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SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
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FORM 8-K
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported): October 25, 1995
Hecla Mining Company
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-8491 82-0126240
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(Commission File Number) (IRS Employer Identification No.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
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(Address of principal executive offices) (Zip Code)
(208) 769-4100
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(Registrant's Telephone Number)
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Item 5. Other Events.
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On October 25, 1995, the Registrant issued the press
release attached hereto as Exhibit A, which is incorporated herein
by this reference.
Item 7. Financial Statements, Proforma Financial Information and
Exhibits.
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Exhibit A - Press Release dated October 25, 1995.
SIGNATURE
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Pursuant to the requirements of Section 12 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
By /s/ Nathaniel K. Adams
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Name: Nathaniel K. Adams
Title: Corporate Counsel and
Assistant Secretary
Dated: October 25, 1995
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EXHIBIT INDEX
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Exhibit A - Press Release dated October 25, 1995
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Exhibit A
[HECLA LOGO]
FOR IMMEDIATE RELEASE
October 25, 1995
HECLA REPORTS DISAPPOINTING RESULTS AT GROUSE CREEK MINE
COEUR D'ALENE, IDAHO -- Hecla Mining Company (HL & HL-
PrB:NYSE) today reported results at its Grouse Creek Unit for the
first nine months of 1995. The Grouse Creek gold mine, which began
commercial production in December 1994, has experienced higher than
expected operating costs per ounce due to lower than anticipated
gold grades. These operating costs, which Hecla views as
unacceptable, have led the company to begin a reevaluation of the
proven and probable reserves at Grouse Creek and its affect on the
economics of the project. Based on information currently available
to management, this reevaluation could result in a write-down of
the property. Hecla holds an 80% interest in the mine, which is
located in central Idaho in the historic Yankee Fork Mining
District, near the town of Challis. The property consists of the
Sunbeam deposit, which is currently being mined, and the Grouse
deposit.
OPERATING RESULTS
During the third quarter of 1995, the Grouse Creek Unit milled
477,000 tons of ore at an average grade of 0.036 ounce of gold per
ton for a total of 15,336 ounces for Hecla's account. In the first
nine months of the year, Hecla's share of Grouse Creek production
was 50,534 ounces of gold, or 1,120,000 tons of ore milled at an
average grade of 0.046 ounce of gold per ton. Based on extensive
drilling and ore reserve modeling of the deposit, Hecla had
anticipated much higher ore grades.
As a result of the ore grade shortfall, the mine's economic
performance has failed to meet expectations. During the third
quarter of 1995, the average cash cost per ounce of gold was $293,
with a full cost of $479 per ounce. For the nine-month period, the
cash cost averaged $352 per ounce of gold and the full cost was
$536 per ounce.
GEOLOGIC INTERPRETATION
Initially, ore reserve estimates for the Sunbeam pit appeared
to be on target. The first 12 benches, which were relatively
small, produced more ounces than anticipated at a grade that was
very near the ore reserve target. However, costs during the start-
up phase of mining were higher than anticipated, mainly due to ore
feeder problems and harsh winter conditions. The plant is now
operating at design capacity, and Hecla believes those start-up
problems have been resolved.
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The third quarter mining plan included three larger, higher-
grade benches in the Sunbeam pit. As mining advanced in late
August, September and early October, shortfalls in both ore tonnage
and grade were encountered. Consequently, these three benches
provided only about half the gold that had been predicted by
drilling and ore reserve modeling.
Hecla is still evaluating its previous ore reserve estimates,
but it appears that the area of influence attributed to numerous
high-grade drill intercepts in the Sunbeam deposit was
misinterpreted, resulting in an overestimation of reserves.
Although the deposit was tightly drilled on 65-foot centers, that
drill spacing proved to be inadequate to accurately predict the
grade continuity. Geologic modeling based on the drilling program
led Hecla to believe that the high-grade area of the deposit was
much larger and more continuous than production to date indicates.
MINE PLAN
Mining operations will continue for now at the Grouse Creek
Unit as Hecla proceeds with work on the optimal mine plan to
extract the ore. In 1994, the life of the Grouse Creek project had
been estimated at seven years, with Hecla's share calculated at a
total of 722,000 contained ounces of gold. Although planning is
not yet complete, Hecla believes the new mine plan will result in
a significantly shorter mine life and fewer ounces recovered at
current metals prices.
BOARD OF DIRECTORS MEETING
Hecla's management is continuing to evaluate project economics
and is studying several alternatives to optimize operations at
Grouse Creek. Hecla believes, based on current information
available to management, that in the worst case the remaining
carrying value for the Grouse Creek Unit of $97 million would be
written down in the third quarter. Information regarding a
potential write-down of the project will be presented to Hecla's
audit committee and the entire board of directors at its regularly
scheduled meeting on November 10. It is expected that board
decisions regarding the Grouse Creek Unit will be released along
with the company's full third quarter financial results on the
afternoon of Friday, November 10. Hecla's management currently
does not expect to recommend that operations at the Grouse Creek
Unit be halted, although all options are under consideration.
Arthur Brown, Hecla's chief executive officer, said he expects
Hecla's third quarter results to be on track to meet market
expectations of a third quarter loss in the range of 5 cents to 7
cents per share. However, Brown said this estimate does not
include the effect of any potential write-down of the Grouse Creek
project. Brown concluded, "A lot of work remains to be done to
fully understand the situation at Grouse Creek, but we wanted to
give our shareholders and the market as much information as we
could as soon as possible."
-HL-
Contact: Bill Booth, vice president - investor and public affairs,
208-769-4126
Vicki Veltkamp, manager - corporate communications, 208-769-4144