San Sebastian powers Hecla

With gold and silver prices on the rise and silver 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 net earnings of US$500,000 (1 per share) on US$23.4 million. Cash flow from operations jumped nearly an order of magnitude to US$4.8 million.

The latest quarter’s results include a one-time US$4 million favourable litigation settlement paid by Zemex (ZMX-T) after its failure 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 produced a shade more than 2 million oz. at US$2.47 apiece.

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

Gold production climbed 21% to more than 53,000 oz. of gold produced, with 35,000 oz. produced at US$137 per oz; the balance of the ounces came as by-product from silver operations. A year earlier, the company churned out 56,402 oz. of gold at US$137 each.

Hecla realized an average of US$333 per oz. for its gold and US$4.69 for each ounce of silver during the quarter, both up from the first quarter of 2002.

Looking ahead, Hecla pegs 2003 production at 215,000 oz of gold and 9 million oz. of silver.

The quarter’s star performer was the San Sebastian underground silver mine in central Mexico, which spat out a record 1 million oz. of silver and nearly 12,000 ounces of gold. Silver grades climbed 23% to more than 32 oz. per ton. By-product gold helped the mine’s average total cash cost hit minus 7 per oz. silver.

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 comp[nay completed a public offering of 23 million shares for net proceeds of around US$91.2 million. The company’s outstanding shares number more than 109 million.

Hecla’s shares were trading US15 or 4% of value higher at US$3.89 in late afternoon trade on the New York Stock Exchange on May 1; the shares trade in a 52-week range of US$2.20-US$5.90.