Hecla Reports Silver Production Of 1.3M Ounces

COEUR D'ALENE, ID - Hecla Mining Company reported first quarter net income applicable to common shareholders of $12.4 million and earnings after adjustments applicable to common shareholders of $16.9 million. First quarter silver production was 1.3 million ounces at a cash cost of $2.24 per ounce, net of by-products.

"During the first quarter of 2012 we continued to invest in Hecla's strong and diversified assets, making excellent progress in the rehabilitation of our Lucky Friday Silver Shaft and record investment in our Greens Creek mine. We also advanced all three major pre-development projects, with the goal of increasing our silver production and reserves by moving into development quickly," said Hecla's President and Chief Executive Officer Phillips S. Baker, Jr.

"While our first quarter silver production at Greens Creek in Alsas, was impacted by ground support work that diverted equipment and personnel, we expect production to increase for the rest of the year," Baker added. "The combination of Hecla's strong balance sheet, including a cash balance of $279 million and substantially no debt, and its long-lived, low cost mines which provide strong cash flow will allow us to deliver an expected 50% growth in silver production."

Exploration and pre-development expense increased to $9.0 million in the first quarter from $3.3 million in the same period in 2011, for exploration work at Greens Creek, the Company's extensive land package in Durango, Mexico, at San Juan Silver project in Colorado, and the Star complex in North Idaho's Silver Valley near the Lucky Friday mine; $6.2 million in suspension-related costs at the Lucky Friday mine and a $5.2 million loss on base metal derivative contracts for the first quarter, compared to a $2.0 million loss for the same period in 2011.

Silver production at Greens Creek was 1.3 million ounces in the first quarter of 2012, compared to 1.7 million in the same period in 2011. Mining and milling costs per ton were up by 37% and 18%, respectively, in the first quarter compared to the same period in 2011 due to lower production, as mill throughput decreased by 13%. The mining costs variance is also attributed to higher maintenance costs during the 2012 period.

The cash cost per ounce of silver increased by $2.97 for the first quarter compared to the same period in 2011, mainly attributable to lower silver ounces produced due to the decrease in mill throughput and lower silver ore grades ($4.71 per ounce), treatment and freight costs ($2.68 per ounce), and mine license tax and other costs ($0.97 per ounce). These factors were partially offset by higher by-product credits of $5.39 per ounce due to higher average gold prices and higher zinc and lead ore grades.

At the Lucky Friday mine, in Idaho, the $19.9 million decrease in gross profit in the first quarter compared to the same period in 2011 resulted from the temporary suspension of production at the mine during the 2012 period. The mine's Silver Shaft is undergoing rehabilitation and extensive improvements, with operations and silver production expected to resume as planned in early 2013. Through the first quarter, all surface work needed for the rehabilitation project was completed, including winches, generators and revised shaft collar structure.

As of early May, approximately 1,500 feet of rehabilitation work on the Silver Shaft had been completed, slightly ahead of plan. This work involves the removal of cementitious material along the main shaft, as well as installation of a metal brattice between the east and west halves of the shaft, repairing shaft steel, and installation of a new power cable, along with additional work, which is expected to improve the shaft's functionality and possibly improve its hoisting capacity. Work along the entire 6,100 foot Silver Shaft is expected to be completed in December 2012.

According to the plan submitted and approved by MSHA, once restoration work in the Silver Shaft is complete through the 4900 level, work crews are expected to be brought back in for development work to prepare the mine for resumption of production. Care and maintenance costs incurred at the Lucky Friday totaled $6.2 million for the first quarter of 2012.

Exploration expenditures for the first quarter were $5.6 million with $1.8 million for exploration at San Juan Silver in Colorado, $1.5 million for San Sebastian in Mexico, $0.6 million at Greens Creek, $0.5 million at the Star and $0.4 million for the Silver Valley. Expenditures for 2012 are expected to be approximately $28.0 million.

Drilling at Greens Creek continues to define ore-grade mineralization along trend of the Gallagher and 9a Zones and South West Bench. Drilling of the 9a Zone has likely extended the resource to the south and drilling of the South West Bench has defined ore-grade material to the north and the east of the existing reserve model. At the Gallagher, drilling continues to define two discrete high-grade zones that are strong to the south and to the east near the Gallagher Fault.

At the north end of the recently expanded Star Complex resource, there are now two drills defining high-grade, northerly and down-dip extensions to the Moffitt, North Star and Noonday veins. Drilling of the Moffitt veins includes intersections of 8.0 opt silver, 26.9% lead, 6.7% zinc over 5.3 feet; 5.0 opt silver, 16.9% lead, 0.7% zinc over 1.5 feet; and 2.6 opt silver, 7.9% lead, 12.9% zinc over 4.3 feet. The North Star is a 42-foot wide stringer zone that includes four separate veins ranging from 1.0 to 2.2 opt silver and 6 to 20% lead-zinc across widths of 1.5 to 5.8 feet.

Most of the exploration drilling in the first quarter occurred underground in the Equity at the San Juan Silver property in Colorado. Initial high-grade gold-silver results at the Equity mine were provided in a press release on February 27, 2012. New drilling has extended the strike length another 50 feet to 200 feet. The plunge of the mineralized zone has now doubled to about 450 feet. Drilling continues to identify strong breccia and vein mineralization that varies from 7 to 25 feet wide with fine-grained sulfides and silver sulfosalts-rich intervals. A second parallel mineralized structure appears in several drill holes.

Assay results from drilling since the February 27 press release include several samples from the Equity vein; 0.17 opt gold and 16.8 opt silver over 6.4 feet; 0.09 opt gold and 23.5 opt silver over 5.2 feet; 0.38 opt gold and 40.2 opt silver over 6.8 feet; and 0.08 opt gold and 9.2 opt silver over 6.4 feet. A second drill is being mobilized to test additional targets.

In Mexico, two drills have been actively drilling extensions to the Andrea vein resource and the Antonella, a parallel, subsidiary vein. Drilling of the Andrea vein to the southeast continues to define a strong vein and breccia varying in width from 4 feet to 16 feet with bands of precious metal bearing sulfides. Step-out holes to the southeast continue to intersect the wide-mineralized Andrea vein that extends 500 meters beyond the 1.7 km strike resource.

Pre-development expenditures for the first quarter of 2012 were $3.4 million with $2.2 million at the San Juan Silver property in Colorado, $1.1 million at the Star property in Idaho and the remaining funds in Mexico. Pre-development expenditures for 2012 are expected to total approximately $11.0 million.

In Colorado at the Equity, crews are continuing to rehabilitate underground workings, install utilities down the decline and develop additional drill stations as drilling continues to intercept high-grade mineralization. At the Bulldog, the design of the decline is being finalized and steel sets for installation at the portal have been received. In addition, surface maintenance facilities have been completed at the Equity and Bulldog project sites.

In Idaho's Silver Valley, as the result of completing Star's mineability study, which has defined the mining method, a preliminary economic analysis is being prepared which is expected in the third quarter. Rehabilitation on the Star 2000 level continues around the shaft stations, the Star #4 hoist room and the Star #5 shaft where a connection to the Grouse 700 Level will provide secondary surface access. In addition, surface maintenance facilities have been completed.

At the San Sebastian project in Mexico, options for accessing the existing resources at the Hugh Zone and a new mine plan have been completed. A preliminary economic analysis is expected to be completed during the third quarter of this year.

A work plan and drill program to define the hydrology of the Andrea area, which is located on the same property package as the Hugh Zone, has been completed and preliminary mine designs have begun. Initial metallurgical testing indicates the Andrea ores are amenable to cyanidation and produce a high-grade gravity concentrate. Further studies will optimize grind versus recovery, leach time, cyanide concentration and consumption, gravity concentrations and carbon loading for a potential CIL circuit.

The company's address is 6500 N Mineral Dr, Suite 200, Coeur d'Alene, ID 83815-9408. 208.769.4100, fax: 208.769.7612.