Camorra results cap good year for Hecla

Exploration drilling at the La Camorra mine in Bolivar state, Venezuela, suggests Hecla Mining (HL-N) may find additional high-grade resources at depth.

A deep drill hole and a hole wedged off from it both intersected the Betzy vein, one of two near-vertical ore structures at the mine. The first hole encountered 54 grams gold per tonne over a width of 2 metres, the effective minimum width for mining at La Camorra. The wedge from the first hole ran 115 grams gold per tonne over an identical width.

Earlier holes intersected the two structures as deep as 390 metres below the currently drilled reserve.

The second structure, the Main vein, is also scheduled to be tested downdip in the current program, which will see 12 holes drilled over the next three to four months. An additional program, to define reserves by close-spaced drilling of the known resources, is to start in April.

Drilling from surface last year indicated possible extensions of the La Camorra structures to the west, so some drilling is planned for the strike extension of the veins. There are also plans for follow-up drilling on the Isbelia vein, 800 metres north of the existing workings, where previous work encountered a 2.5-metre intersection running 147 grams gold per tonne.

A 61-hole program at the Canaima prospect, 7 km east of La Camorra, has defined a drill-indicated resource of 320,000 tonnes with an average gold grade of 16.1 grams per tonne. The Canaima system has multiple veins with a mining width averaging around 2.5 metres and dipping 50-60 over a strike length of 500 metres. Initial economic studies on the deposit indicate that an operation producing 35,000-40,000 oz. annually could incur cash costs of about US$125 per oz.

La Camorra produced 152,000 oz. gold in 2001, up 64% over the previous year. Costs fell 29% from 2000, averaging US$133 per oz. over the year. Tighter dilution control and development of some higher-grade reserves brought millhead grades over 30 grams gold per tonne during the year. Production in 2002 is forecast to exceed 140,000 oz. at a cash cost near US$150 per oz.

At year-end, La Camorra’s reserves stood at 438,000 tonnes grading 29.7 grams gold per tonne. Additional resources on the Main and Betzy veins amounted to 126,000 tonnes averaging 27.1 grams per tonne.

Hecla’s Lucky Friday silver mine in northern Idaho produced 3.2 million oz. silver during 2001, but its average cash cost was US$5.14 per oz., above the spot price of silver. Production cutbacks at Lucky Friday will bring this year’s production down to 1.5 million oz. at a cash cost of around US$5 per oz.

At the San Sebastian silver operation, near Durango, Mexico, where production started last May, Hecla produced 1 million oz. silver and 15,000 oz. gold. Definition drilling on the Francine vein has encountered grades averaging 1,314 grams silver and 15.6 grams gold per tonne. Current production estimates have San Sebastian producing 2 million oz. silver and 25,000 oz. gold this year, but the mining plan may be revised upward based on the recent reserve drilling.

Year-end reserves at San Sebastian, part of the Saladillo concession Hecla inherited when it bought the exploration assets of Monarch Resources, were estimated at 276,000 tonnes, grading 967 grams silver and 10.3 grams gold per tonne.

More drilling is planned on the same concession at a prospect called Cerro Pedernalillo, where initial intersections have traced a mineralized shoot over a strike length of about 100 metres.

Hecla turned a profit of US$2.3 million on revenue of US$85.2 million in 2001, a major improvement over the previous year, when it lost US$83.9 million on revenue of US$75.9 million after US$40.2 million in writedowns. Payment of US$8.1 million in dividends on its preferred share series wiped out the 2001 profit for common shareholders, leaving a bottom-line loss of US$5.7 million (or US8 per share).

The company has US$29.2 million in cash, receivables and inventory, and current liabilities of US$29.6 million. To conserve cash, it has cancelled the dividend on the preferred shares for the present quarter, and to give it the ability to raise some additional capital via an equity float, it is proposing to increase its authorized capital to 200 million shares. In May, shareholders will meet to consider the share proposal.