Hecla to boost productivity 
via ‘culture of innovation’

VANCOUVER — Idaho-based silver and gold miner Hecla Mining (NYSE: HL) hosted a technology gathering for investors alongside its recent annual general meeting in Vancouver, where The Northern Miner caught up with Hecla president and CEO Phillips S. Baker, Jr., to talk about how Hecla is investing in technological innovation to increase productivity, profits and safety.

“In the late 1970s, heap-leach technology really took off and fundamentally changed the gold-mining industry,” Baker said. “We’re at another tipping point where the industry is changing due to the available technologies. If you don’t change alongside it, well, you’re going to get left in the dust.

“The companies that failed to understand heap leaching, and what it could do operationally, disappeared. Other companies emerged by leveraging new technologies to develop the assets that were left behind.”

Hecla describes its approach to technological research and integration as incremental and iterative.

Underground operations at Hecla Mining’s Greens Creek silver-gold mine in Alaska. Credit: Hecla Mining.

Baker said his management team is not pursuing a top-down approach to innovation, but is rather drawing on the firm’s collective experience at long-life mines to identify opportunities where new technology could improve operations and profits.

“When it comes to innovation, we have to understand it can take some time before you see big returns on investment,” Baker said.

“We’re getting more practical experience on the ground, with more technologies than anyone in our peer group. We’re dealing with things at a smaller scope, so incremental improvements at the mine can make a big difference. In many ways, we’re more incentivized to explore the upside of technology than the larger companies.”

Workers commemorate sinking the deepest mine shaft in the United States at Hecla Mining’s Lucky Friday silver-lead-zinc mine in Idaho. Credit: Cementation.

Hecla’s productivity drive at its core assets underpinned improved financial performance over the last 12 months. The company reported a 16% year-on-year jump in quarterly adjusted earnings to start 2016, while boosting its total liquidity 59% to US$313 million.

Hecla has outpaced many peers with a 180% increase in share price over the past 18 months.

An above-ground worker operating an automated load-haul-dump machine at Hecla Mining’s Greens Creek silver mine in southeast Alaska. Credit: Hecla Mining.

“One of the pillars in our strategy are long-life mines, where we can work to control the costs,” Baker said. “We want our operations to run for a long time, which allows us the opportunity to understand and benefit from new methods and machinery over the mine life.”

Hecla expected to produce between 46 million and 50 million equivalent oz. silver this year from its four mining operations: Greens Creek in Alaska, Lucky Friday in Idaho, Casa Berardi in Quebec and San Sebastian in Mexico.

The company has been at the historic Green Creek’s operation since the 1980s, while Lucky Friday has operated in Mullan, Idaho, for nearly 75 years. Meanwhile, Casa Berardi has also seen off-and-on production since the late 1980s.

Hecla has added nearly 300 million oz. in total silver reserves over the past decade despite its aging mines.

The journey hasn’t been without its setbacks, however, and in March the United Steelworkers Union Local 5114 declared a strike at Lucky Friday.

The mine had been scheduled to produce between 8 million and 9 million equivalent oz. silver this year, though Hecla says the labour negotiations “will not have a material impact on its financial position.” Negotiations are ongoing.

Hecla has leveraged a variety of technologies to improve mine performance.

At Green’s Creek, the company has instituted load-haul-dump (LHD) automation to increase productivity during shift changes and blasting. Hecla has also applied Woodgrove Technologies’ staged flotation reactor cells to boost average recoveries at the mine by 7%.

Meanwhile, the company is testing battery-powered LHD technology at Lucky Friday to reduce ventilation requirements in the absence of diesel exhaust.

An automated load-haul-dump machine operated by an above-ground worker at Hecla Mining’s Greens Creek silver mine in southeast Alaska. Credit: Hecla Mining.

It has also made a five-year investment with Atlas Copco into continuous mechanical cutting to eliminate drilling and blasting, which it speculates could “revolutionize some mines.”

“We’re looking at a mechanical mining machine that would operate continuously. I’m going to look at a prototype that’s designed to mine reefs, but we’d look at adapting the technology for vein mining,” Baker said.

Miners at the Casa Berardi gold operations in Quebec. Credit: Hecla Mining.

“It uses some of the technology in tunnel boring, so instead of drilling and blasting, you’d cut the rock. It would change it from a batch to a continuous process. We’re funding the development of the machine, and it will probably be three years before we see results.”

Hecla has been on a mission to improve Casa Berardi since acquiring the operation in a $796-million deal for Aurizon Mines in 2013. The company has spent $200,000 on automated shaft and rock breakers, as well as jumbo-stop drill automation and haulage.

Hecla says that two 40-tonne Sandvik trucks could save $5 million on Casa Berardi’s 985 automated drift in the near term.

Hecla is developing a “Remote Vein Miner” with Atlas Copco to develop. Credit: Hecla Mining.

The company modelled the improvements on Barrick Gold’s (TSX: ABX; NYSE: ABX) Williams gold mine in the Hemlo camp, 350 km east of Thunder Bay, Ontario.

“It’s a question of testing new technologies and finding the best way forward. It’s a long journey from the old way of doing things and being able to quantify how technology might impact the economics of a deposit,” Baker said.

“We have long-term employees step forward who are really excited about a new technology or process, and they get involved. From a company perspective, it’s really exciting to see because what we want is to create that culture of innovation.”

Hecla shares have traded in a 52-week range of US$4.18 to US$7.64, and closed at US$5.30 per share at press time.

The company has 396 million shares outstanding for a US$2.1-billion market capitalization, and reported a 152% year-on-year increase in free cash flows, to US$44.5 million, in 2016.