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HECLA MINING: RETURN ON $ 10,000 INVESTMENT |
Purchase Date | No. of Shares | Purchase Price | Cost ($) | Price Today | Value Today |
June 21, 2002 | 2'500 | 4.10 | 10'250.00 | | |
Total | 2'500 | 4.10 | 10'250.00 | 5.47 | 13'675.00 |
Profit | | | | | 3'425.00 |
Profit (in %) | | | | | 33% |
SILVER, GOLD, LEAD AND ZINC IN THE UNITED STATES, MEXICO AND VENEZUELA
Business Summary
Established in 1891 in northern Idaho's Silver Valley, Hecla Mining Company's rich history of mining has distinguished it as a respected precious metals producer. Now headquartered in Coeur d'Alene, Idaho, this international, publicly traded company is 112 years old.
The Hecla Mining Company mines and processes silver, gold, lead and zinc in the United States, Mexico and Venezuela. Hecla currently produces silver from three silver mines: Greens Creek, San Sebastian and Lucky Friday, and mines gold as well at the La Camorra mine.
The company's gold and silver operations are low cost, with total cash costs during 2001 at $ 133 per ounce of gold and $ 3.52 per ounce of silver. The Greens Creek Unit, in which Hecla holds a 29.73% interest, is on Admiralty Island near Juneau, Alaska, and produced over 3 million ounces of silver for Hecla's account in 2001. Hecla's share of Greens Creek includes over 37.6 million ounces of silver in proven and probable reserves. The San Sebastian mine, an underground mine and exploration project, is located in central Mexico's historically silver-rich Durango district. It produced over 950,000 ounces of silver and nearly 16,000 ounces of gold in 2001, after only six months of operation. San Sebastian has 8.6 million ounces of proven and probable silver reserves and more than 91,000 ounces of proven and probable gold reserves. The Lucky Friday Unit, located in Mullan, Idaho, produced over 3.2 million ounces of silver in 2001 and has over 17 million ounces of silver in proven and probable reserves.
Hecla's gold operation, the La Camorra Unit, is located in El Callao, Venezuela. The mine produced over 152,000 ounces of gold in 2001 and has nearly 700,000 ounces of proven and probable gold reserves and other resources.
Hecla is well known in the United States as a major primary silver producer, and the name "Hecla" is commonly associated with silver by many investors. Over the past two decades, Hecla has also produced a significant amount of gold.
Corporate Headquarters: Coeur d’Alene, Idaho (1)
Silver
Greens Creek Unit - Admiralty Island, Alaska (2)
Hecla's share of Greens Creek production in 2003 was 3,480,800 ounces of silver and 29,564 ounces of gold. Silver was produced at an average total cash cost of $ 1.18 per ounce. Hecla holds a 29.73% interest in Greens Creek, which is a joint venture operated by Kennecott Greens Creek Mining Company, a subsidiary of Rio Tinto.
Lucky Friday Unit - Mullan, Idaho (3)
Michael D. Dexter, General Manager
The Lucky Friday mine produced 2,251,486 ounces of silver in 2003, at an average total cash cost of $ 4.86 per ounce. Even after 45 years operating at this site, Hecla still has a tremendous silver resource at this mine. In 2003, the company made the decision to develop the next mine level in order to double production.
San Sebastian Unit - Durango, Mexico (4)
Scott N. Harman, General Manager
San Sebastian produced 4,085,038 ounces of silver at the incredibly low average total cash cost of negative $ 0.25 per ounce. San Sebastian's cash costs were benefited by a good gold by-product credit resulting from 47,721 ounces of gold production during 2003. The mine went into production in late 2001 and Hecla holds more than 100 square miles of property surrounding the mine, with excellent exploration potential.
Gold
La Camorra Unit - Bolivar, Venezuela (5)
David J. Howe, Vice President of Operations - Minera Hecla Venezolana
The La Camorra gold operation produced 126,567 ounces of gold in 2003 at an average total cash cost of $ 154 per ounce. Hecla has been operating La Camorra since 1999 and during that period, cut cash costs nearly in half, La Camorra's mill could be used to process ore from additional properties developed in the area, such as Mina Isidora.
Exploration/Development
Block B - Mina Isidora - El Callao Mining District, Venezuela (5)
Hecla's 2003 drilling program identified the Mina Isidora gold deposit on the Block B concessions. A prefeasibility study is very encouraging and a final development decision is expected in 2004. The property is located about 70 miles from Hecla's La Camorra mine.
Hollister Block Project - Midas, Nevada (6)
The Hollister Development Block is a 50/50 joint venture gold exploration project with Great Basin Gold. Hollister is located along the Carlin Trend in northern Nevada and, given good exploration results, may become an underground gold mine.
Recent Developments: Hecla Gold Production to Increase with Development Decision on Mina Isidora; Additional Positive Exploration Results from Mexico and Venezuela
The Hecla Mining Company has announced plans to develop the Mina Isidora gold mine on the Block B lease in eastern Venezuela's El Callao gold district. Production is expected as early as the end of 2005. Full commercial production of about 360 tons per day is expected to be achieved in the second quarter of 2006. Annual production rates of between 75,000 to 115,000 ounces of gold at cash costs between $ 150 to $ 185 per ounce are estimated for the first five years of full production, with the current mine plan running to 2012. Relatively little capital is needed to develop the mine, because construction of a processing mill will not be necessary. The ore will be trucked about 70 miles south to Hecla's La Camorra mill.
Hecla's Board of Directors gave the go-ahead Friday to the approximately $30 million development plan. The identified resource at the Mina Isidora deposit has grown steadily since drilling commenced. As of December 2003, reported proven and probable reserves at Mina Isidora were 327,303 ounces of gold. A new resource block model based on definition drilling in the fourth quarter of 2003 and the first quarter of 2004 has increased proven and probable reserves by 29%, to 421,234 ounces. The total estimated mineable resource at Mina Isidora has increased from year-end 2003 to 932,000 tons at a grade of 0.59 ounce of gold per ton. (See attached Mina Isidora schematic.)
Data from a total of 121 drill holes ranging in ore grades up to 10 ounces of gold per ton have been used to develop the Mina Isidora mine plan. However, for resource estimation, individual samples were capped at approximately 3 ounces of gold per ton. Numerous targets have been established where there is additional potential in several areas along the same geologic structure, where drill holes have intersected ore-grade material.
A life-of-mine plan has been developed, using ramp access from the Valle Norte portal site. The orebody has a shallow dip, between 42 to 47 degrees. The life-of-mine ore grades are expected to run in the range of 20.3 grams of gold per ton. At a gold price of $ 360 per ounce, the return on investment is projected at about 26%.
Permission has been granted from the various country authorities to move forward with development of Mina Isidora. The majority of capital will be spent on underground development and equipment, with funds also being used for surface facilities, housing, and road and power line construction.
The deposit occurs in quartz veins hosted in volcanic and intrusive rocks. The mineralized system is open, down-plunge to the southwest. The historic workings of the old Chile Mine are up-plunge to the northeast of the deposit. The El Callao mining district is one of the prolific gold-producing districts located in greenstone belts that are seen in other parts of the world such as the rich Timmins district in Canada and others in South Africa and Australia.
Hecla Mining Company President and Chief Executive Officer Phillips S. Baker, Jr., said, "We acquired this property in late 2002. At that time, it had nothing but exploration targets. By 2005, we expect it will be a 100,000-ounce per year gold mine. This is another example of Hecla's ability to take a project from exploration to production in very short time frames. There are a couple of reasons for this. First, we are the largest gold miner in Venezuela, which means we get exposure to prime opportunities. Second, the quality of the geology in Venezuela's gold mining districts is phenomenal, and we have an excellent land position in both the El Callao district as well as the El Dorado gold district, where our La Camorra gold mine is located. Mina Isidora is just the first of many new projects we expect to be able to develop here."
MEXICO
San Sebastian
In central Mexico, Hecla has made significant progress in characterizing the mineralization and defining exploration targets on its large land position near Durango, where the San Sebastian silver mine is located in one of the world's most prolific and historic silver belts. A detailed geological study of both the Francine and Don Sergio deposits has been completed. Hecla has also carried out extensive geological, geochemical and geophysical surveys in the area. The result of all this work is now being compiled and interpreted, and a number of new exploration targets are being identified.
One of the targets generated as a result of the study led to the recent drilling to test potential deep feeder zones beneath the Francine Vein. Three of the first five holes drilled contained ore-grade intercepts over mineable widths, and all five holes contained mineralized vein material. The holes tested two potential feeder zones approximately 500 meters apart along strike and approximately 150-200 meters below the Francine deposit. The intercepts contain abundant base metal sulphides in addition to the precious metal values, indicating a significant change in the nature of the mineralization. Additional drilling is underway to follow up on the new intercepts, and additional drilling will also be required to test the other two potential feeders zones that have been identified. (See attached San Sebastian long section.)
Baker noted, "We have only been in this district for four years, and we've just begun to scratch the surface of the potential here. There are no guarantees that the deep Francine drilling will result in an economic orebody, but our first holes are ore grade and are consistent with our geologic model. We are going to follow up on this very quickly. Plus, we now have a dozen new drilling targets on this 190-square-mile land position. As we prioritize, some targets will take time to explore, but we are clearly in a mineralized system that is even better than we thought."
Noche Buena
Hecla's Board of Directors also recently approved a plan to spend $ 3.4 million dollars to conduct additional resource definition drilling and to complete a feasibility study for the Noche Buena project, located in northern Sonora, Mexico. Hecla conducted extensive work on the project through 1999 when low gold prices caused the company to place the project on standby. Recent improvement in the gold price has resulted in a re-evaluation of this deposit, which could increase gold production for Hecla in Mexico. Of the $ 3.4 million approved for expenditure, $ 1.8 million will be spent on resource delineation drilling, including approximately 9,100 meters of diamond drilling in 61 holes.
The drill program is expected to be completed by the end of the second quarter of 2005. Positive results will allow Hecla to decide whether to proceed with construction of this low-grade, heap-leach operation. Successful drilling results would improve Hecla's resource position, and a subsequent development decision would significantly increase Hecla's gold production. A feasibility study would be conducted following a successful drilling program. Mining grades, annual production rates and the mine plan would be determined during the feasibility work. Hecla currently has an indicated and inferred resource at Noche Buena of about 11.7 million tons at a gold grade of 0.03 ounce per ton, and there is a potential to double that resource in the future, with the deposit open to the northeast.
VENEZUELA
In addition to the Mina Isidora deposit in Hecla's Block B lease in eastern Venezuela, several further exploration targets have been identified in the area. Drilling has commenced around the old Laguna mine, with ore-grade material encountered in two of the eight holes. Exploration drilling is ongoing on several other targets in Block B. Geologic studies, including surface mapping, geophysics and geochemistry, are being conducted to identify additional exploration prospects.
Target identification continued for the El Dorado district exploration program during the first quarter. Hecla's operating gold mine, La Camorra, is located in this district. The objective is to conduct exploration on Hecla's land position surrounding the mine with a goal of locating additional resources that could supply ore to the La Camorra mill. Previous work has identified several veins in the area.
Fundamental Considerations
Hecla refers only to indicated, proven, and probable ore reserves, while inferred resources remain “blue sky”.
We believe that Hecla, which today is more gold than silver, and listed on the NYSE, will attract institutional funds, since these are unlikely to go to junior exploration companies with little trading volume.
Hecla’s average trading volume exceeds 1.5 million shares per day.
Technical Considerations
“Both metals probably need some rest,” we wrote on January 16 and so it occurred.
While both metals have fallen back into the long-term trend and to the lower trend-line, we remain confident that the correction is drawing to its end.
