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Hecla Mining Reports 3Q Loss As Metals Prices Decline

Kitco News

(Kitco News) - Hecla Mining Co. (NYSE: HL) Thursday reported a net loss for the third quarter as silver output fell and the price of all four of the metals produced by the company declined.

The loss was $23.3 million, or 5 cents per share, compared to net income of $0.2 million, or zero cents, for the same period a year ago.

The company reported lower silver and gold production at San Sebastian and Greens Creek, offset by the addition of Nevada sales. Consolidated silver output fell to 2.5 million ounces from 3.3 million in the same period a year ago, although gold production rose to 72,995 ounces from 63,046. Production of lead and zinc as a by-product metal also declined.

The average realized silver price in the third quarter $14.68 per ounce, 14% lower than $17.01 in the same period a year ago. The average gold price of $1,205 was down 6% year-on-year, while lead and zinc prices decreased by 13% and 22%, respectively.

The company reported a $19.5 million gain on base-metals derivatives contracts of $19.5 million, but also had a foreign-exchange loss of $2.2 million due to a weaker Canadian dollar. Hecla reported a year-on-year increase of $4.6 million in exploration and pre-development expenditures, mainly focused on its Nevada and San Sebastian operations.

Hecla reported suspension-related costs of $6.5 million that included expenses at the Lucky Friday, where a lengthy strike is occurring, as well as $1.1 million for curtailment of production from the Midas Mine in Nevada. Acquisition costs were $6.1 million.

While Hecla posted a net loss, the company also reported adjusted earnings before interest, tax, depreciation and amortization of $40.3 million, compared to $60.5 million in the third quarter of 2017, with the decrease mainly due to lower base-metals prices, higher exploration expense due to the addition of Hecla Nevada and acquisition costs. Phillips S. Baker, Jr., president and chief executive officer, said the EBITDA “despite low metals prices is a result of the improvements we made in our mines.”

Work by salaried staff continues at Lucky Friday while miners remain on strike. The company said the salaried workers will start focusing on limited production to reduce the financial impact of the strike, whereas they previously had been focused on development.

"Lucky Friday has the longest mine life of all our properties, but at these silver prices and with the work rules the union workers have clung to, even at full production the mine doesn't generate significant free cash flow,” said Phillips S. Baker, Jr., president and chief executive officer.

“So, we are operating to minimize the cash consumption before we go back into production, which we expect to be primarily from the RVM (Remote Vein Miner project).”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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