1
[Hecla Logo] Exhibit 13
98-06
HECLA REPORTS SUCCESSFUL SECOND QUARTER
For the Period Ended June 30, 1998
For release: August 4, 1998
COEUR D'ALENE, IDAHO - Hecla Mining Company (HL & HL-PrB:NYSE) today
reported second quarter 1998 income applicable to common shareholders of $1
million, or 2 cents per common share, after the payment of a quarterly dividend
of $2 million to holders of preferred stock. The second quarter earnings for
1998 are virtually the same as the second quarter of 1997, when Hecla reported
earnings of $1 million, or 2 cents per common share. Second quarter 1998
results were positively impacted by good performance from operations, a gain on
the sale of Metaline Contact Mines stock of $1.2 million, lower exploration
expenditures compared to the same period last year, the sale of land near
Hecla's corporate headquarters in Coeur d'Alene, Idaho, and from reduced foreign
taxes and anticipated refund claims.
Year to date, Hecla has earned $1.8 million, or 3 cents per common share,
compared to a loss of $0.5 million, or 1 cent per common share, during the first
six months of 1997. Better performance in 1998 is attributable to improved
results from the silver and industrial minerals segments, as well as income from
the sale of property and investments. Both the industrial minerals and silver
segments have shown significantly better results in the first six months of this
year, compared to the same period last year. Hecla's gold operations have
exceeded expectations and continue to be profitable by maintaining very low-cost
production. However, falling gold prices and a decrease in production have
affected profits in that segment compared to the first six months of 1997.
Arthur Brown, Hecla's chairman and chief executive officer, said, "Precious
and base metals prices remain depressed, so we're especially pleased to be able
to report earnings for two consecutive quarters. We've made significant progress
in lowering our cash cost per ounce of silver from the first to second quarters.
Fortunately, Hecla has some excellent silver, gold and industrial mineral
properties. Through the good efforts of our people at those properties, we are
able to continue to produce gold and silver at low cash costs, which is key to
the company's long-term success."
METAL PRICES
The gold price remained depressed during the second quarter of 1998,
averaging $300 per ounce, compared to a price of $343 per ounce in the same
period a year ago, a 13% decrease. The silver price, on the other hand, has
improved from a year ago, averaging $5.71 per ounce during the second quarter of
1998, compared to $4.76 per ounce in the second quarter of 1997. However, the
silver price has suffered compared to the first quarter of this year, when it
averaged $6.24 per ounce. Lead and zinc, important by-products of Hecla's
silver mines, are both at significantly lower prices than a year ago. During
the second quarter of this year, lead averaged about 25 cents per pound compared
to 28 cents per pound in the second quarter of 1997, an 11% decrease. The zinc
price has dropped 19% from an average of 59 cents per pound in the second
quarter of 1997 to a price of 48 cents per pound during the second quarter of
this year.
2
GOLD
Hecla's gold operations produced 67,000 ounces of gold during the first
half of 1998, at a total cash cost of $181 per ounce. The Rosebud mine in
northern Nevada produced 15,702 ounces of gold for Hecla's account in the second
quarter, bringing the total for the year to 32,291 ounces. The mine operated at
a total cash cost of production of $186 per ounce in the second quarter and has
reported an average total cash cost of $172 per ounce for the year so far. As
anticipated, cash costs at Rosebud during the second quarter were higher than
the same period a year ago because of a lower ore grade and the implementation
of a planned definition drilling program to upgrade zones of inferred resources
to proven and probable reserves where possible.
Work has begun at the La Choya mine in northern Mexico to lay back the pit
edge to expose an additional 20,000 ounces of gold ore. Mining operations at La
Choya will be completed by the end of the year, although heap leach gold
recovery will continue at least through 1999. Reclamation work is under way
concurrent with mining. The mine has been very profitable, and even now toward
the end of its life is producing gold at a low average total cash cost of $195
per ounce so far in 1998.
SILVER
The silver segment of Hecla's business is on track to meet production
expectations for the year, producing 3.2 million ounces during the first six
months. Silver operations have maintained a near break-even level in 1998,
despite depressed lead and zinc prices and a decrease in the price of silver
from the first to second quarter of 1998. Silver production costs have
decreased 17% since the first quarter of the year, with total cash costs
averaging $3.70 per ounce during the second quarter.
Work on the expansion at the Lucky Friday Unit in North Idaho continues on
schedule, and about 85% of production is now coming from the new area. The
transition to the expansion area should be completed in the third quarter of
this year. As a result of the expansion, the Lucky Friday ore grade has
improved from about 10 ounces of silver per ton in the second quarter of 1997 to
nearly 18 ounces of silver per ton during the second quarter of this year.
During that same time period, the average total cash cost per ounce has
decreased from $5.48 per ounce to $4.23 per ounce. The mine produced about 1.8
million ounces of silver during the first six months of 1998, compared to about
948,000 ounces during the same period last year.
The Greens Creek mine in Alaska produced 648,000 ounces of silver for
Hecla's account during the second quarter, at an average total cash cost of
$2.91 per ounce. Hecla holds a 30% interest in Greens Creek, which is a joint
venture with Kennecott Greens Creek Mining Company. In the first six months of
this year, Greens Creek produced 1.3 million ounces of silver for Hecla. Mining
and milling costs per ton at Greens Creek have improved by 11% from the first
six months of last year because of increased tonnage mined and less development
work this year compared to last year. However, the cash cost per ounce has
suffered in 1998 at Greens Creek because of depressed by-product metals prices
and a lower-than-planned ore grade being mined, yielding fewer ounces than
expected. The price of zinc, which has been depressed during the first six
months of the year, has a significant effect on the cash cost per ounce of
silver at the Greens Creek mine. Despite low by-product prices, Greens Creek
has shown a significant operational improvement from the first quarter to the
second quarter of this year, with cash costs decreasing from $3.55 per ounce of
silver in the first quarter to $2.91 per ounce in the
3
second quarter. Hecla still anticipates meeting its overall goal of producing
7 million ounces of silver from the Lucky Friday and Greens Creek mines in 1998.
INDUSTRIAL MINERALS
Hecla's industrial minerals segment has shown a 9% improvement in gross
profit during the first half of the year compared to the same period in 1997.
Higher-than-expected sales were reported at Kentucky-Tennessee Clay Company.
MWCA, a landscaping products subsidiary, is reporting a 17% increase in sales
compared to the first six months of last year. Overall, the industrial minerals
division is performing well in 1998.
OTHER
Long-term debt for the company at the end of the second quarter was $32.5
million, down from $36 million at the end of the first quarter. Proceeds from
borrowings in the first half of the year have been used for working capital
requirements at Hecla's silver and industrial minerals operations, as well as
for capital expenditures relating to the expansion at Lucky Friday.
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.
Statements made which are not historical facts, such as anticipated
production, costs or sales performance are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, and involve
a number of risks and uncertainties that could cause actual results to differ
materially from those projected, anticipated, expected or implied. These risks
and uncertainties include, but are not limited to, metals prices volatility,
volatility of metals production, industrial minerals market conditions and
project development risks. Refer to 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 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
4
HECLA MINING COMPANY
(dollars in thousands, except per share, per ounce and per pound amounts -
unaudited)
Second Quarter Ended Six Months Ended
- --------------------------------------------------------------------------------------------
HIGHLIGHTS June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
- --------------------------------------------------------------------------------------------
FINANCIAL DATA
- --------------------------------------------------------------------------------------------
Total revenue $ 47,058 $ 48,139 $ 89,721 $ 91,746
Gross profit 4,120 6,784 8,596 10,962
Net income 2,996 3,054 5,843 3,572
Income (loss) applicable to
common shareholders 983 1,041 1,818 (453)
Basic and diluted income (loss)
per common share 0.02 0.02 0.03 (0.01)
Cash flow provided (used) by
operating activities 7,871 7,141 595 (1,674)
- --------------------------------------------------------------------------------------------
SALE OF PRODUCTS BY SEGMENT
- --------------------------------------------------------------------------------------------
Gold operations $ 8,375 $ 14,549 $ 17,630 $ 29,924
Silver operations 9,914 8,240 20,036 16,916
Industrial minerals 27,366 23,280 48,118 41,685
--------- --------- --------- ---------
Total sales $ 45,655 $ 46,069 $ 85,784 $ 88,525
- --------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) BY SEGMENT
- --------------------------------------------------------------------------------------------
Gold operations $ 1,483 $ 4,797 $ 3,488 $ 7,827
Silver operations (334) (925) (1) (1,565)
Industrial minerals 2,971 2,912 5,109 4,700
--------- --------- --------- ---------
Total gross profit $ 4,120 $ 6,784 $ 8,596 $ 10,962
OTHER DATA
- --------------------------------------------------------------------------------------------
EBITDA BY SEGMENT (1)
- --------------------------------------------------------------------------------------------
Gold operations $ 2,845 $ 6,818 $ 6,306 $ 10,565
Silver operations 1,767 922 4,735 2,711
Industrial minerals 4,207 4,095 7,671 7,090
--------- ---------- --------- ---------
Total EBITDA $ 8,819 $ 11,835 $ 18,712 $ 20,366
- --------------------------------------------------------------------------------------------
PRODUCTION SUMMARY - TOTALS
- --------------------------------------------------------------------------------------------
Gold - Ounces 31,402 45,429 66,956 89,333
Silver - Ounces 1,691,242 1,280,306 3,221,649 2,524,504
Lead - Tons 8,548 6,415 16,655 12,997
Zinc - Tons 4,607 4,354 8,862 8,562
Industrial minerals - Tons shipped 310,726 272,253 592,927 519,463
Average cost per ounce of gold produced:
Cash operating costs ($/oz.) 179 146 170 169
Total cash costs ($/oz.) 192 155 181 175
Total production costs ($/oz.) 253 225 239 233
Average cost per ounce of silver produced:
Cash operating costs ($/oz.) 3.70 3.61 4.06 3.40
Total cash costs ($/oz.) 3.70 3.61 4.06 3.40
Total production costs ($/oz.) 5.14 5.23 5.53 5.27
- --------------------------------------------------------------------------------------------
AVERAGE METAL PRICES
- --------------------------------------------------------------------------------------------
Gold - Realized ($/oz.) 307 371 303 373
Gold - London Final ($/oz.) 300 343 297 347
Silver - Handy & Harman ($/oz.) 5.71 4.76 5.97 4.89
Lead - LME Cash (cents/pound) 24.8 28.4 24.6 29.6
Zinc - LME Cash (cents/pound) 47.9 59.0 48.0 56.1
(1) EBITDA represents earnings before interest, income taxes, depreciation,
depletion, amortization and items classified as other operating expenses not
occurring at the operating site. The company believes EBITDA is helpful in
understanding cash flow generated from operations that is available for income
taxes, debt service, capital expenditures, and other nonsite operating expenses.
5
HECLA MINING COMPANY
Consolidated Statements of Operations and Comprehensive Income (Loss)
(dollars and shares in thousands, except per share amounts - unaudited)
Second Quarter Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
Sales of products $ 45,655 $ 46,069 $ 85,784 $ 88,525
--------- ---------- ---------- ----------
Cost of sales and other direct
production costs 36,487 34,234 67,014 68,160
Depreciation, depletion and
amortization 5,048 5,051 10,174 9,403
--------- ---------- ---------- ----------
41,535 39,285 77,188 77,563
--------- ---------- ---------- ----------
Gross profit 4,120 6,784 8,596 10,962
--------- ---------- ---------- ----------
Other operating expenses:
General and administrative 2,136 1,912 4,277 4,033
Exploration 1,136 2,438 1,952 3,792
Depreciation and amortization 99 78 193 157
Provision for (benefit from) closed
operations and environmental matters 72 (41) 131 148
--------- ---------- ---------- ----------
3,443 4,387 6,553 8,130
--------- ---------- ---------- ----------
Income from operations 677 2,397 2,043 2,832
--------- ---------- ---------- ----------
Other income (expense):
Interest and other income 1,403 2,070 3,937 3,221
Miscellaneous expense (94) (308) (651) (777)
Gain on investments 1,155 - - 1,241 - -
Interest expense:
Total interest cost (865) (585) (1,605) (1,420)
Less amount capitalized 317 116 588 477
--------- ---------- ---------- ----------
1,916 1,293 3,510 1,501
--------- ---------- ---------- ----------
Income before income taxes 2,593 3,690 5,553 4,333
Income tax (provision) benefit 403 (636) 290 (761)
--------- ---------- ---------- ----------
Net income 2,996 3,054 5,843 3,572
Preferred stock dividends (2,013) (2,013) (4,025) (4,025)
--------- ---------- ---------- ----------
Income (loss) applicable to common
shareholders 983 1,041 1,818 (453)
--------- ---------- ---------- ----------
Other comprehensive income (loss),
net of tax:
Unrealized holding gains (losses)
on securities 61 (287) 42 (118)
--------- ---------- ---------- ----------
Other comprehensive income (loss) 61 (287) 42 (118)
--------- ---------- ---------- ----------
Comprehensive income (loss) $ 1,044 $ 754 $ 1,860 $ (571)
========= ========== ========== ==========
Basic and diluted income (loss)
per common share $ 0.02 $ 0.02 $ 0.03 $ (0.01)
========= ========== ========== ==========
Weighted average number of common
shares outstanding 55,102 55,091 55,098 53,960
========= ========== ========== ==========
6
HECLA MINING COMPANY
Consolidated Balance Sheets
(dollars and shares in thousands - unaudited)
June 30, 1998 Dec. 31, 1997
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 6,108 $ 3,794
Accounts and notes receivable 34,697 24,445
Income tax refund receivable 1,087 793
Inventories 20,701 22,116
Other current assets 2,212 1,416
---------- ----------
Total current assets 64,805 52,564
Investments 3,204 2,521
Restricted investments 7,207 7,926
Properties, plants and equipment, net 177,421 180,037
Other noncurrent assets 8,321 7,620
---------- ----------
Total assets $ 260,958 $ 250,668
========== ==========
- ------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 13,381 $ 12,590
Accrued payroll and related benefits 3,343 2,436
Preferred stock dividends payable 2,012 2,012
Accrued taxes 1,179 1,016
Accrued reclamation and closure costs 5,668 6,914
---------- ----------
Total current liabilities 25,583 24,968
Deferred income taxes 300 300
Long-term debt 32,513 22,136
Accrued reclamation and closure costs 31,667 34,406
Other noncurrent liabilities 8,641 8,518
---------- ----------
Total liabilities 98,704 90,328
---------- ----------
- ------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------
Preferred stock 575 575
Common stock 13,792 13,789
Capital surplus 374,017 373,966
Accumulated deficit (220,325) (222,143)
Accumulated other comprehensive loss (4,919) (4,961)
Treasury stock (886) (886)
---------- ----------
Total shareholders' equity 162,254 160,340
---------- ----------
Total liabilities and shareholders' equity $ 260,958 $ 250,668
========== ==========
Common shares outstanding at end of period 55,105 55,094
========== ==========
7
HECLA MINING COMPANY
Consolidated Statements of Cash Flows
(dollars in thousands - unaudited)
Six Months Ended
------------------------------
June 30, 1998 June 30, 1997
- -------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
- -------------------------------------------------------------------------------------------------
Net income $ 5,843 $ 3,572
Noncash elements included in net income:
Depreciation, depletion and amortization 10,367 9,560
Gain on disposition of properties, plants and equipment (2,326) (1,089)
Gain on investments (1,241) - -
Provision for reclamation and closure costs 287 474
Change in:
Accounts and notes receivable (10,252) (7,407)
Income tax refund receivable (294) 179
Inventories 1,415 3,104
Other current assets (796) 694
Accounts payable and accrued expenses 671 (5,330)
Accrued payroll and related benefits 907 (185)
Accrued taxes 163 (229)
Accrued reclamation and other noncurrent liabilities (4,149) (5,017)
---------- ----------
Net cash provided (used) by operating activities 595 (1,674)
========== ==========
- -------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
- -------------------------------------------------------------------------------------------------
Additions to properties, plants and equipment (8,825) (10,322)
Proceeds from disposition of properties, plants and equipment 3,506 1,242
Proceeds from sale of investments 1,241 - -
Decrease in restricted investments 719 13,784
Purchase of investments and increase in cash surrender
value of life insurance (641) (783)
Other, net (807) 1,740
---------- ----------
Net cash provided (used) by investing activities (4,807) 5,661
---------- ----------
- -------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
- -------------------------------------------------------------------------------------------------
Common stock issued under stock and stock option plans 54 46
Issuance of common stock, net of offering costs - - 23,000
Dividends on preferred stock (4,025) (4,025)
Borrowings on long-term debt 26,500 27,000
Repayment on long-term debt (16,003) (50,067)
---------- ----------
Net cash provided (used) by financing activities 6,526 (3,646)
---------- ----------
Net increase in cash and cash equivalents 2,314 341
Cash and cash equivalents at beginning of period 3,794 7,159
---------- ----------
Cash and cash equivalents at end of period $ 6,108 $ 7,500
========== ==========
8
HECLA MINING COMPANY
Production Data
Second Quarter Ended Six Months Ended
---------------------------- ----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
- --------------------------------------------------------------------------------------------------
LA CHOYA UNIT
- --------------------------------------------------------------------------------------------------
Tons of ore processed 101,903 580,664 834,146 1,332,619
Days of operation 91 91 181 181
Mining cost per ton $2.63 $2.09 $1.69 $2.59
Ore grade crushed - Gold (oz./ton) 0.014 0.026 0.018 0.031
Gold produced (oz.) 9,953 18,820 23,360 39,175
Silver produced (oz.) 1,114 2,154 2,622 4,089
Average cost per ounce of gold produced:
Cash operating costs $200 $160 $194 $183
Total cash costs $201 $161 $195 $184
Total production costs $203 $200 $195 $224
- --------------------------------------------------------------------------------------------------
ROSEBUD UNIT (Reflects Hecla's 50% share) (1)
- --------------------------------------------------------------------------------------------------
Tons of ore mined 44,381 38,180 83,876 38,180
Tons of ore milled 42,844 32,539 81,411 32,539
Days of operation 91 91 181 91
Mining cost per ton $24.97 $28.12 $26.66 $28.12
Milling cost per ton $14.00 $10.83 $12.42 $10.83
Ore grade milled - Gold (oz./ton) 0.379 0.405 0.412 0.405
Ore grade milled - Silver (oz./ton) 2.81 2.97 3.06 2.97
Gold produced (oz.) 15,702 12,227 32,291 12,227
Silver produced (oz.) 60,053 54,234 121,990 54,234
Average cost per ounce of gold produced:
Cash operating costs $166 $123 $153 $123
Total cash costs $186 $144 $172 $144
Total production costs $284 $263 $271 $263
- --------------------------------------------------------------------------------------------------
LUCKY FRIDAY UNIT
- --------------------------------------------------------------------------------------------------
Tons of ore milled 57,754 50,334 114,976 97,691
Days of operation 64 64 127 127
Mining cost per ton $47.88 $44.47 $44.64 $45.46
Milling cost per ton $8.37 $7.33 $8.38 $7.16
Ore grade milled - Silver (oz./ton) 17.85 9.86 16.60 9.94
Silver produced (oz.) 981,281 488,014 1,817,411 947,561
Lead produced (tons) 6,881 5,031 13,576 10,135
Zinc produced (tons) 622 838 1,303 1,757
Average cost per ounce of silver produced:
Cash operating costs $4.23 $5.48 $4.65 $4.97
Total cash costs $4.23 $5.48 $4.65 $4.97
Total production costs $5.05 $6.73 $5.53 $6.27
(cont.)
9
HECLA MINING COMPANY
Production Data (cont.)
Second Quarter Ended Six Months Ended
---------------------------- ----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
- --------------------------------------------------------------------------------------------------
GREENS CREEK (Reflects Hecla's 29.73% share)
- --------------------------------------------------------------------------------------------------
Tons of ore milled 39,921 36,283 76,318 73,063
Days of operation 91 91 181 181
Mining cost per ton $29.10 $37.65 $30.77 $36.55
Milling cost per ton $19.67 $22.08 $21.04 $21.60
Ore grade milled - Silver (oz./ton) 21.34 24.26 21.86 24.40
Silver produced (oz.) 648,008 682,956 1,278,518 1,383,793
Gold produced (oz.) 4,385 3,918 8,378 7,840
Lead produced (tons) 1,667 1,384 3,079 2,862
Zinc produced (tons) 3,985 3,516 7,559 6,805
Average cost per ounce of silver produced:
Cash operating costs $2.91 $2.28 $3.23 $2.32
Total cash costs $2.91 $2.28 $3.23 $2.32
Total production costs $5.28 $4.15 $5.55 $4.59
- --------------------------------------------------------------------------------------------------
OTHER (2)
- --------------------------------------------------------------------------------------------------
Gold produced (oz.) 1,362 10,464 2,927 30,091
Silver produced (oz.) 786 52,948 1,108 134,827
(1) The Rosebud mine commenced operations in April 1997.
(2) Includes the company's share of production from the Grouse Creek mine and
other sources.
CAPITAL EXPENDITURES
(dollars in thousands)
Six Months Ended
--------------------------------------
June 30, 1998 June 30, 1997
------------- -------------
Rosebud (50%*) $ 46 $ 4,256
Lucky Friday 4,375 2,701
Greens Creek (29.73%*) 1,349 751
La Choya 374 - -
Industrial minerals 2,069 1,739
Capitalized interest 588 477
Other 24 398
---------- ----------
Total Capitalized $ 8,825 $ 10,322
========== ==========
Hecla's share
HEDGED POSITIONS
As of June 30, 1998
Silver: 1,250,000 ounces hedged @ average price of $6.18.
Gold: 6,000 ounces hedged @ average price of $354.