unit operating costs for mining and milling decreased $19.86 per ton, or 24%, compared with the third quarter of 2008. Additional mine rehabilitation increased mine and mill costs by $3.20 to $63.76 per ton or 5% more than comparable second quarter 2009 costs of $60.56 per ton. During the period, the mine also produced 16,815 ounces of gold, 17,835 tons of zinc and 5,585 tons of lead.

Alaska Electric Power and Light announced the completion of the Lake Dorothy project adding additional hydroelectric power capacity in the Juneau area. The project was completed ahead of schedule and while Greens Creek is an interruptible customer, it is expected that the utility will provide continuous service to the Greens Creek mine for the foreseeable future resulting in stable, low cost energy.

During the third quarter of 2009, $8.7 million was capitalized for tailings pond expansion, underground development and for sustaining activities at Greens Creek.

The Lucky Friday mine in northern Idaho produced 930,258 ounces of silver during the third quarter of 2009, a 26% increase compared with silver production of 739,870 ounces in the third quarter of 2008. Silver production in the second quarter of 2009 was 868,339 ounces. The decrease in cash costs are due to a combination of higher realized prices for by-product credits, higher silver production and lower site costs.

Increased silver production in the quarter is the result of grade control programs designed to minimize dilution which also tempers the use of backfill and reduces related costs. As a result of the optimization work, silver grades in the third quarter improved 15.4% compared with the prior year period. Daily mine production averaged 959 tons per day or 8% higher than the third quarter of 2008 and was 4% higher than the second quarter daily average of 925 tons per day. The tonnage processed at the Lucky Friday mine in the period was a record high for a quarterly period. Unit operating costs for mining and milling decreased $2.14 per ton, or 3%, in the third quarter of 2009 compared to the third quarter of 2008. Operating costs decreased $5.88 per ton, or 8%, in the third quarter of 2009 compared with the second quarter 2009 costs of $77.37 per ton. The Lucky Friday mine produced 5,615 tons of lead and 2,781 tons of zinc in the third quarter of 2009 with lead 19% higher and zinc 16% higher compared with the same period during 2008. Production of lead and zinc was, on average, up 7.8% compared with the second quarter of 2009.

During the third quarter of 2009, $2.7 million was spent on exploration. Drill programs were underway on Hecla’s four main land packages located in Alaska, Idaho, Colorado and Mexico. Baker said, “Our work in these districts began late in the quarter and is now in full swing. With the 40% increase in our exploration budget, we’re drilling targets at every property. With an expanded and accelerated exploration program, I’m confident we are on the right track to discovery.”

Greens Creek - Four surface exploration holes were completed on the NE contact and analytical results from these holes are pending. The holes intersected multiple and stacked horizons that are interpreted to represent the favorable mine contact near the Greens Creek mine infrastructure. More recently, a second drill was added to the program to test the NE contact from underground set-ups. In addition, underground drills were testing the down-dip potential of the Southwest Lower Contact and the potential for new resources in the Northwest-West South zone.

Lucky Friday - Baker said, “Drilling continues to confirm increased grade and widths as we go deeper at the Lucky Friday. This should result in higher production, reduced costs and even better economics than what this mine has generated over its 67-year history. We’re identifying quality tons deeper and see the potential for resource additions in three directions of the deposit; while to the west, we will drill for an offset of the 30 vein across the post mineralized Silver fault.” During the quarter, approximately 7,000 feet of drilling continued to define the 30 Vein to the east of the current resource below 6200 level with widths and grade increasing as the drilling tests areas below 6400 level. Additional drilling in the central portion of the deposit intersected good grades over mineable widths on the 30 and 90 veins. Selected results include: 6.4 feet of 19.7 ounces per ton silver, 11.9% lead and 9.5% zinc at 6250 level and 11.8 feet grading 17.3 ounces per ton silver, 10% lead and 3.6% zinc at 6400 level. Deeper testing also along the eastern portion of the lower limit of the 2008 resource boundary continued to intersect multiple veins including intercepts such as 11.5 feet of 37.9 ounces per ton silver plus 21.8% lead and 8.9% zinc at 7650 level and 5 feet of 59.1 ounces per ton silver, 19% lead and 0.4% zinc and another step-out hole at a similar depth.

Drilling from surface is in progress at the Vindicator target approximately one mile east of the Lucky Friday mine. The Vindicator veins are an eastern projection of the currently mined 30 Vein at the Lucky Friday mine complex.

San Juan Silver - Drilling is targeting the projected northern extension of the past producing Bulldog vein system. A second drill was recently brought to the project site to test the more gold-bearing Midwest vein in the eastern portion of the Creede district in southwest Colorado. Hecla can earn a 70% interest in the San Juan Silver joint venture; its partners are Emerald Mining and Leasing, LLC and Golden 8 Mining, LLC.

Mexico - Two drills are testing the Pe–ascote and El Garrote targets on the large San Sebastian property near Durango. At Pe–ascote drills will be defining shallow, locally oxidized and potentially bulk tonnage silver mineralization, while deeper silver-gold epithermal veins will be tested at El Garrote.

The company is on track to meet its full year production guidance of 10.5 to 11 million ounces of silver.

 

The company’s address is 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, ID 83815, 208.769.4100, fax: 208.769.7612, email: [email protected].