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Silver lining

| August 18, 2020 12:28 PM

By BILL BULEY

Staff Writer

COEUR d’ALENE — In January, after three years of negotiations, Hecla Mining Company and about 200 members of the United Steelworkers Local 5114 in Mullan ratified a three-year agreement to end the strike at the Lucky Friday mine.

Soon, many striking workers returned.

“To see that parking lot full again is wonderful,” said Michelle Horning, Hecla’s human resources manager.

And the results have been good.

Second quarter 2020 financial and operating results include:

• Sales of $166.4 million, an increase of 24% over prior year period.

• Gross profit of $34.1 million, an increase of $54.3 million over prior year period.

• Cash provided by operating activities was $37.5 million while there were $10.8 million additions to properties, plant, equipment and mineral interests, resulting in $26.7 million of quarterly free cash flow.

• Silver production of 3.4 million ounces and gold production of 59,982 ounces

• Strong balance sheet with cash and cash equivalents of $76 million, repaid $160 million of revolving line of credit, leaving $50 million outstanding; expect full repayment by year end.

“Despite the pandemic, Hecla had its second highest quarterly silver production since 2016 which, combined with higher prices, resulted in almost 25% more revenue than a year ago and generated about $27 million of free cash flow,” said Phillips S. Baker, Jr., Hecla’s President and CEO in a press release. “I am extremely proud of our workforce’s adaptability and commitment in this challenging time which positions Hecla well to improve our cash flow generation in this higher silver and gold price environment.”

Baker said Hecla currently produces about a third of all the silver mined in the U.S., almost three times larger than the next primary producer.

“That number is expected to grow as Lucky Friday ramps up,” he said. “As the United States’ largest and oldest silver producer with America’s largest silver reserve and resource, Hecla gives investors unique exposure to higher silver prices.”

With the strike behind it, Hecla is online for a strong year. Out of the 196 who walked in 2017, 110 returned and the company has hired many more new employees and some who had quit and came back as it builds toward a workforce of about 275 hourly employees.

It continues to advertise for for electricians, millwrights, underground miners and mine support, mill operators and underground and surface maintenance mechanics.

“We have been able to hire good, experience people,” Horning said.

Luke Russell, vice president, said Hecla is working with North Idaho college on developing company specific training modules designed for the necessary skill sets for “the mine of the future.”

For instance, Hecla is phasing out jacklegs, considered a dangerous piece of mining equipment.

“Those skill sets are rapidly changing that are required,” he said, “because our needs are changing rapidly.”

“We need those positions today,” he said.

Horning said they have implemented a progression system that gives employees and opportunity to grow and advance their skills.

With the labor dispute over, there’s a new, positive atmosphere in place, Horning said, and things have well. Conflicts between workers and managements are not there.

“The culture is different now than it was historically at Lucky Friday,” Russell said. “We are really working as a team in backstopping each other with a common goal to make Lucky Friday mine successful to the next 20 or 30 years.”

Exploration and development of the #4 shaft takes Hecla 10,000 feet below the surface.

“The grade gets better as we grow deeper,” Russell said.

Hecla anticipates being back in full production by end of year, as demand for silver is rising, Russell said.

“The stuff we produce is what is needed,” he said.

If you look at alternative energy like solar and wind, silver is a critical mineral for those technologies.

“The way we are evolving in our consumption is dependent on silver and copper and the things that we produce,” Russell said.

Hecla is a key producer of lead and zinc in the U.S.

“We are the first part of the supply chain for these consumer good swe all expect and want to have. And it all begins with mining and we like to say it beings with Hecla,” he said.

Others have noticed.

The Lucky Friday Mine was named a “Pollution Prevention Champion” by the Idaho Department of Environmental Quality for their environmental stewardship practices.

The Lucky Friday was among only four Idaho businesses chosen for the 2019 prestigious award.

“The upgrades, process modifications, and recycling projects that have been implemented at Hecla’s Lucky Friday mine have resulted in significant reductions of waste, water, and energy used by the mine for the production of silver, zinc, and lead. With growing demand for these metals, eliminating waste and pollution from production is more important than ever,” said Ben Jarvis, DEQ’s pollution prevention coordinator, in a press release.

The Lucky Friday Mine was also named a 2018 Sentinels of Safety award winner by the National Mining Association.

The award is presented annually to mines with the best safety records and those that have worked the most employee hours without experiencing a lost-time injury.

Lucky Friday won the small underground metal mine category for achieving 114,829 injury-free hours.

“It was an amazing accomplishment by the salary and hourly guys,” Russell said.

And Lucky Friday remains in the running for the award in 2019.

Russell said the U.S. has the toughest regulatory requirements on the planet, and Idaho has some of the toughest requirements in the nation.

“Doing it right here at home is the best place to do it, to be able to provide the supply chain minerals we need right here in Idaho,” he said.

Hecla will be a 130-year-old company next year.

It has survived and thrived, Russell said, for several reasons.

The employees, of course.

“We as a company have the long view in that we know that when times are good like right now, metal prices are up. But we also know it will be cyclical and metal prices will come down. So we plan for that lower price environment, take advantage of the higher prices environment.

He said board of trustees is experienced

“They understand the cyclical nature of business and thinking about what may come next,” he said.

Hecla also has a strong community presence. It contributes to charitable programs and schools and above all, it listens well, Russell said.

“We see it as a partnership,” he said. “You develop a partnership with the community. What’s good for the mine is good for the community and what’s good for the community is good for the mine.”

Hecla is always asking what it can do to help the community.

“We need to listen firsthand then respond, be transparent and open in our dialogue,” he said

Salaried employees, geologist, safety officials and warehouse staff, stepped in during the strike.

“A lot of them were used to miners so they became miners again,” Horning said.

“We had geologists driving haul trucks.

It was, she said, an amazing time.

“Just watching everybody come together the way they did and willing to step out of their role and into something else to keep things going,” Morning said.

He and Hecla are “very optimistic about the future” of Lucky Friday, which is 76 years old, and has an estimated 20 years of reserves.

He praised a culture of working together, adopting new technologies and skill sets.

“Everybody seems to be aligned that this is what we need to make the mine successful,” he said. We have a great culture back after the strike, positive. A new workforce, embracing the culture.

Hecla has many employees who have been with them more than four decades, which is really a testament to the culture here at Hecla Russell said.

“We’re very excited bout the future of lucky Friday, the company and the community.”