Hecla writes down Grouse Creek interest

The third-quarter operating results of Hecla Mining (NYSE) include a nonrecurring asset writedown of its entire 80% interest in the Grouse Creek gold mine in central Idaho.

Great Lakes Minerals (TSE) owns the remaining 20% of the mine.

Mining operations at Grouse Creek have encountered significant shortfalls of both ore tonnage and grade. As a result, Hecla is re-evaluating the orebody and developing a revised mine plan. The new ore reserve estimate and mine plan will be completed in the first quarter of 1996.

According to a Hecla press release, the company does not expect to recoup its investment in the mine, as the life of the mine and the number of ounces of recoverable gold and silver have been reduced significantly. Those reductions, along with the need to comply with applicable accounting guidelines, were the stated reasons for the writedown.

“We will make every attempt to keep the Grouse Creek unit operating,” says Arthur Brown, Hecla’s chief executive officer. “We intend to cut costs and capital expenditures, and are now looking at the most efficient way to mine the remaining ore.”

Great Lakes’ board of directors has established a technical committee to carry out an independent review of the Grouse Creek project, with the assistance of Hecla’s staff. Once the review is complete, the Great Lakes board will decide how to respond to the situation.

To avoid the potential for conflicting corporate objectives, Hecla and Great Lakes have agreed that Arthur Brown will step down from the Great Lakes board.

Meanwhile, an environmental permit has been issued for Great Lakes’ wholly owned Lluvia de Oro gold project in Mexico’s Sonora state. Earthworks in the pad and pond area are nearing completion, and the mining contractor is expected on site by mid-December, in preparation for placing ore on the pads in January. The first pour is scheduled to occur in March, 1996. Lluvia de Oro is expected to produce 25,000 oz. gold annually at a cash cost of US$245 per oz.

Farther south, in Mexico’s Sinaloa state, Great Lakes has completed a 70-hole drill program at the Palmarito silver-gold project. Results are being compiled.