Exhibit 99.1
Hecla Reports Dramatic Increase in Second Quarter 2006 Income, Sales,
Gross Profit and Cash Flow; For the Period Ended June 30, 2006
COEUR D'ALENE, Idaho--(BUSINESS WIRE)--Aug. 2, 2006--Hecla Mining
Company (NYSE:HL) today reported income applicable to common
shareholders of $9.1 million, or 8 cents per common share, for the
second quarter of 2006, $15.5 million more than the loss of $6.4
million, or 5 cents per common share, during the second quarter of
2005. Compared to the same quarter last year, Hecla increased:
-- Sales revenue by 125%, to $56.9 million, a Hecla record
-- Gross profit by 409%, to $17.7 million
-- Net cash flow before exploration and pre-development by 378%,
to $36.5 million, and
-- Cash flow provided by operating activities to $28.9 million
from $1.0 million
Hecla's silver production costs continued to decrease, with an
average total cash cost of silver produced in the second quarter of
$1.98 per ounce, which compares very favorably to a worldwide industry
average cash cost per ounce of silver production in 2005 of $3.28.
Second quarter financial results were positively impacted by increased
prices for gold, silver, zinc and lead, as well as from the sale of
the Noche Buena gold exploration property in northern Mexico, which
resulted in a pre-tax gain of $4.4 million. This gain was partially
offset by a charge of $1.2 million for stock option expense.
Income applicable to common shareholders for the first half of
2006 was $47.3 million, or 40 cents per share, compared to a loss of
$9.8 million, or 8 cents per share in the first half of 2005. Included
in 2006 results is a first quarter gain of $35.6 million, net of
income taxes, on the sale of investment securities.
Hecla produced 1.3 million ounces of silver at an average total
cash cost per ounce of $1.98 and 42,234 ounces of gold, including
38,399 ounces in Venezuela, at an average total cash cost per ounce of
$340 during the second quarter. For the first six months of 2006,
Hecla produced 2.5 million ounces of silver at an average total cash
cost per ounce of $2.01, and 84,653 ounces of gold, including
production of 76,019 ounces in Venezuela, at an average cash cost per
ounce of $348.
Hecla President and Chief Executive Officer Phillips S. Baker,
Jr., said, "This continues to be a great year, with the most quarterly
revenues in our 115-year history. Hecla is the lowest-cost,
lowest-risk primary silver producer in North America, and these metals
prices have allowed us to generate significant earnings and operating
cash flow after funding our aggressive exploration program. This
program is expected to deliver more reserves or resources at almost
every property this year. Given our successes on both the operating
and exploration fronts, I believe the market is not yet recognizing
the low-risk profile of our silver assets, the cash-generating power
of our operations and the growth in our reserve/resource base."
2ND QUARTER HIGHLIGHTS
-- Significant increase in net income, sales, gross profit and
cash flow compared to the same period one year ago
-- 24% decrease in average total cash cost for silver to $1.98
per ounce, with production of 1.3 million ounces of silver
-- 42,234 ounces of gold produced, including 38,399 ounces
attributed to the La Camorra Unit at an average total cash
cost of $340 per ounce
-- Successful sale of all gold ounces inventoried in Venezuela
and establishing buyers for in-country sales going forward
-- Exploration success, with anticipated resource increases by
year-end at Lucky Friday, Greens Creek and the San Sebastian
Hugh Zone
-- Sale of Noche Buena gold exploration property for $4.4 million
-- No debt; cash and short-term investments of $80.8 million
OPERATIONS
Hecla's Lucky Friday Unit, located in northern Idaho, produced
742,125 ounces of silver during the second quarter of 2006, at an
average total cash cost of $4.97 per ounce. In the first six months of
the year, Lucky Friday produced 1.4 million ounces of silver at an
average total cash cost per ounce of $5.13. Production costs at Lucky
Friday decreased compared to the first quarter of the year as mining
transitioned from the 4900 level to the newly developed 5900 level.
That transition was completed early in the third quarter of 2006 and
most of the production is now coming from the 5900 level, with
anticipated production of about 3 million ounces of silver in 2006 and
close to 4 million ounces in 2007. The Lucky Friday mine is the
deepest underground precious metals mine in the United States and has
been operating for 60 years.
Hecla holds a 29.73% interest in the Greens Creek silver mine, a
joint venture with Rio Tinto, located on Admiralty Island near Juneau,
Alaska. Hecla's share of second quarter Greens Creek production
included 520,750 ounces of silver at the low average total cash cost
of negative $2.28 per ounce, made possible by high prices of
by-product metals: zinc, gold and lead. The mine also contributed
3,750 ounces of gold for Hecla's account during the second quarter of
2006. For the first six months of the year, Hecla's share of Greens
Creek production was 1.1 million ounces of silver and 8,478 ounces of
gold, at an average total cash cost of silver of negative $1.74 per
ounce, compared to 1.7 million ounces of silver in the first half of
2005 at an average total cash cost of $1.07 per ounce. Silver
production has decreased at Greens Creek from a year ago primarily
because of a 25% lower silver ore grade, a rehabilitation work program
completed on major underground intersections in the mine, as well as
less favorable timing for accessing higher-grade workfaces due to
development work. Mine production was hampered in the second quarter
by significant waste haulage and power outages necessary in order to
tie into the public utility services. The tonnage mined is expected to
improve in the third and fourth quarters of the year.
Baker said, "We are anticipating total silver production
company-wide for Hecla to be in the range of 6 million ounces for
2006, and are seeing the improvement in production levels that we
expected at the Lucky Friday mine as more stopes come on line on the
new level. However, while tonnage is expected to improve at Greens
Creek during the second half of the year and there are no long-term
issues, the ore grade would need to show significant improvement
for the mine to achieve its earlier projected level of production for
the year."
The La Camorra Unit, consisting of the La Camorra mine and Mina
Isidora, produced 38,399 ounces of gold in Venezuela during the second
quarter of 2006, a 42% increase in production over the same period a
year ago, now that Mina Isidora is in operation. All the ounces
required to be sold locally for the second quarter were sold, as well
as the gold held in inventory at the end of March. There was no gold
inventory held for local sales at the end of the quarter. The sale of
the gold inventory held at the end of March contributed an additional
$7.2 million in revenue for the quarter, and buyers have been
identified for future in-country gold sales. The average gold ore
grade for the two deposits increased to 0.699 ounce of gold per ton
compared to 0.581 ounce per ton a year ago, due to the startup of Mina
Isidora and its high-grade reserve. However, the mining cost per ton
has increased primarily due to the mining process at Mina Isidora,
unfavorable currency exchange controls and higher labor costs. The
average total cash cost of production increased 7% from the same
period a year ago, to $340 per ounce, and the average full cost of
production increased to $502 per ounce of gold during the second
quarter of 2006, primarily due to depreciation of the shaft completed
last year at the La Camorra mine.
EXPLORATION
Lucky Friday
"We currently have a mine plan that takes us through 2013 with
more than 60 million ounces in silver resources beyond that. Our
exploration is designed to confirm the resource into the next decade,"
said Baker. "Although the potential increase in total resource for the
year is not yet known, we would anticipate an increase in both proven
and probable reserves as well as resources for Lucky Friday later this
year." The Lucky Friday currently has about 90 million ounces of
silver reserve and resources identified.
In 2005, underground exploration work doubled the proven and
probable reserve at Lucky Friday and had considerable success on the
eastern side of the deposit. Additional drilling on the east side this
year looks very encouraging, and favorable host lithology at depth
shows that the eastern economic limit may be increasing for the area
below the 5900 level and has the potential to again increase the
strike length of the deposit. Drilling on the west side of the deposit
began this year down to the 6400 level and four out of five holes
showed mineable ore grade up to 12 ounces of silver per ton, which is
comparable to the current production ore grade being milled, but not
as high grade as on the east side, where the average grade is close to
18.5 ounces of silver per ton. The bottom of the currently known
resource is already about 1,000 feet deeper than the current mining
level. A drilling program is now exploring 1,800 feet below the
current mining level, to 7,700 feet below the surface at the shaft.
Other recent in-fill drilling has yielded numerous vein intercepts. In
addition to this drilling, exploration is occurring to the east, west
and above the current mining level -- all of it previously untested.
There is good potential for an untested, contiguous deposit in the
2,450-foot gap between the currently identified resource and where the
historic deposit was mined nearer the surface. Baker said, "Even
though there's been mining at the Lucky Friday for 60 years, there is
still significant unexplored ground. Our exploration program will
start to scratch the surface of those targets over the next year or
so."
Greens Creek
At Greens Creek, a successful 2006 exploration program has defined
a new resource in the West Gallagher Zone that will be calculated and
added to the resource report at year-end. This ore zone is anticipated
to grow in size over the next year as drilling continues in the
open-ended resource. In addition, ore-grade intercepts have been
intersected approximately 750 feet and 1,000 feet updip from the
mining faces in the area known as the 5250 zone. If the ore proves to
be continuous between the current work area and the new intercepts,
significant new tonnage could be added to reserves, extending the life
of the already long-lived Greens Creek mine even further.
Mexico
At the Hugh Zone exploration project on Hecla's San Sebastian
property in central Mexico, additional success was achieved during the
quarter. Work on a new resource estimate is underway and is expected
to result in a significant increase in the current resource estimate
of 4.1 million ounces of silver. Holes drilled during the second
quarter show ore-grade intercepts on the western side of the deposit
over a two-meter diluted width having net smelter return values of
more than $300 per tonne. Two deeper holes have also been completed
along the inflection point of the deposit, which intersected narrow
veining containing argentite, the dominant silver sulfide. The Hugh
Zone, a stacked system discovered beneath where Hecla has already
mined, is a polymetallic deposit containing silver, copper, zinc, lead
and gold.
Elsewhere on the San Sebastian property, the first hole drilled
into a new target area, located 1.2 kilometers northeast from the Hugh
Zone, encountered strong alteration and a 2.5-meter horizontal width,
moderately banded quartz vein with nearly ore grade gold and silver
mineralization. This vein intercept is very encouraging because it is
a strong, banded vein structure containing silver and gold
mineralization that has a long strike length potential. The San
Sebastian exploration program has also identified several other soil
anomalies that will be future exploration targets in this highly
prospective silver district. Baker said, "This year we have increased
our land package at San Sebastian more than 50%, because we now have
multiple targets that indicate the large size of this rich geologic
environment. So, for the rest of 2006 and in 2007, we expect to add
resource, drill additional targets and identify even more targets."
Venezuela
Hecla's exploration in Venezuela is focused in three areas: the
area adjacent to the La Camorra mine, resource additions at Mina
Isidora and continued exploration on the Block B property surrounding
Mina Isidora. At the La Camorra mine, the Southern vein system was
identified as a result of sampling outcrops on the western end of the
La Camorra tailings ponds. Five distinct structures were mapped on
surface, returning gold values of up to 24 grams per tonne (gpt) (0.7
ounce per ton (opt)). During the second quarter, six holes were
drilled to test the system, and all five structures were identified in
the drill holes. The structures are pervasive, strongly altered and
contain anomalous gold values, and Hecla is continuing with
exploration there.
Resource estimation for Mina Isidora is in progress, following
completion of the most recent drill program. Fourteen underground and
26 surface drill holes were completed for a total exceeding 9,700
meters to test both the M and S veins. Assays of intercepts include
gold values as high as 155 gpt (4.5 opt) and 195 gpt (5.7 opt).
Drilling appears to have been successful in confirming and expanding
the resources and in identifying a new ore shoot.
Drilling of a downdip extension of the historic Panama mine,
located approximately two kilometers to the northeast of Mina Isidora,
is underway. Holes will target the downdip extension of the former
Panama mine that historically produced 500,000 tonnes of ore at an
average gold grade of 16 gpt (0.47 opt). The first drill hole
intersected the vein approximately 50 meters below the old workings at
a vertical depth of approximately 150 meters and returned an assay of
363 gpt gold (10.6 opt) over 0.41 meter. Two additional holes have
been completed and assays are pending, and the drilling program
continues.
Other targets in the Block B concessions will be drilled later
this year.
Nevada
About 30% of the planned underground drilling has been completed
at the Hollister Development Block gold-silver exploration property in
northern Nevada's prolific Carlin Trend. The project is an earn-in to
a 50/50 joint venture with Great Basin Gold (GBG). The exploration
program is on track to allow a decision early next year on whether the
deposit is economically mineable. The East lateral drift was completed
in the second quarter, with the West lateral drift scheduled for
completion in the fourth quarter. Total project-to-date underground
development totals 6,139 feet. About 160 feet of drifting was
completed on the Gwenivere vein, where the mineralized structure
averaged approximately 0.8 ounce of gold per ton and 12 ounces of
silver per ton over an average width of 3.8 feet (undiluted).
Additional drifting on the Gwenivere vein and both the South and
Central Clementine veins is planned in the fourth quarter to generate
a bulk sample for metallurgical and mill testing.
To date, 42 drill holes have been completed for a total of 15,440
feet, out of the 55,000 feet planned for the total program. A second
drill has arrived and is operating underground at the site, and
diamond drilling is slated for completion by the end of the year.
Intercepts have returned gold and silver grades generally ranging from
mildly anomalous up to 8 ounces of gold per ton and 200 ounces of
silver per ton. While there is not enough information yet to determine
the economic viability of the deposit, drilling in some areas is
generally verifying the grades, thicknesses and variability expected
from previous drilling. The feasibility study for the project is on
schedule for completion in the second quarter of 2007.
NEW EXPLORATION V.P.
Hecla is pleased to announce that Dr. Dean McDonald will be
joining the company as Vice President -- Exploration, effective
September 1, 2006. McDonald, a senior corporate executive with 24
years of experience in exploration and project evaluation, will
provide direction for Hecla's aggressive exploration program and help
develop overall strategy for the company as part of the executive
management team. Baker said, "Dean brings to Hecla a wide experience
with projects and deposits in Canada, South America, the U.S. and
Australia. In addition to focusing on Hecla's substantial gold and
silver exploration programs in five world-class mining districts, he
will also lend additional strength to our generative exploration
efforts."
Since 2003, McDonald has been Vice President Exploration and
Business Development for Committee Bay Resource Ltd. in Vancouver,
British Columbia, where he managed gold projects in Nunavut and
Western Australia, including grassroots exploration, in-fill drilling
and resource estimation with related scoping and feasibility studies.
Prior work includes exploration management for Miramar Mining
Corporation, Nerco Exploration Company and Northern Orion
Explorations. McDonald holds a Ph.D. in Geology from the University of
Western Ontario and an M.Sc. in Structural and Mineral Deposits from
the University of New Brunswick. He has received numerous academic and
research awards and has been widely published during his career.
OTHER
Hecla's annual meeting was held in May, with shareholders
re-electing George R. Nethercutt, Jr., and newly electing John H.
Bowles to the Board of Directors for three-year terms. Hecla also said
goodbye to long-time Chairman and 40-year Hecla employee Arthur Brown
with his retirement effective at the annual meeting. As previously
announced, the Board appointed Ted Crumley to the position of Chairman
of the Board. Mr. Crumley is the former Chief Financial Officer of
Boise Cascade Corporation and a Hecla director since 1995.
Cautionary Note Regarding Second Quarter 2006 Results -- Final
2006 second quarter results could be impacted by a provision for
potential losses imposed by the effect of foreign currency exchange
controls if it is decided in the future to convert funds held in local
currency in Venezuela to dollars. The company is assessing whether any
such charge must be taken unless or until such an impact is realized.
Hecla Mining Company, headquartered in Coeur d'Alene, Idaho,
mines, processes and explores for silver and gold in the United
States, Venezuela and Mexico. A 115-year-old company, Hecla has long
been well known in the mining world and financial markets as a quality
silver and gold producer. Hecla's common and preferred shares are
traded on the New York Stock Exchange under the symbols HL and HL-PrB.
Statements made which are not historical facts, such as
anticipated payments, litigation outcome, production, sales of assets,
exploration results and plans, costs, and prices 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
price volatility, volatility of metals production and costs,
exploration risks and results, political risks, project development
risks, labor issues and ability to raise financing. 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. The company
undertakes no obligation and has no intention of updating
forward-looking statements.
Cautionary Note to Investors -- The United States Securities and
Exchange Commission permits mining companies, in their filings with
the SEC, to disclose only those mineral deposits that a company can
economically and legally extract or produce. We use certain terms in
this news release, such as "resource," "reserve," and "inferred
resource" that the SEC guidelines strictly prohibit us from including
in our filing with the SEC. U.S. investors are urged to consider
closely the disclosure in our Form 10-K and Form 10-Q. You can review
and obtain copies of these filings from the SEC's website at
http://www.sec.gov/edgar.shtml.
Hecla Mining Company news releases can be accessed on the Internet
at: http://www.hecla-mining.com.
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, June 30, June 30, June 30,
2006 2005 2006 2005
- ----------------------------------------------------------------------
FINANCIAL DATA
- ----------------------------------------------------------------------
Sales:
Silver operations (2) $ 25,875 $ 15,598 $ 50,090 $ 30,342
Gold operations 31,066 9,657 46,641 19,347
---------- ---------- ---------- ----------
Total sales $ 56,941 $ 25,255 $ 96,731 $ 49,689
========== ========== ========== ==========
Gross Profit:
Silver operations (2) $ 11,835 $ 2,163 $ 21,821 $ 5,325
Gold operations 5,866 1,317 7,613 3,620
---------- ---------- ---------- ----------
Total gross profit $ 17,701 $ 3,480 $ 29,434 $ 8,945
========== ========== ========== ==========
Net income (loss) $ 9,215 $ (6,245) $ 47,609 $ (9,541)
Income (loss)
applicable to common
shareholders $ 9,077 $ (6,383) $ 47,333 $ (9,817)
Basic income (loss) per
common share $ 0.08 $ (0.05) $ 0.40 $ (0.08)
Cash flow provided by
(used in) operating
activities $ 28,912 $ 961 $ 28,609 $ (6,024)
Net cash provided by
operating activities
before exploration
and pre-development
expenses (1) $ 36,477 $ 7,626 $ 41,056 $ 5,567
- ----------------------------------------------------------------------
PRODUCTION SUMMARY - TOTALS
- ----------------------------------------------------------------------
Silver - Ounces 1,262,875 1,438,806 2,503,761 2,857,069
Gold - Ounces 42,234 34,172 84,653 62,295
Lead - Tons 5,288 5,584 10,497 10,480
Zinc - Tons 5,063 6,557 10,632 12,503
Average cost per ounce
of silver produced(2):
Cash operating costs
($/oz.) 1.65 2.45 1.72 2.46
Total cash costs
($/oz.) (3) 1.98 2.59 2.01 2.59
Total production costs
($/oz.) 3.44 4.22 3.54 4.15
Average cost per ounce
of gold produced (4):
Cash operating costs
($/oz.) 332 310 340 299
Total cash costs
($/oz.) (3) 340 317 348 307
Total production costs
($/oz.) 502 373 505 366
- ----------------------------------------------------------------------
AVERAGE METAL PRICES
- ----------------------------------------------------------------------
Silver - London Fix ($/oz.) 12.28 7.15 10.99 7.06
Gold - Realized ($/oz.) 613 432 592 430
Gold - London Final ($/oz.) 627 427 591 427
Lead - LME Cash
(cents/pound) 49.9 44.7 53.1 44.6
Zinc - LME Cash
(cents/pound) 149.3 57.7 125.6 58.7
(1) Net cash provided by operating activities before exploration and
pre-development expenses represents a non-U.S. generally accepted
accounting principle (GAAP) measurement. The following table
presents a reconciliation between cash flow provided by (used in)
operating activities to non-GAAP net cash provided by operating
activities before exploration and pre-development expenses for the
quarters and six months ended June 30, 2006 and 2005:
Cash flow provided by
(used in) operating
activities $ 28,912 $ 961 $ 28,609 $ (6,024)
Add exploration 5,610 4,565 8,998 7,357
Add pre-development
expenses 1,955 2,100 3,449 4,234
-------- --------- --------- ----------
Net cash provided by
operating activities
before exploration and
pre-development
expenses $ 36,477 $ 7,626 $ 41,056 $ 5,567
======== ======== ========= ==========
(2) Includes gold produced at silver operations, which is treated as a
by-product credit and included in the calculation of silver costs
per ounce.
(3) Total cash costs per ounce of silver and gold represent non-U.S.
Generally Accepted Accounting Principles (GAAP) measurements. A
reconciliation of total cash costs to cost of sales and other
direct production costs and depreciation, depletion and
amortization (GAAP) can be found in the cash costs per ounce
reconciliation section of this news release. For additional
information, see note (1) in the cash costs per ounce
reconciliation section.
(4) For the quarters and six months ended June 30, 2006 and 2005,
includes gold produced from third-party mining operations located
near the La Camorra mine and Mina Isidora, which is treated as a
by-product credit and included in the calculation of gold costs
per ounce.
HECLA MINING COMPANY
Consolidated Statements of Operations
(dollars and shares in thousands, except per share amounts
- unaudited)
Second Quarter Ended Six Months Ended
------------------- --------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
--------- --------- --------- --------
Sales of products $ 56,941 $ 25,255 $ 96,731 $ 49,689
-------- -------- -------- --------
Cost of sales and other
direct production costs 30,716 17,896 50,626 33,039
Depreciation, depletion and
amortization 8,524 3,879 16,671 7,705
-------- -------- -------- --------
39,240 21,775 67,297 40,744
-------- -------- -------- --------
Gross profit 17,701 3,480 29,434 8,945
-------- -------- -------- --------
Other operating expenses
General and administrative 3,781 2,287 6,881 4,929
Exploration 5,610 4,565 8,998 7,357
Pre-development expenses 1,955 2,100 3,449 4,234
Depreciation and amortization 238 138 547 283
Other operating expenses 1,024 492 1,264 1,184
Gain on sale of properties,
plants and equipment (4,420) - - (4,420) - -
Provision for closed
operations and environmental
matters 882 353 1,597 687
-------- -------- -------- --------
9,070 9,935 18,316 18,674
-------- -------- -------- --------
Income (loss) from operations 8,631 (6,455) 11,118 (9,729)
-------- -------- -------- --------
Other income (expense):
Gain (loss) on sale of
investments (6) - - 36,416 - -
Interest and other income 1,084 386 1,691 788
Interest expense (236) (3) (363) (8)
-------- -------- -------- --------
842 383 37,744 780
-------- -------- -------- --------
Income (loss) from operations
before income taxes 9,473 (6,072) 48,862 (8,949)
Income tax provision (258) (173) (1,253) (592)
-------- -------- -------- --------
Net income (loss) 9,215 (6,245) 47,609 (9,541)
Preferred stock dividends (138) (138) (276) (276)
-------- -------- -------- --------
Income (loss) applicable to
common shareholders $ 9,077 $ (6,383) $ 47,333 $ (9,817)
======== ======== ======== ========
Basic and diluted income
(loss) per common share
after preferred dividends $ 0.08 $ (0.05) $ 0.40 $ (0.08)
======== ======== ======== ========
Basic weighted average number
of common shares outstanding 119,266 118,429 118,999 118,396
======== ======== ======== ========
Diluted weighted average number
of common shares outstanding 119,673 118,429 119,427 118,396
======== ======== ======== ========
HECLA MINING COMPANY
Consolidated Balance Sheets
(dollars and shares in thousands - unaudited)
June 30, Dec. 31,
2006 2005
- ----------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 65,567 $ 6,308
Short-term investments and securities held for
sale 15,200 40,862
Accounts and notes receivable 12,903 17,595
Inventories 22,368 25,466
Other current assets 5,065 3,546
--------- ---------
Total current assets 121,103 93,777
Investments 3,567 2,233
Restricted cash and investments 20,855 20,340
Properties, plants and equipment, net 134,843 137,932
Other noncurrent assets 22,788 17,884
--------- ---------
Total assets $ 303,156 $ 272,166
========= =========
- ----------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 18,599 $ 16,684
Dividends payable 138 138
Accrued payroll and related benefits 10,809 10,452
Accrued taxes 3,005 2,529
Current portion of accrued reclamation and
closure costs 6,365 6,328
--------- ---------
Total current liabilities 38,916 36,131
Long-term debt - - 3,000
Accrued reclamation and closure costs 60,928 62,914
Other noncurrent liabilities 8,373 8,791
--------- ---------
Total liabilities 108,217 110,836
--------- ---------
- ----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------
Preferred stock 39 39
Common stock 29,881 29,651
Capital surplus 513,306 508,104
Accumulated deficit (348,759) (396,092)
Accumulated other comprehensive income 903 19,746
Treasury stock (431) (118)
--------- ---------
Total shareholders' equity 194,939 161,330
--------- ---------
Total liabilities and shareholders' equity $ 303,156 $ 272,166
========= =========
Common shares outstanding at end of period 119,469 118,594
========= =========
HECLA MINING COMPANY
Consolidated Statements of Cash Flows
(dollars in thousands - unaudited)
Six Months Ended
-------------------
June 30, June 30,
2006 2005
- ----------------------------------------------------------------------
OPERATING ACTIVITIES
- ----------------------------------------------------------------------
Net income (loss) $ 47,609 $ (9,541)
Noncash elements included in net income (loss):
Depreciation, depletion and amortization 17,218 7,988
Gain on sale of investments (36,416) - -
Gain on disposition of properties, plants and
equipment (4,420) (20)
Gain on sale of royalty interests (341) (550)
Provision for reclamation and closure costs 198 335
Stock compensation 1,767 832
Other non-cash charges, net 186 - -
Change in assets and liabilities:
Accounts and notes receivable 1,277 1,310
Inventories 3,098 (5,931)
Other current and noncurrent assets (3,171) 1,823
Accounts payable and accrued expenses 1,915 211
Accrued payroll and related benefits 446 (844)
Accrued taxes 476 208
Accrued reclamation and closure costs and other
noncurrent liabilities (1,233) (1,845)
-------- --------
Net cash provided by (used in) operating
activities 28,609 (6,024)
-------- --------
- ----------------------------------------------------------------------
INVESTING ACTIVITIES
- ----------------------------------------------------------------------
Additions to properties, plants and equipment (14,186) (23,994)
Proceeds from sale of investments 57,441 - -
Proceeds from disposition of properties, plants
and equipment 4,368 18
Purchase of short-term investments (37,210) (56,694)
Maturities of short-term investments 22,010 70,826
Increase in restricted investments (515) (257)
-------- --------
Net cash provided by (used in) investing
activities 31,908 (10,101)
-------- --------
- ----------------------------------------------------------------------
FINANCING ACTIVITIES
- ----------------------------------------------------------------------
Common stock issued under stock option plans 2,331 256
Dividends paid to preferred shareholders (276) (276)
Purchase of treasury shares (313) - -
Borrowings on debt 4,060 - -
Repayments of debt (7,060) - -
-------- --------
Net cash used in financing activities (1,258) (20)
-------- --------
Net increase (decrease) in cash and cash
equivalents 59,259 (16,145)
Cash and cash equivalents at beginning of period 6,308 34,460
-------- --------
Cash and cash equivalents at end of period $ 65,567 $ 18,315
======== ========
HECLA MINING COMPANY
Production Data
Second Quarter Ended Six Months Ended
-------------------- ----------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
- ----------------------------------------------------------------------
LUCKY FRIDAY UNIT
- ----------------------------------------------------------------------
Tons of ore processed 65,703 55,380 129,427 98,565
Days of operation 70 59 139 104
Mining cost per ton $ 51.89 $ 54.52 $ 51.51 $ 60.31
Milling cost per ton $ 12.07 $ 8.00 $ 11.73 $ 8.10
Ore grade milled - Silver
(oz./ton) 12.29 12.09 11.66 12.49
Silver produced (oz.) 742,125 622,866 1,368,917 1,144,258
Lead produced (tons) 4,092 3,756 7,686 6,805
Zinc produced (tons) 1,374 1,180 2,406 2,004
Average cost per ounce of
silver produced (2):
Cash operating costs $ 4.85 $ 4.69 $ 5.06 $ 4.96
Total cash costs (1) $ 4.97 $ 4.69 $ 5.13 $ 4.96
Total production costs $ 6.08 $ 4.84 $ 6.22 $ 5.13
Capital additions (in
thousands) $ 2,406 $ 2,291 $ 4,507 $ 4,102
- ----------------------------------------------------------------------
GREENS CREEK UNIT (Reflects Hecla's 29.73% share)
- ----------------------------------------------------------------------
Tons of ore milled 51,506 58,442 103,394 113,488
Days of operation 82 87 166 170
Mining cost per ton $ 35.72 $ 30.17 $ 35.12 $ 31.73
Milling cost per ton $ 25.84 $ 21.01 $ 24.81 $ 20.71
Ore grade milled - Silver
(oz./ton) 13.73 17.74 14.63 19.53
Silver produced (oz.) 520,750 760,193 1,134,844 1,657,064
Gold produced (oz.) 3,750 5,950 8,478 12,150
Lead produced (tons) 1,196 1,828 2,811 3,675
Zinc produced (tons) 3,689 5,377 8,226 10,499
Average cost per ounce of
silver produced (2):
Cash operating costs $ (2.92) $ 0.87 $ (2.30) $ 0.86
Total cash costs (1) $ (2.28) $ 1.11 $ (1.74) $ 1.07
Total production costs $ 1.22 $ 3.54 $ 1.62 $ 3.43
Capital additions (in
thousands) $ 1,966 $ 894 $ 3,953 $ 1,314
- ----------------------------------------------------------------------
LA CAMORRA UNIT
- ----------------------------------------------------------------------
Tons of ore processed 60,832 49,269 115,379 99,601
Days of operation 86 80 170 163
Mining cost per ton $ 124.48 $ 68.23 $ 123.87 $ 56.19
Milling cost per ton $ 15.59 $ 14.76 $ 16.06 $ 13.49
Ore grade milled - Gold
(oz./ton) 0.699 0.581 0.700 0.514
Gold produced (oz.) 38,399 27,020 76,019 48,881
Average cost per ounce of
gold produced:
Cash operating costs $ 332 $ 310 $ 340 $ 299
Total cash costs (1) $ 340 $ 317 $ 348 $ 307
Total production costs $ 502 $ 373 $ 505 $ 366
Capital additions (in
thousands) $ 1,847 $ 10,961 $ 5,552 $ 18,299
(1) Total cash costs per ounce of silver and gold represent non-U.S.
Generally Accepted Accounting Principles (GAAP) measurements. A
reconciliation of total cash costs to cost of sales and other
direct production costs and depreciation, depletion and
amortization (GAAP) can be found in the cash costs per ounce
reconciliation section of this news release.
(2) Gold, lead and zinc produced have been treated as by-product
credits in calculating silver costs per ounce.
HECLA MINING COMPANY
Reconciliation of Cash Costs per Ounce to Generally Accepted
Accounting Principles (GAAP)(1)
(dollars and ounces in thousands, except per ounce - unaudited)
Three Months Ended Six Months Ended
------------------ -------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
- ----------------------------------------------------------------------
GOLD OPERATIONS
- ----------------------------------------------------------------------
Total cash costs $ 12,562 $ 8,234 $ 25,771 $ 14,416
Divided by gold ounces produced 37 26 74 47
-------- ------- -------- --------
Total cash cost per ounce
produced $ 340 $ 317 $ 348 $ 307
======== ======= ======== ========
Reconciliation to GAAP (2):
Total cash costs $ 12,562 $ 8,234 $ 25,771 $ 14,416
Depreciation, depletion and
amortization 5,925 1,449 11,456 2,777
Treatment and freight costs (2,088) (515) (3,682) (927)
By-product credits 1,015 437 1,425 743
Change in product inventory 7,822 (1,265) 4,111 (1,313)
Reclamation, severance and
other costs (37) - - (53) 31
-------- ------- -------- --------
Costs of sales and other
direct production costs and
depreciation, depletion
and amortization (GAAP) $ 25,199 $ 8,340 $ 39,028 $ 15,727
======== ======= ======== ========
- ----------------------------------------------------------------------
SILVER OPERATIONS
- ----------------------------------------------------------------------
Total cash costs $ 2,503 $ 3,587 $ 5,043 $ 7,252
Divided by silver ounces
produced 1,263 1,384 2,504 2,800
-------- ------- -------- --------
Total cash cost per ounce
produced $ 1.98 $ 2.59 $ 2.01 $ 2.59
======== ======= ======== ========
Reconciliation to GAAP:
Total cash costs $ 2,503 $ 3,587 $ 5,043 $ 7,252
Depreciation, depletion and
amortization (3) 2,599 2,430 5,215 4,928
Treatment and freight costs (8,063) (5,896) (15,016) (11,907)
By-product credits 17,387 11,862 32,714 23,118
Strike-related costs (3) - - 865 - - 1,376
Change in product inventory (4) (441) 497 212 108
Reclamation, severance and
other costs 56 90 101 142
-------- ------- -------- --------
Costs of sales and other
direct production costs and
depreciation, depletion
and amortization (GAAP) $ 14,041 $13,435 $ 28,269 $ 25,017
======== ======= ======== ========
- ----------------------------------------------------------------------
GREENS CREEK UNIT (Reflects Hecla's 29.73% share)
- ----------------------------------------------------------------------
Total cash costs $ (1,186) $ 841 $ (1,974) $ 1,780
Divided by silver ounces
produced 521 760 1,135 1,657
-------- ------- -------- --------
Total cash cost per ounce
produced $ (2.28) $ 1.11 $ (1.74) $ 1.07
======== ======= ======== ========
Reconciliation to GAAP:
Total cash costs $ (1,186) $ 841 $ (1,974) $ 1,780
Depreciation, depletion and
amortization 1,779 1,806 3,722 3,828
Treatment and freight costs (4,396) (3,948) (8,738) (8,181)
By-product credits 11,017 7,945 21,343 15,930
Change in product inventory (250) 916 (467) 855
Reclamation, severance and
other costs 48 42 90 81
-------- ------- -------- --------
Costs of sales and other
direct production costs and
depreciation, depletion
and amortization (GAAP) $ 7,012 $ 7,602 $ 13,976 $ 14,293
======== ======= ======== ========
- ----------------------------------------------------------------------
LUCKY FRIDAY UNIT
- ----------------------------------------------------------------------
Total cash costs $ 3,689 $ 2,663 $ 7,017 $ 5,389
Divided by silver ounces
produced (5) 742 568 1,369 1,087
-------- ------- -------- --------
Total cash cost per ounce
produced $ 4.97 $ 4.69 $ 5.13 $ 4.96
======== ======= ======== ========
Reconciliation to GAAP:
Total cash costs $ 3,689 $ 2,663 $ 7,017 $ 5,389
Depreciation, depletion and
amortization 820 89 1,493 178
Treatment and freight costs (3,667) (1,908) (6,278) (3,686)
By-product credits 6,370 3,433 11,371 6,704
Change in product inventory (192) 142 (228) (186)
Reclamation and other costs 8 (7) 11 6
--------- ------- -------- ---------
Costs of sales and other
direct production costs and
depreciation, depletion
and amortization (GAAP) $ 7,028 $ 4,412 $ 13,386 $ 8,405
======== ======= ======== ========
- ----------------------------------------------------------------------
RECONCILIATION TO GAAP, ALL OPERATIONS
- ----------------------------------------------------------------------
Total cash costs $ 15,065 $ 11,821 $ 30,814 $ 21,668
Depreciation, depletion and
amortization (3) 8,524 3,879 16,671 7,705
Treatment and freight costs (10,151) (6,411) (18,698) (12,834)
By-product credits 18,402 12,299 34,139 23,861
Change in product inventory (4) 7,381 (768) 4,323 (1,205)
Strike-related costs (3) - - 865 - - 1,376
Reclamation and other costs 19 90 48 173
-------- ------- -------- --------
Costs of sales and other direct
production costs and
depreciation, depletion and
amortization (GAAP) $ 39,240 $21,775 $ 67,297 $ 40,744
======== ======= ======== ========
(1) Cash costs per ounce of silver or gold represent non-U.S.
generally accepted accounting principles (GAAP) measurements that
the company believes provide management and investors an
indication of net cash flow, after consideration of the realized
price received for production sold. Management also uses this
measurement for the comparative monitoring of performance of
mining operations period-to-period from a cash flow perspective.
"Total cash cost per ounce" is a measure developed by gold
companies in an effort to provide a comparable standard; however,
there can be no assurance that our reporting of this non-GAAP
measure is similar to that reported by other mining companies.
Cost of sales and other direct production costs and depreciation,
depletion and amortization, was the most comparable financial
measures calculated in accordance with GAAP to total cash costs.
(2) Costs per ounce of gold are based on the gold produced by the La
Camorra mine and Block B concessions only. Gold produced from
third-party mining operations located near the La Camorra mine and
Block B concessions was treated as a by-product credit and
included in the calculation of gold costs per ounce.
(3) During the first quarter and for most of the second quarter,
ending in June 2005, the mill that processed ore from San
Sebastian was closed due to a strike by mill employees. During the
second quarter and first six months of 2005, cost of sales and
other direct production costs of $0.9 million and $1.4 million,
respectively, were not included in the determination of total cash
costs for silver operations. Additionally during the second
quarter and first six months of 2005, San Sebastian recognized
depreciation, depletion and amortization expense of $0.5 million
and $0.9 million, which is reflected in the total for all
properties and combined silver properties above.
(4) Includes approximately $907,000 related to San Sebastian cost of
sales and other direct production costs during the first quarter
of 2006 for prior period dore shipments.
(5) Ounces mined from the 5900 level development project at Lucky
Friday in 2005 were not included in the determination of total
cash costs. During the second quarter and first six months of
2005, approximately 55,000 ounces and 58,000 ounces, respectively,
of silver were excluded from the calculation.
CONTACT: Hecla Mining Company
Vicki Veltkamp, 208-769-4100
Fax: 208-769-7612