Mining firm is thriving in the new economy

Published: Monday, April 28, 2003 Heraldnet-Associated Press

SPOKANE -- It may be a relic of the old economy, but Hecla Mining Co. continued an astonishing turnaround in 2002.

The Coeur d'Alene, Idaho-based company produced more gold and silver than ever, and its stock was the second-best performer on the New York Stock Exchange.

Chief Executive Officer Arthur Brown, 62, will retire in May, although he will remain as chairman. President Phillips Baker, 43, will assume CEO duties.

Brown believes Hecla, which has 700 employees, will continue to thrive.

"Hecla has been around for 112 years and along with our skills as underground miners, we have always been known for our honesty, integrity and as dealing fairly with people," Brown, who began with Hecla in 1967, wrote in the annual report released this week.

In 2002, Hecla produced 240,000 ounces of gold and 8.7 million ounces of silver. Income rose dramatically as the prices for gold and silver climbed while Hecla's costs dropped, the company said.

Hecla posted net income for the year of $8.6 million, or 11 cents a share, compared to net income of $2.3 million, or 3 cents a share in 2001. Sales rose from $85 million in 2001 to $105 million in 2002.

Back-to-back profitable years were dramatic improvements from a decade of losses caused by low mineral prices. In 2000, the company lost $92 million.

In 2002, Hecla Mining was the second-biggest gainer on the New York Stock Exchange, rising by 438 percent when the stock reached $5.06 a share. The biggest gainer was a Chinese maker of diesel engines, China Yuchai International, which rose 485 percent to $4.57.

Hecla stock has since settled around $3.40 per share.

Much of the company's financial health can be traced to efficient production. Hecla produced gold for an average cost of $137 an ounce in 2002. Gold this week was selling for $324.

It produced silver at an average cost of $2.16 per ounce, down 39 percent from 2001. Silver sold this week for $4.53.

The company produces silver, gold, lead and zinc at mines in Idaho, Nevada, Alaska, Mexico and Venezuela. It also has an aggressive exploration and acquisition program, after raising $92 million in a January stock offering.

The company will continue to concentrate on silver production, where it is a dominant player, the annual report said.

But the company hopes to double its gold production over the next five years, thanks to the existing La Camorra mine in Venezuela, and exploration and development at the Block B Project in Venezuela and the Hollister Block in Nevada.

Hecla's only mine in Idaho is the Lucky Friday, near Wallace. About 100 workers were laid off and operations were cut back sharply there in 2002, largely because of high production costs for silver. But the Lucky Friday has a vast quantity of minerals left to mine, and rising silver prices would allow the company to ramp up production there, the report said.

Hecla officials were cheered in 2002 by progress in a massive lawsuit against mining companies for historical pollution in the Silver Valley. The U.S. Environmental Protection Agency proposal for a $359 million cleanup over 30 years "will be very manageable," the company said.