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Hecla Reports Highest Earnings and Lowest Reported Cash Cost for Silver in 116-Year History and Achieves Exploration Success by Increasing Silver Reserves and Resources by 25%
COEUR D'ALENE, Idaho--(BUSINESS WIRE)--Feb. 21, 2007--Hecla Mining Company (NYSE:HL) today reported 2006 income applicable to common shareholders of $68.6 million, or 57 cents per share, compared to a loss of $25.9 million, or 22 cents per share, during 2005. Earnings were reported on revenue of $217.4 million, which is 30% more revenue than the next best year for revenue in Hecla's 116-year history. Net income was 20% higher than the company's next best year, and cash provided by operations of $61.5 million was 70% better than any other year. Hecla's cash cost per ounce of silver in 2006 was the lowest since that statistic has been reported, at just 24 cents per ounce.
Hecla Mining Company President and Chief Executive Officer Phillips S. Baker, Jr. said, "In 2006, Hecla achieved the best financial results in the company's history. These results weren't just a little better; they were better by double-digit margins than our next best year ever. Cash costs for silver were extremely low, and it is important to note that the cash provided by operations is after spending $28 million on exploration and pre-development projects as part of the most aggressive exploration program Hecla has ever conducted."
In the fourth quarter of 2006, Hecla recorded income applicable to common shareholders of $20.4 million, or 17 cents per share, compared to a loss of $7.4 million, or 6 cents per share, in the fourth quarter of 2005. Revenue during 2006's fourth quarter was $70.3 million, compared to $30 million in the same period last year. Positively impacting fourth quarter 2006 financial results was recognition of an $11.8 million deferred tax asset. This item was largely offset by Venezuelan foreign exchange losses and tax accruals, settlement of a dispute with an engineering firm and expensing of stock options. Even without these items, Hecla's fourth quarter 2006 net income would still be well above the market's consensus estimate, largely because of significantly higher-than-expected production from Hecla's La Camorra Unit of 45,907 ounces of gold during the fourth quarter, as well as high metals prices.
For the full year, robust metals prices, a gain on the sale of investments and recognition of a portion of the company's tax assets made contributions to the excellent annual financial results in 2006. However, the primary reason for outstanding results was production of 5.5 million ounces of silver at an average total cash cost of 24 cents per ounce and 179,276 ounces of gold at an average total cash cost of $345 per ounce. The average price of gold during 2006 was $604 per ounce, the highest yearly average in recorded history and 36% higher than 2005. Silver, although a long way from the 1980 average price of more than $20 per ounce, was a healthy $11.57 per ounce during 2006, an increase of 58% over 2005. Hecla also greatly benefited from its by-product metals, zinc and lead, as those prices increased 137% and 32%, respectively, compared to 2005.
In addition to outstanding financial results, Hecla had significant exploration successes, identified additional exploration targets and increased its resources in the ground. Baker said, "Overall, Hecla saw a 33 million-ounce increase in its silver resource, a 33% increase in lead resource and an 18% increase in zinc resource during 2006. At the Lucky Friday silver mine in northern Idaho, we increased the silver resource by 34% and achieved a better understanding of the intermediate veins and the future potential of the mine. The combined successes at San Sebastian and Lucky Friday have increased the value of their mineral resources by an astounding 50% compared to the end of 2005. And this is using the same price assumptions for both years - it really is a reflection of the value of these polymetallic ore bodies. At the Greens Creek mine in Alaska, we discovered an extension to the silver-rich 5250 vein and advanced the knowledge of the new West Gallagher zone. And we see much more opportunity for the future. At current metals prices, Hecla generates a huge amount of cash flow. Now is the time to make the investments for future discovery and growth, and toward that end we are budgeting approximately $22 million, $2 million more than last year, to continue our aggressive exploration program."
2006 HIGHLIGHTS
--Income applicable to common shareholders of $68.6 million, or 57
cents per share, on revenue of $217.4 million
--Cash provided by operations of $61.5 million
--A gain on sale of investments of $36.4 million
--Cash and short-term investments on hand of $101 million, and no
corporate debt
--$28 million in exploration and pre-development expenditures
--Exploration successes at Lucky Friday, Greens Creek and San
Sebastian, with a 33 million-ounce increase in silver resource
--5.5 million ounces of silver produced at an average total cash
cost of 24 cents per ounce
--179,276 ounces of gold produced, with 160,563 of those ounces
produced at La Camorra at an average total cash cost of $345 per
ounce of gold
--Double and triple-digit percentage increases compared to a year
ago in the prices for all the metals Hecla produces: silver, gold,
lead and zinc
