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08.09.11
Hecla Reports Second Quarter 2011 Doubling of Income
For the Period Ended June 30, 2011

COEUR D'ALENE, Idaho, Aug 09, 2011 (BUSINESS WIRE) -- Hecla Mining Company ("Hecla") (NYSE:HL) today announced second quarter net income of $33.3 million, or $0.12 per basic share. Second quarter silver production was 2.3 million ounces at a cash cost of $0.52 per ounce, net of by-products.1

SECOND QUARTER 2011 HIGHLIGHTS

  • Sales of $117.9 million, a 33% increase over the same period in 2010
  • Net income of $33.3 million, or $0.12 per basic share
  • Operating cash flow of $66.3 million, a 16% increase over the same period in 2010
  • Silver production of 2.3 million ounces at a total cash cost of $0.52 per ounce, net of by-products1
  • Cash and cash equivalents of $377 million at June 30, 2011

"Hecla had solid operational and financial results year-to-date generating significant cash flow from Greens Creek and Lucky Friday to fund our capital projects and meet our environmental settlement obligations," said Hecla's President and Chief Executive Officer, Phillips S. Baker, Jr. "The #4 Shaft Project combined with the new pre-development initiatives at our four properties are expected to increase production by approximately 50-60% over the next 5 years.

"We continue to benefit from high silver margins even with increasing industry cost pressures. Hecla's cost increase during the quarter is mainly attributable to higher metals prices, which was partially offset by strong by-product credits. Both Greens Creek and Lucky Friday remain among the lowest cost mines in the silver space."

(1) Total cash cost per ounce of silver represents a non-U.S. Generally Accepted Accounting Principles (GAAP) measurement. A reconciliation of total cash cost to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) can be found at the end of this release.

FINANCIAL OVERVIEW

Hecla reported excellent second quarter revenues and cash flow from operating activities, as a result of higher metals prices. Net income applicable to common shareholders for the second quarter were impacted by the following items:

  • A $19.6 million tax provision, compared to $8.3 million in the same period in 2010, as a result of higher pre-tax income.
  • A $7.8 million negative provisional price adjustment related to precious metal settlements and a short-term buildup of concentrate inventory which negatively impacted sales by approximately $6.5 million.
  • A $3.8 million reduction in depreciation, depletion and amortization mainly due to lower production.
  • A $0.6 million gain on base metal derivative contracts for the second quarter, compared to a $2.0 million gain for the same period in 2010. A summary of the quantities of base metals committed at June 30, 2011 is included on page 3 of this release.
  • A $1.0 million increase in interest expense primarily attributable to pre-lodging interest for the Consent Decree related to the settlement of certain environmental obligations.
Second Quarter Ended Six Months Ended
HIGHLIGHTS June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
FINANCIAL DATA
Sales $
117,860
$
88,631
$
254,224
$
168,506
Gross Profit $
67,791
$
38,066
$
147,364
$
65,602
Income applicable to common shareholders

$

33,179

$

13,675

$

76,398

$

32,111

Basic income per common share $
0.12
$
0.06
$
0.27
$
0.13
Diluted income per common share

$

0.11

$

0.05

$

0.26

$

0.12

Net income $
33,317
$
17,084
$
76,674
$
38,928
Cash flow provided by operating activities

$

66,307

$

56,996

$

127,217

$

74,791

(dollars in thousands except per share amounts - unaudited)

Hecla's cash position at June 30, 2011 was $377 million, compared to $197 million of cash on hand at June 30, 2010.

Capital expenditures (including non-cash capital lease additions) at our operations totaled $26.4 million and $45.7 million for the second quarter and six-month period ended June 30, 2011, respectively. Lucky Friday's expenditures for the second quarter and first half of 2011 were $14.1 million and $28.5 million, respectively, of which the majority was spent on the #4 Shaft Project. Greens Creek's expenditures in the second quarter and first half of 2011 were $12.3 million and $17.2 million, respectively. Expected capital expenditures for 2011 have increased from $100 million to $115 million primarily from the acceleration of projects at Greens Creek.

Exploration expenditures for the second quarter and six-month period ended June 30, 2011 were $5.8 million and $9.1 million, respectively. Exploration for 2011 is expected to increase from $27 million to $32 million due to the establishment of pre-development initiatives and the expansion of exploration programs, primarily in Mexico.

Hecla expects the Consent Decree for the Coeur d'Alene River Basin Environmental litigation to be entered in the third quarter of 2011. Hecla will pay $263.4 million over a three-year period (plus $1.1 million in pre-lodging interest). The initial payment of $167 million, which includes $102 million of cash, $55.5 million of cash or Hecla stock, and approximately $9.5 million in proceeds from previously exercised series 3 warrants, will be payable 30 days after entry of the Consent Decree.

Metals Prices

Realized metals prices continued to increase significantly in 2011 compared to 2010. Realized silver prices in the second quarter of 2011 exceeded those of the same period last year by 89%, while for the first half of the year, realized prices were 102% above last year's levels.

For the second quarter and first six months of 2011, we recorded net negative adjustments to provisional settlements of $7.8 million and $0.4 million, respectively, due largely to a decrease in precious metals prices in the time period between the shipment of concentrate and final settlement. The price adjustment related to zinc and lead contained in our concentrate shipments were offset by gains and losses on forward contracts for those metals.

Second Quarter Ended Six Months Ended
June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
AVERAGE METAL PRICES
Silver - London PM Fix ($/oz.) $
38.17
$
18.32
$
34.92
$
17.62
Realized price per ounce $
35.80
$
18.96
$
36.19
$
17.94
Gold - London PM Fix ($/oz.) $
1,504
$
1,196
$
1,444
$
1,152
Realized price per ounce $
1,550
$
1,246
$
1,478
$
1,178
Lead - LME Cash ($/pound) $
1.16
$
0.88
$
1.17
$
0.95
Realized price per pound $
1.15
$
0.93
$
1.17
$
0.93
Zinc - LME Cash ($/pound) $
1.02
$
0.92
$
1.06
$
0.98
Realized price per pound $
1.02
$
0.89
$
1.06
$
0.92

Base Metals Forward Sales Contracts

The following table summarizes the quantities of base metals committed under financially settled forward sales contracts at June 30, 2011:

Metric tonnes

Average price per

under contract

pound

Zinc Lead Zinc Lead
Contracts on provisional sales
2011 settlements
8,100
4,500
$
1.02
$
1.17
Contracts on forecasted sales
2011 settlements
7,350
6,175
$
0.96
$
1.01
2012 settlements
26,650
18,000
$
1.11
$
1.11
2013 settlements
4,700
8,300
$
1.16
$
1.16

OPERATIONS OVERVIEW

Second quarter silver cash costs, net of by-product credits, was $0.52 per ounce compared to negative $1.82 per ounce in the same period in 2010. Based on current 2011 production guidance and cost estimates and assuming recent metals prices for the second half of 2011, total cash costs, net of by-product credits, are expected to be approximately $1.00 per ounce of silver for the year 2011. The following table provides the production summary on a consolidated basis which includes Greens Creek and Lucky Friday for the second quarter and six months ended June 30, 2011 and 2010:

Second Quarter Ended Six Months Ended
June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
       
PRODUCTION SUMMARY
Silver - Ounces produced
2,250,784
2,628,664
4,705,192
5,112,398
Payable ounces sold
1,878,719
2,027,064
4,242,149
4,069,304
Gold - Ounces produced
14,426
17,880
28,856
34,742
Payable ounces sold
11,744
13,423
23,334
26,275
Lead - Tons produced
10,075
11,582
19,730
23,763
Payable tons sold
8,185
9,173
16,786
18,781
Zinc - Tons produced
18,973
21,623
36,654
43,834
Payable tons sold
12,668
17,302
26,183
32,956
Total cash cost per ounce of silver produced (1) $
0.52
$
(1.82
) $
0.79
$
(2.41
)

(1) Total cash cost 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 at the end of this release.

Greens Creek

Silver production at Greens Creek was 1.5 million ounces in the second quarter of 2011 and 3.2 million ounces in the first half of 2011, compared to 1.8 million ounces and 3.4 million ounces, respectively, in the same periods in 2010. The decrease in silver production year-over-year is due to lower silver ore grade and reduced ore volume. The lower silver grades in the second quarter were expected and are due to differences in the sequencing of production according to the mine plan.

Mining and milling costs were up by 29% and 22% for the second quarter and six-month period ended June 30, 2011, respectively. The increase was driven primarily by higher power costs from generating power on-site due to lower availability of less expensive hydroelectric power, caused by the lower precipitation levels in Southeastern Alaska, and higher labor costs due primarily to higher fringe benefits costs.

Total cash cost per ounce of silver produced at Greens Creek was negative $2.70 and negative $1.64 net of by-products, for the second quarter and first half of 2011, respectively, compared to negative $4.56 and negative $5.45 for the same respective periods in 2010. The increase in total cash cost per ounce quarter-over-quarter and year-over-year is due to higher production costs, treatment costs, and mine license tax by $4.60, $4.28, and $1.12 per ounce, respectively. This is partially offset by higher by-product credits of $8.14 per ounce resulting from higher average market zinc, lead, and gold prices. The higher mine license tax and treatment costs are the result of higher metals prices.

Lucky Friday

Silver production at Lucky Friday was 0.8 million ounces in the second quarter of 2011 and 1.5 million ounces in the first half of 2011, compared to 0.8 million ounces and 1.7 million ounces, in the respective periods in 2010. The overall decrease in production year-over-year is primarily due to lower silver ore grade, which was expected.

Mining and milling costs were up by 9% for both the second quarter and six-month period ended June 30, 2011. The increase was driven primarily by increased cost of fuel, consumable underground materials, reagents, power, and maintenance supplies.

Total cash cost per ounce of silver produced at Lucky Friday was $6.46 and $5.74, net of by-product credits, for the second and first half of 2011, respectively, compared to $4.47 and $3.81, for the same respective periods in 2010. The increase in total cash cost per ounce quarter-over-quarter and year-over-year is primarily due to higher employee profit sharing, production costs, expensed site infrastructure, and treatment costs, which are partially offset by higher by-product credits resulting from higher zinc and lead prices. Higher profit sharing and treatment costs are due to higher metals prices.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Tuesday, August 9, at 1:00 p.m. Eastern Time to discuss these results. You may join the conference call by dialing toll-free 1-866-800-8649 or 1-617-614-2703 internationally. The participant passcode is HECLA.

Hecla's live and archived webcast can be accessed at http://www.hecla-mining.com under Investors or via Thomson StreetEvents Network. Individual investors can listen to the call at http://www.earnings.com, Thomson's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson Street Events (http://www.streetevents.com), a password-protected event management site.

ABOUT HECLA

Established in 1891, Hecla Mining Company is the largest and lowest cash cost silver producer in the U.S. The company has two operating mines and 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, 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, environmental and litigation 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 http://www.sec.gov.

HECLA MINING COMPANY

Consolidated Statements of Income

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

Second Quarter Ended Six Months Ended
June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
Sales of products $
117,860
$
88,631
$
254,224
$
168,506

Cost of sales and other direct production costs

38,865

35,545
83,394
71,815
Depreciation, depletion and amortization
11,204
15,020
23,466
31,089
50,069
50,565
106,860
102,904
Gross profit
67,791
38,066
147,364
65,602
Other operating expenses
General and administrative
4,550
4,664
9,249
8,777
Exploration
5,839
5,820
9,140
9,249
Other operating expenses
2,270
1,601
4,087
2,565
Provision for closed operations and environmental matters

1,341

1,389

2,362

4,765

14,000
13,474
24,838
25,356
Income from operations
53,791
24,592
122,526
40,246
Other income (expense):
Gain (loss) on sale or impairment of investments
--
(739
)
611
(151
)
Gain (loss) on derivative contracts
559
1,999
(1,475
)
1,999
Interest and other income
105
16
123
67
Interest expense
(1,496
)
(529
)
(1,973
)
(1,207
)
(832
)
747
(2,714
)
708
Income before income taxes
52,959
25,339
119,812
40,954
Income tax provision
(19,642
)
(8,255
)
(43,138
)
(2,026
)
Net income
33,317
17,084
76,674
38,928
Preferred stock dividends
(138
)
(3,409
)
(276
)
(6,817
)
Income applicable to common shareholders $
33,179
$
13,675
76,398
$
32,111
Basic income per common share after preferred dividends

$

0.12

$

0.06

$

0.27

$

0.13

Diluted income per common share after preferred dividends

$

0.11

$

0.05

$

0.26

$

0.12

Basic weighted average number of common shares outstanding

279,347

248,549

278,901

245,371

Diluted weighted average number of common shares outstanding

295,756

266,374

296,020

263,868

HECLA MINING COMPANY

Consolidated Balance Sheets

(dollars and shares in thousands - unaudited)

June 30, 2011 Dec. 31, 2010
ASSETS
Current assets:
Cash and cash equivalents $
377,436
$
283,606
Short-term investments and securities held for sale
--
1,474
Accounts receivable
45,121
36,840
Inventories
21,987
19,131
Deferred taxes
75,435
87,287
Other current assets
2,336
3,683
Total current assets
522,315
432,021
Investments
4,161
1,194
Restricted cash and investments
926
10,314
Properties, plants and equipment, net
855,482
833,288
Deferred taxes
73,851
100,072
Other noncurrent assets
3,654
5,604
Total assets $
1,460,389
$
1,382,493
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $
44,355
$
31,725
Accrued payroll and related benefits
10,343
10,789
Accrued taxes
9,678
16,042
Current portion of accrued reclamation and closure costs
175,597
175,484
Current portion of capital leases
3,045
2,481

Current derivative contract liabilities

10,510
20,016

Total current liabilities

253,528
256,537
Long-term capital leases
4,473
3,792
Accrued reclamation and closure costs
143,026
143,313
Other noncurrent liabilities
16,149
16,598
Total liabilities
417,176
420,240
SHAREHOLDERS' EQUITY
Preferred stock
39
543
Common stock
69,976
64,704
Capital surplus
1,180,740
1,179,751
Accumulated deficit
(189,179
)
(265,577
)
Accumulated other comprehensive loss
(15,843
)
(15,117
)
Treasury stock
(2,520
)
(2,051
)
Total shareholders' equity
1,043,213
962,253
Total liabilities and shareholders' equity $
1,460,389
$
1,382,493
Common shares outstanding at end of year
279,512
258,486

HECLA MINING COMPANY

Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)

Six Months Ended
June 30, June 30,
2011 2010
OPERATING ACTIVITIES
Net income $
76,674
$
38,928
Noncash elements included in net income:
Depreciation, depletion and amortization
23,597
31,177
Gain on sale of investments
(611
)
(588
)
Gain on disposition of properties, plants and equipment
(8
)
--
Loss on impairment of investments
--
739
Provision for reclamation and closure costs
556
2,502
Stock compensation
920
2,473
Deferred income taxes
38,319
268
Amortization of loan origination fees
332
320
Unrealized gain on derivative contracts
(9,198
)
(2,202
)
Other non-cash charges, net
391
328
Change in assets and liabilities:
Accounts receivable
(8,282
)
4,023
Inventories
(2,856
)
(3,207
)
Other current and noncurrent assets
2,552
2,517
Accounts payable and accrued expenses
12,818
11,455
Accrued payroll and related benefits
(445
)
(7,332
)
Accrued taxes
(6,364
)
(1,256
)

Accrued reclamation and closure costs and other non-current liabilities

(1,178

)

(5,354

)

Net cash provided by operating activities
127,217
74,791
INVESTING ACTIVITIES
Additions to properties, plants and equipment
(40,580
)
(27,864
)
Proceeds from disposition of properties, plants and equipment
113
--
Decreases in restricted cash and investment balances
9,388
1,476
Proceeds from sale of investments
1,366
1,138
Purchases of investments
(3,200
)
--
Net cash used in investing activities
(32,913
)
(25,250
)
FINANCING ACTIVITIES
Proceeds from exercise of stock options and warrants
4,838
45,562
Dividends paid to preferred shareholders
(3,546
)
(966
)
Acquisition of treasury shares
(469
)
(693
)
Repayments of debt and capital leases
(1,297
)
(744
)
Net cash provided by (used in) financing activities
(474
)
43,159
Net increase in cash and cash equivalents
93,830
92,700
Cash and cash equivalents at beginning of period
283,606
104,678
Cash and cash equivalents at end of period $
377,436
$
197,378

HECLA MINING COMPANY

Production Data

Second Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
GREENS CREEK UNIT
Tons of ore milled
189,483
204,972
379,250
403,096
Mining cost per ton $
49.84
$
41.30
$
48.24
$
41.65
Milling cost per ton $
31.98
$
22.28
$
29.81
$
22.17
Ore grade milled - Silver (oz./ton)
10.47
12.42
11.49
11.66
Ore grade milled - Gold (oz./ton)
0.12
0.14
0.12
0.13
Ore grade milled - Lead (%)
3.70
4.12
3.49
4.20
Ore grade milled - Zinc (%)
10.33
10.82
9.85
11.01
Silver produced (oz.)
1,459,534
1,831,279
3,157,118
3,432,934
Gold produced (oz.)
14,426
17,880
28,856
34,742
Lead produced (tons)
5,497
6,535
10,208
13,215
Zinc produced (tons)
17,069
19,481
32,595
39,161
Total cash cost per ounce of silver produced (1) $
(2.70
) $
(4.56
) $
(1.64
) $
(5.45
)
Capital additions (in thousands) $
12,325
$
4,056
$
17,185
$
5,751
LUCKY FRIDAY UNIT
Tons of ore processed
75,743
79,428
164,503
171,469
Mining cost per ton $
61.36
$
56.62
$
59.82
$
54.71
Milling cost per ton $
17.07
$
15.35
$
16.17
$
14.87
Ore grade milled - Silver (oz./ton)
11.13
10.75
10.13
10.51
Ore grade milled - Lead (%)
6.47
6.80
6.26
6.61
Ore grade milled - Zinc (%)
2.85
3.09
2.85
3.12
Silver produced (oz.)
791,249
797,385
1,548,073
1,679,464
Lead produced (tons)
4,578
5,047
9,522
10,548
Zinc produced (tons)
1,904
2,142
4,059
4,673
Total cash cost per ounce of silver produced (1) $
6.46
$
4.47
$
5.74
$
3.81
Capital additions (in thousands) $
14,092
$
14,048
$
28,502
$
20,529

(1) Gold, lead and zinc produced have been treated as by-product credits in calculating silver costs per ounce. Total cash cost per ounce of silver represents 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.

HECLA MINING COMPANY

Reconciliation of Cash Costs per Ounce to Generally Accepted Accounting Principles (GAAP)(1)

(dollars and ounces in thousands, except per ounce - unaudited)

Second Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
RECONCILIATION TO GAAP, ALL OPERATIONS
Total cash costs $
1,169
$
(4,784
) $
3,699
$
(12,317
)
Divided by silver ounces produced
2,250
2,628
4,705
5,112
Total cash cost per ounce produced $
0.52
$
(1.82
) $
0.79
$
(2.41
)
Reconciliation to GAAP:
Total cash costs $
1,169
$
(4,784
) $
3,699
$
(12,317
)
Depreciation, depletion and amortization
11,204
15,020
23,466
31,089
Treatment costs
(25,948
)
(21,619
)
(50,183
)
(46,535
)
By-product credits
66,931
64,066
131,442
133,461
Change in product inventory
(4,164
)
(2,401
)
(2,631
)
(2,858
)
Reclamation, severance and other costs
877
283
1,067
64
Costs of sales and other direct production costs and depreciation, depletion and amortization (GAAP)

$

50,069

$

50,565

$

106,860

$

102,904

GREENS CREEK UNIT
Total cash costs $
(3,942
) $
(8,345
) $
(5,187
) $
(18,711
)
Divided by silver ounces produced
1,459
1,831
3,157
3,433
Total cash cost per ounce produced $
(2.70
) $
(4.56
) $
(1.64
) $
(5.45
)
Reconciliation to GAAP:
Total cash costs $
(3,942
) $
(8,345
) $
(5,187
) $
(18,711
)
Depreciation, depletion and amortization
9,709
13,108
20,389
27,188
Treatment costs
(20,220
)
(18,063
)
(39,335
)
(38,000
)
By-product credits
54,001
52,850
104,064
108,776
Change in product inventory
(4,198
)
(2,096
)
(2,340
)
(2,430
)
Reclamation, severance and other costs
(529
)
278
(363
)
52
Costs of sales and other direct production costs and depreciation, depletion and amortization (GAAP)

$

34,821

$

37,732

$

77,228

$

76,875

LUCKY FRIDAY UNIT
Total cash costs $
5,111
$
3,561
$
8,886
$
6,394
Divided by silver ounces produced
791
797
1,548
1,679
Total cash cost per ounce produced $
6.46
$
4.47
$
5.74
$
3.81
Reconciliation to GAAP:
Total cash costs $
5,111
$
3,561
$
8,886
$
6,394
Depreciation, depletion and amortization
1,495
1,912
3,077
3,901
Treatment costs
(5,728
)
(3,556
)
(10,848
)
(8,535
)
By-product credits
12,930
11,216
27,378
24,685
Change in product inventory
34
(305
)
(291
)
(428
)
Reclamation and other costs
1,406
5
1,430
12
Costs of sales and other direct production costs and depreciation, depletion and amortization (GAAP)

$

15,248

$

12,833

$

29,632

$

26,029

(1) 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 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.

SOURCE: Hecla Mining Company

Hecla Mining Company
Investor Inquiries

Direct Main: 800-HECLA91 (800-432-5291)
hmc-info@hecla-mining.com
http://www.hecla-mining.com

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