San Sebastian powers Hecla Mining

With gold and silver prices on the rise, and mining costs on the slide, Hecla Mining (HL-N) ventured further into the black during the first three months of 2003.

The Idaho-based miner made US$6.7 million (or 6 per share) on revenue of US$26.4 million, up from year-ago earnings of US$500,000 (1 per share) on US$23.4 million in revenue.

The latest quarterly results include a one-time, US$4-million favourable litigation settlement paid by Zemex (ZMX-T) after it failed to close on the purchase of Hecla’s Kentucky-Tennessee Clay Co. in early 2001. Changes in accounting principles provided a US$1.1-million boost.

First-quarter silver production amounted to 2.4 million oz. at a record low total cash cost of US$1.67 apiece. A year earlier, the company had produced a shade more than 2 million oz. at US$2.47 apiece.

“Hecla produced more silver and at a lower cost per ounce this quarter than in any previous quarter in our 112-year history,” says President Phil Baker. “And this is after a record year of production and costs in 2002.”

Gold production climbed 21% to more than 53,000 oz., with 35,000 oz. produced at US$137 per oz; the balance was a byproduct of silver operations. A year earlier, the company had churned out 56,402 oz. gold at US$137 each.

Hecla realized an average of US$333 per ounce for its gold and US$4.69 for each ounce of silver during the recent period — higher, in both cases, than in the first quarter of 2002.

Looking ahead, Hecla expects to produce 215,000 oz. gold and 9 million oz. silver in 2003.

The star performer was the San Sebastian underground mine in central Mexico, which produced a record 1 million oz. silver and nearly 12,000 oz. gold. Silver grades climbed 23% to more than 32 oz. per ton, while byproduct gold helped push down the average total cash cost.

At quarter’s end, Hecla had cash and equivalents of US$113.6 million, up from US$19.5 million at the end of 2002. In January, the company completed a public offering of 23 million shares for proceeds of US$91.2 million. The number of outstanding shares exceeds 109 million.

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