Hecla Reports 2012 Fourth Quarter And Year-End Results

Hecla Mining Company ( NYSE:HL) today announced 2012 revenue of $321.1 million and gross profit of $143.5 million with net income applicable to common shareholders of $14.4 million, or $0.05 per basic share, and earnings after adjustments applicable to common shareholders of $34.2 million, or $0.12 per basic share, for the year. 1 Full year silver production in 2012 was 6.4 million ounces at a total cash cost of $2.70 per ounce, net of by-products. 2

FULL YEAR 2012 HIGHLIGHTS
  • Produced 6.4 million ounces of silver.
  • Total cash cost of $2.70 per ounce, net of by-products.2
  • Operating cash flow of $69.0 million.
  • Cash and cash equivalents of $191.0 million at December 31, 2012.
  • Year-end silver reserve levels highest in Company history, increasing for the 7th consecutive year, with silver reserves up 2% to 150 million ounces. In addition, mineralized material increased by 7% to 22.4 million tons averaging 5.7 ounces of silver per ton and other resources increased by 37% to 23.4 million tons averaging 7.4 ounces of silver per ton.
  • Gold mineralized material increased fourfold to 1.7 million tons averaging 0.07 ounces of gold per ton and other resources increased 75% to 13.5 million tons averaging 0.05 ounces of gold per ton.
  • Exploration programs in 2012 succeeded in identifying new and highly prospective targets in addition to increasing resources at each of Hecla's pre-development and exploration projects.

FOURTH QUARTER 2012 HIGHLIGHTS
  • Net income applicable to common shareholders of $0.6 million, or $0.00 per basic share, and earnings after adjustments applicable to common shareholders of $10.2 million, or $0.04 per basic share.1
  • Silver production of 2.1 million ounces at a total cash cost of $3.45 per ounce, net of by-products.2
  • Completed cleaning and upgrading of Lucky Friday Silver Shaft. Production has resumed in Q1 2013.
  • Declared quarterly common stock dividend of $0.0125 per share of common stock, which includes a regular quarterly common stock dividend of $0.0025 per share and a special dividend of $0.01 per share.

(1) Earnings after adjustments applicable to common shareholders represents a non-U.S. Generally Accepted Accounting Principles (GAAP) measurement. A reconciliation of net income applicable to common shareholders (GAAP) to earnings after adjustments can be found at the end of the release.

(2) Total cash cost per ounce of silver represents a non-GAAP measurement. A reconciliation of total cash cost to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) can be found at the end of this release.

2013 GUIDANCE
  • Expected full year 2013 silver production of approximately 8 to 9 million ounces.
  • Consolidated company-wide cash costs (based on current metal prices) are expected to be approximately $5.00 per ounce of silver, net of by-products, consisting of approximately $3.25 per ounce at the Greens Creek mine and $11.00 per ounce at the Lucky Friday mine.
  • Lucky Friday's costs are expected to be higher in the first half of the year as it proceeds through a restart phase. Per ounce cash costs are expected to be approximately $17.00 in the first half of the year, and are expected to decline to approximately $9.50 per ounce during the second half.
  • Expected Company-wide capital expenditures of $152.0 million.
  • Expected $51.5 million for 2013 exploration and pre-development expenses.

"This past year, with the Lucky Friday down, Greens Creek generated strong silver production and cash flow to allow record capital investments that are expected to generate not only higher silver production in 2013, but expected organic growth well into the future. For the full year, the Company produced 6.4 million ounces of silver at a cash cost of $2.70 per ounce, still among the lowest costs and highest margins of the major primary silver producers," said Phillips S. Baker, Jr., President and Chief Executive Officer. "In 2013, we are expecting silver production levels to increase more than 25% to approximately 8 to 9 million ounces."

"With MSHA modifying certain orders allowing use of the shaft to the deepest loading pocket, and allowing us to access some of the stopes, we have initiated production of ore and shipped our first concentrates earlier in February. Shaft rehabilitation work will be ongoing and we expect to be in full production in the third quarter. We have done other upgrades and work that we believe make the Lucky Friday a better, more reliable, longer living mine," Mr. Baker added.

"Lastly, our exploration program in 2012 continued to achieve success and grew silver reserves, mineralized material, and other resources. In addition, primarily as a result of our efforts in Mexico, gold mineralized material increased nearly fourfold and other gold resources increased 75%. Meanwhile, our pre-development projects continue to advance toward a planned company-wide goal to produce 15 million ounces of silver production in 2017."

FINANCIAL OVERVIEW

Hecla reported 2012 revenue of $321.1 million and gross profit of $143.5 million. These results were achieved by Greens Creek alone while the Lucky Friday mine was on standby for rehabilitation work on the Silver Shaft and other upgrades. Full year operating cash flow was $69.0 million, which was impacted by the payment of $25.0 million made in connection with our Coeur d'Alene Basin environmental liability settlement that was reached in 2011.
      Fourth Quarter Ended         Twelve Months Ended
HIGHLIGHTS       December 31, 2012       December 31, 2011         December 31, 2012       December 31, 2011
FINANCIAL DATA (000s)                                  
Sales $ 81,100       $ 102,867 $ 321,143       $ 477,634
Gross profit $ 34,037 $ 49,826 $ 143,516 $ 264,995
Income applicable to common shareholders $ 605 $ 18,431 $ 14,402 $ 150,612
Basic income per common share $ $ 0.07 $ 0.05 $ 0.54
Diluted income per common share $ $ 0.06 $ 0.05 $ 0.51
Net income $ 743 $ 18,569 $ 14,954 $ 151,164
Cash provided (used) by operating activities $ 2,528 $ (118,049 ) $ 69,016 $ 69,891
 

Hecla completed a record level of capital investment at its existing operations of $36.6 million and $118.2 million for the fourth quarter and twelve-month period ended December 31, 2012, respectively. These included $29.8 million in 2012 for the Silver Shaft rehabilitation and $26.2 million for other work at the Lucky Friday, and record capital investment of $62.2 million at Greens Creek. At Greens Creek, investment was focused on underground mine development and definition drilling, mining fleet replacement, tailings dam expansion, and the construction of expanded and upgraded camp facilities.

Pre-development expenditures totaled $5.7 million and $17.9 million for the fourth quarter and the year ended December 31, 2012, respectively. Pre-development expenditures in the fourth quarter were primarily for infrastructure and engineering and permitting studies at the San Sebastian project in Mexico, the San Juan Silver property in Creede, Colorado, and the Star Complex in the Silver Valley, Idaho.

Exploration expenditures (including corporate development) for the fourth quarter and twelve-month periods were $7.3 million and $31.8 million, respectively.

Metals Prices

Realized silver prices in the fourth quarter of 2012 were $29.20 per ounce, 8% less than that in the same period in 2011, while for the twelve-month period realized prices were 9% lower than the same period in 2011. In the fourth quarter of 2012, there were negative price adjustments of $5.7 million, compared to positive price adjustments of $0.07 million in the fourth quarter of 2011.

Increases in prices in the time period between the shipment of concentrate and final settlement resulted in positive adjustments to provisional settlements of $3.8 million in 2012, compared to net negative price adjustments to provisional settlements of $2.6 million in 2011.
            Fourth Quarter Ended         Twelve Months Ended
                December 31, 2012       December 31, 2011         December 31, 2012   December 31, 2011
AVERAGE METAL PRICES                              
Silver - London PM Fix ($/oz) $ 32.64       $ 31.82 $ 31.15   $ 35.11
Realized price per ounce $ 29.20 $ 31.61 $ 32.11 $ 35.30
Gold - London PM Fix ($/oz) $ 1,719 $ 1,685 $ 1,669 $ 1,569
Realized price per ounce $ 1,647 $ 1,640 $ 1,687 $ 1,592
Lead - LME Cash ($/pound) $ 1.00 $ 0.90 $ 0.94 $ 1.09
Realized price per pound $ 1.00 $ 0.82 $ 0.96 $ 1.05
Zinc - LME Cash ($/pound) $ 0.88 $ 0.86 $ 0.88 $ 1.00
Realized price per pound $ 0.91 $ 0.87 $ 0.90 $ 1.00
 

Base Metals Forward Sales Contracts

The following table summarizes the quantities of base metals committed under financially settled forward sales contracts at December 31, 2012:
      Pounds Under Contract         Average Price
(in thousands) per Pound
Zinc       Lead Zinc       Lead
Contracts on provisional sales            
2013 settlements 14,991 6,945 $ 0.95 $ 1.00
 
Contracts on forecasted sales
2013 settlements 35,935 32,794 $ 0.96 $ 1.11
2014 settlements 30,203 33,069 $ 0.98 $ 1.03
2015 settlements 3,307 23,534 $ 1.01 $ 1.06
 

OPERATIONS OVERVIEW

Production was down year-over-year due to halted production at the Lucky Friday mine during 2012, as well as ground support rehabilitation work at Greens Creek in the first half of 2012. Fourth quarter and full year silver cash cost, net of by-product credits, was $3.45 per ounce and $2.70 per ounce, respectively, compared to $2.28 per ounce and $1.15 per ounce, respectively, in the same period in 2011.
            Fourth Quarter Ended         Twelve Months Ended
December 31, 2012       December 31, 2011         December 31, 2012     December 31, 2011
PRODUCTION SUMMARY
Silver - Ounces produced 2,081,328       2,491,224 6,394,235     9,483,676
Payable ounces sold 1,538,162 1,923,365 5,430,252 8,119,634
Gold - Ounces produced 15,563 13,745 55,496 56,818
Payable ounces sold 10,828 10,050 43,133 43,942
Lead - Tons produced 5,848 8,194 21,074 39,150
Payable tons sold 3,945 7,046 15,733 33,050
Zinc - Tons produced 15,584 17,384 64,249 73,355
Payable tons sold 12,583 15,914 50,895 53,901
Total cash cost per ounce of silver produced (1) $ 3.45 $ 2.28 $ 2.70 $ 1.15
 

(1) Total cash cost per ounce of silver represents a non-U.S. Generally Accepted Accounting Principles (GAAP) measurement. A reconciliation of total cash costs to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) can be found at the end of this release.

Greens Creek Mine - Alaska

Silver production at Greens Creek in 2012 was 6.4 million ounces for the year and 2.1 million ounces in the fourth quarter. The mine demonstrated steady production increases during the course of 2012, producing 2.7 million ounces in the first half of the year, increasing by 37% to 3.7 million ounces in the second half. The decrease in silver production year-over-year is attributable primarily to the ground support rehabilitation work performed in the first half of 2012.

Total cash cost per ounce of silver produced at Greens Creek was $3.45 and $2.70, net of by-products, for the fourth quarter and full year, respectively, compared to $0.42 and negative $1.29, net of by-products, for the same respective periods in 2011. The increase in total cash cost per ounce for the full year was primarily due to higher production costs of $2.03 per ounce, due primarily to increased use of contract miners, and lower by-product credits of $1.84 per ounce. The decrease in by-product credits is due mainly to lower prices for by-product metals.

Lucky Friday Mine - Idaho

The Lucky Friday mine resumed production in the first quarter of 2013, following a one-year shutdown to rehabilitate and enhance the 6100 foot Silver Shaft and rehabilitate ramps and drifts. All mine employees have now been recalled to work and have received extensive safety training. Mine production, which resumed in February, is expected to ramp up to normal levels by mid-year as we perform additional rehabilitation and get necessary clearances from MSHA, with full year production of more than 2 million ounces of silver expected in 2013.

The Lucky Friday #4 Shaft project construction has also resumed, with shaft sinking set-up activities, primary mechanical and electrical systems, and critical lateral development largely complete. Construction work is expected to focus on shaft sinking and station development activities until project completion, which is expected in 2016. Total project capital is expected to be approximately $200 million, with approximately $92 million spent to date.

In 2012, Hecla spent approximately $29.8 million on rehabilitation work and $26.2 million for other capital projects at the Lucky Friday. The Company incurred non-capitalized expenses of $25.3 million, which includes holding costs and #4 Shaft care and maintenance.

RESERVES & RESOURCES

Hecla replaced mined silver production and added additional mineralized material and other resources. Total proven and probable reserves increased 2% to 150 million ounces of silver, mineralized material increased 7% to 22.4 million tons averaging 5.7 ounces per ton and other resources increased 37% to 23.4 million tons averaging 7.4 ounces per ton. In addition, gold mineralized material increased fourfold to 1.7 million tons averaging 0.07 ounces of gold per ton and other gold resources increased 75% to 13.5 million tons averaging 0.05 ounces of gold per ton.

The ore reserves in Table A are based on $26.50 per ounce of silver, $1,400.00 per ounce of gold, and $0.85 per pound of lead and zinc.

EXPLORATION AND PRE-DEVELOPMENT UPDATE

Exploration expenditures were $31.8 million in 2012, including $7.38 million for San Juan Silver, $6.35 million for Lucky Friday/Silver Valley, $5.74 million for Greens Creek, $5.48 million for San Sebastian and $650,000 for Monte Cristo, Nevada.

Pre-development expenditures were $17.9 million including $11.5 million at the San Juan Silver project, $4.77 million at the Star Complex and $1.65 million for the San Sebastian property.

Greens Creek - Alaska

Exploration

Greens Creek exploration, while not replacing reserves this year, made significant progress in growing the potential of the 200 South and NWW zones. 200 South had some of the widest and highest grade intercepts in recent history at the mine. See drill assay highlights in tables at the end of the release. 2013 is expected to be a year of infill drilling in order to develop a mine plan on 200 South and Southwest Bench. Assays were received on surface drilling at Killer Creek that define a 150-foot wide zone of stockwork veins which comprises intervals with silver up to 1.5 ounces per ton and copper up to 5.4%. This, combined with discovery of zinc mineralization 1,500 feet away at the mine contact, might be the turned over roots to a new mineralized zone. Surface drilling at Killer Creek during 2013 is expected to consist of 25,000 feet and is expected to provide additional intercepts in this new mineralized zone.

San Sebastian - Mexico

Exploration

Re-examination of district potential near the past producing Francine Vein at San Sebastian led to the discovery of the Middle Vein during the year. The Middle Vein has both precious metal rich and base metal rich sulfide mineralized zones. The higher-grade gold-silver mineralization forms other resources of 8.8 million ounces of silver and 45,011 ounces of gold that has been outlined through systematic drilling. The base metal rich sulfide mineralization appears similar in character to the Hugh Zone. Mineralization has been traced for approximately 3,000 feet along strike and to a depth of 1,000 feet and the deposit appears open for extension along strike and to depth.

With the new resource for the Middle Vein, and resource additions on the Andrea Vein, the mineralized material for the San Sebastian property has increased to 4.4 million ounces silver, 73,900 ounces gold, 14,640 tons lead and 19,080 tons zinc. Other resources have increased to 23.9 million ounces silver, 159,700 ounces gold, 25,880 tons lead and 36,040 tons zinc. Potential extensions to both the Middle Vein and Hugh Zone structures to the northwest and southeast remain strong and the Middle Vein is open to depth. The Andrea Vein remains open along strike and at depth. Exploration in 2013 is planned to evaluate the North Vein complex in the vicinity of the Middle Vein.

Pre-development

Further scoping studies are in progress to determine the production viability, rate and sequencing of mining the three resource areas and are expected to be completed in the third quarter of 2013. Concurrent with the completion of the scoping studies, a ramp is being engineered for initial construction, expected this year, to allow access to both the Hugh Zone and Middle Vein. Metallurgical, hydrology and geotechnical studies are also all advancing.

San Juan Silver - Colorado

Exploration

While underground drilling in the Equity Vein system at the San Juan Silver property has outlined multiple zones of high-grade, gold and silver-bearing veins, this work has yet to define sufficient tons to be part of a potential operating plan. However, underground drilling through the second quarter of 2013 will follow-up on high-grade surface drill intersections where the Equity and Amethyst mineralization trends converge. While there continues to be potential in the Equity Amethyst system, development of the Bulldog infrastructure will be prioritized in 2013.

Pre-development

Initial scoping studies and economic models confirm continuing advancement of the Bulldog decline. The 2800-foot long decline has now advanced over 800 feet. The expected fourth quarter 2013 completion of the decline will access old workings and the ore body. This access is expected to allow confirmation of the resource and advancement of the ongoing scoping studies.

Silver Valley - Idaho

Exploration & Pre-Development

Rehabilitation of the Star 2000 level was completed in 2012 providing access to exploration platforms. Drilling from these platforms has continued to discover more mineralization at similar grades as found in the resource. Drilling to follow up on higher-grade surface holes located to the east is expected to continue until April when the Star data is expected to be integrated into the Lucky Friday optimization study. After April, no further underground exploration or pre-development is anticipated on the Star in 2013. Some surface drilling in the summer is proposed along the nearby Noonday and You Like trends.

Monte Cristo - Nevada

Exploration

The 6,100 acre Monte Cristo property in Nevada, located along the Walker Lane structural belt within the Gilbert mining district, was acquired in July and hosts epithermal precious metal mineralization. The initial near-surface resource is estimated to be 913,000 tons containing approximately 131,300 ounces of other gold resources at 0.14 ounces per ton gold. The 2013 exploration program is focused on areas outside the identified resource.

Junior Exploration Investment Program

As part of the Company's junior exploration investment program initiated in 2012, Hecla has recently made equity investments in Dolly Varden Silver Corporation (DVSC), Canamex Resource Corporation and Brixton Metals Corporation (Brixton). DVSC has a 36.6 square mile land package in northwestern B.C. and has indicated plans for a substantial drilling program in 2013. Canamex has a 3.28 square mile land package in central Nevada (Nye County) and has indicated plans to continue to follow up on high-grade drill intersections at its Bruner property. Brixton is currently focused on the exploration of the Thorn Project located in the Atlin Mining District in northern British Columbia.

2013 GUIDANCE

Hecla projects company-wide silver production of approximately 8 to 9 million ounces with cash costs, based on current metals prices, of approximately $5.00 per ounce of silver, consisting of approximately $3.25 per ounce at Greens Creek and approximately $11.00 per ounce at Lucky Friday. Lucky Friday's costs are expected to be higher in the first half of the year as it proceeds through a restart phase, decreasing from approximately $17.00 per ounce to approximately $9.50 per ounce during the second half of the year.

Capital expenditures are expected to be approximately $152.0 million divided approximately equally between Greens Creek and Lucky Friday.

Exploration expenditures for 2013 are anticipated to be $27.1 million, with $6.6 million for Greens Creek; $6.31 million for Lucky Friday/Silver Valley; $6.19 million for San Juan Silver, $3.62 million for San Sebastian and $1.43 million for Monte Cristo. Pre-development expenditures for 2013 are anticipated to be $24.4 million with $18.0 million at the San Juan Silver project and $6.4 million for the San Sebastian property.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held today, February 25, at 10:00 a.m. Eastern Time to discuss these results. You may join the conference call by dialing toll-free 1-866-202-4683 or 1-617-213-8846 internationally. The participant passcode is HECLA. Hecla's live and archived webcast can be accessed at www.hecla-mining.com under Investors or via Thomson StreetEvents Network.

ABOUT HECLA

Established in 1891, Hecla Mining Company is one of the largest and lowest-cost primary silver producers in the U.S. The company has two operating mines and exploration properties in four world-class silver mining districts in the U.S. and Mexico.

Cautionary Statements

Statements made which are not historical facts, such as anticipated payments, litigation outcome, production, sales of assets, exploration results and plans, prospects and opportunities including reserves, resources, and mineralization, costs, and prices or sales performance are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “should,” “expects,” “intends,” “projects,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions are used to identify these forward-looking statements. Forward-looking statements 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, environmental and litigation risks, operating risks, project development risks, political and regulatory risks, labor issues, ability to raise financing and exploration risks and results. Refer to the company's Form 10-K and 10-Q 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 other than as may be required by law.

Cautionary Statements to Investors on Reserves and Resources

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 on this release, such as “resource,” “other resources,” and “mineralized materials” that the SEC guidelines strictly prohibit us from including in our filings 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 www.sec.gov.
HECLA MINING COMPANY

Consolidated Statements of Income

(dollars and shares in thousands, except per share amounts - unaudited)
 
      Fourth Quarter Ended     Twelve Months Ended
December 31,     December 31, December 31,     December 31,
2012 2011 2012 2011
Sales of products $ 81,100   $ 102,867   $ 321,143   $ 477,634  
Cost of sales and other direct production costs 34,682 40,540 134,105 165,573
Depreciation, depletion and amortization 12,381   12,501   43,522   47,066  
47,063   53,041   177,627   212,639  
Gross profit 34,037   49,826   143,516   264,995  
 
Other operating expenses:
General and administrative 5,530 3,732 21,253 18,540
Exploration 7,343 7,947 31,822 26,959
Pre-development 5,670 2,694 17,916 4,446
Other operating expense 1,138 1,959 4,423 7,658
Loss on disposition of property, plants, equipment and mineral interests 275 275
Lucky Friday suspension-related costs 6,564 25,309
Provision for closed operations and reclamation 1,332   1,864   4,652   9,747  
27,852   18,196   105,650   67,350  
 
Income from operations 6,185   31,630   37,866   197,645  
 
Other income (expense):
Gain (loss) on derivative contracts (2,344 ) (919 ) (10,457 ) 37,988
Gain on sale of investments 611
Loss on impairment of investments (1,171 ) (140 ) (1,171 ) (140 )
Interest and other income (loss) (206 ) 4 22 (87 )
Interest expense (864 ) (491 ) (2,427 ) (2,875 )
(4,585 ) (1,546 ) (14,033 ) 35,497  
Income before income taxes 1,600 30,084 23,833 233,142
Income tax provision (857 ) (11,515 ) (8,879 ) (81,978 )
 
Net income 743 18,569 14,954 151,164
Preferred stock dividends (138 ) (138 ) (552 ) (552 )
 
Income applicable to common shareholders $ 605   $ 18,431   $ 14,402   $ 150,612  
 
Basic income (loss) per common share after preferred dividends $   $ 0.07   $ 0.05   $ 0.54  
 
Diluted income per common share after preferred dividends $   $ 0.06   $ 0.05   $ 0.51  
 
Weighted average number of common shares outstanding basic 285,402   280,819   285,375   280,956  
 
Weighted average number of common shares outstanding diluted 299,309   294,133   297,566   297,033  
 

HECLA MINING COMPANY

Consolidated Balance Sheets

(dollars and share in thousands - unaudited)
 
        December 31, 2012     December 31, 2011
ASSETS      

 
     
Current assets:          
Cash and cash equivalents $ 190,984 $ 266,463
Accounts receivable 25,021 20,309
Inventories 28,637 26,195
Current deferred income taxes 29,398 27,810
Other current assets 8,858   21,967  
Total current assets 282,898 362,744
Non-current investments 9,614 3,923
Non-current restricted cash and investments 871 866
Properties, plants, equipment and mineral interests, net 996,659 923,212
Non-current deferred income taxes 86,365 88,028
Other non-current assets and deferred charges 1,883   17,317  
Total assets $ 1,378,290   $ 1,396,090  
               
LIABILITIES              
Current liabilities:
Accounts payable and accrued liabilities $ 43,162 $ 37,831
Accrued payroll and related benefits 10,760 12,878
Accrued taxes 12,321 10,354
Current portion of capital leases 5,564 4,005
Current portion of accrued reclamation and closure costs 19,845 42,248
Other current liabilities 3,335    
Total current liabilities 94,987 107,316
Capital leases 11,935 6,265
Accrued reclamation and closure costs 93,370 111,563
Other non-current liabilities 40,047   30,833  
Total liabilities 240,339   255,977  
               
SHAREHOLDERS’ EQUITY              
Preferred stock 39 39
Common stock 71,499 71,420
Capital surplus 1,218,283 1,215,229
Accumulated deficit (123,288 ) (120,557 )
Accumulated other comprehensive loss (23,918 ) (23,498 )
Treasury stock (4,664 ) (2,520 )
Total shareholders’ equity 1,137,951   1,140,113  
Total liabilities and shareholders’ equity $ 1,378,290   $ 1,396,090  
Common shares outstanding 285,210   285,290  
 

HECLA MINING COMPANY

Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)
 
      December 31,     December 31,
        2012     2011
OPERATING ACTIVITIES              
Net income $ 14,954 $ 151,164
Non-cash elements included in net income:
Depreciation, depletion and amortization 50,113 47,348
Gain on sale of investments (611 )
Loss on impairment of investments 1,171 140
Loss on disposition of properties, plants, equipment and mineral interests 275
Provision for reclamation and closure costs 1,106 7,004
Deferred income taxes 546 76,944
Stock compensation 3,101 2,073
Amortization of loan origination fees 460 598
Amortization of intangible asset
(Gain) loss on derivative contracts 29,627 (53,545 )
Other non-cash charges, net 1,765 1,209
Change in assets and liabilities:
Accounts receivable (4,713 ) 16,531
Inventories (2,442 ) (7,064 )
Other current and non-current assets 610 2,164
Accounts payable and accrued liabilities 4,927 1,466
Accrued payroll and related benefits (2,118 ) 2,090
Accrued taxes 1,967 (5,688 )
Accrued reclamation and closure costs and other non-current liabilities (32,333 ) (171,932 )
Other non-current liabilities    
Cash provided by operating activities 69,016   69,891  
               
INVESTING ACTIVITIES              
Additions to properties, plants, equipment and mineral interests (113,096 ) (87,546 )
Proceeds from sale of investments 1,366
Proceeds from disposition of properties, plants and equipment 886 113
Redemptions of restricted cash and investment balances 9,448
Increases in restricted cash and investment balances (5 ) (3,200 )
Purchases of investments (5,823 )  
Net cash used in investing activities (118,038 ) (79,819 )
               
FINANCING ACTIVITIES              
Proceeds from exercise of stock options and warrants 5,786
Acquisition of treasury shares (2,144 ) (469 )
Dividend paid to common shareholders (17,121 ) (5,592 )
Dividends paid to preferred shareholders (552 ) (3,822 )
Loan origination fees paid (750 ) (180 )
Repayments of capital leases (5,890 ) (2,938 )
Net cash used in financing activities (26,457 ) (7,215 )
Net decrease in cash and cash equivalents (75,479 ) (17,143 )
Cash and cash equivalents at beginning of year 266,463   283,606  
Cash and cash equivalents at end of year $ 190,984   $ 266,463  
 

HECLA MINING COMPANY

Production Data
 
      Fourth Quarter Ended     Twelve Months Ended
December 31,     December 31,     December 31,     December 31,
        2012     2011     2012     2011
GREENS CREEK UNIT                          
Tons of ore milled 215,819 191,858 789,569 772,069
Mining cost per ton $ 69.28 $ 50.85 $ 64.05 $ 49.31
Milling cost per ton $ 30.26 $ 29.41 $ 29.35 $ 30.69
Ore grade milled - Silver (oz./ton) 13.14 13.50 11.13 11.49
Ore grade milled - Gold (oz./ton) 0.11 0.10 0.12 0.12
Ore grade milled - Lead (%) 3.48 3.40 3.49 3.52
Ore grade milled - Zinc (%) 8.31 9.50 9.35 9.81
Silver produced (oz.) 2,081,328 1,990,610 6,394,235 6,498,337
Gold produced (oz.) 15,563 13,745 55,496 56,818
Lead produced (tons) 5,848 5,048 21,074 21,055
Zinc produced (tons) 15,584 16,137 64,249 66,050
Total cash cost per ounce of silver produced (1) $ 3.45 $ 0.42 $ 2.70 $ (1.29 )
Capital additions (in thousands)       $ 17,936     $ 12,551     $ 62,184     $ 41,657  
LUCKY FRIDAY UNIT                          
Tons of ore processed 49,638 298,672
Mining cost per ton $ $ 67.62 $ $ 60.76
Milling cost per ton $ $ 20.79 $ $ 16.96
Ore grade milled - Silver (oz./ton) 10.80 10.69
Ore grade milled - Lead (%) 6.80 6.51
Ore grade milled - Zinc (%) 2.90 2.82
Silver produced (oz.) 500,614 2,985,339
Lead produced (tons) 3,146 18,095
Zinc produced (tons) 1,247 7,305
Total cash cost per ounce of silver produced (1) $ $ 9.68 $ $ 6.47
Capital additions (in thousands) $ 18,713 $ 15,428 $ 55,998 $ 60,454
 

 (1) Total cash costs per ounce of silver represents a non-U.S. Generally Accepted Accounting Principles (GAAP) measurement. 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. 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     Twelve Months Ended
December 31,   December 31,
        2012     2011     2012     2011
RECONCILIATION TO GAAP, ALL OPERATIONS                          
Total cash costs 7,175     $ 5,677 $ 17,262     $ 10,934
Divided by ounces produced 2,081   2,490   6,394   9,483  
Total cash cost per ounce produced $ 3.45   $ 2.28   $ 2.70   $ 1.15  
Reconciliation to GAAP:
Total cash costs $ 7,175 $ 5,677 $ 17,262 $ 10,934
Depreciation, depletion and amortization 12,381 12,501 43,522 47,066
Treatment costs (21,145 ) (22,758 ) (73,355 ) (99,019 )
By-product credits 51,433 53,530 190,916 254,372
Change in product inventory (3,343 ) 836 (1,381 ) (4,805 )
Suspension-related costs 2,495 4,135
Reclamation and other costs 562   760   663   (44 )
 
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 47,063   $ 53,041   $ 177,627   $ 212,639  
                                           
GREENS CREEK UNIT                          
Total cash costs $ 7,175 $ 829 $ 17,262 $ (8,387 )
Divided by ounces produced 2,081   1,990   6,394   6,498  
Total cash cost per ounce produced $ 3.45   $ 0.42   $ 2.70   $ (1.29 )
Reconciliation to GAAP:
Total cash costs $ 7,175 $ 829 $ 17,262 $ (8,387 )
Depreciation, depletion and amortization 12,381 11,032 43,522 41,013
Treatment costs (21,145 ) (19,612 ) (73,355 ) (79,134 )
By-product credits 51,433 46,375 190,916 205,961
Change in product inventory (3,343 ) 720 (1,381 ) (4,966 )
Reclamation and other costs 562   745   663   (81 )
 
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 47,063   $ 40,089   $ 177,627   $ 154,406  
         
LUCKY FRIDAY UNIT        
Total cash costs $ $ 4,848 $ $ 19,321
Divided by silver ounces produced   500     2,985  
Total cash cost per ounce produced $   $ 9.68   $   $ 6.47  
Reconciliation to GAAP:
Total cash costs $ $ 4,848 $ $ 19,321
Depreciation, depletion and amortization 1,469 6,053
Treatment costs (3,146 ) $ (19,885 )
By-product credits 7,155 48,411
Change in product inventory 116 $ 161
Suspension-related costs (2) 2,495 4,135
Reclamation and other costs   15     37  
 
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $   $ 12,952   $   $ 58,233  
 

(1) Cash costs per ounce of silver represent non-U.S. Generally Accepted Accounting Principles (GAAP) measurements that the Company believes provide management and investors an indication of net cash flow. 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 mining 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) Various accidents and other events resulted in temporary suspensions of production at the Lucky Friday unit during 2011 and throughout 2012. Care-and-maintenance, mine rehabilitation, investigation, and other costs incurred during the suspension periods not related to production have been excluded from total cash costs and the calculation of total cash cost per ounce produced.
 
HECLA MINING COMPANY

Reconciliation of Net Income Applicable to Common Shareholders (GAAP) to Earnings After Adjustments(1)

(dollars and ounces in thousands, except per share amounts - unaudited)
 
      Three Months Ended     Twelve Months Ended
December 31,     December 31,
2012   2011     2012   2011
Net income applicable to common shareholders (GAAP) $

605
  $ 18,431 $

14,402
  $ 150,612
Adjusting items:
(Gains)/losses on derivatives contracts 2,344 919 10,457 (37,988 )
Environmental accruals 382 336 (1,054 ) 4,990
Provisional price (gains)/losses 5,667 (728 ) (3,820 ) 2,611
Lucky Friday suspension-related costs 6,564 25,309
Income tax effect of above adjustments (5,384 ) (184 ) (11,121 ) 10,635  
 
Earnings after adjustments applicable to common shareholders $

10,178
  $ 18,774   $

34,173
  $ 130,860  
Weighted average shares - basic 285,402 280,819 285,375 280,956
Weighted average shares - diluted 299,309 294,133 297,566 297,033
Basic earnings after adjustments per common share $ 0.04 $ 0.07 $ 0.12 $ 0.47
Diluted earnings after adjustments per common share $ 0.03 $ 0.06 $ 0.11 $ 0.44

 

(1)  Earnings After Adjustments and Earnings After Adjustments per share are non-GAAP measures which are indicators of our performance.  They exclude certain impacts which are of a nature which we believe are not reflective of our underlying performance.  Management believes that earnings after adjustments per common share provides investors with the ability to better evaluate our underlying operating performance.
 

Table A
Hecla Estimated Ore Reserves and Resources
(As of December 31, 2012)
 
        Silver     Gold     Lead     Zinc     Silver     Gold     Lead     Zinc
Mine     Tons     (Oz/ton)     (Oz/ton)     (%)     (%)     (Ounces)     (Ounces)     (Tons)     (Tons)

Proven and Probable Reserves

Proven Ore Reserves
Lucky Friday, USA 2,206,600 12.1 7.4 2.7 26,778,900 163,350 58,560
Greens Creek, USA     12,000     9.3     0.10     2.7     7.8     112,500     1,100     330     930
Subtotal Proven     2,218,600                             26,891,400     1,100     163,680     59,490

Probable Reserves
Lucky Friday, USA 1,931,700 14.8 8.7 3.2 28,676,000 167,390 62,300
Greens Creek, USA     7,845,600     12.0     0.09     3.4     9.0     94,481,200     718,400     267,410     702,300
Subtotal Probable     9,777,300                             123,157,200     718,400     434,800     764,600
Total Proven & Probable     11,995,900                             150,048,600     719,500     598,480     824,090

Mineralized Material
Lucky Friday, USA (1) 19,028,600 5.7 3.8 2.3 108,704,400 731,460 440,470
Greens Creek, USA (2) 448,600 5.9 0.12 3.2 7.0 2,650,500 53,500 14,300 31,580
San Sebastian, Mexico (3) 1,297,300 3.4 0.06 1.1 1.5 4,371,000 73,900 14,640 19,080
San Juan Silver, USA (4) 515,500 14.8 2.1 1.1 7,619,600 10,760 5,820
Star Complex, USA (5)     1,061,200     3.0         6.4     7.5     3,235,200         68,340     80,100
Total Mineralized Material     22,351,200                             126,580,700     127,400     839,500     577,050

Other Resources
Lucky Friday, USA (6) 6,921,900 9.1 5.6 2.3 62,651,500 384,930 158,240
Greens Creek, USA (7) 3,784,500 11.4 0.10 2.4 6.2 42,977,300 379,200 92,130 233,110
San Sebastian, Mexico (8) 5,695,900 4.2 0.03 0.5 0.6 23,897,400 159,700 25,880 36,040
San Juan Silver, USA (9) 3,078,200 10.7 0.01 1.3 1.1 33,096,400 35,600 40,990 34,980
Star Complex, USA (10) 2,972,300 3.2 5.9 5.5 9,377,900 174,080 163,480
Monte Cristo, USA (11)     913,300     0.3     0.14             271,000     131,300        
Total Other Resources     23,366,100                             172,271,500     705,800     718,010     625,850
 
Note: All estimates are in-situ; Rounding may affect totals
 

(1) Mineralized Material from Gold Hunter and Lucky Friday vein systems diluted and factored for expected mining recovery.

(2) Mineralized Material only in Gallagher orebody, factored for dilution and mining recovery.

(3) Mineralized Material, diluted to minimum mining width of 2.0 meters for Hugh Zone, 1.5 meters for Andrea Vein.

(4) Mineralized Material, diluted to minimum mining width of 6.0 feet for Bulldog.

(5) Mineralized Material, diluted to minimum mining width of 4.3 feet.

(6) Other Resources from Gold Hunter and Lucky Friday vein systems diluted and factored for expected mining recovery.

(7) Other Resources in East Ore, Gallagher, NWW, 200S orebodies, factored for dilution and mining recovery.

(8) Other Resources, diluted to minimum mining width of 2.0 meters for Hugh Zone, 1.5 meters for Andrea & Middle Veins.

(9) Other Resources, diluted to minimum mining width of 6.0 feet for Bulldog.

(10) Other Resources, diluted to minimum mining width of 4.3 feet.

(11) Other Resources, diluted to minimum mining width of 5 feet.
 

Table B
Assay Results
 
                                                 
San Sebastian           Drillhole     Width     Gold     Silver     Width     Gold     Silver
(Mexico)     Area     Number     (Meters)     (g/tonne)     (g/tonne)     (Feet)     (oz/ton)     (oz/ton)
      Middle Vein     SS-387     0.78     0.78     214.1     2.56     0.02     6.24
Middle Vein     SS-388     0.61     0.80     585.4     2.00     0.02     17.07
Middle Vein     SS-392     1.01     0.12     152.5     3.31         4.45
Middle Vein     SS-393     0.52     0.43     428.0     1.71     0.01     12.48
Middle Vein     SS-394     1.11     0.03     68.1     3.64         1.99
Middle Vein     SS-395     1.43     3.33     964.1     4.69     0.10     28.12
Middle Vein     SS-398     1.09     0.16     219.0     3.58         6.39
Middle Vein     SS-404     2.09     0.71     216.0     6.86     0.02     6.30
Middle Vein     SS-405     1.41     8.59     2,554.9     4.62     0.25     74.52
Middle Vein     SS-406     1.31     0.85     329.9     4.30     0.02     9.62
    Middle Vein     SS-411     0.18     5.16     4,900.0     0.59     0.15     142.92
                                               
Greens Creek     Drillhole     Width     Gold     Silver        
(Alaska)     Zone     Number     (Feet)     (oz/ton)     (oz/ton)     Zinc (%)     Lead (%)
      200 South     GC3337     3.1     0.02     18.3     2.0     0.9
      200 South     GC3483     50.0     0.08     35.9     11.2     4.9
      200 South     GC3490     19.0     0.49     65.8     7.0     3.5
      200 South     GC3500     3.0     0.04     58.2     3.3     1.5
      200 South     GC3503     31.3     0.21     26.5     10.0     2.6
      200 South     GC3516     8.3     0.03     50.3     4.2     2.1
      200 South     GC3457     39.0     0.18     29.7     9.1     3.5
      200 South     GC3469     25.2     0.11     27.3     14.7     5.9
      200 South     GC3500     3.0     0.04     58.2     3.3     1.5
      200 South     GC3506     40.0     0.24     16.5     14.0     4.2
      200 South     GC3512     15.7     0.11     65.4     5.2     2.4
      200 South     GC3517     9.8     0.10     23.7     2.9     1.7
      200 South     GC3471     28.6     0.37     9.8     21.7     11.4
      200 South     GC3501     27.5     0.13     28.1     14.8     8.0
      200 South     GC3482     37.0     0.22     23.0     11.5     4.5
      200 South     GC3486     23.0     0.21     21.8     8.5     3.6
      Gallagher     GC3382     5.1     0.10     14.8     2.0     1.5
      Gallagher     GC3394     10.0     0.09     5.0     14.7     7.7
      Gallagher     GC3530     5.7     0.18     8.4     19.4     7.1
      Gallagher     GC3536     4.5     0.14     11.5     9.9     5.0
      Gallagher     GC3537     10.0     0.23     6.1     13.7     5.1
      Southwest Bench     GC3453     10.5     0.06     91.8     17.7     8.5
      Southwest Bench     GC3456     5.9     0.01     19.1     1.2     0.5
      Lower Southwest     GC3514     11.8     0.18     14.63     15.0     3.3
      5250 Zone     GC3534     20.6     0.18     33.20     22.0     12.2
      5250 Zone     GC3535     15.0     0.09     14.69     7.1     3.2
      5250 Zone     GC3538     30.3     0.28     28.21     14.6     7.4
      5250 Zone     GC3468     8.8     0.10     30.9     7.4     4.4
      9a Zone     GC3371     19.0     0.06     9.0     25.5     10.8
      9a Zone     GC3425     6.6     0.59     25.0     13.2     6.8
 
                               
San Juan Silver Drillhole Width Gold Silver
(Colorado)     Vein / Area     Number     (Feet)     (oz/ton)     (oz/ton)
                               
      Amethyst     NAU12161     9.1     0.05     5.1
      Amethyst     NAU12175     2.3     0.03     12.7
      Amethyst     NAU12177     2.9     0.01     11.5
      Amethyst     NAU12178     21.3     0.04     2.9
      Amethyst     NAU12180     4.7     0.01     4.5
      Equity     NAU12183     0.6     0.03     72.5
 
                                     
Silver Valley/Star Drillhole Width Silver
(Idaho)     Vein / Area     Number     (Feet)     (oz/ton)     Zinc (%)     Lead (%)
                                     
STAR COMPLEX     STR200-1028     Morning     4.3     1.6     2.7     3.2
      STR200-1034     Morning     4.3     0.6     1.4     1.6
      STR200-1027     Morning Hangingwall     4.3     3.1     0.7     3.3
      STR200-1028     Morning Hangingwall     4.3     1.9     0.3     2.1
      STR200-1026     Morning Hangingwall     4.3     3.7     0.1     1.3
      STR200-1031     Morning Hangingwall     4.3     6.1     6.0     11.9
      STR200-1032     Morning Hangingwall     4.3     1.8     0.2     2.3
      STR200-1033     Morning Hangingwall     4.3     4.6     0.1     6.4
      STR200-1034     Morning Hangingwall     4.3     1.3     1.0     2.5
      STR200-1035     Morning Hangingwall     4.3     1.2     7.2     2.0
      STR200-1035     Morning Hangingwall     4.3     2.1     5.0     3.9
      STR200-1036     Morning Hangingwall     4.3     7.0     0.2     7.2
      STR200-1026     Noonday     4.3     1.6     4.6     4.0
      STR200-1028     Noonday     4.3     3.4     0.9     3.1
      STR200-1035     Noonday     4.3     1.1     3.3     3.5
      STR200-1036     Noonday     4.5     7.7     0.8     4.5
      STR200-1025     Noonday N. Split     4.3     1.7     4.1     4.7
      STR200-1026     Noonday N. Split     4.3     3.9     0.4     10.7
      STR200-1031     Noonday N. Split     4.3     2.5     1.2     3.9
      STR200-1036     Noonday N. Split     4.3     8.1     7.9     7.4

Copyright Business Wire 2010

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