1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission file number 1-8491
---------------------------------------------------------
HECLA MINING COMPANY
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 82-0126240
- --------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83815-8788
- ---------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
208-769-4100
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes XX . No .
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding October 31, 2000
- -------------------------- ----------------------------
Common stock, par value 66,797,641 shares
$0.25 per share
2
Hecla Mining Company and Subsidiaries
Form 10-Q
For the Quarter Ended September 30, 2000
I N D E X*
Page
PART I. - Financial Information
Item l - Consolidated Balance Sheets - September 30,
2000 and December 31, 1999 3
- Consolidated Statements of Operations and
Comprehensive Loss - Three Months and Nine
Months Ended September 30, 2000 and 1999 4
- Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 2000 and 1999 5
- Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
PART II. - Other Information
Item 1 - Legal Proceedings 32
Item 6 - Exhibits and Reports on Form 8-K 36
*Items omitted are not applicable.
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Part I - Financial Information
Hecla Mining Company and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(In thousands, except share data)
September 30, December 31,
2000 1999
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,486 $ 2,719
Accounts and notes receivable 26,801 29,202
Inventories 17,824 24,033
Other current assets 3,529 2,548
---------- ----------
Total current assets 52,640 58,502
Investments 793 2,130
Restricted investments 6,262 5,998
Properties, plants and equipment, net 173,028 191,026
Other noncurrent assets 11,679 10,701
---------- ----------
Total assets $ 244,402 $ 268,357
========== ==========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 11,260 $ 12,135
Accrued payroll and related benefits 6,220 4,394
Preferred stock dividends payable 2,012 2,012
Current portion of long-term debt 57,000 782
Accrued taxes 2,500 2,369
Accrued reclamation and closure costs 15,563 8,384
---------- ----------
Total current liabilities 94,555 30,076
Deferred income taxes 300 300
Long-term bank debt 11,704 55,095
Accrued reclamation and closure costs 30,190 40,941
Other noncurrent liabilities 8,558 9,244
---------- ----------
Total liabilities 145,307 135,656
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $0.25 par value, authorized 5,000,000 shares; issued
and outstanding - 2,300,000 shares, liquidation preference $117,012 575 575
Common stock, $0.25 par value, authorized 100,000,000 shares;
issued 2000 - 66,859,752 shares, issued 1999 - 66,844,575 shares 16,715 16,711
Capital surplus 400,236 400,205
Accumulated deficit (312,224) (278,533)
Accumulated other comprehensive loss (4,807) (4,871)
Less stock held by grantor trust; 2000 - 139,467, 1999 - 132,290 common shares (514) (500)
Less treasury stock, at cost; 2000 and 1999 - 62,111 common shares (886) (886)
---------- ----------
Total shareholders' equity 99,095 132,701
---------- ----------
Total liabilities and shareholders' equity $ 244,402 $ 268,357
========== ==========
The accompanying notes are an integral part of the consolidated financial statements.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(Dollars and shares in thousands, except for per-share amounts)
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
Sept 30, 2000 Sept 30, 1999 Sept 30, 2000 Sept 30, 1999
------------- ------------- ------------- -------------
Sales of products $ 37,916 $ 38,305 $ 118,490 $ 126,021
--------- --------- --------- ---------
Cost of sales and other direct production costs 31,028 30,281 98,967 96,708
Depreciation, depletion and amortization 5,000 5,404 17,076 17,348
--------- --------- --------- ---------
36,028 35,685 116,043 114,056
--------- --------- --------- ---------
Gross profit 1,888 2,620 2,447 11,965
--------- --------- --------- ---------
Other operating expenses:
General and administrative 1,735 1,835 6,092 5,648
Exploration 1,992 1,739 5,378 3,919
Depreciation and amortization 69 75 213 248
Provision for closed operations and
environmental matters 522 27,923 4,020 28,533
Reduction in carrying value of mining properties - - 4,077 9,072 4,077
--------- --------- --------- ---------
4,318 35,649 24,775 42,425
--------- --------- --------- ---------
Loss from operations (2,430) (33,029) (22,328) (30,460)
--------- --------- --------- ---------
Other income (expense):
Interest and other income 1,508 772 3,975 3,291
Miscellaneous expense (531) (349) (2,632) (1,180)
Loss on investments - - (96) - - (96)
Interest expense:
Total interest cost (2,116) (1,234) (5,843) (3,116)
Less amount capitalized - - 19 - - 19
--------- --------- --------- ---------
(1,139) (888) (4,500) (1,082)
--------- --------- --------- ---------
Loss before income taxes, cumulative effect of change
in accounting principle and extraordinary item (3,569) (33,917) (26,828) (31,542)
Income tax provision (53) (85) (178) (239)
--------- --------- --------- ---------
Loss before cumulative effect of change in accounting
principle and extraordinary item (3,622) (34,002) (27,006) (31,781)
Extraordinary item, net of income tax - - - - (647) - -
Cumulative effect of change in accounting principle,
net of income tax - - - - - - (1,385)
--------- --------- --------- ---------
Net loss (3,622) (34,002) (27,653) (33,166)
Preferred stock dividends (2,013) (2,013) (6,038) (6,038)
--------- --------- --------- ---------
Loss applicable to common shareholders (5,635) (36,015) (33,691) (39,204)
--------- --------- --------- ---------
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities (150) - - 64 40
Reclassification adjustment for loss included
in net loss - - 96 - - 96
--------- --------- --------- ---------
Other comprehensive income (loss) (150) 96 64 136
--------- --------- --------- ---------
Comprehensive loss applicable to common shareholders $ (5,785) $ (35,919) $ (33,627) $ (39,068)
========= ========= ========= =========
Basic and diluted loss per common share before cumulative
effect of change in accounting principle $ (0.08) $ (0.54) $ (0.49) $ (0.62)
Extraordinary item - - - - (0.01) - -
Cumulative effect of change in accounting principle - - - - - - (0.02)
--------- --------- --------- ---------
Basic and diluted loss per common share $ (0.08) $ (0.54) $ (0.50) $ (0.64)
========= ========= ========= =========
Cash dividends per common share $ - - $ - - $ - - $ - -
========= ========= ========= =========
Weighted average number of common shares outstanding 66,798 66,716 66,789 60,868
========= ========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended
-----------------------------
Sept 30, 2000 Sept 30, 1999
------------- -------------
Operating activities:
Net loss $ (27,653) $ (33,166)
Noncash elements included in net loss:
Depreciation, depletion and amortization 17,289 17,596
Cumulative effect of change in accounting principle - - 1,385
Extraordinary charge 647 - -
Loss on sale of MWP division of MWCA 929 - -
Gain on disposition of properties, plants and equipment (1,292) (1,548)
Loss on investments - - 96
Reduction in carrying value of mining properties 9,072 4,077
Provision for reclamation and closure costs 2,124 28,049
Change in assets and liabilities net of effects from purchase of
Monarch Resources Investments Limited:
Accounts and notes receivable 2,510 (5,199)
Income tax refund receivable - - 1,079
Inventories (1,829) 1,466
Other current and noncurrent assets (578) (1,341)
Accounts payable and accrued expenses (1,472) (5,874)
Accrued payroll and related benefits 1,826 1,640
Accrued taxes 131 1,737
Accrued reclamation and other noncurrent liabilities (6,410) (5,590)
--------- ---------
Net cash provided (used) by operating activities (4,706) 4,407
--------- ---------
Investing activities:
Proceeds from sale of MWCA 9,677 - -
Purchase of Monarch Resources Investments Limited, net of cash acquired - - (9,183)
Additions to properties, plants and equipment (11,455) (9,512)
Proceeds from disposition of properties, plants and equipment 1,946 1,991
Proceeds from the sale of investments 283 311
Decrease (increase) in restricted investments (264) 369
Purchase of investments and change in cash surrender value
of life insurance, net 1,114 11
Other, net 175 325
--------- ---------
Net cash provided (used) by investing activities 1,476 (15,688)
--------- ---------
Financing activities:
Common stock issued under stock and stock option plans 35 20
Issuance of common stock, net of offering costs - - 12,104
Preferred stock dividends (6,038) (6,038)
Payment for debt issuance costs (1,811) (995)
Borrowings against cash surrender value of life insurance - - 925
Borrowings on long-term debt 79,500 45,536
Repayments on long-term debt (66,689) (36,652)
--------- ---------
Net cash provided by financing activities 4,997 14,900
--------- ---------
Net increase in cash and cash equivalents 1,767 3,619
Cash and cash equivalents at beginning of period 2,719 2,480
--------- ---------
Cash and cash equivalents at end of period $ 4,486 $ 6,099
========= =========
The accompanying notes are an integral part of the consolidated financial statements.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Notes to Consolidated Financial Statements
Note 1.
The notes to the consolidated financial statements as of December 31, 1999,
as set forth in Hecla Mining Company's (Hecla) 1999 Annual Report on Form 10-K,
substantially apply to these interim consolidated financial statements and are
not repeated here. For additional information, please refer to such notes.
Note 2.
The financial information given in the accompanying unaudited interim
consolidated financial statements reflects all adjustments which, in the opinion
of management, are necessary to a fair statement of the results for the interim
periods reported. All such adjustments are of a normal recurring nature with
the exception of an adjustment recognized in 2000 for the early extinguishment
of debt as described in Note 8 and an adjustment recognized in 1999 for the
cumulative effect of a change in accounting principle. All financial statements
presented herein are unaudited. However, the balance sheet as of December 31,
1999, was derived from the audited consolidated balance sheet referenced in
Note 1 above. Certain consolidated financial statement amounts have been
reclassified to conform to the 2000 presentation. These reclassifications had
no effect on the net loss or accumulated deficit as previously reported.
Note 3.
On March 15, 2000, Hecla completed the sale of its MWCA - Mountain West
Products (MWP) division for $8.5 million in cash. The sale of MWP resulted in a
loss on disposal of $0.9 million. The proceeds from the sale were used to pay
down amounts outstanding under Hecla's previously existing revolving credit
facility. On June 5, 2000 Hecla completed a sale of the landscape operations of
the Colorado Aggregate Division (CAC) of MWCA for $1.1 million in cash. The
sale of the CAC landscape operations did not result in a gain or loss. Hecla is
currently negotiating with third parties for a potential sale of the remaining
assets of the Colorado Aggregate division of MWCA, although there can be no
assurance that a sales transaction will be completed.
Note 4.
In the second quarter of 2000, Hecla recorded adjustments totaling $10.3
million for asset write-downs and future reclamation and closure costs. This
total includes an asset write-down for the property, plant, and equipment and
supply inventory at the Rosebud mine, in which Hecla owns an approximate 51%
interest, of $4.4 million. The adjustment at Rosebud
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
was necessitated due to the closure of the Rosebud mine previously announced by
Hecla and Newmont, Hecla's joint venture partner. The Rosebud mine completed
mining activity on July 31, 2000, with the completion of milling activities in
August 2000. An adjustment for future closure costs and reclamation activities
totaling approximately $0.7 million was also recorded for the Rosebud mine. An
asset write-down of $4.7 million was recorded for previously capitalized
development costs at the Noche Buena gold property in Mexico. Development
activity at the Noche Buena property was previously suspended due to low gold
prices. The continuation of lower gold prices resulted in Hecla's decision to
reduce the carrying value of Noche Buena. Additionally, Hecla recorded $0.6
million in accruals for reclamation and environmental matters at various other
properties in the second quarter.
Note 5.
The components of the income tax provision for the nine months ended
September 30, 2000 and 1999 were as follows (in thousands):
2000 1999
------ ------
Current:
State income taxes $ 166 $ 204
Federal income taxes - - 2
Foreign income taxes 12 33
------ ------
Total $ 178 $ 239
====== ======
Hecla's income tax provision for the first nine months of 2000 and 1999
varies from the amount that would have been provided by applying the statutory
rate to the income (loss) before income taxes primarily due to the inability to
use tax losses in 2000 and 1999.
Note 6.
Inventories consist of the following (in thousands):
Sept. 30, Dec. 31,
2000 1999
--------- --------
Concentrates, bullion, metals
in transit and other products $ 6,535 $ 3,947
Industrial mineral products 3,171 9,275
Materials and supplies 8,118 10,811
-------- --------
$ 17,824 $ 24,033
======== ========
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
At September 30, 2000, Hecla had forward sales commitments through December
31, 2004 for 244,605 ounces of gold at an average price of $288.23 per ounce and
forward sales commitments through December 29, 2000 for 300,000 ounces of silver
at an average price of $5.51 per ounce. Also at September 30, 2000, Hecla had
swap contracts through December 2000 for 1,500 metric tons of zinc at an average
price of $0.519 per pound. All of the aforementioned contracts were designated
as hedges at September 30, 2000. Hecla is exposed to certain losses, generally
the amount by which the contract price exceeds the spot price of a commodity, in
the event of nonperformance by the counterparties to these agreements. The
London Final gold price at September 29, 2000 was $273.65 per ounce. The Handy
& Harman silver price at September 29, 2000 was $4.93 per ounce. At September
29, 2000, the LME cash zinc price was $0.538 per pound.
Note 7. Contingencies
- - Bunker Hill Superfund Site
In 1994, Hecla, as a potentially responsible party under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (CERCLA),
entered into a consent decree with the Environmental Protection Agency (EPA) and
the state of Idaho, concerning environmental remediation obligations at the
Bunker Hill Superfund site located at Kellogg, Idaho. The consent decree
settled Hecla's response-cost liability under CERCLA at the Bunker Hill site.
As of September 30, 2000, Hecla has estimated and accrued an allowance for
liability for remedial activity costs at the Bunker Hill site of $6.1 million.
These estimated expenditures are anticipated to be made over the next three to
five years. Although Hecla believes the allowance is adequate based upon
current estimates of aggregate costs, Hecla will reassess its obligations under
the consent decree as new information is developed. Depending on the results of
any reassessment, it is reasonably possible that Hecla's estimate of its
obligations may change in the near or longer term.
- - Coeur d'Alene River Basin Natural Resource Damage Claims
- Coeur d'Alene Tribe Claims
In July 1991, the Coeur d'Alene Indian Tribe brought a lawsuit, under
CERCLA, in Idaho Federal District Court against Hecla and a number of other
mining companies asserting claims for damages to natural resources downstream
from the Bunker Hill site over which the tribe alleges some ownership or
control. Hecla answered the Tribe's complaint denying liability for natural
resource damages. In October 1996, following a court imposed four-year
suspension of the proceeding, the Tribe's natural resource damage litigation was
consolidated
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
with the United States Natural Resources Damage litigation described below for
discovery and other limited pretrial purposes.
- U.S. Government Claims
In March 1996, the United States filed a lawsuit in Idaho Federal District
Court against certain mining companies that conducted historic mining operations
in the Silver Valley of northern Idaho, including Hecla. The lawsuit asserts
claims under CERCLA and the Clean Water Act and seeks recovery for alleged
damages to or loss of natural resources located in the Coeur d'Alene River Basin
in northern Idaho for which the United States asserts to be the trustee under
CERCLA. The lawsuit asserts that the defendants' historic mining activity
resulted in releases of hazardous substances and damaged natural resources
within the Basin. The suit also seeks declaratory relief that Hecla and other
defendants are jointly and severally liable for response costs under CERCLA for
historic mining impacts in the Basin outside the Bunker Hill site. Hecla
answered the complaint in May 1996, denying liability to the United States under
CERCLA and the Clean Water Act and asserted a counterclaim against the United
States for the federal government's involvement in mining activities in the
Basin which contributed to the releases and damages alleged by the United
States. Hecla believes it also has a number of defenses to the United States'
claims.
In May 1998, the EPA announced that it had commenced a remedial
investigation/feasibility study under CERCLA for the entire Basin, including
Lake Coeur d'Alene, in support of its response cost claims asserted in its March
1996 lawsuit.
On September 30, 1998, the Federal District Court granted Hecla's summary
judgment motion with respect to the applicable statute of limitations and
dismissed the United States' natural resources damage claims due to the failure
of the EPA to comply with federal law and EPA regulations in expanding the
national priority list site boundaries to include the entire Coeur d'Alene
River/Lake Coeur d'Alene Basin which would have the effect of extending the
statute of limitations. In an opinion issued June 15, 2000, the Ninth Circuit
Court of Appeals vacated the District Court's ruling stating that the District
Court did not have jurisdiction to determine the scope of the Bunker Hill
Superfund site. On September 30, 1999, the court issued an order on one of the
defendant's challenges to the constitutionality of the retroactive application
of liability under CERCLA. Although the court held that the statute did not
facially violate the due process or taking clauses of the U.S. Constitution, the
court also stated that the constitutionality of retroactive application of
liability to the defendants in this case cannot be resolved at this stage of
litigation as genuine issues of material fact exist and liability has not been
established.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
The Federal District Court case is proceeding through discovery. A number
of Summary Judgement motions filed by both the plaintiffs and the defendants are
currently pending before the court. Trial is currently scheduled for January
2001.
The Company is also involved in settlement negotiations with
representatives of the U.S. Government and the Coeur d'Alene Tribe. The Company
is also participating with certain of the other defendants in the litigation in
a state of Idaho led settlement effort.
- - Insurance Coverage Litigation
In 1991, Hecla initiated litigation in the Idaho State District Court in
Kootenai County, Idaho, against a number of insurance companies which provided
comprehensive general liability insurance coverage to Hecla and its
predecessors. Hecla believes that the insurance companies have a duty to defend
and indemnify Hecla under their policies of insurance for all liabilities and
claims asserted against Hecla by the EPA and the tribe under CERCLA related to
the Bunker Hill site and the Basin in northern Idaho. In 1992, the Idaho State
District Court ruled that the primary insurance companies had a duty to defend
Hecla in the Tribe's lawsuit. During 1995 and 1996, Hecla entered into
settlement agreements with a number of the insurance carriers named in the
litigation. Hecla has received a total of approximately $7.2 million under the
terms of the settlement agreements. Thirty percent of these settlements were
paid to the EPA to reimburse the U.S. government for past costs under the Bunker
Hill site consent decree. Litigation is still pending against one insurer with
trial suspended until the underlying environmental claims against Hecla are
resolved or settled. The remaining insurer in the litigation with a second
insurer not named in the litigation is providing Hecla with a partial defense in
all Basin environmental litigation. As of September 30, 2000, Hecla had not
reduced its accrual for reclamation and closure costs to reflect the receipt of
any anticipated insurance proceeds.
- - Other Claims
In 1997, Hecla's subsidiary, Kentucky-Tennessee Clay Company (K-T Clay),
terminated shipments of 1% of annual ball clay production, sold to animal feed
producers, when the Food and Drug Administration determined trace elements of
dioxin were present in poultry. Dioxin is inherently present in ball clays
generally. On September 22, 1999, Riceland Foods (the primary purchaser of ball
clay from K-T Clay used in animal feed) commenced litigation against K-T Clay in
State Court in Arkansas to recover their losses and their insurance company's
payments to downstream users of their animal feed. The complaint alleges
negligence, strict liability and breach of implied warranties.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Legal counsel retained by the insurance company for K-T Clay has had the case
removed to Federal Court in Arkansas and has answered the complaint denying
liability. In July 2000, a second complaint was filed against K-T Clay and
Hecla in Arkansas State Court by another purchaser of animal feed containing
ball clay sold by K-T Clay. A third complaint was filed in the United States
District Court in Arkansas on August 31, 2000, by a successor in interest to a
third purchaser of ball clay sold by K-T Clay and used in the animal feed
industry. The plaintiffs together allege damages totaling approximately $8.5
million. These complaints contain similar allegations to the Riceland Foods'
case and legal counsel retained by the insurance carrier is defending K-T Clay
and Hecla in these lawsuits. The Company believes that these claims comprise
substantially all the potential claims related to this matter. The defense of
these lawsuits is also expected to be covered by insurance. The Company
believes that $11.0 million of insurance coverage is available to cover these
claims. Although the outcome of the litigation or insurance coverage cannot be
assured, Hecla currently believes that there will be no material adverse effect
on Hecla's results of operations, financial condition or cash flows from this
matter.
Hecla is subject to other legal proceedings and claims which have arisen in
the ordinary course of its business and have not been finally adjudicated.
Although there can be no assurance as to the ultimate disposition of these
matters and the proceedings disclosed above, it is the opinion of Hecla's
management that the outcome of these matters will not have a material adverse
effect on the financial condition of Hecla. However, it is possible that these
matters could have a material effect on quarterly or annual operating results
and cash flows, when they are resolved, in future periods.
Note 8.
On March 31, 2000, Hecla entered into a new $55.0 million term loan
facility due on April 10, 2001. Proceeds from the term loan facility were
utilized to repay amounts outstanding under the previous bank credit agreement,
to fund a restricted account to repay revenue bonds, to repay the subordinated
debt, and to fund general corporate purposes. As security for the loan, Hecla
pledged the common stock of certain of Hecla's subsidiaries and certain other
assets. Interest rates are to be based on LIBOR plus 2.25%. At September 30,
2000, $55.0 million was outstanding under the new term loan facility and
classified as current portion of long-term debt.
As part of the refinancing, $9.9 million of the proceeds from the new term
loan credit facility were placed into a restricted investment account to repay
the $9.8 million in
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
outstanding revenue bonds. On May 1, 2000, the revenue bonds were repaid.
In connection with refinancing the previously existing debt, Hecla recorded
a $0.6 million extraordinary charge in the first quarter of 2000 to write-off
capitalized issuance costs associated with the extinguished debt. Due to the
availability of net operating losses, there was no tax effect associated with
the charge.
On June 30, 2000, Hecla entered into a new $3.0 million subordinated debt
facility. Proceeds from the subordinated debt are available for general
corporate purposes. Interest rates are to be based on LIBOR plus a margin of
4.0%. The loan is to be repaid in equal installments on June 30, 2003, December
31, 2003, and June 30, 2004.
At September 30, 2000, Hecla's wholly owned subsidiary, HRIL, had $10.6
million outstanding under a credit agreement utilized to finance the acquisition
of the La Camorra gold mine in Venezuela. At September 30, 2000, HRIL was in
compliance with restrictive covenants related to the available ore reserves and
financial performance of the La Camorra mine. At September 30, 2000, $8.6
million of the project financing debt was classified as long-term debt, with the
remaining $2.0 million classified as current portion of long-term debt.
On October 12, 2000, Hecla entered into a $2.0 million revolving credit
facility through January 15, 2001. This revolving credit facility is secured by
Hecla's corporate office building. As of October 31, 2000, no amounts were
outstanding under the revolving credit facility.
At September 30, 2000, Hecla had a working capital deficit of $41.9
million. In order to improve its financial condition, Hecla is considering
alternatives available to repay or restructure the $55.0 million in indebtedness
due in April 2001, including refinancings, public offerings of equity and/or
debt securities and possible asset sales. There can be no assurance that Hecla
will be successful in refinancing its debt, issuing equity, or selling assets.
If Hecla is unsuccessful in these efforts, there can be no assurance that Hecla
will be able to repay its debt and fund continuing operations.
Note 9.
The following table presents a reconciliation of the numerators (net income
or net loss) and denominators (shares) used in the basic and diluted loss per
common share computations. Also shown is the effect that has been given to
preferred stock dividends in arriving at loss applicable to common shareholders
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
for the three and nine months ended September 30, 2000 and 1999 in computing
basic and diluted loss per common share (dollars and shares in thousands, except
per-share amounts).
Three Months Ended September 30,
--------------------------------------------------------------------
2000 1999
--------------------------------- --------------------------------
Net Per-Share Net Per-Share
Loss Shares Amount Loss Shares Amount
--------- ------ ------ --------- ------ ------
Net loss before preferred stock
dividends $ (3,622) $ (34,002)
Less: Preferred
stock dividends (2,013) (2,013)
--------- ---------
Basic loss applicable to
common shareholders (5,635) 66,798 $(0.08) (36,015) 66,716 $(0.54)
Effect of dilutive
securities - - - - - - - - - - - -
--------- ------ ------ --------- ------ ------
Diluted loss applicable
to common shareholders $ (5,635) 66,798 $(0.08) $ (36,015) 66,716 $(0.54)
========= ====== ====== ========= ====== ======
Nine Months Ended September 30,
--------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
Net Per-Share Net Per-Share
Loss Shares Amount Income (loss) Shares Amount
--------- ------ ------ ------------- ------ ------
Net income (loss) before
preferred stock dividends $ (27,653) $ (33,166)
Less: Preferred
stock dividends (6,038) (6,038)
--------- ---------
Basic loss applicable
to common shareholders (33,691) 66,789 $(0.50) (39,204) 60,868 $(0.64)
Effect of dilutive
securities - - - - - - - - - - - -
--------- ------ ------ --------- ------ ------
Diluted loss applicable
to common shareholders $ (33,691) 66,789 $(0.50) $ (39,204) 60,868 $(0.64)
========= ====== ====== ========= ====== ======
These calculations of diluted earnings per share for the three months and
nine months ended September 30, 2000 and 1999 exclude the effects of
$115,000,000 of convertible preferred stock as such conversion would be
antidilutive. Also excluded from these calculations are the effects of common
stock issuable upon exercise of stock options as of September 30, 2000 and 1999,
as their exercise would be antidilutive, as follows:
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Three Months Ended Nine Months Ended
---------------------- ----------------------
September 30, September 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
2,168,000 2,316,000 2,168,000 2,316,000
The calculations of diluted earnings per share for the three and nine
months ended September 30, 2000 and 1999, also exclude 1,506,998 warrants to
purchase common stock, as their exercise would be antidilutive.
Note 10.
Hecla is organized and managed primarily on the basis of the principal
products being produced from its ten operating units. Three of the operating
units have been aggregated into the Metals-Gold segment, two of the operating
units have been aggregated into the Metals-Silver segment, and six operating
units have been combined to form the Industrial Minerals segment. Two of the
operating units in the gold segment have completed operations, including the La
Choya mine where mining activities were completed in December 1998, and the
Rosebud mine where mining and milling activities were completed in the third
quarter of 2000. On March 15, 2000, Hecla sold the MWCA - Mountain West
Products division. Following the sale, the Industrial Minerals segment consists
of five operating units. General corporate activities not associated with
operating units as well as idle properties are presented as Other.
The following tables present information about reportable segments for the
three months and nine months ended September 30 (in thousands):
Three Months Ended Nine Months Ended
------------------- ---------------------
September 30, September 30,
2000 1999 2000 1999
--------- -------- --------- ---------
Net sales to unaffiliated customers:
Metals-Gold $ 8,439 $ 3,913 $ 23,192 $ 15,904
Metals-Silver 11,605 13,384 35,485 37,743
Industrial Minerals 17,872 21,008 59,813 72,374
-------- -------- --------- ---------
$ 37,916 $ 38,305 $ 118,490 $ 126,021
======== ======== ========= ==-======
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Three Months Ended Nine Months Ended
------------------- --------------------
September 30, September 30,
2000 1999 2000 1999
-------- --------- -------- --------
Income (loss) from operations:
Metals-Gold $ (842) $ (3,308) $(15,147) $ (4,483)
Metals-Silver (1,182) 1,075 (2,284) 2,734
Industrial Minerals 1,920 (788) 4,759 5,893
Other (2,326) (30,008) (9,656) (34,604)
-------- -------- -------- --------
$ (2,430) $(33,029) $(22,328) $(30,460)
======== ======== ======== ========
The table below presents identifiable assets by reportable segment as of
September 30, 2000, and December 31, 1999 (in thousands):
September 30, December 31,
2000 1999
------------- ------------
Identifiable assets:
Metals-Gold $ 45,603 $ 56,018
Metals-Silver 115,871 121,814
Industrial Minerals 57,776 65,580
Other 25,152 24,945
--------- ---------
$ 244,402 $ 268,357
========= =========
Note 11.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued. SFAS
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It
requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. In June 1999, SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" was issued. SFAS 137 defers the effective date of
SFAS 133 to all fiscal quarters of all fiscal years beginning after June 15,
2000; however, earlier application is encouraged as of the beginning of any
fiscal quarter. Hecla is presently evaluating the effect the adoption of this
standard will have on Hecla's financial condition, results of operations, and
cash flows.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
Hecla Mining Company is involved in the exploration, development, mining,
and processing of gold, silver, lead, zinc, and industrial minerals. Hecla's
gold and silver segment revenues and profitability are strongly influenced by
world prices of gold, silver, lead, and zinc, which fluctuate widely and are
affected by numerous factors beyond Hecla's control, including inflation and
worldwide forces of supply and demand for precious and base metals. The
aggregate effect of these factors is not possible to accurately predict. In the
current metals price environment, Hecla's industrial minerals segment has been a
significant contributor to overall revenues, including 50% of total revenue
during the first nine months of 2000. In the following descriptions, where
there are changes that are attributable to more than one factor, Hecla presents
each attribute in descending order relative to the attribute's importance to the
overall change.
Except for the historical information contained in this Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
matters discussed below are forward-looking statements that involve risks and
uncertainties, including:
- the timely development of existing properties and reserves and future
projects,
- the impact of metal prices and metal production volatility,
- changing market conditions and the regulatory environment,
- limited access to capital markets,
- potential asset sales,
- ability to repay indebtedness, and
- the other risks detailed from time to time in Hecla's Form 10-K and
Form 10-Qs filed with the Securities and Exchange Commission (see also
"Investment Considerations" of Part I, Item 1 of Hecla's 1998 Annual
Report on Form 10-K).
As a result of the above factors and potentially others, actual results may
differ materially from those projected, forecasted or implied. These forward-
looking statements
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
represent Hecla's judgment as of the date of this filing. Hecla disclaims,
however, any intent or obligation to update these forward-looking statements as
circumstances may change or develop.
During the first nine months of 2000, Hecla produced approximately 112,000
ounces of gold compared to approximately 76,000 ounces of gold production in the
first nine months of 1999. The following table displays the actual gold
production (in ounces) by operation for the nine months ended September 30, 2000
and 1999, projected gold production for the year ending December 31, 2000, and
actual gold production for the year ended December 31, 1999:
Actual Actual Projected Actual
Sept. 30, Sept. 30, Dec. 31, Dec. 31,
Operation 2000 1999 2000 1999
- --------- --------- --------- --------------- ---------
La Camorra (1) 68,000 - - 88,000-91,000 17,000
Greens Creek(3) 19,000 19,000 23,000-24,000 24,000
Rosebud(3)(4) 24,000 46,000 24,000 56,000
Other(2) 1,000 11,000 1,000 13,000
-------- ------- --------------- --------
Totals 112,000 76,000 136,000-140,000 110,000
======== ======= =============== ========
(1) Production commenced under Hecla's ownership in October of 1999
at the La Camorra mine.
(2) Includes production from the La Choya mine, which completed
mining in December 1998, and other sources.
(3) Reflects Hecla's portion.
(4) The Rosebud mine completed mining operations in July 2000 and
milling operations in August 2000.
In the first nine months of 2000, Hecla produced approximately 6.1 million
ounces of silver compared to approximately 5.7 million ounces in the first nine
months of 1999. The following table displays the actual silver production (in
ounces) by operation for the nine months ended September 30, 2000 and 1999,
projected silver production for the year ending December 31, 2000, and actual
silver production for the year ended December 31, 1999 (in thousands):
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Actual Actual Projected Actual
Sept. 30, Sept, 30, Dec. 31, Dec. 31,
Operation 2000 1999 2000 1999
- --------- --------- --------- ------------- --------
Lucky Friday 3,904 3,343 5,100-5,300 4,441
Greens Creek(1) 2,091 2,247 2,750-2,900 3,051
Rosebud(1)(2) 56 104 56 124
Other sources - - 1 - - 1
-------- ------- ------------- --------
Totals 6,051 5,695 7,906-8,256 7,617
======== ======= ============= ========
(1) Reflects Hecla's portion.
(2) The Rosebud mine completed mining operations in July 2000 and
milling operations in August 2000.
In 1999, Hecla shipped approximately 1,072,000 tons of product, which
included ball clay, kaolin, and feldspar, from the Kentucky-Tennessee Clay
group. Hecla's shipments of industrial minerals from the Kentucky-Tennessee
Clay group are expected to increase to approximately 1,147,000 tons in 2000.
During the first nine months of 2000, Hecla shipped approximately 56,000 tons of
specialty aggregates from the Colorado Aggregate division of our subsidiary
MWCA, and approximately 130,000 cubic yards of landscape material from the
Mountain West Products (MWP) division of MWCA. On March 15, 2000, Hecla sold
substantially all of the assets of its MWP division of MWCA for $8.5 million in
cash. The sale of MWP resulted in a loss on disposal of $0.9 million. The
proceeds from the sales transaction were used to pay down amounts outstanding
under Hecla's previously existing revolving credit facility. On June 5, 2000
Hecla completed a sale of the landscape operations of the Colorado Aggregate
Division (CAC) of MWCA for $1.1 million in cash. The sale of the CAC landscape
operations did not result in a gain or loss. Hecla is currently negotiating
with third parties for a potential sale of the remaining assets of the Colorado
Aggregate division of MWCA, although there can be no assurance that a sales
transaction will be completed.
Results of Operations
First Nine Months 2000 Compared to First Nine Months 1999
Hecla recorded a net loss, before an extraordinary charge and preferred
stock dividends, of approximately $27.0 million, or $0.41 per common share, in
the first nine months of 2000 compared to a loss of approximately $31.8 million,
or $0.52 per common
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
share, before a cumulative effect of a change in accounting principle and
preferred stock dividends for the same period of 1999. After recognizing a $0.6
million extraordinary charge for the write-off of debt issuance costs related to
extinguished debt, and after $6.0 million in dividends to holders of Hecla's
Series B Cumulative Convertible Preferred Stock, Hecla's loss applicable to
common shareholders for the first nine months of 2000 was approximately $33.7
million, or $0.50 per common share, compared to a loss of $39.2 million, or
$0.64 per common share, in the comparable 1999 period, after recognizing a $1.4
million charge to write off unamortized start-up costs associated with the
Greens Creek mine, and after $6.0 million in dividends to holders of Hecla's
Series B Cumulative Convertible Preferred Stock.
Sales of products decreased by approximately $7.5 million, or 6%, in the
first nine months of 2000 as compared to the same period in 1999 primarily due
to:
- decreased sales totaling approximately $12.6 million from Hecla's
industrial minerals segment, principally the result of decreased
shipments at the MWCA group of $15.2 million due to the sale of the MWP
division of MWCA on March 15, 2000 and the sale of the landscape
operations of CAC on June 5, 2000. The decreases from MWCA were partly
offset by increased sales of $2.6 million from the K-T Clay group,
- decreased sales totaling approximately $2.2 million from silver
operations primarily due to lower lead and silver prices, partly offset
by an increased zinc price and increased production of silver, lead, and
zinc, and
- increased sales of $7.3 million from gold operations principally a
result of the acquisition of the La Camorra mine in June 2000 partly
offset by lower gold production at the Rosebud mine in 2000.
The following table compares the average metal prices for the first nine
months of 2000 with the comparable 1999 period:
Metal 2000 1999 $ Change % Change
----------------------------- ------- ------- -------- --------
Gold-Realized ($/oz.) $ 286 $ 284 $ 2 1%
Gold-London Final ($/oz.) 282 273 9 3
Silver-Handy & Harman ($/oz.) 5.08 5.24 (0.16) (3)
Lead-LME Cash (cents/pound) 0.203 0.231 (0.028) (12)
Zinc-LME Cash (cents/pound) 0.520 0.475 0.045 9
Adjustments to the carrying value of mining properties increased $5.0
million to $9.1 million in 2000 compared with an asset write-down totaling $4.1
million during 1999, principally
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
for a write-down at MWCA. Adjustments in 2000 consist of $4.4 million for
properties, plants, and equipment and supply inventory at the Rosebud mine, and
$4.7 million for previously capitalized deferred development costs at the Noche
Buena gold property. The $4.4 million adjustment at the Rosebud mine was
necessitated due to the closure of the Rosebud mine previously announced by
Hecla and Newmont, Hecla's joint venture partner. The Rosebud mine completed
mining activity in July 2000 and milling activities in August 2000. At the
Noche Buena property, Hecla suspended activities in 1999 due to a low price for
gold. Based upon the continuation of the lower gold price an adjustment to the
carrying value of the Noche Buena property was recorded in the second quarter of
2000.
Interest expense increased $2.7 million in the first nine months of 2000 as
compared to the same period in 1999. The $2.7 million increase was the result
of increased average borrowings due to the $11.0 million of La Camorra project
financing put in place in June 1999, $3.0 million of subordinated debt that was
outstanding for three additional months in 2000, and the new $55.0 million term
loan facility put in place in March 2000 which replaced a revolving $55.0
million credit facility that was in place in 1999. Higher average interest
rates, and increased loan fees also contributed to the increase in interest
expense as compared to the 1999 period.
Exploration expense increased $1.5 million, or 37%, during the first nine
months of 2000 as compared to the same period of 1999 principally due to
increased expenditures at the Saladillo property in Mexico ($1.3 million),
increased expenditures at the Rosebud mine ($0.7 million), and increased
exploration at La Camorra ($0.4 million). These increases were partly offset by
decreased expenditures at the Cacique property ($0.4 million) and other targets
in Mexico and other properties ($0.5 million).
Cost of sales and other direct production costs increased approximately
$2.2 million, or 2%, from the first nine months of 1999 to the comparable 2000
period primarily due to:
- increased cost of sales from gold operations of $6.3 million due to
the acquisition of the La Camorra mine in June 1999 partly offset by
lower costs of sales at the La Choya mine and the Rosebud mine due to
lower gold production,
- increased cost of sales from silver operations of $2.8 million
resulting from increased production of silver, lead, and zinc at the
Lucky Friday and Greens Creek mines, and
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
- decreased cost of sales at the industrial minerals segment of $6.9
million principally due to the partial sale of MWCA, partly offset by
increased costs at the K-T Clay group resulting from increased sales and
increased energy costs.
Cost of sales and other direct production costs as a percentage of sales
from products increased from 77% in the first nine months of 1999 to 84% in the
comparable 2000 period. The increase was principally a result of decreased
margins in all three segments. In the gold segment, decreased gold production
and higher unit cash costs at the Rosebud mine negatively impacted the gross
margin. In the silver segment, lower hedging revenues combined with lower
average lead and silver prices led to the reduced margins. The industrial
minerals segment also saw reduced margins due to higher unit costs at MWCA and
at the K-T Clay group.
Miscellaneous expense increased $1.4 million, from $1.2 million in the 1999
period to $2.6 million in the 2000 period. The increase in 2000 was principally
the result of a loss on the sale of the Mountain West Products division of MWCA
($0.9 million) and increased severance costs ($0.4 million).
An extraordinary charge of $0.6 million was recorded in 2000 to write off
previously unamortized debt issuance costs associated with the extinguishment of
Hecla's previous $55.0 million credit facility.
General and administrative expense increased $0.5 million, from $5.6
million in the 1999 period to $6.1 million in the 2000 period. The increase in
2000 was principally the result of increased incentive compensation and
increased relocation and recruiting expenses.
Hecla's provision for closed operations and environmental matters decreased
$24.5 million from $28.5 million in the first nine months of 1999 to $4.0
million in the 2000 period. The decrease resulted principally from the 1999
environmental and reclamation accruals totaling $27.3 million for future
environmental and reclamation expenditures at the Grouse Creek mine and the
Bunker Hill Superfund site. The decrease is partially offset by a $1.5 million
provision during the first nine months of 2000 at Grouse Creek, combined with
reclamation and closure cost accruals of $668,000 for the Rosebud mine and
$590,000 for various other properties.
The cumulative effect of change in accounting principle totaled $1.4
million in 1999, due to the write off of unamortized start-up costs relating to
Hecla's 29.7% ownership interest in the Greens Creek mine. The adjustment was
the result of application
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
of Statement of Position No. 98-5, "Accounting for Start-up Activities."
Cash operating and total cash cost per gold ounce increased from $177 and
$190 for the first nine months of 1999 to $213 and $216 for the first nine
months of 2000, respectively. The increases were primarily attributable to
higher costs per ounce at the Rosebud mine associated with mining of lower grade
ore in 2000. Total production cost per gold ounce decreased slightly from $290
for the first nine months of 1999 to $281 for the first nine months of 2000.
This decrease was principally due to production from the lower cost La Camorra
mine in 2000 and due to the write-down of the carrying value of the Rosebud mine
in the second quarter of 2000, which eliminated the depreciation, depletion and
amortization component of the total production cost per ounce at Rosebud in the
third quarter of 2000.
Cash operating, total cash and total production cost per silver ounce
increased from $3.66, $3.67 and $5.21 in the first nine months of 1999 to $3.90,
$3.91 and $5.35 in the first nine months of 2000, respectively. The increases
in the cost per silver ounce are due primarily to lower average lead prices
which negatively impacted by-product credits, partly offset by increased
production and a favorable zinc price.
Three Months Ended September 30, 2000 Compared to Three Months Ended
September 30, 1999
Hecla recorded a net loss of approximately $3.6 million, or $0.05 per
common share, in the third quarter of 2000 compared to a net loss of
approximately $34.0 million, or $0.51 per common share, in the same period of
1999. After $2.0 million in dividends to holders of Hecla's Series B Cumulative
Convertible Preferred Stock, Hecla's loss applicable to common shareholders for
the third quarter of 2000 was approximately $5.6 million, or $0.08 per common
share, compared to $36.0 million, or $0.54 per common share, in the comparable
1999 period. The decreased loss in 2000 compared to the same period in 1999 was
due to a variety of factors, the most significant of which were 1999
environmental and reclamation accruals totaling $27.3 million for future
environmental and reclamation expenditures at the Grouse Creek mine and the
Bunker Hill Superfund site, and asset write-downs totaling $4.1 million,
principally for the write-down of MWCA.
Interest and other income increased $0.7 million from $0.8 million in the
third quarter of 1999 to $1.5 million in the 2000 period. The increase was
principally due to the receipt of approximately $0.7 million in interest from
the Mexican Hacienda associated with claims for past due value added tax refunds
in Mexico.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Exploration expense increased $0.3 million, or 14.5%, during the third
quarter of 2000 as compared to the same period of 1999 principally due to
increased expenditures at the Saladillo property in Mexico ($0.5 million). This
increase was partly offset by decreased expenditures in Peru ($0.1 million) and
at the Rosebud mine ($0.1 million).
Interest expense, net of amounts capitalized, increased $0.9 million in the
third quarter of 2000 as compared to the third quarter of 1999. The increase
was the result of increased average borrowings due to the $11.0 million of La
Camorra project financing put in place in June 1999 and the new $55.0 million
term loan facility put in place in March 2000 which replaced a revolving $55.0
million credit facility that was in place in 1999. Higher average interest rates
and increased loan fees also contributed to the increase in interest expense as
compared to the 1999 period.
Cost of sales and other direct production costs increased approximately
$0.7 million, or 2%, from the third quarter of 1999 to the comparable 2000
period primarily due to:
- increased cost of sales from gold operations of $1.7 million due to
the acquisition of the La Camorra mine in June 1999 ($1.8 million), an
increase at Rosebud ($0.4 million), partly offset by lower costs of
sales at the La Choya mine,
- increased cost of sales from silver operations of $0.8 million
resulting from increased production and shipments of silver, lead, and
zinc at the Lucky Friday and Greens Creek mines, and
- decreased cost of sales at the industrial minerals segment ($1.7
million) principally due to the partial sale of MWCA.
Cost of sales and other direct production costs as a percentage of sales
from products increased from 79.1% in the third quarter of 1999 to 81.8% in the
comparable 2000 period. The increase was principally a result of decreased
margins in all three segments. In the gold segment, decreased gold production
and higher unit cash costs at the Rosebud mine negatively impacted the gross
margin. In the silver segment, lower hedging revenues combined with lower
average lead and silver prices led to the reduced margins. The industrial
minerals segment also saw reduced margins due to higher unit costs at MWCA and
at the K-T Clay group.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Sales of products decreased by approximately $0.4 million, or 1%, in the
third quarter of 2000 as compared to the same period in 1999 primarily due to:
- decreased sales totaling approximately $3.1 million from Hecla's
industrial minerals segment principally the result of decreased shipments
at the MWCA group ($4.3 million) due to the sale of the MWP division of
MWCA on March 15, 2000 and the sale of the landscape operations of CAC on
June 5, 2000. The decreases from MWCA were partly offset by increased
sales of $1.2 million from the K-T Clay group,
- decreased sales totaling approximately $1.8 million from silver
operations primarily due to decreased shipments from the Lucky Friday
and Greens Creek mines and lower lead and silver prices, and
- increased sales of $4.5 million from gold operations principally a
result of the acquisition of the La Camorra mine in June 2000 partly
offset by lower gold production at the Rosebud mine in 2000.
The following table compares the average metal prices for the third quarter
of 2000 with the comparable 1999 period:
Metal 2000 1999 $ Change % Change
---------------------------- ------- ------ -------- ---------
Gold-Realized ($/oz.) $ 281 $ 258 $ 23 9%
Gold-London Final ($/oz.) 277 259 18 7
Silver-Handy & Harman ($/oz.) 4.96 5.27 (0.31) (6)
Lead-LME Cash (cents/pound) 0.213 0.228 (0.015) (7)
Zinc-LME Cash (cents/pound) 0.533 0.513 0.020 4
Cash operating, total cash and total production cost per gold ounce
decreased from $227, $238 and $338 for the third quarter of 1999 to $192, $195
and $239 for the third quarter of 2000, respectively. The decreases in the cash
operating and total cash cost per gold ounce were primarily attributable to
lower cost production from the La Camorra mine. The decrease in total
production cost per gold ounce was attributable to decreased depreciation
charges associated with the Rosebud mine due to the write-down of the carrying
value of Rosebud in the second quarter of 2000.
Cash operating, total cash, and total production cost per silver ounce
increased from $3.55, $3.56 and $5.08 in the third quarter of 1999 to $4.23,
$4.25 and $5.79 in the third quarter of 2000, respectively. The increases in
the cost per silver ounce are due primarily to lower silver production and lower
average
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
lead prices which negatively impact by-product credits, partly offset by a
favorable zinc price. Gold, lead, and zinc are by-products of Hecla's silver
production, the revenues from which are netted against production costs in the
calculation of production cost per ounce of silver.
FINANCIAL CONDITION AND LIQUIDITY
A substantial portion of the Hecla's revenue is derived from the sale of
products, the prices of which are affected by numerous factors beyond Hecla's
control. Prices may change dramatically in short periods of time and such
changes have a significant effect on revenues, profits and liquidity of Hecla.
Hecla is subject to many of the same inflationary pressures as the U.S. economy
in general. Hecla continues to implement cost-cutting measures in an effort to
reduce per unit production costs. Management believes, however, that Hecla may
not be able to continue to offset the impact of inflation over the long term
through cost reductions alone. However, the market prices for products produced
by Hecla have a much greater impact than inflation on Hecla's revenues and
profitability. Moreover, the discovery, development and acquisition of mineral
properties are in many instances unpredictable events. Future metals prices,
the success of exploration programs, changes in legal and regulatory
requirements, and other property transactions can have a significant impact on
the need for capital.
At September 30, 2000, assets totaled approximately $244.4 million and
shareholders' equity totaled approximately $99.1 million. Cash and cash
equivalents increased by $1.8 million to $4.5 million at September 30, 2000 from
$2.7 million at December 31, 1999.
During the first nine months of 2000, approximately $5.0 million of cash
was provided by financing activities. The major sources of cash were borrowings
of long-term debt of $79.5 million. These sources were partially offset by
repayments of long-term debt of $66.7 million, and payment of preferred stock
dividends totaling $6.0 million.
Hecla's investing activities provided $1.5 million of cash during the first
nine months of 2000. The most significant sources of cash were proceeds from
the sale of MWP and the CAC landscape operations of $9.7 million, proceeds from
the sale of other assets of $1.9 million, and cash provided from termination of
life insurance policies of $1.1 million. These sources were partly offset by
additions to properties, plants, and equipment totaling $11.5 million, including
significant additions at the industrial minerals segment, principally for the
Mexican plant expansion project ($3.7 million), at the La Camorra mine ($3.1
million), at the Greens Creek mine ($3.2 million), and at the Lucky Friday mine
($1.2 million).
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Operating activities used approximately $4.7 million of cash during the
first nine months of 2000. Significant uses of cash included (1) cash required
for reclamation activities and other noncurrent liabilities of $6.4 million, (2)
increases in inventories of $1.8 million primarily due to product inventory
increases at La Camorra and Rosebud, and (3) decreased accounts payable and
accrued expenses of $1.5 million. Principal noncash charges included
depreciation, depletion and amortization of $17.3 million, reduction in carrying
value of mining properties for the Rosebud mine and Noche Buena property of $9.1
million, provisions for reclamation and closure costs of $2.1 million, a $0.9
million loss on the sale of MWP, and an extraordinary charge of $0.6 million for
the write off of debt issuance costs related to extinguished debt.
Hecla estimates that minimum capital expenditures to be incurred during the
remainder of 2000 will be approximately $3.3 million. These capital
expenditures consist primarily of:
Property Expenditure
--------------------------- ------------
Lucky Friday $0.2 million
Greens Creek (29.7% interest) $1.6 million
La Camorra $1.4 million
Other $0.1 million
These planned capital expenditures will depend, in large part, on Hecla's
ability to obtain the required funds from operating activities, potential asset
sales, additional borrowing, and the possible issuance of additional equity.
There can be no assurance that actual capital expenditures will be as projected
based upon the uncertainties associated with the estimates for capital projects,
uncertainties associated with possible development projects, board of director
approval, and Hecla's ability to generate adequate funding for the projected
capital expenditures.
On March 31, 2000, Hecla entered into a new $55.0 million term loan
facility due on April 10, 2001. Proceeds from the term loan facility were
utilized to repay amounts outstanding under the previous bank credit agreement,
to repay revenue bonds, to repay the subordinated debt, and to fund general
corporate purposes. As security for the loan, Hecla pledged the common stock of
certain of Hecla's subsidiaries and certain other assets. Interest rates are to
be based on LIBOR plus a margin of 2.25%. At September 30, 2000, $55.0 million
was outstanding under the new term loan facility and classified as current
portion of long-term debt.
On June 30, 2000, Hecla entered into a new $3.0 million subordinated debt
facility. Proceeds from the subordinated debt
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
are available for general corporate purposes. Interest rates are to be based on
LIBOR plus a margin of 4.0%. The loan is to be repaid in equal installments on
June 30, 2003, December 31, 2003, and June 30, 2004.
At September 30, 2000, Hecla's wholly owned subsidiary, HRIL, had $10.6
million outstanding under a credit agreement utilized to finance the acquisition
of the La Camorra gold mine in Venezuela. At September 30, 2000, HRIL was in
compliance with restrictive covenants related to the available ore reserves and
financial performance of the La Camorra mine. At September 30, 2000, $8.6
million of the project financing debt was classified as long-term debt, with the
remaining $2.0 million classified as current portion of long-term debt.
On October 12, 2000, Hecla entered into a $2.0 million revolving credit
facility through January 15, 2001. This revolving credit facility is secured by
Hecla's corporate office building. As of October 31, 2000, no amounts were
outstanding under the revolving credit facility.
At September 30, 2000, Hecla has a working capital deficit of $41.9
million. In order to improve its financial condition, Hecla is considering
alternatives available to it to repay or restructure the $55.0 million in
indebtedness due in April 2001, including refinancings, public offerings of
equity and/or debt securities, and possible asset sales. On July 18, 2000,
Hecla announced that is has decided to carry out a formal review of its
strategic options in regard to Kentucky-Tennessee Clay Company, its wholly owned
subsidiary. Hecla has received a number of expressions of interest in K-T Clay
and has hired an investment-banking firm to assist management in considering
possible strategies, including the potential sale of K-T Clay. Hecla is
continuing to evaluate the possible sale of K-T Clay. There can be no assurance
that Hecla will be successful in refinancing its debt, issuing equity, or
selling assets. If Hecla is unsuccessful in these efforts, there can be no
assurance that Hecla will be able to repay its debt and fund continuing
operations.
As of September 30, 2000, Hecla's unrestricted cash balance totaled $4.5
million. Based upon Hecla's estimate of metal prices and metal production for
the remainder of 2000, Hecla believes that its operating cash flows, current
unrestricted cash balance, proceeds available from the new $2.0 million
revolving credit facility, and potential proceeds from asset sales should be
adequate to fund its anticipated cash requirements for the year 2000, including
anticipated capital expenditures, idle property expenditures, and exploration
expenditures. The Company's management continues to evaluate and implement
additional cash conservation measures to better ensure the
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
continued liquidity of Hecla, including the deferral of the fourth quarter
dividend to holders of Hecla's preferred stock of $2.0 million, as well as
continuing to pursue the sale of the remaining assets of the MWCA - Colorado
Aggregate Division, considering other asset sales, and pursuing equity offerings
in order to provide funds for possible expansion projects, acquisition, or other
cash requirements.
On August 21, 2000, Hecla was notified by the New York Stock Exchange that
the common stock price had been below $1.00 per share for more than 30 days and
that Hecla has six months to increase the stock price. If Hecla's stock price
has not increased to an average closing price of $1.00 or more per share for a
30-day period following the end of the six-month notification period, or the
Company has not otherwise completed steps to increase its stock price, it is
possible that the New York Stock Exchange will commence delisting procedures for
Hecla's common stock under the rules and regulations of the New York Stock
Exchange.
Pursuant to a Registration Statement filed with the Securities and Exchange
Commission and declared effective in the third quarter of 1995, Hecla can, at
its option, issue debt securities, common shares, preferred shares or warrants
in an amount not to exceed $100.0 million in the aggregate. As of September 30,
2000, Hecla has issued $62.2 million of Hecla's common shares and warrants under
the Registration Statement. Due to the current market capitalization of the
Company, there can be no assurance as to the availability of this Registration
Statement.
Reserves for closure costs, reclamation and environmental matters totaled
$45.8 million at September 30, 2000. Hecla anticipates that expenditures
relating to these reserves will be made over the next several years. Although
Hecla believes the allowance is adequate based on current estimates of aggregate
costs, Hecla plans to periodically reassess its environmental and reclamation
obligations as new information is developed. Depending on the results of any
reassessment, it is reasonably possible that Hecla's estimate of its obligations
may change in the near term.
For information on hedged positions and derivative instruments, see Item 7A
"Quantitative and Qualitative Disclosure About Market Risk."
Hecla is subject to legal proceedings and claims which have arisen in the
ordinary course of its business and have not been finally adjudicated (see Part
II. Item 1. Legal Proceedings and Note 7 of Notes to Consolidated Financial
Statements). Although the ultimate disposition of these matters and various
other
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
pending legal actions and claims is not presently determinable, it is the
opinion of Hecla's management that the outcome of these matters will not have a
material adverse effect on the financial position of Hecla and its subsidiaries.
However, it is possible that these matters could have a material effect on
quarterly or annual operating results and cash flows, when they are resolved, in
the future periods.
New Accounting Pronouncement
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued. SFAS
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measures those
instruments at fair value. In June 1999, SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" was issued. SFAS 137 defers the effective date of
SFAS 133 to all fiscal quarters of all fiscal years beginning after June 15,
2000; however, earlier application is encouraged as of the beginning of any
fiscal quarter. Hecla is presently evaluating the affect the adoption of this
standard will have on Hecla's financial condition, results of operations, and
cash flows.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
The following discussion about Hecla's risk-management activities include
"forward-looking statements" that involve risk and uncertainties. Actual
results could differ materially from those projected in the forward-looking
statements.
The following tables summarize the financial instruments and derivative
instruments held by Hecla at September 30, 2000, which are sensitive to changes
in interest rates and commodity prices. Hecla believes that there has not been a
material change in its market risk since the end of its last fiscal year. In
the normal course of business, Hecla also faces risks that are either
nonfinancial or nonquantifiable (See "Investment Considerations" of Part I, Item
1 of Hecla's 1999 Annual Report on Form 10-K).
Interest-Rate Risk Management
At September 30, 2000, Hecla's debt is subject to changes in market
interest rates and is sensitive to those changes. Hecla currently has no
derivative instruments to offset the risk of interest rate changes. Hecla may
choose to use derivative
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
instruments, such as interest rate swaps to manage the risk associated with
interest rate changes.
The following table presents principal cash flows for debt outstanding at
September 30, 2000, by maturity date and the related average interest rate. The
variable rates are estimated based on implied forward rates in the yield curve
at the reporting date.
(in thousands)
2000 2001 2002 2003 2004 Thereafter Total Value
------- --------- ------- ------- ------- ------------ -------- ---------
Bank credit agreement $ - - $ 55,000 $ - - $ - - $ - - $ - - $ 55,000 $ 55,000
Average interest rate 9.01% 8.81% - - - - - - - -
Subordinated debt $ - - $ - - $ - - $ 2,000 $ 1,000 $ - - $ 3,000 $ 3,000
Average interest rate 10.76% 10.52% 10.55% 10.66% 10.81% - -
Project financing debt $ 375 $ 3,250 $ 3,000 $ 3,000 $ 1,000 $ - - $ 10,625 $ 10,625
Average interest rate 9.26% 9.02% 9.05% 9.16% 9.31% - -
Commodity-Price Risk Management
Hedging
Hecla uses commodity forward sales commitments, commodity swap contracts,
and commodity put and call option contracts to manage its exposure to
fluctuation in the prices of certain metals which it produces. Contract
positions are designed to ensure that Hecla will receive a defined minimum price
for certain quantities of its production. Hecla uses these instruments to
reduce risk by offsetting market exposures. Hecla is exposed to certain losses,
generally the amount by which the contract price exceeds the spot price of a
commodity, in the event of nonperformance by the counterparties to these
agreements. The instruments held by Hecla are not leveraged and are held for
purposes other than trading. All of these contracts are designated as hedges at
September 30, 2000.
The following table provides information about Hecla's forward sales
commitments and commodity swap contracts at September 30, 2000. The table
presents the notional amount in ounces or tonnes, the average forward sales
price, and the total-dollar contract amount expected by the maturity dates,
which occur between October 31, 2000, and December 31, 2004.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Expected Expected Expected Expected Expected Estimated
Maturity Maturity Maturity Maturity Maturity Fair
2000 2001 2002 2003 2004 Value
-------- -------- -------- -------- -------- ---------
Forward contracts:
Gold sales (ounces) 13,437 62,010 60,428 59,802 48,928
Future price (per ounce) $ 288 $ 288 $ 288 $ 288 $ 288
Contract amount (in $000's) $ 3,868 $ 17,874 $ 17,418 $ 17,238 $ 14,103 $ (4,284)
Silver sales (ounces) 300,000 - - - - - - - -
Future price (per ounce) $ 5.51 $ - - $ - - $ - - $ - -
Contract amount (in $000's) $ 1,653 $ - - $ - - $ - - $ - - $ 167
Swap contracts:
Zinc (tonnes) 1,500 - - - - - - - -
Future price (per pound) $ 0.519 $ - - $ - - $ - - $ - -
Contract amount (in $000's) $ 1,718 $ - - $ - - $ - - $ - - $ (11)
In addition to the above contracts, Hecla has a quarterly Gold Lease Rate
Swap at a fixed rate of 1.5% on 242,205 ounces of the above gold forward
contracts. The ounces covered under the swap are adjusted each quarter,
commencing June 30, 2000, in accordance with the expiration of the forward gold
contracts. The estimated cost to close out the Gold Lease Rate Swap at
September 30, 2000 was $151,842.
Trading
On July 30, 1999, Hecla sold call options for 300,000 ounces of silver
through June 30, 2000, at an average strike price of $5.50. Hecla sold the call
options to provide additional cash flow. During the first nine months of 2000,
Hecla recognized revenue of $66,000 from expired call option contracts. There
are no call options outstanding as of September 30, 2000.
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Part II - Other Information
Hecla Mining Company and Subsidiaries
Item 1. Legal Proceedings
- - Bunker Hill Superfund Site
In 1994, Hecla, as a potentially responsible party under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (CERCLA),
entered into a consent decree with the Environmental Protection Agency (EPA) and
the state of Idaho, concerning environmental remediation obligations at the
Bunker Hill Superfund site located at Kellogg, Idaho. The consent decree
settled Hecla's response-cost liability under CERCLA at the Bunker Hill site.
As of September 30, 2000, Hecla has estimated and accrued an allowance for
liability for remedial activity costs at the Bunker Hill site of $6.1 million.
These estimated expenditures are anticipated to be made over the next three to
five years. Although Hecla believes the allowance is adequate based upon
current estimates of aggregate costs, Hecla will reassess its obligations under
the consent decree as new information is developed. Depending on the results of
any reassessment, it is reasonably possible that Hecla's estimate of its
obligations may change in the near or longer term.
- - Coeur d'Alene River Basin Natural Resource Damage Claims
- Coeur d'Alene Tribe Claims
In July 1991, the Coeur d'Alene Indian Tribe brought a lawsuit, under
CERCLA, in Idaho Federal District Court against Hecla and a number of other
mining companies asserting claims for damages to natural resources downstream
from the Bunker Hill site over which the tribe alleges some ownership or
control. Hecla answered the Tribe's complaint denying liability for natural
resource damages. In October 1996, following a court imposed four-year
suspension of the proceeding, the Tribe's natural resource damage litigation was
consolidated with the United States Natural Resources Damage litigation
described below for discovery and other limited pretrial purposes.
- U.S. Government Claims
In March 1996, the United States filed a lawsuit in Idaho Federal District
Court against certain mining companies that conducted historic mining operations
in the Silver Valley of northern Idaho, including Hecla. The lawsuit asserts
claims under CERCLA and the Clean Water Act and seeks recovery for alleged
damages to or loss of natural resources located in the Coeur d'Alene River Basin
in northern Idaho for which the United States asserts to be the trustee under
CERCLA. The lawsuit asserts that the defendants' historic mining activity
resulted in releases of hazardous substances and damaged natural resources
within the Basin. The suit also seeks declaratory relief that
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Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
Hecla and other defendants are jointly and severally liable for response costs
under CERCLA for historic mining impacts in the Basin outside the Bunker Hill
site. Hecla answered the complaint in May 1996, denying liability to the United
States under CERCLA and the Clean Water Act and asserted a counterclaim against
the United States for the federal government's involvement in mining activities
in the Basin which contributed to the releases and damages alleged by the United
States. Hecla believes it also has a number of defenses to the United States'
claims.
In May 1998, the EPA announced that it had commenced a remedial
investigation/feasibility study under CERCLA for the entire Basin, including
Lake Coeur d'Alene, in support of its response cost claims asserted in its March
1996 lawsuit.
On September 30, 1998, the Federal District Court granted Hecla's summary
judgment motion with respect to the applicable statute of limitations and
dismissed the United States' natural resources damage claims due to the failure
of the EPA to comply with federal law and EPA regulations in expanding the
national priority list site boundaries to include the entire Coeur d'Alene
River/Lake Coeur d'Alene Basin which would have the effect of extending the
statute of limitations. In an opinion issued June 15, 2000, the Ninth Circuit
Court of Appeals vacated the District Court's ruling stating that the District
Court did not have jurisdiction to determine the scope of the Bunker Hill
Superfund site. On September 30, 1999, the court issued an order on one of the
defendant's challenges to the constitutionality of the retroactive application
of liability under CERCLA. Although the court held that the statute did not
facially violate the due process or taking clauses of the U.S. Constitution, the
court also stated that the constitutionality of retroactive application of
liability to the defendants in this case cannot be resolved at this stage of
litigation as genuine issues of material fact exist and liability has not been
established.
The Federal District Court case is proceeding through discovery. A number
of Summary Judgement motions filed by both the plaintiffs and the defendants are
currently pending before the court. Trial is currently scheduled for January
2001.
The Company is also involved in settlement negotiations with
representatives of the U.S. Government and the Coeur d'Alene Tribe. The Company
is also participating with certain of the other defendants in the litigation in
a state of Idaho led settlement effort.
- - Insurance Coverage Litigation
In 1991, Hecla initiated litigation in the Idaho State District Court in
Kootenai County, Idaho, against a number of insurance companies which provided
comprehensive general
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Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
liability insurance coverage to Hecla and its predecessors. Hecla believes that
the insurance companies have a duty to defend and indemnify Hecla under their
policies of insurance for all liabilities and claims asserted against Hecla by
the EPA and the tribe under CERCLA related to the Bunker Hill site and the Basin
in northern Idaho. In 1992, the Idaho State District Court ruled that the
primary insurance companies had a duty to defend Hecla in the Tribe's lawsuit.
During 1995 and 1996, Hecla entered into settlement agreements with a number of
the insurance carriers named in the litigation. Hecla has received a total of
approximately $7.2 million under the terms of the settlement agreements. Thirty
percent of these settlements were paid to the EPA to reimburse the U.S.
government for past costs under the Bunker Hill site consent decree. Litigation
is still pending against one insurer with trial suspended until the underlying
environmental claims against Hecla are resolved or settled. The remaining
insurer in the litigation with a second insurer not named in the litigation is
providing Hecla with a partial defense in all Basin environmental litigation.
As of September 30, 2000, Hecla had not reduced its accrual for reclamation and
closure costs to reflect the receipt of any anticipated insurance proceeds.
- - Other Claims
In 1997, Hecla's subsidiary, Kentucky-Tennessee Clay Company (K-T Clay),
terminated shipments of 1% of annual ball clay production, sold to animal feed
producers, when the Food and Drug Administration determined trace elements of
dioxin were present in poultry. Dioxin is inherently present in ball clays
generally. On September 22, 1999, Riceland Foods (the primary purchaser of ball
clay from K-T Clay used in animal feed) commenced litigation against K-T Clay in
State Court in Arkansas to recover their losses and their insurance company's
payments to downstream users of their animal feed. The complaint alleges
negligence, strict liability and breach of implied warranties. Legal counsel
retained by the insurance company for K-T Clay has had the case removed to
Federal Court in Arkansas and has answered the complaint denying liability. In
July 2000, a second complaint was filed against K-T Clay and Hecla in Arkansas
State Court by another purchaser of animal feed containing ball clay sold by K-T
Clay. A third complaint was filed in the United States District Court in
Arkansas on August 31, 2000, by a successor in interest to a third purchaser of
ball clay sold by K-T Clay and used in the animal feed industry. The plaintiffs
together allege damages totaling approximately $8.5 million. These complaints
contain similar allegations to the Riceland Foods' case and legal counsel
retained by the insurance carrier is defending K-T Clay and Hecla in these
lawsuits. The Company believes that these claims comprise substantially all the
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Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
potential claims related to this matter. The defense of these lawsuits is also
expected to be covered by insurance. The Company believes that $11.0 million of
insurance coverage is available to cover these claims. Although the outcome of
the litigation or insurance coverage cannot be assured, Hecla currently believes
that there will be no material adverse effect on Hecla's results of operations,
financial condition or cash flows from this matter.
Hecla is subject to other legal proceedings and claims which have arisen in
the ordinary course of its business and have not been finally adjudicated.
Although there can be no assurance as to the ultimate disposition of these
matters and the proceedings disclosed above, it is the opinion of Hecla's
management that the outcome of these matters will not have a material adverse
effect on the financial condition of Hecla. However, it is possible that these
matters could have a material effect on quarterly or annual operating results
and cash flows, when they are resolved, in future periods.
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Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.2 - Employment Agreement dated June 1, 2000, between
Hecla Mining Company and Arthur Brown. (Registrant has
substantially identical agreements with each of Messrs.
William B. Booth, J. Gary Childress, Michael B. White and
Ms. Vicki J. Veltkamp)
10.14 - Variable Rate Commercial Revolving Loan between Hecla
Mining Company and Idaho Independent Bank dated October 12,
2000
12 - Fixed Charge Coverage Ratio Calculation
27 - Financial Data Schedule
(b) Reports on Form 8-K
September 8, 2000 - News Release Related to No Preferred Dividend
Payment
Items 2, 3, 4, and 5 of Part II are omitted from this report as inapplicable.
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Hecla Mining Company and Subsidiaries
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HECLA MINING COMPANY
-----------------------------------
(Registrant)
Date: November 10, 2000 By /s/ Arthur Brown
---------------------------------
Arthur Brown, Chairman, President
and Chief Executive Officer
Date: November 10, 2000 By /s/ Lewis E. Walde
---------------------------------
Lewis E. Walde,
Controller
(Chief Accounting Officer)
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Exhibit Index
-------------
Exhibit
No. Description
- -------- -------------
10.2 Employment Agreement dated June 1, 2000, between Hecla Mining
Company and Arthur Brown. (Registrant has substantially identical
agreements with each of Messrs. William B. Booth, J. Gary Childress,
Michael B. White and Ms. Vicki J. Veltkamp)
10.14 Variable Rate Commercial Revolving Loan between Hecla Mining
Company and Idaho Independent Bank dated October 12, 2000
12 Fixed Charge Coverage Ratio Calculation
27 Financial Data Schedule
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