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Long-term fundamentals for silver never better – Hecla CEO

Despite low metals prices, Hecla’s Phil Baker says small denomination silver demand is still doing well, citing the lack of physical inventories.

Author: Dorothy Kosich
Posted: Wednesday , 05 Nov 2008

RENO, NV -

During a conference call Tuesday to discuss its $3.8 million net loss for the third quarter, Hecla Mining President and CEO Phil Baker insisted that long-term fundamentals for silver have never been better.

Despite the financial loss, Hecla reported its second largest quarterly silver production for the past 20 years, as well as its highest-ever zinc production.

"While there is a great deal of short-term uncertainty about the prices of the metals we produce, I believe in the long-term the fundamentals have never been better," Baker advised. "Silver like gold should eventually perform well as a result of the impact of all the liquidity injection into the economy by the Fed and Treasury in what we believe will be the ultimate impact on the U.S. dollar."

"On the fundamental supply-demand front the lack of physical inventories for small denomination silver shows the broad-based demand for the metal as an investment," he said. "And industrial demand for silver will, over the long term, not abate given the unique properties of the metal. "

"So the fundamentals for our business is probably the best it's ever been," Baker asserted.

Silver production in the first nine months of this year increased 41% to 6.2 million ounces, while three-quarter production increased 88% compared to the third quarter of 2007, to 2.5 million ounces of silver.

In Hecla's financial results release, Baker expressed surprise that "precious metals prices have declined in this period of economic unrest. Clearly, the lack of physical inventories of bullion silver in smaller dominations shows that the demand for silver is very strong and I believe that we should see increased demand for precious metals during this time of economic and global uncertainty."

Despite the financial tsunami, Baker noted that Hecla has reduced its debt from $360 million to $161 million, and intends to try to restructure remaining debt.

The company has made $40 million to $50 million in cuts to its capital expenditure, exploration and G&A costs, Baker told analysts. He anticipates further cost declines in the fourth quarter.

In spite of the cutbacks, Baker noted that the drilling program at the flagship Lucky Friday mine in Idaho revealed "we clearly have not been mining the heart of the orebody. The best is yet to come."

FINANCIALS

For the nine months ended September 30, 2008, Hecla reported a net loss of $39.5 million or negative 31-cents per share, compared to a net profit of $45 million (37-cents/sh) reported during the same period of 2007.

For the third quarter of this year, Hecla reported a net loss of $7.16 million or negative 5-cents per share, compared to a net profit of $12.3 million (10-cents/sh) for the third-quarter 2007.