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Hecla Reports Third Quarter 2012 Results and Expected 2013 Production from Lucky Friday Mine

For the Period Ended September 30, 2012

COEUR D'ALENE, Idaho--()--Hecla Mining Company (NYSE:HL) today announced a third quarter net loss applicable to common shareholders of $1.0 million, or $0.00 per basic share, and earnings after adjustments applicable to common shareholders of $3.2 million, or $0.01 per basic share. Third quarter silver production was up 19% from the previous quarter to 1.6 million ounces at a cash cost of $3.52 per ounce, net of by-products. Operating cash flow for the quarter was $35.2 million.

“We are pleased to report that shaft rehabilitation at the Lucky Friday mine advanced on schedule during the third quarter, and we anticipate being in production in the first quarter of 2013 and ramping up through the year to more than 2 million ounces by year end”

THIRD QUARTER 2012 HIGHLIGHTS

  • Silver production of 1.6 million ounces, up 19% from the previous quarter, at a total cash cost (a non-GAAP measure) of $3.52 per ounce, net of by-products.
  • Operating cash flow of $35.2 million.
  • Net loss applicable to common shareholders of $1.0 million, or $0.00 per basic share, due primarily to non-cash mark-to-market adjustments related to the Company's long-term base metal hedging program.
  • Earnings after adjustments applicable to common shareholders (a non-GAAP measure) of $3.2 million, or $0.01 per basic share.
  • Lucky Friday rehabilitation work progresses to approximately 5700 level with production expected to resume in Q1/2013. Full-year 2013 silver production expected at more than 2 million ounces.
  • Cash and cash equivalents of $232 million at September 30, 2012.
  • Declaration of common stock dividend of $0.0225 per share, payable on or about December 5 to shareholders of record on November 27.
  • Drilled very high-grade mineralization over exceptional widths at Greens Creek (Alaska).
  • At San Sebastian, drilling of the Middle Vein has defined a very high-grade, gold-silver vein which is approximately 800 feet from the Hugh Zone.

"We are pleased to report that shaft rehabilitation at the Lucky Friday mine advanced on schedule during the third quarter, and we anticipate being in production in the first quarter of 2013 and ramping up through the year to more than 2 million ounces by year end," said Hecla's President and Chief Executive Officer Phillips S. Baker, Jr. "Work crews have completed the Silver Shaft rehabilitation work to approximately the 5700 level, which is 400 feet from the shaft bottom. Therefore, we have recalled all employees and begun preparatory work for sinking of the #4 Shaft."

"Greens Creek delivered 19% higher silver production than the previous quarter, as a result of increases in ore throughput and silver grade. Cash costs increased to $3.52 per ounce due to higher silver grades relative to the by-product metals resulting in lower by-product credit per ounce of silver produced. Meanwhile, our record capital investment program continued at Greens Creek, preparing the mine for many more years of anticipated low-cost production and reserve growth," Mr. Baker said.

"Quarterly operating cash flow was $35.2 million, helped by higher production at Greens Creek and strong silver prices. With our realized silver prices averaging $35.00 per ounce, Hecla will pay the silver-linked dividend in addition to our regular common stock dividend.

"Meanwhile, our expanded pre-development and exploration programs continued to deliver impressive results, including ramp development at the historic Bulldog mine in Colorado, and very high-grade intercepts at all four properties. We are rapidly advancing toward our targeted goal of 15 million ounces of Company-wide silver production by 2017. Underpinning this growth is our very strong balance sheet, with $232 million in cash and no significant debt," Mr. Baker added.

FINANCIAL OVERVIEW

Net loss applicable to common shareholders for the third quarter was $1.0 million, or $0.00 per basic share, compared to net income of $55.8 million, or $0.20 per basic share for the same period a year ago, and was impacted by the following items:

  • Temporary suspension of mining activities at the Lucky Friday mine, where production has been suspended since January 2012, but which is expected to resume production in the first quarter of 2013. There were $6.1 million in suspension-related costs at the Lucky Friday in the third quarter, including $1.5 million of depreciation.
  • Lower average silver and base metals prices compared to the same period a year ago.
  • Exploration and pre-development expense increased to $17.1 million in the third quarter from $11.6 million in the same period in 2011.
  • A $9.1 million non-cash loss for mark-to-market adjustments on base metal derivative contracts for the third quarter, compared to a $40.4 million gain for the same period in 2011. A summary of the quantities of base metals committed under financially settled forward contracts on September 30, 2012, is included on page 4 of this release.
  • A $14,000 tax provision, compared to $27.3 million in the same period in 2011, was the result of higher pre-tax income in 2011. The effective income tax rate is approximately 36% in 2012 compared to 35% in the same period in 2011.
  • Gains of $5.9 million on provisional price adjustments compared to losses of $3.6 million in the same period of 2011.

 

    Third Quarter Ended   Nine Months Ended
HIGHLIGHTS   September 30, 2012   September 30, 2011   September 30, 2012   September 30, 2011
FINANCIAL DATA                
Sales (000)   $ 81,871     $ 120,543     $ 240,043     $ 374,767
Gross profit (000)   $ 37,309     $ 67,805     $ 109,479     $ 215,169
Income (loss) applicable to common shareholders (000)   $ (1,023 )   $ 55,783     $ 13,797     $ 132,181
Basic income per common share   $ 0.00     $ 0.20     $ 0.05     $ 0.47
Diluted income per common share   $ 0.00     $ 0.19     $ 0.05     $ 0.45
Net income (loss) (000)   $ (885 )   $ 55,921     $ 14,211     $ 132,595
Cash provided by operating activities (000)   $ 35,248     $ 60,721     $ 66,488     $ 187,938

Operating cash flow was $35.2 million during the third quarter of 2012.

Capital expenditures (including non-cash capital lease additions) at the operations totaled $14.5 million at Lucky Friday and $14.2 million at Greens Creek. Full-year capital expenditures are expected to be approximately $135.0 million in 2012, primarily due to projects at Greens Creek.

Pre-development expenditures totaled $5.4 million in the third quarter. Pre-development expenditures for the full year 2012 are expected to be approximately $23.0 million.

Exploration expenditures for the third quarter of 2012 were $11.7 million. Exploration expenditures for the full-year 2012 are expected to be approximately $30.0 million.

METALS PRICES

Average realized silver prices in the third quarter were $35.00 per ounce, compared with average realized prices in the third quarter of 2011 of $37.02 per ounce.

      Third Quarter Ended   Nine Months Ended
      September 30, 2012   September 30, 2011   September 30, 2012   September 30, 2011
AVERAGE METAL PRICES                
Silver - London PM Fix ($/oz)   $ 29.91     $ 38.79     $ 30.65     $ 36.21
  Realized price per ounce   $ 35.00     $ 37.02     $ 33.27     $ 36.45
Gold - London PM Fix ($/oz)   $ 1,655     $ 1,700     $ 1,652     $ 1,530
  Realized price per ounce   $ 1,754     $ 1,799     $ 1,700     $ 1,578
Lead - LME Cash ($/pound)   $ 0.90     $ 1.12     $ 0.91     $ 1.15
  Realized price per pound   $ 0.94     $ 1.01     $ 0.94     $ 1.11
Zinc - LME Cash ($/pound)   $ 0.86     $ 1.01     $ 0.88     $ 1.04
  Realized price per pound   $ 0.90     $ 1.04     $ 0.90     $ 1.05

 

Base Metals Forward Sales Contracts

The following table summarizes the quantities of base metals committed under financially settled forward sales contracts at September 30, 2012:

    Metric Tonnes Under Contract   Average Price per Pound
    Zinc     Lead   Zinc     Lead
Contracts on provisional sales                    
2012 settlements   8,525     3,400     $ 0.88     $ 0.96
2013 settlements   2,200         $ 0.97     N/A
Contracts on forecasted sales                    
2012 settlements       600    

N/A

    $ 1.12
2013 settlements   10,250     16,850     $ 1.06     $ 1.12

OPERATIONS OVERVIEW

Average third quarter silver cash cost was $3.52 per ounce, net of by-products, compared to $0.67 per ounce in the same period in 2011. The following table provides the production summary on a consolidated basis for the third quarter and nine months ended September 30, 2012 and 2011:

      Third Quarter Ended   Nine Months Ended
      September 30, 2012   September 30, 2011   September 30, 2012   September 30, 2011
PRODUCTION SUMMARY                
Silver - Ounces produced     1,619,110   2,287,262   4,312,907   6,992,453
  Payable ounces sold     1,331,139   1,954,120   3,892,090   6,196,269
Gold - Ounces produced     14,024   14,217   39,933   43,073
  Payable ounces sold     10,193   10,558   32,305   33,892
Lead - Tons produced     5,499   11,226   15,226   30,956
  Payable tons sold     3,990   9,218   11,788   26,004
Zinc - Tons produced     16,649   19,316   48,665   55,970
  Payable tons sold     12,342   11,804   38,312   37,987
Total cash cost per ounce of silver produced (1)   $ 3.52   $ 0.67   $ 2.34   $ 0.75

(1) See the attached schedule for a reconciliation to GAAP.

Greens Creek mine - Alaska

Silver production at Greens Creek was 1.6 million ounces in the third quarter of 2012, compared to 1.4 million ounces in the same period in 2011. Third quarter silver cash cost was $3.52 per ounce, net of by-products, compared to a negative $2.98 per ounce in the same period in 2011, due in part to lower average base metals prices. Mining costs per ton were up by 23% and milling costs were 19% lower in the third quarter, as compared to the same period in 2011. The higher mining costs were primarily due to the increased use of contract miners, and the lower milling costs resulted from higher mill throughput and the availability of more hydroelectric power.

During the first nine months of 2012, production totaled 4.3 million ounces of silver at an average cash cost of $2.34 per ounce, net of by-products.

Greens Creek is expected to produce more than 6 million ounces of silver in 2012.

Lucky Friday mine - Idaho

At the Lucky Friday mine, the Silver Shaft rehabilitation is complete to approximately the 5700 level. Concurrent with the rehabilitation, the shaft is being upgraded for potential future capacity increases. Complete rehabilitation to the bottom of the shaft is expected by the end of year with production expected to resume in the first quarter of 2013. Also, at the 5900 level, a bypass is being developed around an area impacted by a rock burst in December 2011.

We have recalled all employees necessary to reach full production. All recalled employees have received safety training, including new techniques in risk assessment and accident prevention designed to improve safe work practices.

In addition, we have begun preparations to resume work in the first quarter on the #4 Shaft project. To date, $90 million has been invested on the estimated $200 million #4 Shaft project, which is planned to access extensions to reserves, resources and additional exploration targets. The project is expected to be completed in early 2016.

Care-and-maintenance costs incurred at the Lucky Friday totaled $6.1 million for the third quarter of 2012, including depreciation of $1.5 million.

Pre-Development

Pre-development expenditures for the third quarter of 2012 were $5.4 million at the Company's three pre-development projects in Colorado, Idaho and Mexico.

At the San Juan Silver project, the new 2,800 foot decline at the historic Bulldog mine has begun and has now advanced over 100 feet. This decline will provide access to a resource of 37 million ounces of silver and underground exploration platforms to expand these resources. Support facilities such as the maintenance and shotcrete shops are completed and operational. Prior to the Company acquiring 100% interest in the Bulldog, it had historic production of approximately 25 million ounces of silver before it was closed by the previous owner in 1985 due to then low silver prices.

At the Star project, rehabilitation of the main level and the secondary escape ramp to surface are complete as well as development of a 750-foot exploration drift. The #5 Shaft rehab is complete and installation of the hoist has begun. Exploration drilling has begun from the new drift on the southeast extension of the Noonday and Morning Veins.

At San Sebastian, with the discovery of the Middle Vein mineralization, economic analysis has been delayed until the first quarter of 2013 to determine the Hugh Zone access. Hydrological studies are complete and initial metallurgy and mine design have begun on the Andrea.

Exploration

Exploration expenditures for the third quarter were $11.7 million, focused on all four properties.

At San Sebastian, drilling moved from the Andrea where resources are being updated, to the Hugh Zone and approximately 800 feet further north to the Middle Vein to follow-up on limited drilling from six years ago. Results at the Middle Vein have been very good, with high-grade intersections such as 0.36 opt gold and 39.2 opt silver over 7 feet. Two drills are currently active and have defined mineralization for over 3,000 feet of strike and from surface to at least 1,000 feet in depth. Drilling also continues to expand the Hugh Zone updip and to the northwest in parallel with the Middle Vein. An extensive list of assay intersections is provided in tables at the end of this press release.

At Greens Creek, underground drilling continues to extend ore-grade mineralization along trend of the Southwest Bench, 200 South, Gallagher, 5250 and 9a Zones, with exceptional widths and grades, such as 70 feet of 0.3 opt gold, 13.8 opt silver and 21% combined zinc and lead at the 200 South; and 73 feet of 0.17 opt gold, 17.58 opt silver and 23.7% combined zinc and lead at the Southwest Bench. In 2013, modeling of these intersections could result in significant additions to the resource. Surface drilling has successfully identified mineralization at Killer Creek 1.5 miles west-northwest of the mine that contains copper-rich veins and bands and one mile west of the mine at West Gallagher that contains pyrite mud intervals that have carried anomalous base and precious metal grades in the past. Killer Creek and West Gallagher will be priority targets for the 2013 summer program.

In the Silver Valley at the Star, drilling along strike to the southeast from known mineralization has produced good results with the best grading 29.1 opt silver and 8.9% combined lead and zinc over 5 feet. Drilling from underground and surface have confirmed progressively higher silver grades to the southeast where the mineralization trend is open. For 2013, more drilling is planned from the recently completed exploration drift and also from the surface.

At San Juan Silver in Creede, Colorado, drilling in the Equity ramp continues to have high grades on both the Equity and Amethyst Veins. Final drilling on the Equity structure includes an intersection of 0.17 opt gold and 22.3 opt silver over 10.1 feet. The mineralized zones at the Equity appear to be high grade with strike lengths from 100 to 300 feet but with significant down-plunge potential. Two underground drills are currently focused on the north-south trending Amethyst structure. Initial drilling has defined the upper limits of two distinct, steeply plunging mineralized vein trends along the Amethyst structural zone and include the intersection 0.27 opt gold and 33.4 opt silver over 4.7 feet.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Tuesday, November 6, at 1:00 p.m. Eastern Time to discuss these results. You may join the conference call by dialing toll-free 1-866-510-0705 or 1-617-597-5363 internationally. The participant passcode is HECLA. Hecla's live and archived webcast can be accessed at www.hecla-mining.com under Investors or via Thomson StreetEvents Network.

ABOUT HECLA

Hecla Mining Company is among the largest and lowest cash cost silver producers in the U.S. The company has two operating mines, as well as exploration properties in four world-class silver mining districts in the U.S. and Mexico.

Cautionary Statements

Statements made which are not historical facts, such as anticipated payments, litigation outcome (including settlement negotiations), 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. Words such as “may,” “will,” “should,” “expects,” “intends,” “projects,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions are used to identify these forward-looking statements. Forward-looking statements 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, litigation, regulatory and environmental risks, operating risks, project development risks, political risks, labor issues, ability to raise financing and exploration risks and results. Refer to the company's Form 10-K and 10-Q 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 other than as may be required by law.

Cautionary Statements to Investors on Reserves and Resources

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 on this release, such as “resource,” “other resources,” and “mineralized materials” that the SEC guidelines strictly prohibit us from including in our filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 10-K and Form 10-Q. You can review and obtain copies of these filings from the SEC's website at www.sec.gov.

HECLA MINING COMPANY

Condensed Consolidated Statements of Income

(dollars and shares in thousands, except per share amounts - unaudited)

         
    Third Quarter Ended   Nine Months Ended
    September 30, 2012   September 30, 2011   September 30, 2012   September 30, 2011
Sales of products   $ 81,871     $ 120,543     $ 240,043     $ 374,767  
Cost of sales and other direct production costs   32,961     41,639     99,423     125,033  
Depreciation, depletion and amortization   11,601     11,099     31,141     34,565  
    44,562     52,738     130,564     159,598  
Gross profit   37,309     67,805     109,479     215,169  
                 
Other operating expenses:                
General and administrative   5,695     5,559     15,723     14,808  
Exploration   11,722     9,872     24,479     19,012  
Pre-development   5,409     1,752     12,246     1,752  
Other operating expense   736     1,612     3,285     5,699  
Provision (credit) for closed operations and reclamation   (1,093 )   5,521     3,320     7,883  
Lucky Friday suspension-related costs   6,114         18,745      
    28,583     24,316     77,798     49,154  
Income (loss) from operations   8,726     43,489     31,681     166,015  
Other income (expense):                
Gain (loss) on derivative contracts   (9,053 )   40,382     (8,113 )   38,907  
Interest and other income (loss)   47     (214 )   228     520  
Interest expense   (591 )   (411 )   (1,563 )   (2,384 )
    (9,597 )   39,757     (9,448 )   37,043  
Income (loss) before income taxes   (871 )   83,246     22,233     203,058  
Income tax provision   (14 )   (27,325 )   (8,022 )   (70,463 )
Net income (loss)   (885 )   55,921     14,211     132,595  
Preferred stock dividends   (138 )   (138 )   (414 )   (414 )
Income (loss) applicable to common shareholders   $ (1,023 )   $ 55,783     $ 13,797     $ 132,181  
Basic income (loss) per common share after preferred dividends   $ 0.00     $ 0.20     $ 0.05     $ 0.47  
Diluted income (loss) per common share after preferred dividends   $ 0.00     $ 0.19     $ 0.05     $ 0.45  
Weighted average number of common shares outstanding - basic   285,492     279,541     285,400     279,067  
Weighted average number of common shares outstanding - diluted   285,492     295,000     296,739     295,739  

 

HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and share in thousands - unaudited)

         
    September 30, 2012   December 31, 2011
ASSETS        
Current assets:        
Cash and cash equivalents   $ 232,194     $ 266,463  
Accounts receivable:        
Trade   21,991     10,996  
Other, net   7,827     9,313  
Inventories   25,170     26,195  
Current deferred income taxes   31,537     27,810  
Other current assets   12,230     21,967  
Total current assets   330,949     362,744  
Non-current investments   9,023     3,923  
Non-current restricted cash and investments   866     866  
Properties, plants, equipment and mineral interests, net   973,586     923,212  
Non-current deferred income taxes   86,324     88,028  
Other non-current assets and deferred charges   2,855     17,317  
Total assets   $ 1,403,603     $ 1,396,090  
         
LIABILITIES        
Current liabilities:        
Accounts payable and accrued liabilities   $ 39,652     $ 37,831  
Accrued payroll and related benefits   10,124     12,878  
Accrued taxes   9,743     10,354  
Current portion of capital leases   4,654     4,005  
Current portion of accrued reclamation and closure costs   34,146     42,248  
Total current liabilities   98,319     107,316  
Capital leases   10,163     6,265  
Accrued reclamation and closure costs   113,928     111,563  
Other noncurrent liabilities   33,905     30,833  
Total liabilities   256,315     255,977  
         
SHAREHOLDERS’ EQUITY        
Preferred stock   39     39  
Common stock   71,496     71,420  
Capital surplus   1,217,461     1,215,229  
Accumulated deficit   (117,471 )   (120,557 )
Accumulated other comprehensive loss   (21,219 )   (23,498 )
Treasury stock   (3,018 )   (2,520 )
Total shareholders’ equity   1,147,288     1,140,113  
Total liabilities and shareholders’ equity   $ 1,403,603     $ 1,396,090  
Common shares outstanding   285,487     285,290  

 

HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)

     
    Nine Months Ended
    September 30, 2012   September 30, 2011
OPERATING ACTIVITIES        
Net income   $ 14,211     $ 132,595  
Non-cash elements included in net income:        
Depreciation, depletion and amortization   36,042     34,769  
Gain on sale of investments       (611 )
Loss on disposition of properties, plants, equipment and mineral interests   359      
Provision for reclamation and closure costs   3,937     832  
Stock compensation   2,296     1,497  
Deferred income taxes   (2,023 )   60,790  
Amortization of loan origination fees   324     498  
(Gain) loss on derivative contracts   24,748     (56,512 )
Other non-cash charges, net   901     932  
Change in assets and liabilities:        
Accounts receivable   (9,508 )   7,745  
Inventories   1,025     (6,608 )
Other current and non-current assets   (417 )   373  
Accounts payable and accrued liabilities   4,561     17,233  
Accrued payroll and related benefits   (2,754 )   581  
Accrued taxes   (611 )   (6,276 )
Accrued reclamation and closure costs and other non-current liabilities   (6,603 )   100  
Cash provided by operating activities   66,488     187,938  
         
INVESTING ACTIVITIES        
Additions to properties, plants, equipment and mineral interests   (81,318 )   (64,381 )
Proceeds from sale of investments       1,366  
Proceeds from disposition of properties, plants and equipment   744     113  
Purchases of investments   (3,261 )   (3,200 )
Changes in restricted cash and investment balances       9,388  
Net cash used in investing activities   (83,835 )   (56,714 )
         
FINANCING ACTIVITIES        
Proceeds from exercise of stock options and warrants       5,108  
Acquisition of treasury shares   (497 )   (469 )
Dividends paid to common shareholders   (10,700 )    
Dividends paid to preferred shareholders   (414 )   (3,684 )
Loan origination fees   (750 )    
Repayments of capital leases   (4,561 )   (2,042 )
Net cash used in financing activities   (16,922 )   (1,087 )
Net increase (decrease) in cash and cash equivalents   (34,269 )   130,137  
Cash and cash equivalents at beginning of period   266,463     283,606  
Cash and cash equivalents at end of period   $ 232,194     $ 413,743  

 

HECLA MINING COMPANY

Production Data

         
    Three Months Ended   Nine Months Ended
    September 30, 2012   September 30, 2011   September 30, 2012   September 30, 2011
GREENS CREEK UNIT                
Tons of ore milled   210,802     200,961     573,750     580,211  
Mining cost per ton   $ 61.33     $ 49.86     $ 62.08     $ 48.80  
Milling cost per ton   $ 27.04     $ 33.58     $ 29.01     $ 31.11  
Ore grade milled - Silver (oz./ton)   10.56     9.64     10.37     10.85  
Ore grade milled - Gold (oz./ton)   0.11     0.12     0.12     0.12  
Ore grade milled - Lead (%)   3.40     3.74     3.49     3.58  
Ore grade milled - Zinc (%)   9.12     9.99     9.74     9.90  
Silver produced (oz.)   1,619,110     1,350,609     4,312,907     4,507,727  
Gold produced (oz.)   14,024     14,217     39,933     43,073  
Lead produced (tons)   5,499     5,799     15,226     16,007  
Zinc produced (tons)   16,649     17,318    

48,665

    49,913  
Total cash cost per ounce of silver produced (1)   $ 3.52     $ (2.98 )   $ 2.34     $ (2.04 )
Capital additions (in thousands)   $ 14,195     $ 11,921     $ 44,248     $ 29,106  
LUCKY FRIDAY UNIT                
Tons of ore processed       84,531         249,034  
Mining cost per ton   $     $ 58.54    

$

    $ 59.39  
Milling cost per ton   $     $ 16.26     $

    $ 16.20  
Ore grade milled - Silver (oz./ton)       11.74    

    10.68  
Ore grade milled - Lead (%)       6.84    

    6.46  
Ore grade milled - Zinc (%)       2.74    

    2.81  
Silver produced (oz.)       936,652         2,484,725  
Lead produced (tons)       5,427        

14,949

 
Zinc produced (tons)       1,999         6,058  
Total cash cost per ounce of silver produced (1)   $     $ 5.94     $     $ 5.82  
Capital additions (in thousands)   $ 14,548     $ 16,524     $ 37,285     $ 45,026  
                                 

(1) Total cash costs per ounce of silver represents a non-U.S. Generally Accepted Accounting Principles (GAAP) measurement. A reconciliation of total cash costs to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) can be found in the cash costs per ounce reconciliation section of this news release. Gold, lead and zinc produced have been treated as by-product credits in calculating silver costs per ounce.

 

Non-GAAP Measures

(Unaudited)

This release contains references to a non-GAAP measure of cash costs per ounce. Cash costs per ounce of silver represent non-U.S. Generally Accepted Accounting Principles (GAAP) measurements that the Company believes provide management and investors an indication of net cash flow. Management also uses this measurement for the comparative monitoring of performance of mining operations period-to-period from a cash flow perspective. "Total cash cost per ounce" is a measure developed by gold companies and used by silver companies in an effort to provide a comparable standard; however, there can be no assurance that our reporting of this non-GAAP measure is similar to that reported by other mining companies. Cost of sales and other direct production costs and depreciation, depletion and amortization was the most comparable financial measures calculated in accordance with GAAP to total cash costs.

The following table calculates cash cost per ounce (in thousands, except per-ounce amounts):

   

Three Months Ended September 30,

  Nine Months Ended September 30,
   

2012

  2011   2012   2011
RECONCILIATION TO GAAP, ALL OPERATIONS                                
Total cash costs   $ 5,701     $ 1,533     $ 10,087     $ 5,257  
Divided by ounces produced  

 

1,619

   

 

2,288

   

 

4,313

   

 

6,993

 
Total cash cost per ounce produced   $ 3.52     $ 0.67     $ 2.34     $ 0.75  
Reconciliation to GAAP:                                
Total cash costs   $ 5,701     $ 1,533     $ 10,087     $ 5,257  
Depreciation, depletion and amortization  

 

11,601

   

 

11,099

   

 

31,141

   

 

34,565

 
Treatment costs  

 

(18,351

)  

 

(26,078

)

 

 

(52,210

)

 

 

(76,261

)

By-product credits  

 

47,778

   

 

69,400

   

 

139,483

   

 

200,842

 
Change in product inventory  

 

(1,944

)  

 

(3,010

)

 

 

1,962

   

 

(5,641

)

Reclamation and other costs  

 

(223

)  

 

(206

)

 

 

101

   

 

836

 
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)   $ 44,562     $ 52,738     $ 130,564     $ 159,598  
                                 
GREENS CREEK UNIT                                
Total cash costs  

$

5,701

   

$

(4,029

)

  $ 10,087    

$

(9,216

)

Divided by ounces produced     1,619       1,351    

 

4,313

      4,508  
Total cash cost per ounce produced  

$

3.52

   

$

(2.98

)

  $ 2.34    

$

(2.04

)

Reconciliation to GAAP:                                
Total cash costs  

$

5,701

   

$

(4,029

)

  $ 10,087    

$

(9,216

)

Depreciation, depletion and amortization     11,601       9,592    

 

31,141

      29,981  
Treatment costs     (18,351

)

 

  (20,187

)

 

 

(52,210

)     (59,522

)

By-product credits     47,778       55,522    

 

139,483

      159,586  
Change in product inventory     (1,944

)

 

  (3,346

)

 

 

1,962

      (5,686

)

Reclamation and other costs     (223

)

 

  (463

)

 

 

101

      (826

)

Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)  

$

44,562

   

$

37,089

 

 

$

130,564    

$

114,317

 

                                 
LUCKY FRIDAY UNIT (1)                                
Total cash costs  

$

   

$

5,562

 

 

$

   

$

14,473

 

Divided by silver ounces produced           937             2,485  
Total cash cost per ounce produced  

$

     

5.94

 

 

$

   

$

5.82

 

Reconciliation to GAAP:                                
Total cash costs  

$

   

$

5,562

 

 

$

   

$

14,473

 

Depreciation, depletion and amortization           1,507             4,584  
Treatment costs           (5,891

)

 

$

      (16,739

)

By-product credits           13,878             41,256  
Change in product inventory           336    

$

      45  
Reclamation and other costs           257               1,662  
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)  

$

   

$

15,649

 

 

$

   

$

45,281

 

                                 

   (1)  Production has been temporarily suspended at the Lucky Friday Unit as work is performed to rehabilitate the Silver Shaft, the primary access from surface to the underground workings at the Lucky Friday mine. See the Lucky Friday Segment section above for further discussion of the Silver Shaft work and temporary suspension of operations. Care and maintenance costs incurred at the Lucky Friday during the suspension of production are included in a separate line item under Other operating expenses on the Condensed Consolidated Statement of Operations and Comprehensive Income (Unaudited), and have been excluded from the calculation of total cash costs for the three- and nine-month periods ended September 30, 2012.

 

This release also refers to a non-GAAP measure of earnings after adjustments. Earnings After Adjustments and Earnings After Adjustments per share are non-GAAP measures which are indicators of our performance. They exclude certain impacts which are of a nature which we believe are not reflective of our underlying performance. Management believes that earnings after adjustments per common share provides investors with the ability to better evaluate our underlying operating performance. The following table reconciles income (loss) applicable to common shareholders to earnings after adjustments applicable to common shareholders (in thousands):

    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2012   2011   2012   2011
Income (loss) applicable to common shareholders (GAAP)  

$

(1,023

)

 

$

55,783

   

$

13,797

   

$

132,181

 
Adjusting items:                                
(Gains)/losses on derivatives contracts     9,053       (40,382 )     8,113       (38,907 )
Environmental accruals     (2,750 )     4,851       (1,436 )     4,851  
Provisional price gains     (5,861 )     3,621       (9,487 )     3,340  
Lucky Friday suspension-related costs     6,114             18,745        
Income tax effect of above adjustments     (2,360 )     11,488       (5,737 )     11,058  
Earnings after adjustments applicable to common shareholders  

$

3,173

 

 

$

35,361

   

$

23,995

   

$

112,523

 
Weighted average shares - basic     285,492       279,541       285,400       279,067  
Weighted average shares - diluted     297,498       295,000       296,739       295,739  
Basic earnings after adjustments per common share  

$

0.01

 

 

$

0.13

   

$

0.08

   

$

0.40

 
Diluted earnings after adjustments per common share  

$

0.01

 

 

$

0.12

   

$

0.08

   

$

0.38

 

 

Assay Results - Q3 2012

MINE / PROJECT   Zone   Drill Hole No.   Width (Feet)   Silver (oz/ton)   Gold (oz/ton)   Zinc (%)   Lead (%)
                             
GREENS CREEK   200 South   GC3458   70.9   13.8   0.30   5.4   16.0
    200 South   GC3477   51.0   21.1   0.37   4.3   12.2
    200 South   GC3482   37.0   23.0   0.22   11.5   4.5
    200 South   GC3506   40.0   16.5   0.24   14.0   4.2
    200 South   GC3501   27.5   28.1   0.13   8.0   14.8
    200 South   GC3498   15.5   55.9   0.37   3.3   6.8
    200 South   GC3500   16.5   24.1   0.37   4.0   10.7
    200 South   GC3490   14.0   22.7   0.46   2.3   4.2
    200 South   GC3497   12.9   24.4   0.40   3.9   6.9
    200 South   GC3498   19.0   65.8   0.49   7.0   3.5
    200 South   GC3382   12.0   49.6   0.04   2.6   6.0
    Gallagher   GC3365   23.5   19.0   0.41   4.0   9.6
    Gallagher   GC3350   18.0   39.30   0.16   11.3   21.6
    Gallagher   GC3364   14.5   7.80   0.20   5.0   11.8
    Gallagher   GC3419   10.7   20.50   0.41   2.1   4.1
    Gallagher   GC3368   9.8   6.54   0.15   3.2   7.0
    Southwest Bench   GC3364   73.0   17.58   0.17   5.3   18.4
    Southwest Bench   GC3451   55.0   18.74   0.23   10.7   26.8
    Southwest Bench   GC3365   38.8   15.3   0.21   3.9   21.9
    Southwest Bench   GC3366   36.0   6.3   0.15   4.0   25.1
    Southwest Bench   GC3445   19.7   54.9   0.10   8.9   20.5
    5250 Zone   GC3401   33.5   18.7   0.08   2.2   3.2
    5250 Zone   GC3493   13.2   17.2   0.14   5.6   22.8
    5250 Zone   GC3468   8.8   30.9   0.10   4.4   7.4
    9a Zone   GC3425   16.3   23.2   0.14   6.5   13.2
    9a Zone   GC3369   19.8   10.7   0.03   16.2   28.4
    9a Zone   GC3425   6.6   25.0   0.59   13.2   6.8
MINE / PROJECT   Vein Area   Drill Hole No.   Width (Feet)   Silver (oz/ton)   Gold (oz/ton)
                     
SAN JUAN SILVER (CREEDE)   Equity   NAU12121   5.6   14.2   0.23
    Equity   NAU12123   10.1   22.3   0.17
    Equity   NAU12128   7.2   8.3   0.06
    Equity   NAU12129   4.1   7.4   0.03
    Amethyst   NAU12150   4.7   33.4   0.27
    Amethyst   NAU12158   11.0   15.3   0.10
    Amethyst   NAU12159   5.1   15.4   0.14
    Amethyst   NAU12133   5.6   17.2   0.06
    Amethyst   NAU12143   4.5   12.4   0.01
    Amethyst   NAU12144   2.5   17.6   0.23
    Amethyst   NAU12139   3.1   11.0   0.01
    Amethyst   NAU12157   3.0   6.5   0.13

 

MINE / PROJECT   Vein Number / Area   Drill Hole No.   Width (Feet)   Silver (oz/ton)   Zinc (%)   Lead (%)
SILVER VALLEY DRILLING                        
                         
STAR COMPLEX   Noonday   ND-46   4.2   18.0   0.1   15.7
    Noonday   ND-61   2.6   21.8   0.4   28.1
    Noonday   ND-62   4.3   5.1   0.1   2.1
    Noonday   ND-63   4.7   6.9   0.1   5.6
    Noonday   ND-64   4.5   14.3   0.1   21.5
    Noonday Split   ND-64   5.1   29.1   1.3   7.6
    Noonday Split   ND-59   9.8   14.4   5.5   6.0
    Noonday Split   ND-48   4.3   10.8   17.4   0.7
    Noonday Split   ND-59   4.3   27.8   4.5   7.8
    Morning/Noonday   ND-61   5.3   14.4   0.1   1.5
    Morning/Noonday   ND-64   5.1   29.1   1.3   7.6
    Morning   ND-57   3.2   31.7   0.2   2.3
    Moffitt   STR200-1014   4.3   5.4   7.6   16.4
    Moffitt   STR200-1018   2.4   8.9   10.2   34.4
    Moffitt   STR200-1013   2.5   2.9   8.2   18.1
    Moffitt   STR200-1017   4.3   2.1   6.1   10.3
    North Star   STR200-1014   0.8   7.2   1.8   22.2
    North Star   STR200-1022   4.3   0.7   10.9   2.6
    North Star   STR200-1013   4.3   2.9   2.4   7.6
MINE / PROJECT   Area   Drill Hole No.   Width (Meters)   Silver (g/tonne)   Gold (g/tonne)   Width (Feet)   Silver (oz/ton)   Gold (oz/ton)
                                 
MEXICO - SAN SEBASTIAN   Middle Vein   SS-380   2.36   1,345.2   12.42   7.74   39.2   0.36
    Middle Vein   SS-381   1.10   619.4   4.30   3.61   18.1   0.13
    Middle Vein   SS-382   0.51   4,173.8   17.69   1.67   121.7   0.52
    Middle Vein   SS-374   3.62   296.8   0.74   11.87   8.7   0.02
    Middle Vein   SS-375   0.81   218.0   0.42   2.66   6.4   0.01
    Middle Vein   SS-376   0.88   234.0   0.47   2.89   6.8   0.01
    Middle Vein   SS-377   0.54   787.6   2.61   1.77   23.0   0.08
    Middle Vein   SS-378   1.47   462.2   1.59   4.82   13.5   0.05
    Middle Vein   SS-361   0.82   238.6   1.09   2.69   7.0   0.03
    Middle Vein   SS-284   0.55   386.5   0.39   1.80   11.3   0.01
    Middle Vein   SS-383   2.21   332.8   1.23   7.25   9.7   0.04
    Francine/Hugh   SS-364   1.57   253.3   1.15   5.15   7.4   0.03

 


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NYSE:HL

  • Headquarters: Coeur d'Alene, Idaho
  • Website: www.hecla-mining.com
  • CEO: Phillips S. Baker, Jr.
  • Employees: 656
  • Organization: Public
  • Ticker: NYSE:HL NYSE:HL-PrB
  • Revenues: $477 million (2011)
  • Net Income: $151.1 million (2011)

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