Hecla faces Venezuelan taxman (October 28, 2005)

Idaho-based Hecla Mining (HL-N) will face an accounting review by Venezuela’s tax agency Seniat, after claims of irregularities by the local labor union, according to the country’s state news agency.

While Hecla says it has not been officially notified of such an audit, the company said it would “cooperate fully with any review by the Seniat to put these allegations to rest.”

“If the Seniat decides to conduct an investigation, I am sure it will be in an attempt to determine the truth,” said Hecla CEO Phillips Baker. “We have undergone such audits in the past with satisfactory results.”

“Hecla has a hundred-year reputation of integrity and we will fully and completely respond to any attempts to tarnish that good reputation,” he added.

Hecla has been operating in Venezuela since 1999 and employs nearly 1,000 people in the country.

The company recently cuts its 2005 gold production estimate by around 15% to 145,000 oz., while raising cost estimates on increased fuel, steel and cement costs. The company’s Venezuelan operations, including the La Camorra mine , are slated to chip in around 105,000 oz. Total cash cost for the year are expected to average US$290 to US$300 per oz.

Bakers says the Venezuelan gold operations are currently suffering through higher labor costs, a stronger Venezuelan bolivar, lower grades and tonnages, and a work slowdown by a new union. He figures the currency effect will continue as long as oil prices remain high, while grades and tonnages and workforce productivity are improving.

Meanwhile, the company has also trimmed its silver production forecast by 200,000 oz. to about 6.3 million oz. at average total cash cost of US$3.10 to US$3.30 apiece.

Hecla also warned that its quarterly results, due out on Nov. 8, would be impacted by much higher expenses associated with its aggressive exploration program in 2005.

Shares in Hecla were off US25, or 7.5%, at a 52-week low of $3.10 in late afternoon trading in New York on Oct. 28. The stock is off more than 45% so far this year.