Environmental costs hit Hecla

Vancouver – Some US$23.1 million in estimated future environmental costs pushed Hecla Mining (HL-N) deep into the red during the third quarter of 2003.

The company posted a net loss of US$17.5 million, or US$0.16 per share in the quarter ended Sept. 30, compared with a net income of US$1.5 million, or a loss of US$0.20 a share after preferred-share dividends in the same period last year.

Excluding the environmental accruals, earnings tallied US$5.6 million, compared to income of US$1.9 million in the third quarter of last year.

Silver production hit 2.6 million oz in the quarter, a 27% jump over the third quarter of 2002. The company’s profit from silver came in at US$7.2 million, compared to US$700,000 last year. Total cash cost to produce an oz of silver fell 45% to US$1.33.

Hecla’s gold segment decreased due to lower gold production from the La Camorra gold mine in Venezuela. Gold production in the third quarter totaled 47,176 oz at an average total cash cost of US$161 per oz.

The star performer was the San Sebastian mine in central Mexico, which added 1.1 million oz of silver in the third quarter at a total cash credit of US$0.22 per oz.

“San Sebastian’s ore grade has improved, and we have been able to mine ore with an average grade of more than 29 ounces of silver per ton and a third of an ounce of gold per ton this year,” says Hecla’s CEO, Phillips Baker.

At Hecla’s 29.7% owned Greens Creek mine in Alaska, production contributed 1 million oz of silver to Hecla in the third quarter, at an average total cash cost of US$1.14 per oz., a record low for the mine. Ore grade came in at 22-oz silver per ton, an improvement over the 20.4 oz silver mined in the same period last year.

The Lucky Friday silver mine in northern Idaho produced 500,000 oz. of silver during the third quarter. So far, the deep underground mine has produced more than 115 million oz. of silver over its 45-year mine life.

“We know the Lucky Friday mine still has tens of millions of ounces of silver resource in it — it’s just a matter of mining them profitably,” says Baker. “We think we’re getting close to a plan that will accomplish that job, even at current metals prices.”

On the gold side, the La Camorra mine saw the ore grade drop to 0.58 oz gold driving up the average total cash cost to US$161per oz. In the first nine months of the year, the operation cranked out 94,785 oz of gold at an average total cash cost of US$145 per oz.

“A characteristic of this orebody is variability in grade,” states Baker. “Last year we were mining in extremely high-grade areas of the mine, and this year the mine plan has us mining areas that have not been as rich.”