x | Annual report pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 |
Commission file no. | 1-8491 |
HECLA MINING COMPANY |
Delaware | 82-0126240 | |
(State or other jurisdiction ofincorporation or organization) | (I.R.S. EmployerIdentification No.) | |
6500 N. Mineral Drive, Suite 200 Coeur d’Alene, Idaho | 83815-9408 | |
(Address of principal executive offices) | (Zip Code) | |
208-769-4100 | ||
(Registrant’s telephone number, including area code) |
Title of each class | ||
Common Stock, par value $0.25 per share Preferred Share Purchase Rights for Series A Junior Participating Preferred Stock, par value $0.25 per share Series B Cumulative Convertible Preferred Stock, par value $0.25 per share | ) ) ) ) ) ) ) ) ) | Name of each exchange on which registered New York Stock Exchange |
Section | Page No |
Special Note on Forward Looking Statements | 1 |
Part I | |
Item 1. Business and Item 2. Properties | 1 |
Products and Segments | 4 |
Employees | 5 |
Available Information | 6 |
Risk Factors | 6 |
Glossary of Certain Terms | 20 |
Operating Properties | 23 |
La Camorra Unit | 23 |
-La Camorra Mine | 24 |
-Block B | 27 |
-Custom Milling Business | 30 |
San Sebastian Unit | 31 |
Greens Creek Unit | 35 |
Lucky Friday Unit | 39 |
Exploration | 41 |
Hollister Development Block | 42 |
Noche Buena | 44 |
Discontinued Properties | 44 |
Idle Properties | 44 |
Grouse Creek Mine | 44 |
Republic Mine | 45 |
Item 3. Legal Proceedings | 46 |
Item 4. Submission of Matters to a Vote of Security Holders | 46 |
Part II | |
Item 5. Market Price of and Dividends on the Registrant’s Common Equity and Related Stock - Holders Matters | 47 |
Item 6. Selected Financial Data | 50 |
Item 7. Analysis of Financial Condition and Results of Operations | 52 |
Overview | 52 |
Results of Operations | 56 |
2004 Compared to 2003 | 56 |
Mexico Segment | 56 |
United States Segment | 57 |
-Greens Creek | 57 |
-Lucky Friday | 57 |
Venezuelan Segment | 58 |
Corporate Matters | 61 |
2003 Compared to 2002 | 62 |
Mexico Segment | 63 |
United States Segment | 64 |
-Greens Creek | 64 |
-Lucky Friday | 64 |
Venezuelan Segment | 65 |
Corporate Matters | 65 |
Reconciliation of Total Cash Costs (non-GAAP) to Cost of Sales and Other | |
Direct Production Costs (GAAP) | 67 |
Financial Condition and Liquidity | 70 |
Contractual Obligations and Contingent Liabilities and Commitments | 70 |
Operating Activities | 71 |
Investing Activities | 71 |
Financing Activities | 72 |
Other | 72 |
Critical Accounting Policies | 73 |
Revenue Recognition | 73 |
Proven & Probable Ore Reserves | 74 |
Depreciation & Depletion | 75 |
Impairment of Long Lived Assets | 75 |
Environmental Matters | 75 |
Foreign Exchange in Venezuela | 76 |
Byproduct Credits at the San Sebastian Unit in Mexico | 77 |
Value Added Taxes | 77 |
New Accounting Pronouncements | 78 |
Forward Looking Statements | 80 |
Item7A.Quantitative and Qualitative Disclosures About Market Risk | 81 |
Interest Rate Risk Management | 81 |
Commodity Price Risk Management | 81 |
Item 8. Financial Statements and Supplemental Data | 83 |
Item 9. Changes in Disagreements with Accountants on Accounting and Financial Disclosures | 83 |
Item 9A. Controls and Procedures | 83 |
Management’s Report on Internal Controls over Financial Reporting | 85 |
Report of Independent Registered Public Accounting Firm | 86 |
Item 9B. Other Information | 88 |
Part III | |
Item 10. Directors and Executive Officers of the Registrant | 89 |
Item 11. Executive Compensation | 92 |
Item 12. Security Ownership of Certain Beneficial Owners and Management | 92 |
Item 13. Certain Relationships and Related Transactions | 93 |
Item 14. Principal Accounting Fees and Services | 93 |
Part IV | |
Item 15. Exhibit Financial Statement Schedules and Reports on Form 8K | 94 |
Signatures | 95 |
Index to Consolidated Financial Statements | F-1 |
Exhibit Index | F-55 |
Year | ||||||||||
2004 | 2003 | 2002 | ||||||||
Silver (ounces) | 6,960,580 | 9,817,324 | 8,681,293 | |||||||
Gold (ounces) | 189,860 | 204,091 | 239,633 | |||||||
Lead (tons) | 19,558 | 21,224 | 18,291 | |||||||
Zinc (tons) | 25,644 | 25,341 | 26,134 | |||||||
Average cost per ounce of silver produced: | ||||||||||
Cash operating cost (1,2) | $ | 1.87 | $ | 1.31 | $ | 2.16 | ||||
Total cash cost (1,2) | $ | 2.02 | $ | 1.43 | $ | 2.25 | ||||
Total production cost (1,2) | $ | 3.57 | $ | 2.70 | $ | 3.68 | ||||
Average cost per ounce of gold produced: | ||||||||||
Cash operating cost (2) | $ | 176 | $ | 154 | $ | 137 | ||||
Total cash cost (2) | $ | 180 | $ | 154 | $ | 137 | ||||
Total production cost (2) | $ | 271 | $ | 222 | $ | 206 | ||||
Average metals prices: | ||||||||||
Silver - Handy & Harman ($/oz.) | $ | 6.69 | $ | 4.91 | $ | 4.63 | ||||
Gold - Realized ($/oz.) | $ | 379 | $ | 339 | $ | 303 | ||||
Gold - London Final ($/oz.) | $ | 409 | $ | 364 | $ | 310 | ||||
Lead - LME Cash ($/pound) | $ | 0.402 | $ | 0.233 | $ | 0.205 | ||||
Zinc - LME Cash ($/pound) | $ | 0.475 | $ | 0.375 | $ | 0.353 |
(1) | Includes by-product credits from gold, lead and zinc production and are calculated pursuant to standards of the Gold Institute. |
(2) | Cash costs per ounce of silver or gold represent measurements that management uses to monitor and evaluate the performance of its mining operations, which are not in accordance with GAAP. We believe cash costs per ounce of silver or gold produced provide an indicator of cash flow generation at each location and on a consolidated basis, as well as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties. A reconciliation of this non-GAAP measure to cost of sales and other direct production costs, the most comparable GAAP measure, can be found in Item 7 - Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, under Reconciliation of Total Cash Costs to Costs of Sales and Other Direct Production Costs. |
· | the San Sebastian unit, located in the State of Durango, Mexico, which is 100% owned by us through our wholly owned subsidiary, Minera Hecla, S.A. de C.V. The San Sebastian mine is 56 miles northeast of the city of Durango on concessions acquired in 1999. During 2004, San Sebastian contributed $30.2 million, or 23.1%, to our consolidated sales. Although a strike at the mill which processes the ore mined as San Sebastian has halted such processing since October 2004, the mine is operating and ore is being stockpiled for future processing. The current mine plan estimates that mining will cease near the middle of 2005. |
· | the La Camorra unit, located in the eastern Venezuelan State of Bolivar, has been 100% owned by us through our wholly owned subsidiary, Minera Hecla Venezolana, C.A., since June 1999. During 2004, La Camorra contributed $47.9 million, or 36.6%, to our consolidated sales; |
· | the Greens Creek unit, a 29.73% owned joint-venture arrangement with Kennecott Greens Creek Mining Company, the manager of Greens Creek, and Kennecott Juneau Mining Company, both wholly owned subsidiaries of Kennecott Minerals. Greens Creek is located on Admiralty Island, near Juneau, Alaska, and has been in production since 1989, with a temporary shutdown from April 1993 through July 1996. During 2004, Greens Creek contributed $34.2 million, or 26.1%, to our consolidated sales; and |
· | the Lucky Friday unit located in northern Idaho. Lucky Friday is 100% owned and has been a producing mine for us since 1958. During 2004, Lucky Friday contributed $18.5 million, or 14.2%, to our consolidated sales. |
Year | ||||||||||
2004 | 2003 | 2002 | ||||||||
Silver | 63.4 | % | 65.9 | % | 53.4 | % | ||||
Gold | 36.6 | % | 33.7 | % | 46.6 | % | ||||
Other | -- | 0.4 | % | -- | ||||||
Year | ||||||||||
Segment | 2004 | 2003 | 2002 | |||||||
United States | 40.3 | % | 35.9 | % | 31.1 | % | ||||
Venezuela | 36.6 | % | 33.7 | % | 46.6 | % | ||||
Mexico | 23.1 | % | 30.0 | % | 22.3 | % | ||||
Other | -- | 0.4 | % | -- |
1985 | 1990 | 1995 | 2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||||
Silver (1) (per oz.) | $ | 6.14 | $ | 4.82 | $ | 5.19 | $ | 5.00 | $ | 4.36 | $ | 4.63 | $ | 4.91 | $ | 6.69 | |||||||||
Gold (2) (per oz.) | 317.26 | 383.46 | 384.16 | 279.03 | 272.00 | 309.97 | 363.51 | 409.21 | |||||||||||||||||
Lead (3) (per lb.) | 0.18 | 0.37 | 0.29 | 0.21 | 0.22 | 0.21 | 0.23 | 0.40 | |||||||||||||||||
Zinc (4) (per lb.) | 0.36 | 0.69 | 0.47 | 0.51 | 0.40 | 0.35 | 0.38 | 0.48 | |||||||||||||||||
(1) | Handy & Harman |
(2) | London Final |
(3) | London Metals Exchange -- Cash |
(4) | London Metals Exchange -- Special High Grade - Cash |
· | the effects of local political, labor and economic developments and unrest; |
· | significant or abrupt changes in the applicable regulatory or legal climate; |
· | exchange controls and export or sale restrictions; |
· | currency fluctuations and repatriation restrictions; |
· | invalidation of governmental orders, permits, or agreements; |
· | corruption, demands for improper payments, expropriation, and uncertain legal enforcement and physical security; |
· | fuel or other shortages; |
· | taxation and laws or policies of foreign countries and the United States affecting trade, investment and taxation; and |
· | civil disturbances, war, and terrorist actions. |
· | the rights issued in connection with the stockholder rights plan that will substantially dilute the ownership of any person or group that acquires 15% or more of our outstanding common stock unless the rights are first redeemed by our board of directors, in its discretion. Furthermore, our board of directors may amend the terms of these rights, in its discretion, including an amendment to lower the acquisition threshold to any amount greater than 10% of the outstanding common stock; |
· | the classification of our board of directors into three classes serving staggered three-year terms; |
· | the ability of our board of directors to issue shares of preferred stock with rights as it deems appropriate without stockholder approval; |
· | a provision that special meetings of our board of directors may be called only by our chief executive officer or a majority of our board of directors; |
· | a provision that special meetings of stockholders may only be called pursuant to a resolution approved by a majority of our entire board of directors; |
· | a prohibition against action by written consent of our stockholders; |
· | a provision that our board members may only be removed for cause and by an affirmative vote of at least 80% of the outstanding voting stock; |
· | a provision that our stockholders comply with advance-notice provisions to bring director nominations or other matters before meetings of our stockholders; |
· | a prohibition against certain business combinations with an acquirer of 15% or more of our common stock for three years after such acquisition unless the stock acquisition or the business combination is approved by our board prior to the acquisition of the 15% interest, or after such acquisition our board and the holders of two-thirds of the other common stock approve the business combination; and |
· | a prohibition against our entering into certain business combinations with interested stockholders without the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of voting stock. |
· | Cash Operating Costs -- Includes all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense and on-site general and administrative costs, net of by-product revenues earned from all metals other than the primary metal produced at each unit. |
· | GAAP -- United States generally accepted accounting principles. |
· | Doré -- Unrefined gold and silver bullion bars consisting of approximately 90% precious metals, which will be further refined. |
· | Mineralized Material -- Estimates of mineralization that have been sufficiently drilled and geologically understood to allow the assumption of continuity between samples, but for which an economically viable plan has not been formulated. |
· | Ore -- A mixture of valuable minerals and gangue (valueless minerals) from which at least one of the minerals or metals, combined with by-products, can be extracted at a profit. |
· | Orebody -- A continuous, well-defined mass of material of sufficient ore content to make extraction economically feasible. |
· | Primary Development -- The initial access to an orebody through adits, shafts, declines, ramps and winzes. |
· | Proven and Probable Ore Reserves -- Reserves that reflect estimates of the quantities and grades of mineralized material at our mines which we believe can be recovered and sold at prices in excess of the total cash cost associated with extracting and processing the ore. The estimates are based largely on current costs and on metals prices and demand for our products. Mineral reserves are stated separately for each of our properties based upon factors relevant to each location. Reserves represent diluted in-place grades and do not reflect losses in the recovery process. Our estimates of proven and probable reserves for the Lucky Friday unit, the San Sebastian unit and the La Camorra unit are based on the following metals prices: |
December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||
Silver | $ | 5.60 | $ | 4.95 | $ | 4.75 | ||||
Gold | $ | 350 | $ | 335 | $ | 300 | ||||
Lead | $ | 0.28 | $ | 0.24 | $ | 0.21 | ||||
Zinc | $ | 0.42 | $ | 0.40 | $ | 0.44 |
December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||
Silver | $ | 5.00 | $ | 5.00 | $ | 5.00 | ||||
Gold | $ | 338 | $ | 300 | $ | 300 | ||||
Lead | $ | 0.25 | $ | 0.24 | $ | 0.24 | ||||
Zinc | $ | 0.46 | $ | 0.45 | $ | 0.46 |
· | Probable Reserves -- A portion of a mineralized deposit that can be extracted or produced economically and legally at the time of the reserve determination. Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. |
· | Proven Reserves -- A portion of a mineralized deposit that can be extracted or produced economically and legally at the time of the reserve determination. Reserves for which; (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well-defined that size, shape, depth and mineral content of reserves are well established. |
· | Sands -- In Venezuela, the term “sands” is used in reference to the processing of waste, or tailings, from small mining and milling operations. These operations generally employ old technology and achieve relatively low gold recoveries. Minera Hecla will, from time to time, purchase these sands for further processing at our La Camorra mill. |
· | Secondary Development -- The preparation of the orebody for production through crosscuts, raises and stope preparation. |
· | Stope -- An underground excavation from which ore has been extracted either above or below a level in a mine. A level is the distance below the collar of the shaft where an opening is driven. |
· | Total Cash Costs -- Includes all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs, royalties and mine production taxes, net of by-product revenues earned from all metals other than the primary metal produced at each unit. |
· | Total Production Costs -- Includes total cash costs, as defined above, plus depreciation, depletion, amortization and accretion of asset retirement obligations relating to each operating unit. |
· | Total Production Costs Per Ounce -- Calculated based upon total production costs, as defined above, net of by-product revenues earned from all metals other than the primary metal produced at each unit, divided by the total ounces of the primary metal produced. |
· | Unpatented Mining Claim -- A parcel of property located on federal lands pursuant to the General Mining Law and the requirements of the state in which the unpatented claim is located, the paramount title of which remains with the federal government. The holder of a valid, unpatented lode-mining claim is granted certain rights including the right to explore and mine such claim under the General Mining Law. |
Years Ended December 31, | ||||||||||
Production | 2004 | 2003 | 2002 | |||||||
Ore processed (tons) | 199,453 (1 | ) | 197,591 (1 | ) | 194,960 | |||||
Gold (ounces) | 130,436 (1 | ) | 126,567 (1 | ) | 167,386 |
Average Cost per Ounceof Gold Produced (2) | ||||||||||
Cash operating costs | $ | 176 | $ | 154 | $ | 137 | ||||
Total cash costs | $ | 180 | $ | 154 | $ | 137 | ||||
Total production costs | $ | 271 | $ | 222 | $ | 206 |
Proven and ProbableOre Reserves (3,4,5,6) | 12/31/04 | 12/31/03 | 12/31/02 | |||||||
Total tons | 356,192 | 318,644 | 453,224 | |||||||
Gold (ounces per ton) | 0.60 | 0.69 | 0.91 | |||||||
Contained gold (ounces) | 213,244 | 220,552 | 412,332 |
(1) | During 2004, 24,264 tons milled and 4,789 gold ounces produced included in the production figures were generated from Hecla’s custom milling business and other purchases of ore from third-parties. During 2003, 15,155 tons milled and 3,049 gold ounces produced included in the production figures listed above were generated from tailings from outside small third-party milling operations in the local area and other gold-bearing quartz material not mined at La Camorra. |
(2) | Cash costs per ounce of silver or gold represent measurements that management uses to monitor and evaluate the performance of its mining operations that are not in accordance with GAAP. We believe cash costs per ounce of silver or gold provide an indicator of profitability and efficiency at each location and on a consolidated basis, as well as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties. A reconciliation of this non-GAAP measure to cost of sales and other direct production costs, the most comparable GAAP measure, can be found in Item 7 - Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, under Reconciliation of Total Cash Costs to Costs of Sales and Other Direct Production Costs. |
(3) | For proven and probable ore reserve assumptions, including assumed metals prices, see Glossary of Certain Terms. |
(4) | The 2004 year-end reserves show an increase in tonnage and decrease in grade resulting in a decrease in ounces when compared to the 2003 year-end reserves. The changes are a result of a combination of new drill data and underground sampling information, a revision of ore shoot limits and the increase in mine dilution being applied to the Betzy vein material together with a depletion of reserves by mining. |
(5) | The decrease in tons of proven and probable ore reserves in 2003 compared to 2002 is primarily due to the depletion of reserves by mining and other factors, including a reinterpretation of the La Camorra mine ore shoot geometry and a revised mine plan. Mining in the Betzy vein encountered changes in orebody geometry and more extensive waste zones than expected. |
(6) | Proven and probable ore reserves at the La Camorra mine are based on drill spacing of 30 to 50 meters and closely spaced chip sample information. Cutoff grade assumptions are developed based on reserve prices, anticipated mill recoveries and cash operating costs. The cutoff grade at La Camorra is 8 grams of gold per tonne. |
Proven and ProbableOre Reserves (1,2,3) | 12/31/04 | 12/31/03 | |||||
Total tons | 338,965 | 500,011 | |||||
Gold (ounces per ton) | 1.03 | 0.66 | |||||
Contained gold (ounces) | 350,547 | 327,303 |
(1) | For proven and probable ore reserve assumptions, including assumed metals prices, see Glossary of Certain Terms. |
(2) | Proven and probable ore reserves at Mina Isidora are based on diamond drilling spaced at approximately 30 meters, geostatistical modeling and a feasibility study. Cutoff grade assumptions are developed based on reserve prices, anticipated mill recoveries and cash operating costs. |
(3) | The changes to the Mina Isidora ore reserves in 2004 compared to 2003 can be attributed to additional drill data, changes in resource modeling techniques and changes in mining assumptions. Many of the modeling changes are the direct result of the independent audit of the 2003 reserves that we commissioned. |
Years Ended December 31, | ||||||||||
Production | 2004 | 2003 | 2002 | |||||||
Ore milled (tons) | 128,711 | 150,717 | 156,532 | |||||||
Silver (ounces) | 2,042,173 | 4,085,038 | 3,432,394 | |||||||
Gold (ounces) | 33,563 | 47,721 | 41,510 |
Average Cost per Ounceof Silver Produced (1,2) | ||||||||||
Cash operating costs | $ | (0.10 | ) | $ | (0.46 | ) | $ | 0.91 | ||
Total cash costs | $ | 0.21 | $ | (0.25 | ) | $ | 1.09 | |||
Total production costs | $ | 2.11 | $ | 0.71 | $ | 2.06 |
Proven and ProbableOre Reserves (3,4,5,6) | 12/31/04 | 12/31/03 | 12/31/02 | |||||||
Total tons | 30,300 | 170,711 | 369,556 | |||||||
Silver (ounces per ton) | 15.4 | 22.3 | 23.7 | |||||||
Gold (ounces per ton) | 0.29 | 0.26 | 0.24 | |||||||
Contained silver (ounces) | 465,400 | 3,812,503 | 8,761,109 | |||||||
Contained gold (ounces) | 8,600 | 43,731 | 88,269 |
(1) | The continued low costs per silver ounce during 2004 and 2003, compared to 2002, are due in part to significant by-product credits from gold production and a higher average gold price. Costs per ounce amounts are calculated pursuant to standards of the Gold Institute. For the years ended December 31, 2004, 2003 and 2002, gold by-product credits were approximately $6.61, $4.25 and $3.76 per silver ounce, respectively. By-product credits are deducted from operating costs in the calculation of cash costs per ounce. If our accounting policy was changed to treat gold production as a co-product, the following total cash costs per ounce would be reported: |
2004 | 2003 | 2002 | ||||||||
Silver | $ | 3.42 | $ | 2.14 | $ | 2.67 | ||||
Gold | $ | 208 | $ | 160 | $ | 181 | ||||
(2) | Cash costs per ounce of silver or gold represent measurements that management uses to monitor and evaluate the performance of its mining operations that are not in accordance with GAAP. We believe cash costs per ounce of silver or gold provide an indicator of profitability and efficiency at each location and on a consolidated basis, as well as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties. A reconciliation of this non-GAAP measure to cost of sales and other direct production costs, the most comparable GAAP measure, can be found in Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, under Reconciliation of Total Cash Costs to Costs of Sales and Other Direct Production Costs. |
(3) | For proven and probable ore reserve assumptions and definitions, including assumed metals prices, see Glossary of Certain Terms. |
(4) | Ore reserves represent in-place material, diluted and adjusted for expected mining recovery. Mill recoveries of ore reserve grades are expected to be approximately 90% for gold and 89% for silver. Returnable metal recoveries by smelters and refiners for doré toll treatment of gold and silver are expected to be 99.50% for silver and 99.50% for gold. Proven and probable reserves at San Sebastian are based on drill spacing of 35 meters. Cutoff grade assumptions are developed based on reserve prices, anticipated mill recoveries, royalties and cash operating costs. The cutoff grade at San Sebastian is 4.5 grams per tonne of gold equivalent. |
(5) | By the end of 2004 essentially all of proven and probable ore reserves have been exhausted. The current mine plan estimates mining of remaining resources at the San Sebastian unit will cease in third quarter of 2005. |
(6) | Mining depletion accounts for the majority of the changes in proven and probable ore reserves from 2002 to 2003. A revised 2004 mine plan removed some ore pillars from reserves offset by new reserve additions. A small block of ore from the Don Sergio vein was added based on new underground development exposures. |
Years Ended December 31, (reflects 29.73% interest) | ||||||||||
Production | 2004 | 2003 | 2002 | |||||||
Ore milled (tons) | 239,456 | 232,297 | 218,072 | |||||||
Silver (ounces) | 2,886,264 | 3,480,800 | 3,244,495 | |||||||
Gold (ounces) | 25,624 | 29,564 | 30,531 | |||||||
Zinc (tons) | 22,649 | 22,809 | 23,875 | |||||||
Lead (tons) | 7,384 | 8,289 | 8,200 |
Average Cost per Ounceof Silver Produced (1,2) | ||||||||||
Cash operating costs | $ | 0.98 | $ | 1.10 | $ | 1.76 | ||||
Total cash costs | $ | 1.13 | $ | 1.18 | $ | 1.81 | ||||
Total production costs | $ | 3.47 | $ | 3.64 | $ | 4.28 |
Proven and ProbableOre Reserves (3,4,5,6) | 12/31/04 | 12/31/03 | 12/31/02 | |||||||
Total tons | 2,358,189 | 2,226,361 | 2,095,703 | |||||||
Silver (ounces per ton) | 14.1 | 14.1 | 14.9 | |||||||
Gold (ounces per ton) | 0.11 | 0.12 | 0.13 | |||||||
Zinc (percent) | 10.2 | 10.7 | 11.4 | |||||||
Lead (percent) | 3.9 | 4.0 | 4.2 | |||||||
Contained silver (ounces) | 33,334,025 | 31,386,366 | 31,252,609 | |||||||
Contained gold (ounces) | 261,604 | 256,726 | 268,603 | |||||||
Contained zinc (tons) | 240,467 | 237,202 | 238,029 | |||||||
Contained lead (tons) | 92,916 | 89,422 | 88,574 |
(1) | Includes by-product credits from gold, lead and zinc production and are calculated pursuant to standards of the Gold Institute. Cash costs per ounce of silver or gold represent measurements that management uses to monitor and evaluate the performance of its mining operations that are not in accordance with GAAP. We believe cash costs per ounce of silver or gold provide an indicator of profitability and efficiency at each location and on a consolidated basis, as well as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties. A reconciliation of this non-GAAP measure to cost of sales and other direct production costs, the most comparable GAAP measure, can be found in Item 7 - Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, under Reconciliation of Total Cash Costs to Costs of Sales and Other Direct Production Costs. |
(2) | For proven and probable ore reserve assumptions and definitions, including assumed metals prices, see Glossary of Certain Terms. |
(3) | Ore reserves represent in-place material, diluted and adjusted for expected mining recovery. Mill recoveries of ore reserve grades differ by ore zones and are expected to be in the range of 72-80% for silver, 65-73% for gold, 83-92% for zinc and 72-82% for lead. |
(4) | The changes in reserves in 2004 versus 2003 are due to addition of new drill data increases in forecast precious metals prices, which has resulted in the addition of new reserves based on updated resource estimates for certain orebodies, partially offset by depletion due to production. |
(5) | The changes in reserves in 2003 versus 2002 are due to increases in forecast metals prices and additions of new reserves based on updated resource estimates for certain orebodies, partially offset by depletion due to production. |
(6) | Proven and probable reserves at the Greens Creek unit are based on average drillspacing of 50 to 100 feet. Cutoff grade assumptions vary by orebody and are developed based on reserve prices, anticipated mill recoveries and smelter payables and cash operating costs. Cutoff grades range from $70 per ton net smelter return to $100 per ton net smelter return. |
Years Ended December 31, | ||||||||||
Production | 2004 | 2003 | 2002 | |||||||
Ore milled (tons) | 166,866 | 151,991 | 159,651 | |||||||
Silver (ounces) | 2,032,143 | 2,251,486 | 2,004,404 | |||||||
Gold (ounces) | 236 | 239 | 206 | |||||||
Lead (tons) | 12,174 | 12,935 | 10,091 | |||||||
Zinc (tons) | 2,995 | 2,532 | 2,259 |
Average Cost per Ounceof Silver Produced (1,2) | ||||||||||
Cash operating costs | $ | 5.12 | $ | 4.86 | $ | 4.97 | ||||
Total cash costs | $ | 5.12 | $ | 4.86 | $ | 4.97 | ||||
Total production costs | $ | 5.17 | $ | 4.88 | $ | 5.49 |
Proven and ProbableOre Reserves (3,4,5,6) | 12/31/04 | 12/31/03 | 12/31/02 | |||||||
Total tons | 757,700 | 659,380 | - - | |||||||
Silver (ounces per ton) | 14.7 | 15.4 | - - | |||||||
Lead (percent) | 7.9 | 8.4 | - - | |||||||
Zinc (percent) | 2.4 | 2.4 | - - | |||||||
Contained silver (ounces) | 11,150,368 | 10,154,299 | - - | |||||||
Contained lead (tons) | 59,888 | 55,192 | - - | |||||||
Contained zinc (tons) | 18,047 | 15,715 | - - |
(1) | Includes by-product credits from gold, lead and zinc production and are calculated pursuant to standards of the Gold Institute. |
(2) | Cash costs per ounce of silver or gold represent measurements that management uses to monitor and evaluate the performance of its mining operations that are not in accordance with GAAP. We believe cash costs per ounce of silver or gold provide an indicator of profitability and efficiency at each location and on a consolidated basis, as well as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties. A reconciliation of this non-GAAP measure to cost of sales and other direct production costs, the most comparable GAAP measure, can be found in Item 7 - Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, under Reconciliation of Total Cash Costs to Costs of Sales and Other Direct Production Costs. |
(3) | For proven and probable ore reserve assumptions and definitions including metals prices, see Glossary of Certain Terms. |
(4) | Reserves are in-place material that incorporate estimates of the amount of waste that must be mined along with the ore and expected mining recovery. Mill recoveries are expected to be 93% for silver, 93% for lead and 76% for zinc. |
(5) | The changes in reserves in 2004 versus 2003 are due to addition of data from new drill holes and development work together with increases in forecast metals prices, which has resulted in the addition of new reserves based on updated resource estimates, partially offset by depletion due to production. |
(6) | As of December 31, 2002, it was determined the Lucky Friday mineralized material did not meet all the criteria established for disclosure of reserves by the Securities and Exchange Commissions Industry Guide 7. At December 31, 2002, the estimated mineralized material included 1,082,000 tons with 13.2 ounces per ton silver, 8.5% lead and 1.7% zinc. |
Part I.
(a) | (i) | Shares of our common stock are traded on the New York Stock Exchange, Inc. |
(ii) | Our common stock quarterly high and low sale prices, based on the New York Stock Exchange composite transactions as reported by NYSEnet.com, for the past two years were as follows: |
First | Second | Third | Fourth | ||||||||||
Quarter | Quarter | Quarter | Quarter | ||||||||||
2004 - High | $ | 9.31 | $ | 8.55 | $ | 7.48 | $ | 7.50 | |||||
- Low | $ | 7.10 | $ | 5.00 | $ | 4.83 | $ | 5.30 | |||||
2003 - High | $ | 5.86 | $ | 4.34 | $ | 7.11 | $ | 8.72 | |||||
- Low | $ | 2.60 | $ | 2.90 | $ | 4.20 | $ | 4.88 | |||||
(b) | As of February 28, 2005, there were 7,811 shareholders of record of the Common Stock. |
(c) | We have not declared or paid any cash dividends on our common stock for several years and do not anticipate paying any such cash dividends in the foreseeable future. We are currently restricted from paying dividends on our common stock or repurchasing common stock until such time as we have paid the cumulative dividends on our Series B preferred stock. At December 31, 2004, the cumulative dividend for the preferred stock was $2.3 million. On January 3, 2005, the company paid the regularly scheduled dividend on outstanding preferred stock and dividends were approved for the first quarter of 2005, payable April 1, 2005. Dividends were not paid for the prior 17 quarters and remain unpaid. |
(d) | On August 2, 2002, through our wholly owned subsidiary Hecla Ventures Corporation, we entered into an earn-in agreement with Rodeo Creek Gold, Inc., a wholly owned subsidiary of Great Basin Gold Ltd. (“Great Basin”). Pursuant to the agreement, Great Basin was issued a warrant to purchase 2,000,000 shares of our common stock as of the date of execution of the Earn-in Agreement, which was exercised during 2003 at a price of $3.73 per share. Neither the warrant nor the underlying common stock was registered under the Securities Act of 1933 pursuant to Section 4(2) of such Act. In the event that we elect to conduct certain development activities, Great Basin will receive an additional warrant to purchase 1,000,000 shares of common stock, at the then market value, and, upon completion of development activities, Great Basin will receive a final warrant to purchase 1,000,000 shares of our common stock at the then market value. |
(e) | The following table provides information as of December 31, 2004, regarding our compensation plans under which equity securities are authorized for issuance: |
Number of Securities To | Weighted-Average | Number of Securities | ||||||||
Be Issued Upon Exercise | Exercise Price | Remaining Available For | ||||||||
of Outstanding Options, | of Outstanding Options, | Future Issuance Under | ||||||||
Warrants and Rights | Warrants and Rights | Equity Compensation Plans | ||||||||
Equity Compensation Plans Approved by Security Holders: | ||||||||||
1987 and 1995 Stock Incentive Plans | 2,412,668 | $ | 5.37 | 5,071,360 | ||||||
Stock Plan for Nonemployee Directors | 111,884 | N/A | 843,946 | |||||||
Key Employee Deferred Compensation Plan (1) | 798,672 | $ | 5.46 | 5,149,728 | ||||||
Equity Compensation Plans Not Approved by Security Holders | - - | - - | - - |
Total | 3,323,224 | $ | 5.39 | 11,065,034 |
(1) | The number of securities to be issued include 254,325 shares. The issuance of 68,825 shares requires no future service or payment of any exercise price. The balance of 185,500 shares will vest over a service period. |
Item 6. | Selected Financial Data |
2004 | 2003 (1) | 2002 | 2001 | 2000 | ||||||||||||
Sales of products | $ | 130,826 | $ | 116,353 | $ | 105,700 | $ | 85,247 | $ | 75,850 | ||||||
Income (loss) from continuingoperations before cumulative | ||||||||||||||||
effect of change in accountingprinciple (1) | $ | (6,134 | ) | $ | (7,088 | ) | $ | 10,863 | $ | (9,582 | ) | $ | (84,847 | ) | ||
Income (loss) from discontinued operations (2) | - - | -- | (2,224 | ) | 11,922 | 1,529 | ||||||||||
Net income (loss) | (6,134 | ) | (6,016 | ) | 8,639 | 2,340 | (83,965 | ) | ||||||||
Preferred stock dividends (3) | (11,602 | ) | (12,154 | ) | (23,253 | ) | (8,050 | ) | (8,050 | ) | ||||||
Loss applicable to common shareholders (3) | $ | (17,736 | ) | $ | (18,170 | ) | $ | (14,614 | ) | $ | (5,710 | ) | $ | (92,015 | ) | |
Loss from continuing operationsper common share (1) | $ | (0.15 | ) | $ | (0.16 | ) | $ | (0.15 | ) | $ | (0.25 | ) | $ | (1.39 | ) | |
Basic and diluted loss percommon share | $ | (0.15 | ) | $ | (0.16 | ) | $ | (0.18 | ) | $ | (0.08 | ) | $ | (1.38 | ) | |
Total assets | $ | 279,448 | $ | 278,195 | $ | 160,141 | $ | 153,116 | $ | 194,836 | ||||||
Accrued reclamation & closure costs | $ | 75,188 | $ | 70,632 | $ | 49,723 | $ | 52,481 | $ | 58,710 | ||||||
Noncurrent portion of debt | $ | - - | $ | 2,341 | $ | 4,657 | $ | 11,948 | $ | 10,041 | ||||||
Cash dividends paid per commonshare | $ | - - | $ | - - | $ | - - | $ | - - | $ | -- | ||||||
Cash dividends paid per preferredshare (3) | $ | - - | $ | - - | $ | - - | $ | -- | $ | 1.75 | ||||||
Common shares issued | 118,350,861 | 115,543,695 | 86,187,468 | 73,068,796 | 66,859,752 | |||||||||||
Shareholders of record | 7,853 | 8,203 | 8,584 | 8,926 | 9,273 | |||||||||||
Employees | 1,417 | 1,074 | 720 | 701 | 1,195 |
(1) | On January 1, 2003, we adopted SFAS No. 143 “Accounting for Asset Retirement Obligations,” which resulted in a positive cumulative effect of a change in accounting principle of $1.1 million. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. SFAS No. 143 requires us to record a liability for the present value of an estimated environmental remediation cost and the related asset created with it. |
(2) | During 2000, in furtherance of our determination to focus our operations on silver and gold mining and to raise cash to reduce debt and provide working capital, our board of directors made the decision to sell our industrial minerals segment. As such, the industrial minerals segment has been recorded as a discontinued operation as of and for each of the three years in the period ended December 31, 2002. The balance sheets for December 31, 2001 and 2000 have been reclassified to reflect the net assets of the industrial minerals segment as a discontinued operation. |
Year Ended December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||
Number of shares of Series B preferred stock exchanged for shares of common stock | 306,961 | 288,625 | 1,546,598 | |||||||
Number of shares of common stock issued | 2,436,098 | 2,183,719 | 10,826,186 | |||||||
Non-cash preferred stock dividend incurred in exchange (millions of dollars)(a) | $ | 10.9 | $ | 9.6 | $ | 17.6 |
(a) | The non-cash dividend represents the difference between the value of the common stock issued in the exchange offer and the value of the shares that were issuable under the stated conversion terms of the Series B preferred stock. The non-cash dividend had no impact on our total shareholders’ equity as the offset was an increase in common stock and surplus. |
(3) | As of December 31, 2004, we have not declared or paid $2.3 million of Series B preferred stock dividends. As the dividends are cumulative, they continue to be reported in determining the income (loss) applicable to common stockholders, but are excluded in the amount reported as cash dividends paid per preferred share. |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
2004 Price | High | Low | Average | |||||||
Gold, per ounce | $ | 454 | $ | 375 | $ | 409 | ||||
Silver, per ounce | $ | 8.29 | $ | 5.50 | $ | 6.69 | ||||
Lead, per tonne | $ | 1,040 | $ | 690 | $ | 960 | ||||
Zinc, per tonne | $ | 1,260 | $ | 940 | $ | 1,110 |
· | The United States segment - silver operations |
o | The Lucky Friday unit in Idaho (metal concentrates) |
o | The Greens Creek unit in Alaska (metal concentrates and doré) |
· | The Mexico segment - silver operation |
o | The San Sebastian unit (doré and precipitate) |
· | The Venezuela segment - gold operation |
o | The La Camorra unit (doré) |
· | Maintaining our production and cost profile; |
· | Significantly increasing our proven and probable reserves via investment in exploration and acquisitions; |
· | Positioning the company to double our silver and gold production; |
· | Maintaining our financial strength; and |
· | Focusing on silver and gold assets and production. |
Projected | Actual | ||||||||||||
2005 | 2004 | 2003 | 2002 | ||||||||||
Silver ounce production: | |||||||||||||
San Sebastian unit (1) | 1,200 | 2,042 | 4,085 | 3,432 | |||||||||
Greens Creek unit (2) | 2,800 | 2,887 | 3,481 | 3,245 | |||||||||
Lucky Friday unit | 3,000 | 2,032 | 2,251 | 2,004 | |||||||||
Total silver ounces | 7,000 | 6,961 | 9,817 | 8,681 | |||||||||
Gold ounce production: | |||||||||||||
La Camorra unit | 140 | 130 | 127 | 167 | |||||||||
San Sebastian unit (1) | 27 | 34 | 48 | 42 | |||||||||
Greens Creek unit (2) | 23 | 26 | 29 | 31 | |||||||||
Total gold ounces | 190 | 190 | 204 | 240 |
(1) | Our mill that processes ore from our San Sebastian mine has experienced a strike by employees since mid-October 2004, which has continued into 2005. The production estimates for San Sebastian assume that a timely, satisfactory resolution to the strike can be reached in 2005. The mine plan for San Sebastian estimates that mining will cease in the middle of 2005. |
(2) | Reflects our 29.73% portion. |
2004 | 2003 | 2002 | ||||||||
Average costs per ounce of silver produced: | ||||||||||
Total cash costs per ounce ($/oz.) (1,3) | 2.02 | 1.43 | 2.25 | |||||||
Total production costs per ounce ($/oz.) (1,3) | 3.57 | 2.70 | 3.68 | |||||||
Average costs per ounce of gold produced: | ||||||||||
Total cash costs per ounce ($/oz.) (2,3) | 180 | 154 | 137 | |||||||
Total production costs per ounce ($/oz.) (2,3) | 271 | 222 | 206 | |||||||
Average Metals Prices: | ||||||||||
Silver-Handy & Harman ($/oz.) | 6.69 | 4.91 | 4.63 | |||||||
Gold-Realized ($/oz.) | 379 | 339 | 303 | |||||||
Gold-London Final ($/oz.) | 409 | 364 | 310 | |||||||
Lead-LME Cash ($/pound) | 0.402 | 0.234 | 0.205 | |||||||
Zinc-LME Cash ($/pound) | 0.475 | 0.375 | 0.353 |
(1) | The higher costs per silver ounce during 2004 compared to 2003 are due in part to lower grades affecting production at all three silver operations and greater depth of mining at the Lucky Friday mine which increased costs, partly offset by significant by-product credits from an increased gold price and base metals prices. Strike-related costs associated with our mill in Mexico totaling $777,000, have been excluded from silver costs per ounce. Our costs per ounce amounts are calculated pursuant to standards of the Gold Institute. |
(2) | Costs per ounce of gold are based on the gold produced from our gold operating properties only. Gold produced from San Sebastian and Greens Creek is treated as a by-product credit in calculating silver costs per ounce. Gold produced from ores purchased from third parties is treated as a by-product credit in calculating gold costs per ounce. |
(3) | Cash costs per ounce of silver or gold represent measurements that management uses to monitor and evaluate the performance of its mining operations that are not in accordance with GAAP. We believe cash costs per ounce of silver or gold provide an indicator of cash flow generation at each location and on a consolidated basis, as well as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties. A reconciliation of this non-GAAP measure to cost of sales and other direct production costs, the most comparable GAAP measure, can be found below under Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs (GAAP). |
2004 | 2003 | 2002 | ||||||||
Mexico & United States Segments (combined) (1) | ||||||||||
Total cash costs | $ | 14,078 | $ | 14,041 | $ | 19,569 | ||||
Divided by silver ounces produced | 6,961 | 9,817 | 8,681 | |||||||
Total cash cost per ounce produced | $ | 2.02 | $ | 1.43 | $ | 2.25 | ||||
Reconciliation to GAAP: | ||||||||||
Total cash costs | $ | 14,078 | $ | 14,041 | $ | 19,569 | ||||
Treatment & freight costs | (19,044 | ) | (18,556 | ) | (17,853 | ) | ||||
By-product credits | 50,340 | 47,082 | 37,937 | |||||||
Change in product inventory | 1,395 | 33 | (2,734 | ) | ||||||
Strike-related costs | 777 | - - | - - | |||||||
Reclamation and other costs | 407 | 869 | 1,156 | |||||||
Cost of sales and other directproduction costs (GAAP) | $ | 47,953 | $ | 43,469 | $ | 38,075 | ||||
San Sebastian Unit (1,2,3) | ||||||||||
Total cash costs | $ | 421 | $ | (1,007 | ) | $ | 3,737 | |||
Divided by silver ounces produced | 2,042 | 4,085 | 3,432 | |||||||
Total cash cost per ounce produced | $ | 0.21 | $ | (0.25 | ) | $ | 1.09 | |||
Reconciliation to GAAP: | ||||||||||
Total cash costs | $ | 421 | $ | (1,007 | ) | $ | 3,737 | |||
Treatment & freight costs | (1,069 | ) | (2,158 | ) | (2,224 | ) | ||||
By-product credits | 13,493 | 17,367 | 12,909 | |||||||
Change in product inventory | 1,476 | 597 | (2,089 | ) | ||||||
Strike-related costs | 777 | - - | - - | |||||||
Reclamation and other costs | 224 | 294 | 403 | |||||||
Cost of sales and other directproduction costs (GAAP) | $ | 15,322 | $ | 15,093 | $ | 12,736 | ||||
Greens Creek Unit (1) | ||||||||||
Total cash costs | $ | 3,257 | $ | 4,108 | $ | 5,872 | ||||
Divided by silver ounces produced | 2,886 | 3,481 | 3,245 | |||||||
Total cash cost per ounce produced | $ | 1.13 | $ | 1.18 | $ | 1.81 | ||||
Reconciliation to GAAP: | ||||||||||
Total cash costs | $ | 3,257 | $ | 4,108 | $ | 5,872 | ||||
Treatment & freight costs | (12,745 | ) | (12,082 | ) | (12,271 | ) | ||||
By-product credits | 27,013 | 23,985 | 21,367 | |||||||
Change in product inventory | (231 | ) | (472 | ) | (690 | ) | ||||
Reclamation and other costs | 157 | 575 | 611 | |||||||
Cost of sales and other directproduction costs (GAAP) | $ | 17,451 | $ | 16,114 | $ | 14,889 |
2004 | 2003 | 2002 | ||||||||
Lucky Friday Unit (1) | ||||||||||
Total cash costs | $ | 10,400 | $ | 10,940 | $ | 9,960 | ||||
Divided by silver ounces produced | 2,032 | 2,251 | 2,004 | |||||||
Total cash cost per ounce produced | $ | 5.12 | $ | 4.86 | $ | 4.97 | ||||
Reconciliation to GAAP: | ||||||||||
Total cash costs | $ | 10,400 | $ | 10,940 | $ | 9,960 | ||||
Treatment & freight costs | (5,230 | ) | (4,316 | ) | (3,358 | ) | ||||
By-product credits | 9,834 | 5,730 | 3,661 | |||||||
Change in product inventory | 150 | (92 | ) | 45 | ||||||
Reclamation and other costs | 26 | - - | 142 | |||||||
Cost of sales and other directproduction costs (GAAP) | $ | 15,180 | $ | 12,262 | $ | 10,450 | ||||
Venezuela Segment (1) | ||||||||||
Total cash costs | $ | 22,617 | $ | 19,498 | $ | 22,879 | ||||
Divided by gold ounces produced | 126 | 127 | 167 | |||||||
Total cash cost per ounce produced | $ | 180 | $ | 154 | $ | 137 | ||||
Reconciliation to GAAP: | ||||||||||
Total cash costs | $ | 22,617 | 19,498 | 22,879 | ||||||
Treatment & freight costs | (1,980 | ) | (1,634 | ) | (1,840 | ) | ||||
By-product credits | 1,892 | - - | - - | |||||||
Change in product inventory | 1,383 | (810 | ) | (53 | ) | |||||
Reclamation and other costs | 3 | 70 | 388 | |||||||
Cost of sales and other directproduction costs (GAAP) | $ | 23,915 | $ | 17,124 | $ | 21,374 |
(1) | See Glossary of Certain Terms for definition of “Total Cash Costs”. |
(2) | Costs totaling $777,000 have been excluded from the determination of silver costs per ounce in 2004 as they relate to the strike at the Velardeña mill and are not representative of normal operating costs. |
(3) | Gold is accounted for as a by-product at the San Sebastian unit whereby revenues from gold are deducted from operating costs in the calculation of cash costs per ounce. If our accounting policy was changed to treat gold production as a co-product, the following costs per ounce would be reported: |
2004 | 2003 | 2002 | ||||||||
Total cash costs (in thousands) | $ | 13,914 | $ | 16,360 | $ | 16,646 | ||||
Revenue | ||||||||||
Silver | 49.9 | % | 53.4 | % | 55.0 | % | ||||
Gold | 50.1 | % | 46.6 | % | 45.0 | % | ||||
Ounces produced (in thousands) | ||||||||||
Silver | 2,042 | 4,085 | 3,432 | |||||||
Gold | 34 | 48 | 42 | |||||||
Total cash cost per ounce produced | ||||||||||
Silver | $ | 3.42 | $ | 2.14 | $ | 2.67 | ||||
Gold | $ | 208 | $ | 160 | $ | 181 | ||||
Payments Due By Period | ||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | Thereafter | Total | ||||||||||||||||
Purchase obligations | $ | 12,987 | - - | - - | - - | - - | $ | 12, 987 | ||||||||||||||
Contractual obligations (1) | 2,828 | 2,828 | ||||||||||||||||||||
Earn-in agreement (2) | 4,288 | - - | - - | - - | - - | 4,288 | ||||||||||||||||
Operating lease commitments (3) | 731 | 611 | 146 | 19 | 15 | 1,522 | ||||||||||||||||
Total contractual cash obligations | $ | 20,834 | $ | 611 | $ | 146 | $ | 19 | $ | 15 | $ | 21,625 |
(1) | As of December 31, 2004, we were committed to approximately $0.6 million for the construction of a shaft at the La Camorra mine $1.7 million for transportation, and $0.5 million for other capital projects. |
(2) | In August 2002, we entered into an earn-in agreement with Rodeo Creek Gold, Inc., a wholly owned subsidiary of Great Basin Gold Ltd. (“Great Basin”), concerning exploration, development and production on Great Basin’s Hollister Development Block gold property. The agreement provides us with an option to earn a 50% working interest in the Hollister Development Block in return for funding a two-stage, advanced exploration and development program leading to commercial production. As of December 31, 2004, we were contractually committed to fund approximately $4.3 million, which represents the remaining portion of the first stage of the agreement. The $4.3 million has not been recorded in our Consolidated Financial Statements; although project to date, we have incurred expenditures of $6.1 million, which has been recorded in our Consolidated Financial Statements as pre-development expenditures. |
(3) | We enter into operating leases in the normal course of business. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease arrangements. |
2004 | 2003 | 2002 | ||||||||
Silver | $ | 3.42 | $ | 2.14 | $ | 2.67 | ||||
Gold | $ | 208 | $ | 160 | $ | 181 | ||||
Expected Maturity Date | Fair | |||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | Total | Value | ||||||||||||||||
Short-term investments | $ | 18,478 | - - | - - | - - | - - | $ | 18,478 | $ | 18,478 | ||||||||||||
Average interest rate | 1.996 | % | - - | - - | - - | - - | ||||||||||||||||
Expected Maturity | ||||
Date | ||||
2005 | ||||
Forward contracts: | ||||
Lead tonnes | 4,050 | |||
Future price (per tonne) | $ | 782.40 | ||
Contract amount (in thousands) | $ | 3,169 | ||
Estimated fair value | $ | (904 | ) | |
Estimated % of annual production committed to contracts | 19 | % |
Item 8. Financial Statements and Supplementary Data
First | Second | Third | Fourth | |||||||||||||
2004 | Quarter | Quarter | Quarter | Quarter | Total | |||||||||||
Sales of products | $ | 36,650 | $ | 31,712 | $ | 33,718 | $ | 28,746 | $ | 130,826 | ||||||
Gross profit | $ | 13,409 | $ | 10,071 | $ | 6,905 | $ | 7,021 | $ | 37,406 | ||||||
Net income (loss) | $ | 6,180 | $ | 2,748 | $ | (11,292 | ) | $ | (3,770 | ) | $ | (6,134 | ) | |||
Preferred stock dividends | $ | (11,188 | ) | $ | (138 | ) | $ | (138 | ) | $ | (138 | ) | $ | (11,602 | ) | |
Income (loss) applicable tocommon shareholders |
(1) | On January 1, 2003, we adopted SFAS No. 143 “Accounting for Asset Retirement Obligations,” which resulted in a positive cumulative effect of change in accounting principle of $1.1 million. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. SFAS No. 143 requires us to record a liability for the present value of estimated environmental remediation costs and the related asset created with it. |
· | In planning its assessment of internal control, management determined that controls over the processes at the Velardeña mill (the “Mill”) in Mexico should be documented and tested. Employees at the Mill have been on strike since October 16, 2004. The strike was not anticipated by management. As a result of this strike and the resulting shutdown in operations at the Mill, management was not able to complete all the testing of controls that it had planned to perform. Management successfully completed tests of the controls relating to the processing costs at the Mill, but management’s testing of controls over the determination of the quantity of metal ounces in the Mill work-in-process inventory was not completed before the strike occurred. Processing costs incurred at the Mill represent approximately 6% of Cost of Sales during the year ended December 31, 2004. The Mill work-in-process inventory as of December 31, 2004 is zero due to the circumstances described in the following paragraph. Management believes that its inability to test these controls as planned is a material weakness in its control environment and monitoring components of internal control as defined by the COSO framework. |
· | When the strike occurred, the Mill supervisors determined the inventory quantities and reported them to accounting personnel. Subsequently, certain shutdown procedures were performed at the Mill, which included emptying work-in-process inventory into the tailings impoundment. The emptying of the work-in-process inventory was not reported to accounting personnel who would have adjusted the Mill inventory balance to zero had the information been reported. This discrepancy was discovered by our independent auditors during their year end audit. As a result, management recorded an adjustment of $421,000 to properly reflect the work in process inventory balance. This adjustment is reflected in the 2004 financial statements presented in this annual report on Form 10-K. Management considers the failure of the accounting personnel to be properly notified of the Mill activity a material weakness under the information and communication component of the COSO framework. |
· | At our Mexican operations, certain vendor balances in accounts payable were not reviewed and adjusted on a timely basis to proper balances. The Company failed to have an appropriate control in place for oversight and monitoring of the detail of accounts payable balances. The result was four errors in recorded balances, none of which alone, or in the aggregate, was material to the financial statements of the Company; however, the lack of a control over the monitoring of the detail of accounts payable records cannot ensure that a material misstatement in the financial statements would be prevented or detected under normal operating conditions. Accordingly, the Company views the lack of a control to monitor the detail of accounts payable records as a material weakness in financial reporting. |
Age at | |||
May 6, 2005 | Position and Committee Assignments | ||
Ian Atkinson | 55 | Vice President - Exploration and Strategy | |
Phillips S. Baker, Jr. | 45 | President and Chief Executive Officer, Director (1,6) | |
Michael H. Callahan | 41 | Vice President - Corporate Development | |
Ronald W. Clayton | 46 | Vice President - North American Operations | |
Thomas F. Fudge, Jr. | 50 | Vice President - Operations | |
Vicki Veltkamp | 48 | Vice President - Investor and Public Relations | |
Lewis E. Walde | 38 | Vice President and Chief Financial Officer | |
Arthur Brown | 64 | Chairman of the Board (1,7) | |
David J. Christensen | 43 | Director (2,3,8) | |
John E. Clute | 70 | Director (1,4,5) | |
Ted Crumley | 60 | Director (1,2,4,5) | |
Charles L. McAlpine | 71 | Director (3,4,5,7) | |
George R. Nethercutt, Jr. | 60 | Director | |
Jorge E. Ordoñez C. | 65 | Director (2,3,4,7) | |
Dr. Anthony P. Taylor | 63 | Director (7,8) |
(1) | Member of Executive Committee |
(2) | Member of Finance Committee |
(3) | Member of Audit Committee |
(4) | Member of Corporate Governance and Directors Nominating Committee |
(5) | Member of Compensation Committee |
(6) | Member of Retirement Board |
(7) | Member of Technical Committee |
(8) | Elected by holders of Series B preferred stock |
(a) | (1) Financial Statements |
(a) | (2) Financial Statement Schedules |
(a) | (3) Exhibits |
HECLA MINING COMPANY | ||
| | |
By: | /s/ Phillips S. Baker, Jr. | |
Phillips S. Baker, Jr. Chief Executive Officer and Director | ||
Date: | March 16, 2005 | |
/s/ Phillips S. Baker, Jr. | 3/16/05 | /s/ Ted Crumley | 3/16/05 | |||
Phillips S. Baker, Jr. | Date | Ted Crumley | Date | |||
President, Chief Executive Officer | Director | |||||
and Director | ||||||
(principal executive officer) | ||||||
/s/ Lewis E. Walde | 3/16/05 | /s/ Charles L. McAlpine | 3/16/05 | |||
Lewis E. Walde | Date | Charles L. McAlpine | Date | |||
Vice President andChief Financial Officer | Director | |||||
(principal financial and accountingofficer) | ||||||
/s/ Arthur Brown | 3/16/05 | /s/ George R. Nethercutt, Jr. | 3/16/05 | |||
Arthur Brown | Date | George R. Nethercutt, Jr. | Date | |||
Chairman and Director | Director | |||||
/s/ David J. Christensen | 3/16/05 | /s/ Jorge E. Ordoñez | 3/16/05 | |||
David J. Christensen | Date | Jorge E. Ordoñez | Date | |||
Director | Director | |||||
/s/ John E. Clute | 3/16/05 | /s/ Anthony P. Taylor | 3/16/05 | |||
John E. Clute | Date | Anthony P. Taylor | Date | |||
Director | Director |
Index to Consolidated Financial Statements
Consolidated Financial Statements | Page | ||
Reports of Independent Registered Public Accounting Firms | F-2 to F-3 | ||
Consolidated Balance Sheets at December 31, 2004 and 2003 | F-4 | ||
Consolidated Statements of Operations and Comprehensive Income (Loss) | |||
for the Years Ended December 31, 2004, 2003 and 2002 | F-5 | ||
Consolidated Statements of Cash Flows for the Years Ended | |||
December 31, 2004, 2003 and 2002 | F-6 | ||
Consolidated Statements of Changes in Shareholders’ Equity for the | |||
Years Ended December 31, 2004, 2003 and 2002 | F-7 | ||
Notes to Consolidated Financial Statements | F-8 to F-54 | ||
Hecla Mining Company and Subsidiaries
December 31, | |||||||||||
2004 | 2003 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 52,610 | $ | 105,387 | |||||||
Short-term investments | 28,178 | 18,003 | |||||||||
Accounts and notes receivable: | |||||||||||
Trade | 6,911 | 6,975 | |||||||||
Other | 15,025 | 9,343 | |||||||||
Inventories | 20,250 | 16,936 | |||||||||
Deferred income taxes | - - | 1,427 | |||||||||
Other current assets | 5,607 | 3,174 | |||||||||
Total current assets | 128,581 | 161,245 | |||||||||
Investments | 1,657 | 722 | |||||||||
Restricted cash and investments | 19,789 | 6,447 | |||||||||
Properties, plants and equipment, net | 114,515 | 95,315 | |||||||||
Deferred income taxes | - - | 896 | |||||||||
Other noncurrent assets | 14,906 | 13,570 | |||||||||
Total assets | $ | 279,448 | $ | 278,195 | |||||||
LIABILITIES | |||||||||||
Current liabilities: | |||||||||||
Accounts payable and accrued liabilities | $ | 16,042 | $ | 13,847 | |||||||
Accrued payroll and related benefits | 9,405 | 7,307 | |||||||||
Current portion of debt | - - | 2,332 | |||||||||
Accrued taxes | 2,379 | 3,193 | |||||||||
Current portion of accrued reclamation and closure costs | 9,237 | 7,400 | |||||||||
Total current liabilities | 37,063 | 34,079 | |||||||||
Long-term debt | - - | 2,341 | |||||||||
Accrued reclamation and closure costs | 65,951 | 63,232 | |||||||||
Other noncurrent liabilities | 7,107 | 7,114 | |||||||||
Total liabilities | 110,121 | 106,766 | |||||||||
Commitments and contingencies (Notes 2, 3, 4, 5, 8 and 11) | |||||||||||
SHAREHOLDERS’ EQUITY | |||||||||||
Preferred stock, $0.25 par value, authorized 5,000,000 shares; | |||||||||||
issued 2004 - 157,816 shares and 2003 - 464,777 shares, | |||||||||||
liquidation preference 2004 - $10,238 and 2003 - $28,932 | 39 | 116 | |||||||||
Common stock, $0.25 par value, authorized 200,000,000 shares; | |||||||||||
issued 2004 - 118,350,861 shares and issued 2003 - 115,543,695 shares | 29,588 | 28,886 | |||||||||
Capital surplus | 506,630 | 504,858 | |||||||||
Accumulated deficit | (367,832 | ) | (361,560 | ) | |||||||
Accumulated other comprehensive income (loss) | 1,020 | (753 | ) | ||||||||
Less treasury stock, at cost; 8,274 common shares | (118 | ) | (118 | ) | |||||||
Total shareholders’ equity | 169,327 | 171,429 | |||||||||
Total liabilities and shareholders’ equity | $ | 279,448 | $ | 278,195 |
Year Ended December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||
Sales of products | $ | 130,826 | $ | 116,353 | $ | 105,700 | ||||
Cost of sales and other direct production costs | 71,868 | 61,197 | 59,449 | |||||||
Depreciation, depletion and amortization | 21,552 | 20,121 | 22,536 | |||||||
93,420 | 81,318 | 81,985 | ||||||||
Gross profit | 37,406 | 35,035 | 23,715 | |||||||
Other operating expenses: | ||||||||||
General and administrative | 8,731 | 8,407 | 7,121 | |||||||
Exploration | 15,995 | 9,608 | 5,172 | |||||||
Pre-development expense | 4,227 | 1,395 | 653 | |||||||
Depreciation and amortization | 326 | 341 | 116 | |||||||
Other operating expense (income) | 1,723 | (1,439 | ) | 414 | ||||||
Provision for closed operations and environmental matters | 11,170 | 23,777 | 898 | |||||||
42,172 | 42,089 | 14,374 | ||||||||
Income (loss) from operations | (4,766 | ) | (7,054 | ) | 9,341 | |||||
Other income (expense): | ||||||||||
Interest income | 1,923 | 2,590 | 420 | |||||||
Interest expense | (500 | ) | (1,407 | ) | (1,816 | ) | ||||
1,423 | 1,183 | (1,396 | ) | |||||||
Income (loss) from continuing operations before income taxes and | ||||||||||
items shown below | (3,343 | ) | (5,871 | ) | 7,945 | |||||
Income tax benefit (provision) | (2,791 | ) | (1,217 | ) | 2,918 | |||||
Income (loss) from continuing operations before items shown below | (6,134 | ) | (7,088 | ) | 10,863 | |||||
Cumulative effect of change in accounting principle, net of income tax | - - | 1,072 | - - | |||||||
Discontinued operations, net of income tax | - - | - - | (2,224 | ) | ||||||
Net income (loss) | (6,134 | ) | (6,016 | ) | 8,639 | |||||
Preferred stock dividends | (11,602 | ) | (12,154 | ) | (23,253 | ) | ||||
Loss applicable to common shareholders | $ | (17,736 | ) | $ | (18,170 | ) | $ | (14,614 | ) | |
Net income (loss) | $ | (6,134 | ) | $ | (6,016 | ) | $ | 8,639 | ||
Minimum pension liability adjustment | 32 | (1,400 | ) | - - | ||||||
Change in derivative contracts | (761 | ) | - - | (256 | ) | |||||
Unrealized holding gains on investments | 2,481 | 645 | 9 | |||||||
Other | 21 | 38 | 38 | |||||||
Comprehensive income (loss) | $ | (4,361 | ) | $ | (6,733 | ) | $ | 8,430 | ||
Basic and diluted income (loss) per common share: | ||||||||||
Loss from operations after preferred stock dividends | $ | (0.15 | ) | $ | (0.17 | ) | $ | (0.15 | ) | |
Cumulative effect of change in accounting principle | - - | 0.01 | - - | |||||||
Loss from discontinued operations | - - | - - | (0.03 | ) | ||||||
Basic and diluted loss per common share | $ | (0.15 | ) | $ | (0.16 | ) | $ | (0.18 | ) | |
Weighted average number of common | ||||||||||
shares outstanding - basic and diluted | 118,048 | 110,610 | 80,250 |
Year Ended December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||
Operating activities: | ||||||||||
Net income (loss) | $ | (6,134 | ) | $ | (6,016 | ) | $ | 8,639 | ||
Non-cash elements included in net income (loss): | ||||||||||
Depreciation, depletion and amortization | 21,878 | 20,462 | 22,652 | |||||||
Cumulative effect of change in accounting principle | - - | (1,072 | ) | - - | ||||||
Gain on disposition of properties, plants and equipment | (222 | ) | (350 | ) | (329 | ) | ||||
Provision for reclamation and closure costs | 10,271 | 24,086 | 1,931 | |||||||
Deferred income taxes | 2,323 | 677 | (3,300 | ) | ||||||
Stock compensation | 495 | - - | - - | |||||||
Change in assets and liabilities: | ||||||||||
Accounts and notes receivable | (5,618 | ) | (6,164 | ) | (3,506 | ) | ||||
Inventories | (3,314 | ) | (2,178 | ) | (3,890 | ) | ||||
Other current and noncurrent assets | (3,163 | ) | (2,051 | ) | 575 | |||||
Accounts payable and accrued expenses | 1,690 | 2,154 | 1,581 | |||||||
Accrued payroll and related benefits | 1,859 | 396 | 312 | |||||||
Accrued taxes | (814 | ) | 1,621 | 395 | ||||||
Accrued reclamation and closure costs and other noncurrent liabilities | (5,917 | ) | (5,588 | ) | (4,825 | ) | ||||
Net cash provided by operating activities | 13,334 | 25,977 | 20,235 | |||||||
Investing activities: | ||||||||||
Proceeds from sale of discontinued operations | - - | - - | 1,585 | |||||||
Additions to properties, plants and equipment | (41,371 | ) | (19,535 | ) | (11,219 | ) | ||||
Proceeds from disposition of properties, plants and equipment | 352 | 486 | 5,710 | |||||||
Increase in restricted investments | (13,433 | ) | (19 | ) | (3 | ) | ||||
Purchases of short-term investments | (35,034 | ) | (21,053 | ) | - - | |||||
Maturities of short-term investments | 26,404 | 3,050 | - - | |||||||
Other, net | (2 | ) | 8 | (285 | ) | |||||
Net cash used by investing activities | (63,084 | ) | (37,063 | ) | (4,212 | ) | ||||
Financing activities: | ||||||||||
Common stock issued under warrants and stock option plans | 1,646 | 14,218 | 2,925 | |||||||
Issuance of common stock, net of offering costs | - - | 91,243 | 72 | |||||||
Borrowings on debt | 2,430 | 1,350 | 3,317 | |||||||
Repayments on debt | (7,103 | ) | (9,880 | ) | (10,355 | ) | ||||
Net cash provided (used) by financing activities | (3,027 | ) | 96,931 | (4,041 | ) | |||||
Change in cash and cash equivalents: | ||||||||||
Net increase (decrease) in cash and cash equivalents | (52,777 | ) | 85,845 | 11,982 | ||||||
Cash and cash equivalents at beginning of year | 105,387 | 19,542 | 7,560 | |||||||
Cash and cash equivalents at end of year | $ | 52,610 | $ | 105,387 | $ | 19,542 | ||||
Supplemental disclosure of cash flow information: | ||||||||||
Cash paid during year for: | ||||||||||
Interest, net of amount capitalized | $ | 1,312 | $ | 707 | $ | 1,174 | ||||
Income tax payments, net | $ | 413 | $ | 148 | $ | 9 | ||||
See Notes 2, 4, 9 10 and 11 for non-cash investing and financing activities. |
Accumulated | Stock | ||||||||||||||||||||||||||||||
Other | Held by | ||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Capital | Accumulated | Comprehensive | Grantor | Unearned | Treasury | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Surplus | Deficit | Income (Loss) | Trust | Compensation | Stock | ||||||||||||||||||||||
Balances, January 1, 2002 | 2,300 | $ | 575 | 73,069 | $ | 18,267 | $ | 404,354 | $ | (364,183 | ) | $ | 173 | $ | (330 | ) | $ | (6 | ) | $ | (886 | ) | |||||||||
Net income | 8,639 | ||||||||||||||||||||||||||||||
Preferred stock exchange | (1,547 | ) | (387 | ) | 10,826 | 2,707 | (2,320 | ) | |||||||||||||||||||||||
Stock issued as compensation | 429 | 108 | 332 | ||||||||||||||||||||||||||||
Stock issued to directors | 73 | 18 | 52 | ||||||||||||||||||||||||||||
Stock disbursed by grantor trust | (264 | ) | 264 | ||||||||||||||||||||||||||||
Stock issued under stock option and warrant plans | 1,733 | 433 | 2,493 | ||||||||||||||||||||||||||||
Warrants issued under warrant plans | 1,936 | ||||||||||||||||||||||||||||||
Issuance of restricted stock | 57 | 14 | 42 | (56 | ) | ||||||||||||||||||||||||||
Amortization of unearned compensation | 62 | ||||||||||||||||||||||||||||||
Stock issued as contribution to benefit plan | (666 | ) | 768 | ||||||||||||||||||||||||||||
Other comprehensive loss | (209 | ) | |||||||||||||||||||||||||||||
Balances, December 31, 2002 | 753 | 188 | 86,187 | 21,547 | 405,959 | (355,544 | ) | (36 | ) | (66 | ) | - - | (118 | ) | |||||||||||||||||
Net loss | (6,016 | ) | |||||||||||||||||||||||||||||
Stock issued for cash, net of issuance costs | 23,000 | 5,750 | 85,493 | ||||||||||||||||||||||||||||
Preferred stock exchange | (288 | ) | (72 | ) | 2,184 | 546 | (473 | ) | |||||||||||||||||||||||
Stock issued as compensation | 186 | 47 | 555 | ||||||||||||||||||||||||||||
Stock issued to directors | 19 | 5 | 73 | ||||||||||||||||||||||||||||
Stock disbursed by grantor trust | (66 | ) | 66 | ||||||||||||||||||||||||||||
Stock issued under stock option and warrant plans | 3,968 | 991 | 13,227 | ||||||||||||||||||||||||||||
Stock options issued for deferred compensation | 90 | ||||||||||||||||||||||||||||||
Other comprehensive loss | (717 | ) | |||||||||||||||||||||||||||||
Balances, December 31, 2003 | 465 | 116 | 115,544 | 28,886 | 504,858 | (361,560 | ) | (753 | ) | - - | - - | (118 | ) | ||||||||||||||||||
Net loss | (6,134 | ) | |||||||||||||||||||||||||||||
Preferred stock exchange | (307 | ) | (77 | ) | 2,436 | 609 | (532 | ) | |||||||||||||||||||||||
Stock issued to directors | 14 | 4 | 84 | ||||||||||||||||||||||||||||
Modification of stock option awards | 441 | ||||||||||||||||||||||||||||||
Stock issued under stock option plans | 357 | 89 | 1,520 | ||||||||||||||||||||||||||||
Stock options issued for deferred compensation | 259 | ||||||||||||||||||||||||||||||
Preferred stock dividends | (138 | ) | |||||||||||||||||||||||||||||
Other comprehensive income | 1,773 | ||||||||||||||||||||||||||||||
Balances, December 31, 2004 | 158 | $ | 39 | 118,351 | $ | 29,588 | $ | 506,630 | $ | (367,832 | ) | $ | 1,020 | $ | - | $ | - | $ | (118 | ) | |||||||||||
Year Ended December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||
Loss applicable to common shareholders: | ||||||||||
As reported | $ | (17,736 | ) | $ | (18,170 | ) | $ | (14,614 | ) | |
Stock-based employee compensation expense included in | ||||||||||
reported loss(a) | 583 | 1,130 | 1,455 | |||||||
Total stock-based employee compensation expense determined | ||||||||||
under fairvalue based method for all awards | (3,344 | ) | (3,694 | ) | (3,012 | ) | ||||
Pro forma loss applicable to common Shareholders | $ | (20,497 | ) | $ | (20,734 | ) | $ | (16,171 | ) |
Loss applicable to commonShareholders per share: | ||||||||||
As reported | $ | (0.15 | ) | $ | (0.16 | ) | $ | (0.18 | ) | |
Pro forma | $ | (0.17 | ) | $ | (0.19 | ) | $ | (0.20 | ) |
2004 | 2003 | ||||||
Certificates of deposit | $ | 6,498 | $ | 3,094 | |||
United States government and federal agency securities | 9,500 | 5,616 | |||||
Municipal securities | 1,480 | 6,091 | |||||
Corporate bonds | 1,000 | 3,202 | |||||
Marketable equity security (cost - $7,807) | 9,700 | - - | |||||
$ | 28,178 | $ | 18,003 | ||||
December 31, | |||||||
2004 | 2003 | ||||||
Concentrates, doré, bullion, metals in transitand other products | $ | 4,965 | $ | 7,745 | |||
Stockpiled ore | 2,782 | 43 | |||||
Materials and supplies | 12,503 | 9,148 | |||||
$ | 20,250 | $ | 16,936 | ||||
December 31, | |||||||
2004 | 2003 | ||||||
Mining properties | $ | 13,127 | $ | 13,947 | |||
Development costs | 118,411 | 109,734 | |||||
Plants and equipment | 183,581 | 176,369 | |||||
Land | 857 | 655 | |||||
Mineral interests | 7,338 | 6,722 | |||||
Construction in progress | 31,159 | 8,796 | |||||
354,473 | 316,223 | ||||||
Less accumulated depreciation,depletion and amortization | 239,958 | 220,908 | |||||
Net carrying value | $ | 114,515 | $ | 95,315 |
Year ending December 31, | ||||
2005 | $ | 731 | ||
2006 | 611 | |||
2007 | 146 | |||
2008 | 19 | |||
2009 | 15 | |||
Total | $ | 1,522 |
Operating properties: | 2004 | 2003 | |||||
Greens Creek | $ | 4,746 | $ | 4,486 | |||
La Camorra unit | 1,475 | 1,240 | |||||
San Sebastian | 1,917 | 1,812 | |||||
Lucky Friday | 498 | 677 | |||||
Hollister | 630 | - - | |||||
Nonoperating properties: | |||||||
Grouse Creek | 31,734 | 32,154 | |||||
Coeur d’Alene Basin | 23,600 | 18,000 | |||||
Bunker Hill | 4,533 | 6,831 | |||||
Republic | 2,600 | 2,594 | |||||
All other sites | 3,455 | 2,838 | |||||
Total | 75,188 | 70,632 | |||||
Amount reflected as current | (9,237 | ) | (7,400 | ) | |||
Amount reflected as long-term | $ | 65,951 | $ | 63,232 | |||
Balance at January 1, 2002 | $ | 52,481 | ||
Accruals for estimated costs | 2,514 | |||
Payment of reclamation obligations | (5,272 | ) | ||
Balance at December 31, 2002 | 49,723 | |||
Accruals for estimated costs | 24,086 | |||
Adoption of SFAS No. 143 andsubsequent additions due to changes in reclamation plans | 1,744 | |||
Payment of reclamation obligations | (4,921 | ) | ||
Balance at December 31, 2003 | 70,632 | |||
Accruals for estimated costs | 10,271 | |||
Revision of estimated cash flows due to changes in reclamation plans | 569 | |||
Payment of reclamation obligations | (6,284 | ) | ||
Balance at December 31, 2004 | $ | 75,188 | ||
1. | An increase of approximately $0.7 million to accrued reclamation and closure costs to reflect the estimated present value of reclamation liabilities based on the discounted fair market value of future cash flows to settle the obligation; |
2. | An increase to the carrying amounts of the associated long-lived assets of approximately $3.3 million to capitalize the present value of the liabilities as of the date the obligation occurred, offset by $1.5 million of accumulated depletion through January 1, 2003; and |
3. | A cumulative effect of change in accounting principle of $1.1 million gain, reflecting the difference between those amounts and amounts previously recorded in our consolidated financial statements at January 1, 2003. |
2004 | 2003 | ||||||
Balance January 1 | $ | 7,631 | $ | 6,053 | |||
Changes in obligations due to changes inreclamation plans | (15 | ) | 1,031 | ||||
Accretion expense | 263 | 747 | |||||
Payment of reclamation obligations | (17 | ) | (200 | ) | |||
Balance December 31 | $ | 7,862 | $ | 7,631 |
For the Year Ended December 31, | ||||
2002 | ||||
Reported loss applicable to common shareholders | $ | (14,614 | ) | |
Adjustment to cost of sales and other directproduction costs | 1,038 | |||
Adjustment to depreciation, depletionand amortization | (523 | ) | ||
Pro forma loss applicable to common shareholders | $ | (14,099 | ) | |
Basic and diluted loss per share: | ||||
As reported | $ | (0.18 | ) | |
Pro forma | $ | (0.18 | ) |
2004 | 2003 | 2002 | ||||||||
Current: | ||||||||||
Federal | $ | 117 | $ | - - | $ | - - | ||||
State | 4 | 6 | - - | |||||||
Foreign | 347 | 534 | 382 |
Total current income tax provision | 468 | 540 | 382 | |||||||
Deferred: | ||||||||||
Federal | - - | - - | - - | |||||||
Foreign | 2,323 | 677 | (3,300 | ) | ||||||
Total deferred income tax provision(benefit) | 2,323 | 677 | (3,300 | ) |
Total income tax provision (benefit) | $ | 2,791 | $ | 1,217 | $ | (2,918 | ) |
2004 | 2003 | 2002 | ||||||||
Domestic | $ | (9,144 | ) | $ | (26,973 | ) | $ | (11,234 | ) | |
Foreign | 5,801 | 21,102 | 19,179 | |||||||
Total | $ | (3,343 | ) | $ | (5,871 | ) | $ | 7,945 |
December 31, | |||||||
2004 | 2003 | ||||||
Deferred tax assets: | |||||||
Accrued reclamation costs | $ | 26,043 | $ | 23,273 | |||
Investment valuation differences | 710 | 1,357 | |||||
Postretirement benefits other than pensions | 1,462 | 1,099 | |||||
Deferred compensation | 897 | 282 | |||||
Foreign net operating losses | 3,872 | 2,796 | |||||
Federal net operating losses | 110,399 | 118,014 | |||||
State net operating losses | 13,547 | 14,518 | |||||
Tax credit carryforwards | 2,604 | 1,362 | |||||
Miscellaneous | 2,973 | 1,663 | |||||
Total deferred tax assets | 162,507 | 164,364 | |||||
Valuation allowance | (155,968 | ) | (156,463 | ) | |||
Total deferred tax assets | 6,539 | 7,901 | |||||
Deferred tax liabilities: | |||||||
Pension costs | (4,783 | ) | (4,266 | ) | |||
Properties, plants and equipment | (699 | ) | (1,312 | ) | |||
Inventory | (1,057 | ) | - - | ||||
Total deferred tax liabilities | (6,539 | ) | (5,578 | ) | |||
Net deferred tax asset | $ | - - | $ | 2,323 |
2004 | 2003 | 2002 | ||||||||
Balance at beginning of year | $ | (156,463 | ) | $ | (150,165 | ) | $ | (153,214 | ) | |
Increase related to nonutilization of net operating loss carryforwards and nonrecognition of deferred tax assets due to uncertainty of recovery | (5,768 | ) | (12,408 | ) | - - | |||||
(Increase) decrease related to net recognition of foreign deferred tax asset | (2,323 | ) | (677 | ) | 3,000 | |||||
Decrease related to utilization and expiration of net operating loss carryforwards | 8,586 | 6,787 | 49 | |||||||
Balance at end of year | $ | (155,968 | ) | $ | (156,463 | ) | $ | (150,165 | ) |
2004 | 2003 | 2002 | |||||||||||||||||
Computed “statutory” (benefit)/provision | $ | (1,137 | ) | (34 | )% | $ | (1,996 | ) | (34 | )% | $ | 2,701 | 34 | % | |||||
Net increase (reduction) ofvaluation | |||||||||||||||||||
allowance on Mexican loss carryforward | 2,323 | 69 | 677 | 12 | (3,000 | ) | (38 | ) | |||||||||||
Nonutilization of net operating losses and | |||||||||||||||||||
effect of stateand foreign taxes | 1,605 | 48 | 2,536 | 43 | (2,619 | ) | (33 | ) | |||||||||||
$ | 2,791 | 83 | % | $ | 1,217 | 21 | % | $ | (2,918 | ) | (37 | )% |
Pension Benefits | Other Benefits | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
Change in benefit obligation: | |||||||||||||
Benefit obligation at beginning of year | $ | 54,927 | $ | 47,071 | $ | 1,531 | $ | 1,376 | |||||
Service cost | 578 | 649 | 6 | 6 | |||||||||
Interest cost | 3,185 | 2,978 | 90 | 88 | |||||||||
Participant transfers in | - - | 100 | - - | - - | |||||||||
Plan amendments | - - | 1,714 | - - | - - | |||||||||
Actuarial (gain) loss | 254 | 5,848 | (270 | ) | 124 | ||||||||
Benefits paid | (3,491 | ) | (3,433 | ) | (34 | ) | (63 | ) | |||||
Benefit obligation at end of year | 55,453 | 54,927 | 1,323 | 1,531 | |||||||||
Change in fair value of plan assets: | |||||||||||||
Fair value of plan assets at beginning of year | 66,414 | 60,397 | - - | - - | |||||||||
Actual return on plan assets | 8,370 | 9,076 | - - | - - | |||||||||
Employer and employee contributions | 363 | 374 | 34 | 63 | |||||||||
Benefits paid | (3,491 | ) | (3,433 | ) | (34 | ) | (63 | ) | |||||
Fair value of plan assets at end of year | 71,656 | 66,414 | - - | - - | |||||||||
Funded status at end of year | 16,203 | 11,487 | (1,323 | ) | (1,531 | ) | |||||||
Unrecognized net actuarial gain | (7,015 | ) | (3,992 | ) | (338 | ) | (76 | ) | |||||
Unrecognized transition obligation | 3 | 7 | - - | - - | |||||||||
Unamortized prior-service cost | 2,972 | 3,361 | (17 | ) | 59 | ||||||||
Net amount recognized in consolidated | |||||||||||||
balance sheets | $ | 12,163 | $ | 10,863 | $ | (1,678 | ) | $ | (1,548 | ) | |||
Pension Benefits | Other Benefits | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
Other noncurrent assets: | |||||||||||||
Prepaid benefit costs | $ | 14,069 | $ | 12,547 | $ | - - | $ | - - | |||||
Other noncurrent liabilities: | |||||||||||||
Accrued benefit liability | (4,078 | ) | (3,960 | ) | (1,678 | ) | (1,548 | ) | |||||
Intangible asset | 804 | 876 | - - | - - | |||||||||
Accumulated other comprehensive income (loss) | 1,368 | 1,400 | - - | - - | |||||||||
Net amount recognized | $ | 12,163 | $ | 10,863 | $ | (1,678 | ) | $ | (1,548 | ) | |||
Pension Benefits | Other Benefits | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
Discount rate | 6.00 | % | 6.00 | % | 6.00 | % | 6.00 | % | |||||
Expected rate on plan assets | 8.00 | % | 8.00 | % | - - | - - | |||||||
Rate of compensation increase | 4.00 | % | 4.00 | % | - - | - - | |||||||
Pension Benefits | Other Benefits | ||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | ||||||||||||||
Service cost | $ | 578 | $ | 649 | $ | 534 | $ | 6 | $ | 6 | $ | 9 | |||||||
Interest cost | 3,186 | 2,978 | 2,814 | 90 | 88 | 183 | |||||||||||||
Expected return on plan assets | (5,180 | ) | (4,733 | ) | (4,585 | ) | - - | - - | - - | ||||||||||
Amortization of transitionasset (obligation) | 5 | 5 | 23 | - - | - - | - - | |||||||||||||
Amortization of unrecognized prior | |||||||||||||||||||
service cost | 389 | 542 | 439 | 76 | 75 | 75 | |||||||||||||
Amortization of unrecognized net | |||||||||||||||||||
gain (loss) from earlier periods | 86 | (65 | ) | 15 | (8 | ) | (22 | ) | (18 | ) | |||||||||
Net periodic pension cost (income) | $ | (936 | ) | $ | (624 | ) | $ | (760 | ) | $ | 164 | $ | 147 | $ | 249 |
Hecla Plan | Lucky Friday Plan | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
Interest-bearing cash | 8 | % | 27 | % | 13 | % | 28 | % | |||||
Equity securities | 40 | % | 33 | % | 38 | % | 33 | % | |||||
Debt securities | 37 | % | 29 | % | 34 | % | 28 | % | |||||
Real estate | 0 | % | 0 | % | 0 | % | 0 | % | |||||
Absolute return | 10 | % | 0 | % | 10 | % | 0 | % | |||||
Precious metals and other natural resources | 5 | % | 11 | % | 5 | % | 11 | % | |||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | |||||
Equity Portion | 30-46 | % | ||
Fixed Income Portion | 29-43 | % | ||
Real Estate Portion | 8-12 | % | ||
Absolute Return Portion | 8-12 | % | ||
Precious Metals andOther Natural Resources Portion | 5-10 | % |
Year Ending December 31, | Hecla Plan | Lucky Friday Plan | |||||
2005 | $ | 2,633 | $ | 688 | |||
2006 | 2,610 | 764 | |||||
2007 | 2,579 | 755 | |||||
2008 | 2,579 | 806 | |||||
2009 | 2,581 | 866 | |||||
Years 2010-2014 | 13,512 | 4,545 |
Year Ended December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||
Number of shares of Series B preferred stock exchanged for shares of common stock | 306,961 | 288,625 | 1,546,598 | |||||||
Number of shares of common stock issued | 2,436,098 | 2,183,719 | 10,826,186 | |||||||
Non-cash preferred stock dividend incurred in exchange (millions of dollars)(1) | $ | 10.9 | $ | 9.6 | $ | 17.6 | ||||
2004 | 2003 | 2002 | ||||||||
Expected dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | ||||
Expected stock price volatility | 70.86 | % | 77.38 | % | 78.89 | % | ||||
Risk-free interest rate | 2.59 | % | 1.90 | % | 2.09 | % | ||||
Expected life of options | 2.8 years | 3.2 years | 3.0 years | |||||||
Weighted Average | |||||||
Shares | Exercise Price | ||||||
Outstanding, December 31, 2001 | 2,391,000 | $ | 3.89 | ||||
Year ended December 31, 2002 | |||||||
Granted | 1,095,000 | $ | 3.25 | ||||
Exercised | (634,330 | ) | $ | 1.85 | |||
Expired | (50,000 | ) | $ | 9.75 | |||
Outstanding, December 31, 2002 | 2,801,670 | $ | 3.99 | ||||
Year ended December 31, 2003 | |||||||
Granted | 1,186,000 | $ | 4.95 | ||||
Exercised | (1,933,434 | ) | $ | 3.43 | |||
Expired | (1,334 | ) | $ | 3.23 | |||
Outstanding, December 31, 2003 | 2,052,902 | $ | 5.08 | ||||
Year ended December 31, 2004 | |||||||
Granted | 752,000 | $ | 5.99 | ||||
Exercised | (340,234 | ) | $ | 4.34 | |||
Expired | (52,000 | ) | $ | 9.58 | |||
Outstanding, December 31, 2004 | 2,412,668 | $ | 5.37 | ||||
2004 | 2003 | 2002 | ||||||||
Exercisable options | 2,362,668 | 2,052,902 | 2,467,714 | |||||||
Weighted average exercise price | $ | 5.35 | $ | 5.08 | $ | 4.09 |
Weighted Average | |||||||||||||
Range of | Exercise | Remaining | |||||||||||
Shares | Exercise Price | Price | Life (years) | ||||||||||
Exercisable options | 159,000 | $ | 1.13 - $1.31 | $ | 1.13 | 1.6 | |||||||
Exercisable options | 189,168 | $ | 2.88 - $3.23 | $ | 3.23 | 0.5 | |||||||
Exercisable options | 438,000 | $ | 4.10 - $5.19 | $ | 4.48 | 2.6 | |||||||
Exercisable options | 1,413,500 | $ | 5.63 - $8.00 | $ | 6.00 | 3.4 | |||||||
Exercisable options | 163,000 | $ | 8.63 - $9.34 | $ | 8.69 | 0.9 | |||||||
Total exercisable options | 2,362,668 | $ | 1.13 - $9.34 | $ | 5.36 | 2.8 | |||||||
Unexercisable options | 50,000 | $ | 5.99 | $ | 5.99 | 4.5 | |||||||
Total all options | 2,412,668 | $ | 1.13 - $9.34 | $ | 5.37 | 2.8 | |||||||
Maturity Date | ||||
2005 | ||||
Lead contract (metric tons) | 4,050 | |||
Future price (per tonne) | $ | 782.40 | ||
Contract amount (in thousands) | $ | 3,169 | ||
Estimated fair value (in thousands) | $ | (904) | (a) | |
Estimated % of annual lead production | ||||
Committed to contracts | 19 | % |
(a) | The estimated fair value is determined based on information as of December 31, 2004 provided by our counterparties and represents an approximation of the amount we would have to pay the counterparties to close out the positions at December 31, 2004. |
At January 1, 2004 | $ | - - | ||
Change in fair value | (1,208 | ) | ||
Hedge losses transferred to earnings | 310 | (a) | ||
Hedge ineffectiveness transferred to earnings | 135 | (b) | ||
At December 31, 2004 | $ | (763 | ) |
(a) | Included as sales on the consolidated statement of operations. |
(b) | Included as sales on the consolidated statement of operations. A portion of our smelter treatment charge is linked to the lead price. As the lead price increases our treatment charge also increases, thus creating the hedge to be less than 100% effective. Inception to date, our lead hedges have been approximately 82% effective. The ineffective portion of the hedge has been reclassed to sales in each reporting period. |
Year Ended December 31, | ||||||||||
Segment | 2004 | 2003 | 2002 | |||||||
United States | 40.3 | % | 35.9 | % | 31.1 | % | ||||
Venezuela | 36.6 | % | 33.7 | % | 46.6 | % | ||||
Mexico | 23.1 | % | 30.0 | % | 22.3 | % | ||||
Other | - - | 0.4 | % | - - |
2004 | 2003 | 2002 | ||||||||
Net sales to unaffiliated customers: | ||||||||||
United States | $ | 52,713 | $ | 41,685 | $ | 32,873 | ||||
Venezuela | 47,884 | 39,192 | 49,296 | |||||||
Mexico | 30,229 | 34,956 | 23,531 | |||||||
Other | - - | 520 | - - | |||||||
$ | 130,826 | $ | 116,353 | $ | 105,700 | |||||
Income (loss) from operations: | ||||||||||
United States | $ | 12,730 | $ | 4,323 | $ | (1,476 | ) | |||
Venezuela | 6,718 | 10,344 | 15,181 | |||||||
Mexico | 3,557 | 11,906 | 5,954 | |||||||
Other | (27,771 | ) | (33,627 | ) | (10,318 | ) | ||||
$ | (4,766 | ) | $ | (7,054 | ) | $ | 9,341 | |||
Capital expenditures (includingnon-cash additions): | ||||||||||
United States | $ | 8,610 | $ | 1,887 | $ | 2,856 | ||||
Venezuela | 31,848 | 13,879 | 8,564 | |||||||
Mexico | 984 | 3,863 | 1,834 | |||||||
Other | 354 | 1,156 | 1,997 | |||||||
$ | 41,796 | $ | 20,785 | $ | 15,251 | |||||
Depreciation, depletion and amortization: | ||||||||||
United States | $ | 6,454 | $ | 7,986 | $ | 8,342 | ||||
Venezuela | 11,439 | 8,538 | 11,273 | |||||||
Mexico | 3,659 | 3,597 | 2,921 | |||||||
Other | 326 | 341 | 116 | |||||||
$ | 21,878 | $ | 20,462 | $ | 22,652 | |||||
Other significant non-cash items: | ||||||||||
United States | $ | 192 | $ | 217 | $ | 714 | ||||
Venezuela | 43 | (475 | ) | 2,638 | ||||||
Mexico | 223 | 165 | 403 | |||||||
Other | 9,813 | 23,120 | 2,213 | |||||||
$ | 10,271 | $ | 23,027 | $ | 5,968 |
2004 | 2003 | 2002 | ||||||||
Identifiable assets: | ||||||||||
United States | $ | 77,692 | $ | 71,539 | $ | 68,954 | ||||
Venezuela | 80,198 | 47,538 | 40,004 | |||||||
Mexico | 23,362 | 17,837 | 13,568 | |||||||
Discontinued operations | - - | - - | 686 | |||||||
Other | 98,196 | 141,281 | 36,929 | |||||||
$ | 279,448 | $ | 278,195 | $ | 160,141 | |||||
2004 | 2003 | 2002 | ||||||||
United States | $ | 3,474 | $ | 13,698 | $ | 7,779 | ||||
Canada | 46,174 | 21,698 | 13,276 | |||||||
Mexico | 9,193 | 14,468 | 22,929 | |||||||
United Kingdom | 40,825 | 16,970 | 28,070 | |||||||
Japan | 17,069 | 34,500 | 24,090 | |||||||
Korea | 12,164 | 8,407 | 5,456 | |||||||
Other foreign | 1,927 | 6,612 | 4,100 | |||||||
$ | 130,826 | $ | 116,353 | $ | 105,700 | |||||
2004 | 2003 | 2002 | ||||||||
United States | $ | 59,365 | $ | 57,443 | $ | 61,281 | ||||
Venezuela | 48,773 | 28,811 | 23,000 | |||||||
Mexico | 6,377 | 9,061 | 8,084 | |||||||
$ | 114,515 | $ | 95,315 | $ | 92,365 |
2004 | 2003 | 2002 | ||||||||
Teck Cominco Ltd. | 20.2 | % | 21.1 | % | 12.6 | % | ||||
Standard Bank London | 19.4 | % | 15.2 | % | 24.8 | % | ||||
Scotia Mocatta | 15.7 | % | 1.4 | % | - - | % | ||||
HSBC Bank USA | 9.5 | % | 9.0 | % | 6.1 | % | ||||
Korea Zinc | 8.0 | % | 5.5 | % | 4.0 | % | ||||
Mitsubishi International Corp. | 7.5 | % | 26.2 | % | 19.9 | % | ||||
Met-Mex Peñoles, S.A. de C.V. | 7.2 | % | 13.7 | % | 21.7 | % |
December 31, | |||||||||||||
2004 | 2003 | ||||||||||||
Carrying | Fair | Carrying | Fair | ||||||||||
Amounts | Value | Amounts | Value | ||||||||||
Financial assets (liabilities): | |||||||||||||
Short-term investments | $ | 28,178 | $ | 28,178 | $ | 18,003 | $ | 18,003 | |||||
Investments | $ | 19,789 | $ | 19,789 | $ | 722 | $ | 722 | |||||
Gold lease rate swap | $ | - - | $ | - - | $ | 169 | $ | 169 | |||||
Long-term debt | $ | - - | $ | - - | $ | (4,673 | ) | $ | (4,673 | ) | |||
Gold forward sales contracts | $ | - - | $ | - - | $ | - - | $ | (6,300 | ) | ||||
Lead forward sales contracts | $ | (897 | ) | $ | (897 | ) | $ | - - | $ | - - |
2004 | 2003 | 2002 | ||||||||
Income (loss) before cumulative effect of change in | ||||||||||
accounting principle and preferred stock dividends | $ | (6,134 | ) | $ | (7,088 | ) | $ | 8,639 | ||
Add: Cumulative effect of change in accountingprinciple | - - | 1,072 | - - | |||||||
Less: Preferred stock dividends | (11,602 | ) | (12,154 | ) | (23,253 | ) | ||||
Basic and diluted loss applicable to commonShareholders | $ | (17,736 | ) | $ | (18,170 | ) | $ | (14,614 | ) | |
Basic and dilutive weighted average shares | 118,048 | 110,610 | 80,250 | |||||||
Basic and diluted loss per common share | $ | (0.15 | ) | $ | (0.16 | ) | $ | (0.18 | ) |
2004 | 2003 | 2002 | ||||||||
1995 Stock Incentive Plan | ||||||||||
Stock options | 2,412,668 | 2,052,902 | 2,801,670 | |||||||
2002 Key Employee Deferred Compensation Plan | ||||||||||
Stock options | 544,347 | 202,218 | 7,613 | |||||||
Restricted Stock Units | 185,500 | - - | - - | |||||||
Warrants | -- | - - | 2,000,000 | |||||||
Total | |||||||||||||
Unrealized | Minimum | Accumulated | |||||||||||
Gains | Pension | Change in | Other | ||||||||||
(Losses) | Liability | Derivative | Comprehensive | ||||||||||
On Securities | Adjustment | Contracts | Income (Loss) | ||||||||||
Balance January 1, 2002 | 14 | - - | 159 | 173 | |||||||||
2002 change | 9 | - - | (218 | ) | (209 | ) | |||||||
Balance December 31, 2002 | 23 | - - | (59 | ) | (36 | ) | |||||||
2003 change | 647 | (1,400 | ) | 36 | (717 | ) | |||||||
Balance December 31, 2003 | 670 | (1,400 | ) | (23 | ) | (753 | ) | ||||||
2004 change | 2,481 | 32 | (740 | ) | 1,773 | ||||||||
Balance December 31, 2004 | $ | 3,151 | $ | (1,368 | ) | $ | (763 | ) | $ | 1,020 |
Balance Sheet | 2004 | 2003 | |||||
Assets: | |||||||
Current assets | $ | 31,996 | $ | 46,715 | |||
Properties, plants and equipment, net | 122,955 | 134,383 | |||||
Securities held for reclamation fund | 26,499 | - - | |||||
Total assets | $ | 181,450 | $ | 181,098 | |||
Liabilities and equity: | |||||||
Liabilities | $ | 29,495 | $ | 27,150 | |||
Equity | 151,955 | 153,948 | |||||
Total liabilities and equity | $ | 181,450 | $ | 181,098 |
Summary of Operations | 2004 | 2003 | 2002 | |||||||
Net revenue | $ | 123,751 | $ | 105,259 | $ | 85,190 | ||||
Operating income | $ | 29,558 | $ | 17,406 | $ | 5,274 | ||||
Net income | $ | 30,007 | $ | 15,130 | $ | 5,437 |
2002 | ||||
Sales of products | $ | 4,221 | ||
Cost of sales | 5,145 | |||
Depreciation, depletion and amortization | 116 | |||
5,261 | ||||
Gross loss | (1,040 | ) |
Loss from operations | (1,040 | ) | ||
Other expense: | ||||
Miscellaneous expense | (1,178 | ) | ||
Interest expense | (6 | ) | ||
(1,184 | ) | |||
Loss from discontinued operations beforeincome taxes | (2,224 | ) | ||
Income tax provision | - - | |||
Loss from discontinued operations | $ | (2,224 | ) | |
F-54 |
Hecla Mining Company and Wholly Owned Subsidiaries
Form 10-K – December 31, 2004
Index to Exhibits
3.1 | Certificate of Incorporation of the Registrant as amended to date. Filed as exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 and incorporated herein by reference. |
3.2 | By-Laws of the Registrant as amended to date.* |
4.1(a) | Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock of the Registrant. Filed as exhibit 4.1(d)(e) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference. |
4.1(b) | Certificate of Designations, Preferences and Rights of Series B Cumulative Convertible Preferred Stock of the Registrant. Filed as exhibit 4.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference. |
4.2 | Rights Agreement dated as of May 10, 1996, between Hecla Mining Company and American Stock Transfer & Trust Company, which includes the form of Rights Certificate of Designation setting forth the terms of the Series A Junior Participating Preferred Stock of Hecla Mining Company as Exhibit A and the summary of Rights to Purchase Preferred Shares as Exhibit B. Filed as exhibit 4 to Registrant’s Current Report on Form 8-K dated May 10, 1996 and incorporated herein by reference. |
4.3 | Stock Purchase Agreement dated as of August 27, 2001, between Hecla Mining Company and Copper Mountain Trust. Filed as exhibit 4.3 to Registrant’s Registration Statement on Form S-1 filed on October 7, 2002 (File No. 333-100395) and incorporated herein by reference. |
4.4 | Warrant Agreement dated August 2, 2002, between Hecla Mining Company and Great Basin Gold Ltd. Filed as exhibit 4.4 to Registrant’s Registration Statement on Form S-1 filed on October 7, 2002 (File No. 333-100395) and incorporated herein by reference. |
4.5 | Registration Rights Agreement dated August 2, 2002, between Hecla Mining Company and Great Basin Gold Ltd. Filed as exhibit 4.5 to Registrant’s Registration Statement on Form S-1 filed on October 7, 2002 (File No. 333-100395) and incorporated herein by reference. |
10.1 | Employment agreement dated November 6, 2001, between Hecla Mining Company and Phillips S. Baker, Jr. (Registrant has substantially identical agreements with each of Messrs. Thomas F. Fudge, Jr., Michael H. Callahan, Ronald W. Clayton, Lewis E. Walde and Ms. Vicki Veltkamp. Such substantially identical agreements are not included as separate exhibits.) Filed as exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 and incorporated by herein by reference. (1) |
10.2(a) | 1987 Nonstatutory Stock Option Plan of the Registrant. Filed as exhibit B to Registrant’s Proxy Statement dated March 20, 1987 and incorporated herein by reference. (1) |
10.2(b) | Hecla Mining Company 1995 Stock Incentive Plan, as amended. (1)* |
10.2(c) | Hecla Mining Company Stock Plan for Nonemployee Directors, as amended. (1)* |
10.2(d) | Hecla Mining Company Key Employee Deferred Compensation Plan. Filed as exhibit 4.3 to Registrant’s Registration Statement on Form S-8 filed on July 24, 2002 (File No. 333-96995) and incorporated herein by reference. (1) |
10.2(e) | Hecla Mining Company form of Non-Qualified Stock Option Agreement (Under the Key Employee Deferred Compensation Plan) entered into between Hecla Mining Company and participants under the Key Employee Deferred Compensation Plan. Filed as Exhibit 10.2(e) to Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 and incorporated herein by reference. (1) |
10.3(a) | Hecla Mining Company Retirement Plan for Employees and Supplemental Retirement and Death Benefit Plan. Filed as exhibit 10.11(a) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1985 and incorporated herein by reference. (1) |
10.3(b) | Supplemental Excess Retirement Master Plan Documents. Filed as exhibit 10.5(b) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. (1) |
10.3(c) | Hecla Mining Company Nonqualified Plans Master Trust Agreement. Filed as exhibit 10.5(c) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. (1) |
10.4 | Form of Indemnification Agreement dated December 14, 2004, between Hecla Mining Company and Arthur Brown (Registrant has substantially identical agreements with each of Messrs. David J. Christensen, John E. Clute, Ted Crumley, Charles L. McAlpine, George R. Nethercutt, Jr. (dated February 25, 2005), Jorge E. Ordonez C., Anthony P. Taylor, Phillips S. Baker, Jr., Thomas F. Fudge, Jr., Lewis E. Walde, Ian Atkinson, Ronald W. Clayton, Michael H. Callahan and Ms. Vicki Veltkamp. Such substantially identical agreements are not included as separate exhibits.) (1)* |
10.5(a) | Hecla Mining Company Performance Pay Compensation Plan. (1) * |
10.5(b) | Written description of objectives for 2004 under the Hecla Mining Company Performance Payment Plan. Filed as exhibit 10.6(b) to Registrant’s Amendment No. 1 on Form 10-Q/A for the quarter ended March 31, 2004, filed on March 16, 2005 and incorporated herein by reference. (1) |
10.5(c) | Written description of objectives for 2005 under the Hecla Mining Company Performance Payment Plan. (1) * |
10.5(d) | Written description of the Hecla Mining Company Executive and Senior Management Long-Term Performance Payment Plan. Filed as exhibit 10.7(b) to Registrant’s Amendment No. 1 on Form 10-Q/A for the quarter ended June 30, 2003, filed on March 15, 2005 and incorporated herein by reference. (1) |
10.5(e) | Written description of objectives for the 2004-2006 plan period under the Hecla Mining Company Executive and Senior Management Long-Term Performance Payment Plan, which Plan was previously filed as exhibit 10.7(b) to Registrant’s Amendment No. 1 on Form 10-Q/A for the quarter ended June 30, 2003, filed on March 15, 2005. Filed as exhibit 10.6(c) to Registrant’s Amendment No. 1 on Form 10-Q/A for the quarter ended March 31, 2004, filed on March 16, 2005 and incorporated herein by reference. (1) |
10.6(a) | Amended and Restated Golden Eagle Earn-in Agreement between Echo Bay Mines Ltd. (successor in interest to Newmont Mining Corp./Santa Fe Pacific Gold Corp.) and Hecla Mining Company dated September 6, 1996. Filed as exhibit 10.11(a) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference. |
10.6(b) | Golden Eagle Operating Agreement between Echo Bay Mines Ltd. (successor in interest to Newmont Mining Corp./Santa Fe Pacific Gold Corp.) and Hecla Mining Company dated September 6, 1996. Filed as exhibit 10.11(b) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and incorporated herein by reference. |
10.6(c) | First Amendment to the Amended and Restated Golden Eagle Earn-in Agreement effective September 5, 2002, by and between Echo Bay Mines Ltd. and Hecla Mining Company. Filed as exhibit 10.6(c) to Registrant’s Registration Statement on Form S-1 filed on October 7, 2002 (File No. 333-100395) and incorporated herein by reference. |
10.7 | Restated Mining Venture Agreement among Kennecott Greens Creek Mining Company, Hecla Mining Company and CSX Alaska Mining Inc. dated May 6, 1994. Filed as exhibit 99.A to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 and incorporated herein by reference. |
10.8 | Stock Purchase Agreement dated February 27, 2001, between Hecla Mining Company and IMERYS USA, Inc. Filed as exhibit 99 to Registrant’s Current Report on Form 8-K dated March 27, 2001 and incorporated herein by reference. |
10.9 | Real Estate Purchase and Sale Agreement between Hecla Mining Company and JDL Enterprises, LLC, dated October 19, 2001. Filed as exhibit 10.21 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference. |
10.10 | Earn-in Agreement dated August 2, 2002, between Hecla Ventures Corp. and Rodeo Creek Gold Inc. Filed as exhibit 10.19 to Registrant's Registration Statement on Form S-1 filed on October 7, 2002 (File No. 333-100395) and incorporated herein by reference. |
10.11 | Lease Agreement dated September 5, 2002 between Hecla Mining Company and CVG-Minerven. Filed as exhibit 10.20 to Registrant’s Registration Statement on Form S-1 filed on October 7, 2002 (File No. 333 – 100395) and incorporated herein by reference. |
10.12 | Agreement No. C-020 between Minera Hecla Venezolana, C.A. and Redpath Venezolana, C.A., dated October 31, 2003, for the construction of the La Camorra mine production shaft facility. Filed as exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference. |
11. | Computation of weighted average number of common shares outstanding.* |
21. | List of subsidiaries of the Registrant.* |
23.1 | Consent of PricewaterhouseCoopers LLP.* |
23.2 | Consent of BDO Seidman, LLP.* |
31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
32.2 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
_________________
(1) Indicates a management contract or compensatory plan or arrangement.
* Filed herewith