Equity Alert on HL,
Hecla Reports Best Quarterly Performance in More Than a Decade, More Production and Lower Costs; For the Period Ended June 30, 2002
COEUR D'ALENE, Idaho, Aug 1, 2002 (BUSINESS WIRE) -- Hecla Mining Company (NYSE:HL)(NYSE:HL-PrB) today reported second quarter 2002 net income of $4.8 million, compared to a net loss of $1.6 million in the second quarter of 2001.
Cash flow provided by operating activities increased more than 60% during the comparative period, from $3.8 million in last year's second quarter to $6.1 million in the second quarter of 2002. Gross profit more than tripled compared to the second quarter of 2001, from $2.4 million to $7.9 million in the second quarter of 2002. For the first six months of 2002, Hecla reported net income of $5.2 million, compared to net income of $8 million in the first half of 2001. Last year's first half was positively impacted by the nonrecurring benefit of a gain of $13 million on the sale of the majority of Hecla's industrial minerals operations.
Arthur Brown, Hecla's Chairman and Chief Executive Officer, said, "Hecla's second quarter 2002 results were the best in recent history. This is further evidence that Hecla has turned around. We produced more gold than in any other quarter during Hecla's 111-year history. Net income from continuing operations was the highest it's been for 12 years. We had the highest quarterly precious metals revenue since 1990 and we had the lowest costs per ounce of silver since we began calculating it this way in 1986. Obviously, we're extremely pleased with the company's excellent performance this quarter and in the first half of the year." Brown continued, "Our low-cost operations will keep us on track for profitability, regardless of the volatility of precious metals prices. We will continue to work at what we do best...mine gold and silver safely, efficiently and at a low cost."
Highlights
-- 29% increase in gold production quarter-on-quarter, 41%
increase for the first six months, while maintaining low
production costs
-- Record low silver costs per ounce, with a 39% decrease in the
average total cash cost per ounce of silver quarter-on-quarter
-- Increased 2002 production estimates
-- Gross profit from operations more than tripled
-- Successful tender offer for Hecla's Preferred B stock
-- Exciting exploration developments
-- Dramatically increased cash and cash equivalents
-- 26% decrease in total debt
Operations
Excellent performance from operations in the first half of the year prompted Hecla to increase its 2002 production estimates to approximately 215,000 ounces of gold and 8 million ounces of silver.
In the second quarter, Hecla produced 65,323 ounces of gold, bringing the first half total to 121,725 ounces of gold produced, a 41% increase over the first half of 2001. Average total cash costs improved compared to last year, at $131 per ounce of gold for the second quarter and $134 per ounce of gold for the first half of the year.
The La Camorra operation in Venezuela is the main contributor to Hecla's gold segment, producing 45,869 ounces of gold in the second quarter and a total of 86,086 ounces in the first half of the year. La Camorra has become a steady performer for Hecla, producing at these levels for the past year.
Hecla's silver production totaled 2.3 million ounces in the second quarter and 4.3 million ounces for the first half of 2002. The average total cash cost per ounce of silver decreased 39% during the second quarter compared to the same period last year, from $3.30 per ounce to $2.00 per ounce. For the first six months, the average total cash cost per ounce of silver was among the lowest in the industry, at $2.17 per ounce.
Hecla's Greens Creek mine in Alaska, in which the company holds a 29.73% interest, produced 1.7 million ounces of silver for Hecla's account in the first half of 2002, at an average total cash cost of $1.68, including by-product credits.
The San Sebastian mine in central Mexico has produced about 1.6 million ounces of silver during the first six months of the year at just $1.38 average total cash cost per ounce. San Sebastian's ore grade has increased since it has been in full production, and it mined an average grade of nearly 24 ounces of silver per ton and 0.29 ounce of gold per ton for the first six months of the year.
Hecla's Lucky Friday mine contributed just over 1 million ounces of silver for the first half of 2002, at an average total cash cost of $4.29 per ounce, excluding approximately $0.4 million in costs classified as care-and-maintenance costs. Costs have continued to decrease at Lucky Friday, and second quarter costs were reduced to $3.91 total cash cost per ounce, excluding approximately $0.2 million in costs classified as care-and-maintenance costs. This is a 20% improvement over the second quarter of last year.
Brown said, "We spent about $6 million on capital expenditures at our properties during the first six months of the year, and we expect to maintain approximately that level of expenditures through the remainder of the year."
After factoring in the charge for unpaid preferred share dividends of $2 million, Hecla's income applicable to common shareholders in the second quarter of 2002 was $2.7 million, or 4 cents a share, compared to a loss of $3.6 million, or 5 cents a share, for the same period last year. For the first half of 2002, including $4 million in unpaid dividend charges, Hecla reported income applicable to shareholders of $1.2 million, or 2 cents a share, compared to $4 million, or 6 cents a share, in the first half of 2001.
Exploration
In June, Hecla reported continued drilling success in central Mexico, at the Cerro Pedernalillo gold/silver project. Multiple targets have been identified in the area and Hecla President and Chief Operating Officer Phillips S. Baker, Jr. said, "Our exploration progress at Cerro Pedernalillo is exciting. Preliminary evaluation indicates a possible ore shoot there. We will continue our activity at Cerro Pedernalillo and hope to define an indicated gold and silver resource by the end of the year. We are intensifying our exploration efforts overall and expect to spend about $5 million this year on Hecla's exploration projects."
On June 10, Hecla entered into an agreement on Great Basin Gold's Hollister Block deposit in Nevada's golden Carlin Trend, subject to a final definitive agreement. The two companies would participate in a 50/50 joint venture arrangement, where Hecla funds the exploration and development stages of the underground gold project, and then earns 115% of its investment back before paying Great Basin Gold a sliding royalty. Baker said, "This is a project that is low risk in terms of getting our investment back, and the additional potential there is tremendous. It is another underground, narrow vein, high-grade deposit that Hecla is expert at developing. The Hollister Block is exactly the kind of low capital, low risk, high potential return type of project we do well."
Tender Offer
On June 13, Hecla announced an offer to holders of its Series B Cumulative Convertible Preferred stock to exchange each of their Preferred shares for 7 shares of Hecla common stock. The offer closed on July 25, 2002. Preliminary results showed that approximately 1.55 million shares of the Preferred B stock were tendered, representing approximately 68% of the total number of preferred shares outstanding. As a result of the exchange, the outstanding shares of common stock will increase from about 75 million to about 86 million. Approximately 745,000 shares of the Preferred B stock remain issued and outstanding. Future annual preferred dividends of approximately $5.4 million were eliminated by the exchange. Also eliminated were undeclared but accumulated dividends of approximately $10.9 million. Hecla will be required to take a one-time noncash dividend charge against earnings in the third quarter in the amount of approximately $17.6 million as a result of the tender offer. Although no cash was distributed or debt incurred, accounting principles require the disclosure and presentation on the income statement of the fair market value of the additional shares exchanged above the original exchange ratio of 3.2 shares of common stock for each share of Preferred B stock. This dividend is noncash and does not impact the total equity on the company's balance sheet.
Annual Meeting
Hecla held its annual meeting of shareholders on May 10, 2002, at which Preferred B shareholders elected David J. Christensen and Dr. Anthony P. Taylor to the board of directors. Shareholders also approved increasing the number of authorized shares of common stock to 200 million and the selection of BDO Seidman, LLP as Hecla's auditor for 2002. The meeting was adjourned until July 18, 2002, at which time shareholders overwhelmingly approved an amendment to the existing 1995 Stock Incentive Plan, an amendment to the Corporation's existing Stock Plan for Nonemployee Directors and an adoption of a Key Employee Deferred Compensation Plan. About 73% of the shares present at the adjourned meeting were voted in favor of the three proposals.
Financial
Hecla's financial condition continues to improve, with a current ratio at the end of the quarter of 1.4:1 compared to 0.99:1 at December 31, 2001. In addition, Hecla's cash position increased to $13.1 million at the end of the second quarter. As of June 30, 2002, total debt had decreased 26% since the beginning of the year, to $14.1 million.
During the second quarter, Hecla was notified by the New York Stock Exchange that the company's average stock price is within the NYSE's minimum requirement and therefore is viewed as "in good standing" with the NYSE.
Hecla Mining Company, headquartered in Coeur d'Alene, Idaho, mines and processes silver and gold in the United States, Venezuela and Mexico. A 111-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, production, sales of assets, exploration results and plans, costs, 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, project development risks 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.
Hecla Mining Company news releases can be accessed on the Internet at: hecla-mining.com |
