Largest silver reserve/resource increase in Hecla's history muted by $66.6m loss

It was the best and worst of times for Hecla in 2008 as the company's silver reserves and resources set a 118-year record as the Idaho silver miner lost millions in net income.

RENO, NV - 

As Hecla Mining reported the largest annual increase of total silver reserves and resources in the company's 118-year history, the Coeur d'Alene, Idaho-based silver miner also experienced a net loss of $66.6 million last, down substantially from the net income of $53.2 million in 2007.

Hecla President and CEO Phil Baker blamed "an unprecedented convergence of economic events, which had depressed metals prices and frozen capital markets in 2008."

"The timing in the fall in metal prices and the credit crisis impeded progress on refinancing the debt taken to acquire the mine [Alaska's Greens Creek mine], but I am pleased to say we have overcome the challenges of this difficult period. Hecla has repaid 70% of the debt and successfully worked with our banks to restructure the remainder," Baker said.

"With this development, we can focus on driving our costs down," he added. This year's exploration and capital expenditures have been halved and the workforce was reduced by 50%." Two of Hecla's long-time executives-Michael Callahan, the chief of Venezuelan operations and longtime Hecla investor relations head Vicki Veltkamp both chose to voluntarily leave the company.

However, Hecla reported it had increased silver production by 54% last year to 8.7 million ounces with the company now holding 325 million ounces of silver reserves and resources. Lead production increased 43% as Hecla reported a 131% increase in zinc last year.

In a presentation Tuesday to the BMO Metals and Mining Conference, Hecla CFO James Sabala told institutional fund managers, mining executives and analysts that the company hopes to produce 11 million ounces of silver this year at a cash cost of $6 per ounce. However, Sabala added that silver production is also relying on zinc prices in the year ahead.

During a conference call with analysts Tuesday to discuss financial results, Hecla officials also stressed that the company would still produce 55,000 to 60,000 ounces of gold this year despite the decision to sell the La Camorra gold assets in Venezuela.

Last year's financial results for Hecla were impacted by what officials called "dramatically lower lead and zinc prices" during the year, coupled with higher smelter treatment charges, increased mining costs, and lower ore grades at Hecla mines.

The company also made negative provisional price adjustments of $25.7 million resulting from increased metals prices. A $12-million loss on the sale of Venezuelan properties, along with an operating loss of $17 million from those operations, was also recorded.

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