Hecla eyes increased San Sebastian production

With better-than-expected production in the first quarter, and additional definition drilling results in hand, Coeur D’Alene, Idaho-based Hecla Mining (HL-N) has upped 2002 production estimates for its San Sebastian silver operation, near Durango, Mexico.

During the first three months of the year, San Sebastian churned out more than 765,000 oz. of silver and 9,000 oz. of gold.

The company now expects San Sebastian to pump out 2.8 million oz. of silver in 2002, a 40% increase over the previously estimated 2 million oz. Gold production at the mine is expected to climb by 28% to 32,000 oz. during the year. With the expected increase in production and higher by-product credits, average total cash cost at San Sebastian during 2002 are pegged at US$2 per oz. silver.

Production at San Sebastian began last May, and by the end of 2001, the mine had poured 1 million oz. silver and 15,000 oz. gold.

Phil Baker, Hecla’s president and COO said, “San Sebastian has gone from a start-up operation to a significant cash flow generator in less than a year.” “With very little capital investment, Hecla has been able to develop a production plan that is expected to take this mine to the middle of 2005, and we’ve only just begun our exploration program here,” he added.

At the end of 2001, 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.

On the exploration front, delineation drilling on the Francine vein at San Sebastian has increased minable tonnes by about 50% and boosted silver and gold resource estimates by 21%.

The company has also pinned down 14 additional veins on the surrounding Saladillo concession. About 6.4 km south of the current mining operations, the company will follow up on positive initial drilling on the Cerro Pedernalillo area with a 33-hole shallow drilling program.

In Venezuela, the La Camorra underground gold mine in Bolivar state, Venezuela, produced about 40,000 oz. of gold.

Underground exploration drilling on La Camorra’s Main vein returned a 2-metre section averaging 32.1 grams gold per tonne at a depth of about 560 metres, nearly 230 metres below current mining levels. A confirmation assay from an offset hole averaged 45.7 grams over 2 metres.

Earlier this year, a deep drill hole and a hole wedged off from it both cut the Betzy vein, the other near-vertical ore structure at La Camorra. The first hole ran 54 grams over 2 metres. The wedge from the first hole ran 115 grams gold over an identical width.

Mid-to-deep level drilling on both the Main and Betzy veins will continue through November.

Year-end reserves at La Camorra were 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.

First-quarter production from the Lucky Friday silver mine in northern Idaho and the Greens Creek mine on Admiralty Island, near Juneau, Alaska, are on track to chip in a combined 4.5 million oz. of silver to Hecla’s account in 2002.

On an operation-wide basis, Hecla expects silver production to climb by 1 million oz., to about 7.5 million oz. during 2002. Cash costs are expected to ring in at US$3 per oz., more than US50 per oz. lower than in 2001.

Last week, Hecla sold its headquarters building in Coeur d’Alene for US$5.6 million. The company will lease half the building to house its recently reduced headquarters staff. Most of the proceeds from the sale will go to fund exploration in Mexico and Venezuela.

After suffering a US$83.9-million loss on revenue of US$75.9 million after US$40.2 million in writedowns in 2000, Hecla managed to turned things around and post a profit of US$2.3 million on revenue of US$85.2 million in 2001.