Hecla, Cd’A boost 2002 production - Central, South American properties key to better results at two companies

www.spokanejournal.com By  Addy Hatch

Inland Northwest mining companies say they’re hitting rich veins of opportunity at their Central and South American mine properties.

Hecla Mining Co., of Coeur d’Alene, estimates it could have four additional areas under production or exploration development in Venezuela and Mexico by the end of the year. Coeur d’Alene Mines Corp., also of Coeur d’Alene, credits its South American business for its improved finances. Meanwhile, Spokane-based Gold Reserve Inc., says it has received approval from the Venezuelan government to proceed with a gold and copper mine in that South American country.

Coeur d’Alene Mines says its South American mining operations are so beneficial to the company that, “We have every expectation that we will be producing high-grade silver and gold in Southern Chile and Argentina for many years.”

Low production costs

Coeur said in an announcement of its 2002 results that production last year exceeded its expectations, and its cash costs for silver production fell to a record low of $2.89 an ounce, including byproducts. The company produced about 14.8 million troy ounces of silver in 2002, up 36 percent from the previous year, and about 117,000 ounces of gold, up 22 percent.

Two South American mines—one brought on line in 2002 and the other bought by Coeur last year—were “the primary reason for the company’s considerable production growth and reduction in cash costs,” Coeur says. Together, Coeur’s Cerro Bayo mine, in Chile, and its Martha mine, in Argentina, produced 3.1 million ounces of silver and 45,200 ounces of gold. The average total cash cost for production in those mines was 38 cents per ounce of silver, a figure that includes the cost of producing both metals since Coeur’s gold production is a byproduct of its silver production, says company spokesman Mitchell Krebs.

The two U.S. mines Coeur currently operates also had improved results. Coeur’s Galena mine near Wallace, Idaho, produced a record 5.3 million ounces of silver, up 18 percent from 2001 and the company’s Rochester mine, in Nevada, produced 6.4 million ounces of silver and about 72,000 ounces of gold, both of which exceeded earlier production estimates, Coeur says.

The company says its mining success last year, combined with higher metals prices, made 2002 “a turnaround year for Coeur,” enabling the company to reduce its debt significantly.

Earlier this week, gold was trading at $354 an ounce on the spot market, up from $260 an ounce two years ago, when precious metals hit a low ebb, while silver was trading at $4.68 an ounce, up from $4.07 an ounce in late 2001.

Record Hecla production

Hecla produced 8.7 million ounces of silver last year and 240,000 ounces of gold—the largest annual production of both materials in Hecla’s 112-year history, the company says. About 167,000 ounces of that gold came from Hecla’s La Camorra mine in Venezuela. The company’s average total cash cost of gold last year was $137 per ounce.

Of Hecla’s silver production, about 3.4 million ounces came from its San Sebastian mine, in Mexico; 3.2 million ounces came from the Greens Creek mine, in Alaska, from which Hecla shares production; and about 2 million ounces came from its Lucky Friday mine, in Mullan, Idaho. Hecla enjoyed a 39 percent reduction in its average total cash cost of silver, to $2.16 per ounce.

“In addition to an outstanding year operationally, Hecla’s exploration programs continue to turn up good results,” and the company could have four more exploratory or producing operations under way by the end of 2003—three in Venezuela and one in Mexico, Hecla says in an announcement of its 2002 results.

“That’s depending on our feasibility studies, and assuming everything goes well,” says Vicki Veltkamp, vice president of investor and public relations at Hecla. While Hecla could start construction of mine ramps at those properties this year, it could take more than two years for commercial production at some of those properties to begin.

Green light for Gold Reserve

Gold Reserve Inc. says it’s getting closer to constructing its own South American operation following the Venezuelan Ministry of Energy and Mines’ approval of the Spokane company’s operating plan for its Brisas gold-and-copper property there.

“This approval is the result of considerable effort by the company and has occurred at a time period when the economics of the project have been enhanced by the recent increase in the price of gold and copper,” Gold Reserve says. Copper currently is selling for about 77 cents a pound on the COMEX spot market, compared with 74 cents a pound a year ago.

The company acquired title to different parts of its Brisas mining concession in 1992 and 1998, and has worked since then on exploring the property and conducting feasibility studies.

Gold Reserve now is working on completing a study for project financing and applying for environmental permits.