By: Liezel Hill

17th February 2010

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TORONTO (miningweekly.com) – US miner Hecla Mining will consider smaller, underground gold operations as potential acquisitions, but, when it comes to silver, it is all about “size and scale”, CEO Phillips Baker Jr said on Wednesday.

After a difficult start to 2009, in the fourth quarter, Hecla was able to repay the remaining balance on its term loan taken on for an acquisition a year earlier.

The company has benefited from rising production levels, as well as firming prices for silver, lead and zinc, which it produces from two mines in Alaska and Idaho.

Hecla ended the year with $104,7-million in cash and cash equivalents and no debt for borrowed money.

It also entered into a three-year, $60-million senior-secured credit facility during the fourth quarter. With the facility still undrawn, the company has some $165-million available to spend on growing its own operations and potential acquisitions.

The firm also recently appointed a new vice-president and general counsel, David Sienko, who Baker pointed out at the time has extensive experience in corporate transactions.

“When we evaluate how we might grow, we really divide the world into silver assets and gold assets, and we focus our attention on both because we think we have operating expertise with respect to both types of assets,” Baker said on a conference call on Wednesday.

When it comes to gold, the company believes there are a lot of opportunities, but is restricting its focus to smaller operations, where it can apply its expertise in underground mining, he said.

The field has also been narrowed to just assets in Canada, the US and Mexico.

For silver, on the other hand, the approach is far more widespread.

“When we think about silver assets, we are thinking much more broadly than that, and we would like more size and scale associated with the silver assets,” Baker said.

“And so we consider all assets in the Americas. There isn't really a country we wouldn't at least consider going into in North and South America.”

Hecla owns the Greens Creek silver/zinc/gold/lead mine in Alaska and the Lucky Friday mine in Idaho, which produces silver, lead and zinc.

It is also exploring properties in Colorado and Mexico.

The company reported fourth-quarter net income of $28,7-million, compared with a loss of $40,7-million a year earlier.

Revenue increased to $88-million for the quarter, from $31,2-million in the same period of 2008.

The company produced almost 11-million ounces of silver in 2009, compared with 8,7-million ounces the previous year.

Hecla said on Wednesday it expects output of between 10-million and 11-million silver ounces in 2010, at cash costs of $1,90/oz to $2,25/oz, based on current prices for its by-product metals.

Capital spending is budgeted at between $50-million and $60-million and the firm has forecast $18-million in exploration expenditure.

LUCKY FRIDAY

At the Lucky Friday mine, where Hecla is studying an expansion, reserves have been increased by 77%, to 38,6-million ounces of silver.

Ongoing studies and evaluation work for a deep development project at Lucky Friday are “strongly” supporting the economic viability of an internal shaft to access deeper vein material and the life of the mine, which has been in production since 1942, could be extended to at least 2028, Baker said.

The company will make a formal decision on the shaft later this year when the engineering work is advanced enough on costs and schedules, but it is already moving muck and making some long-term procurements, to be ready to go when the decision is made.

“Lucky Friday is going to continue to be a flagship mine for Hecla for decades to come,” Baker said.

“It's pretty unique in the mining industry to have an operation that will at least operate the better part of 100 years.”

The Lucky Friday mine produced 3,5-million ounces of silver in 2009, a 23% increase over 2008 production of 2,9-million ounces.

Greens Creek, Hecla's other operation, produced 7,5-million ounces , up from 7,1-million a year earlier.