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SILVER, GOLD, LEAD AND ZINC IN THE UNITED 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 112 years old.
The 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.
(1) Corporate Headquarters (2+3+4) Gold (5+6) Silver
Greens Creek Unit - Admiralty Island, Alaska (2)
Hecla's share of Greens Creek production in 2003 was 3,480,800 ounces of silver and 29,564 ounes of gold. Silver was produced at an average total cash cost of $ 1.18 per ounce. Hecla holds a 29.73% interest in Greens Creek, which is a joint venture operated by Kennecott Greens Creek Mining Company, a subsidiary of Rio Tinto.
Lucky Friday Unit - Mullan, Idaho (3)
The Lucky Friday mine produced 2,251,486 ounces of silver in 2003, at an average total cash cost of $ 4.86 per ounce. After operating there for 45 years, Hecla still has a tremendous silver resource at this mine. In 2003, the company made the decision to develop the next mine level in order to double production.
San Sebastian Unit - Durango, Mexico (4)
San Sebastian produced 4,085,038 ounces of silver at the incredibly low average total cash cost of negative $ 0.25 per ounce. San Sebastian's cash costs were benefited by a good gold by-product credit resulting from 47,721 ounces of gold production during 2003. The mine went into production in late 2001 and Hecla holds more than 100 square miles of property surrounding the mine, with excellent exploration potential.
Gold
La Camorra Unit - Bolivar, Venezuela (5)
The La Camorra gold operation produced 126,567 ounces of gold in 2003 at an average total cash cost of $ 154 per ounce. Hecla has been operating La Camorra since 1999 and during that period, cut cash costs nearly in half, La Camorra's mill could be used to process ore from additional properties developed in the area, such as Mina Isidora.
Exploration/Development
Block B - Mina Isidora - El Callao Mining District, Venezuela (5)
Hecla's 2003 drilling program identified the Mina Isidora gold deposit on the Block B concessions. A prefeasibility study is very encouraging and a final development decision is expected in 2004. The property is located about 70 miles from Hecla's La Camorra mine.
Hollister Block Project - Midas, Nevada (6) The Hollister Development Block is a 50/50 joint venture gold exploration project with Great Basin Gold. Hollister is located along the Carlin Trend in northern Nevada and, given good exploration results, could become an underground gold mine.
Recent Developments: Hecla CEO's to Celebrate 40 Years on NYSE by Ringing Closing Bell October 12
Hecla Mining company celebrated 40 years of trading its shares on the New York Stock Exchange with the current Chief Executive Officer and two former Chief Executive Officers ringing the closing bell on the Exchange on Tuesday, October 12. The company, now 113 years old, first traded publicly on the Curb Exchange in 1915, the precursor to the American Stock Exchange. Hecla was first listed on the NYSE 40 years ago in 1964. It is the oldest publicly-traded precious-metals mining company in North America.
Phillips S. Baker, Jr., Hecla's current President and CEO, joined current Hecla Chairman and former CEO, Arthur Brown, and former Chairman and CEO, William Griffith in ringing the bell in New York to celebrate the historic event. The three men represent the last 25 years of Hecla's executive leadership. Baker said, "It is not often that a company rings the bell at the NYSE to celebrate four decades of trading. In this era of mergers and name changes, there are few companies that have been continuously listed for this long on the world's premier stock exchange. I am proud of Hecla's longevity and reputation, and pleased that three of the eleven CEO's in Hecla's history are able to attend this event."
In 1891, Hecla Mining Company was born in the richly mineralized Coeur d'Alene Mining District of northern Idaho. Now headquartered in Coeur d'Alene, Idaho, it is the last of the pioneer mining companies incorporated in Idaho before 1900 to remain in business. A $ 150 hillside-mining claim was the beginning of what is now a diverse, multi-national gold and silver mining company that has a market cap of about $ 800 million.
Although its roots are in North Idaho, the past quarter-century has seen Hecla expand its horizons dramatically. Hecla is now mining silver and gold in Alaska, Idaho, Mexico and Venezuela, employing about 1,200 people across North and South America, with revenue last year of over $ 116 million.
In 2004, Hecla anticipates mining approximately 8 million ounces of silver at an average total cash cost of under $ 2.00 per ounce, and 215,000 ounces of gold at an average total cash cost of under $ 185 per ounce. The company is currently developing a new gold mine in Venezuela and expanding the Lucky Friday silver mine in northern Idaho. Both projects will be in full production in 2006.
Fundamental Considerations
Hecla refers only to indicated, proven, and probable ore reserves, while inferred resources remain "blue sky".
We believe that Hecla, which today is more gold than silver, and listed on the NYSE, will attract institutional funds, since these are unlikely to go to junior exploration companies with little trading volume.
Hecla's average trading volume exceeds 1.5 million shares per day.
Technical Considerations
The gold price has risen 70% since the low reached in 2001 while silver rose 80%. We are confident that this signifies the end of the bull-market in precious metals -possibly the end of the beginning.
We are confident that we shall see much higher prices in the future.
Our recommendation: BUY!
Peter Zihlmann
www.pzim.com
investment@pzim.com
forex@pzim.com
November 8, 2004
Disclosure: The author has not been paid to write this article, nor has he received any other inducement to do so. The author is a shareholder in the company and will benefit from any increase in the company's share price. Disclaimer: The author's objective in writing this article is to invoke an interest on the part of potential investors in this stock to the point where they are encouraged to conduct their own further diligent research. Neither the information, nor the opinions expressed should be construed as a solicitation to buy or sell this stock. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions in the stock.