Hecla Has Third Highest Quarterly Revenue In Company History
COEUR D'ALENE, ID - Hecla Mining Company reported first quarter net income applicable to common stockholders of $11.5 million, and adjusted net income applicable to common stockholders of $4.9 million. First quarter silver production was 2.5 million ounces at a cash cost, after by-product credits, per silver ounce of $3.83.2
Hecla's first quarter demonstrates that, despite lower prices, we can grow production, revenue, cash flow, and earnings, said Phillips S. Baker, Jr., Hecla’s President and CEO. As we continue to execute our projects, such as the Lucky Friday #4 Shaft and the Casa Berardi optimization, we expect even more growth, particularly when metal prices increase.
With adjusted EBITDA of $41 million in the first quarter, and capital and exploration programs of only $34 million; we are demonstrating that we can invest in growth while operating within our adjusted EBITDA. Costs at Greens Creek, in Alaska, are lower than expected, and we are improving Hecla's 2014 guidance for cash cost, after by-product credits, per silver ounce to $6.50, added Mr. Baker.
Silver production at Greens Creek was 1.8 million ounces in the first quarters of 2014 and 2013. This consistent silver production is due, in part, to the investment in capital projects that are designed to reduce the risk of the operation. The mill operated at 2,252 tons per day during the first quarter of 2014.
Power and treatment costs were lower than in the first quarter of 2013. Power costs were lower due to the availability of hydroelectric power. Lower power costs are the largest factor in a reduction of mining and milling costs per ton by 7% and 27%, respectively, in the first quarter compared to the same period in 2013. Treatment costs are less as a result of lower silver prices, as treatment costs include the value of silver retained by the smelters. The cash cost, after by-product credits, per silver ounce declined to $1.58 in the first quarter of 2014 from $5.02 in the first quarter of 2013. The Company has updated its guidance for cash cost, after by-product credits, to $5.00 per silver ounce1 to reflect the first quarter performance and the expected utilization of more diesel-generated power over the second half of the year.
First quarter 2014 silver production at Lucky Friday, in Idaho, was 699,605 ounces at a cash cost, after by-product credits, per silver ounce of $9.60. The Company has updated its guidance for cash cost, after by-product credits, to $9.75 per silver ounce1 to reflect the first quarter performance. Operating cost per ton is lower than in the previous four quarters because of increased throughput.
Production recommenced in February of 2013 following completion of the rehabilitation and enhancement project at the 6,100 foot Silver Shaft, the main access to the mine, and the 5900 bypass. Historical throughput was reached in September 2013, and has continued into 2014.
#4 Shaft, a key growth project, has been excavated 2,000 feet to below the 6500 level. The project is more than 60% complete and is expected to be finished in the third quarter of 2016. The total estimated completion cost of the #4 Shaft is approximately $215 million, with $138 million having been spent through the first quarter. With the remaining work primarily limited to the actual sinking of the shaft and development of the levels, the project risks have declined. As of March 31, 2014, the #4 Shaft team has worked 864 days without a lost-time accident.
The Casa Berardi mine, in Quebec, acquired from Aurizon Mines Ltd. on June 1, 2013, produced 31,259 ounces of gold in the first quarter at a cash cost, after by-product credits, per gold ounce of $886. For the seven-month period ending December 31, 2013 under Hecla ownership, the mine produced gold at a cash cost, after by-product credits, per gold ounce of $951.1 The lower cost in the first quarter of 2014 was due in part to increased production, as mill throughput averaged 2,068 tons per day. Operating costs were negatively impacted by approximately $1.2 million, or approximately $38 per gold ounce, due to higher heating costs resulting from a propane shortage in eastern Canada and the U.S. The Company believes improved ground control has resulted in generally safer operations, as well as a reduction in waste rock generation.
Advanced engineering work is underway in an effort to increase metallurgical recoveries, better control dilution, and reduce the development necessary to maintain production. Beginning in 2015, these initiatives should positively affect revenue and cash cost, as well as reduce the capital required, with an expected life of mine financial benefit of $140 million. Additional information on these programs can be found in the April 9, 2014, Investor Day presentation on the Company's website.
Work on the West Mine Shaft deepening continues, with a focus during the first quarter on the construction of stations, a loading pocket and transfer rises. The shaft has approximately 38 meters remaining, and completion of the associated mechanical and electrical infrastructure is expected late in the third quarter of 2014, with commissioning to follow. The deeper shaft allows access to the deeper mining horizons and exploration targets.
At Greens Creek, definition and exploration drilling from two drills continues to enhance the potential of Deep 200 South, a mineralization trend that extends over 3,000 feet along strike and over 1,000 feet of dip. Drilling of Deep 200 South has defined three stacked folds of high-grade mineralization that represent up to 600 feet of down-dip continuity. Drilling of the upper fold or bench mineralization had some of the widest and highest-grade intercepts in recent history at the mine. This drilling confirms the resource model and shows the upper limb of the bench fold extends about 100 feet east beyond the current model. Significant drill intersections include 27.3 oz/ton silver, 0.46 oz/ton gold, 13.7% zinc, and 6.7% lead over 28.2 feet and 52.1 oz/ton silver, 0.40 oz/ton gold, 14.8% zinc, and 7.5% lead over 4.9 feet. Drill intersections continue to be very encouraging and mineralization remains open to the south.
At Casa Berardi, five drills have been operating underground. Definition drilling of the 113 Zone confirmed and expanded previous resources upward towards the 310 level and includes an intersection of 0.87 oz/ton gold over 17.7 feet. Drilling of the 118 Zone was successful in extended lenses 118-27, 118-45, and 118-46 to the east and includes intersections such as 0.37 oz/ton gold over 58.1 feet. At the lower 118 Zone, some intercepts including 0.48 oz/ton gold over 16.4 feet represents an extension to the current resource.
Exploration drilling on the 123 Zone intersected 0.21 oz/ton gold over 3.4 feet and 0.22 oz/ton gold over 17.4 feet on the east extension of the 123-30 lens. Exploration drilling of the 124 Zone Principle on the east extension of the 124-30 lens intersected 0.25 oz/ton over 10.4 feet on the south side of the Casa Berardi fault and appears to be open to the east. See more complete drill assay highlights in Table A at the end of the release.
At Lucky Friday, definition drilling from the #4 Shaft 6500 Station continues to confirm resources and refine vein solids interpretation below the 15 and 16 stopes between the 6476 to 7005 levels. Intersections of the 30 Vein include 28.7 oz/ton silver, 21.4% zinc, and 6.7% lead over 16.5 feet. Other strong intersections include 36.2 oz/ton silver, 2.1% zinc, and 17.7% lead over 17.0 feet (130 Vein) and 17.5 oz/ton silver, 12.4% zinc, and 2.3% lead over 6.7 feet (50 Vein).
Hecla is earning in a 50% interest in the Fayolle property, located in Abitibi about 81 miles southeast of Casa Berardi. Fayolle has a small, near surface, high-grade gold occurrence; however, large portions of the property remain under-explored and display geological similarities with the main deposit. Recent drilling of the Cinco intersected 0.12 oz/ton gold over 14.4 feet within a broader interval of 0.08 oz/ton over 26.9 feet. In a second hole, visible gold was observed in a vein and graded 0.48 oz/ton gold over 2.6 feet.
At San Sebastian in Durango, Mexico, potential extensions of the Middle, Francine and North veins to the northwest and southeast remain strong and the Middle Vein is open to depth. The combination of recent surface drill holes and trenching has defined a series of drill targets that could be the strike extensions of these veins located across the San Ricardo Fault and north of the San Sebastian mine area. These targets are expected to be evaluated with trenching and drilling in the second quarter, and may provide new resources to incorporate into the mine plan for a potential restart of production at San Sebastian.
Metallurgical testwork on the Middle Vein at San Sebastian is in progress to refine the metallurgical processing and mill designs. Scoping studies are determining the production viability, rate and sequencing of mining for a near surface mine that could require less capital initially and provide increased returns. Test pits are being excavated along the Middle and Andrea veins at 10-meter spacing for evaluation of overburden, vein continuity and oxidation.
At San Juan Silver in Colorado, work continues on water discharge permits and on an amendment to the 5-year Plan of Operations (POO) for surface exploration drilling. Subject to receipt of the permits and the amended POO, and improved market conditions, the Company expects to commence underground rehabilitation in order to establish drill platforms.