DENVER (Dow Jones)--Hecla Mining Co. (HL) will use proceeds from rising silver prices to expand production and explore for new resources as executives also weigh acquisitions, the company's chief said Tuesday.
As gold prices rise to records on investor appetite for safe-haven assets and a currency and inflation hedge, prices for fellow precious metal silver have been surging as well.
"Silver will track gold," President and Chief Executive Phillips Baker told Dow Jones Newswires in an interview on the sidelines of the Denver Gold Forum mining conference. "There's quite a bit of uncertainty out there with respect to monetary and fiscal policy."
In the second quarter, Hecla reported the second-highest gross profit and cash flow from operating activities in the company's 119-year history.
During the period, it realized $18.96 per ounce of silver as average prices for the metal were 33% higher than a year earlier. Tuesday, most actively traded silver futures, for December delivery, settled at $20.640 an ounce on the Comex division of the New York Mercantile Exchange.
Idaho-based Hecla, the largest producer of silver in the U.S., will use money from higher silver prices to continue its expansion plans.
The company has budgeted $150 million to $200 million over the next three and a half years to put in a new underground shaft at its Lucky Friday mine in Idaho and to increase capacity at its Greens Creek property in Alaska. By the end of this year it will already have spent about $50 million of that.
The new shaft in Idaho will boost Lucky Friday's production from 3 million ounces a year to 5 million ounces annually, and it will increase the life of the mine, which began operations in 1942.
"I would anticipate we would have a hundred-year mine," Baker said.
The increased production will also lower the costs of the mine. Currently, one ounce of silver costs $4.47 to produce at the property.
Hecla will also spend $20 million on exploration this year, and a similar amount next year, at these two operations, plus at two properties in Colorado and Mexico.
Meanwhile, "we will continue to evaluate acquisitions," Baker said.
Any potential silver targets would have to be in the Americas, produce 3 million ounces or more of the metal per year and have long mine-life expectations, he said. |
