Hecla Mining Company ( NYSE:HL) today announced a third quarter net loss applicable to common shareholders of $8.6 million, or $0.03 per basic share.

The Company reported a 42% increase in third quarter silver production to 2.3 million ounces compared to a year ago, with strong production from Greens Creek and the re-opened Lucky Friday reaching full production levels towards the end of the third quarter. In addition, with the June 1, 2013 acquisition of the Casa Berardi mine in Quebec, gold production increased 164% from the same period a year ago to 36,966 ounces.

“Hecla’s third quarter saw the Lucky Friday get back to planned tonnage, Casa Berardi completing several key capital programs and Greens Creek lowering its cash cost, before by-product credits, per silver ounce 1 by 20%,” said Phillips S. Baker, Jr., President and CEO. “And Hecla was recognized for its commitment to safety with an award from NIOSH, a federal government agency, for using innovative technologies to improve safety.”

“The fourth quarter is expected to be our best quarter of the year with the Lucky Friday at its normal tonnage rate for the whole quarter and Casa at this year's highest tonnage and grade. We also are continuing to reduce capital, exploration and pre-development expenditures, so the annual projections for these largely discretionary expenditures should be down 26% from the beginning of the year. For 2014, we are planning to spend within Adjusted EBITDA, so our financial position should remain the strongest in Hecla's history. We believe Hecla is well positioned to weather any further weakness in metals prices and to take advantage of the higher prices we expect in the future.”

THIRD QUARTER HIGHLIGHTS AND SIGNIFICANT ITEMS
  • Silver production of 2.3 million ounces at an average cash cost, after by-product credits, per silver ounce (a non-GAAP measure) of $7.40.2 Silver production for 2013 is expected to be near the high end of previous guidance of 8 to 9 million ounces with cash costs, after by-product credits, per silver ounce at approximately $6.50.
  • Lucky Friday mine, which re-opened in February, reached planned and historical throughput levels of more than 900 tons per day in September and have averaged above that rate since. Lucky Friday had a 121% increase in silver production and a 49% decrease in average cash costs, after by-product credits, per silver ounce, from the second quarter.
  • Gold production of 36,966 ounces, an increase of 164% over the third quarter of 2012, with 23,400 ounces from the Casa Berardi mine. Total gold production for Casa Berardi for 2013, starting June 1, is expected to be approximately 62,000 ounces.
  • Operating cash flow of negative $5.2 million, primarily due to a $25.4 million concentrate shipment made late in the quarter that settled early in the fourth quarter, and a $5.0 million production inventory buildup, primarily at Casa Berardi.
  • Capital, exploration and pre-development expenditures are projected to be 24%, 29% and 41% less, respectively, than estimated at the beginning of the year, a total savings of approximately $69 million since the start of the year.
  • Net loss applicable to common shareholders of $8.6 million, or $0.03 per basic share, due primarily to lower average silver and gold prices over the prior year period.
  • Adjusted EBITDA (a non-GAAP measure) of $30.4 million.3
  • Cash and cash equivalents of $238 million at September 30, 2013.
  • Subsequent to the end of the third quarter, a quarterly dividend of $0.0025 per share of common stock, payable on or about December 4, 2013, to shareholders of record on November 25, 2013.

(1) Cash cost, before by-product credits, per silver and gold ounce is a non-GAAP measurement; a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) can be found at the end of this release.

(2) Cash cost, after by-product credits, per silver and gold ounce is a non-GAAP measurement; a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) can be found at the end of this release.

(3) Adjusted EBITDA is a non-GAAP measurement; a reconciliation of which to net income (GAAP) can be found at the end of this release.

FINANCIAL OVERVIEW

Net loss applicable to common shareholders for the third quarter was $8.6 million, or $0.03 per basic share, compared to net loss of $1.0 million, or $0.00 per basic share, for the same period a year ago, and was impacted by the following items:
  • Lower average silver, gold and zinc prices compared to the same period a year ago.
  • Interest expense, net of amount capitalized, of $7.3 million, compared to $0.6 million as a result of the Senior Notes issuance in April 2013.
  • Higher general and administrative costs of $2.0 million due primarily to costs resulting from the acquisition of Aurizon Mines Ltd. (Aurizon) on June 1, 2013.
  Third Quarter Ended   Nine Months Ended
HIGHLIGHTS   September 30, 2013   September 30, 2012   September 30, 2013   September 30, 2012
FINANCIAL DATA                
Sales (000) $ 106,629   $ 81,871 $ 268,409   $ 240,043
Gross profit (000) $ 20,686 $ 37,309 $ 51,415 $ 109,479
Income (loss) applicable to common shareholders (000) $ (8,596 ) $ (1,023 ) $ (22,636 ) $ 13,797
Basic income (loss) per common share $ (0.03 ) $ $ (0.07 ) $ 0.05
Diluted income (loss) per common share $ (0.03 ) $ $ (0.07 ) $ 0.05
Net income (loss) (000) $ (8,458 ) $ (885 ) $ (22,222 ) $ 14,211
Cash provided by (used in) operating activities (000) $ (5,195 ) $ 35,248 $ 5,080 $ 66,488

Operating cash flow was negative $5.2 million during the third quarter of 2013, impacted in part by timing of a $25.4 million concentrate shipment made late in the quarter at Greens Creek that settled early in the fourth quarter, and a $5.0 million production inventory buildup, primarily at Casa Berardi.

Capital expenditures (including non-cash capital lease additions) at the operations totaled $51 million during the quarter, including $15.7 million at Lucky Friday, $18.4 million at Greens Creek, and $16.9 million at Casa Berardi. Capital expenditures totaled $116.3 million for the nine-month period ending September 30, 2013, and are expected to be approximately $163 million for the full year 2013.

Exploration expenditures were $5.8 million for the third quarter of 2013 and $18.5 million for the nine-month period ending September 30, 2013. Exploration expenditures for the full year 2013 are expected to be approximately $21 million. Pre-development expenditures totaled $3.4 million in the third quarter and $12.7 million for the nine month period ending September 30, 2013. Pre-development expenditures for the full year 2013 are expected to be approximately $14 million.

Metals Prices

Average realized silver prices in the third quarter were $22.22 per ounce, compared with average realized prices in the third quarter of 2012 of $35.00 per ounce.
  Third Quarter Ended   Nine Months Ended
      September 30, 2013   September 30, 2012   September 30, 2013   September 30, 2012
AVERAGE METAL PRICES                
Silver - London PM Fix ($/oz) $ 21.37   $ 29.91 $ 24.85   $ 30.65
Realized price per ounce $ 22.22 $ 35.00 $ 21.68 $ 33.27
Gold - London PM Fix ($/oz) $ 1,327 $ 1,655 $ 1,457 $ 1,652
Realized price per ounce $ 1,335 $ 1,754 $ 1,349 $ 1,700
Lead - LME Cash ($/pound) $ 0.96 $ 0.90 $ 0.98 $ 0.91
Realized price per pound $ 1.01 $ 0.94 $ 0.99 $ 0.94
Zinc - LME Cash ($/pound) $ 0.84 $ 0.86 $ 0.87 $ 0.88
Realized price per pound $ 0.88 $ 0.90 $ 0.88 $ 0.90

The Company uses financially settled forward contracts to help manage the exposure to changes in prices of silver, gold, zinc and lead contained in its unsettled concentrate shipments and of forecasted future zinc and lead sales. The following table summarizes the quantities and prices of forecasted lead and zinc sales committed under financially settled forward sales contracts at September 30, 2013:

Pounds Under Contract

(in thousands)
  Average Price Per Pound
  Zinc   Lead   Zinc   Lead
(pounds) (pounds) (pounds) (pounds)
 
Contracts on forecasted sales
2013 settlements 3,527 4,079 $ 0.95 $ 1.07
2014 settlements 60,516 47,619 $ 0.99 $ 1.05
2015 settlements 42,769 39,628 $ 0.96 $ 1.07
2016 settlements 661 9,755 $ 0.97 $ 1.04

OPERATIONS OVERVIEW

Average consolidated third quarter cash cost, after by-product credits, per silver ounce was $7.40, compared to $3.52 in the same period in 2012, due largely to higher silver production relative to by-product metal production. Cash costs, before by-product credits, declined by $5.46 over the same period last year. The following table provides the production and cost per ounce summary on a consolidated basis for the third quarter and nine months ended September 30, 2013 and 2012:
  Third Quarter Ended   Nine Months Ended
      September 30, 2013   September 30, 2012   September 30, 2013   September 30, 2012
PRODUCTION SUMMARY            
Silver - Ounces produced 2,292,145   1,619,110 6,431,006   4,312,907
Payable ounces sold 2,022,875 1,331,139 5,930,649 3,892,090
Gold - Ounces produced 36,966 14,024 72,881 39,933
Payable ounces sold 31,618 10,193 63,628 32,305
Lead - Tons produced 8,001 5,499 20,746 15,226
Payable tons sold 6,514 3,990 17,831 11,788
Zinc - Tons produced 14,489 16,648 44,889 48,665
Payable tons sold 11,048 12,343 31,392 38,312
Cash cost, before by-product credits, per silver ounce $ 27.57 $ 33.03 $ 28.76 $ 34.68
By-product credits per silver ounce $ (20.17 ) $ (29.51 ) $ (22.11 ) $ (32.34 )

Cash cost, after by-product credits, per silver ounce(1)
$ 7.40 $ 3.52 $ 6.65 $ 2.34

 

Cash cost, after by-product credits, per gold ounce(1)
$ 1,066 $   $ 1,086 $  
 

(1) See the attached schedule for a reconciliation to GAAP.

Greens Creek Silver Mine - Alaska

Greens Creek maintained its consistent, low-cost production in the third quarter of 2013, with 1.8 million ounces of silver produced at a cash cost, after by-product credits, per silver ounce of $5.00, compared to 1.6 million ounces of silver at $3.52 per ounce in the same period in 2012. The increase in the cash cost, after by-product credits, comes despite the third quarter of 2013 having a $6.85 lower total cash cost, before by-product credits, per silver ounce than the prior year period. By-product credit was $8.33 per silver ounce less than the prior year period due to lower by-product revenue and more silver production. Mining and milling costs per ton were up by 10% and 24%, respectively, in the third quarter, as compared to the same period in 2012. The increase in milling costs was primarily due to diesel fuel costs related to the generation of more power on-site due to lower availability of less expensive hydroelectric power, the result of lower precipitation levels in Southeastern Alaska. Both mining and milling costs were impacted by an increase in labor costs.

For the first nine months of 2013, production totaled 5.6 million ounces of silver at an average cash cost, after by-product credits, per silver ounce of $4.18. Greens Creek is expected to produce approximately 7 million ounces of silver in 2013.

The US Forest Service has issued a Record of Decision (ROD) on the planned expansion of the Greens Creek Tailings Facility. The ROD supports construction of a facility that provides storage capacity that is sufficient for the current mine life. The ROD is in an appeal period through the remainder of the year. Assuming the appeal process is completed favorably, the ROD should be implemented and required permits are expected to be obtained in 2014.

Lucky Friday Silver Mine - Idaho

The Lucky Friday mine, which re-opened in February after a year of rehabilitation and enhancement, produced 479,188 ounces of silver during the third quarter and 816,776 ounces of silver for the nine months ended September 30, 2013. Annual production is expected to be approximately 1.6 million ounces in 2013. Cash cost, after by-product credits, per silver ounce should continue to decline to approximately $9.50 for the month of December.

During late September, the mine reached its full historical and targeted throughput rate of approximately 900 tons per day, an average rate the mine is expected to maintain for the remainder of the year. A total of 61,051 tons of ore was milled during the third quarter.

The #4 Shaft Project is currently at the 5900 level, having begun at the 4900 level. At the 5900 level, work has begun on the first of the three shaft stations, which will allow the loading and unloading of men and materials once the shaft is operational, expected in 2016. The approximately $200 million #4 Shaft Project is more than 50% completed. This shaft should allow access that is expected to increase production from deeper, higher-grade ore zones that could raise Lucky Friday’s silver production to 5 million ounces in 2017.

Casa Berardi Gold Mine - Quebec

Hecla's recently acquired Casa Berardi mine produced 23,406 ounces of gold in the third quarter, slightly more than the target of 20,000 ounces, at a cash cost, after by-product credits, per gold ounce of $1,066, or 7% lower than the previous quarter. Mill throughput rate averaged 1,546 tons per day in the third quarter. The development of new, higher grade stopes in the 118 and 113 Zones is expected to increase the gold ounces produced, to an estimated 32,000 ounces in the fourth quarter. With increased production at Casa Berardi expected during the fourth quarter, the cash cost, after by-product credits, per gold ounce is expected to decline to approximately $950 in the fourth quarter of 2013.

The project to deepen the West Mine Shaft by 1,100 feet was initially started by Aurizon and requires approximately another 150 feet of shaft construction and shaft loading facilities to be completed. The project is expected to be complete by year-end with loading pockets finished in the first half of 2014. Development of a new drift on the 1010 level is planned by the end of 2014 to provide additional access to the 118 Zone and facilitate deeper exploration.

Additional mine enhancements completed since the acquisition earlier this year include a concrete plant and a paste fill facility, both of which are expected to increase the efficiency of operations.

EXPLORATION AND PRE-DEVELOPMENT

For the third quarter of 2013 exploration expenditures were $5.8 million and pre-development expenditures were $3.4 million. Drill assay highlights can be found at the end of this release.

Greens Creek - Alaska

Definition and exploration drilling of the Deep 200 South area has made significant progress in defining three stacked folds of high-grade mineralization that represent up to 600 feet of down-dip continuity. Drill intersections continue to include high grade silver, gold and lead/zinc intercepts including: 16.59 oz/ton silver, 0.51 oz/ton gold, 15.43% zinc and 9.01% lead over 24.6 feet and 21.01 oz/ton silver, 0.46 oz/ton gold, 12.75% zinc and 2.81% lead over 28.8 feet.

In addition, in-fill drilling is expected to convert up to 700 feet of strike length of the newly defined Deep 200 South resource to reserves, and step-out exploration drilling to the south has confirmed these mineralized folds for another 500 feet of strike length. The Deep 200 South resource remains open to the south, west and east. Portions of this mineralization are expected to be added to reserves over the next two to three years.

Surface drilling at Killer Creek, located approximately 0.5 miles west-northwest of the Greens Creek mine infrastructure, intersected broad mineralized zones up to 400 feet with stringer veins containing copper, gold, zinc, lead, and silver mineralization in the mine footwall rocks. In general, the northern holes are more copper-gold rich and the southeast area is more zinc, lead and silver rich. The 12 holes drilled in this area may have defined a vein-dominant mineralized vent that could be the feeder to either the Greens Creek deposit or a satellite deposit.

Lucky Friday - Idaho

At Lucky Friday drilling from the 6200-56 Ramp station on the east side of the mine is expected to upgrade some of the 30 Vein and Intermediate Vein (40, 80 and 90 veins) resources above the 7300 level from inferred to indicated category. Drill intersections continue to include high-grade silver, gold and lead/zinc intercepts that are deeper than the current mining area providing further evidence of potentially higher-grade mineralization. The drill results and the levels on the primary 30 Vein include: 10.5 oz/ton silver, 6.7% zinc and 10.1% lead over 8.1 feet at the 7222 level and 27.9 oz/ton silver, 6.6% zinc and 16.8% lead over 10.1 feet at the 7600 level. A second drill from the 6400 level of the 55 Ramp will focus on upgrading the resource on the western-central region of the 30 Vein near the 7800 level.

Casa Berardi - Quebec

At Casa Berardi a total of five drills have been operating underground to refine the current resource and potential stope designs and are currently defining the mineralization in the Principale Zone, 118 Zone and 123 Zone further east toward the East Shaft. Drilling of the 113 Zone was successful in extending a series of lenses to the east with high-grade gold intersections. Some of the drill results include: 0.80 oz/ton gold over 83.3 feet, 1.18 oz/ton gold over 23 feet, and 5.29 oz/ton gold over 11.8 feet.

Heva-Hosco - Quebec

Located along the Cadillac Break, a prolific gold mining district of Quebec, the Heva-Hosco properties were included in the acquisition of Aurizon. Based on a recently completed drill program measured and indicated mineral resources at Heva-Hosco have increased by 292,000 and 216,000 ounces, respectively, compared to the previous mineral resources announced by Aurizon on June 5, 2012 (refer to "Technical Report-Feasibility Study of the Hosco Deposit - Joanna Gold Project, Rouyn-Noranda, Quebec, for Aurizon Mines Ltd. - June 5 2012 Update, Effective Date July, 2012" available under Aurizon's profile on SEDAR at www.sedar.com). At Heva-Hosco the measured resources now total 1.6 million gold ounces, indicated resources now total 1.52 million ounces and inferred resources now total 0.6 million ounces, based on $1,300/ounce gold. In addition, the measured and indicated mineral resource grade at Heva has increased by 12% and 14%, respectively, and the inferred mineral resource grade has increased by 63%. The complete resource table can be viewed at the end of the press release.

While the Company is encouraged by the expanded resource, the next steps in evaluating Heva-Hosco are in the context of a larger and more diversified Hecla, taking into account the recent declines in gold prices, to determine if it has greater potential to generate value for shareholders relative to the Company's other opportunities.

San Sebastian - Mexico

Exploration

An updated resource estimate is being finalized on the Middle Vein based on in-fill and exploration drilling during the first half of 2013 and is anticipated to upgrade most of the inferred resource to indicated category. The Middle and Francine Veins have been truncated to the northeast by the San Ricardo Fault and a trenching program has been initiated to define drill targets across the San Ricardo Fault to the northeast.

Pre-Development

Pre-Development expenditures were primarily directed towards scoping studies to establish ramp access to the Middle Vein and Hugh Zone and determine mine sequencing, production rates and potential project viability. Extensive metallurgical test work is in progress to refine the metallurgical processing and mill designs. The Company is reevaluating the project in the context of a larger and more diversified Hecla, lower prices and potential changes in the tax regime in Mexico.

San Juan Silver - Colorado

Pre-Development

Development of the Bulldog infrastructure advanced with a breakthrough of the new decline into the previous underground workings. Rehabilitation of the old workings for resource confirmation and establishing drill platforms are conditional on receipt of state permits, available cash flow and prioritization of the Company's other opportunities.

2013 Guidance

For the full year 2013, based on current metals prices, the Company expects:
  • Silver production near the high end of the previously established range of between 8 and 9 million ounces, with Greens Creek at approximately 7 million and Lucky Friday at approximately 1.6 million ounces. Total cash cost, after by-product credits, per silver ounce is expected to be approximately $6.50.
  • Gold production from Casa Berardi of approximately 62,000 ounces this year (Since June 1, 2013), with cash costs, after by-product credits, per gold ounce to average approximately $950 in the fourth quarter of 2013.
  • 2013 capital expenditures (excluding capitalized interest) to be approximately $163 million.
  • 2013 pre-development expenditures to be approximately $14.0 million.
  • 2013 exploration expenditures to be approximately $21.0 million.
  • Strong silver reserve growth anticipated at year end.

Dividends

The Board of Directors declared a quarterly dividend of $0.0025 per share of common stock, payable on or about December 4, 2013, to shareholders of record on November 25, 2013. The Company's realized silver price was $22.22 in the third quarter and therefore did not trigger a larger dividend under the Company's dividend policy.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Tuesday, November 5, at 10:00 a.m. Eastern Time to discuss these financial and operating results. You may join the conference call by dialing toll-free 1-866-515-2913 or for international calls 1-617-399-5127. 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

Hecla Mining Company ( NYSE:HL) is a leading low-cost U.S. silver producer with operating mines in Alaska and Idaho, and is a growing gold producer with an operating mine in Quebec, Canada. The Company also has exploration and pre-development properties in five world-class silver and gold mining districts in the U.S., Canada, and Mexico, and an exploration office and investments in early-stage silver exploration projects in Canada.

Qualified Person (QP) Pursuant to Canadian National Instrument 43-101

Dean McDonald, PhD. P.Geo., Senior Vice President - Exploration of Hecla Mining Company, who serves as a Qualified Person under National Instrument 43-101, supervised the preparation of the scientific and technical information concerning Hecla’s mineral projects in this news release. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of analytical or testing procedures for the Greens Creek Mine are contained in a technical report titled “Technical Report for the Greens Creek Mine” dated March 28, 2013, and for the Lucky Friday Mine are contained in a technical report titled “Technical Report for the Lucky Friday Mine Shoshone County, Idaho, USA” dated March 28, 2013. Also included in these two technical reports is a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors. Copies of these technical reports are available under Hecla's and Aurizon's profiles on SEDAR at www.sedar.com.

The current Casa Berardi drill program was performed on core sawed in half and included the insertion of blanks and standards of variable grade in every 24 core samples. Standards were generally provided by Analytical Solutions Ltd and prepared in 30 gram bags. Samples were sent to the Swastika Laboratories in Swastika, Ontario, a registered accredited laboratory, where they were dried, crushed, and split for gold analyses. Analysis for gold was completed by fire assay fire assay with AA finish. Gold over-limits were analyzed by fire assay with gravimetric finish. Data received from the lab were subject to validation using in-built program triggers to identify outside limit blank or standard assays that require re-analysis. Over 5% of the original pulps and rejects are sent for re-assay to ALS Chemex in Val d’Or for quality control.

Dr. McDonald reviewed and verified information regarding drill sampling, data verification of all digitally-collected data, drill surveys and specific gravity determinations relating to the Casa Berardi mine. The review encompassed quality assurance programs and quality control measures including analytical or testing practice, chain-of-custody procedures, sample storage procedures and included independent sample collection and analysis. This review found the information and procedures meet industry standards and are adequate for Mineral Resource and Mineral Reserve estimation and mine planning purposes.

Cautionary Statements

Statements made or information provided in this news release that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of Canadian securities laws. Words such as “may”, “will”, “should”, “expects”, “intends”, “projects”, “believes”, “estimates”, “targets”, “anticipates” and similar expressions are used to identify these forward-looking statements. Such forward-looking statements or forward-looking information include statements or information regarding anticipated production, cost reductions and efficiencies at the Company’s mines, access to higher grade mineralization, anticipated liquidity, capital projects, anticipated positive future cash flow, expansion of the tailings facility at Greens Creek, life of mine at Greens Creek and Casa Berardi, commencement of operation of the #4 Shaft at Lucky Friday, planned evaluation of the Heva and Hosco projects, an anticipated mineral resource estimate and mineral resource category upgrade and PEA for the San Sebastian project, future rehabilitation work at the San Juan Silver project, and anticipated capital expenditures, pre-development expenditures and exploration expenditures for 2013. The material factors or assumptions used to develop such forward-looking statements or forward-looking information include that the Company’s plans for development and production will proceed as expected and will not require revision as a result of risks or uncertainties, whether known, unknown or unanticipated, to which the Company’s operations are subject.

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, litigation, regulatory and environmental risks, operating risks, project development risks, political 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

Reporting requirements in the United States for disclosure of mineral properties are governed by the SEC and included in the SEC's Securities Act Industry Guide 7, entitled “Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations” (Guide 7). However, the Company is also a "reporting issuer" under Canadian securities laws, which require estimates of mineral resources and reserves to be prepared in accordance with Canadian National Instrument 43-101 (NI 43-101). NI 43-101 requires all disclosure of estimates of potential mineral resources and reserves to be disclosed in accordance with its requirements. Such Canadian information is being included here to satisfy the Company's “public disclosure” obligations under Regulation FD of the SEC and to provide U.S. holders with ready access to information publicly available in Canada.

Reporting requirements in the United States for disclosure of mineral properties under Guide 7 and the requirements in Canada under NI 43-101 standards are substantially different. This document contains a summary of certain estimates of the Company, not only of proven and probable reserves within the meaning of Guide 7, which requires the preparation of a “final” or “bankable” feasibility study demonstrating the economic feasibility of mining and processing the mineralization using the three-year historical average price for any reserve or cash flow analysis to designate reserves and that the primary environmental analysis or report be filed with the appropriate governmental authority, but also of mineral resource and mineral reserve estimates estimated in accordance with the definitional standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. The terms “measured resources”, "indicated resources," and "inferred resources" are Canadian mining terms as defined in accordance with NI 43-101. These terms are not defined under Guide 7 and are not normally permitted to be used in reports and registration statements filed with the SEC in the United States, except where required to be disclosed by foreign law. Still, investors are cautioned not to assume that any part or all of the mineral deposits in such categories will ever be converted into proven or probable reserves. “Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of such a "resource” will ever be upgraded to a higher category or will ever be economically extracted. Investors are cautioned not to assume that all or any part of a "resource” exists or is economically or legally mineable. Investors are also especially cautioned that the mere fact that such resources may be referred to in ounces of silver and/or gold, rather than in tons of mineralization and grades of silver and/or gold estimated per ton, is not an indication that such material will ever result in mined ore which is processed into commercial silver or gold.
 
HECLA MINING COMPANY

Condensed Consolidated Statements of Income (Loss)

(dollars and shares in thousands, except per share amounts - unaudited)
 
  Third Quarter Ended   Nine Months Ended
September 30, 2013   September 30, 2012 September 30, 2013   September 30, 2012
Sales of products $ 106,629   $ 81,871   $ 268,409   $ 240,043  
Cost of sales and other direct production costs 66,937 32,961 163,770 99,423
Depreciation, depletion and amortization 19,006   11,601   53,224   31,141  
85,943   44,562   216,994   130,564  
Gross profit 20,686   37,309   51,415   109,479  
 
Other operating expenses:
General and administrative 7,720 5,695 22,141 15,723
Exploration 5,797 11,722 18,511 24,479
Pre-development 3,444 5,409 12,747 12,246
Other operating expense 342 736 1,571 3,285
Provision (credit) for closed operations and reclamation 933 (1,093 ) 4,572 3,320
Lucky Friday suspension-related (income) expense (59 ) 6,114 (1,401 ) 18,745
Aurizon acquisition costs 768     26,368    
18,945   28,583   84,509   77,798  
Income (loss) from operations 1,741   8,726   (33,094 ) 31,681  
Other income (expense):
Gain (loss) on derivative contracts (4,564 ) (9,053 ) 23,516 (8,113 )
Gain on sale of investments 197
Interest and other income (loss) (829 ) 47 (257 ) 228
Interest expense, net of amount capitalized (7,348 ) (591 ) (14,506 ) (1,563 )
(12,741 ) (9,597 ) 8,950   (9,448 )
Income (loss) before income taxes (11,000 ) (871 ) (24,144 ) 22,233
Income tax benefit (provision) 2,542   (14 ) 1,922   (8,022 )
Net income (loss) (8,458 ) (885 ) (22,222 ) 14,211
Preferred stock dividends (138 ) (138 ) (414 ) (414 )
Income (loss) applicable to common shareholders $ (8,596 ) $ (1,023 ) $ (22,636 ) $ 13,797  
Basic income (loss) per common share after preferred dividends $ (0.03 ) $   $ (0.07 ) $ 0.05  
Diluted income (loss) per common share after preferred dividends $ (0.03 ) $   $ (0.07 ) $ 0.05  
Weighted average number of common shares outstanding - basic 342,638   285,492   310,601   285,400  
Weighted average number of common shares outstanding - diluted 342,638   285,492   310,601   296,739  
 

HECLA MINING COMPANY

Condensed Consolidated Balance Sheets

(dollars and share in thousands - unaudited)
 
    September 30, 2013   December 31, 2012
ASSETS        
Current assets:    
Cash and cash equivalents $ 237,836 $ 190,984
Accounts receivable:
Trade 34,481 17,555
Other, net 17,263 7,466
Inventories 43,639 28,637
Current deferred income taxes 36,141 29,398
Other current assets 20,526   8,858  
Total current assets 389,886 282,898
Non-current investments 8,364 9,614
Non-current restricted cash and investments 5,378 871
Properties, plants, equipment and mineral interests, net 1,776,554 996,659
Non-current deferred income taxes 75,950 86,365
Other non-current assets and deferred charges 12,880   1,883  
Total assets $ 2,269,012   $ 1,378,290  
         
LIABILITIES        
Current liabilities:
Accounts payable and accrued liabilities $ 56,592 $ 43,162
Accrued payroll and related benefits 18,128 10,760
Accrued taxes 3,729 12,321
Current portion of capital leases 7,398 5,564
Current portion of accrued reclamation and closure costs 74,481 19,845
Other current liabilities 17,576   3,335  
Total current liabilities 177,904 94,987
Capital leases 12,603 11,935
Accrued reclamation and closure costs 49,862 93,370
Long-term debt 490,417
Non-current deferred tax liability 171,260
Other noncurrent liabilities 39,180   40,047  
Total liabilities 941,226   240,339  
         
SHAREHOLDERS’ EQUITY        
Preferred stock 39 39
Common stock 85,890 71,499
Capital surplus 1,425,581 1,218,283
Accumulated deficit (151,079 ) (123,288 )
Accumulated other comprehensive loss (27,565 ) (23,918 )
Treasury stock (5,080 ) (4,664 )
Total shareholders’ equity 1,327,786   1,137,951  
Total liabilities and shareholders’ equity $ 2,269,012   $ 1,378,290  
Common shares outstanding 342,638   285,210  
 

HECLA MINING COMPANY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands - unaudited)
 
  Nine Months Ended
   

September 30,

2013
 

September 30,

2012
OPERATING ACTIVITIES        
Net income (loss) $ (22,222 )   $ 14,211
Non-cash elements included in net income (loss):
Depreciation, depletion and amortization 55,279 36,042
Gain on sale of investments (195 )
(Gains) loss on disposition of properties, plants, equipment and mineral interests (125 ) 359
Unrealized gain on investments (327 )
Provision for reclamation and closure costs 1,701 3,937
Stock compensation 3,253 2,296
Deferred income taxes (1,304 ) (2,023 )
Amortization of loan origination fees 905 324
(Gain) loss on derivative contracts (15,589 ) 24,748
Reversal of purchase price allocation to product inventory 550
Other non-cash items, net (819 ) 901
Change in assets and liabilities:
Accounts receivable (14,711 ) (9,508 )
Inventories (1,923 ) 1,025
Other current and non-current assets (793 ) (417 )
Accounts payable and accrued liabilities 8,574 4,561
Accrued payroll and related benefits (281 ) (2,754 )
Accrued taxes (10,458 ) (611 )
Accrued reclamation and closure costs and other non-current liabilities 3,565     (6,603 )
Cash provided by operating activities 5,080     66,488  
         
INVESTING ACTIVITIES        
Additions to properties, plants, equipment and mineral interests (112,806 ) (81,318 )
Acquisition of Aurizon, net of cash acquired (321,117 )
Proceeds from sale of investments 1,772
Proceeds from disposition of properties, plants and equipment 126 744
Purchases of investments (5,738 ) (3,261 )
Changes in restricted cash and investment balances (36 )    
Net cash used in investing activities (437,799 )   (83,835 )
         
FINANCING ACTIVITIES        
Acquisition of treasury shares (286 ) (497 )
Dividends paid to common shareholders (5,134 ) (10,700 )
Dividends paid to preferred shareholders (414 ) (414 )
Debt issuance and loan origination fees (1,244 ) (750 )
Borrowings on debt 490,000
Repayments of capital leases (5,171 )   (4,561 )
Net cash provided by (used in) financing activities 477,751     (16,922 )
Effect of exchange rates on cash 1,820      
Net increase (decrease) in cash and cash equivalents 46,852 (34,269 )
Cash and cash equivalents at beginning of period 190,984     266,463  
Cash and cash equivalents at end of period $ 237,836     $ 232,194  
 

HECLA MINING COMPANY

Production Data
 
  Three Months Ended   Nine Months Ended
   

September 30,

2013
 

September 30,

2012
 

September 30,

2013
 

September 30,

2012
GREENS CREEK UNIT                
Tons of ore milled 190,437   210,802   600,015   573,750
Mining cost per ton $ 67.30 $ 61.33 $ 68.09 $ 62.08
Milling cost per ton $ 33.52 $ 27.04 $ 34.71 $ 29.01
Ore grade milled - Silver (oz./ton) 13.15 10.56 13.21 10.37
Ore grade milled - Gold (oz./ton) 0.12 0.11 0.12 0.12
Ore grade milled - Lead (%) 3.13 3.40 3.38 3.49
Ore grade milled - Zinc (%) 8.23 9.12 8.49 9.74
Silver produced (oz.) 1,807,781 1,619,110 5,607,266 4,312,907
Gold produced (oz.) 13,560 14,024 42,735 39,933
Lead produced (tons) 4,542 5,499 15,155 15,226
Zinc produced (tons) 13,367 16,648 42,977 48,665
Cash cost, after by-product credits, per silver ounce (1) $ 5.00 $ 3.52 $ 4.18 $ 2.34
Capital additions (in thousands)   $ 18,390     $ 14,195     $ 45,148     $ 44,248
LUCKY FRIDAY UNIT                
Tons of ore processed 61,051 98,203
Mining cost per ton $ 97.23 $ $ 111.15 $
Milling cost per ton $ 23.46 $ $ 34.53 $
Ore grade milled - Silver (oz./ton) 8.39 8.93
Ore grade milled - Lead (%) 6.23 6.29
Ore grade milled - Zinc (%) 2.36 2.60
Silver produced (oz.) 479,188 816,776
Lead produced (tons) 3,459 5,591
Zinc produced (tons) 1,122 1,912
Cash cost, after by-product credits, per silver ounce (1) $ 16.50 $ $ 23.63 $
Capital additions (in thousands)   $ 15,691     $ 14,548     $ 42,825     $ 37,285
CASA BERARDI UNIT                
Tons of ore milled 142,231 202,711
Mining cost per ton $ 147.55 $ $ 135.86 $
Milling cost per ton $ 25.38 $ $ 23.15 $
Ore grade milled - Gold (oz./ton) 0.18 0.17
Ore grade milled - Silver (oz./ton) 0.041 0.039
Silver produced (oz.) 5,176 6,964
Gold produced (oz.) 23,406 30,146
Cash cost, after by-product credits, per gold ounce (1) 1,066 $ $ 1,086 $
Capital additions (in thousands)   $ 16,896     $     $ 22,834     $

(1) Cash cost, after by-product credits, per ounce represents a non-U.S. Generally Accepted Accounting Principles (GAAP) measurement. A reconciliation of cash cost, after by-product credits, to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) can be found in the cash cost 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. The primary metal produced at Casa Berardi is gold, with a by-product credit for the value of silver production.

HECLA MINING COMPANY

Cost Per Ounce Measures

Non-GAAP Measures

(Unaudited)

This release contains references to a non-GAAP measure of cash cost, after by-product credits, per ounce. Cash cost, after by-product credits, per ounce represents a non-U.S. Generally Accepted Accounting Principles (GAAP) measurement 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. "Cash cost, after by-product credits, per ounce" is a measure developed by gold companies and used by silver 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 are the most comparable financial measures calculated in accordance with GAAP to cash costs, after by-product credits.

As depicted in the Greens Creek Segment and the Lucky Friday Unit tables below, by-product credits comprise an essential element of our silver unit cost structure. By-product credits constitute an important competitive distinction for our silver operations due to the polymetallic nature of their orebodies. By-product credits included in our presentation of cash cost, after by-product credits, per silver ounce include:
  Total, Greens Creek and Lucky Friday
     

Three Months Ended

September 30,

Nine Months Ended

September 30,
2013   2012 2013   2012
By-product value, all silver properties:    
Zinc $ (17,911 ) $ (21,001 ) $ (56,851 ) $ (64,147 )
Gold (14,979 ) (18,904 ) (51,416 ) (53,660 )
Lead (13,244 ) (7,872 ) (33,768 ) (21,676 )
Total by-product credits $ (46,134 ) $ (47,777 ) $ (142,035 ) $ (139,483 )
 
By-product credits per silver ounce, all silver properties
Zinc $ (7.83 ) $ (12.97 ) $ (8.85 ) $ (14.87 )
Gold (6.55 ) (11.68 ) (8.00 ) (12.44 )
Lead (5.79 ) (4.86 ) (5.26 ) (5.03 )
Total by-product credits $ (20.17 ) $ (29.51 ) $ (22.11 ) $ (32.34 )
 

By-product credits included in our presentation of cash cost, after by-product credits, per gold ounce for our Casa Berardi Segment include:
  Casa Berardi

Three Months Ended

September 30,
 

Nine Months Ended

September 30,
2013   2013
Silver by-product value $ (113 )   $ (150 )
Silver by-product credits per gold ounce $ (4.83 ) $ (4.98 )
 

The following table calculates cash cost, after by-product credits, per ounce (in thousands, except per-ounce amounts):

  Total, Greens Creek and Lucky Friday

Three Months Ended

September 30,
 

Nine Months Ended

September 30,
2013   2012 2013   2012
Cash cost, before by-product credits (1) $ 63,087 $ 53,479 $ 184,787 $ 149,570
By-product credits (46,134 ) (47,778 ) (142,035 ) (139,483 )
Cash cost, after by-product credits 16,953 5,701 42,752 10,087
Divided by silver ounces produced 2,287 1,619 6,424 4,313
Cash cost, before by-product credits, per silver ounce $ 27.57 $ 33.03 $ 28.76 $ 34.68
By-product credits per silver ounce $ (20.17 ) $ (29.51 ) $ (22.11 ) $ (32.34 )
Cash cost, after by-product credits, per silver ounce $ 7.40   $ 3.52   $ 6.65   $ 2.34  
Reconciliation to GAAP:
Cash cost, after by-product credits $ 16,953 $ 5,701 $ 42,752 $ 10,087
Depreciation, depletion and amortization 15,735 11,601 46,630 31,141
Treatment costs (18,486 ) (18,351 ) (56,055 ) (52,210 )
By-product credits 46,134 47,778 142,035 139,483
Change in product inventory 7 (1,944 ) 3,839 1,962
Reclamation and other costs 734   (223 ) 1,373   101  
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 61,077   $ 44,562   $ 180,574   $ 130,564  
 
  Greens Creek Unit

Three Months Ended

September 30,
 

Nine Months Ended

September 30,
2013   2012 2013   2012
Cash cost, before by-product credits (1) $ 47,340 $ 53,479 $ 152,590 $ 149,570
By-product credits (38,294 ) (47,778 ) (129,138 ) (139,483 )
Cash cost, after by-product credits 9,046 5,701 23,452 10,087
Divided by silver ounces produced 1,808 1,619 5,607 4,313
Cash cost, before by-product credits, per silver ounce $ 26.18 $ 33.03 $ 27.21 $ 34.68
By-product credits per silver ounce $ (21.18 ) $ (29.51 ) $ (23.03 ) $ (32.34 )
Cash cost, after by-product credits, per silver ounce $ 5.00   $ 3.52   $ 4.18   $ 2.34  
Reconciliation to GAAP:
Cash cost, after by-product credits $ 9,046 $ 5,701 $ 23,452 $ 10,087
Depreciation, depletion and amortization 13,694 11,601 41,116 31,141
Treatment costs (15,269 ) (18,351 ) (50,575 ) (52,210 )
By-product credits 38,294 47,778 129,138 139,483
Change in product inventory 585 (1,944 ) 5,292 1,962
Reclamation and other costs 688   (223 ) 1,312   101  
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 47,038   $ 44,562   $ 149,735   $ 130,564  
 

  Lucky Friday Unit (2)

Three Months Ended

September 30,
 

Nine Months Ended

September 30,
2013   2012 2013   2012
Cash cost, before by-product credits (1) $ 15,747 $ $ 32,197 $
By-product credits (7,840 ) (12,897 )
Cash cost, after by-product credits 7,907 19,300
Divided by silver ounces produced 479 817
Cash cost, before by-product credits, per silver ounce $ 32.87 $ $ 39.42 $
By-product credits per silver ounce $ (16.37 ) $   $ (15.79 ) $
Cash cost, after by-product credits, per silver ounce $ 16.50   $   $ 23.63   $
Reconciliation to GAAP:
Cash cost, after by-product credits $ 7,907 $ $ 19,300 $
Depreciation, depletion and amortization 2,041 5,514
Treatment costs (3,217 ) (5,480 )
By-product credits 7,840 12,897
Change in product inventory (578 ) (1,453 )
Reclamation and other costs 47     61  
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 14,040   $   $ 30,839   $
 
  Casa Berardi Unit (3)

Three Months Ended

September 30,
 

Nine Months Ended

September 30,
2013   2012 2013   2012
Cash cost, before by-product credits (1) $ 25,068 $ $ 32,874 $
By-product credits (113 ) (150 )
Cash cost, after by-product credits 24,955 32,724
Divided by gold ounces produced 23,406 30,146
Cash cost, before by-product credits, per gold ounce $ 1,070.82 $ $ 1,090.49 $
By-product credits per gold ounce $ (4.83 ) $   $ (4.98 ) $
Cash cost, after by-product credits, per gold ounce $ 1,065.99   $   $ 1,085.51   $
Reconciliation to GAAP:
Cash cost, after by-product credits $ 24,957 $ $ 32,724 $
Depreciation, depletion and amortization 3,271 6,594
Treatment costs (78 ) (87 )
By-product credits 113 150
Change in product inventory (3,456 ) (3,042 )
Reclamation and other costs 59     81  
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 24,866   $   $ 36,420   $
 

  Total, All Locations

Three Months Ended

September 30,
 

Nine Months Ended

September 30,
2013   2012 2013   2012
Reconciliation to GAAP:
Cash cost, after by-product credits $ 41,910 $ 5,701 $ 75,476 $ 10,087
Depreciation, depletion and amortization 19,006 11,601 53,224 31,141
Treatment costs (18,564 ) (18,351 ) (56,142 ) (52,210 )
By-product credits 46,247 47,778 142,185 139,483
Change in product inventory (3,449 ) (1,944 ) 797 1,962
Reclamation and other costs 793   (223 ) 1,454   101  
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) $ 85,943   $ 44,562   $ 216,994   $ 130,564  
 

(1) Includes all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs, royalties and mining production taxes, net of by-product revenues earned from all metals other than the primary metal produced at each unit.

(2) Production was temporarily suspended at the Lucky Friday Unit during 2012 as work was performed to rehabilitate the Silver Shaft, the primary access from surface to the underground workings at the Lucky Friday mine. Care and maintenance income and expense related to the suspension of production at the Lucky Friday are included in a separate line item under Other operating expenses on the Condensed Consolidated Statements of Income (Loss) (Unaudited), and have been excluded from the calculation of cash cost, before by-product credits, for the three- and nine- month periods ended September 30, 2013 and 2012 .

(3) On June 1, 2013, we completed the acquisition of Aurizon Mines Ltd., which gave us 100% ownership of the Casa Berardi mine in Quebec, Canada. The information presented reflects our ownership of Casa Berardi commencing as of that date. The primary metal produced at Casa Berardi is gold, with a by-product credit for the value of silver production.

HECLA MINING COMPANY

Adjusted EBITDA

This release refers to a non-GAAP measure of adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), which is a measure of our operating performance. Adjusted EBITDA is calculated as net income before the following items: interest expense, income tax provision (benefit), depreciation, depletion, and amortization expense, exploration expense, pre-development expense, Aurizon acquisition costs, Lucky Friday suspension-related (income) expense, interest and other income (expense), gains and losses on derivative contracts, and provisional price gains and losses. Management believes that, when presented in conjunction with comparable GAAP measures, Adjusted EBITDA is useful to investors in evaluating our operating performance. The following table reconciles net income to Adjusted EBITDA:
Dollars are in thousands   Three Months Ended   Nine Months Ended

September 30,

2013
 

September 30,

2012
 

September 30,

2013
 

September 30,

2012
Net income (loss) $ (8,458 )   $ (885 )   $ (22,222 )   $ 14,211
Plus: Interest expense, net of amount capitalized 7,348 591 14,506 1,563
Plus/(Less): Income taxes (2,542 ) 14 (1,922 ) 8,022
Plus: Depreciation, depletion and amortization 20,445 13,243 55,279 36,042
Plus: Exploration expense 5,797 11,722 18,511 24,479
Plus: Pre-development expense 3,444 5,409 12,747 12,246
Plus: Aurizon acquisition costs 768 26,368
Plus: Aurizon product inventory fair value adjustment 550
Plus/(Less): Lucky Friday suspension-related (income) expense (59 ) 6,114 (1,401 ) 18,745
Plus/(Less): Interest and other (income) expense 829 (47 ) 257 (228 )
Less: Gains on derivative contracts 4,564 9,053 (23,516 ) 8,113
Plus/(Less): Provisional price (gains)/losses (1,740 ) (5,861 ) 16,056   (9,487 )
Adjusted EBITDA $ 30,396   $ 39,353   $ 95,213   $ 113,706  

HECLA MINING COMPANY

Assay Results
 
GREENS CREEK UNDERGROUND                
                                         
Zone   Drill Hole   Drillhole   Sample From   Sample To   True Width   Silver   Gold   Zinc   Lead   Depth From Mine
    Number   Azm/Dip   (Feet)   To (Feet)   (Feet)   (oz/ton)   (oz/ton)   (%)   (%)   Portal (Feet)
Deep 200 South   GC3617   063/-83   179.0   192.4   13.4   30.57   0.06   13.09   5.40   (1,425.0)
    GC3623   261/-84   693.7   699.7   3.4   11.01   0.34   26.90   11.28   (1,939.0)
    GC3625   243/-59   204.0   211.0   6.0   57.79   0.33   4.56   2.02   (1,427.0)
    GC3627   243/-49   228.3   244.5   12.6   27.85   0.05   7.20   3.63   (1,322.0)
    GC3629   243/-40   278.0   287.7   9.7   29.23   0.04   2.88   1.53   (1,429.0)
    GC3629   243/-40   330.3   340.4   10.1   21.28   0.21   4.43   2.16   (1,465.0)
    GC3631   259/-40   342.8   382.0   39.2   44.27   0.04   7.14   3.31   (1,457.0)
    GC3633   243/-36   420.0   425.0   2.9   60.08   0.03   1.36   0.68   (1,488.0)
    GC3634   219/-64   258.1   267.2   9.1   22.78   0.03   5.63   2.60   (1,478.0)
    GC3634   219/-64   1,049.6   1,074.2   24.6   16.59   0.51   15.43   9.01   (2,225.0)
    GC3638   232/-44   302.4   307.2   3.4   50.08   0.03   2.72   1.58   (859.0)
    GC3639   221/-62   202.6   209.0   6.4   86.04   0.05   5.88   3.03   (1,390.0)
    GC3639   221/-62   246.6   264.1   17.5   49.91   0.03   10.52   5.34   (1,421.0)
    GC3641   221/-82   184.0   189.0   5.0   63.86   0.09   9.33   4.26   (859.0)
    GC3646   201/-73   195.4   213.8   17.6   26.44   0.07   8.96   4.00   (859.0)
    GC3648   160/-83   190.5   205.4   14.8   46.48   0.15   17.27   7.49   (859.0)
    GC3648   160/-83   979.0   986.0   6.9   23.56   0.58   6.43   3.08   (859.0)
    GC3651   063/-89   278.0   284.2   6.2   37.74   0.15   18.69   10.22   (859.0)
    GC3659   243/-46   260.3   275.0   8.4   52.28   0.10   9.50   4.20   (1,440.0)
    GC3659   243/-46   312.3   335.0   13.0   42.14   0.22   0.63   0.30   (1,479.0)
    GC3660   243/-37   347.0   349.0   1.3   17.00   0.04   1.42   0.63   (1,461.0)
    GC3663   063/-90   637.1   655.5   18.4   34.67   0.23   19.05   10.88   (1,885.0)
    GC3666   063/-68   240.0   245.0   3.8   55.24   0.04   3.48   1.94   (859.0)
    GC3673   243/-83   612.0   641.3   28.8   21.01   0.46   12.75   2.81   (1,860.0)
    GC3674   243/-50   410.9   414.7   3.1   34.39   0.26   18.30   8.69   (1,572.0)
    GC3681   063/-85   269.0   280.5   11.5   89.63   0.18   8.25   4.33   (1,521.0)
    GC3687   243/-75   177.1   182.5   5.0   27.91   0.04   9.66   4.43   (1,425.0)
    GC3617   063/-83   179.0   192.4   13.4   30.57   0.06   13.09   5.40   (1,425.0)
    GC3631   259/-40   342.8   382.0   39.2   44.27   0.04   7.14   3.31   (1,457.0)
    GC3639   221/-62   246.6   264.1   17.5   49.91   0.03   10.52   5.34   (1,421.0)
    GC3648   160/-83   190.5   205.4   14.8   46.48   0.15   17.27   7.49   (859.0)
    GC3659   243/-46   277.8   301.3   13.5   40.57   0.08   2.53   1.12   (1,448.0)
    GC3659   243/-46   312.3   335.0   13.0   42.14   0.22   0.63   0.30   (1,479.0)
    GC3663   063/-90   637.1   655.5   18.4   34.67   0.23   19.05   10.88   (1,885.0)
 

GREENS CREEK SURFACE
                                       
Zone   Drill Hole  

Sample From

(Feet)
 

Sample To

(Feet)
 

Length

(Feet)
  Silver   Gold   Copper   Zinc   Lead  
    Number         oz/ton   oz/ton   %   %   %  
Killer Creek   PS-0370   184.7   186.5   1.8   0.69   0.02   0.10   5.54   0.94  
    PS-0370   272.0   275.0   3.0   1.38   0.09   0.17   4.96   1.36  
    PS-0370   315.0   318.0   3.0   1.09     0.08   6.35   3.94  
    PS-0370   554.6   556.8   2.2   0.29   0.01   0.25   5.30   0.01  
    PS-0371   1,973.4   1,975.0   1.6   0.04     0.11   3.65   0.01  
    PS-0372   461.0   463.0   2.0   0.05     0.04   5.81    
    PS-0373   172.5   176.0   3.5   1.75     6.95   0.13   0.05  
    PS-0373   1,767.4   1,768.4   1.0   0.87   0.01   3.12   0.06    
    PS-0374   428.6   431.0   2.4   1.56     6.00   0.06    
    PS-0374   431.0   435.7   4.7   1.13   0.01   4.41   0.11   0.04  
    PS-0374   550.0   552.4   2.4   1.24   0.01   4.04   0.05    
    PS-0375   34.5   35.5   1.0   0.02     0.01   1.62   0.05  
    PS-0375   620.3   624.3   4.0   0.02     0.04   3.22    
    PS-0376   935.6   936.6   1.0   0.02     0.03   2.92    
    PS-0377   731.5   732.5   1.0   1.89   0.01   3.52   0.03   0.01  
    PS-0377   937.8   939.0   1.2   1.30   0.01   1.76   0.73   0.06  
    PS-0377   953.0   958.6   5.6   3.67     9.98   0.41   0.03  
    PS-0377   1,303.9   1,307.2   3.3   1.33   0.02   8.58   0.02    
    PS-0377   1,533.7   1,537.3   3.6   0.10     0.09   6.71    
    PS-0377   2,124.0   2,125.0   1.0   0.39   0.03   0.48   3.26   0.01  
    PS-0378   114.5   116.0   1.5   0.04     0.12   1.78   0.01  
    PS-0378   1,674.0   1,675.6   1.6   0.04     0.03   2.06   0.01  
    PS-0379   267.0   268.0   1.0   6.17   0.01     0.01   0.01  
    PS-0379   1,118.7   1,119.8   1.1   0.38     1.89   0.01    
    PS-0379   1,891   1,892.5   1.5   0.21     0.03   5.38   0.49  
 

CASA BERARDI
 
Zone (Lens)   Drill Hole   Drill Hole   Drillhole   Sample From   Sample To   True Width   Gold   Gold   Depth From Mine
    Number   Section   Azm/Dip   (Feet)   (Feet)   (Feet)   (g/ton)   (oz/ton)   Surface (Feet)
Upper 113   CBW-0350-015   11,190   217/20   142.1   156.8   13.8   9.6   0.28   (1,086.0)
    CBW-0350-023   11,100   237/30   141.4   164.0   20.7   7.2   0.21   (1,054.5)
Upper 118 (118-43)   CBP-0530-103   12,150   180/-1   64.3   147.6   83.3   27.4   0.80   (1,732.6)
    CBP-0530-104   12,190   160/-2   75.8   125.3   49.5   14.9   0.43   (1,733.6)
    CBP-0530-105   12,180   180/-9   79,4   102.7   23.0   40.3   1.18   (1,744.4)
    CBP-0530-106   12,180   180/6   106.3   124.7   18.4   9.9   0.29   (1,718.5)
    CBP-0530-109   12,195   179/5   142.7   181.1   38.4   19.4   0.57   (1,719.2)
    CBP-0530-127   12,180   180/-1   148.3   183.7   35.4   28.6   0.83   (1,735.6)
Upper 123 (123-08)   CBP-0544   12,355   180/-10   503.3   515.1   11.8   181.3   5.29   (1,834.0)
    CBP-0549   12,365   174/-30   734.6   743.1   7.9   103.6   3.02   (2,116.8)
    CBP-0550   12,365   174/-22   595.5   608.6   12.8   15.8   0.46   (1,947.5)
Principal (127-16)   CBP-0300-032   12,675   181/46   163.7   184.7   15.1   33.6   0.98   (822.2)
127 Zone (127-17)   CBP-0300-044   12,640   178/2   82.0   95.1   13.1   11.9   0.35   (945.5)
(127-17)   CBP-0300-045   12,645   181/5   83.7   100.1   16.4   12.7   0.37   (940.9)
(127-16)   CBP-0300-049   12,675   180/36   131.6   151.9   16.7   8.5   0.25   (860.2)
(127-13)   CBP-0300-050   12,675   180/54   352.0   375.3   15.1   67.7   1.97   (652.9)
(127-16)   CBP-0300-052   12,700   180/46   223.1   251.0   20,7   15.5   0.45   (777.6)
(127-16)   CBP-0300-055   12,700   180/36   214.9   246.1   25.6   7.7   0.22   (809.1)
(127-16)   CBP-0300-057   12,675   176/35   228.7   280.2   43.3   8.8   0.26   (802.2)
(127-16)   CBP-0300-058   12,675   180/43   215.9   256.9   30.8   13.3   0.39   (786.1)
 
LUCKY FRIDAY
                   
Veins   Drill Hole Number   Drill Hole Azm/Dip   Sample From   Sample To   True Width (Feet)   Silver (oz/ton)   Zinc (%)   Lead (%)   Mine Level   Elevation (feet)
90   GH72-05   178.3/-63.1   425.7   440.8   5.1   10.4   0.1   0.1   6,734   (3,355)
50   GH72-05   174.1/-57.4   940.6   946.8   2.7   10.5   2.2   11.0   7,177   (3,797)
30   GH72-05   172.3/-57.1   987.8   1,006.3   8.1   20.5   6.7   10.1   7,222   (3,842)
50   GH73-07   160.5/-68.2   1,275   1,283.6   3.1   9.2   3.5   9.4   7,561   (4,181)
30   GH73-07   162.6/-67.5   1,310   1,331.3   10.1   37.9   6.6   16.8   7,600   (4,220)
 

Updated Mineral Resources for Heva-Hosco Projects
 
Mineral Resources   Sectors   Resource Depth     July 2013
Cut-off grade Tonnage*   Grade   Au metal** (oz)
      (oz/ton)   (ton)   (oz/ton)      
Measured Hosco   In-pit   0.01 33,070,000 0.04 1,296,000
Heva In-pit   0.01 5,150,000 0.05 271,000
        Underground   0.06   330,000   0.10   33,000  
    Total           38,550,000   0.04   1,600,000  
Indicated Hosco In-pit   0.01 30,970,000 0.04 1,099,000
    Underground   0.06 650,000 0.08 52,000
Heva In-pit   0.01 4,710,000 0.06 279,000
        Underground   0.058   860,000   0.10   90,000  
    Total           37,190,000   0.04   1,520,000  
Measured + Indicated Hosco In-pit   0.01 64,040,000 0.04 2,395,000
    Underground   0.06 650,000 0.08 52,000
Heva In-pit   0.01 9,850,000 0.06 550,000
        Underground   0.06   1,190,000   0.10   122,000
    Total           75,730,000   0.04   3,119,000
Inferred Hosco In-pit   0.01 6,440,000 0.03 221,000
    Underground   0.06 1,210,000 0.08 93,000
Heva In-pit   0.01 2,370,000 0.06 144,000
        Underground   0.06   1,840,000   0.11   206,000  
    Total           11,860,000   0.06   664,000  

Notes:

Effective date: July 12, 2013 - * Rounded to nearest 10k - ** Rounded to nearest 1k

Total Grades (oz/ton) are calculated with rounded Au metal (oz) and Tonnage (ton). Sums may not match due to rounding.

Relative density used: 2.75 ton/m 3 for Hosco, 2.78 ton/m 3 for Heva, 2.9 ton/m3 for the AMPO zone in Heva East sector.

Mineral resources which are not mineral reserves do not have demonstrated economic viability.

The Heva and Hosco optimized shells were done using a gold price of US$1,300 per oz Au with respectively a mining dilution of 10% and 6.5% (at 0 g/t Au) and material loss of 5% and 4%.

The marginal cut-off grade for Heva is 0.37 g/tonne Au and for Hosco is 0.39 g/tonne Au. All Mineral Resources presented above are in-situ (without dilution and material loss).

The mineral resources of Hosco Underground consists of two sizes of blocks separated at 7,236 mE (local grid):

West of 7,236 mE, blocks are 4m x 2.5m x -4m. East of 7,236 mE, blocks are 8m x 5m x -8m.

Hosco historical production of 9,704 oz has been removed from measured mineral resources.

Heva historical production of 10,470 oz has been removed from measured mineral resources.

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