Hecla Reports First Quarter Net Income of $18.4 Million and Negative Cash Costs of $3.03 Per Ounce of Silveror the Period Ended March 31, 2010 COEUR D'ALENE, Idaho--(BUSINESS WIRE)--Hecla Mining Company (NYSE:HL) today reported first quarter financial and operating results for 2010.
FIRST QUARTER 2010 HIGHLIGHTS
- Silver production of 2.5 million ounces
- Gold production of 16,862 ounces
- Record quarterly lead production and second highest zinc production
- Record quarterly tonnage throughput at the Lucky Friday mine
- Lucky Friday mine produced its ten millionth ton of ore
- Cash costs of negative $3.03 per ounce of silver after by-product credits, a reduction of $7.70 per ounce compared with the first quarter of 2009 and $1.03 per ounce compared with the fourth quarter of 2009
- Net income of $18.4 million, or 8 cents per basic share, applicable to common shareholders and cash flow from operations of $19.3 million
- Adjusted net income1 of $17.2 million, or 7 cents per share, applicable to common shareholders
- Further strengthening of the balance sheet, Hecla now has more than $115 million in cash
Hecla reported net income of $21.8 million in the first quarter of 2010, compared with net income of $7.3 million in the first quarter of 2009. After dividends to holders of its preferred stock, Hecla reported net income applicable to common shareholders of $18.4 million, or 8 cents per basic share, in the first quarter of 2010, compared to $3.9 million in the first quarter of 2009. Hecla's mandatory convertible preferred stock is required to be converted into common stock in January 2011.
Adjusted net income1 applicable to common shareholders, which excludes the impact of an income tax benefit, a negative provisional price adjustment, an increased reclamation accrual and a gain on the sale of marketable securities, was $17.2 million, or 7 cents per share, in the first quarter of 2010, compared to loss of $12.4 million in the first quarter of 2009.
(1) Adjusted income is a non-GAAP measure; see Reconciliation of Net Income at end of this release.
Cash flow from operating activities in the first quarter of 2010 was $19.3 million compared with negative $0.5 million in cash flow from operating activities in the same prior year period. The increase in operating cash flow was achieved in spite of an increase in accounts receivable of $12.2 million, which primarily resulted from normal variations in the concentrate shipment schedule. During the quarter, capital expenditures were $8.3 million compared to $3.6 million in the same prior year period. The increase is primarily the result of expenditures on the Lucky Friday deep development project.
During the first quarter of 2010, Hecla recorded a tax benefit of $6.2 million to recognize the expected benefit associated with the realization of its deferred tax assets arising from expected future profitability due to improved metals prices, which now total $51.8 million. Hecla also realized a gain of $0.6 million on the sale of marketable securities. Hecla recorded an accrual of $2.4 million in the first quarter of 2010 for the Bunker Hill Superfund Site costs and recorded a negative adjustment to provisional metal sales of $3.0 million in the period.
At March 31, 2010, Hecla had $116.3 million in cash and cash equivalents and no debt. Hecla has approximately 242.3 million shares of common stock outstanding.
During the first quarter of 2010, Hecla realized $16.92 and $1,107 per ounce of silver and gold, respectively, and $0.96 and $0.93 per pound, respectively, for zinc and lead.
Average prices for all metals in the first quarter of 2010 were higher compared to the same 2009 period. Average prices for silver and lead were lower in the first quarter of 2010 compared with prices in the fourth quarter of 2009, while average prices for zinc and gold were higher in the first quarter of 2010 compared with the fourth quarter of 2009.
Hecla produced 2.5 million ounces of silver in the first quarter of 2010 at a cash cost of negative $3.03 per ounce, after by-product credits. This compares with 2.9 million ounces of silver in the first quarter of 2009 at a cash cost of $4.67 per ounce and 2.4 million ounces of silver in the fourth quarter of 2009 at a cash cost of negative $2.00 per ounce. Lower cash costs in the first quarter of 2010 compared with the same period in the previous year is attributed to higher prices for by-product credits and increased production of zinc and lead. Silver production in the first quarter of 2010 compared with the first quarter of 2009 was lower due to normal variation in the mine plan resulting in lower silver grades at both mines.
The production of 12,181 tons of lead in the first quarter this year set a new quarterly record for Hecla, and 22,212 tons of zinc production was the second highest in Hecla's history.
Greens Creek - The Greens Creek mine in Alaska produced 1.6 million ounces of silver during the first quarter of 2010 at an average total cash cost per ounce of negative $6.47, compared to production of 2.0 million ounces at an average total cash cost per ounce of $3.21 for the prior year period. The decrease in cash costs in the first quarter of 2010 compared to the first quarter of 2009, despite lower silver production, is primarily the result of higher prices for by-product credits and increased zinc and lead production.
Milled tonnage averaged 2,201 tons per day, or 6% higher than production in the first quarter of 2009, while mine production was very strong; pre-production development and back-fill activities continue to be well synchronized. Although total production costs at Greens Creek were higher in the first quarter of 2010 compared to the same 2009 period, increased production volumes lowered unit operating costs for mining and milling by 5% to $64.05 per ton compared with unit operating costs in the first quarter of 2009. Baker said, "Mining and milling operations at Greens Creek have made steady gains over the past five quarters. Since 2008, we have successfully increased mill throughput by approximately 10%, reducing operating costs significantly, and we still have excess mill capacity for potential increases in the future. This quarter's lower silver grade was expected and should increase over the course of the year."
During the first quarter of 2010, $1.7 million was capitalized for underground development and purchases of new mobile equipment at the Greens Creek mine.
Lucky Friday - The Lucky Friday mine in northern Idaho produced 882,079 ounces of silver during the first quarter of 2010 at an average total cash cost of $3.21 per ounce of silver after by-product credits, compared to 866,298 ounces of silver during the first quarter of 2009 at an average total cash cost of $8.03 per ounce. Cash costs in the first quarter of 2010 were lower due to higher by-product credits and increased mine production. Capital investment and optimization activities in the mill continue to have a positive impact and resulted in record throughput, which averaged 1,022 tons per day in the first quarter of 2010. The mine is forecast to produce approximately 3 million ounces of silver in 2010.
Unit operating costs for mining and milling in the first quarter of 2010 were $67.54 per ton, or 3% lower than the first quarter of 2009.
Capitalized mine costs in the first quarter were $6.5 million. This work included $3.5 million for engineering of an internal shaft and lateral development towards the planned hoist room. Hecla anticipates finalizing the design, cost estimate and schedule for the internal shaft later this year.
Baker said, "That we are achieving record production at the Lucky Friday mine should come as no surprise. A highly experienced workforce, a great ore body and the investments made over the past five years have each contributed to stellar operational performances, quarter after quarter. We believe that the future looks even better as we continue work on the internal shaft and related infrastructure. This deep development is expected to have a construction period of approximately five years and cost between $150 and $200 million to build. With average expected head grades of approximately 14 ounces of silver per ton, the Lucky Friday mine could produce approximately 5 million ounces of silver per year, with combined lead-zinc production more than 20% higher. All of this is on a mine that is celebrating production of its ten millionth ton of ore."
During the first quarter, $3.4 million was spent on exploration with expenditures mostly focused on drill programs at Greens Creek, Lucky Friday and in Mexico. Surface drilling has recently started in the Silver Valley near the Lucky Friday mine, and drilling should also begin later in the second quarter at the San Juan Silver project in Colorado. Baker said, "We're excited about targets on all of our properties this year and have had some promising early results with underground drill testing at Greens Creek and Lucky Friday to date. Due to a mild winter, we have an early start to the Silver Valley program in Idaho, and there are promising early results on a new vein structure at San Sebastian." Hecla plans to spend $17.8 million on exploration in 2010, almost twice the expenditure compared to 2009.
Greens Creek - Exploration at the Greens Creek mine was on underground activities, including continued development of the 1147 Exploration Drift to provide a staging platform for future drill testing for the southward extensions of the 5250 South and 200 South ore zones. Encouraging results from both targets have been seen in the initial drill tests with a 4.2-foot intersection grading 37.6 ounces of silver per ton in the 5250 zone, and a 14-foot drill interval of massive sulfide along the southwestern extent of the 200 South zone that further extends the resource. Pre-production drilling in the NWW zone to provide better definition to resources and extend mineralization towards the west was successful and mine plans are being designed.
The NE contact is a priority exploration target that can be evaluated from existing underground infrastructure, as well as from surface during the summer months. While ore grade mineralization has not been found, drilling has intersected appreciable quantities of sulfide mineralization along this newly defined mine contact, which is evidence towards the potential of the target. Drill testing along the southern extent of this target at depth indicates that better mineralization is above the tested sections, and this target will be a priority for the surface drilling program that is scheduled to start in the latter part of the second quarter.
Lucky Friday - Two underground drills continue to test the potential to expand the resource area outwards to the east with one program evaluating the interval between the 6100 and 6800 levels of the mine, and the other is testing significantly below the 7000 level of the mine. Early results indicate that mineralization to the east continues and selected results include: 3.7 feet of 20.6 ounces per ton silver and 9.1% combined lead-zinc at the 6600 level in the 30 Vein and 20.1 ounces per ton silver plus 18.9% combined lead-zinc in the 90 Vein near the 6700 level of the mine. Deeper testing at approximately the 7200 level intersected 1.8 feet of 30 Vein grading 26.5 ounces per ton silver plus 7.3% combined lead-zinc in one completed hole.
Silver Valley - Surface drilling recently began east of the Lucky Friday mine to evaluate the Silver Mountain area, and site construction has begun for two surface drills to determine the potential along the 4000 foot strike length of the Star Morning to Gold Hunter (Lucky Friday Extension) structure to the west of the current mine.
San Juan Silver - The San Juan Silver Joint Venture in southern Colorado is located in an historic mining district where silver mining ceased in the 1980s. Hecla is earning a 70% interest in the project from its partners, Emerald Mining and Leasing, LLC and Golden 8 Mining, LLC. The 2010 exploration program, with a drilling budget of approximately $3 million, is expected to begin in the early part of May.
Mexico - On the San Sebastian property, surface drilling on the Zapata Norte target began in late February. Four of five completed holes in this epithermal target intersected finely banded veins and stockwork, which has similar characteristics to the past producing Francine and Don Sergio vein systems on the San Sebastian property.
Hecla's is maintaining its previously announced full-year production guidance of 10 to 11 million ounces of silver with cash costs in the range of $1.90-$2.25 per ounce. Hecla's estimate of cash costs in 2010 is based on by-product prices of $0.80 per pound for zinc and lead.
In March 2010, Ron Clayton, Senior Vice-President - Operations, resigned from Hecla. "Ron worked for more than 20 years with Hecla and is moving to another opportunity in the mining industry. Ron has been an important part of the leadership at Hecla and made an invaluable contribution to our organization. As credit to him and his teams, he leaves as our mines are performing well and we wish him the best in his future endeavor," Baker said.
Hecla Mining Company, headquartered in Coeur d'Alene, Idaho, mines, processes and explores for silver and gold in the United States and Mexico. A 119-year-old company, Hecla has long been well known in the mining world and financial markets as a quality producer of silver and gold. Hecla's common and preferred shares are traded on the New York Stock Exchange under the symbols HL, HL-PrB and HL-PrC.
Statements made which are not historical facts, such as anticipated payments, litigation outcome, production, sales of assets, exploration results and plans, costs, and prices or sales performance are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and involve a number of risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, expected or implied. These risks and uncertainties include, but are not limited to, metals price volatility, volatility of metals production and costs, exploration risks and results, political risks, project development risks, labor issues and ability to raise financing. Refer to the company's Form 10-Q and 10-K reports for a more detailed discussion of factors that may impact expected future results. The company undertakes no obligation and has no intention of updating forward-looking statements.
Cautionary Note to Investors - The United States Securities and Exchange Commission permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms in this news release, such as "resource," "reserve," and "inferred resource" that the SEC guidelines strictly prohibit us from including in our filing with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 10-K. You can review and obtain copies of these filings from the SEC's website at http://www.sec.gov/edgar.shtml.
Posted: April 28, 2010
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