Lacklustre silver prices forced
The total loss amounted to US$18.7 million (or 28 per share), compared with an income of US$322,000 (1 per share) in the second quarter of 1999.
The writedowns included US$4.4 million for the closure of the Rosebud gold mine in northern Nevada, where mining ceased in July. The underground operation was a 50-50 joint venture with
Hecla wrote down the US$4.7-million net book value of the Noche Buena gold property in Sonora state, Mexico. The continued low gold price prompted the writedown, after the company suspended work on the project last year.
During the quarter, Hecla recorded provisions at other properties amounting to US$1.9 million, as well as paying out US$2 million in dividends to preferred shareholders.
Hecla produced 4.2 million oz. silver and 71,278 oz. gold during the first half of this year, up from 3.7 million oz. and 54,991 oz., respectively, in the first six months of 1999.
Higher production at the Lucky Friday mine, in northern Idaho, accounted for the improved silver production. Headgrades averaged more than 17 oz. per ton during the first half, up 16% from a year ago. Production was up slightly at the Greens Creek mine in Alaska, where the company owns a 29.73% interest.
Still, silver prices weren’t where they were a year ago. In the second quarter, Hecla realized US$5.07 per oz., down from US$5.16 per oz. Since July, the spot price for silver has fallen below US$5 per oz. Making matters worse, the price of lead, an important byproduct at Lucky Friday, is down 15% from last year to US19.9 per lb.
All the news wasn’t bad. The La Camorra mine in Venezuela produced at a record pace, accounting for the company’s improved gold production. The underground mine contributed 24,727 oz. gold at US$185 per oz. in the second quarter, and 43,557 oz. at US$191 per oz. in the first half of the year. The mine remains on target to produce 80,000 oz. for the year.
On the exploration front, Hecla has begun a second phase of drilling at the Saladillo silver-gold project in Mexico. Results are expected in the next three months.
Meanwhile, the company is considering selling its industrial minerals division, K-T Clay, and has already received several inquiries. The move would allow the company to eliminate debt and focus on its core business.
At the end of the second quarter, Hecla had US$11.6 million in cash, compared with US$1.6 million at the end of the first quarter.
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