Nevada Mines Acquired By Hecla Will Operate As One Unit

 

COEUR D'ALENE, ID - Hecla Mining Company President, Phillip Baker said, “We have now closed the acquisition of the high-grade Nevada mines, and are beginning their integration into Hecla.” Our plan is to operate the mines and mill as one unit, allocating the workforce and capital to generate margins and focus on profitability, not just on production for production's sake. Fire Creek has the best margin of the 3 mines by a considerable amount, so ramping it up is our priority. We are also focused on the exceptional exploration opportunities in the 110 square mile land package." Hecla took control of the Nevada assets previously belonging to Klondex on in July. Hecla is quickly moving forward with multiple initiatives aimed at improving the operations.

The company also reported second quarter 2018 financial and operating results. Capital expenditures (excluding capitalized interest) at the operations totaled $26.8 million for the second quarter, similar to 2017. Greens Creek and Lucky Friday expenditures increased by $2.7 million and $0.3 million, respectively, offset by decreased expenditures at Casa Berardi of $2.3 million and San Sebastian of $0.7 million. Expenditures at Greens Creek, Casa Berardi, San Sebastian and Lucky Friday were $14.2 million, $9.8 million, $1.7 million, and $1.1 million respectively.

At the Greens Creek mine, 2.0 million ounces of silver and 13,719 ounces of gold were produced in the second quarter, compared to 1.9 million ounces and 12,704 ounces, respectively, in the second quarter of 2017. The increased silver production was due to higher grades compared to the second quarter of 2017. The mill operated at an average of 2,290 tons per day (tpd) in the second quarter, which was slightly lower than the second quarter of 2017.

The cost of sales for the second quarter was $47.7 million, and the cash cost, after by-product credits, per silver ounce, was $(3.47), compared to $54.3 million and $1.86, respectively, for the second quarter of 2017.4 The AISC, after by-product credits, was $4.43 per silver ounce for the second quarter compared to $8.71 in the second quarter of 2017.5 The per ounce silver costs were lower primarily due to higher gold and base metals prices and production. Approximately 5% of production is coming from automated headings. Higher by-product credits in the second quarter 2018, along with lower exploration expenditures, contributed to lower AISC, partially offset by higher capital spending. Estimates for cash cost, after by-product credits, per silver ounce have declined to $(0.50) from $0.50, and AISC, after by-product credits, declined per silver ounce to $7.00 from $7.75.

Idaho Preparations for the introduction of the Remote Vein Miner (RVM), expected in late 2019, continued to be a major focus at Lucky Friday in the second quarter. The RVM project is proceeding as expected and has the potential to revolutionize how the Lucky Friday is mined, making it a safer and more efficient operation. In addition, limited production and capital improvements continue to be performed by salaried staff.

Production has been limited since March 13, 2017 due to the ongoing strike and now the focus is completing the development necessary to accommodate the RVM in 2019. Costs related to care-and-maintenance of the mine are reported in a separate line item in our condensed consolidated statement of operations and are excluded from the calculation of cost of sales, cash cost, after by-product credits, per silver ounce and AISC, after by-product credits, per silver ounce.

At the Casa Berardi mine in Quebec, 42,722 ounces of gold were produced in the second quarter, including 8,979 ounces from the East Mine Crown Pillar (EMCP) pit, compared to 33,261 ounces in the prior year period, with the increase primarily due to higher grades. The mill operated at an average of 3,845 tpd in the second quarter, an increase of 6% over the second quarter of 2017.

The automated 985 drift project is working well, with the autonomous haul truck running better and with higher availability than originally anticipated. The second 40-ton Sandvik autonomous haul truck is expected to be delivered later this year. Operating two autonomous trucks is expected to result in operating savings of several million dollars a year.

At the San Sebastian mine in Mexico, 559,647 ounces of silver and 3,872 ounces of gold were produced in the second quarter, compared to 866,950 ounces and 6,596 ounces, respectively, in the prior year period. Although silver and gold production were lower compared to the second quarter of 2017, both still exceeded our estimates for the quarter due to the amount of higher-grade stockpile material processed.