Hecla lists revised 2020 gold, silver output, cost guidance

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(Kitco News) – Hecla Mining Co. (NYSE: HL) listed revised production guidance for 2020 Thursday while reporting its quarterly financial results.

As has been the case for a number of producers, some of the company’s mines have been temporarily suspended due to government restrictions to combat the COVID-19 pandemic. However, four out of five mines are operating again, representing 95% of Hecla’s production, the company said.

“With our key mines operational, we expect the second half of the year to be strong as Casa Berardi resumes normal operations, Lucky Friday ramps up to full production and Greens Creek continues to deliver,” said Phillips S. Baker, Jr., president and chief executive officer.

The company now projects full-year silver output of 10.9 million to 11.9 million ounces, down slightly from 11.1 million to 12.1 million originally. Gold production is now forecast at 195,000 to 208,000 ounces, compared to the original guidance of 212,000 to 225,000.

Guidance for all-in sustaining costs for silver, after by-product credits, has been revised to a range of $12.25 to $13.25 an ounce, up from $11 to $12.25 originally. AISC guidance for gold was left at $1,150 to $1,250.

“Finally, we are able to re-establish production and cost guidance,” Baker said. “Our silver-production guidance is largely unchanged with AISC, after byproduct credits, about 10% higher due primarily to benchmark smelter costs and lower by-product credits from lower zinc production and prices. Our gold production guidance is about 10% lower, but AISC, after byproduct credits, is relatively unchanged due to lower capital costs.”
Hecla said there are no known cases of COVID-19 at any of its sites.
As for financial results, the company listed a net loss for the first quarter of $17.2 million, or 3 cents per basic share, compared to a net loss of $25.5 million, or 5 cents, in the first quarter of 2019. Hecla said the January-March results were impacted by lower provisional prices for a Greens Creek shipment, higher treatment charges, higher product inventory and the temporary shutdown of Casa Berardi due to restrictions imposed by the government of Quebec.
Casa Berardi was temporarily shut down on March 23 and partial production resumed April 16. The company said the restart is expected to take about a month to reach full production.

Meanwhile, work at the San Sebastian mine was suspended when the Mexican government issued a COVID-19 decree at the end of March, with the order now extended to May 30. However, Hecla said this is not expected to have a material impact on full-year output as long as the mine restarts in the second quarter because of a planned partial year of production.

Operations in Nevada continued. Meanwhile, the company is continuing to ramp up operations at the Lucky Friday Mine in Idaho after a lengthy strike, with the recall of union workers complete and the company hiring new employees.

Hecla listed first-quarter silver production of 3.2 million ounces, up from 2.9 million in the year ago period. However, only 2.6 million were sold, with the difference between production and sales mainly due to the timing of concentrate shipments at the Greens Creek Mine in Alaska, the company said. Year-ago first-quarter silver sales were 2.9 million ounces.

Hecla produced 58,792 ounces of gold in the first quarter, down from 60,021 a year earlier. The company also produced 5,893 tons of lead and 12,847 tons of zinc.

Combined production of all metals amounted to 10.8 million silver-equivalent ounces, the company reported.

The average realized silver price in the first quarter of 2020 was $14.48 per ounce, 8% lower than the $15.70 price realized in the first quarter of 2019. Realized gold prices were higher by 21% to $1,588 an ounce, while lead and zinc prices were lower by 16%, and 32%, respectively

AISC for silver, after by-product credits, were $11.06 an ounce. AISC for gold was $1,302 an ounce.

“While our financial position is strong, with over $200 million in cash at quarter end, no near-term debt maturities and no large capital projects planned for the next several years, we are reducing 2020 capital and exploration expenditures by 25%,” Baker said. “We also continue to protect our revenues with put options for silver and gold that set a floor price but don’t limit upside participation, and forward sales of our lead and zinc production.”
The company aid it has put option contracts for gold and silver to establish a floor price of $16 for silver in the second quarter and $1,450, $1,650 and $1,600 for gold in the second through fourth quarters, for much of the expected production but with full upside available other than cost of the contracts.

The company said it maintained its common and preferred share dividends. A cash dividend of $0.0025 per share of common stock is payable around June 2 to stockholders of record on May 22. A quarterly cash dividend of $0.875 per share of preferred stock is payable around July 1 to stockholders of record on June 15.

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