Production Recommenced At Lucky Friday Mine
COEUR D'ALENE, ID - During the first quarter we recommenced production at the Lucky Friday mine, in Shoshone County, Idaho, after a year of rehabilitation and enhancement, and expect the mine to produce more than 2 million ounces of silver this year and 3 million ounces of silver in 2014," said Phillips S. Baker, Jr., President and Chief Executive Officer of Hecla Mining Company. "My ongoing thanks to the team at the Lucky Friday who completed this work safely and efficiently, and the team at Greens Creek, in Alaska, whose effort generates the cash flow that's carrying the Company through this period.
There has been significant weakness in precious metals prices this spring, which we are watching closely, but I am pleased to note the increase in demand for the physical metal, particularly in the Middle East and in Asia, that has emerged as a result of these lower prices, Baker concluded. I believe that in these times of price volatility and uncertainty, those companies like Hecla with low costs, high margins and the flexibility to scale back or increase discretionary expenditures such as exploration, pre-development, capital and investments, will fare the best.
In February, the Lucky Friday recommenced production upon completion of the rehabilitation and enhancement project of the 6,100 foot Silver Shaft, the main access to the mine, and the 5900 bypass. In the first quarter, Lucky Friday produced 120,000 ounces of silver at a cash cost of $36.55 per ounce. The high cash costs are the result of the low production levels in the early phase of the mine restart. Two of seven production areas have restarted, and the Company anticipates a ramp-up in mine output during the first half of the year as additional production stopes come on line, with a return to full production levels expected in mid-2013. Full year production is expected to total more than 2 million ounces of silver with about 1.5 million ounces in the second half of the year.
The Company resumed sinking of the #4 Shaft in early 2013 upon completion of the Silver Shaft work and re-opening of the mine. Once complete, the #4 Shaft project, an internal shaft at the Lucky Friday mine, is expected to provide deeper access to higher grade material in order to extend the operational life and to increase silver production to 5 million ounces per year.
Total cash cost per silver ounce produced and cost per ton milled for the first quarter of 2013 were generally higher than historical periods of operating at full production. The higher per-unit costs are primarily due to lower production, as mine output is limited until production areas come on line. The Company anticipates the higher per-unit costs to continue until the mine returns to full production in approximately mid-2013.
Greens Creek exploration made significant progress in defining high-grade extensions to mineralization along the Deep Southwest, 5250 and Gallagher ore trends. Deep Southwest is a recently discovered zone which lies below and further west of the Southwest Zone. The geometry of this body is currently being defined but it is open down dip and to the southwest along strike. Significant intersections include 27.1 oz/ton silver, 0.39 oz/ton gold, 13.3% zinc and 6.1% lead over 8.6 feet (Deep Southwest); 21.5 oz/ton silver, 0.31 oz/ton gold, 8.9% zinc and 4.1% lead over 10.5 feet (Deep Southwest) and 21.9 oz/ton silver, 0.05 oz/ton gold, 5.8% zinc and 2.8% lead over 24.6 feet (5250 Zone). Drilling will continue in an effort to define and expand the Deep Southwest further southwest and the 5250 Zone to the south; however, the emphasis is expected to shift to in-fill drilling of the 200 South in an effort to convert resources to reserves and exploration drilling to the south and west that could extend mineralization beyond the current high-grade resources.
Re-examination of district potential near the past producing Francine Vein at San Sebastian, in Mexico, led to the discovery of both precious metal-rich oxide and more base metal-rich sulfide mineralization at the Middle Vein in 2012. Drilling during the quarter was a combination of in-fill drilling to refine and upgrade the resource and exploration drilling that extended the very high-grade, near-surface oxide resource to the southeast. Recent drill intersections include 62.16 oz/ton silver and 0.34 oz/ton gold over 8.0 feet and 34.25 oz/ton silver and 0.22 oz/ton gold over 8.4 feet (Middle Vein). Drilling is expected to continue along the prospective Middle Vein trend, which is currently defined for approximately 3,000 feet along strike and to a depth of 1,000 feet and appears open for extension along strike to the southeast. Drilling is also planned for extensions to the Hugh Zone and Andrea Vein structures.
Underground drilling in the Equity Vein system at the San Juan Silver property, in Colorado, continued to outline multiple zones of high-grade, gold and silver-bearing veins near the intersection with the North Amethyst Vein. However, it did not generate sufficient tons to justify continuing at this time. Planned exploration for the remainder of the year will focus on the Bulldog Vein system.
Development of the Bulldog infrastructure is continuing with the 2800-foot long decline now advanced over 1,300 feet. The expected fourth quarter 2013 completion of the decline will access old workings and the ore body. This decline provides access for the confirmation of the resource and potential drill platforms for exploration. Scoping studies, resource updates and economic models related to the Bulldog continue to be advanced.