Hecla's Silver Production Increased By 88%

COEUR D'ALENE, ID - During the third quarter, Hecla Mining Company produced 2.5 million ounces of silver, 88% more silver than the same quarter a year ago, at an average total cash cost per ounce of $4.46, compared to 1.3 million ounces of silver in the third quarter of 2007, at an average cash cost of $(4.93). Hecla also produced 16,396 ounces of gold, 9,488 tons of lead and 18,851 tons of zinc during the third quarter, significantly higher quantities than the same period a year ago as a result of Hecla owning 100% of Greens Creek for the full quarter.
The Greens Creek mine near Juneau, Alaska, produced 1.8 million ounces of silver during the third quarter of 2008, at an average total cash cost per ounce of $3.79, compared to 679,884 ounces (Hecla's share) at an average total cash cost per ounce of $(7.42) in the third quarter of 2007. During the first nine months of 2008, Hecla's share of Greens Creek production was 4 million ounces of silver at an average total cash cost of $1.96 per ounce, compared to 2.1 million ounces of silver during the first nine months of 2007, at an average total cash cost per ounce of $(5.15). The increases in cash costs per ounce of silver for the third quarter and nine-month period compared to last year are attributable primarily to decreased by-product credits due to lower zinc and lead prices, an increase in freight charges, higher energy and steel costs, and a lower average grade of silver being produced from the current mining area compared to a year ago.
Greens Creek's electricity comes primarily from diesel generators, and those costs have been higher than last year due to the increased diesel prices. The operation realized approximately $500,000 of savings in the quarter when excess hydropower was available due to high water levels in the reservoir feeding Juneau. In the future, increased hydropower is expected to be available to Greens Creek once the local utility completes construction on additional reservoirs in late 2009 or 2010.
The Lucky Friday silver operation in northern Idaho's Silver Valley, owned and operated by Hecla for the past 50 years, produced about 740,000 ounces of silver in the third quarter at an average total cash cost of $6.06 per ounce, compared to 662,000 ounces of silver at an average total cash cost of $(2.38) per ounce in the third quarter of 2007. During the first nine months, Lucky Friday produced 2.2 million ounces of silver at an average total cash cost per ounce of $4.55, compared to 2.3 million ounces at an average total cash cost per ounce of $(0.28) in the first nine months of 2007. The increases in cash costs per ounce of silver for the third quarter and nine-month period compared to last year are attributable primarily to decreased by-product credits because of the lower prices of zinc and lead, and higher energy and steel costs. The increase in cash costs per ounce for the first nine months of 2008 was also impacted by higher concentrate treatment charges, compared to the same 2007 period. To preserve capital, the feasibility study for an internal shaft has been deferred. The shaft is for access in the future to the deeper resources, which are known to reach more than 2,000 feet below the current mining level. Other alternatives are also being considered to reach the deep resource.
During the third quarter, Hecla spent $5.5 million on exploration programs company-wide, with $18.4 million spent on exploration in the first nine months of the year. In the fourth quarter, exploration expense is expected to be approximately $3.5 million in response to market conditions and Hecla's liquidity.
Hecla's approximately 25-square-mile property position in the Silver Valley (also known as the Coeur d'Alene Mining District) includes the Lucky Friday mine, where drilling focused on the east and central part of the resource down to the 7100 Level, 1,200 feet below the active mining level. This drilling followed up previous indications that the prominent 30 and 40 veins (where most production currently occurs) may coalesce into an even larger, high-grade vein at depth. Preliminary results show an approximately 25% increase in silver per vertical foot, and some of the better drill intersections include:
• 30.5 ounces per ton (opt) of silver, with 28% combined lead and zinc over 20.1 feet; • 29.0 opt of silver, with 22.5% combined lead and zinc over 19.4 feet; • 25.3 opt of silver, with 24.9% combined lead and zinc over 21.4 feet; and • 21.3 opt of silver, with 22.0% combined lead and zinc over 12.3 feet.
In addition, a deep drill hole successfully intersected high-grade silver/lead mineralization on the 30 vein at the east edge of the resource boundary at the 7500 Level. The drilling program in the 2,500-foot 'Gap' area above the current mining level returned encouraging results. All seven widely-spaced holes intersected multiple veins in strongly developed mineralized structures with silver-base metal mineralization. These veins are up-dip and along trend of the current resource and should provide the opportunity to add additional resources in the future.
During the third quarter, surface crews conducted regional mapping and sampling programs in strategic exploration areas identified by the three-dimensional (3D) modeling and other modern exploration techniques on Hecla's larger land position in the Silver Valley outside the Lucky Friday operation.
Hecla controls the 500-square-mile San Sebastian property in central Mexico's silver belt, and spent $3.6 million on this extremely prospective area during the first half of 2008. In the third quarter, that expenditure was reduced to approximately $600,000 due to current market conditions and the desire to preserve liquidity. Hecla intends to continue the Mexican exploration program by conducting fundamental, low-cost exploration to optimize the potential for additional discoveries on this property in the future.
Underground drilling at Greens Creek on the Gallagher Zone extended mineralization deeper and opened up potential to the north. This year's surface drilling exploration activities totaled 20,649 feet in 18 holes across Hecla's 29-square-mile property position at Greens Creek. Drilling from the North Big Sore identified mine contact rocks that may have the potential for adding resources in an area that was previously thought to be barren. This new area is in relatively close proximity to current mining infrastructure.
Drilling of the East Ridge target, which is eight miles north of the mine, confirms the presence of the two rock types typical of the Greens Creek-type deposit. Coincident geophysical anomalies suggest this contact extends for many miles.
The San Juan Silver Joint Venture in southern Colorado received all permits and approvals for the initial drill program in the Creede District from the USDA Forest Service and Colorado Department of Natural Resources at the end of July 2008. During the third quarter, two drills began the program to confirm the remaining silver resources in the historic Bulldog Mine and explore the previously untested northern extension of the Bulldog vein system. Preliminary baseline reconnaissance studies also began in support of permitting for district-wide exploration.
In October 2008, the joint venture agreement was amended, allowing Hecla to delay the $10 million remaining earn-in expenditures by approximately four years. Hecla has no obligation, other than property maintenance, for further expenditures until 2012.
Baker said, "It is surprising that the precious metals prices have declined in this period of economic unrest. Clearly, the lack of physical inventories of bullion silver in smaller denominations shows that demand for silver is very strong, and I believe that we should see increased demand for precious metals during this time of economic and global uncertainty."
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].