Hecla Reports Sale of Venezuelan Gold Properties

COEUR D'ALENE, ID - Hecla Mining Company reported an agreement to sell its subsidiaries engaged in Venezuelan activities to Rusoro Mining Ltd. (Rusoro) for $25 million, consisting of $20 million in cash and 4,273,504 shares of Rusoro common stock. The transaction is dependent upon regulatory approval.
Hecla Mining Company President and Chief Executive Officer, Phillips S. Baker, Jr., said, "The sale of our Venezuelan properties is part of our strategy to reduce the financing put in place to acquire Greens Creek. Prior to this transaction, Hecla repatriated approximately $39 million in cash that generated a $14 million foreign exchange loss. This transaction generates immediate cash from both the sale of the assets and the repatriation of $25 million of cash from our Venezuelan subsidiaries."
Hecla currently carries the Venezuelan properties at a book value of $39 million, so the transaction is expected to result in a pre-tax loss on the sale in the range of $10 million to $12 million, subject to normal post-closing adjustments. The $14 million foreign exchange loss will also be reported in second quarter 2008 results. Baker said, "Our operations in Venezuela were very important to Hecla in the early 2000s, during a time when precious metals prices were depressed. But more recently that operation has become a much smaller proportion of our company's value, as revenues from our U.S. silver properties grew. In fact, in 2007, the La Camorra unit contributed just 3% of our annual gross profit."
The sale of the La Camorra unit is expected to reduce Hecla's 2008 gold production estimate to approximately 70,000 ounces (from earlier guidance of 115,000 ounces), with the majority of that production coming as a by-product from the Greens Creek mine. Baker said, "2008 is a transition year for Hecla as we see a reduction in gold production but an increase in silver production. And while we will not own a primary gold mine, we will continue to consider gold properties in politically secure countries that leverage our expertise as an underground miner."
The company's address is 6500 N. Mineral Drive, Suite 200, Coeur d'Alene, Idaho 83815, 208.769.4100, fax: 208.769.7612, email: [email protected].