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Hecla Cuts Nevada Spending, Trims Gold-Output Guidance

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(Kitco News) - Hecla Mining Co. (NYSE: HL) is reducing spending and laying off personnel at its Nevada operations in order to improve cash flow, the company said Thursday.

Officials also revised down the gold-production outlook for Hecla’s Nevada mines. When issuing its first-quarter earnings report in May, Hecla had suspended its 2019 guidance and said it was reviewing its Nevada operations.

Hecla said Thursday that the company has significantly curtailed planned development investment in Nevada while production continues. Officials trimmed expectations for company-wide capital spending by $12 million, with exploration reduced by $9 million, and general and administrative/other costs cut by $4 million. This adds up to a $25 million planned spending cut for 2019.

Hecla is committed to generating cash flow, said Phillips S. Baker, Jr., president and chief executive officer.

“However, the Nevada operations have not generated the cash flow we had hoped for, so we are curtailing most development and reducing the workforce with the goal of the operation generating positive cash flow in the second half of the year,” he said. “We still see lots of opportunities to improve costs, manage water, improve recoveries and explore but only plan to do it within cash flow.

“We expect that with the company-wide reduction in spending Hecla will generate sufficient cash flow to nearly eliminate the need to borrow under the revolver by year end.”

The company issued revised annual 2019 Nevada production estimates of 60,000 gold ounces at an all-in sustaining cost, after by-product credits, of $1,700 per gold ounce. Previously, Hecla was looking for Nevada gold production of 76,000 ounces this year at AISC of $1,325.

The company said its new plan is to mine currently developed ore at Fire Creek. Mining at Midas is expected to continue through the end of the year, but Hollister will be shut down, meaning a 25% reduced in the company’s Nevada workforce.

The company is also pursuing potential ore-processing arrangements with third parties in order to cut transportation and milling costs.

Hecla said it remains committed to exploration of Hatter Graben, which is one of the key reasons the Nevada operations were acquired. However, the level of development activity is being curtailed, with the focus instead expected to be on surface drilling.

Meanwhile, Hecla said it has bought put contracts on 2.9 million ounces of silver and 93,000 ounces of gold, locking in $14.73 per silver ounce and $1,318 for gold for the next four months. This sets a floor on the price the company could expect to receive but still maintains all of the upside potential, other than the transaction costs, Hecla said, adding that it may undertake more such protection for the rest of the year and part of 2020.

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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