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 June 30, 2001
Commission file number 1-8491
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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 July 31, 2001
- -------------------------- --------------------------
Common stock, par value 66,924,612 shares
$0.25 per share
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Hecla Mining Company and Subsidiaries
Form 10-Q
For the Quarter Ended June 30, 2001
I N D E X*
Page
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PART I. - Financial Information
Item l - Consolidated Balance Sheets - June 30,
2001 and December 31, 2000
- Consolidated Statements of Operations and
Comprehensive Income (Loss) - Three Months and
Six Months Ended June 30, 2001 and 2000
- Consolidated Statements of Cash Flows - Six
Months Ended June 30, 2001 and 2000
- Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. - Other Information
Item 1 - Legal Proceedings
Item 4 - Annual Meeting of Shareholders
Item 6 - Exhibits and Reports on Form 8-K
*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)
June 30, December 31,
2001 2000
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 3,405 $ 1,373
Accounts and notes receivable 9,906 11,164
Inventories 10,570 11,269
Other current assets 1,038 2,105
Net assets of discontinued operations 2,612 44,057
--------- ---------
Total current assets 27,531 69,968
Investments 202 502
Restricted investments 6,564 6,268
Properties, plants and equipment, net 110,496 108,343
Other noncurrent assets 11,494 9,755
--------- ---------
Total assets $ 156,287 $ 194,836
========= =========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 8,134 $ 7,520
Accrued payroll and related benefits 5,183 4,732
Current portion of long-term debt 5,710 59,274
Accrued taxes 2,319 2,188
Accrued reclamation and closure costs 7,496 12,060
--------- ---------
Total current liabilities 28,842 85,774
Deferred income taxes 300 300
Long-term debt 14,370 10,041
Accrued reclamation and closure costs 47,745 46,650
Other noncurrent liabilities 7,448 7,326
--------- ---------
Total liabilities 98,705 150,091
--------- ---------
SHAREHOLDERS' EQUITY
Preferred stock, $0.25 par value, authorized 5,000,000 shares; issued
and outstanding - 2,300,000 shares, liquidation preference 2001 - $123,049
and 2000 - $119,025 575 575
Common stock, $0.25 par value, authorized 100,000,000 shares;
issued 2001 - 66,920,980 shares, issued 2000 - 66,859,752 shares 16,730 16,715
Capital surplus 400,240 400,236
Accumulated deficit (358,543) (366,523)
Accumulated other comprehensive loss (64) (4,858)
Less stock held by grantor trust; 2001 - 146,728 and 2000 - 139,467 common shares (470) (514)
Less treasury stock, at cost; 2001- 62,116 common shares and
2000 - 62,114 common shares (886) (886)
--------- ---------
Total shareholders' equity 57,582 44,745
--------- ---------
Total liabilities and shareholders' equity $ 156,287 $ 194,836
========= =========
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 Income (Loss)
(Unaudited)
(Dollars and shares in thousands, except for per-share amounts)
Three Months Ended Six Months Ended
------------------------------ ----------------------------
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
--------------- ------------- ------------- -------------
Continuing Operations:
Sales of products $ 24,561 $ 21,005 $ 40,978 $ 38,633
-------- -------- -------- --------
Cost of sales and other direct production costs 16,832 17,036 28,004 31,087
Depreciation, depletion and amortization 5,371 5,222 9,765 9,943
-------- -------- -------- --------
22,203 22,258 37,769 41,030
-------- -------- -------- --------
Gross profit (loss) 2,358 (1,253) 3,209 (2,397)
-------- -------- -------- --------
Other operating expenses:
General and administrative 1,808 2,274 3,322 4,153
Exploration 778 1,650 1,294 3,270
Depreciation and amortization 68 71 136 144
Reduction in carrying value of mining properties - - 9,072 - - 9,072
Provision for closed operations and environmental matters 418 2,632 991 3,498
-------- -------- -------- --------
3,072 15,699 5,743 20,137
-------- -------- -------- --------
Loss from operations (714) (16,952) (2,534) (22,534)
-------- -------- -------- --------
Other income (expense):
Interest and other income 310 1,839 1,100 2,462
Miscellaneous expense (435) (716) (848) (1,099)
Interest expense, net (611) (2,049) (2,616) (3,715)
-------- -------- -------- --------
(736) (926) (2,364) (2,352)
-------- -------- -------- --------
Loss from continuing operations before income taxes and
extraordinary charge (1,450) (17,878) (4,898) (24,886)
Income tax provision - - - - - - (10)
-------- -------- -------- --------
Loss from continuing operations before extraordinary charge (1,450) (17,878) (4,898) (24,896)
Discontinued operations:
Income (loss), net of income tax (2) 1,006 160 2,129
Gain (loss) on disposal, net of income tax (265) 161 12,718 (617)
Extraordinary charge, net of income tax - - - - - - (647)
-------- -------- -------- --------
Net income (loss) (1,717) (16,711) 7,980 (24,031)
Preferred stock dividends (2,013) (2,013) (4,025) (4,025)
-------- -------- -------- --------
Income (loss) applicable to common shareholders (3,730) (18,724) 3,955 (28,056)
-------- -------- -------- --------
Other comprehensive income (loss), net of income tax:
Cumulative effect of a change in accounting principle - - - - (136) - -
Reclassification adjustment of loss included in net income (loss) 10 - - 20 - -
Unrealized holding gains (losses) on securities (33) (79) 11 214
Change in foreign currency items - - - - 4,898 - -
-------- -------- -------- --------
Other comprehensive income (loss) (23) (79) 4,793 214
-------- -------- -------- --------
Comprehensive income (loss) applicable to common shareholders $ (3,753) $(18,803) $ 8,748 $(27,842)
======== ======== ======== ========
Basic and diluted income (loss) per common share:
Loss from continuing operations $ (0.06) $ (0.30) $ (0.13) $ (0.43)
Income from discontinued operations - - 0.02 0.19 0.02
Extraordinary charge - - - - - - (0.01)
-------- -------- -------- --------
Basic and diluted income (loss) per common share $ (0.06) $ (0.28) $ 0.06 $ (0.42)
======== ======== ======== ========
Weighted average number of common shares outstanding 66,839 66,788 66,818 66,784
======== ======== ======== ========
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)
Six Months Ended
-------------------------------
June 30, 2001 June 30, 2000
------------- -------------
Operating activities:
Net income (loss) $ 7,980 $ (24,031)
Noncash elements included in net income (loss):
Depreciation, depletion and amortization 9,901 12,217
Extraordinary charge - - 647
(Gain) loss on sale of discontinued operations (12,718) 929
(Gain) loss on disposition of properties, plants and equipment 17 (1,262)
Reduction of carrying value of mining properties - - 9,072
Provision for reclamation and closure costs 476 1,844
Change in net assets of discontinued operations 1,316 - -
Change in assets and liabilities:
Accounts and notes receivable 1,258 607
Inventories (1,256) (1,830)
Other current and noncurrent assets (338) 174
Accounts payable and accrued expenses 614 3,782
Accrued payroll and related benefits 451 (101)
Accrued taxes 131 (51)
Accrued reclamation and closure costs and other noncurrent liabilities (3,824) (3,351)
--------- ---------
Net cash provided (used) by operating activities 4,008 (1,354)
--------- ---------
Investing activities:
Proceeds from sale of discontinued operations 59,761 9,677
Additions to properties, plants and equipment (12,740) (8,429)
Proceeds from disposition of properties, plants and equipment 239 1,768
Increase in restricted investments (296) (89)
Purchase of investments and change in cash
surrender value of life insurance, net 313 94
Other, net (97) 233
--------- ---------
Net cash provided by investing activities 47,180 3,254
--------- ---------
Financing activities:
Common stock issued under stock and stock option plans 6 9
Common stock issuance, net of offering costs 32 - -
Dividends paid on preferred stock - - (4,025)
Payments for debt issuance costs - - (1,811)
Borrowings on long-term debt 10,609 79,500
Repayments on long-term debt (59,803) (66,689)
--------- ---------
Net cash provided (used) by financing activities (49,156) 6,984
--------- ---------
Net increase in cash and cash equivalents 2,032 8,884
Cash and cash equivalents at beginning of period 1,373 2,719
--------- ---------
Cash and cash equivalents at end of period $ 3,405 $ 11,603
========= =========
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, 2000,
set forth in Hecla Mining Company's (Hecla) 2000 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. All financial statements presented are unaudited. However, the balance
sheet as of December 31, 2000, 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 income (loss) or accumulated deficit
as previously reported.
The accompanying financial statements have been prepared assuming Hecla
will continue as a going concern. In order to provide Hecla liquidity,
management is currently evaluating a number of financing alternatives including
debt financing, sale of royalty interest, asset sales and equity issuance.
Hecla currently anticipates completing one or more financing alternatives during
2001. Proceeds from these planned financings will be available for general
corporate purposes. Hecla also continues to pursue the sale of the remaining
assets of the Colorado Aggregate division of MWCA (CAC), which had $2.6 million
of net assets at June 30, 2001. There can be no assurance that Hecla will be
successful in obtaining financing or in completing a sales transaction for the
remaining assets of CAC.
Based upon Hecla's estimate of metals prices and metals production for the
remainder of 2001, Hecla currently believes that its operating cash flows,
proceeds from potential financings and the anticipated proceeds from the sale of
the remaining assets of CAC will be adequate to fund anticipated minimum capital
expenditures, idle property expenditures and exploration expenditures in 2001.
Cash flows from operations, however, could be significantly impacted if the
market price of gold, silver, zinc and lead fluctuate. In the event that cash
balances decline to a level that cannot support the operations of the Company,
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
management will defer certain planned capital and exploration expenditures as
needed to conserve cash for operations. If management's plans are not
successful, operations and liquidity may be adversely affected.
Note 3.
On March 27, 2001, Hecla completed a sale of the K-T Group for $62.5
million subject to customary post-closing adjustments. Hecla recorded a gain on
the sale of the K-T Group of $13.0 million in the first quarter of 2001. The
proceeds from the sale were used to repay a term loan facility of $55.0 million,
and to repay amounts outstanding under a $2.0 million revolving bank agreement.
The remaining net proceeds were available for general corporate purposes.
During the second quarter of 2001, a $0.3 million adjustment was made to reduce
the gain relating to the K-T Group. Hecla also continues to pursue the sale of
the remaining assets of CAC, although there can be no assurance that a sales
transaction will be completed. At June 30, 2001, the remaining net assets of
CAC are approximately $2.6 million. Including the gain on sale, Hecla recorded
income from discontinued operations of approximately $12.9 million, or $0.19 per
common share, in the first six months of 2001 compared to income of
approximately $1.5 million, or $0.02 per common share, in the same period in
2000.
Note 4.
The components of the income tax provision for the six months ended June
30, 2001 and 2000 were as follows (in thousands):
2001 2000
------ ------
Current:
State income taxes $ - - $ - -
Federal income taxes - - - -
Foreign income taxes - - 10
------ ------
Total $ - - $ 10
====== ======
Hecla's income tax provision for the first half of 2001 and 2000 varies
from the amount that would have been provided by applying the statutory rate to
the loss before income taxes primarily due to the inability to use tax losses in
2001 and 2000.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Note 5.
Inventories consist of the following (in thousands):
June 31, Dec. 31,
2001 2000
-------- --------
Concentrates, bullion, metals
in transit and other products $ 5,605 $ 5,932
Materials and supplies 4,965 5,337
-------- --------
$ 10,570 $ 11,269
======== ========
At June 30, 2001, Hecla had forward sales commitments through December 31,
2004 for 200,054 ounces of gold at an average price of $288.25 per ounce. Hecla
intends to physically deliver metals in accordance with the terms of the forward
sales contracts. As such, Hecla has elected to designate the contracts as
normal sales in accordance with SFAS 138 and as a result, these contracts are
not required to be accounted for as derivatives under SFAS 133. 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 June 29,
2001 was $270.60 per ounce.
Note 6. 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 June 30, 2001, Hecla has estimated and accrued an allowance for liability
for remedial activity costs at the Bunker Hill site of $10.6 million. These
estimated expenditures are anticipated to be made over the next three to five
years. In August 2000, Sunshine Mining and Refining Company which was also a
party to the 1994 Consent Decree, filed for Chapter 11 bankruptcy and in January
2001, the Federal District Court approved a new Consent Decree between Sunshine,
the U.S. Government and the Coeur d'Alene Indian Tribe which settled Sunshine's
environmental liabilities in the Coeur d'Alene Basin lawsuits described below
and released Sunshine from further
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
obligations under the 1994 Consent Decree. Although Hecla believes the accrual
is adequate based upon current estimates of aggregate costs, it is reasonably
possible that Hecla's estimate of its obligations may change in the near or
longer term.
Coeur d'Alene River Basin Environmental Claims
- Coeur d'Alene Indian 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. The Tribe's natural resource damage litigation has been consolidated
with the United States' litigation described below.
- 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 has
asserted 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.
The first phase of the trial commenced on the consolidated Coeur d'Alene
Indian Tribe's and The United States' Federal District Court cases on January
22, 2001 and was concluded on July 30, 2001. In the first phase of the trial,
the Court has been asked to determine the extent of liability, if any, of the
defendants for the plaintiffs' CERCLA claims. The Court has also been asked to
determine the liability of the United States for its historic involvement in the
Basin. If liability is determined in the first phase, a second trial will be
scheduled in late 2001 or early 2002 to address damages and remedy selection.
Two of the defendant mining companies, Coeur d'Alene
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Mines Corporation and Sunshine Mining and Refining Company, settled their
liabilities under the litigation during the first quarter of 2001. Hecla and
ASARCO are the only defendants remaining in the litigation.
During 2000, Hecla was involved in settlement negotiations with
representatives of the U.S. government and the Coeur d'Alene Indian Tribe. The
Company also participated with certain of the other defendants in the litigation
in a state of Idaho led settlement effort. Settlement negotiations with the
U.S. government and the Coeur d'Alene Indian Tribe were discontinued in late
2000, but recommenced in March 2001 and are continuing.
As of June 30, 2001, Hecla has not accrued any amounts for potential
liability associated with the Coeur d'Alene River Basin environmental claims as
the amount, if any, is currently not estimable. It is reasonably possible that
Hecla's obligation may change in the near or longer term. An adverse ruling
against Hecla on liability and damages in this matter could have a material
adverse effect on the Company.
Insurance Coverage Litigation
In 1991, Hecla initiated litigation in the Idaho State District Court in
Kootenai County, Idaho, against a number of insurance companies that provided
comprehensive general liability insurance coverage to Hecla and its
predecessors. Hecla believes 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, along with a
second insurer not named in the litigation, is providing Hecla with a partial
defense in all Basin environmental litigation. As of June 30, 2001, Hecla had
not reduced its accrual for reclamation and closure costs to reflect the receipt
of any anticipated insurance proceeds.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Other Claims
In 1997, Hecla's subsidiary, Kentucky-Tennessee Clay Company (K-T Clay),
terminated shipments (comprising approximately 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 its
losses and its insurance company's payments to downstream users of its animal
feed. The complaint alleged negligence, strict liability and breach of implied
warranties and seeks damages in excess of $7.0 million. Legal counsel retained
by the insurance company for K-T Clay had the case removed to Federal Court in
Arkansas. 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 two more recent lawsuits together allege damages totaling approximately $1.7
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. In January 2001,
Hecla was dismissed from the only lawsuit in which it had been named as a
defendant. In March 2001, prior to trial, K-T Clay settled the Riceland Foods
litigation against K-T Clay through settlement payment substantially funded by
K-T Clay's insurance carrier. K-T Clay contributed $230,000 toward the Riceland
Foods settlement. The defense of the remaining lawsuits is being covered by
insurance. The Company believes that $11.0 million of insurance coverage is
available to cover all three claims. On March 27, 2001, Hecla sold its interest
in K-T Clay. However, Hecla agreed to indemnify the purchaser of K-T Clay from
all liability resulting from these dioxin claims and litigation to the extent
not covered by insurance. Although the outcome of the remaining 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 not disclosed above
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 other matters, it is the opinion of Hecla's management that
the outcome of these other matters will not have a material adverse effect on
the financial condition of Hecla.
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Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Note 7.
As of June 30, 2001, Hecla's wholly owned subsidiary Hecla Resource
Investments Limited (HRIL), had $8.1 million outstanding under a project
financing agreement, nonrecourse to Hecla, that was utilized to acquire the La
Camorra mine in Venezuela. As collateral for the loan, HRIL granted a security
interest over the stock of its Venezuelan subsidiary, certain Venezuelan real
property assets and all cash proceeds of the La Camorra mine. HRIL must
maintain compliance with certain financial and other restrictive covenants
related to the available ore reserves and financial performance of the La
Camorra mine. The project financing agreement is repayable in semiannual
payments ending December 31, 2004.
The HRIL project financing agreement requires the Company to maintain
hedged gold positions sufficient to cover all dollar loans, operating
expenditures, taxes, royalties and similar fees projected for the project
through December 31, 2004. At June 30, 2001, there were 200,054 ounces of gold
sold forward at $288.25 per ounce. Portions of these forward contracts mature
quarterly from September 2001 through December 2004. The forward sales
agreement assumes the ounces of gold committed to forward sales at the end of
each quarter can be leased at a rate of 1.5% for each following quarter. The
Company entered into a separate quarterly gold lease rate swap at a fixed rate
of 1.5% on the outstanding notional volume of the flat forward sale. Settlement
is made quarterly with the Company receiving the fixed rate and paying the
current floating gold lease rate. All settlements are made by delivering gold.
As of June 30, 2001, the Company has outstanding a $3.0 million
subordinated loan which is due in three equal semiannual payments commencing in
June of 2003.
The interest rates for borrowings under the project financing and
subordinated debt agreements were 6.84% and 7.71%, respectively, as of June 30,
2001. The interest rates are based on LIBOR rates.
On April 16, 2001, Hecla entered into a new $1.5 million revolving bank
agreement due on June 16, 2001. On June 15, 2001, the Company amended the note
to allow borrowings up to $1.0 million and extended the repayment date until
November 1, 2001. Amounts available under the bank agreement are available for
general corporate purposes. As collateral for the loan, Hecla pledged its
corporate office building and related property located in Coeur d'Alene, Idaho.
The interest rate is based on the prime lending rate plus 1.25%.
13
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
On April 30, 2001, Hecla's wholly owned subsidiary, Minera Hecla, S.A. de
C.V. acquired a processing mill at Velardena, Mexico, to process ore to be mined
from the San Sebastian project on the Saladillo mining concessions located near
Durango, Mexico. The purchase price of $7.4 million was financed by a credit
facility between Minera Hecla, S.A. de C.V. and the lender. The credit facility
is nonrecourse to Hecla. Under the terms of the credit facility, Minera Hecla,
S.A. de C.V. will make monthly payments for principal and interest over 63
months. The loan is collateralized by the mill at Velardena and the Saladillo,
Saladillo 1 and Saladillo 5 mining concessions.
On May 7, 2001, Hecla's wholly owned subsidiary, Minera Hecla, S.A. de C.V.
entered into a $700,000 short-term loan to finance the working capital of the
San Sebastian project. The loan requires monthly interest payments with a final
principal payment due on November 7, 2001. The loan is nonrecourse to Hecla and
is unsecured.
On April 26, 2001, Hecla entered into a factoring agreement, whereas Hecla,
without recourse, will sell all of its right, title and interest in certain
smelter accounts receivable from the Lucky Friday mine, less estimated finance
charges, up to a maximum of $1.7 million. Factored accounts receivable at
June 30, 2001, were $1.1 million.
On June 27, 2001, Hecla entered into a factoring agreement, whereas Hecla
may sell qualified accounts receivable, without recourse except as specifically
provided, certain receivables from MWCA - Colorado Aggregate Division, less
estimated finance charges. The amount of borrowings allowable under the
agreement at any time is a function of the amount of the then outstanding
eligible trade accounts receivable. Factored accounts receivable at June 30,
2001, were $1.4 million.
Note 8.
The following tables present a reconciliation of the numerators (net income
(loss)) and denominators (shares) used in the basic and diluted income (loss)
per common share computations. Also shown is the effect that has been given to
declared and undeclared cumulative preferred stock dividends in arriving at
income (loss) applicable to common shareholders for the three months and six
months ended June 30, 2001 and 2000, in computing basic and diluted income
(loss) per common share (dollars and shares in thousands, except per-share
amounts). For the three months and six months ended June 30, 2001, the $2.0
million and $4.0 million, respectively, have not been declared or paid.
14
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Three Months Ended June 30,
------------------------------------------------------------------
2001 2000
------------------------------- -------------------------------
Net Per-Share Net Per-Share
Income (Loss) Shares Amount Income (Loss) Shares Amount
------------ ------ --------- ------------- ------ ---------
Loss before preferred stock dividends $ (1,717) $ (16,711)
Less: Preferred
stock dividends (2,013) (2,013)
---------- ---------
Basis loss per common share:
Basic loss applicable to common shareholders (3,730) 66,839 $ (0.06) (18,724) 66,788 $ (0.28)
Effect of dilutive securities - - - - - - - - - - - -
---------- ------ ------- --------- ------ -------
Diluted loss per common share $ (3,730) 66,839 $ (0.06) $ (18,724) 66,788 $ (0.28)
========== ====== ======= ========= ====== =======
Six Months Ended June 30,
------------------------------------------------------------------
2001 2000
------------------------------- --------------------------------
Net Per-Share Net Per-Share
Income Shares Amount Income (Loss) Shares Amount
------- ------ --------- ------------- ------ ---------
Income (loss) before extraordinary charge $ 7,980 $ (23,384)
Extraordinary charge, net of income tax - - (647)
---------- ---------
Income (loss) before preferred
stock dividends $ 7,980 $ (24,031)
Less: Preferred
stock dividends (4,025) (4,025)
---------- ---------
Basic income (loss) per common share:
Basic income (loss) applicable
to common shareholders 3,955 66,818 $ 0.06 (28,056) 66,784 $ (0.42)
Effect of dilutive securities - - 568 - - - - - - - -
---------- ------ ------- --------- ------ -------
Diluted income (loss) per common share $ 3,955 67,386 $ 0.06 $ (28,056) 66,784 $ (0.42)
========== ====== ======= ========= ====== =======
These calculations of diluted earnings per share for the three months and
six months ended June 30, 2001 and 2000 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 June 30, 2001 and 2000, as their exercise would
be antidilutive, as follows:
15
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Three Months Ended Six Months Ended
--------------------- ----------------------
June 30, June 30,
2001 2000 2001 2000
---------- ---------- ---------- ----------
2,356,500 2,546,500 2,356,500 2,546,500
The calculations of diluted earnings per share for the three months and six
months ended June 30, 2000, also exclude 1,506,998 warrants to purchase common
stock, as their exercise would be antidilutive. The calculations of diluted
earnings per share for the three months ended June 30, 2001, also exclude
1,477,699 warrants to purchase common stock, as their exercise would be
antidilutive.
Note 9.
Hecla is organized and managed primarily on the basis of the principal
products being produced from its operating units. One operating unit has been
aggregated into the Metals-Gold segment, three of the operating units have been
aggregated into the Metals-Silver segment, and five operating units have been
aggregated as part of the Industrial Minerals segment. During November 2000,
the industrial minerals segment was designated as a discontinued operation. On
March 27, 2001, Hecla sold the K-T Group which consisted of four operating
units. Following the sale of the K-T Group, discontinued operations consisted
of one operating unit. 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 six months ended June 30 (in thousands):
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 30,
2001 2000 2001 2000
-------- ------- -------- -------
Net sales to unaffiliated customers:
Metals-Gold $ 11,410 $ 8,575 $ 18,107 $ 14,753
Metals-Silver 13,151 12,430 22,871 23,880
-------- -------- -------- --------
$ 24,561 $ 21,005 $ 40,978 $ 38,633
======== ======== ======== ========
16
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Three Months Ended Six Months Ended
------------------ --------------------
June 30, June 30,
2001 2000 2001 2000
-------- -------- -------- ---------
Income (loss) from operations:
Metals-Gold $ 2,798 $(11,682) $ 4,068 $(14,001)
Metals-Silver (1,221) (961) (2,221) (1,406)
Other (2,291) (4,309) (4,381) (7,127)
-------- -------- -------- --------
$ (714) $(16,952) $ (2,534) $(22,534)
======== ======== ======== ========
The following table presents identifiable assets by reportable segment as of
June 30, 2001, and December 31, 2000 (in thousands):
June 30, December 31,
2001 2000
---------- ----------
Identifiable assets:
Metals-Gold $ 36,442 $ 42,667
Metals-Silver 92,888 81,572
Discontinued operations 2,612 44,057
Other 24,345 26,540
-------- --------
$156,287 $194,836
======== ========
Note 10.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 was amended in June 2000 with the
issuance of SFAS 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities." SFAS 133, which Hecla adopted effective January 1, 2001,
requires that derivatives be recognized as assets or liabilities and be measured
at fair value. Gains or losses resulting from changes in the fair value of
derivatives in each period are to be accounted for either in current earnings or
other comprehensive income (loss) depending on the use of the derivatives and
whether they qualify for hedge accounting. The key criterion for hedge
accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in the fair value or cash flows of the hedging
instruments and the hedged items.
At June 30, 2001, Hecla's hedging contracts, used to reduce exposure to
precious metal prices, consisted of forward sales
17
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
contracts and a gold lease rate swap. Hecla intends to physically deliver
metals in accordance with the terms of the forward sales contracts, as such,
Hecla has elected to designate the contracts as normal sales in accordance with
SFAS 138 and as a result, these contracts are not required to be accounted for
as derivatives under SFAS 133. Hecla recorded a cumulative effect of a change in
accounting principle in other comprehensive income of approximately $0.1 million
loss related to the gold lease rate swap upon adoption of SFAS 133 on January 1,
2001. This amount is being amortized over the physical settlement of ounces
subject to the gold lease rate swap. During the next twelve months,
approximately $40,000 is expected to be amortized to the income statement.
Note 11.
On July 18, 2001, Hecla announced that operations at its Lucky Friday
silver mine will be reduced, effective October 2001, due to continued low silver
and lead prices. Employment at the mine will decrease from the current level of
approximately 189 people to approximately 42 employees by January 2002.
Production is anticipated to total approximately 3.5 million ounces of silver in
2001, and will be further reduced to approximately 1.2 million ounces in 2002.
The reduced production level will allow the mine to remain ready to increase
production if and when silver and lead prices increase. Primary development at
the mine will be suspended and mining will take place in currently developed
areas. Production is anticipated to be approximately 24,000 tons per month
through September, dropping to 16,000 tons in October and November. Starting in
December, production will be further reduced to approximately 7,000 tons per
month, which will yield approximately 100,000 ounces of silver production per
month. It is estimated that production can be continued at this level for a
period of approximately 24 months, assuming future metals prices do not decrease
significantly.
18
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. On February 27, 2001,
Hecla signed an agreement to sell the Kentucky-Tennessee Clay Company, Kentucky-
Tennessee Feldspar Corporation, Kentucky-Tennessee Clay de Mexico and certain
other minor inactive industrial minerals companies (collectively the K-T Group).
The sales transaction closed on March 27, 2001. Hecla also intends to sell the
remaining assets of the Colorado Aggregate division of MWCA (CAC), which is a
wholly owned subsidiary of Hecla. As a result of Hecla's decision to sell the
industrial minerals segment in 2000, it is now accounted for as discontinued
operations. 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 pay creditors, and
- the other risks detailed from time to time in Hecla's Form 10-K and
Form 10-Q's filed with the Securities and
19
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Exchange Commission (see also "Investment Considerations" of Part I,
Item 1 of Hecla's 2000 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 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.
On April 30, 2001, Hecla's wholly owned subsidiary, Minera Hecla, S.A. de
C.V. (Minera Hecla) acquired a processing mill at Velardena, Mexico, to process
ore to be mined from the San Sebastian project on the Saladillo mining
concessions located near Durango, Mexico. The purchase price of $7.4 million
was financed by a credit facility between Minera Hecla and the lender. The
credit facility is nonrecourse to Hecla. Ore mined from the San Sebastian
project will be trucked approximately 100 kilometers to the processing mill.
The mill has a rated capacity of 500 tonnes per day and produces a silver/gold
precipitate which is to be sold to a precious metals refiner. Milling
operations commenced in early May, and production from Sebastian is anticipated
to be between 1.0 million and 1.3 million ounces of silver, and 20,000 to 25,000
ounces of gold in 2001.
On July 18, 2001, Hecla announced that operations at its Lucky Friday
silver mine will be reduced, effective October 2001, due to continued low silver
and lead prices. Employment at the mine will decrease from the current level of
approximately 189 people to approximately 42 employees by January 2002.
Production is anticipated to total approximately 3.5 million ounces of silver in
2001, and will be further reduced to approximately 1.2 million ounces in 2002.
The reduced production level will allow the mine to remain ready to increase
production if and when silver and lead prices increase. Primary development at
the mine will be suspended and mining will take place in currently developed
areas. Production is anticipated to be approximately 24,000 tons per month
through September, dropping to 16,000 tons in October and November. Starting in
December, production will be further reduced to approximately 7,000 tons per
month, which will yield approximately 100,000 ounces of silver production per
month. It is estimated that production can be continued at this level for a
period of approximately 24 months, assuming future metals prices do not decrease
significantly.
During the first six months of 2001, Hecla produced approximately 86,000
ounces of gold compared to approximately 71,000 ounces in the first six months
of 2000. The following table displays the actual gold production (in ounces) by
operation
20
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
for the six months ended June 30, 2001 and 2000, projected gold production for
the year ending December 31, 2001, and actual gold production for the year ended
December 31, 2000:
Actual Actual Projected Actual
June 30, June 30, Dec. 31, Dec. 31,
Operation 2001 2000 2001 2000
- --------- -------- -------- --------------- --------
La Camorra 68,000 44,000 120,000-125,000 93,000
Greens Creek(2) 13,000 13,000 23,000-25,000 25,000
San Sebastian 5,000 - - 20,000-25,000 3,000
Rosebud(1)(2) - - 14,000 - - 24,000
Other - - - - 0-1,000 1,000
------ ------- --------------- -------
Totals 86,000 71,000 163,000-176,000 146,000
====== ======= =============== =======
(1) The Rosebud mine completed operations in the third quarter of 2000.
(2) Reflects Hecla's portion.
In the first six months of 2001, Hecla produced approximately 4.1 million
ounces of silver compared to approximately 4.2 million ounces in the first six
months of 2000. The following table displays the actual silver production (in
ounces) by operation for the six months ended June 30, 2001 and 2000, projected
silver production for the year ending December 31, 2001, and actual silver
production for the year ended December 31, 2000 (in thousands):
Actual Actual Projected Actual
June 30, June 30, Dec. 31, Dec. 31,
Operation 2001 2000 2001 2000
- --------- -------- -------- ----------- --------
Lucky Friday 2,090 2,690 3,400-3,500 5,012
Greens Creek(1) 1,727 1,496 3,000-3,200 2,754
San Sebastian 282 - - 1,000-1,300 177
Rosebud(1) - - 44 - - 56
----- ----- ----------- -----
Totals 4,099 4,230 7,400-8,000 7,999
===== ===== =========== =====
(1) Reflects Hecla's portion.
21
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
In 2000, Hecla shipped approximately 1,078,000 tons of product from the K-T
Group, which included ball clay, kaolin and feldspar, as well as approximately
61,000 tons of specialty aggregates from CAC and 130,000 cubic yards of
landscape material from the Mountain West Products division of MWCA. During the
first six months of 2001, Hecla shipped approximately 254,000 tons from the
industrial minerals group, including 13,000 tons from CAC. On March 27, 2001,
Hecla completed a sale of the K-T Group for $62.5 million subject to customary
post-closing adjustments. Hecla recorded a gain on the sale of the K-T Group of
$12.7 million. The proceeds were used to repay a term loan facility of $55.0
million and to repay amounts outstanding under a $2.0 million revolving bank
agreement. The remaining net proceeds were available for general corporate
purposes. Hecla continues to pursue a sale of the remaining assets of CAC,
although there can be no assurance that Hecla will complete a sales transaction.
During 2000, Hecla sold substantially all of the assets of its Mountain West
Products division of MWCA and the landscape operations of the Colorado Aggregate
division of MWCA.
Results of Operations
First Six Months 2001 Compared to First Six Months 2000
Hecla recorded a net loss from continuing operations, before preferred
stock dividends, of $4.9 million, or $0.07 per common share, for the first six
months of 2001 compared to a net loss from continuing operations of
approximately $24.9 million, before an extraordinary charge and preferred stock
dividends, or $0.37 per common share, in the first six months of 2000. After
recognizing $12.9 million in income from discontinued operations and $4.0
million (which have not been declared or paid) in dividends to holders of
Hecla's Series B Cumulative Convertible Preferred Stock, Hecla's income
applicable to common shareholders for the first six months of 2001 was
approximately $4.0 million, or $0.06 per common share, compared to a loss of
$28.1 million, or $0.42 per common share, after recognizing $1.5 million in
income from discontinued operations, a $0.6 million extraordinary charge for the
write-off of debt issuance costs related to extinguished debt and $4.0 million
in dividends to holders of Hecla's Series B cumulative convertible Preferred
Stock in the first six months of 2000. Although Hecla has elected not to
declare the dividends for the first and second quarter of 2001, because these
dividends are cumulative, the effects of the undeclared dividends are reflected
in the income applicable to common shareholders.
The income during 2001 compared to the loss in the same period of 2000 was
attributable to a variety of factors, the most significant of which are
discussed below.
22
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Sales of products increased by approximately $2.3 million, or 6%, in the
first six months of 2001 as compared to the same period in 2000 primarily due
to:
- increased sales of $3.3 million from gold operations, principally a
result of increased production and sales at the La Camorra mine ($6.4
million), partly offset by decreased sales at the Rosebud mine ($3.0
million), a result of the completion of mining activity in the third
quarter of 2000, and
- decreased sales totaling approximately $1.0 million from silver
operations, primarily due to lower zinc and silver prices, partly offset
by higher lead prices, lower production at the Lucky Friday mine and
reduced hedging activities in the 2001 period. These factors are partly
offset by increased sales at the San Sebastian mine due to the
commencement of operations in May 2001 ($2.5 million).
The following table compares the average metal prices for the first six
months of 2001 with the comparable 2000 period:
Metal 2001 2000 $ Change % Change
----------------- -------- -------- --------- ---------
Gold-Realized ($/oz.) $ 278 $ 288 $ (10) (3)%
Gold-London Final ($/oz.) 266 285 (19) (7)
Silver-Handy & Harman ($/oz.) 4.48 5.14 (0.66) (13)
Lead-LME Cash ($/pound) 0.217 0.198 0.019 10
Zinc-LME Cash ($/pound) 0.443 0.513 (0.07) (14)
Cost of sales and other direct production costs decreased approximately
$3.1 million, or 10%, from the first six months of 2000 to the comparable 2001
period primarily due to:
- decreased cost of sales at the Rosebud mine ($4.0 million) due to the
completion of mining in the third quarter of 2000,
- decreased cost of sales at the Lucky Friday mine ($1.3 million)
resulting from decreased production of silver and lead and overall cost
cutting measures,
- increased cost of sales at the San Sebastian mine ($1.5 million) due
to the commencement of operations in May 2001, and
- increased cost of sales from the La Camorra mine ($1.0 million) due to
increased production.
23
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Cost of sales and other direct production costs as a percentage of sales
from products decreased from 80% in the first six months of 2000 to 68% in the
comparable 2001 period. The change was due to increased margins from the gold
segment resulting from increased production, increased gold ore grade and better
efficiencies at the La Camorra mine, decreased production and sales at the
Rosebud mine due to the completion of mining activity in 2000, partly offset by
lower hedging revenues and lower margins from the silver segment due to lower
silver and zinc prices.
Hecla recorded adjustments to the carrying value of mining properties of
$9.1 million in the second quarter of 2000, including $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, which 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.
Hecla's provision for closed operations and environmental matters decreased
$2.5 million, from $3.5 million in the first six months of 2000 to $1.0 million
in the 2001 period. The decrease resulted principally from increased costs
during 2000 associated with the Grouse Creek property, combined with reclamation
and closure cost accruals of $668,000 for the Rosebud mine and $590,000 for
various other properties.
Exploration expense decreased $2.0 million, or 60%, during the first six
months of 2001 as compared to the same period of 2000 principally due to
decreased expenditures at the Rosebud mine ($1.1 million), due to completion of
operations in the third quarter of 2000, and reduced exploration activity in
Mexico ($0.6 million) and South America ($0.2 million).
Interest income decreased $1.4 million in the first six months of 2001 as
compared to the same period in 2000, principally a result of the gains
recognized during 2000 on the sale of assets, recognition of the mark to market
adjustment on the gold lease rate swap contract in 2001 in accordance with SFAS
138 and lower interest income.
Interest expense decreased $1.1 million in the first six months of 2001 as
compared to the same period in 2000. The $1.1 million decrease was the result
of the repayment of the $55.0 term loan facility in March 2001 and decreased
loan fees during 2001 as compared to the 2000 period.
24
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
General and administrative expense decreased $0.8 million, from $4.2
million in the 2000 period to $3.3 million in the 2001 period. The decrease in
2001 was principally the result of reduced spending at the corporate level, as
well as reduced staffing levels.
Miscellaneous expense decreased $0.3 million, from $1.1 million in the 2000
period to $0.8 million in the 2001 period. The decrease in 2001 was principally
the result of decreased severance costs ($0.4 million).
Hecla recorded income from discontinued operations of approximately $12.9
million, or $0.19 per common share, in the first six months of 2001 compared to
income of approximately $1.5 million, or $0.02 per common share, in the same
period in 2000. On March 27, 2001, Hecla completed a sale of the K-T Group for
$62.5 million, subject to customary post-closing adjustments, and recorded a
gain of $12.7 million on the sale in 2001. Other factors contributing to the
change include:
- decreased sales of approximately $23.0 million, a direct result of the
sale of the K-T Group ($17.6 million), as well as decreased shipments at
the MWCA group ($5.4 million) due to the sale of the Mountain West
Products division of MWCA in March 2000 and the landscape operation of
Colorado Aggregate in June 2000,
- decreased cost of sales of $19.6 million, directly due to the lower sales
at the K-T Group and the partial sale of MWCA during 2000,
- decreased depreciation, depletion and amortization of $1.2 million, due
to the sale of the K-T Group and the partial sale of MWCA in 2000, and
- a loss of $0.6 million on the sale of the Mountain West Products division
of MWCA in 2000.
An extraordinary charge of $0.6 million was recorded in 2000 to write off
previously unamortized debt issuance costs associated with the extinguishment of
debt.
Cash operating, total cash and total production cost per gold ounce
decreased from $225, $228 and $306 for the first six months of 2000 to $137,
$137 and $208 for the first six months of 2001, respectively. The decreases in
cost per gold ounce were primarily attributable to increased production at the
La Camorra mine, as well as the completion of mining activity in the third
quarter of 2000 at the Rosebud mine.
25
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Cash operating, total cash and total production cost per silver ounce
decreased from $3.77, $3.77 and $5.16 in the first six months of 2000 to $3.22,
$3.23 and $4.57 in the first six months of 2001, respectively. The decreases in
the cost per silver ounce were due primarily to the low-cost San Sebastian mine,
which commenced operations in May 2001, and the positive impacts of Greens
Creek's increased silver production during 2001, resulting from 20% higher
silver grade and increased tons mined. The full cost per ounce was also
positively impacted by decreased per ounce depreciation at the Lucky Friday mine
due to the write-down of the majority of property, plant and equipment in the
fourth quarter of 2000.
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
Hecla recorded a loss from continuing operations, before preferred stock
dividends, of $1.5 million, or $0.02 per common share, for the three months
ended June 30, 2001, compared to a loss from continuing operations of $17.9
million, or $0.27 per common share, before preferred stock dividends, for the
three months ended June 30, 2000. After recognizing $2.0 million in dividends
to holders of Hecla's Series B Cumulative Convertible Preferred Stock and a $0.3
million loss from discontinued operations, Hecla's loss applicable to common
shareholders for the second quarter of 2001 was approximately $3.7 million, or
$0.06 per common share, compared to a loss for the same period in 2000 of $18.7
million, or $0.28 per common share, after $2.0 million in dividends to holders
of Hecla's Series B cumulative convertible preferred stock and income of $1.2
million from discontinued operations. The change in loss applicable to common
shareholders during 2001 was attributable to a variety of factors, the most
significant which are discussed below.
Sales of products increased by approximately $3.6 million, or 17%, in the
second quarter of 2001 as compared to the same period in 2000 primarily due to:
- increased sales of $2.8 million from gold operations, principally a
result of increased production and sales at the La Camorra mine ($4.1
million), partly offset by decreased sales at the Rosebud mine ($1.2
million), a result of the completion of mining activity in the third
quarter of 2000, and
- increased sales totaling approximately $0.7 million from silver
operations primarily due to increased sales at the San Sebastian mine,
due to the commencement of operations in May 2001 ($2.5 million),
increased production from the Greens Creek mine ($0.4 million), partly
offset by lower lead and silver prices, lower production at the Lucky
Friday mine ($1.9 million), as well as reduced hedging activity during
2001 ($0.3 million).
26
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
The following table compares the average metal prices for the second
quarter of 2001 with the comparable 2000 period:
Metal 2001 2000 $ Change % Change
----------------- -------- -------- --------- ---------
Gold-Realized ($/oz.) $ 277 $ 287 $ (10) (3)%
Gold-London Final ($/oz.) 268 280 (12) (4)
Silver-Handy & Harman ($/oz.) 4.40 5.07 (0.67) (13)
Lead-LME Cash ($/pound) 0.223 0.199 0.024 12
Zinc-LME Cash ($/pound) 0.453 0.505 (0.052) (10)
Cost of sales and other direct production costs decreased slightly to $16.8
million in the second quarter of 2001 from $17.0 million in 2000. Cost of sales
from gold operations decreased $1.1 million due to lower costs of sales at the
Rosebud mine due to the completion of mining activity, offset by higher costs of
sales at the La Camorra mine due to increased production. Cost of sales from
silver operations increased $0.9 million resulting from increased cost of sales
at the San Sebastian mine, due to the commencement of operations in May 2001,
increased production at the Greens Creek mine, partially offset by decreased
cost of sales at the Lucky Friday mine due to lower production.
Cost of sales and other direct production costs as a percentage of sales
from products decreased from 81% in the second quarter of 2000 to 69% in the
comparable 2001 period. The change was due to increased margins from the gold
segment resulting from increased production, higher gold ore grade and better
efficiencies at the La Camorra mine, decreased production and sales at the
Rosebud mine, due to the completion of mining activity in 2000, partly offset by
lower hedging revenues and lower margins from the silver segment due to lower
silver and zinc prices.
Hecla recorded adjustments to the carrying value of mining properties of
$9.1 million in the second quarter of 2000, including $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, which 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.
27
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Hecla's provision for closed operations and environmental matters decreased
$2.2 million, from $2.6 million in the second quarter of 2000 to $0.4 million in
the 2001 period. The decrease resulted principally from increased costs during
2000 associated with the Grouse Creek property, combined with reclamation and
closure cost accruals of $668,000 for the Rosebud mine and $590,000 for various
other properties.
Interest and other income decreased $1.5 million during the second quarter
of 2001 as compared to the same period of 2000, principally a result of gains
recognized for the sale of assets during 2000, the recognition of a mark to
market adjustment on the gold lease rate swap contract in accordance with SFAS
138 in 2001 and lower interest income.
Interest expense decreased $1.4 million in the second quarter of 2001 as
compared to the same period in 2000. The $1.4 million decrease was the result
of the repayment of the $55.0 term loan facility in March 2001, lower average
interest rates and decreased loan fees during 2001 as compared to the 2000
period.
Exploration expense decreased $0.9 million, or 53%, during the second
quarter of 2001 as compared to the same period of 2000 principally due to
decreased expenditures at the Rosebud Mine ($0.6 million), due to completion of
operations in the third quarter of 2000, and reduced exploration activity in
Mexico ($0.2 million).
General and administrative expense decreased $0.5 million, from $2.3
million in the 2000 period to $1.8 million in the 2001 period. The decrease is
principally due to reduced spending at the corporate level, as well as reduced
staffing levels.
Miscellaneous expense decreased $0.3 million, from $0.7 million in the 2000
period to $0.4 million in the 2001 period. The decrease in 2001 was principally
the result of decreased severance costs ($0.4 million).
Cash operating, total cash and total production cost per gold ounce
decreased from $210, $213 and $291 for the second quarter of 2000 to $131, $131
and $203 for the second quarter of 2001, respectively. The decreases in cost
per gold ounce were primarily attributable to increased productivity and higher
average gold ore grade at the La Camorra mine, as well as completion of mining
activity in the third quarter of 2000 at the Rosebud mine.
Cash operating, total cash and total production cost per silver ounce
decreased from $3.85, $3.86 and $5.32 in the second quarter of 2000 to $3.27,
$3.30 and $4.71 in the second quarter of 2001, respectively. The decreases in
the cost per silver ounce are due primarily to the low-cost San Sebastian mine,
due to high
28
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
gold by-product credits, which commenced operations in May 2001. The full cost
per ounce was also positively impacted by decreased per ounce depreciation at
the Lucky Friday mine due to the write-down of the majority of property, plant
and equipment in the fourth quarter of 2000.
Financial Condition and Liquidity
A substantial portion of 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 seek and 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. 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 June 30, 2001, assets totaled approximately $156 million and
shareholders' equity totaled approximately $58 million. Cash and cash
equivalents increased by $2.0 million to $3.4 million at June 30, 2001 from $1.4
million at December 31, 2000.
Hecla's investing activities provided $47.2 million of cash during the
first six months of 2001. The most significant source of cash was from the sale
of the K-T Group ($59.8 million), partly offset by additions to properties,
plants and equipment totaling $12.7 million, principally at the San Sebastian
mine to acquire the Velardena mill ($7.4 million), at the La Camorra mine ($2.7
million) and at the Greens Creek mine ($2.5 million).
Operating activities provided approximately $4.0 million of cash during the
first six months of 2001. Significant sources of cash included cash provided by
La Camorra and Greens Creek, increased accrued payroll and related benefits of
$2.0 million and decreased accounts and notes receivable of $1.3 million.
Significant uses of cash included cash required for reclamation activities and
other noncurrent liabilities of $3.8 million, increases in inventories of $1.3
million, primarily due to increases at the La Camorra and Greens Creek mines,
and a decrease in accounts payable and accrued expenses of $1.0 million.
Principal noncash charges included a $12.7 million gain on the sale of the K-T
Group, partly offset by charges for depreciation, depletion and amortization of
$9.9 million.
29
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
During the first six months of 2001, approximately $49.2 million of cash
was used by financing activities. The major use of cash was repayment of debt
of $59.8 million, including the Company's $55.0 million term loan facility.
This use was partly offset by borrowings of $10.6 million, including $7.4
million at Minera Hecla to finance the Velardena mill purchase.
At June 30, 2001, Hecla's wholly owned subsidiary, HRIL, had $8.1 million
outstanding under a credit agreement utilized to finance the acquisition of the
La Camorra gold mine in Venezuela. At June 30, 2001, HRIL was in compliance with
restrictive covenants related to the available ore reserves and financial
performance of the La Camorra mine. At June 30, 2001, $5.0 million of the
project financing debt was classified as long-term debt, with the remaining $3.1
million classified as current portion of long-term debt.
On April 16, 2001, Hecla entered into a new $1.5 million revolving bank
agreement due on June 16, 2001. On June 15, 2001, the Company amended the note
to allow borrowings up to $1.0 million and extended the repayment date until
November 1, 2001. Amounts available under the bank agreement are available for
general corporate purposes. As collateral for the loan, Hecla pledged its
corporate office building and related property located in Coeur d'Alene, Idaho.
The interest rate is based on the prime lending rate plus 1.25%.
On April 30, 2001, Minera Hecla acquired a processing mill at Velardena,
Mexico, to process ore to be mined from the San Sebastian project on the
Saladillo mining concessions located near Durango, Mexico. The purchase price
of $7.4 million was financed by a credit facility between Minera Hecla and the
lender. The credit facility is nonrecourse to Hecla. Under the terms of the
credit facility, Minera Hecla will make monthly payments for principal and
interest over 63 months, including payments of $170,000 a month in 2001. The
loan is collateralized by the mill at Velardena and the Saladillo, Saladillo 1
and Saladillo 5 mining concessions.
On May 7, 2001, Minera Hecla entered into a $700,000 short-term loan to
finance the working capital of the San Sebastian project. The loan requires
monthly interest payments with a final principal payment due on November 7,
2001. The loan is nonrecourse to Hecla and is unsecured.
On April 26, 2001, Hecla entered into a factoring agreement, whereas Hecla,
without recourse, will sell all of its right, title and interest in certain
smelter accounts receivable from the Lucky Friday mine, less estimated finance
charges, up to a maximum of $1.7 million. Factored accounts receivable at
June 30, 2001, were $1.1 million.
30
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
On June 27, 2001, Hecla entered into a factoring agreement, whereas Hecla
may sell qualified accounts receivable, without recourse except as specifically
provided, certain receivables from MWCA - Colorado Aggregate Division, less
estimated finance charges. The amount of borrowings allowable under the
agreement at any time is a function of the amount of the then outstanding
eligible trade accounts receivable. Factored accounts receivable at June 30,
2001, were $1.4 million.
On July 18, 2001, Hecla announced that operations at its Lucky Friday
silver mine will be reduced, effective October 2001, due to continued low silver
and lead prices. Employment at the mine will decrease from the current level of
approximately 189 people to approximately 42 employees by January 2002.
Production is anticipated to total approximately 3.5 million ounces of silver in
2001, and will be further reduced to approximately 1.2 million ounces in 2002.
The reduced production level will allow the mine to remain ready to increase
production if and when silver and lead prices increase. Primary development at
the mine will be suspended and mining will take place in currently developed
areas. Production is anticipated to be approximately 24,000 tons per month
through September, dropping to 16,000 tons in October and November. Starting in
December, production will be further reduced to approximately 7,000 tons per
month, which will yield approximately 100,000 ounces of silver production per
month. It is estimated that production can be continued at this level for a
period of approximately 24 months, assuming future metals prices do not decrease
significantly.
Hecla currently estimates that capital expenditures for the remainder of
2001 will be in the range of $4.5 to $6.0 million, principally for expenditures
at the Greens Creek and La Camorra mines. Expenditures for environmental
remediation and reclamation for the remainder of 2001 are estimated in the range
of $4.0 to $6.0 million, principally for activities at the Grouse Creek property
and the Bunker Hill Superfund site. Hecla also estimates that exploration
expenditures for the remainder of 2001 will be in the range of $0.8 to $1.3
million for expenditures at the San Sebastian project in Mexico and at the
Greens Creek and La Camorra mines. These expenditures will be dependent upon
Hecla's ability to generate sufficient operating cash flows, proceeds from
potential debt financings, proceeds generated from the potential sale of assets
and possible offerings of equity and/or debt securities. There can be no
assurance that Hecla will be successful in generating adequate funding for
planned capital expenditures, environmental remediation and reclamation
expenditures and for exploration expenditures.
Reserves for closure costs, reclamation and environmental matters totaled
$55.2 million at June 30, 2001. Hecla anticipates that expenditures relating to
these reserves will be
31
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
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 the reassessment, it is
reasonably possible that Hecla's estimate of its obligations may change in the
near term.
Hecla has 2.3 million shares of Series B Cumulative Convertible Preferred
Stock (the Preferred Shares) outstanding. Holders of the Preferred Shares are
entitled to receive cumulative cash dividends at the annual rate of $3.50 per
share payable quarterly, when and if declared by the Board of Directors. As of
July 31, 2001, Hecla has not declared and paid the equivalent of four quarterly
dividends. Holders of the Preferred Shares have no voting rights except if
Hecla does not declare and pay the equivalent of six quarterly dividends. If
these dividends are not paid, the holders of Preferred Shares, voting as a
class, shall be entitled to elect two additional directors. The holders of
Preferred Shares also have voting rights related to certain amendments to
Hecla's Articles of Incorporation.
Hecla brought suit in January 2001 against Zemex Corporation of Toronto,
Canada, under its guarantee for its subsidiary Zemex U.S. Corporation's failure
to close on the sale of K-T Clay and K-T Mexico. Hecla had announced the agreed
upon sale in November 2000 for $68.0 million and is seeking damages incurred by
Zemex U.S. Corporation's failure to purchase K-T Clay and K-T Mexico as agreed.
Hecla received shareholder approval at its annual shareholders' meeting on
June 11, 2001, allowing a reverse split of its common stock at the discretion of
Hecla's board of directors. The choice of stock split ratios given to the
directors was one for three, one for four or one for five. The directors have
the option to implement a reverse split at one of those ratios any time prior to
June 11, 2003, or not at all. The company requested the board be granted
authority to implement a reverse split from shareholders if necessary to remain
listed on the New York Stock Exchange. Hecla's common stock has been trading
above the minimum average criteria for continued listing on the Exchange since
mid-May 2001. The Exchange's criterion is a minimum average of $1 per share.
The directors have elected not to take any action on the reverse split at this
time, as the company remains within the minimum criteria for the 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
32
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
amount not to exceed $100.0 million in the aggregate. As of June 30, 2001,
Hecla has issued $62.2 million of Hecla's common shares and warrants under the
Registration Statement. Due to the current market capitalization of Hecla,
there can be no assurance as to the availability of this Registration Statement.
As of June 30, 2001, Hecla's unrestricted cash balance totaled $3.4
million. Maintaining this cash position in the current low precious metals
price environment will require further reductions in spending and implementing
one or more financing alternatives. Hecla is currently evaluating a number of
alternatives including additional debt financing, asset sales, hedging, sale of
royalty interest and equity issuance. Hecla currently anticipates completing
one or more financing alternatives during 2001. Proceeds from possible
financings will be available for general corporate purposes. Hecla also
continues to pursue the sale of the remaining assets of CAC. There can be no
assurance that Hecla will be successful in obtaining additional financing or in
completing a sales transaction for the remaining assets of CAC.
Based upon Hecla's estimate of metals prices and metals production for
2001, Hecla currently believes that its operating cash flows, proceeds from
possible financings and the anticipated proceeds from the sale of the remaining
assets of CAC will be adequate to fund anticipated minimum capital expenditures,
idle property expenditures and exploration expenditures in 2001. Cash flows
from operations, however, could be significantly impacted if the market price of
gold, silver, zinc and lead fluctuate. In the event that cash balances decline
to a level that cannot support the operations of the Company, management will
defer certain planned capital and exploration expenditures as needed to conserve
cash for operations. If management's plans are not successful, operations and
liquidity may be adversely affected.
Various laws and permits require that financial assurances be in place for
certain environmental and reclamation obligations and other potential
liabilities. Hecla currently has in place such financial assurances in the form
of surety bonds from four bonding companies. One of the bonding companies,
Amwest Surety Insurance Company, has provided $4.8 million of bonds secured with
$1.7 million of cash collateral for certain reclamation requirements at Grouse
Creek and Republic. Amwest is in liquidation under Nebraska law and new
financial assurances might be required. There can be no guarantee that Hecla
will be able to maintain and/or put in place the necessary replacement financial
assurances or any additional financial assurances that may be required.
For information on hedged positions and derivative instruments, see Item 7A
"Quantitative and Qualitative Disclosure About Market Risk."
33
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Hecla is subject to legal proceedings and claims that have not been finally
adjudicated (see Part II. Item 1. Legal Proceedings and Note 6 of Notes to
Consolidated Financial Statements). The ultimate disposition of these matters
and various other pending legal actions and claims is not presently
determinable. However, an adverse determination in certain of these matters may
have a material adverse effect on the financial position of Hecla and its
subsidiaries.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
The following discussion about Hecla's risk-management activities includes
"forward-looking statements" that involve risk and uncertainties, as well as
summarize the financial instruments and derivative instruments held by Hecla at
June 30, 2001, which are sensitive to changes in interest rates and commodity
prices. Actual results could differ materially from those projected in the
forward-looking statements. 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
2000 Annual Report on Form 10-K).
Interest-Rate Risk Management
At June 30, 2001, Hecla's debt was subject to changes in market interest
rates and was sensitive to those changes. Hecla currently has no derivative
instruments to offset the risk of interest rate changes. Hecla may choose to
use derivative 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
June 30, 2001, 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.
34
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
(in thousands)
2001 2002 2003 2004 Thereafter Total Value
-------- -------- -------- -------- ---------- -------- --------
Subordinated debt $ - - $ - - $ 2,000 $ 1,000 $ - - $ 3,000 $ 3,000
Average interest rate 7.94% 9.05% 10.05% 10.48%
Project financing debt $ 1,625 $ 3,000 $ 3,000 $ 500 $ - - $ 8,125 $ 8,125
Average interest rate 6.44% 7.55% 8.55% 8.98% - -
Project financing debt $ 564 $ 1,243 $ 2,283 $ 837 $ 2,327 $ 7,254 $ 7,254
Average interest rate 13.0% 13.0% 13.0% 13.0% 13.0%
Revolving bank debt $ 1,000 $ - - $ - - $ - - $ - - $ 1,000 $ 1,000
Average interest rate 8.0% - - - - - - - -
Commodity-Price Risk Management
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. Hecla intends to physically deliver metals in
accordance with the terms of the forward sales contracts. As such, Hecla has
elected to designate the contracts as normal sales in accordance with SFAS 138
and as a result, these contracts are not required to be accounted for as
derivatives under SFAS 133.
The following table provides information about Hecla's forward sales
contracts at June 30, 2001. The table presents the notional amount in ounces,
the average forward sales price and the total-dollar contract amount expected by
the maturity dates, which occur between September 28, 2001, and December 31,
2004.
35
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Expected Expected Expected Expected Estimated
Maturity Maturity Maturity Maturity Fair
2001 2002 2003 2004 Value
--------- -------- -------- -------- ---------
Forward contracts:
Gold sales (ounces) 30,896 60,428 59,802 48,928
Future price (per ounce) $ 288 $ 288 $ 288 $ 288
Contract amount (in $000's) $ 8,906 $ 17,418 $ 17,238 $ 14,103 $ 621
In addition to the above contracts, Hecla has a quarterly gold lease rate
swap at a fixed rate of 1.5% on 184,606 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 gold forward
contracts. The estimated cost to close out the gold lease rate swap at June 30,
2001 was $517,456.
36
Part II - Other Information
Hecla Mining Company and Subsidiaries
Item 1. Legal Proceedings
For information concerning legal proceedings, refer to Note 6 to
Consolidated Financial Statements of this Form 10-Q.
37
Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
Item 4. Annual Meeting of Shareholders
At the annual meeting of shareholders held on June 8, 2001, the following
matters were voted on by Hecla's shareholders:
Election of Three Directors:
Votes Votes
For Withheld
---------- ---------
Ted Crumley 56,445,902 1,248,426
Charles L. McAlpine 56,445,308 1,249,020
Jorge E. Ordonez C. 56,452,924 1,241,404
To approve alternative proposals to amend the Certificate of Incorporation
to effect a one-for-three, one-for-four or one-for-five reverse stock split of
the issued and outstanding shares of the Corporation's Common Stock at the
discretion of the Board of Directors.
Votes Votes
For Against Abstentions
---------- --------- -----------
54,593,702 2,831,626 269,000
Approval of selection of
PricewaterhouseCoopers LLP as
Hecla's Auditors for 2001
Votes Votes
For Against Abstentions
---------- ------- -----------
56,947,096 508,138 239,094
38
Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.4(c) - Hecla Mining Company 1995 Stock Incentive Plan,
Amended February 19, 1999, Amended June 7, 2001
10.19 - Form of Retention Agreement dated July 10,
2001, between the Registrant and each of the following named
executives: Arthur Brown, William B. Booth, Thomas F.
Fudge, Vicki J. Veltkamp, Lewis E. Walde, and Michael B.
White. The formula for retention payments is based upon 22%
of each executive's salary for the June 30, 2002 payment and
44% of each executive's salary for the December 31, 2002
payment plus outstanding unpaid amounts due the executive
under the Registrant's terminated Executive Deferral Plan.
12 - Fixed Charge Coverage Ratio Calculation
(b) Reports on Form 8-K
None
39
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: August 13, 2001 By /s/ Arthur Brown
-------------------------------------------
Arthur Brown, Chairman, President
and Chief Executive Officer
Date: August 13, 2001 By /s/ Lewis E. Walde
-------------------------------------------
Lewis E. Walde, Vice President - Controller
(Chief Accounting Officer)
40
Exhibit Index
Exhibit
No. Description
- -------- -----------------
10.4(c) Hecla Mining Company 1995 Stock Incentive Plan, Amended February 19,
1999, Amended June 7, 2001
10.19 Form of Retention Agreement dated July 10, 2001, between the
Registrant and each of the following named executives: Arthur Brown,
William B. Booth, Thomas F. Fudge, Vicki J. Veltkamp, Lewis E. Walde,
and Michael B. White. The formula for retention payments is based upon
22% of each executive's salary for the June 30, 2002 payment and 44%
of each executive's salary for the December 31, 2002 payment plus
outstanding unpaid amounts due the executive under the Registrant's
terminated Executive Deferral Plan.
12 Fixed Charge Coverage Ratio Calculation