Hecla Mining Co. Aug. 4 reported silver production of 2.4 million ounces, an increase of 60 percent for the second quarter 2008 compared to the same period a year ago. The company also reported a loss of $44.4 million, or 35 cents per share, on revenue of $64 million. Hecla attributed the decline in stock value largely to several one-time or transactional items related to the purchase of Greens Creek, the sale of the Venezuelan operations and the sale of Great Basin Gold stock which resulted in a combined charge of $39.3 million.
Hecla President and CEO Phillips S. Baker, Jr., said, "The second quarter has been a transformational quarter for Hecla. We acquired the remainder of the Greens Creek Joint Venture and sold our Venezuelan interests. Both transactions had one-time impacts on the second quarter financial results as we completed the transition related to these two assets. In the long term, the Greens Creek acquisition and the Venezuelan disposition provide our shareholders with 100 percent of the world's lowest-cost and fifth-largest silver mine, a substantially lower political risk profile, and a 60 percent increase in 2008 annual silver production to 9 million ounces. We have already seen a 60 percent increase in silver production for the second quarter compared to the same period a year ago."
Hecla received 1.7 million ounces of silver from second quarter production at the Greens Creek Mine in Southeast Alaska, up from 500,000 ounces during the first quarter. The gain was a result of Hecla’s increased ownership of the mine from 29.7 percent to 100 percent in April.
The average cash cost of silver at Greens Creek during the second quarter was $2.10 per ounce after by-product credits, and an average of 50 cents per ounce for the first half. Hecla attributes the increases in cash costs in the second quarter largely to increased diesel fuel and steel costs as well as increased smelter treatment and freight charges.
Hecla reported production from Greens Creek for the first half of 2008 averaged about 1,950 tons per day. June’s performance was the best of the year at 2,369 tons per day. Capital expenditures during the second quarter at Greens Creek totaled $10.2 million and were targeted primarily at tailings facility expansion, purchase of underground mining equipment, underground mine development, and definition drilling.
Hecla has increased its 2008 annual exploration budget to a range of $23 million to $27 million as it incorporates 100 percent of the Greens Creek exploration program and commences activities at the San Juan Silver Joint Venture project in southern Colorado. In the first six months of the year, about $12.9 million was spent on exploration, including $1.1 million at Greens Creek (Hecla's share).
Underground drilling during the second quarter at Greens Creek focused on the Gallagher zone where drilling pinpointed the location and extent of the resource that dips to the west and plunges to the south. The mineralization is now better defined for over 200 feet and transitions from two bands of mineralization with widths totaling 63 feet to one thick band of mineralization with a 105-foot width. This adds 200 feet to the Gallagher zone that earlier was 700 feet in strike length, potentially adding 20 percent to the existing resource. Targets in the SW and East zones are the focus for the remaining 2008 exploration program at Greens Creek. Exploration drilling will focus on historic underground higher-grade intercepts in the SW zone and on results from recent surface drilling in the vicinity of the East zone. A surface drill program at Greens Creek began May 17 with two rigs.
The company said completing a transaction the size of the Greens Creek Joint Venture acquisition causes some long-term impacts. These impacts include increased depreciation, depletion and amortization as the result of purchase price accounting that will initially amortize and depreciate approximately $334 million of the purchase price over Greens Creek's current proven and probable reserves.
