1
Exhibit 13
[HECLA LOGO]
HECLA WRITE-DOWNS AND ACCRUALS AFFECT THIRD QUARTER RESULTS
For the Period Ended September 30, 1996
For release: November 11, 1996
Hecla Mining Company (HL & HL-PrB:NYSE) today reported a net loss for
the third quarter of 1996 of $38.8 million, or 76 cents per share, after the
payment of a quarterly dividend of $2 million to shareholders of preferred
stock. The third quarter loss includes nonrecurring adjustments totaling
$38.1 million. The largest portion of the nonrecurring adjustments relates to
the decision by Hecla's board of directors to suspend operations at the Grouse
Creek gold mine in central Idaho next year. The mine will be placed on a care
and maintenance status. Some reclamation on the property is anticipated next
summer, after the Sunbeam pit is mined out during the second quarter of 1997.
Although major reclamation and dismantling of the plant have not been
scheduled, the company decided to accrue $22.5 million for holding costs,
reclamation and final closure expenses. The company also took a reduction in
the carrying value of the Grouse Creek mine in the amount of $5.3 million
relating to the write-down of tailings impoundment construction costs and other
assets. Year to date, Grouse Creek has produced 40,000 ounces of gold, at a
cash cost of $315 per ounce.
Hecla earlier announced an asset write-down of $7.6 million with an
additional closure cost accrual of $336,000 during the third quarter for the
American Girl gold mine in southern California. In addition, an accrual of
$2.3 million was recorded for future costs relating to Coeur d'Alene River
Basin environmental issues. Before these write-downs and accruals, Hecla had a
net loss of $649,000, or 1 cent per share, on revenue of $41 million after a $2
million quarterly dividend payment to shareholders of preferred stock.
The third quarter loss was partially offset by miscellaneous income of
about $3 million, which is primarily a result of a gain of $1 million on the
sale of the Apex mine in southern Utah, a favorable settlement in the amount of
approximately $680,000, and a $625,000 gain on the sale of an immediate 75%
interest in the Golden Eagle gold exploration project to Santa Fe Pacific Gold
Corporation.
For the first nine months of 1996, the company incurred a net loss of
$38.5 million, or 75 cents per share, on revenue of $125.9 million, compared to
a net loss in the same period last year of $109 million, or $2.26 per share, on
revenue of 121.9 million.
PRODUCTION AND PRICES
Hecla produced nearly 1.8 million ounces of silver and 122,000 ounces
of gold during the first nine months of 1996, at a total cash cost of $4.07 per
ounce of silver and $277 per ounce of gold. The average price of silver for
the first nine months of 1996 was $5.29 per ounce, and the average price of
gold was $397 per ounce.
OPERATIONS
ROSEBUD
The 50/50 joint venture agreement with Santa Fe Pacific Gold
Corporation on the Rosebud gold project was finalized in September. The
project is located in northern Nevada. The mine will be operated by Hecla, and
the ore will be trucked to Santa Fe's Twin Creeks mine for processing.
Development is on schedule, and the underground mine is expected to begin
production in the second quarter of 1997. After reaching full production,
Rosebud is expected to yield about 50,000 ounces of gold annually for Hecla's
account. Current reserve estimates give the operation a five year life.
Exploration plans through the end of 1997 include approximately $2 million for
a surface drilling program. In addition, an underground drilling program is
planned to further delineate the deposit to the north and east of current
development. Rosebud lies on trend with several other operating gold
properties, and Arthur Brown, Hecla's chairman and chief executive officer,
said, "We are very optimistic about the potential here to expand the mine life
at Rosebud through further exploration."
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LA CHOYA
The La Choya gold mine in Sonora, Mexico, is on its way to producing
well over 70,000 ounces of gold in 1996. During the first nine months, the
mine has produced nearly 60,000 ounces of gold at a total cash cost of $181 per
ounce.
LUCKY FRIDAY
At the Lucky Friday mine, increased production, better lead prices and
development ore from the higher-grade expansion area contributed significantly
to the reduction in total cash costs to $3.37 per ounce during the third
quarter of 1996. The full cost of production, including depreciation, was
$4.55 per ounce. For the first nine months, the total cash cost per ounce of
silver at Lucky Friday was $4.07, and the full cost of production was $5.30 per
ounce.
Thirty-six drill holes into the expansion area adjacent to the
underground Lucky Friday workings have all encountered ore-grade material. The
identified extent of the deposit now has about a 1,400-foot strike length and
is still open above, below, and to the east and west. The drill indicated
resource in the main vein of the expansion area has an average grade of 21
ounces of silver per ton, which is twice the grade currently being mined at
Lucky Friday. Brown said, "We continue to see excellent drilling results from
this new area. I'm enthused about the potential for this deposit to bring the
Lucky Friday mine back to historic levels of production of 4 to 5 million
ounces annually, and with that, a return to profitability." Engineering and
final feasibility studies for the Lucky Friday expansion project are expected
to be completed in the first quarter of 1997.
GREENS CREEK
The Greens Creek mine in Alaska went back into operation ahead of
schedule at the end of July. Start-up is going smoothly, and the mine produced
about 145,000 ounces of silver for Hecla's account during the first two months
of operation. Full production rates are expected by the end of the year.
Hecla's share of 1997 production is expected to exceed 3 million ounces of
silver at a cash cost ranging from $2.50-$3.00 per ounce. Hecla owns a 29.7%
interest in the mine, which is operated by Kennecott Greens Creek Mining
Company.
INDUSTRIAL MINERALS
Hecla's industrial minerals segment continued its record performance
in the third quarter. Gross profit from industrial minerals increased 30% to
$2.6 million, compared to $2 million in the same period of 1995. In the first
nine months of 1996, the industrial minerals segment contributed $8.9 million
in gross profit, compared to $6.5 million in the first nine months of last
year.
The improvement is associated with increased shipments from all four
of Hecla's industrial minerals subsidiaries: Mountain West Products, Kentucky-
Tennessee Clay Company, K-T Feldspar Corporation and Colorado Aggregate
Company.
EXPLORATION
GOLDEN EAGLE
Hecla owns a 25% interest in this gold exploration property in
northeast Washington State. The remaining interest is held by Santa Fe Pacific
Gold Corporation, which has the exploration rights at the site. Santa Fe has
reported that it has confirmed and expanded the volume of gold mineralization
present at the site. However, economic and technical analyses indicate that
either an improvement in the gold price or a reduction in operating or capital
costs is required to warrant a positive development decision.
PREFERRED DIVIDEND APPROVED
Hecla's directors approved a $2 million dividend payment to preferred
stock shareholders of record as of December 11, 1996, payable January 1, 1997.
CONCLUSION
The decisions affecting the Grouse Creek and American Girl mines
negatively affected third quarter earnings, but Brown said having those issues
settled is a positive development. "Although earnings are temporarily
affected, suspending operations at these high-cost mines lets us look forward
to lower operating costs for both our silver and gold segments in the future.
We feel confident that this is the best decision we could make, considering the
circumstances. It's time now to concentrate on increasing our silver
production over the next two years and putting Rosebud into operation. We see a
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strong upturn in our future, and I'm optimistic about where we're headed,
especially on the silver side of our business."
FORWARD-LOOKING INFORMATION
Statements made which are not historical facts are forward-looking
statements, which involve a number of risks and uncertainties that could cause
actual results to differ materially from those projected. These risks and
uncertainties include, but are not limited to, metal price volatility,
volatility of metals production and project development risks. See the
company's Form 10-Q and 10-K reports for a more detailed discussion of factors
that may impact expected future results.
Hecla Mining Company, headquartered in Coeur d'Alene, Idaho, is one of
the United States' best-known silver producers. The company also produces gold
and is a major supplier of ball clay, kaolin and other industrial minerals.
Hecla's operations are principally in the U.S. and Mexico.
-HL-
Hecla Mining Company news releases can be accessed on the Internet at:
http://www.hecla-mining.com
You can also request a free fax of this entire news release
from BusinessWire NewsOnDemand at 800-344-7826
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HECLA MINING COMPANY
(dollars in thousands, except per-share amounts and per-ounce
amounts - unaudited)
Third Quarter Ended Nine Months Ended
-------------------------------- -------------------------------
HIGHLIGHTS Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL DATA
- ---------------------------------------------------------------------------------------------------------------
Total revenue $ 41,008 $ 44,273 $ 125,886 $ 121,888
Gross profit 2,360 1,775 9,323 2,621
Net loss (36,765) (102,723) (32,489) (102,945)
Loss applicable to common shareholders (38,778) (104,736) (38,527) (108,983)
Loss per common share (0.76) (2.17) (0.75) (2.26)
Cash flow provided by operating activities 11,358 4,553 17,780 4,222
- --------------------------------------------------------------------------------------------------------------
SALES OF PRODUCTS BY SEGMENT
- --------------------------------------------------------------------------------------------------------------
Gold operations $ 16,342 $ 17,795 $ 47,809 $ 47,902
Silver operations 3,361 3,170 11,290 8,902
Industrial minerals 17,959 17,176 62,033 54,194
Specialty metals - - 1,947 - - 4,414
----------- ----------- ----------- ----------
Total sales $ 37,662 $ 40,088 $ 121,132 $ 115,412
- -------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) BY SEGMENT
- -------------------------------------------------------------------------------------------------------------
Gold operations $ (152) $ (282) $ 731 $ (4,652)
Silver operations (93) (204) (289) 487
Industrial minerals 2,605 1,995 8,881 6,492
Specialty metals - - 266 - - 294
----------- ----------- ----------- ----------
Total gross profit $ 2,360 $ 1,775 $ 9,323 $ 2,621
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PRODUCTION SUMMARY - TOTALS
- -------------------------------------------------------------------------------------------------------------
Gold - Ounces 43,558 44,209 121,739 119,839
Silver - Ounces 811,299 604,988 1,763,120 1,623,661
Lead - Tons 6,066 4,241 16,064 12,492
Zinc - Tons 1,598 722 3,374 2,118
Industrial minerals - Tons shipped 276,574 265,524 824,498 767,713
Average cost per ounce of gold produced:
Cash operating costs ($/oz.) 284 261 273 300
Total cash cost ($/oz.) 288 264 277 303
Total production costs ($/oz.) 389 393 375 424
Average cost per ounce of silver produced:
Cash operating costs ($/oz.) 3.37 4.57 4.07 4.73
Total cash costs ($/oz.) 3.37 4.57 4.07 4.73
Total production costs ($/oz.) 4.55 5.71 5.30 5.95
- -------------------------------------------------------------------------------------------------------------
AVERAGE METAL PRICES
- -------------------------------------------------------------------------------------------------------------
Gold - Realized ($/oz.) 391 388 397 388
Gold - London Final ($/oz.) 385 384 392 384
Silver - Handy & Harman ($/oz.) 5.05 5.33 5.29 5.17
Lead - LME Cash ( cents/pound) 36.2 27.8 36.0 27.6
Zinc - LME Cash ( cents/pound) 45.5 45.8 46.4 47.1
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HECLA MINING COMPANY
Consolidated Balance Sheets
(dollars in thousands - unaudited)
Sept. 30, 1996 Dec. 31, 1995
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 11,139 $ 4,024
Accounts and notes receivable 27,055 25,571
Income tax refund receivable 765 737
Inventories 19,339 20,915
Other current assets 1,473 2,038
-------------- ------------
Total current assets 59,771 53,285
Investments 1,950 2,200
Restricted investments 16,468 16,254
Properties, plants and equipment, net 175,437 177,374
Other noncurrent assets 10,674 9,077
-------------- ------------
Total assets $ 264,300 $ 258,190
============== ============
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 14,872 $ 14,145
Accrued payroll and related benefits 2,986 3,217
Preferred stock dividends payable 2,012 2,012
Accrued taxes 1,323 1,042
Accrued reclamation costs 7,392 5,549
-------------- ------------
Total current liabilities 28,585 25,965
Deferred income taxes 359 359
Long-term debt 33,082 36,104
Accrued reclamation costs 48,160 26,782
Other noncurrent liabilities 6,585 4,864
-------------- ------------
Total liabilities 116,771 94,074
-------------- ------------
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------
Preferred stock 575 575
Common stock 12,800 12,079
Capital surplus 351,659 330,352
Accumulated deficit (211,733) (173,206)
Net unrealized gain on investments 12 100
Foreign currency translation adjustment (4,898) (4,898)
Treasury stock (886) (886)
-------------- ------------
Total shareholders' equity 147,529 164,116
-------------- ------------
Total liabilities and shareholders' equity $ 264,300 $ 258,190
============== ============
Common shares outstanding at end of period 51,137 48,255
============== ============
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HECLA MINING COMPANY
Consolidated Statements of Operations
(dollars and shares in thousands, except per-share amounts - unaudited)
Third Quarter Ended Nine Months Ended
------------------------------- -------------------------------
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
-------------- -------------- -------------- --------------
Sales of products $ 37,662 $ 40,088 $ 121,132 $ 115,412
---------- ---------- ---------- ----------
Cost of sales and other direct
production costs 29,998 31,298 96,623 94,211
Depreciation, depletion and
amortization 5,304 7,015 15,186 18,580
---------- ---------- ---------- ----------
35,302 38,313 111,809 112,791
---------- ---------- ---------- ----------
Gross profit 2,360 1,775 9,323 2,621
---------- ---------- ---------- ----------
Other operating expenses:
General and administrative 2,331 3,106 6,836 7,570
Exploration 1,410 2,671 3,400 4,879
Depreciation and amortization 82 97 256 265
Provision for closed operations
and environmental matters 25,492 4,069 22,691 4,296
Reduction in carrying value of
mining properties 12,902 97,387 12,902 97,387
---------- ---------- ---------- ----------
42,217 107,330 46,085 114,397
---------- ---------- ---------- ----------
Loss from operations (39,857) (105,555) (36,762) (111,776)
---------- ---------- ---------- ----------
Other income (expense):
Interest and other income 3,346 4,185 4,754 6,476
Foreign exchange gain (loss) 9 (12) (19) 150
Gain (loss) on investments (158) (1,051) (28) 2,842
Interest expense:
Total interest cost (875) (650) (2,224) (1,236)
Less amount capitalized 671 474 1,714 850
---------- ---------- ---------- ----------
2,993 2,946 4,197 9,082
---------- ---------- ---------- ----------
Loss before income taxes (36,864) (102,609) (32,565) (102,694)
Income tax (provision) benefit 99 (114) 76 (251)
---------- ---------- ---------- ----------
Net loss (36,765) (102,723) (32,489) (102,945)
Preferred stock dividends (2,013) (2,013) (6,038) (6,038)
---------- ---------- ---------- ----------
Loss applicable to common
shareholders $ (38,778) $ (104,736) $ (38,527) $ (108,983)
========== ========== ========== ==========
Loss per common share $ (0.76) $ (2.17) $ (0.75) $ (2.26)
========== ========== ========== ==========
Weighted average number of
common shares outstanding 51,137 48,237 51,133 48,178
========== ========== ========== ==========
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HECLA MINING COMPANY
Consolidated Statements of Cash Flows
(in thousands - unaudited)
Nine Months Ended
----------------------------------------
Sept. 30, 1996 Sept. 30, 1995
- ---------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
- ---------------------------------------------------------------------------------------------------------------
Net loss $ (32,489) $ (102,945)
Noncash elements included in net loss:
Depreciation, depletion and amortization 15,442 18,845
Gain on disposition of properties, plants and equipment (731) (3,484)
Loss (gain) on investments 28 (2,842)
Reduction in carrying value of mining properties 12,902 97,387
Provision for reclamation and closure costs 27,429 4,651
Change in:
Accounts and notes receivable (2,695) (7,224)
Income tax refund receivable (28) (3)
Inventories (699) 571
Other current assets 332 (732)
Accounts payable and accrued expenses 727 388
Accrued payroll and related benefits (231) (163)
Accrued taxes 281 661
Accrued reclamation and other noncurrent liabilities (2,488) (888)
-------------- --------------
Net cash provided by operating activities 17,780 4,222
-------------- --------------
- ---------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
- ---------------------------------------------------------------------------------------------------------------
Additions to properties, plants and equipment (25,596) (33,083)
Proceeds from disposition of properties, plants and equipment 3,158 3,069
Proceeds from the sales of investments 130 4,685
Increase in restricted investments (214) (1,439)
Purchase of investments and increase in cash surrender
value of life insurance (607) (822)
Other, net (1,715) (1,249)
-------------- --------------
Net cash used by investing activities (24,844) (28,839)
-------------- --------------
- ---------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
- ---------------------------------------------------------------------------------------------------------------
Proceeds from exercise of stock warrants - - 1,239
Common stock issued under stock option plans - - 91
Issuance of common stock, net of offering costs 22,028 - -
Dividends on preferred stock (6,038) (6,038)
Borrowings against cash surrender value of life insurance 602 - -
Borrowing on long-term debt 40,500 41,000
Repayment on long-term debt (42,913) (11,796)
-------------- --------------
Net cash provided by financing activities 14,179 24,496
-------------- --------------
Net increase (decrease) in cash and cash equivalents 7,115 (121)
Cash and cash equivalents at beginning of period 4,024 7,278
-------------- --------------
Cash and cash equivalents at end of period $ 11,139 $ 7,157
============== ==============
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HECLA MINING COMPANY
Production Data
Third Quarter Ended Nine Months Ended
----------------------------- -------------------------------
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
-------------- -------------- -------------- --------------
LA CHOYA UNIT
Tons of ore processed 793,271 1,310,417 2,771,076 2,781,845
Ore grade processed - Gold (oz./ton) 0.029 0.029 0.025 0.028
Gold produced (oz.) 20,007 21,799 59,722 45,480
Silver produced (oz.) 1,866 2,273 5,912 4,699
Average cost per ounce of gold produced:
Cash operating costs $193 $180 $181 $214
Total cash costs $194 $180 $181 $214
Total production costs $309 $287 $296 $313
AMERICAN GIRL UNIT (1) (Reflects Hecla's 47% share)
Tons of ore milled 28,931 17,709 94,147 40,943
Tons of ore to heap 88,375 115,684 304,262 615,296
Ore grade milled - Gold (oz./ton) 0.125 0.191 0.126 0.191
Ore grade to heap - Gold (oz./ton) 0.037 0.029 0.041 0.029
Gold produced (oz.) 5,708 5,436 18,466 15,985
Silver produced (oz.) 1,465 3,063 4,781 10,331
Average cost per ounce of gold produced:
Cash operating costs $424 $437 $463 $407
Total cash costs $447 $461 $486 $428
Total production costs $509 $523 $559 $468
GROUSE CREEK (2) (Reflects Hecla's share)
Tons of ore milled 398,062 476,992 943,331 1,120,461
Ore grade milled - Gold (oz./ton) 0.048 0.036 0.046 0.046
Ore grade milled - Silver (oz./ton) 0.37 0.61 0.39 0.64
Gold produced (oz.) 16,529 15,336 40,063 50,534
Silver produced (oz.) 71,010 149,314 195,554 390,273
Average cost per ounce of gold produced:
Cash operating costs $337 $308 $315 $352
Total cash costs $337 $308 $315 $352
Total production costs $437 $503 $403 $536
LUCKY FRIDAY UNIT
Tons of ore milled 56,598 43,004 139,359 117,022
Ore grade milled - Silver (oz./ton) 10.30 10.72 10.16 10.73
Silver produced (oz.) 591,771 449,791 1,409,556 1,201,266
Lead produced (tons) 5,806 4,241 15,804 12,492
Zinc produced (tons) 1,031 722 2,807 2,118
Average cost per ounce of silver produced:
Cash operating costs $3.37 $4.57 $4.07 $4.73
Total cash costs $3.37 $4.57 $4.07 $4.73
Total production costs $4.55 $5.71 $5.30 $5.95
(cont.)
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HECLA MINING COMPANY
Production Data (cont.)
Third Quarter Ended Nine Months Ended
----------------------------- -----------------------------
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
-------------- -------------- -------------- --------------
GREENS CREEK (3) (Reflects Hecla's 29.73% share)
Tons of ore milled 12,157 - - 12,157 - -
Ore grade milled - Silver (oz./ton) 20.50 - - 20.50 - -
Silver produced (oz.) 144,609 - - 144,609 - -
Gold produced (oz.) 320 - - 320 - -
Lead produced (tons) 260 - - 260 - -
Zinc produced (tons) 567 - - 567 - -
OTHER
Gold produced (oz.) 994 1,638 3,168 7,840
Silver produced (oz.) 578 547 2,708 17,092
(1)On September 5, 1996, Hecla announced that operations at the American Girl
Joint Venture gold mine will be suspended effective November 4, 1996. During
the third quarter, Hecla recorded an approximate $7.6 million write-down of the
carrying value of the property, and a closure cost accrual totaling
approximately $0.3 million.
(2)The ownership percentage of the Grouse Creek mine has increased to 81.05% as
of September 30, 1996, compared to 80.00% at September 30, 1995. Hecla
announced plans to suspend operations at the Grouse Creek mine next year. The
mine will be placed on a care-and-maintenance status. The company recorded
adjustments in the third quarter of 1996 for holding costs, reclamation and
final closure expenses of $22.5 million and reduction in carrying value
totaling $5.3 million.
(3)The Greens Creek mine recommenced operations on July 29, 1996, on a start-up
basis; as such, no cost per ounce amounts are reported. Full production is
expected by January 1997.