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COEUR D'ALENE, Idaho--(BUSINESS WIRE)--Feb. 22, 2005--Hecla Mining Company (NYSE:HL) today reported increased sales and gross profit in 2004 compared to 2003. A decrease in silver and gold production was offset by increased precious metals prices during the year. In 2004, Hecla's net loss was $6.1 million, compared to a net loss of $6 million in 2003. Hecla's income for 2004 was $23.3 million, before accounting for exploration and pre-development expenses and a noncash environmental accrual for closed operations. This compares to income before environmental accruals and exploration and pre-development expenses of $28.1 million in 2003. Hecla's President and Chief Executive Officer Phillips S. Baker, Jr., said, "Today we hold property in five world-class mining districts. To maximize our opportunities on these excellent exploration properties, we increased our exploration spending in 2004 to $16 million, and spent $4 million in pre-development expense -- more than we've ever spent in our history. Our robust operating cash flow and promising exploration targets give us the opportunity to make a concerted effort over the next three to four years on exploration, growing our resource base and leading to increased production in the future. We were successful in 2004 and have created a platform for continued success in 2005 and beyond." Hecla maintained its position in 2004 as the lowest-cost primary silver miner and one of the lowest-cost gold miners in the business. The company produced nearly 7 million ounces of silver in 2004, at an average total cash cost of $2.02 per ounce, and about 190,000 ounces of gold, at an average total cash cost of $180 per ounce, a strong performance relative to the rest of the industry. Production for the fourth quarter and year was lower than expected, as a strike by workers at the Velardena mill during virtually the entire fourth quarter of 2004 reduced planned production from the San Sebastian mine in Mexico. The mine at San Sebastian continued to operate and stockpile ore in preparation for processing when the strike is concluded. Company-wide 2005 production is estimated in the same range as 2004, at about 6.5 million ounces of silver at an average total cost of less than $2.50 per ounce and approximately 190,000 ounces of gold at an average total cash cost of $180 per ounce, assuming the strike is resolved. Hecla's estimate of cash cost per ounce of gold is based on an effective Venezuelan currency exchange rate of 2,500 bolivares to US$1. The company is currently evaluating several significant changes to the exchange control rules applicable to exports of goods, services or technology scheduled to go into effect in Venezuela in mid-March, which could cause total cash costs per ounce of gold to be 10% to 20% higher. Hecla's reported ounces of silver produced in the fourth quarter of 2004 was 1.3 million, compared to 2.3 million in the same period last year, and 35,736 ounces of gold in the fourth quarter of 2004, compared to 51,724 ounces of gold in the fourth quarter 2003, with lower production in 2004 due to lack of milling facilities at San Sebastian. The net loss in the fourth quarter of 2004, which included $7.2 million in exploration and pre-development expenses, was $3.8 million, compared to net income in the fourth quarter of 2003 of $2.2 million, which included just $2.7 million in exploration and pre-development expenses. Hecla's balance sheet is extremely healthy. The company is debt-free, and cash, cash equivalents and short-term investments totaled $80.8 million at the end of 2004.
2004 HIGHLIGHTS
-- Began development of Mina Isidora gold mine in Venezuela, with
commercial production as part of the La Camorra unit scheduled
for 2006
-- Expansion commenced at the Lucky Friday silver mine in
northern Idaho to double production to 4 million ounces
annually in 2006; increased the strike length on the Lucky
Friday deposit
-- Feasibility work initiated at the Noche Buena gold property in
Mexico
-- A new significant mineralized structure discovered on the
Block B property in Venezuela (Twin Conductora)
-- Began excavation of the underground exploration ramp at the
Hollister gold project in Nevada
-- Replaced reserves mined during 2004 at all properties except
San Sebastian
-- Produced approximately 7 million ounces of silver at an
average total cash cost of $2.02/oz, and 189,860 ounces of
gold at an average cash cost of $180/oz
-- Noncash environmental accruals of $8.4 million in the third
quarter
-- Successful exchange of preferred stock for common stock, with
accompanying $10.9 million noncash dividend charge on the
income statement
-- Debt-free, with $80.8 million in cash and short-term
investments at the end of 2004
OPERATIONS
SILVER
Hecla produced 6,960,580 ounces of silver in 2004 at an average total cash cost per ounce of $2.02. Fourth quarter production was 1,310,178 ounces at an average total cash cost of $2.92. Higher fuel, steel and transportation costs impacted costs per ounce across the board for Hecla, as well as the rest of the mining industry, in the latter part of 2004. Increased costs and decreased production of silver compared to 2003 were also affected by a strike during the fourth quarter at the mill in Velardena, Mexico, which processes the ore from Hecla's San Sebastian mine. The strike at the mill occurred because the national union wants to unionize the mine. Mine workers have informed the company, the union and the Ministry of Labor they do not want to unionize. The company is meeting regularly with government and union officials to resolve the issue. The mine continued to operate at a normal rate during the fourth quarter, stockpiling ore in preparation for future processing. The mill can process the ore at a much faster rate than it is mined once the strike is resolved, although the company is also looking for contract custom milling facilities that can process the ore. At the end of the year, 30,000 tons of ore-grade material had been stockpiled, containing an estimated 350,000 ounces of silver and 12,000 ounces of gold. The Francine and Don Sergio veins at the San Sebastian mine will be exhausted by mid-2005 and the mine will cease production. Work is continuing on the deeper part of the Francine vein, known as the Hugh zone, but is not far enough along to allow uninterrupted production. As expected, the ore grades are decreasing as the mine life winds down. Baker said, "San Sebastian has been a tremendously profitable mine for Hecla. Given the prospects on our 200-square-mile property, I expect we will soon discover the next deposit, develop the Hugh zone, or both. We expect to be exploring and mining in Mexico for a long time to come." The Lucky Friday silver mine in northern Idaho produced 2 million ounces of silver during 2004, at an average total cash cost of $5.12 per ounce. As expected, cash costs were higher than in 2003, as mining gets deeper and more costly until the new access is completed on the 5900 level. Lucky Friday personnel did a good job of controlling costs in 2004, considering price increases for fuel and steel, and increased manpower as the Lucky Friday gears up for higher production levels at the end of 2005. When complete, the new 5900-level drift will bring lower costs and higher production. About $3.8 million was spent on this expansion during 2004. By the third quarter of 2005, miners should be drifting on the new vein. Some production will come out of the new area before the end of 2005, with full production by early 2006. Cash costs are expected to decrease by as much as $1 per ounce with full production from the 5900 level. During 2004, Lucky Friday was able to more than replace the reserves it mined during the year and added almost a year to proven and probable reserves. Lucky Friday's estimated 2005 production is approximately 3 million ounces of silver. In Alaska, Hecla's Greens Creek silver mine produced 2.9 million ounces of silver and 25,624 ounces of gold, at an average total cash cost of $1.13 per ounce of silver for Hecla's account. Hecla holds about 30% of the project, partnering with Kennecott Greens Creek Mining Company, a subsidiary of Rio Tinto. Production at the mine was down slightly compared to the previous year due to lower ore grade, but cash costs per ounce for the year decreased, in part due to increased by-product metals prices. In the fourth quarter alone, costs increased compared to the fourth quarter of 2003 because of a lower ore grade and higher dilution from pillar extraction. Anticipated production in 2005 at Greens Creek is 2.8 million ounces of silver and 23,000 ounces of gold. During 2004, the Greens Creek tailings facility was expanded and some mill improvements were implemented. Greens Creek obtained ISO (International Organization for Standardization) 14001 certification on its first attempt in 2004, which is a major environmental achievement. ISO is a global organization and the certification recognizes that Greens Creek comprehensively addresses environmental protection and pollution prevention. GOLD Hecla produced 189,860 ounces of primary and by-product gold in 2004. Of the total, 130,437 ounces were mined in Venezuela at an average total cash cost of $180 per ounce. At the La Camorra mine in eastern Venezuela, the ore grade was more than two-thirds of an ounce of gold per ton. La Camorra is an underground gold mine, accessed through a decline ramp. At the mine, haulage times continue to increase as the mine's ramp goes deeper. Increased haul distances affected costs at the mine, as did increased maintenance issues during the year. To offset higher costs experienced over the last few quarters and expected through midyear that are associated with the deepening of the mine, Hecla started construction of a 2,000-foot production and ventilation shaft in 2004. The new shaft, scheduled to go into service in the second quarter of 2005, will help maintain lower costs at the mine. Between La Camorra, a small number of ounces from Mina Isidora and custom milling for small miners in the area, Hecla expects to produce 140,000 ounces of gold out of Venezuela in 2005. Costs were expected to be about the same as 2004, but may increase due to changes in Venezuela's currency exchange controls. Mina Isidora, a new gold mine that Hecla is developing in the El Callao gold district about 70 miles north of the La Camorra gold mine, is on schedule to begin full production in 2006. Some production from the area accessed by the Pozo de Agua incline shaft is expected before the end of 2005. The mine will have two points of access, a main ramp and a small, rehabilitated incline shaft. The shaft rehabilitation is about 90% complete, and this shaft will allow Hecla to gain early access to high-grade gold ore in Mina Isidora. The Mina Isidora ramp is more than halfway to the vein. Approximately 350,000 ounces of proven and probable gold reserve with an average grade of 1 ounce per ton has been identified at Mina Isidora, with the deposit remaining open at depth. Hecla started its custom milling business in 2004, providing technical assistance to 20 small mining cooperatives. Baker said, "Realizing that these miners are an integral part of the gold mining industry in Venezuela and lending a helping hand has created incalculable goodwill from the communities and the government toward Hecla. We recently received recognition from the Governor of the State of Bolivar for our model economic programs and integration of the small miners into our business." RESERVES AND RESOURCES Hecla replaced or increased the proven and probable ore reserves mined in 2004 at each operation except for San Sebastian in Mexico, where ore reserves will be depleted and mining will be finished in mid-2005.
ESTIMATED ORE RESERVES
(as of December 31, 2004)
Proven and Probable
----------------------------------------------------------------------
Gold Silver Lead Zinc
Mine - (Hecla interest in %) Tons (oz/ton) (oz/ton) (%) (%)
----------------------------------------------------------------------
Lucky Friday Unit, USA 757,700 - 14.7 7.9 2.4
Greens Creek (29.73%), USA 2,358,189 0.11 14.1 3.9 10.2
San Sebastian Unit, Mexico 30,300 0.29 15.4 - -
La Camorra Unit, Venezuela 695,157 0.81 - - -
----------------------------------------------------------------------
ESTIMATED ORE RESERVES
(as of December 31, 2004)
Proven and Probable
------------------------------- ------------------------------
Gold Silver Lead Zinc
Mine - (Hecla interest in
%) (ounces) (ounces) (tons) (tons)
------------------------------- --------------------------------------
Lucky Friday Unit, USA - 11,150,368 59,888 18,047
Greens Creek (29.73%),
USA 261,604 33,334,025 92,916 240,467
San Sebastian Unit,
Mexico 8,600 465,400 - -
La Camorra Unit,
Venezuela 563,791 - - -
TOTAL 833,995 44,949,793 152,804 258,514
------------------------------- --------------------------------------
Mineralized Material (1)
----------------------------------------------------
Gold Silver Lead Zinc
Mine - (Hecla interest in %) Tons (oz/ton) (oz/ton) (%) (%)
----------------------------------------------------------------------
San Sebastian Unit (2) 33,000 0.33 20.6 - -
La Camorra Unit (3) 571,272 0.39 - - -
Lucky Friday Unit (4) 5,221,315 - 9.3 5.1 2.6
----------------------------------------------------------------------
(1) Securities and Exchange Commission guidelines do not allow the
company to complete the calculation of tons multiplied by grade to
equal contained ounces in the "mineralized material" and "other
resources" categories.
(2) In situ Francine vein and Don Sergio vein, diluted to assumed
mining width and adjusted for expected mining recovery.
(3) In situ resources, Canaima Lower and Middle veins, diluted and
factored for mining recovery (90%) and Isidora in situ M and S
vein.
(4) In situ Measured and Indicated resources from Gold Hunter and
Lucky Friday vein systems, diluted and factored for expected
mining recovery.
Other Resources(1)
-----------------------------------------
Gold Silver Lead Zinc
Mine - (Hecla interest in %) Tons (oz/ton) (oz/ton) (%) (%)
----------------------------------------------------------------------
San Sebastian Hugh (2) 478,837 0.02 8.6 5.4 6.7
San Sebastian DS & F (3) 83,000 0.35 8.6 - -
Lucky Friday Unit (4) 2,623,560 - 10.3 6.2 2.6
Greens Creek (29.73%) (5) 785,276 0.13 14.0 4.0 11.1
La Camorra Unit (6) 616,486 0.62 - - -
Noche Buena (7) 9,349,737 0.03 - - -
----------------------------------------------------------------------
(1) Securities and Exchange Commission guidelines do not allow the
company to complete the calculation of tons multiplied by grade to
equal contained ounces in the "mineralized material" and "other
resources" categories.
(2) Inferred resources, Hugh zone (Deep Francine).
(3) Inferred resources, Francine and Don Sergio veins diluted to
assumed mining width and adjusted for mining recovery.
(4) Inferred resources, diluted to assumed mining width and adjusted
for mining recovery.
(5) Inferred resources, East, West, SW, NWW, 9A, and 200S orebodies,
factored for dilution and mining recovery.
(6) Indicated resource, diluted and factored for mining.
(7) Indicated and Inferred resources inside dipper pit.
Baker said, "In 2005, we expect to spend approximately $23 million on exploration and pre-development expense. With this expenditure, our goal is to add reserves and resources during 2005, with further additions in future years. This would allow us to increase our gold production and see the silver side of our business grow through quality, low-cost production." In 2005, Hecla plans exploration expenditures of approximately $1.5 million in the United States, $4 million in Mexico, $5.5 million in Venezuela, $3 million on unallocated projects, and $9 million in pre-development at the Hollister Development Block project. VENEZUELA EXPLORATION In Venezuela, drilling in 2005 is expected to expand the reserve at Mina Isidora on the Block B property near El Callao. In 2004, exploration drilling to the east of Mina Isidora identified potential for a new ore shoot beneath the old Chile mine, where a number of ore-grade intercepts returned values up to 15 grams of gold per tonne over 6.71 meters. This ore shoot would be accessible from Mina Isidora and drilling is planned this year to further test the area. Elsewhere on Block B, Hecla will continue work on the Twin Conductora system, where drilling in 2004 has identified a previously unknown mineralized structure. Drilling has returned a number of ore- grade intercepts, where the best assay interval is 16.2 grams of gold per tonne over a width of 6.78 meters. The mineralized structure has been traced over a strike length of 700 meters, and down dip over 350 meters. The structure is open in all directions. According to Baker, "Our first two exploration attempts on Block B have arguably been wildly successful, resulting in the development of Mina Isidora and now the identification of a large new mineralized structure. This is very prospective property, and we've now begun evaluating the geophysics and geochemistry results to point us to additional targets on Block B." At the La Camorra mine, deep directional drilling will continue to be employed to test targets on the east flank of La Camorra's Main vein and at depth beneath the current resource limits. MEXICO EXPLORATION In Mexico, exploration drilling in 2004 has identified a new silver resource deeper on the Francine vein, which has been called the Hugh zone. Drilling will continue in 2005 to further define the resource. The Hugh zone is the first priority on the Mexican property. However, other high priority targets are also being drill tested to the west and north of the mine. That program will be continued in the second and third quarters of 2005. Hecla added to its already large land position in central Mexico with the acquisition of the La Roca concessions during the fourth quarter. La Roca is a historic mining district that lies to the northeast of San Sebastian and has potential for both silver and gold. At Noche Buena, a potential surface heap leach gold operation in northern Mexico, work is on schedule to complete a feasibility study in the third quarter of this year. The resource model has been completed and the pit design, engineering and metallurgical test work are underway. The current resource at Noche Buena is 9.3 million tons at a grade of 0.03 ounce of gold per ton. UNITED STATES EXPLORATION More than 500 feet of advance has been made on the decline at the Hollister Development Block gold exploration project in Nevada. This underground exploration project, an earn-in to a joint venture with Great Basin Gold, is located in northern Nevada, near the Carlin trend. Surface facilities are 90% complete. Access to the deposit via the ramp, exploration drilling and drifting, and a feasibility study leading to a decision on production are on schedule to be completed in approximately 18 months. During 2004, exploration drilling at the Lucky Friday in northern Idaho led to a 12.5% increase in the strike length of the silver deposit on the mine's 5900 level. In 2005, additional drilling at depth will test other targets for similar styles of mineralization to the east of the identified reserve and elsewhere on the property. The Greens Creek mine in Alaska also reported progress on its exploration program in 2004. Underground drilling targeted the mineralization intersected west of the Gallagher fault in early 2004. Nine holes have been drilled and all have intersected significant mineralization. Two zones of mineralization have been intersected in a number of the holes, with the longest continuous intercept of mineralization being over 280 feet in length. Assay results for the holes are still pending, however the sections have coarse grain galena, sphalerite and rare ruby silver as well as electrum and acanthite, which is usually an indication of promising metal grades. OTHER In the fourth quarter, Hecla declared a dividend of $0.875 per share on the outstanding Series B Cumulative Convertible Preferred stock. The cash dividend, totaling approximately $0.1 million, was paid on January 3, 2005. There are 157,816 shares of the Preferred B stock outstanding. A milestone for Hecla was reached during the fourth quarter, as the company celebrated 40 years of listing on the New York Stock Exchange. Hecla CEO Phil Baker, along with former Hecla CEO William Griffith and former CEO and current Chairman Arthur Brown, rang the closing bell at the NYSE in October 2004 to commemorate the event. Long-time Hecla director Joe Coors, Jr. retired from the board of directors in February 2005. After 15 years of dedicated service to Hecla, Coors has decided to focus on other projects and opportunities. Hecla Mining Company, headquartered in Coeur d'Alene, Idaho, mines and processes silver and gold in the United States, Venezuela and Mexico. A 114-year-old company, Hecla has long been well known in the mining world and financial markets as a quality silver and gold producer. Hecla's common and preferred shares are traded on the New York Stock Exchange under the symbols HL and HL-PrB. 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," "other resources" and "mineralized materials" 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. Statements made which are not historical facts, such as anticipated payments, litigation outcome, production, sales of assets, exploration results and plans, costs, 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, exploration risks and results, political risks, project development risks 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. Hecla Mining Company news releases can be accessed on the Internet at: http://www.hecla-mining.com.
HECLA MINING COMPANY
(dollars in thousands, except per share, per ounce and per
pound amounts - unaudited)
Fourth Quarter Ended Year Ended
HIGHLIGHTS Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
----------------------------------------------------------------------
FINANCIAL DATA
----------------------------------------------------------------------
Sales of products $ 28,746 $ 31,630 $ 130,826 $ 116,353
Gross profit 7,022 8,045 37,406 35,035
Income before
environmental
accruals and
exploration and pre-
development
expenses (1) 3,856 4,841 23,271 28,094
Net income (loss) (3,770) 2,171 (6,134) (6,016)
Basic loss per common
share (2) (0.03) (0.07) (0.15) (0.16)
Cash flow provided
(used) by operating
activities (3,948) 8,369 13,334 25,977
----------------------------------------------------------------------
SALES OF PRODUCTS
----------------------------------------------------------------------
Silver operations (3) $ 17,593 $ 20,977 $ 82,942 $ 76,658
Gold operations 11,153 10,670 47,884 39,192
Other - - (17) - - 503
Total sales $ 28,746 $ 31,630 $ 130,826 $ 116,353
----------------------------------------------------------------------
GROSS PROFIT (LOSS)
----------------------------------------------------------------------
Silver operations (3) $ 4,804 $ 5,506 $ 24,875 $ 21,605
Gold operations 2,218 2,552 12,531 13,530
Other - - (13) - - (100)
Total gross profit $ 7,022 $ 8,045 $ 37,406 $ 35,035
----------------------------------------------------------------------
PRODUCTION SUMMARY -
TOTALS
----------------------------------------------------------------------
Silver - Ounces 1,310,178 2,331,587 6,960,580 9,817,324
Gold - Ounces 35,736 51,724 189,860 204,091
Lead - Tons 4,770 5,201 19,558 21,224
Zinc - Tons 6,776 6,525 25,644 25,341
Average cost per ounce
of silver produced
(3):
Cash operating costs
($/oz.) 2.79 1.01 1.87 1.31
Total cash costs
($/oz.) (4) 2.92 1.15 2.02 1.43
Total production
costs ($/oz.) 4.34 2.51 3.57 2.70
Average cost per ounce
of gold produced (5):
Cash operating costs
($/oz.) 229 181 176 154
Total cash costs
($/oz.) (4) 237 181 180 154
Total production
costs ($/oz.) 318 250 271 222
----------------------------------------------------------------------
AVERAGE METAL PRICES
----------------------------------------------------------------------
Silver - Handy &
Harman ($/oz.) 7.26 5.30 6.69 4.91
Gold - Realized
($/oz.) 397 362 379 339
Gold - London Final
($/oz.) 434 392 409 364
Lead - LME Cash
(cents/pound) 43.5 28.8 40.2 23.4
Zinc - LME Cash
(cents/pound) 50.5 42.2 47.5 37.5
(1) As reported on page one of this release, income before
environmental accruals and exploration and pre-development
expenses of $23.3 million for 2004 and income before environmental
accruals and exploration and pre-development expenses of $28.1
million for 2003 represent non-U.S. generally accepted accounting
principles (GAAP) measurements. The following table presents a
reconciliation between net income (loss) to non-GAAP income before
environmental accruals and exploration and pre-development
expenses for the quarters and years ended December 31, 2004 and
2003:
Net income (loss) $ (3,770) $ 2,171 $ (6,134) $ (6,016)
Add noncash adjustment
to provision for closed
operations and
environmental matters 427 -- 9,183 23,107
Add exploration 4,520 2,323 15,995 9,608
Add pre-development 2,679 347 4,227 1,395
---------- -------- -------- ----------
Income before
environmental accruals
and exploration and
pre-development
expenses $ 3,856 $ 4,841 $ 23,271 $ 28,094
========== ======== ======== ==========
(2) For the quarters and years ended December 31, 2004 and 2003,
preferred stock dividends of $0.1 million and $10.2 million,
respectively, and $11.6 million and $12.2 million, respectively,
are not included in the determination of net income (loss);
however, they are included in determining loss applicable to
common shareholders and loss per share. Both the 2004 and 2003
amounts include noncash dividends of approximately $10.9 million
and $9.6 million, respectively, related to exchanges of preferred
stock for common stock. Including the effects of preferred stock
dividends, we reported a loss applicable to common shareholders of
$3.9 million for the three months ended December 31, 2004, as
compared to a loss applicable to common shareholders of $8.0
million during the same period in 2003. For the years ended
December 31, 2004 and 2003, losses applicable to common
shareholders totaled $17.7 million and $18.2 million,
respectively.
(3) Includes gold produced at silver properties, which is treated as a
by-product credit and included in the calculation of silver costs
per ounce.
(4) Total cash costs per ounce of silver and gold represent non-U.S.
generally accepted accounting principles (GAAP) measurements. A
reconciliation of total cash costs to cost of sales and other
direct production costs (GAAP) can be found in the cash costs per
ounce reconciliation section of this news release. For additional
information, see note (1) on the cash costs per ounce
reconciliation section.
(5) Includes gold produced from third-party mining operations located
near the La Camorra mine, which is treated as a by-product credit
and included in the calculation of gold costs per ounce.
HECLA MINING COMPANY
Consolidated Statements of Operations
(dollars and shares in thousands, except per share
amounts - unaudited)
Fourth Quarter Year Ended
Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
--------- --------- --------- ---------
Sales of products $ 28,746 $ 31,630 $130,826 $116,353
--------- --------- --------- ---------
Cost of sales and other
direct production costs 17,911 18,749 71,868 61,197
Depreciation, depletion and
amortization 3,813 4,836 21,552 20,121
--------- --------- --------- ---------
21,724 23,585 93,420 81,318
--------- --------- --------- ---------
Gross profit 7,022 8,045 37,406 35,035
--------- --------- --------- ---------
Other operating expenses:
General and administrative 2,562 2,304 8,731 8,407
Exploration 4,520 2,323 15,995 9,608
Pre-development expense 2,679 347 4,227 1,395
Depreciation and
amortization 95 73 326 341
Other operating expense
(income) 6 1,113 1,723 (1,439)
Provision for closed
operations and
environmental matters 1,200 289 11,170 23,777
--------- --------- --------- ---------
11,062 6,449 42,172 42,089
--------- --------- --------- ---------
Income (loss) from operations (4,040) 1,596 (4,766) (7,054)
--------- --------- --------- ---------
Other income (expense):
Interest income 711 363 1,923 2,590
Interest expense (43) (493) (500) (1,407)
--------- --------- --------- ---------
668 (130) 1,423 1,183
--------- --------- --------- ---------
Income (loss) before income
taxes and cumulative effect
of change in accounting
principle (3,372) 1,466 (3,343) (5,871)
Income tax benefit (provision) (398) 705 (2,791) (1,217)
--------- --------- --------- ---------
Income (loss) before
cumulative effect of change
in accounting principle (3,770) 2,171 (6,134) (7,088)
Cumulative effect of change in
accounting principle,
net of income tax - - - - - - 1,072
Net income (loss) $ (3,770) $ 2,171 $ (6,134) $ (6,016)
========= ========= ========= =========
Basic income (loss) per common
share:
Loss after preferred stock
dividends $ (0.03) $ (0.07) $ (0.15) $ (0.17)
Cumulative effect of change
in accounting principle - - - - - - 0.01
--------- --------- --------- ---------
Basic loss per common share
(1) $ (0.03) $ (0.07) $ (0.15 )$ (0.16)
========= ========= ========= =========
Basic weighted average number
of common shares outstanding 118,326 113,473 118,048 110,610
========= ========= ========= =========
(1) For the quarters and years ended December 31, 2004 and 2003,
preferred stock dividends of $0.1 million and $10.2 million,
respectively, and $11.6 million and $12.2 million, respectively,
are not included in the determination of net income (loss);
however, they are included in determining loss applicable to
common shareholders and loss per share. Both the 2004 and 2003
amounts include noncash dividends of approximately $10.9 million
and $9.6 million, respectively, related to exchanges of preferred
stock for common stock. Including the effects of preferred stock
dividends, we reported a loss applicable to common shareholders of
$3.9 million for the three months ended December 31, 2004, as
compared to a loss applicable to common shareholders of $8.0
million during the same period in 2003. For the years ended
December 31, 2004 and 2003, losses applicable to common
shareholders totaled $17.7 million and $18.2 million,
respectively.
HECLA MINING COMPANY
Consolidated Balance Sheets
(dollars and shares in thousands - unaudited)
Dec. 31, Dec. 31,
2004 2003
----------------------------------------------------------------------
ASSETS
----------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 52,610 $ 105,387
Short-term investments 28,178 18,003
Accounts and notes receivable 21,936 16,318
Inventories 20,250 16,936
Deferred income taxes - - 1,427
Other current assets 5,607 3,174
--------- ---------
Total current assets 128,581 161,245
Investments 1,657 722
Restricted cash and investments 19,789 6,447
Properties, plants and equipment, net 114,515 95,315
Deferred income taxes - - 896
Other noncurrent assets 14,906 13,570
--------- ---------
Total assets $ 279,448 $ 278,195
========= =========
----------------------------------------------------------------------
LIABILITIES
----------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 16,042 $ 13,847
Accrued payroll and related benefits 9,405 7,307
Current portion of debt - - 2,332
Accrued taxes 2,379 3,193
Current portion of accrued reclamation and
closure costs 9,237 7,400
--------- ---------
Total current liabilities 37,063 34,079
Long-term debt - - 2,341
Accrued reclamation and closure costs 65,951 63,232
Other noncurrent liabilities 7,107 7,114
--------- ---------
Total liabilities 110,121 106,766
========= =========
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
----------------------------------------------------------------------
Preferred stock 39 116
Common stock 29,588 28,886
Capital surplus 506,630 504,858
Accumulated deficit (367,832) (361,560)
Accumulated other comprehensive income (loss) 1,020 (753)
Treasury stock (118) (118)
--------- ---------
Total shareholders' equity 169,327 171,429
--------- ---------
Total liabilities and shareholders' equity $ 279,448 $ 278,195
========= =========
Common shares outstanding at end of year 118,343 115,535
========= =========
HECLA MINING COMPANY
Consolidated Statements of Cash Flows
(dollars in thousands - unaudited)
Year Ended
Dec. 31, Dec. 31,
2004 2003
----------------------------------------------------------------------
OPERATING ACTIVITIES
----------------------------------------------------------------------
Net loss $ (6,134) $ (6,016)
Noncash elements included in net loss:
Depreciation, depletion and amortization 21,878 20,462
Cumulative effect of change in accounting
principle - - (1,072)
Gain on disposition of properties, plants and
equipment (222) (350)
Provision for reclamation and closure costs 10,271 24,086
Deferred incomes taxes 2,323 677
Stock compensation 495 - -
Change in assets and liabilities:
Accounts and notes receivable (5,618) (6,164)
Inventories (3,314) (2,178)
Other current and noncurrent assets (3,163) (2,051)
Accounts payable and accrued expenses 1,690 2,154
Accrued payroll and related benefits 1,859 396
Accrued taxes (814) 1,621
Accrued reclamation and closure costs and other
noncurrent liabilities (5,917) (5,588)
-------- --------
Net cash provided by operating activities 13,334 25,977
-------- --------
----------------------------------------------------------------------
INVESTING ACTIVITIES
----------------------------------------------------------------------
Additions to properties, plants and equipment (41,371) (19,535)
Proceeds from disposition of properties, plants
and equipment 352 486
Purchase of short-term investments (35,034) (21,053)
Maturity of short-term investments 26,404 3,050
Increase in restricted investments (13,433) (19)
Other, net (2) 8
-------- --------
Net cash used by investing activities (63,084) (37,063)
-------- --------
----------------------------------------------------------------------
FINANCING ACTIVITIES
----------------------------------------------------------------------
Common stock issued under warrants and stock
option plans 1,646 14,218
Issuance of common stock, net of offering costs - - 91,243
Borrowings on debt 2,430 1,350
Repayment on debt (7,103) (9,880)
-------- --------
Net cash provided (used) by financing activities (3,027) 96,931
-------- --------
Net increase (decrease) in cash and cash
equivalents (52,777) 85,845
Cash and cash equivalents at beginning of year 105,387 19,542
-------- --------
Cash and cash equivalents at end of year $ 52,610 $105,387
======== ========
HECLA MINING COMPANY
Production Data
(dollars in thousands, except per ounce, and per ton - unaudited)
Fourth Quarter Ended Year Ended
--------------------- -----------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
----------------------------------------------------------------------
LA CAMORRA UNIT
----------------------------------------------------------------------
Tons of ore processed 41,305 52,552 199,453 197,591
Days of operation 83 83 334 327
Mining cost per ton $ 55.81 $ 38.16 $ 44.79 $ 36.63
Milling cost per ton $ 13.39 $ 11.22 $ 13.12 $ 12.56
Ore grade crushed - Gold
(oz./ton) 0.646 0.651 0.684 0.679
Gold produced (oz.) 28,015 31,782 130,437 126,567
Average cost per ounce
of gold produced:
Cash operating costs $ 229 $ 181 $ 176 $ 154
Total cash costs (1) $ 237 $ 181 $ 180 $ 154
Total production costs $ 318 $ 250 $ 271 $ 222
Capital additions $ 7,136 $ 6,583 $ 31,596 $ 13,879
----------------------------------------------------------------------
SAN SEBASTIAN UNIT (2)
----------------------------------------------------------------------
Tons of ore processed - - 39,320 128,711 150,717
Days of operation - - 81 256 322
Mining cost per ton - - $ 30.72 $ 47.08 $ 29.62
Milling cost per ton - - $ 32.81 $ 38.65 $ 34.99
Ore grade milled -
Silver (oz./ton) - - 26.23 17.94 28.77
Ore grade milled - Gold
(oz./ton) - - 0.360 0.287 0.347
Silver produced (oz.) - - 949,600 2,042,173 4,085,038
Gold produced (oz.) - - 12,674 33,563 47,721
Average cost per ounce
of silver produced (3):
Cash operating costs - - $ (1.19) $ (0.10) $ (0.46)
Total cash costs (1) - - $ (0.94) $ 0.21 $ (0.25)
Total production costs - - $ 0.25 $ 2.11 $ 0.71
Capital additions - - $ 306 $ 975 $ 3,863
----------------------------------------------------------------------
GREENS CREEK UNIT
(Reflects Hecla's
29.73% share)
----------------------------------------------------------------------
Tons of ore milled 62,020 57,881 239,456 232,297
Days of operation 92 92 366 365
Mining cost per ton $ 29.17 $ 28.76 $ 28.07 $ 27.72
Milling cost per ton $ 18.53 $ 16.84 $ 17.84 $ 16.27
Ore grade milled -
Silver (oz./ton) 15.56 19.58 16.65 19.69
Silver produced (oz.) 704,157 861,281 2,886,264 3,480,800
Gold produced (oz.) 5,949 7,209 25,624 29,564
Lead produced (tons) 1,858 2,131 7,384 8,289
Zinc produced (tons) 5,965 5,828 22,649 22,809
Average cost per ounce
of silver produced (3):
Cash operating costs $ 1.17 $ 0.86 $ 0.98 $ 1.10
Total cash costs (1) $ 1.39 $ 0.98 $ 1.13 $ 1.18
Total production costs $ 3.35 $ 3.33 $ 3.47 $ 3.64
Capital additions $ 775 $ 990 $ 3,754 $ 1,887
----------------------------------------------------------------------
LUCKY FRIDAY UNIT
----------------------------------------------------------------------
Tons of ore milled 44,696 35,854 166,866 151,991
Days of operation 92 92 366 365
Mining cost per ton $ 58.08 $ 55.11 $ 55.60 $ 49.90
Milling cost per ton $ 8.50 $ 7.34 $ 7.80 $ 6.76
Ore grade milled -
Silver (oz./ton) 12.55 15.45 13.11 15.76
Silver produced (oz.) 519,686 520,706 2,032,143 2,251,486
Lead produced (tons) 2,912 3,070 12,174 12,935
Zinc produced (tons) 811 697 2,995 2,532
Average cost per ounce
of silver produced (3):
Cash operating costs $ 5.53 $ 5.24 $ 5.12 $ 4.86
Total cash costs (1) $ 5.51 $ 5.24 $ 5.12 $ 4.86
Total production costs $ 5.59 $ 5.26 $ 5.17 $ 4.88
Capital additions $ 1,675 $ - - $ 5,060 $ - -
(1) Total cash costs per ounce of silver and gold represent non-U.S.
generally accepted accounting principles (GAAP) measurements. A
reconciliation of total cash costs to costs of sales and other
direct production costs (GAAP) can be found in the cash costs per
ounce reconciliation section of this news release.
(2) The mill that processes San Sebastian ore was closed due to a
strike by mill workers during virtually all of the fourth quarter
of 2004, making fourth quarter production statistics not
meaningful.
(3) Gold produced is treated as a by-product credit in calculating
silver costs per ounce.
HEDGED POSITIONS
As of December 31, 2004
Sold forward: 4,050 metric tons of lead @ average price of $0.355
per pound
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)
Three Months Ended Year Ended
--------------------- ---------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
----------------------------------------------------------------------
GOLD OPERATIONS
----------------------------------------------------------------------
Total cash costs $ 6,174 $ 5,782 $ 22,617 $ 19,498
Divided by gold ounces
produced 26 32 126 127
------- ------- -------- --------
Total cash cost per
ounce produced $ 237 $ 181 $ 180 $ 154
======= ======= ======== ========
Reconciliation to GAAP (2):
Total cash costs $ 6,174 $ 5,782 $ 22,617 $ 19,498
Treatment & freight
costs (518) (480) (1,980) (1,634)
By-product credits 745 - - 1,892 - -
Change in product
inventory 433 618 1,383 (810)
Reclamation and other
costs 11 18 3 70
------- ------- --------- --------
Costs of sales and other
direct production costs
(GAAP) $ 6,845 $ 5,938 $ 23,915 $ 17,124
======= ======= ======== ========
----------------------------------------------------------------------
SILVER OPERATIONS
----------------------------------------------------------------------
Total cash costs $ 3,829 $ 2,681 $ 14,078 $ 14,041
Divided by silver ounces
produced 1,310 2,332 6,961 9,817
------- ------- -------- --------
Total cash cost per
ounce produced $ 2.92 $ 1.15 $ 2.02 $ 1.43
======= ======= ======== ========
Reconciliation to GAAP:
Total cash costs $ 3,829 $ 2,681 $ 14,078 $ 14,041
Treatment & freight
costs (4,765) (4,804) (19,044) (18,556)
By-product credits 10,593 13,397 50,340 47,082
Change in product
inventory 851 1,044 1,395 33
Strike-related costs 777 - - 777 - -
Reclamation and other
costs (219) 494 407 907
------- ------- -------- --------
Costs of sales and other
direct production costs
(GAAP) $11,066 $12,812 $ 47,953 $ 43,507
======= ======= ======== ========
----------------------------------------------------------------------
GREENS CREEK UNIT (Reflects
Hecla's 29.73% share)
----------------------------------------------------------------------
Total cash costs $ 977 $ 844 $ 3,257 $ 4,108
Divided by silver ounces
produced 704 861 2,886 3,481
------- ------- -------- --------
Total cash cost per
ounce produced $ 1.39 $ 0.98 $ 1.13 $ 1.18
======= ======= ======== ========
Reconciliation to GAAP:
Total cash costs $ 977 $ 844 $ 3,257 $ 4,108
Treatment & freight
costs (3,405) (3,073) (12,745) (12,082)
By-product credits 7,254 6,526 27,013 23,985
Change in product
inventory (263) (856) (231) (472)
Reclamation and other
costs (79) 407 157 575
------- ------- -------- --------
Costs of sales and other
direct production costs
(GAAP) $ 4,484 $ 3,848 $ 17,451 $ 16,114
======= ======= ======== ========
----------------------------------------------------------------------
SAN SEBASTIAN UNIT
----------------------------------------------------------------------
Total cash costs $ (11) $ (893) $ 421 $ (1,007)
Divided by silver ounces
produced 86 950 2,042 4,085
------- ------- -------- --------
Total cash cost per
ounce produced $ (0.13) $ (0.94) $ 0.21 $ (0.25)
======= ======= ======== ========
Reconciliation to GAAP:
Total cash costs $ (11) $ (893) $ 421 $ (1,007)
Treatment & freight
costs (32) (564) (1,069) (2,158)
By-product credits 720 4,982 13,493 17,367
Change in product
inventory 1,120 1,889 1,476 597
Strike-related costs 777 - - 777 - -
Reclamation and other
costs (45) 77 224 294
------- ------- -------- --------
Costs of sales and other
direct production costs
(GAAP) $ 2,529 $ 5,491 $ 15,322 $ 15,093
======= ======= ======== ========
----------------------------------------------------------------------
LUCKY FRIDAY UNIT
----------------------------------------------------------------------
Total cash costs $ 2,863 $ 2,730 $ 10,400 $ 10,940
Divided by silver ounces
produced 520 521 2,032 2,251
------- ------- -------- --------
Total cash cost per
ounce produced $ 5.51 $ 5.24 $ 5.12 $ 4.86
======= ======= ======== ========
Reconciliation to GAAP:
Total cash costs $ 2,863 $ 2,730 $ 10,400 $ 10,940
Treatment & freight
costs (1,328) (1,167) (5,230) (4,316)
By-product credits 2,619 1,889 9,834 5,730
Change in product
inventory (6) 11 150 (92)
Reclamation and other
costs (95) 10 26 38
------- ------- -------- --------
Costs of sales and other
direct production costs
(GAAP) $ 4,053 $ 3,473 $ 15,180 $ 12,300
======= ======= ======== ========
(1) Cash costs per ounce of silver or gold represent non-U.S.
generally accepted accounting principles (GAAP) measurements that
management uses to monitor and evaluate the performance of its
mining operations. We believe cash costs per ounce of silver or
gold provide an indicator of profitability at each location and on
a consolidated total, as well as a meaningful basis for which to
compare other mining companies and other mining operating
properties.
(2) Costs per ounce of gold are based on the gold produced by the La
Camorra mine only. Gold produced from third-party mining
operations located near the La Camorra mine is treated as a
by-product credit and included in the calculation of gold costs
per ounce.
CONTACT: Hecla Mining Company
Vicki Veltkamp, 208-769-4100
SOURCE: Hecla Mining Company
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