Hecla Delivers Solid Production Performance
COEUR D'ALENE, ID - "During the third quarter we delivered solid production performance, with our Greens Creek Mine in Alaska, continuing to lead the way. Cash costs, after by-product credits, were higher because of the weak price of our by-product metals," said Phillips S. Baker Jr., Hecla's President and CEO. "Hecla's cash flow and balance sheet have allowed continued investment in capital improvements, growth and exploration initiatives; the benefits of which are just beginning to be realized. We expect San Sebastian in Mexico to start processing ore by year end, Casa Berardi in Quebec is accessing a newly discovered, high-grade stope and the Lucky Friday Mine in Idaha, has returned to full production after replacing the main ventilation booster fans."
At the Lucky Friday Mine in Idaho, third quarter silver production of 592,243 ounces was 39% lower than the third quarter of 2014 due to lower tonnage and grade. A failure of the underground booster fan reduced the ventilation capacity of the mine, leading to the temporary closure of a higher-grade production stope. Replacement fans are now in operation and Lucky Friday has returned to normal production. In addition, there were 16 days of downtime in the third quarter for planned hoist mechanical maintenance. The mill operated at an average of 792 tpd in the third quarter.
The cash cost, after by-product credits, per silver ounce of $16.60, increased from $8.71 per ounce in the third quarter of 2014. This increase was principally due to lower production and realized metals grades relating to downtime from the ventilation fan replacement, as well as lower by-product credits relating to lower base metals prices.
#4 Shaft, a key growth project, has been excavated to the 8,244 level. The project is more than 89% complete and is expected to be finished in the fourth quarter of 2016. The final depth of the shaft has been slightly reduced to 8600 from the earlier target of 8800 feet. A shaft station and operating level will be established at 8300 feet, the depth of the known resource. The total completion cost estimate remains at approximately $225 million, with $193.8 million already spent through the third quarter of 2015. As of September 30, 2015, the #4 Shaft team has worked 1,413 days without a lost-time accident.
Casa Berardis in Quebec up to seven drills have been operating underground in an effort to refine current stope designs and expand reserves and resources in the 118, 123, 124 and Lower Inter zones. Other exploration drilling has extended mineralization on the 124 Zone and newly discovered 117 Zone. In-stope and definition drilling of the upper 118 Zone from the 530 level intersected a 15 to 55-foot wide shear zone that includes mineralized intervals of 0.74 oz/ton gold over 42.3 feet and 0.18 oz/ton gold over 55.4 feet. Mineralization is open and deeper drilling suggests the zone continues to plunge to the west. Drilling from the 910 level on the lower 118 Zone intersected 0.46 oz/ton gold over 18.7 feet and 0.36 oz/ton gold over 28.8 feet. This drilling has extended the resource to the east and also remains open to depth.
Drilling from the 550, 770, and 850 levels in the mine has identified multiple, stacked high-grade lenses of the 123 Zone that represent at least 1,800 feet of semi-continuous down-dip mineralization with an average strike length of 425 feet. Definition and step-out drilling at the bottom of the 123 Zone resource has defined a series of high-grade mineralized structures with intervals including 0.81 oz/ton gold over 23.6 feet and 0.73 oz/ton gold over 11.8 feet below the 850 level that are open at depth and to the west. Future drilling is expected to continue to expand the resource, and the close proximity of these new lenses to mine infrastructure is expected to allow near-term production from these areas.
Underground drilling on the 124 Zone east of the Principal Zone area defined a 15 to 60-foot thick, quartz-bearing zone with over 300 feet of strike length that is expected to define a resource close to the 250 level. Within this zone are high-grade lenses, including intervals of 1.50 oz/ton gold over 9.2 feet and 0.71 oz/ton gold over 11.8 feet at the 290 level. Drilling from the same level of the 124-81 lens includes intersections of 0.40 oz/ton gold over 8.2 feet. Deeper drilling of the 124 Principal Zone intersected broad mineralization at the 500 level including 0.26 oz/ton gold over 36.1 feet and 0.25 oz/ton gold over 16.1 feet. Exploration drilling from the 810 level of the newly defined 117 Zone has extended gold mineralization both north and south of the Casa Berardi Fault for over 325 feet down-plunge. Recent drill results include an interval of 0.13 oz/ton gold over 17.1 feet in iron formation north of the Casa Berardi Fault and 0.15 oz/ton gold over 21.8 feet in sheared veins to the south of the Casa Berardi Fault.
At the west end of the mine, drilling of the Lower Inter Zone intersected 1.04 oz/ton gold over 19.7 feet and 1.37 oz/ton gold over 9.8 feet and these intersections represent the upper extension of a multiple vein system that is open. Exploration drilling on the 157 Zone at the East Mine has better defined the geometry and continuity intersected narrow, high-grade zones including an intersection of 1.26 oz/ton gold over 3.3 feet.
The recent successes in both surface and underground drilling are expanding reserves and resources with considerable increases in overall grade and are also identifying new resource trends throughout the West Mine of Casa Berardi. When the acquisition of Casa Berardi was made, there was an expectation of finding significant mineralization that would prolong gold production for many years to come, and this expectation is being realized.
Casa Berardis third quarter gold production of 29,259 ounces was 1% higher than the third quarter of 2014. The mill operated at an average of 2,262 tpd in the third quarter.
The cash cost, after by-product credits, per gold ounce of $793, decreased from $898 in the third quarter of 2014 mainly due to the weaker Canadian dollar relative to the USD.
Casa Berardi started the fourth quarter very strongly, with production of approximately 15,000 ounces of gold in October. The mine is expected to produce approximately 40,000 ounces of gold in the fourth quarter.
Hecla is quickly advancing the San Sebastian mine in the State of Durango, Mexico with the goal of producing ore from small open pits by year end. Updates to the third-party owned processing plant are proceeding well, the hiring of supervisory staff is nearing completion, and stripping has begun on the East Francine and Middle veins.
There has been significant drilling success over the past two and a half years on the near-surface East Francine, Middle and North veins at the San Sebastian project, and the project is quickly advancing to open pit mine production. The East Francine, Andrea, Middle and North veins now define nearly 5.0 miles of mineralized strike length and are open along strike and at depth.
The East Francine Vein has currently been traced for over 1,600 feet along strike and to 500 feet of depth. The near-surface, high-grade zones are characterized as being silver and gold dominant, supergene enriched and oxidized (cyanide soluble). An in-fill drill program of the main mineralized shoot has demonstrated the continuity of the vein structure and increased resource confidence to measured and indicated categories in the proposed open pit areas. The drilling also appears to extend the high-grade area further along strike, potentially expanding the open pit resource. Assay results from drilling at the east extent of the East Francine Vein resource include 0.17 oz/ton gold and 8.2 oz/ton silver over 23.9 feet. About 550 feet east of the resource a 1 foot-wide vein grading 0.07 oz/ton gold and 10.5 oz/ton silver was intersected in recent exploration drilling suggesting mineralized veins are present well away from the current resource.
The Middle Vein has been traced for nearly 7,000 feet along strike and to a depth of over 1,000 feet. Shallow in-fill drilling of the Middle Vein confirmed the continuity of the vein mineralization and includes intercepts of 0.20 oz/ton gold and 54.2 oz/ton silver over 5.9 feet and 0.11 oz/ton gold and 38.4 oz/ton silver over 6.5 feet. This in-fill program improved the continuity and grade over previous drilling and has defined strong mineralization beyond the original pit outline. Exploration drilling continues to define a new zone of near-surface mineralization to the southeast, past the San Ricardo Fault. The zone is slightly deeper and shallower dipping than the Middle Vein to the west of the fault, and assay intervals include 0.10 oz/ton gold and 13.2 oz/ton silver over 7.0 feet, and 0.01 oz/ton gold and 11.1 oz/ton silver over 8.9 feet.
The North Vein has a mineralized trend that extends over 3,500 feet along strike and 700 feet to depth and remains open along strike in both directions and at depth. The North Vein in-fill drilling intercepts have returned grade results that are consistent with the initial drilling completed prior to this year. These assay intervals include 1.74 oz/ton gold and 15.9 oz/ton silver over 4.3 feet, and 0.29 oz/ton gold and 7.6 oz/ton silver over 4.8 feet. On the North Vein, some of exploration intercepts to the southeast include 0.12 oz/ton gold and 3.7 oz/ton silver over 10.4 feet and 0.04 oz/ton gold and 11.7 oz/ton silver over 5.0 feet.
Exploration and in-fill drilling at San Sebastian over the last two quarters has expanded the resources and improved the confidence in near-surface resources to measured and indicated category. All of the resource models are in the process of being updated. Updated mining models of each vein are expected to be finalized by the end of the year and are expected to provide upside to production defined in the PEA study.
At Greens Creek in Alasaka third quarter production of 2.0 million ounces of silver exceeded the third quarter of 2014 by 5%, while gold production of 14,376 ounces was up 6% over the same period last year. The higher silver and gold production were a result of higher recoveries and increased tonnage, partially offset by lower grades. Silver recoveries increased to 76.5%, up from 71.0% in the prior year period as a result of a change implemented in late 2014 to the flotation circuit to more efficiently scalp additional lead concentrate directly to final concentrate, and by introducing CO 2 for pH control in the lead flotation circuit. The increased recoveries positively impacted the operation's revenues by $1.8 million in the third quarter. Recoveries for the other three metals also increased period over period. The mill operated at an average of 2,233 tons per day (tpd) in the third quarter.
The cash cost, after by-product credits, per silver ounce of $4.82 increased from $3.75 in the third quarter 2014. The per ounce cost was impacted by lower by-product credits and slightly lower operating costs. Power costs were similar to the 2014 period due to higher precipitation levels in southeast Alaska in both cases resulting in availability of less expensive hydroelectric power, a condition that is expected to last through the next quarter. Treatment costs were lower as a result of lower prices.