Hecla Mining Company Reschedules Debt Payments

Hecla Mining Company Reschedules Debt Payments

COEUR DALENE, ID – Hecla Mining Company reported that it is amending its loan agreement to reschedule all 2009 term debt payments to 2010 and 2011. To make the amendment effective, Hecla will raise at least $50 million in an equity or subordinated debt offering and repay its $40 million bridge loan.
Hecla Mining Company President and Chief Executive Officer Phillips S. Baker, Jr., said, ÒThis amendment will provide Hecla with the time to optimize our business and capital structure by moving about $50 million of debt payments from this year to two years from now and $16Êmillion into next year. We were able to amend our credit facility in these uncertain economic times due to the quality of our mines and people and the support of our banks.Ó
Hecla produced approximately 8.7 million ounces of silver in 2008, a 54% increase compared with 2007. The increase is attributable to the acquisition of the 70.3% interest in the Greens Creek mine in Alaska which was acquired from Rio Tinto on April 16, 2008.
Estimated 2008 cash costs are expected to be approximately $4.25 per ounce of silver produced, net of by-product credits. Cash costs were negatively impacted by the dramatic decline in the price of lead and zinc, especially during the fourth quarter of the year. In addition, higher charges for smelting, freight and consumable products, particularly diesel fuel, eroded operating margins.
During the fourth quarter of 2008, Hecla produced approximately 2.5 million ounces of silver at an estimated cash cost of $7.50 per ounce, net of by-product credits. As discussed above, lower by-product metal prices and record high input costs for consumables such as diesel and steel increased production costs during the period. Compared with the third quarter, the average metal prices declines in the fourth quarter for silver, lead and zinc were 32%, 36% and 32%, respectively.
The Company expects to report a net loss applicable to common shareholders of approximately $40 million to $42 million or $0.24 to $0.25 per common share for the fourth quarter of 2008. Results in the fourth quarter were adversely impacted by negative price adjustments to final smelter settlements of approximately $10 million and an estimated reduction in the value of deferred tax assets of $8.5 million. Absent these items, the net loss applicable to common shareholders would have been approximately $21.5 million to $23.5 million or $0.13 to $0.14 per common share.
Hecla expects to report an 80 million ounce increase in silver reserves at year-end 2008, or an increase of approximately 150% over 2007, as a result of successful definition drilling activities at its two operations and from the acquisition of the rest of the Greens Creek mine. Gold reserves are expected to increase 400,000 ounces or 100% over the same period. Lead and zinc reserves are also expected to increase substantially.
Hecla is forecasting 10 to 11 million ounces of silver production in 2009, or an approximately 20% increase over 2008 production. Cash cost estimates for 2009 are expected to improve compared with fourth quarter 2008 cash costs if cost inputs for consumables used in mine production continue to ease in 2009. Other cost-cutting actions and optimization are aimed at ensuring that Hecla retains a low cost structure relative to its peers.
The companyÕs address is 6500 N. Mineral Drive, Suite 200, Coeur dÕAlene, ID 83815, 208.769.4100, fax: 208.769.7612, email: hmc-info@hecla-mining.com.