Hecla Mining Co. officials believe the Coeur dAlene companys 1998 tally sheet will show more silver, less gold, and no red.


Red ink, that is. For the first time in eight years, Hecla expects in 1998 to show an annual profit. That would be welcome news for a venerable mining company that has suffered through rough times for most of this decade. In recent years, net losses have piled up, metals prices have largely been uncooperative, and the stock market has responded in kinddropping Heclas share performance into the ranks of the nations worst stocks, according to Wall Street Journal analyses.


Last year, Hecla lost a net of $8.5 million, following a $40.4 million net loss in 1996. In the past two years, rising production costs and falling gold prices have forced the company to close both its American Girl and Grouse Creek mines, the latter closure alone triggering a $100 million write-off.


Hecla officials now believe the tarnish is wearing off the precious metals company. Silver prices are rising, the companys production costs are falling, and additional ore reserves are being identified.


As long as silver prices remain decent, says Hecla Chairman, President, and CEO Arthur Brown, Theres no reason for us not be profitable.


Specifically, Hecla believes:


Its silver production will jump 30 percent this year. The company plans to double production during 1998 at its Lucky Friday operation in North Idaho to 4 million troy ounces, and to again get about 3 million ounces from its share of the Greens Creek mine in Alaska.


Silver prices, which have greatly improved in the past few months, will remain strong for the remainder of the year. Prices hit an 11-year high of $7.25 an ounce in early February before settling back to their current level of about $6 an ounce.


It will be able to continue to produce silver companywide at between $3 and $3.50 an ounce, and gold at under $200 an ounce. During the past year, Hecla has been able to decrease those production costs substantially.


It will identify additional proven and probable gold reserves at its Rosebud mine in Nevada, and hopes to end up with additional gold reserves elsewhere as the result of an aggressive acquisition plan. However, the company expects its overall gold production to fall this year, to about 110,000 ounces, compared with 174,164 ounces last year, because of the planned closure of its La Choya gold mine in Mexico.


It will continue to develop new markets in Latin America and the Far East for its industrial-minerals division, which set a sales record in January.


Hecla also had another bit of good news last year. After a legal battle that lasted for years, the Idaho Supreme Court reversed a $20 million judgment granted in 1994 against Hecla. The ruling allowed the company to free up $10 million in restricted cash that it had been holding in escrow.


That is a decision that was a long time coming. We were proven to be right by the Supreme Court. Its good to have that behind us, Brown says.Volatile pricesThough Hecla is enjoying improved silver prices, it and other mining companies have been hindered by falling gold prices, which averaged $331 a troy ounce in 1997, almost 15 percent lower than 1996s average price of $388 an ounce. Gold prices have fallen further since and Brown predicts that while theyre currently hovering around $300 per troy ounce, they wont improve much in 1998.


Also, despite the optimism currently surrounding silver, Brown warns that the metals price still could be volatile. Hecla officials are hopeful that silver prices will continue to rise gradually through the rest of the decade, rather than skyrocket as they did in the late 70s and then crash, which he says caused some suffering for the company.


If prices climb from around $6 to $6.50 (an ounce) to between $7 to $8 (an ounce) by the end of the decade, that would be good for us. That isnt disruptive to the market, he says.Lucky FridayHeclas historic Lucky Friday Mine, located near Mullan, Idaho, has struggled in the past decade, but its silver lining is once again beginning to glisten.


We have spent a huge amount of negative dollars to keep that mine open and to keep people employed there. Now, we hope to get some of that back, Brown says.


Hecla is pinning its hopes on an expansion of the Lucky Friday called Gold Hunter, which it continued to develop and explore further last year. Brown says Hecla expects this spring to shift its production emphasis from the Lucky Friday main deposit to Gold Hunter. So far the ore that Hecla has found in Gold Hunter has been of a better grade than in the Lucky Fridays main deposits, and the vein in the Gold Hunter is almost twice as large. Those factors could drive down the mines production costs further.


Brown adds that the Gold Hunter hasnt been fully explored, and Hecla geologists believe further mine development there is likely. We expect to be operating there for the long term, he says.Greens CreekHecla also is counting on the Greens Creek mine, in which it owns an interest of about 30 percent, to be a long-term producer for the company. Hecla predicts that the mine, which is located on Admiralty Island, near Juneau, Alaska, will produce about 3 million ounces of silver this year for Heclas account at a cash cost of about $2.30 an ounce. That mine also produces zinc, lead, and some gold.


As of Dec. 31, Heclas share of Greens Creeks proven and probable reserves totaled 46.5 million ounces of silver, 369,000 ounces of gold, 318,000 tons of zinc, and 112,000 tons of lead. Brown says he expects those reserve levels to grow.


Last year, a potential ore zone was discovered at Greens Creek and within the next year Hecla hopes to define further the size of that ore deposit and determine any addition it might make to proven and probable reserves. Also, Hecla has gained more land there for future exploration through a land exchange with the U.S. Forest Service.RosebudThe Rosebud gold mine, in northern Nevada, of which Hecla is a 50 percent owner, has been a steady producer for Hecla.


At Rosebud, which is about 58 miles west of Winnemucca, Nev., Hecla handles the mining work, and its joint-venture partner, Newmont Gold Co., of Denver, Colo., transports the ore, extracts the gold, and performs the processing.


Production at the Rosebud began in April of last year, about two months ahead of schedule and nearly $6 million, or 25 percent, under budget, Brown says. He adds that production levels so far are right at expectations. Last year, the mine produced 47,000 ounces of gold on Heclas side of the ledger, at a cash cost of about $156 an ounce.


Processing there has been right on, says Brown. It is great to see things work just like our people had said it would.


Brown says that there are a number of exploration targets at Rosebud, and Hecla expects to continue exploratory drilling this year. At one such location, Hecla found ore that contained an ounce of gold per ton of rocka relatively high ore grade. Hecla hasnt determined whether that area is minable yet, but Brown says the discovery is encouraging because the company previously didnt know there was any ore in that location.La ChoyaHecla expects this year to close its La Choya mine, an open-pit, heap-leach gold producer located in Mexico about 30 miles south of its border with Arizona. Just two years ago, the La Choya was Heclas most profitable precious metals operation, but its proven and probable reserves are expected to be depleted by the end of the third quarter this year.


The company had expected the mine to be fully mined out during the first quarter of 1998, but the discovery of added reserves extended the mines life some, Brown says. The La Choya produced more than 78,000 ounces of gold last year at a cash cost of $180 an ounce.


Brown says that while reclamation efforts already have begun in some parts of the La Choya operation, exploration will continue on property near the mine in hopes that Hecla will find additional reserves there.


Hecla had been exploring numerous sites in Mexico, but so far the deposits it has examined cant be mined viably. To stay competitive, Hecla needs to find a high-grade ore body that it could develop efficiently. We know there are lower-cost producers around, Brown says. We will continue to be a low-cost producer. We wont add ounces just for the sake of adding ounces.Industrial MineralsHeclas industrial-minerals division, which last year, for the first time in 11 years, failed to rack up a gain in annual sales, is expected to rebound this year, Brown says. Mountain West Products, the divisions decorative-bark subsidiary, had an operating loss of $975,000 in 1997, compared with operating income of $1.3 million the year earlier. At Kentucky-Tennessee Clay Co., a subsidiary that produces kaolin and feldspar for the ceramics industry, revenues fell by about $1.6 million.


Softer demand in Asia, increased competition, and falling sales overall contributed to the divisions operating losses. Brown remains optimistic, however. Two months ago, the division had its best January ever.


For the first two months of this year, we are well above the budgeted numbers. I believe we have that division turned around, Brown says, adding Its the one thing that has really kept us going. We want to stay in it.