HECLA MINING COMPANY (NY:HL): FOLLOW-UP NO 3
Home page: http://www.hecla-mining.com/mainProfile.html
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SILVER, GOLD, LEAD AND ZINC IN THE UNITES STATES, MEXICO AND VENEZUELA
Business Summary
Established in 1891 in northern Idaho's Silver Valley, Hecla Mining Company's rich history of mining has distinguished it as a respected precious metals producer. Now headquartered in Coeur d'Alene, Idaho, this international, publicly traded company is 111 years old.
Hecla Mining Company mines and processes silver, gold, lead and zinc in the United States, Mexico and Venezuela. Hecla currently produces silver from three silver mines, Greens Creek, San Sebastian and Lucky Friday, and mines gold as well at the La Camorra mine.
The company's gold and silver operations are low cost, with total cash costs during 2001 at $133 per ounce of gold and $3.52 per ounce of silver. The Greens Creek Unit, in which Hecla holds a 29.73% interest, is on Admiralty Island near Juneau, Alaska, and produced over 3 million ounces of silver for Hecla's account in 2001. Hecla's share of Greens Creek includes over 37.6 million ounces of silver in proven and probable reserves. The San Sebastian mine, an underground mine and exploration project, is located in central Mexico's historically silver-rich Durango district. It produced over 950,000 ounces of silver and nearly 16,000 ounces of gold in 2001, after only six months of operation. San Sebastian has 8.6 million ounces of proven and probable silver reserves and more than 91,000 ounces of proven and probable gold reserves. The Lucky Friday Unit, located in Mullan, Idaho, produced over 3.2 million ounces of silver in 2001 and has over 17 million ounces of silver in proven and probable reserves.
Hecla's gold operation, the La Camorra Unit, is located in El Callao, Venezuela. The mine produced over 152,000 ounces of gold in 2001 and has nearly 700,000 ounces of proven and probable gold reserves and other resources.
Hecla is well known in the United States as a major primary silver producer, and the name "Hecla" is commonly associated with silver by many investors. Over the past two decades, Hecla has also produced a significant amount of gold.
Recent Developments: Hecla's Brown Sets Retirement Date
Hecla Mining Company's Chairman and Chief Executive Officer Arthur Brown has announced his intention to retire from the position of Chief Executive Officer of the company effective at Hecla's 2003 Annual Meeting of Shareholders, currently scheduled for Friday, May 9, 2003.
Brown, who has been with the 111-year-old precious metals mining company for 35 years, will retain his position as chairman of the Board. He joined Hecla in 1967 as an engineer and worked his way up through the ranks to his appointment as president in 1986 and chairman and chief executive officer in 1987. Brown, 62, said this is a move he's been contemplating for some time and has thoroughly discussed it with Hecla's Board of Directors. "I have been working on succession planning, and one step of that plan occurred last year when Phil Baker was appointed president. Our intent is that Phil will succeed me as chief executive officer when I step down next year."
Brown continued, "I am very pleased to be able to make this announcement and take this step into the next phase of my life at a time when Hecla's fortunes have turned around and we are looking at a bright future. I have been fortunate enough to assemble an executive team of talented young people that are very capable of moving this company forward under the leadership of Phil Baker."
Baker, Hecla's president and chief operating officer, said, "Art Brown has led Hecla through a very difficult period, at a time when the prices of precious metals were very depressed. Through his guidance and determination, he positioned Hecla for future growth and prosperity and will be leaving the company in good shape with great properties."
Brown said he's excited about Hecla's prospects. "In my view, Hecla now has some of its best exploration properties ever, with its projects in Mexico, Venezuela and the U.S.A. Rarely in my 40 years of mining experience have I seen as great a potential as I do with our San Sebastian and La Camorra mines. 2002 has been one of Hecla's best operating years ever, and I was determined not to retire until the company was on excellent financial and operational footing. I am satisfied we are at that point, and I am comfortable that the company will have the leadership necessary to make the most of these opportunities."
Baker says he's grateful for the legacy Brown will leave. "Art has fostered a culture at Hecla that has maintained and grown its reputation as one of the best underground, narrow vein hardrock miners in the world. It's easy to attract good people to work here because he has made it a company that is respected for its expertise, as well as its care and concern for employees and the communities where they work."
Fundamental Considerations
Rising gold and silver prices will make these deposits more valuable.
Technical Considerations
Shareholders of Hecla had a rough time when they saw the price decline from $ 30 in 1981 to 50 cents by the year 2000 for a loss of nearly 99%. At that stage however, Hecla would have been a fantastic buy as gold and silver also hit bottom.
The fortunes of Hecla have changed. The share price has since gone up by almost 1000% but we believe that the share price will rise further as the silver price resumes the up-trend.
This is also being demonstrated when you compare the action of Hecla's share price with the Philadelphia Gold & Silver Index over the past two years. Hecla has indeed outperformed the market.
Hecla Mining to offer 20 mln common shares
Last week, Hecla Mining Co. filed with U.S. regulators to offer 20 million shares of common stock.
The proceeds from the sale will go to fund future exploration and development, working capital requirements, capital expenditures and other general corporate purposes, the firm said in a filing with the Securities and Exchange Commission.
Underwriters Merrill Lynch, CIBC World Markets and Salomon Smith Barney have an option to purchase an additional 3 million shares.
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Above announcement caused the share price to fall back from the high recently reached and is therefore fully discounted.
Our recommendation: BUY!
Peter Zihlmann
www.pzim.com
forex@pzim.com
January 16, 2003
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