Hecla Mining’s Silver Production Increases 128%

 

COEUR DALENE, ID - Hecla Mining Company President and Chief Executive Officer Phillips S. Baker, Jr., said, ”We had a much improved first quarter with all operational benchmarks showing significant improvement compared with the second half of 2008. More tons of higher-grade material coupled with lower costs drove the results combined with some positive one-time items. We are clearly on track to hit our production and cost targets reversing the trend of rising costs experienced in 2008. Our outlook is very positive given the solid operational performance, stronger balance sheet, higher prices, and the ongoing exploration success at the Lucky Friday.”

First quarter production was a record 2.86 million ounces of silver compared to 1.25 million ounces of silver in the first quarter of 2008. The increase in production is primarily due to Hecla consolidating 100% ownership in the Greens Creek mine with the purchase of the 70.3% interest that was previously owned by Rio Tinto and a very strong operational performance at both the Greens Creek and Lucky Friday mines. On a pro forma basis, combining 100% of Greens Creek production in 2008 with results from the Lucky Friday, Hecla’s silver production increased 18% in the first quarter of 2009 compared with silver production in the first quarter of 2008. Hecla’s average silver cash cost per ounce remains among the lowest in the industry, with the first quarter total cash cost averaging $4.67 per ounce of silver after by-product credits. This compares with cash costs of negative $1.42 per ounce of silver after by-product credits in the first quarter of 2008. The increase in cash costs is mainly due to lower prices for lead and zinc, important by-product revenue credits.

By-product metal production totaled 18,049 ounces of gold, 18,712 tons of zinc and 10,825 tons of lead in the first quarter of 2009 compared to 4,851 ounces of gold, 7,021 tons of zinc and 6,147 tons of lead for the first quarter of 2008. Pro forma by-product metal production in the first quarter of 2008 was 16,317 ounces of gold, 17,596 tons of zinc and 9,546 tons of lead. Milled tonnage at Greens Creek and Lucky Friday was higher by 14% and 8%, respectively, compared with pro forma first quarter 2008 production volumes.

Unit operating costs improved in the first quarter of 2009 compared with the first quarter of 2008; at Greens Creek unit costs decreased $11.28 per ton, or 14%, and at Lucky Friday unit costs were reduced $3.81 per ton, or 5%, compared to the same period in 2008. Lower prices for consumable products such as diesel fuel also helped to lower operating costs.

The Greens Creek mine produced 2.0 million ounces of silver during the first quarter of 2009, at an average total cash cost per ounce of $3.21, compared to pro forma production of 1.7 million ounces at an average total cash cost per ounce of $(5.10) for the prior year period. Hecla’s share of silver production from the Greens Creek mine in the first quarter of 2008 was 495,853 ounces, reflecting its 29.7% interest in the mine. The remaining 70.3% interest in the Greens Creek mine was purchased in April 2008.

On a 100% basis, the mine produced strong operating results with milled tonnage 14% higher than the same period in 2008. Improved grades for all metals, increased mine productivity and lower prices for some consumable products, particularly diesel fuel, lowered unit operating costs 14%, or $11.28 per ton, in the first quarter of 2009 compared to the first quarter of 2008. During the period, the mine also produced 18,049 ounces of gold, 16,121 tons of zinc and 5,186 tons of lead. These levels are 11%, 7% and 7% higher, respectively, than pro forma production in the same period in 2008. The increase in cash costs in 2009, compared to the same period in 2008, is primarily due to decreased by-product credits.

During the first quarter of 2009, $2.9 million was capitalized for purchases of new mobile equipment and underground development at the Greens Creek mine.

The Lucky Friday mine in northern Idaho produced 866,298 ounces of silver during the first quarter of 2009, at an average total cash cost of $8.03 per ounce after by-product credits, compared to 759,303 ounces of silver during the first quarter of 2008, at an average total cash cost of $0.98 per ounce. Cash costs in the first quarter of 2009 were higher due to lower by-product credits compared to the first quarter of 2008. The increased metal production was the result of increased throughput tonnage and selective mining and grade control procedures. The Lucky Friday mine produced 5,639 tons of lead and 2,591 tons of zinc in the first quarter of 2009, or 20% and 2% more metal, respectively, than the prior year period. The mine is forecast to produce approximately 3 million ounces of silver in 2009.

Capitalized mine costs in the first quarter were $3.25 million. This included purchases of new equipment and work at the water treatment plant and the new #4 tailings facility. We also allocated internal resources to continue the investigation of our access options for the deeper development work below the current working areas of the mine.

During the first quarter, $1.0 million was spent on exploration. The expenditures were mostly made at the Greens Creek and Lucky Friday mines. Baker said, “Although exploration spending has been reduced for this year, we are as excited about our targets today as we have been at any time in the past, particularly at the Lucky Friday. Last quarter we said that the exploration intercepts at the Lucky Friday were some of the most impressive in its history. That has continued this quarter. Our preliminary evaluation indicates grades for all metals are substantially higher than those in our current mine plan as the Lucky Friday goes deeper. We are continuing the evaluation.”

The underground drill program began in early February and is generally aligned to infill drill several zones during the year to increase the confidence level of reserves and resources. Production drilling on the lowermost development level on a poorly defined deeper extension of the West Wall ore zone encountered good mineralization and results indicate that underground development is warranted for this level, and possibly one to two additional levels below. Elsewhere, infill drilling of the Northwest-West zone from the 878 block confirmed grades and styles of mineralization for future longhole stope development in this area.

Exploration drilling, at Lucky Friday, continues to follow up last year’s results. While there is work to be completed above the 4050 level, west of the Silver Fault, east along the Paymaster Fault, the priority work is testing the deeper mineralization in the central and east portions of the vein system. This program follows up on 81 drill intercepts from the 30 vein which show uncapped and diluted grades averaging 15.28 ounces per ton silver over an average width of 14.9 feet.

The San Juan Silver Joint Venture in southern Colorado is located in an historic mining district where silver mining ceased in the 1980s. Hecla announced a 13.2 million ounce resource on a portion of the Bulldog vein in February 2009. Additional modeling and resource estimation for numerous other veins of the Bulldog deposit continued in the first quarter and is expected to be completed in the second quarter of 2009. Field surveys documenting the baseline characteristics of the district will resume in the second quarter. Advancing the permitting for future exploration activity in the historic Creede mining district remains a priority; Hecla continues to work closely with the regulatory agencies to facilitate this process.

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