Hecla Mining Co (HL) 2004 Q4 法說會逐字稿

Good day, ladies and gentlemen welcome to the Hecla Mining Company fourth quarter and year end 2004 conference call. My name is Kaitlyn. I will be your coordinator today. At this time ail participants are in a listen-only mode. We will facilitate a question-and-answer session at the end of the conference. If at any time during the call you require assistance, please press star followed by zero and a coordinator will be happy to assist you. I would like to now turn the presentation to your host, Ms. Vicki Veltkamp, Vice President, Investor and Public Relations. Please go ahead, ma'am.

Thank you, Kaitlyn. Thanks to all the rest of you as well for joining us today. I am Vicki Veltkamp, as Kaitlyn mentioned, and this is the fourth quarter and year end 2004 Hecla Mining Company conference call. The call is being webcast live today. So you would be able to access a replay of this if you wish at our Web site which is www.hecla-mining.com, and at that Website you can find the financial results in today's quarterly's news release, and at the end of the news release the quantitative reconciliation to GAAP of cash costs per ounce which is now an SEC requirement. Today's presentation will be made by Phil Baker, Hecla's President and CEO, and he will have help from Lew Walde, our Chief Financial Officer, Ron Clayton, our Vice President of North American Operations, Tom Fudge, Hecla's President of Venezuelan Operations, and Ian Atkinson, Vice President of Exploration and Strategy. Following that, we will have a question-and-answer period. Any forward-looking statements made today by our management comes under the Private Securities Litigation Reform Act of 1995, and involve a number of risks that could cause actual results to differ from projections. And now I would like to turn this over to Hecla Mining Company's President and Chief Executive Officer, Phil Baker.

Thanks, Vicky. Good afternoon, ladies and gentlemen. And let me add my welcome to Vicky's. This year, our loss was about the same as last year, despite a large increase of exploration and predevelopment. We had lower production and higher costs. And what happened was we benefited from the significantly higher metal prices for all the metals that we produced. For the quarter, we generated a loss largely due to the $5 million increase in the exploration spending that we incurred.

It has been an exciting year for Hecla Mining Company. We have made significant investments in developing, expanding, improving our mines, and exploring the five world class districts that we have. We've doubled both our capital investment and exploration predevelopment expenditures over last year. These investments, we think, are going to lead to a growth in our resource base, our ability to maintain low cost and increasing production. I firmly believe that this is a major part of the equation of how we generate value for shareholders, and are absolutely ,and we think we're well positioned to deliver this value to our shareholders. The other part of generating value for shareholders is current production and earnings, and while we've produced more revenues and gross profit for the year, I recognize that it was driven by higher prices rather than higher production and lower costs. But we did hit our cost targets of less than $185 per ounce for gold, and $2 per ounce for silver.

While we had less production than we expected, it was all attributable to the mill strike that we have in Mexico and Ron is going to talk more about this in a moment. The mine kept operating but the mill was on strike, and so we've had to stockpile the ore. But even without San Sebastian's production in the fourth quarter, we're still the lowest cost primary silver producer in the industry and on the gold side, when we gave our cost estimates, we knew costs would be higher as we go deeper in the La Camorra mine and that is why we made the investment to build a shaft that will be operational in the second half of the year which will allow us to maintain our low cost profile. Tom is going to talk a little bit more about that in a moment.

As far as earnings go, we continue to have a loss and it's really a function of the level of exploration that we're doing. And I will talk about why we think that's justified in just a second, but the bottom line is that these operations generated the cash flow that we expected which along with the cash that we have in hand allowed us to make the investment that we think will benefit Hecla in 2005 and beyond. And in 2005, we're going to see immediate results from these developments. At Mina Isidora, we will begin production from a rehabilitated incline shaft later this year. This will supplement production from La Camorra Unit in order for us to maintain its current production and cost profile. And the rest of the Mina Isidora development will have an even greater impact in the future. At the Lucky Friday, the investment that we've made in 2004, and will continue in 2005, will allow us to see us increase our production by about 50 percent this year and see our costs decline about 10 percent. And then in 2006, we will see it increase again by about a third, and then another 10 percent decline in our costs. As a result of these investments and others like the La Camorra shaft, we expect operations this year to be similar to what they were last year. This year being 2005. About 190,000 ounces of gold production at a cash cost of about $180 per ounce. And about 6.5 million ounces of silver at a cash cost about $2.50 per ounce. There is a little less silver -- I mean it is at a higher cost because San Sebastian will have a gap production until we develop the new ore body. The Lucky Friday with its higher cost structure is largely going to make up the difference. On the gold side, there is some risk that costs could be higher than this $180, based on new currency regulations. We're working through this right now. But we don't expect it to be more than a 10 to 20 percent increase. And also, the investments that we made this past year are going to really benefit us had the future, particularly on the exploration side. We clearly have the best exploration opportunities in our 100-year history. And we think that those opportunities are worth the reduction in our current earnings in order to secure our future and allow us to grow in the future. In 2004, the program has already replaced reserves mined with better quality ounces than we had before. But more importantly, we have targets that we think will add to the resources starting in the next couple of years and every one of our properties. That's going from our newest property, the Block B area, where we've identified the Twin Conductora and we think there is a lot more to find, to the Lucky Friday, where we have been operating and exploring there for more than 50 years, or almost 50 years now. We see the potential at each one of these properties to generate resources over the next few years. Ian will talk more about this.

Now, our exploration program does have challenges. As I mentioned, with the level of spending that we have, we have created -- we have a loss on earnings. We've also have not immediately found more ore on the Hugh zone in San Sebastian so we are going to have this gap in production, but we've gone enough work now that we know that the vein is changing directions, and we know what is causing that change, and we know that we need to extend the drill holes, and so we even have more encouragement as to the potential for that property. The drilling at depth at La Camorra has not expanded the strike length, but we've experienced this before, and so patience, sound geology, and drilling are really what's ordered there at La Camorra. And with the shaft going in, we are going to have more flexibility to evaluate targets than we've had in the past. And we think the outcome of the capital expenditures and investments is going to be more resources, growing production, and better earnings. And we think we have prospects of achieving those things very quickly and efficiently. Let me turn it over to Lew and let him talk a little bit about the financial results that we've had.

Thank you, Phil. You know, we will take a few minutes and chat about the fourth quarter and the year-end results. During the fourth quarter, Hecla continued its focus on reserves and resources. Nearly doubling the exploration spending to $4.5 million, this compares to $2.3 million in 2003. In addition, work on the Hollister Development Block down in Nevada hit full stride during the fourth quarter. We saw predevelopment expense increase nearly $2.5 million quarter on quarter. These two factors increased our cost $4.5 million in Q4, which along with about $1 million change in our tax provision explains the majority of the change in net income for the -- from a year ago. As Phil mentioned we also experienced lower gold and silver production and higher cash cost per ounce during the fourth quarter. Strike in Mexico was the principal reason for this as it limited our ability to produce gold and silver at the San Sebastian property in the fourth quarter. The lack of the production -- silver production at this is extremely low cost mine in Mexico also had an impact on the cost per ounce which increased to $2.92 per silver ounce during the fourth quarter. On the gold side, production for the fourth quarter was down about 12 percent at our La Camorra Unit, primarily due to fewer tons being mined and processed. Again, the decreased production and increased costs associated with mining deeper and maintaining the equipment at the La Camorra mine have resulted in increased costs which totaled about $237 per ounce during the fourth quarter. We certainly benefited from improved metal prices compared to 2003. And this certainly provides us with ability to generate robust cash flows that provides us the financing that's necessary for investing and growing and expanding the reserves and resources through the increased exploration program.

Shifting to the annual results for 2004, Hecla recorded income before environmental accruals, noncash dividends, exploration and predevelopment, and other one-time items of about $23.3 million. Which was about $8 million less than in 2003. While our gross profit expanded 7 percent in 2004, to a total of 37.4 million. Increased gross profit provides the cash flow again that is necessary for investing in the future of the Company. We did this in 2004, where we saw exploration and predevelopment expenditures increase 9.2 million or more than 83 percent to a total of $20 million during 2004. But despite the increase in the exploration and predevelopment expenses, our net loss remained constant with the 2003 net loss of 6 million. On the production front, we produced 7 million ounces of silver at an industry leading cash cost of $2.02 per ounce. Which again was right on the target that we said at the start of the year of $2 per ounce. And on the gold side, production totaled approximately 190,000 ounces at a cash cost of $180 per ounce, which again was better than what we had previously estimated.

Turning to -- for a minute to our cash flow, our cash flows from operations decreased to $13 million in 2004, compared to 26 million in 2003. Again this decrease is primarily due to the investments that we're making in exploration, the predevelopment expenditures, which increased by about 10 million -- or $9 million for the year. Phil had talked about the capital. During 2004, we invested $41 million in capital projects, the majority of which is intended to increase or supplement our production and maintain our low cost going forward in the future. These major projects consisted of the expansion capital at the Lucky Friday to develop the 5900 level, construction of a shaft at the La Camorra mine, and development activities at Mina Isidora in Venezuela. From a financial perspective at the end of the year, we had cash and short-term investments equal to more than $81 million, and we're debt free at the end of the year.

So in summary, although the fourth quarter provided us with some challenges, we still manage to hit our annual targets, and build a platform for Hecla to expand resources and increase production in the future. Our balance sheet is in great shape, and also provides us with a foundation to carry out our growth strategy. Now, I will turn it over to Ron Clayton who will talk about our Mexican and U.S. operations.

Thanks, LEW. The labor strike at the Velardena mill in Durango, Mexico continues to be unresolved. The strike started on October 15th. The mine continues to operate and ore is being stockpiled for processing at a later date. The Francine and Don Sergio veins will be exhausted by mid year and the mine will cease production at that time. The key focus for the national labor union is organization of the mine workers at San Sebastian. The national union is using the mill, which is unionized as leverage to achieve their goal. We continue to work with the Ministry of Labor, our employees, and other government entities and the union to come to a resolution, and have seen some progress in the last couple of sessions.

The Hugh zone scoping study has been completed with positive results. The Hugh zone is located beneath the Francine vein, which has been the major source of production at San Sebastian. Positive drill results allowed us to include approximately 479,000 tons at a grade of 02 ounces per ton gold, 8.6 ounces per ton silver, 2.7 percent copper, 5.4 percent lead and 6.7 percent zinc and the other resources category at year end. The ore body is open to expansion down depth and a long strike both east and west. Metallurgical work indicates that economic copper, lead, and zinc concentrates can be produced. No fatal flaws were identified in the study. The next step will be to expand the size of the deposit and drilling is in progress. This deposit exhibits characteristics that are similar to the more traditional high silver base metal deposits that are -- have a long history in this part of Mexico.

We continue to advance other high priority targets and develop new targets at San Sebastian. We were able to acquire the La Roca concession recently. La Roca lies in the heart of our concessions and has been of interest to us for some time. We have begun our initial geologic work there. We remain convinced that we will be able to develop additional production from our holdings at San Sebastian in the future.

The Noche Buena project is a heap leach gold deposit in Sonora, Mexico. We have completed the drilling program at Noche Buena and updated the resource model. The feasibility study is on budget and schedule, however we have expanded the scope to evaluate run of mine leaching. We hope to enhance the economics of the project by lowering the capital and operating costs. This work is expected to be completed early fall.

The Greens Creek team turned in another good low cost performance during the fourth quarter and for all of 2004. Throughput increased during the year by 60 tons per day over the 2003 levels, and costs were held nearly constant even though costs for diesel, steel, and shipping increased significantly during the year. In light of the fact that Greens Creek generates its own power, this is a significant achievement. In addition, the operation was awarded the Sentinels of Safety award for their performance, safety performance in 2003, and received the ISO 14001 Environmental Certification during the year.

On the exploration front, drilling west of the Gallagher fault has identified mineralization in known ore horizons. Assays from the initial drill holes indicate ore grades over mineable widths. While it is early, we are optimistic that this exciting discovery will eventually become an economic deposit. We are earning into a 50/50 joint venture with Great Basin Gold at Hollister Gold exploration project in Nevada. The land access issues were resolved last September and we were able to begin construction of the surface support facilities in October. This allowed us to collar the portal in December and begin excavation. Severe winter weather has hampered the schedule somewhat, but the surface construction is 90 percent complete. We have advanced the decline approximately 500 feet and we expect to begin underground drilling in the third quarter as scheduled. The feasibility is expected to be complete summer 2006, and will include 5300 feet of development to construct drill platforms, 55,000 feet of underground diamond drilling and 800 feet of expiration drifting on veins.

The Lucky Friday produced over 2 million ounces of silver last year, and while the costs were slightly over $5 per ounce, the team did a remarkable job of holding costs down in the face of extreme increases in the price of diesel fuel and steel products. We were able to increase our proven and probable reserves by more than we mined during the year, and we have been able to increase the strike length of 30 vein by approximately 12 percent. Our drilling during the year also helped increase the quality of our resource estimate, and has set the stage for additional resources to be added during the next couple of years. The 5900 level development project progressed on schedule and on budget throughout the year. We have drifted over 5300 feet since last April and crossed the 30 vein with a drift earlier this month. We are currently completing some preliminary secondary development and will begin development along the 30 vein late in the second quarter. The first stoke from this area is expected to begin production late in the third quarter and we expect to reach full production in 2006. Exploration during 2005 will focus along strike and down dip on the 30 vein and will look at one additional new target during the year. The Board of Directors at the December meeting approved a capital project designed to improve the quality of both the lead and zinc concentrates, as well as improved metal recoveries. Construction will begin in the second quarter and be completed in the fourth quarter. I am very excited about the future of the Lucky Friday. Tom, I will pass it along to you for notes about Venezuela.

Thanks, Ron. The Venezuelan operation completed the year with a flurry of capital and exploration projects. As we ramped up our development activities at Mina Isidora and the La Camorra shaft. We continued our aggressive exploration programs at Block C, La Camorra and surrounding areas. Our annual production was up 3 percent compared to the previous year, and is anticipated to increase an additional 10 percent in 2005. Over the last 3 years, the operating depth of the La Camorra mine has increased by 216 meters, more than 700 feet. This has extended the access ramp by more than a mile. Leading to increased travel times for personnel and materials, increased equipment operating and maintenance cost, increased severity in equipment duty, as well as the addition of over 1,000 horsepower primary ventilation fans. Operating costs increased by about 17 percent on a year to year basis. Most of this was anticipated as a result of the greater depth. And in the third and fourth quarters, the additional waste handling and operational interference for the development to the La Camorra shaft. In addition, other factors leading to higher costs were a worldwide increase in steel prices, a local increase of 40 percent in explosives prices, and the rising cost of mining equipment spare parts from the European manufacturers due to weakness in the dollar. The La Camorra shaft is justified for ventilation and safety reasons alone and has already provided significant benefits. Installation of a hoisting system will reduce the La Camorra operating costs and waste expense. Reduced personnel travel time providing more productive hours during the shift, and elimination of almost 75 percent of the haul truck operating hours. The hoisting system is scheduled for commissioning during the second quarter.

Mina Isidora is being developed from an historic Pozo de Agua incline shaft and the new [indiscernible] ramp. Rehabilitation incline shaft is about 90 percent complete, and level development has commenced. The shaft capacity is limited, but will provide approximately 100 tons per day of one-ounce ore by the end of the year. The ramp is advanced over 600 meters and will be in a position to start testing the upper portion in the ore body in the second quarter. Although development ore is not currently expected until the fourth quarter. Use of the incline shaft has allowed us to limit the infrastructure development required for the ramp, reducing preproduction costs by as much as $5 million.

The internal political situation in Venezuela has substantially stabilized, following the presidential referendum last August, and a regional elections in October where the supporters of President Chavez prevailed in 20 out of 23 states. With this behind them, the Venezuelan President has started his drive for re-election in 2006, by focusing on regional issues and demonstrating his independence with verbal attacks on the administration in Washington, D.C. We remain actively engaged in Venezuelan government relations. We have access to the various ministries as well as the U.S. Embassy and we employ the services of internationally recognized consultants to assist in monitoring the situation. While political relations between the U.S. and Venezuelan governments are becoming more heated, the commercial relations remain strong. With a continuing effort to attract foreign investment, our strategy is right out of Hecla's 114-year history. Be a good neighbor, support and invest in the communities you live and work in, live by the law of the land, and in doing so, we've become an accepted partner in the development to the Venezuelan gold mining industry. This is best exemplified by our small miner programs where a relatively modest investment of just $5 million has provided equipment, technology, and working capital for as many as 29 small mining cooperativas that have directly employed more than 400 people, and has recently earned us the Medal of Recognition from the Governor Rangel of Bolivar State. Our involvement with the small miners through our custom milling business also provides significant geologic information and that to generate enough revenue to be self sustaining by the end of 2005.

Exchange controls have been in effect in Venezuela for two years. Until now, they have had limited -- they've had relatively little impact on our business. Last week, new regulations were published in the official gazette containing significant changes to the exchange control rules applicable to the export of goods and services effective mid March. We are evaluating these new regulations, and believe they will have an impact on our cost per ounce in the range of 10 to 20 percent. While this provides an additional challenge, over the last 5 years, we have repeatedly demonstrated our ability to work successfully in Venezuela while facing a wide variety of situations. We remain confident that this rich geologic environment will continue to provide high returns for our shareholders. I haven't spoken much about ventilation because today that privilege belongs to our Vice President of Exploration and Strategy Ian Atkinson. Ian?

Okay. Thanks, Tom. Before talking about exploration I would like to make a few comments about our year end reserve resource numbers, which we released today. Our 2004 year end proven and probable reserves stand at 834,000 ounces of gold and 45 million ounces of silver, which is very similar to our 2003 year end numbers which were 848,000 ounces of gold and 45 million ounces of silver. We replaced or increased the proven and probable ore reserves mined in 2004 at each of our properties with the exception of San Sebastian in Mexico, where ore reserves will be depleted and mining will be finished in the middle of this year. In addition to replacing the reserves mined in 2004, we were also successful in proving the quality of the overall resource base. Drill programs returned positive results at the Lucky Friday, increasing the reserve and improving the quality of the resources substantially, where we moved a large amount of material from other resources into mineralized material. At Isadora, drilling and further geological work resulted in improved grades with an excellent opportunity to increase resources in the future. In Mexico, the discovery of the Hugh zone beneath the Francine vein at San Sebastian has resulted in a new resource being defined that we will expand on this year. And at Greens Creek, again we've increased reserves and resources and that's an exciting exploration success west of the Gallagher fault.

So now moving on to exploration. In Venezuela, work in the fourth quarter continued to focus on the Twin Conductora structure on our Block B exploration property in the El Callao district. The Twin Conductora structure is a new mineralized shear zone that we discovered in the second quarter of 2004. The structure is a host to a large mineralized zone which we have now traced over a strike length of over 700 meters and down depth for some 400 meters. We've got intercepts ranging from 3 grams per ton to over 42 grams per ton from widths of over a meeter to over 20 meters. The structure is open in all directions and we will be continuing an aggressive drill campaign in 2005 to evaluate the potential of this new system. Also on block B drilling earlier in 2004, to the east of Isidora beneath the Old Chile mine an identified potential for another new ore chute. We obtained a number of ore grade intercepts with values up to15 grams per ton over 6.7 meters. We've already got additional drilling underway here to follow-up on those ore grade intercepts, which if we are successful will be easily accessible from the Mina Isidora workings. At La Camorra, we continue our deep directional drilling program in the fourth quarter and although the results were not as good as we expected, we still have two excellent targets there, one to the east -- on the east flank of the main zone at La Camorra and the second target at depth to follow-up on earlier drill results where two holes have returned assets of 11 grams per ton over 2 meters.

In Mexico, drilling in the fourth quarter continued to define a new resource below the Francine vein which we call the Hugh zone and Ron has already talked about this. And drilling will continue in 2005 to further define. And I think, as Ron has already indicated, our target there is to at least double this resource to be able to develop a viable deposit. The Hugh zone is our first priority target at San Sebastian. However we've also identified a number of other high priority targets to the west and north of the mine which we will also be drill testing in the second and third quarters of this year. And again, it is -- as Ron already mentioned at the start of this year, we've actually added substantially to our large land position around San Sebastian by acquiring the La Roca concession. The La Roca concession is a historic mining district that lies to the northeast of San Sebastian and it has excellent potential for both silver and gold.

In the U.S., Ron again has already talked about our progress at Hollister and certainly we expect to be drilling there from underground ground by the third quarter of this year. And to help define the resource we have there. At the Lucky Friday mine, we carried out a very successful exploration program in 2004, which led to an increase in the strike length of the deposit, and the resulting increase in the resource. We plan on carrying out additional drilling there in 2005 to test the gold content deposit at depth and also test other targets to the east of the deposit and elsewhere on the property.

We've also had some exciting results at Greens Creek in Alaska. In the fourth quarter, we completed some additional underground drilling targeting the mineralization that we had discovered west of the Gallagher fault earlier in the year. We have completed an additional 9 holes and all have intersected significant mineralization with the longest continuous intercept in mineralization being over 280 feet in length. Actual results for the holes are still pending. However the sections of course grain galena, sphalerite, ruby silver, as well as electrum and acanthite which are usually very good indicators of promising grades.

I guess we will continue with an aggressive exploration program in 2005 at all of our properties. We expect to spend approximately $23 million on exploration and predevelopment expenses. On that note, I will pass you back to Phil for some closing remarks.

Yes, you can see why we're excited about the prospects for Hecla Mining Company. We have excellent properties, excellent districts that we're in, we've got a strong balance sheet to be able to move forward with those projects, and we've got operations that will continue to operate along the lines of what you've seen us do over the last few years. And so, with that Vicki, I think we are ready.

Operator, could you give the instructions for the question and answer period now please?

[operator instructions] Your first question comes from Terence Ortslan of TSO and Associates.

It is Terry Ortslan. Good afternoon.

Hi, Terry.

Thanks. Just a couple of questions. On the balance sheet we had short term investments go from 18 to 28. What's in there?

Well, the -- one of the items is the inventorying the ore at San Sebastian. That would be one item. What else is there, Lew?

That's a short term investment? The ore?

I'm sorry you said short term investment. I misunderstood the question. What is included in there is our investment in Alamos.

Okay.

That's the primary thing. And then there is also just various other short-term investments, in marketable securities.

Mostly marketable securities still or is it also paper?

Mostly marketable securities.

Okay. Just coming back to Ian's -- on Greens Creek, can you put another dimension geometrically to this recent discovery at Greens Creek, have some arm waving here, in terms of what we got in Greens Creek in terms of resource base or life or a new dimension geometrically?

Not at this point. The significance of the drill holes is as I said west of the Gallagher fault which is a major, roughly Northwest fault, so this has extended the mine stratigrafy across a fault that has probably got a displacement on it of at least 1,000 feet. What we're doing right now is pushing the drift across the fault to get ourselves above this mineralization so we can drill it properly and define the shape of it adequately. The holes we drill currently are fairly long holes from the drift on the east side and that long intercept, quite likely if you're familiar with Greens Creek at all, it is a highly folded ore body, and so you have got to get above it to be able to drill it properly to define it properly. But the fact that we've got, you know, all these nine holes of hit mineralization over probably an area that is oh, 500, 600 feet long, and probably 150 feet wide, you know, is -- has really got us encouraged.

You want to add anything, Ron?

The one thing I might add, or actually a couple of things, is that this is the first time we've done any significant exploration on that side of the Gallagher fault so again it is significant from that standpoint. It brings a whole lot of territory into play in the exploration program. And the other thing is, is that, you know, we've historically found deposits kind of down dip and offset on faults at Greens Creek that -- and I would expect that if there is something there, it would be similar to those kinds of discoveries that we've had in the past.

Got you.. On the 20-odd-million you're spending this year, Ian, how much is going to go to Greens Creek?

Our portion of the Greens Creek runs about a million dollars, the total program there is about 4.

Okay. And Phil, just coming back to the Greens Creek again, the zinc prices as they are, I mean are you expecting a better year in terms of [indiscernible] costs for Greens Creek? Any reason why not to expect that?

Off hand, I don't recall -- do you recall, Lew?

Actually, I believe it is fairly consistent with last year, although with -- I believe the prices for zinc that are in our budget, perhaps you're seeing higher prices today so we could see some benefit from that.

There is going to be some offset there with the silver grade being a little bit lower.

But in order of magnitude, a dollar to $1.20 sort of cost per ounce.

Okay. Pretty good number.

Yes.

Pretty good number. Just coming back to Lucky Friday, I think I missed that statement. Something about the 30 vein and you're targeting another area this year. What was the reference on that?

The 30 vein. That's the vein that we've been mining -- Lucky Friday for some time now and what has happened is it has expanded its strike length. What else do you want to --

I think your question is more related to what we're going to do this coming year, and we're looking out quite a distance along strike, out into an area that we have traditionally not looked at before, so we're trying to expand that strike length significantly rather than just small step-outs with the drilling this year, as well as down dip, and then there is one additional target area that isn't even related to that vein at all that we're going to drill a hole at.

There is also a series of other veins that we're seeing more encouragement from those as well that are parallel.

Right. That's something that we haven't talked about a whole lot but the major producer at the Lucky Friday has been this 30 vein in the Gold Hunter area. But there are a series of additional veins that -- there's probably 15 of them, that over the period of the last year, year and a half, we have, for the first time, have been able to get economic production on them. Now they're fairly short in strike length traditionally and they require us to go back to old mining methods like slushers and Jack legs but we've been able to develop some very good systems for doing that, and while they're fairly low productivity, they have been very high margin stoves, very high grade. So there is some more opportunity there that we're going to continue to pursue in the future.

Now, you guys have done a great job on Lucky Friday. It has been top form. Any adjectives you want to use. So if you were to take me out to 2005, the numbers you gave to us, with mine sequencing and all, what numbers should we use in terms of let's say a range of production, a range of costs.

At the Lucky Friday?

Yes.

Roughly 4 million ounces of production at a cost of 4.50-ish sort of.

In the next five years?

Maybe even a little let than that.

We're going to put some effort next year, or this year, in 2005, looking at some ways to get through our infrastructure constraints and that kind of thing. We're going to actually look at increasing throughput, but there are a number of infrastructure issues we've got to deal with there, and if we can do that, then there's opportunity to improve on those numbers that Phil just gave you. But we've got some homework to do there.

Just before I sign off, how many shares of Alamos do you guys have now?

Do you remember the exact number?

Or a percent.

9.4 percent.

Okay. Thanks for your time. Thank you. Thanks for a thorough presentation.

Thanks.

Your next question, sir, from Anthony Sorrentino [ph] of Sorrentino Metals.

Hello, everyone.

Hi, Tony.

Hi, how are you?

Doing great. What you would expect your capital expenditures to total in 2005? And would you give a break down of them by property?

Yeah, it is $43 million is our capital expenditures for the year. 10 million at the Lucky Friday. 28 million at La Camorra. And 5 million in Greens Creek.

Okay. Very good. Thank you very much.

Okay. Thanks.

Your next question comes from Geoff Stanley of BMO Nesbitt Burns.

Good afternoon. A couple of questions. Just hoping you can clarify the timing a little bit on increases from production from Lucky Friday, so perhaps a question for you, Ron. You know, is it going to come thick and fast from the first quarter? Or are we looking at gradual improvements throughout the year? And then I was wondering if you can elaborate a little bit on details of, you know, naturally the progress you're making on the strike at San Sebastian.

Okay. In terms of the Lucky Friday, you're going to see most of the increase in the last half of the year, but we will begin to make some production out of that area in the second quarter. The basic plan is, is that we're doing some -- we've actually crossed the vein now, and we're doing some preliminary lateral development out in the waste to get ourselves on the proper elevation and then we will take one pass across the entire strike length, over the course of the next two or three quarters, and then in the third quarter, the first stope -- production stope we will actually move down there, and by early first quarter, 2006, we will have all of the stopes beginning into production. So by2006, first quarter 2006 we will be at what we're now considering the capacity of that part of the deposit to be. But there will be some gradual improvements over the course of the year. In terms of the progress at -- on the strike at San Sebastian, for the first time this week, we have been able to get the union to discuss some specific issues at the mill, which was their original basis for the strike. So for the first time they've been willing to talk about detail.

Okay.

So I'm encouraged from that standpoint. There are certainly a lot of issues that have got to be dealt with.

Right. And you intimated there will be a further 30 percent increase in production from Lucky Friday into '06. Or is that measured against '05 or is that measured against '04?

That's measured against '05.

Basically, we will do -- we will jump from 2 million ounces in 2004, to 3 million ounces in 2005, to 4 million ounces in 2006.

Okay. So the second half of next year, sorry, of this year, should be pretty attractive.

Yes.

All right. Excellent. Thank you very much. And good luck.

Thanks, Geoff.

Your next question from Mike Jalonen of Merrill Lynch.

That's a good variation of my name, Phil. I will have to use it. But some of my questions -- most of them have already asked but I guess I will go back to the big picture question I seem to ask you guys all the time. You seem to have stuck your toe into the corporate development world with your interest in Alamos -- was it 9 percent or so? Just wondering, obviously you'll [indiscernible] for investment purposes, but you must have an eye on the property and the company, and certainly Mexico is your backyard, just wondering if you had any more comments on it.

You know, we own 9.4 percent. We had an opportunity to look at the asset, and so we thought it was a good investment and we will see where it takes us.

I guess you will be watching the presentation next week?

I'm not sure which one you're referring to.

I guess remember the Alamo. You know, I don't know if you want to mention your competitors but anyway --

I will let Jeff mention that. Okay, well thanks for that.

Ladies and gentlemen, if you have any further questions, please key star one now. Your next question come from Mike Curran of CIBC.

Hi, guys. Just wondering the Hollister Block, does that get lumped into the exploration and predevelopment cap ex or is there a separate -- I don't think I heard a number for Hollister Block in '05.

Yeah, we will spend $23 million on exploration and predevelopment, 14 million is exploration, and 9 million is predevelopment, and that's all Hollister.

All Hollister, all right. Excellent.

All right. Anything else, Mike?

Nope, that's good.

Thank you.

Sir, that was your final question. I will hand the call back to you.

Well, thank you, operator. That was the fourth quarter and year-end 2004 Hecla Mining Company conference call. If anyone has any further questions, they can call me, Vicki Veltkamp in investors relations at 208-769-4144. Thank you all for joining us, and have a good day.

Ladies and gentlemen, that does conclude your conference call. You may now disconnect.