With record gold production at a mine in Alaska, Hecla Mining Co. is expecting 2017 to finish as one of the 10 to 15 strongest years in its 126-year history, from a production perspective, company CEO Phillips S. Baker says.  

That’s despite a nine-month work stoppage at the Coeur d’Alene-based company’s Lucky Friday mine in North Idaho, where workers are on strike in part because they want what’s called a bid system—where miners select their crews—to remain in place. The previous six-year contract between union workers and the company ended in April.

“We’re having great success exploration-wise. This year has gone really, really well for us, and we’re going to exceed our original expectations,” Baker says.

Hecla’s four largest operating mines are the Lucky Friday Mine, near Wallace, Idaho; Greens Creek Mine, north of Juneau, Alaska; Casa Berardi Mine, in Quebec, Canada, near its provincial border with Ontario; and the San Sebastian Mine, in Durango, Mexico.

The company’s third-quarter gold production of 63,000 ounces is up 21 percent, from 52,100 ounces, in the third quarter 2016. Baker says higher zinc and lead prices have also helped fuel the company in 2017. Meanwhile, overall capital expenditures of $24.4 million represented a 44 percent drop compared with the year-earlier period.

Baker says, “The operating performance combined with lower capital expenditure allows Hecla to continue to generate positive cash flow and strengthen our balance sheet.”

Hecla, however, won’t come near its 2016 mark of $69.5 million in earnings. Through three quarters this year, the company reports $4.2 million in net income, down from $49.2 million the year-earlier period.

For the third quarter alone, the company posted net income of $1.4 million, down considerably compared with net income of $25.8 million in the year-earlier quarter.

The strike at Lucky Friday cost the company $3.7 million during the third quarter and Casa Berardi and San Sebastian required $4.6 million in exploration and predevelopment costs, the report says.

Also eating into third-quarter income was a mark-to-market loss of $11.2 million on base metal derivatives contracts due to the higher zinc and lead prices, compared with the third quarter of 2016, when there was an active hedging program in place, the report says.

For perspective, Hecla reported a net loss of $87 million in 2015, following 2014 net income of $18 million, a loss of $25.1 million in 2013, and $15 million in earnings in 2012. Hecla was selling for $3.68 a share earlier this week. It’s 52-week high at that time was $6.78 a share, with a 52-week low of $3.63 per share. 

But for all of 2017, Baker points to Greens Creek as the mine in Hecla’s portfolio that continues to drive company revenue in an upward direction this year.

Not uncommon in the mining industry is the fact it can take years for a company to realize profits in trying to develop a mine, if it sees any at all. Millions are spent in the predevelopment phase of exploration, Baker says.

“From 1987 to 1997, Greens Creek was generating negative cash flow,” he says. “But since 1997, it’s generated $1.5 billion in free cash flow. It’s doing monster production.”

At Casa Berardi, revenue is flat, and the company is working at trying to make that mine more “predictable and consistent,” he says.

As for Lucky Friday, Baker says the company remains optimistic that the work stoppage there will soon end for its 270 employees.

“For years, senior miners have determined where they work and who would work with them,” Baker says of the bid system. “That’s what the big hang-up is on the strike.”

Of the bid system, Baker adds, “I don’t know how you compromise.”

Lucky Friday produced 88,300 ounces of silver in the third quarter, down from 887,400 ounces mined during the same quarter in 2016, the report says. For all of its properties, silver production fell to 3.3 million ounces produced in the third quarter, from 4.3 million in the year-earlier period.

In addition to the four major mines, Hecla has nearly a dozen other projects in predevelopment across North America, including the Montanore project located in northwestern Montana. Montanore is considered one of the largest undeveloped silver and copper deposits in North America.

In 2015, Hecla acquired former Spokane-based Mines Management Inc.—which previously owned Montanore—and former Spokane Valley-based Revett Minerals Inc., and took over its Rock Creek project which is 10 miles from the Montanore site.

Hecla has continued where Mines Management left off when that company, in 2005, began its attempts to secure federal and state permits to move forward with the Montanore project. Baker says Hecla officials hope to be able to begin early exploration at Montanore next year.

But in October, environmentalists asked Montana regulators to suspend permits for the two mines, citing environmental concerns. Hecla contends the Clark Fork Coalition and three other groups are misconstruing the law to block the new mines.

Hecla, located at 6500 N. Mineral in Coeur d’Alene, occupies the entire second level of the two-story Hecla Building. The company once owned the building but sold it to a buyer in Western Washington more than a decade ago. Hecla has 60 employees here and is approaching 10 employees in Vancouver, British Columbia, where the company is co-headquartered, Baker says.

Now at Hecla’s helm for 14 years, Baker says he’s more energized now than when he first took over as CEO.

“I love it,” Baker says. “This is the most interesting and satisfying time in my career. There is technology being developed that can fundamentally change how we operate.”

Despite the strike at Lucky Friday, Baker says Hecla is working with an equipment manufacturer to develop a mechanical mining machine that could eliminate the need for drilling and blasting. Instead, the machine would mine the hard rock orebody by cutting the rock and installing ground support as it goes.

“We don’t know if this concept will be successful, but the potential improvements in safety and productivity are compelling,” he says.