Hecla Mining Co (HL) 2007 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to first quarter 2007 Hecla Mining earnings conference call. My name is Fab, and I'll be your coordinator for today. At this time, all participants are in a listen only mode. We will conduct a question and answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) I would now like to turn the presentation over to Vicki Veltkamp, Vice President of Investor Relations. Please proceed, ma'am.

Thank you, all for joining us today. As the Operator said, I'm Vicki Veltkamp with Hecla Mining Company and we're pleased to be conducting our First Quarter 2007 Conference Call. Our call is being webcast live today at www.Hecla-mining.com. And on our website, you can find the financial results and today's news release, and in the news release we've reconciled the GAAP, the cash cost per ounce calculations. Today's presentation will be made by Phil Baker, Hecla's President and CEO; and he will be joined by Lew Walde, our Chief Financial Officer; Mike Callahan, who is our President of Venezuelan Operations; Dean McDonald, our Vice President of Exploration; and today we have Scott Hartman, our Vice President of Technical Services standing in for our Senior Vice President of Operations, Ron Clayton. Ron is undergoing surgery today, but we expect to see him back and healthier than ever in just a couple of weeks. So, following the comments from these gentlemen, we'll have a question and answer period.

But before we start, I need to let you know that any forward-looking statements made today by our Management comes under the Private Securities Litigation Reform Act. It involves a number of risks that could cause actual results to differ from projections. And in addition in our filings with the SEC, we're allowed to disclose mineral deposits that we can economically and legally extract or produce. And investors are cautioned about our use of such terms as measured, indicated, and inferred resources, and we urge you to consider those disclosures in our SEC filings. And now I'm happy to turn the call over to Hecla Mining Company's President and Chief Executive Officer, Phil Baker.

Thanks, Vicki. I want to start off by adding my welcome to Vicki on today's Conference Call. We appreciate you listening to our thoughts on our Earnings Release, and our first thought is really the surprise to see the stock performance of today and of the last few weeks. 2006 had the best earnings and cash flow in the history of the Company. And this continues with the First Quarter of 2007 having the third best earnings and cash flow in the last 27 years. Unfortunately, for the comparison for this quarter, the best in the history of the Company was the First Quarter of last year on the back of an asset sale and the fact that some people who write headlines don't bother to understand what they're writing about.

Anyway, these record level earnings and cash flow are after a very aggressive exploration program that's delivering, and I think investors will -- if you look at the fundamentals, you will see a Hecla that has a base of operations, exploration and financials that is going to deliver value and growth with very low risk. So I think the stock price will rebound to levels that we've seen recently and go significantly beyond that. Now, why do I say that? Well, last quarter, I talked on this Conference Call about the fact that we have a 40 square mile land package in the Silver Valley that we were going to digitize the data from the dozens of mines to develop a 3D district model. Now, I thought it would be toward the end of the year before we would see any results. Well, with incredibly fast work done on a 24-7 basis, we now have a 3D model of the Lucky Friday, the Lucky Friday extension, and the Star Morning Mine. This is an area that is about three miles by two miles where 200 million ounces have been mined, and we think we have maybe another 200 million ounces to mine based on our current resource and the logical extension of it. So when I saw the 3D model of this area, I was amazed to see 7,500 feet of vertical continuity on the Star Mine and 5,000 feet on the Lucky Friday, next to the Lucky Friday extension, where we have a 2,500 foot gap from the historic mine at surface to where we're mining today.

We now have a hole in that gap stopped in the mineralization that is providing the first evidence of what you would expect visually from the 3D model, and that is the continuity from the old workings to 8,000 feet. Now, Dean's going to talk more about this, but we could not be more excited about the possibility and maybe even the likelihood of creating true value by discovering a whole new section of the Lucky Friday extension that could be tens of millions of ounces or more. This of course could tie into the expansion program that we are working on that is to be justified based on mineralization that's 4,000 feet deeper.

Next week, we'll have slices of this 3D model on our website from our Annual Meeting presentation that I encourage you to examine because I think once you see it, you will understand not only the potential of the extension, but you'll also see the exploration potential on this three by two square mile block. These are huge systems that will generate massive amounts of metals -- or have generated massive amounts of metals, and the exploration we're doing is not going to be searching for a needle in the haystack. We're looking for very large systems. But that's not the end of the story in generating true value to shareholders. At Greens Creek, exploration at the 5250 area -- again, this is above our existing workings -- is discovering more and more mineralization. So much more that we are now evaluating if the controls we thought limited the mineralization are correct, and while there's more from an exploration standpoint, there's also just the solid nature of our operations that are delivering more value by mining beyond the reserve and even beyond the resource, so our shareholders are getting more than what the market has valued the Company on and we're going to work to continue to do that.

Now, one comment on the earnings estimates which seems to be causing a lot of turmoil in the market, particularly in our stock. Our revenues and earnings this period and every period are driven by the margin -- by what gets driven at the margin, by what gets shipped to the smelter, and which direction final settlements go on provisional payments. Interestingly, if our concentrates at the Lucky Friday had been a little drier, so they could have been shipped, or if the ship going to Greens Creek could have been there a little earlier, we would have certainly met our estimates -- the analyst estimates -- and probably exceeded them. So I'm not sure why the focus on the quarterly earnings and its impact on the value of Hecla, but we're going to consider whether we need to report non-GAAP numbers that normalize these earnings. We'll think about that over the course of the coming quarter. In the meantime, Lew will talk about what the impact was of this on this quarter.

Now there's more I'd like to talk about, but I'm going to stop here and let Lew give you some insights into the financials and my other colleagues on what they're responsible for. But before I do that, let me mention that we have Scott Hartman standing in for Ron today, due to the surgery that Vicki mentioned -- and the reason we're doing that is to let you see the depth of talent we have at Hecla. We have more experienced people than you would expect from a company our size, and that's an advantage in this market both in terms of operating our existing assets and acquiring new ones. With that, Lew, let me ask you to take over.

All right, well, thank you, Phil. To get started, our silver production totaled 1.6 million ounces in the First Quarter and this was produced at a record cost of negative $1.12 per ounce. This production enabled Hecla to realize income of $8.1 million or $0.07 a share, which compares to $2.8 million or $0.02 per share in 2006, before the $35 million gain on the sale of investment. So we're very pleased with the results we have achieved in the First Quarter and feel we're off to a very good start to 2007. Now the major variances between the periods are discussed in the Press Release, so I won't go into those details, but let me focus on a few other items that are included.

First of all, let's talk about something I like to pass on as far as general knowledge for our shareholders. I think it is very important for our shareholders to understand how our revenue and profits can be impacted by concentrate shipment timing and smelter contracts. During the First Quarter, we produced metal that had a value that was approximately $4 million greater than what we were able to ship and recognize as revenue. With the margins contained in our production, this has an impact on the timings of earnings realization. Additionally, because our revenue on sales to smelters is recorded at provisional prices, the metal prices we use to record revenues are estimates, and these get changed each period until the final pricing period of a smelter contract. And of course, we all know that prices change daily, but prices for zinc dropped quite a bit from the end of 2006 to the end of the First Quarter of 2007, and as a result, we had reduced revenues from concentrate shipments made in previous periods to the tune of about $1.7 million. The combined impact of these two items on the First Quarter is approximately $0.03 per share in earnings. Now, these issues are not uncommon in the mining industry, as I think some of you may have seen, both Teck Cominco and Pan American have cited similar issues with regards to their First Quarter. So again, these impacts are very normal in our business and don't reflect any issues with our business or our plans going forward.

The second item I'd like to talk about is the functional currency in Venezuela. As we discussed during the last earnings call and we disclosed this in our 10-K, we change the functional currency for accounting purposes in Venezuela from the U.S. Dollar to the Venezuelan Bolivar effective January 1, 2007. This had an impact of reducing our supply inventory balance and our property plant and equipment balance in Venezuela by about $7 million. The offset to this reduction is really a reduction in the equity, which is included in the accumulated other comprehensive income section on the Balance Sheet. This change also means the local financial statements will be converted at a current exchange rate rather than historical rates, and any future exchange gains or losses resulting from translating the financial statements will be deferred in the equity section of the Balance Sheet.

Another issue that we talked about last time was taxes, so let's discuss this a little bit further. Last quarter, I spoke about our tax position in the United States and the fact that we have $250 million in tax loss carryforwards available to offset future taxable income. And as a result of that, we recorded a deferred tax asset of $11.8 million, which represented utilization of these tax benefits over the course of the upcoming 12 months. So during this First Quarter, we amortized off about $2.2 million of this asset, but we also added an additional asset of about the same amount which represents the First Quarter of 2008, thus maintaining this 12 month look forward. But although the value of the assets actually increased for the balance of 2007, the accounting rules require that this increased value not be recognized immediately, but rather, it is recognized over the course of the year being an adjustment to the effective tax rate that's going to be applied. Thus, no additional benefits for this increase in value is recognized this quarter. We will continue to perform this analysis each quarter until such time as enough positive evidence indicates that the reserve on these tax losses can be lifted for a period of time longer than 12 months. Certainly in today's price environment, we would expect this to occur sometime later this year.

Moving on to our cash flow in 2006, we recorded record cash flows for the year from operations of about $60 million, and during this First Quarter we're off to a great start to match or exceed this amount in 2007. For the quarter, we generated over $16 million in cash flow from operations despite not shipping all of the production that we produced. This cash generation led to an increase in overall cash and short-term investment position to over $111 million at quarter end. I realize in April we also received cash proceeds of about $45 million related to the sale of Hollister in Nevada, which further increases our already strong cash and short-term investment position. Of course, speaking about Hollister in the sale, this sale was completed in April of this year during the Second Quarter, and Hecla received cash as well as shares of Great Basin gold stock and we will recognize the gain of approximately $63 million, which again be included in the Second Quarter results.

Now, although I mentioned I wouldn't talk about too many items in the Press Release, there is one item I would like to mention, and this is in the environmental area. First of all, our people who managed at the Rosebud reclamation project in Nevada received accolades from the Bureau of Land Management for the fine work that was done there and I want to extend my congratulations to that team that was involved in that project. But as many of you know, Rosebud is not the only place where we are dealing with environmental matters. I am very proud to say we have completed reclamation activities on a number of projects over the past several years and decreased remaining work on sites such as Grouse Creek, where a large portion of the site has now been reclaimed and we are beginning some of the reclamation work on the tailings impoundment. We've also essentially completed all the yard remediation work at the Bunker Hill Superfund site in Kellogg, although well as some additional work remains here as well as few larger issues, and we're also involved in litigation surrounding the Coeur d'Alene River Basin in the Silver Valley. Again, for your knowledge, it is our practice to review the status of our accruals each period, and in recent periods we have only had minor changes to these accruals. But as we continue to advance these projects, gain new information, it's important to remember that it's always possible that changes in these estimates may occur.

So that wraps up those items, so just a quick summary on the First Quarter, the First Quarter was what we expected it to be. We had good earnings, great cash flows, and a growing cash balance. Our production estimates remain on track for the year, and we've seen improvements in our silver cash cost. Now I'd like to turn it over to Scott, who will discuss our operations.

Thanks, Lew, and good day. Our First Quarter operating performance at the Lucky Friday was right on track to meet our 2007 projections. One of the things we are quite proud of is that our operating costs per ton are very similar if not lower than most underground mines. This is in spite of the fact that our production comes from much greater depths and horizontal distance from our main infrastructure than most underground operations. This is not new, but has been a trademark of our performance for many years and a real credit to our people at the mine. They are truly some of the best in the business. During the First Quarter, we continued to mine some areas of the mine wider in order to extract additional zinc that we would not otherwise mine. This strategy continues to provide enhanced short-term and long term economics, even though it results in lower silver grades and delayed silver production in the current period. We will continue to employ this strategy so long as zinc prices provide us with this opportunity. But we are constantly monitoring this to make sure we are enhancing the economic performance of the operation.

We have three very important projects going forward at a brisk pace this year. Mill upgrade project is designed to improve our zinc recovery and improve overall mill performance. This project includes additional zinc flotation equipment and online analysis and is scheduled for completion this fall. We have started the engineering and design work for the new number 4 shaft, which will provide us access to the (inaudible) the 6,200 level and to depths of our current drilling which extends to nearly the 8,000 level. We expect this engineering to be complete mid 2008, and construction is likely to begin in 2008. The third project under way is the mine expansion pre-feasibility study. This study is examining the potential for higher production rates and the infrastructure requirements and economics of such an expansion. Obviously, we see great upside potential in the future of the Lucky Friday as well as strong current financial performance. Cash costs per ounce continue to be very low at the Greens Creek mine. Silver grade was up due to mining from zones with higher silver grades. We hope to be able to continue this throughout the year. Recovery of all metals increased as the upgrade to the lead flotation circuit was completed and brought online. Greens Creek is on track to meet projections for the year and we are very encouraged by the drill results in the 5250 zone. Because we are finding major extensions to ore in a zone that is already in production, this new ore has potential to be in production relatively soon. Dean will talk more about this exploration.

At our La Camorra Unit, production was -- as expected -- would cost higher than last year due to lower grade. To improve costs and production, we are working to reduce employees which would not affect tonnage, optimize metallurgical parameters for the Mina Isadora ore, and increase production from Mina Isadora. Ron and I want to commend the job our people in Venezuela have done as we transition ore sources feeding the mill. Out of the last 11 quarters, this is the fifth highest production we have had, which is a result of the dedication and hard work of our team there. At our San Sebastian property in Mexico, the Hugh Zone pre-feasibility study continues to advance. All but one of the consultant reports have been finalized. We have tendered, received and analyzed contractor proposals for a shaft. Most of the components of the study have been completed and we are in the process of updating a consolidated economic model. The infrastructure to access this deep deposit requires the significant investment of time and resources. While the economics of the project appear robust in this price environment, we may decide to allow other nearby exploration targets to develop so that we can assess if there are multiple deposits that could be serviced by common infrastructure. As you are aware, we sold our share of Hollister, so with that, I will turn the program over to Mike Callahan for further discussions of Venezuela.

Thanks, Scott. Just a brief follow-up to Scott's comments, we're really excited about the performance at the La Camorra Unit as we transition to almost all of our production coming from Mina Isadora. This is something that we've been working toward for the past three years. Now, we can focus even more attention on the rest of our two land packages to extend the life of the Unit. On the cost reduction front that Scott mentioned, we're really focused on reducing the workforce. This has been and will continue to be challenging as there's a firing freeze in the country; however, we have been able to reduce the workforce by about 250 workers so far and we look forward to reducing it by another 150 over the remainder of the year. On the political side, President Chavez continues to talk about moving forward with his socialist agenda and no one, even Chavez, is really clear what form this will take. Chavez recently stated he's not sure what 21st Century socialism will look like in Venezuela, but it's going to be the people of Venezuela who will decide what form it will take. The reason I mention this is because the one thing that is very clear -- the companies that are going to be operating in Venezuela will need to have a program that provides social support to the workforce and programs for the community. And the advantage that Hecla has is that we have already a large social program and a big community support program in place, and we've had one for many years. In fact, Hecla's Community Relations program is the largest of any private gold mining Company in the country. The support that we provide to the communities where we operate is one of the reasons that Hecla has been successful through all of the challenges that the country has faced in recent years, and it's this program that will assist us in being successful in the future.

I think the political news out of Venezuela will be headline grabbing, but it will not negatively affect our short or long term prospects we have in the country. It will be more the perception of the country. I think everybody recognizes the geology of Venezuela is one of the top gold districts in the world, and Hecla's technical expertise makes it one of the best companies to mine this style of mineralization, especially these high grade vein structures. However, like other companies in Venezuela, we need permits to realize this. This past quarter, Gold Reserve received its permits to commence operations, and we view this as a positive statement that the government is supportive of foreign investment in the gold sector. This is really consistent with the message we've received over the past several months from the government there. Our most recent meeting with MIBAN was just last week, and it was very positive. MIBAN has committed to assist us in obtaining our exploration permits and we see them following through. In the five years I've worked in Venezuela, I have not seen a more responsive and committed group than I see today in the Ministry of MIBAN and the Ministry of Environment. Based upon our conversations, I sense they recognize that the lack of permits granted over the past several years has hurt the mining industry and they are taking a proactive approach to try to reignite this industry.

In short, our strategy remains the same: continue to build on the incredible success we've had in the country, but do it with a low profile, both in the country and in the market. We will reinvest where we can and continue to take some money out of the country. We are focused on applying our expertise to expand and improve our assets and take advantage of the geology that has generated tremendous cash returns to our Company and to our shareholders, and with that I'll turn it over to Dean to talk about exploration.

Thank you, Mike. Exploration has become an important component in the growth of Hecla Mining Company. Recent discoveries and resource expansions at Lucky Friday, Hugh Zone and Greens Creek have been the catalyst for pre-feasibility studies on new production, mine expansion, and future mine development that Scott has described. It's hard to follow-up the achievement of a 35% increase in the silver resource at the Lucky Friday recorded last year. The drilling in the First Quarter suggests outstanding resource expansion potential in the Lucky Friday in the near future. As Phil mentioned, the first drill hole collared on the 4050 level was drilled upward into a 2,500 foot gap area along the structure between the current mine workings of the Lucky Friday extension and the bottom of historic mine workings near surface. This hole entered a broad alteration and structural zone that contained multiple intervals of silver base metal mineralization. These multiple zones varied in width from 4 to 8 feet and contained grades up to 7.3 ounces per ton silver and 14% combined lead and zinc.

Unfortunately, the hole was abandoned within this mineralized zone before it intersected the main target as it reached the full capacity of the drill. Now, why is this intersection important? When we project the 30 vein, which was the dominant vein in the Lucky Friday extension, this drill hole has not gone far enough to intersect it. The drill hole also deviated to the east and only intersected the fringe of our strike length projection of the vein. I am very confident that we will have significantly better intersections of silver and base metals as we refine our drill targeting.

With that in mind we are currently reviewing alternative platform locations to fully evaluate this outstanding target. The options include drilling from surface with some form of directional drilling, reestablishing the Gold Hunter sixth level as a drill platform above, or putting in new development on the 4050 level to drill from below, or all of the above. Drilling under way from the 5900 level is designed to confirm the western extension of the resource to 6900 elevation. By the end of the year, Hecla should have adequate drilling to define the resource down to 7200 feet, which is another 400 feet below our current resource. As we have mentioned before, drilling has intersected continuations of this mineralization below 7,900 feet, so I think lots of news to come from that area.

We're now leveraging our strategic 40 square mile land position and knowledge of the Silver Valley into a major multi-disciplinary exploration program that will provide resource expansion beyond the Lucky Friday mine infrastructure. It's been 50 years since there's been a concerted regional surface exploration program on the Hecla ground, but early 3D modeling and surface GIS work is producing quick dividends. A preliminary 3D model of the Star Morning mine is suggesting that projections of known structures and veins from the Star towards the Lucky Friday infrastructure have never been identified and certainly never drilled. As Phil mentioned, in creating the 3D model of the Star Morning complex, it just reinforced how amazing the vertical continuity of the ore zones in these mines are. This is vertical continuity exceeding one mile. The potential for finding another major vein structure in this area is very likely and the impact on resource development could be staggering.

At Greens Creek, an aggressive underground exploration drill program utilizing three drills is currently expanding the 5250 North extension. Some spectacular intersections have been recorded in this years program with some intervals exceeding 30 ounces per ton silver and combined lead zinc of 18%. Mineralization in the 5250 zone is now believed to extend well beyond the faulting in shearing constraints earlier proposed, and could easily double in size from the over 2 million tons at 16 ounces per ton silver and 11% combined lead zinc currently in the reserves.

As Scott mentioned, what also is remarkable about the 5250 zone is it's in very close proximity to much of the underground workings and really limited development is required to put most of this zone in production. At Greens Creek, surface drilling won't begin until June, but final synthesis of anomalies generated by MT and AMT geophysical surveys are completed. As a result, drill targets this summer include Upper Plate, East Bruin, Upper and West Gallagher and Little Sore. What's important in all of these targets is that these are all localized in the same geologic contact as the current mine.

In Mexico, Hecla holds more than 340 square miles of contiguous concessions in the State of Durango. We refer to it as the San Sebastian project. An aggressive regional program of geochemistry and geophysics has been adding on to the more than 15 targets already generated on the property. For instance, strong geophysical anomalies have recently been defined a long trend of the past producing Francine veins at the Nazareno and San Nagel areas (sic - see Press Release). We're currently evaluating the St. Jude vein where drilling has defined mineralized quartz veins that show downplunge continuity. The reason we're emphasizing the St. Jude vein is that this potential new resource is parallel to and within a kilometer of the Hugh Zone where pre-feasibility study is being completed. Any additional resources defined at St. Jude could quickly be incorporated into the Hugh Zone study.

Elsewhere on the property, drilling has identified isolated veins and shears in the newly identified extensive area referred to as the silver anomaly. It lies southwest of the Hugh Zone, and again there's something that we may consider in the future in addition to the Hugh Zone. Drilling has also begun on the large regional quartz veins at the Rio Grande property, which is located approximately 30 miles south of San Sebastian property. Rio Grande consists of a series of high grade veins and branches that extend for over nine miles. Surface sampling of the veins has confirmed high grade silver and gold, so we now are preparing for an extensive drill program throughout 2001 (sic). Drilling at the Isadora mine in Venezuela has identified narrow intervals of high grade gold below the current mine infrastructure and revised resource estimates will incorporate this new information. A drill is also in place to identify near surface strike extensions of the Isadora mineralization.

Initial exploration surrounding the Camorra property has identified numerous surface anomalies and advanced exploration is planned. To finish off, the Vancouver office is now fully functioning and providing a platform to establish close industry contacts with companies that have emerging exploration and development projects. Hecla is pursuing exploration opportunities in Mexico and the Silver Valley, and we are evaluating where besides these two jurisdictions we should have exploration and development projects operating mines and pursue Corporate Development opportunities. With that, I'd like to pass it back to Phil.

I think Vicki, we're ready for questions.

That concludes our prepared remarks. Operator, would you give the instructions for the question and answer period, please?

(OPERATOR INSTRUCTIONS) Your first question is from the line of Anthony Sorrentino with Sorrentino Metals. Please proceed.

Hello, everyone.

Hi, Anthony.

What is your philosophy concerning the hedging of base metals prices?

Well, Anthony, we have a hedging policy that starts with the view that we add value to shareholders two ways. First, by developing new mines and deposits and putting things into production. Second, by giving investors exposures to the metals prices. So to the extent that we need to hedge to do the former, to develop new mines, then we'll do that. And if we do, we will hedge the base metals first. At this point, we have the financial capacity to do everything that we're envisioning without hedging, so until that changes, you won't see us put hedge positions of any size in place. We might do some small sort of interquarter things but nothing on a significant basis.

All right, fine. And at Lucky Friday, how will you decide which companies are being considered to engineer and sink the internal shaft?

We've got a team of people that are working on that as we speak, and there's going to be a lot of factors that come into play. The people that we're able to get, the time that they're able to devote to this and the cost. We've identified probably a half dozen potential firms that could do this work and we're in the process of evaluating how to proceed with them.

Okay, and one final question, would you give a breakdown of the at least $22 million that you plan to spend on exploration by location?

Sure. It is, well, we have roughly $9 million of that, that we've not yet allocated to the locations and, guys, help me out. Go ahead, Dean.

Sure. The key areas for exploration, we've allotted approved budget of over $5 million for Mexico. We're looking at with the Silver Valley spending about $600,000, and that's really the pre-emptive 3D modeling GIS. With Venezuela, we're looking at just under $3 million, and with Greens Creek, probably our component is about $1.5 million. But as Phil mentioned, there's $9 million that's at this point unallocated, and depending on success of projects or the acquisition of new projects, we'll move money where the success is.

If you go, and just to add to that, there's another roughly $4 million that's being spent in Mexico. I think that's probably covered just about -- maybe the Lucky Friday another $1.5 million or so at this point. Again, with that $9 million, it's going to be allocated to the projects that have the best success and the best outlook. And Anthony, there is always the possibility that we might exceed that $22 million. We of course will keep the market informed if we come to that conclusion that we are justified in spending more than that.

Okay. Sounds good. Thank you very much and congratulations on a good quarter.

Thanks, Anthony.

(OPERATOR INSTRUCTIONS) Your next question is from the line of David Bond with Platts Metal Week. Please proceed.

Hi, David.

Good morning, everybody. Great quarter. And I don't blame you for being a little bit sore at Reuters this morning.

I didn't get that either. Actually, I think the previous caller asked what I was curious about. You apparently allocated a little bit more of the exploration budget since your presentation in Zurich. Can you give me an estimate for sinking this new number 4 shaft at Lucky Friday? Order of magnitude, $20 million to maybe even as much as $30 million.

Okay, that should cover me.

Thanks.

Thank you.

Your next question is from the line of Terence Ortslan with TSO and Associates.

Thanks.

Hi, Terry.

How are you guys?

Great.

Thank you very much for the presentation again as usual. Just on Venezuela itself, I think it's a good overview and preamble for what's happening in Venezuela in terms of the socialist issues and the ongoing parameters of the politics -- but let's go back to the mining business in terms of one of the major deposits constantly yet to be permitted which constantly seems to be in the forefront of news -- Crystallex. If they get the permit conditionally or not, how would that change your view -- number one, and two, how do you think it's going to change your valuation of Venezuela?

Well, first, I guess I'd say that the permit being received by Crystallex -- and I'll let Mike jump in in a moment -- I don't think it changes our view of Venezuela. We actually have a pretty positive view of Venezuela. Terry, the time we've been there, it's been tough, but it's tough operating a mining company anywhere in the world, and we wouldn't characterize it as being any harder there. But having said that, the market seems to just look at the headlines and not focus in on what actually happens. Are you able to make money? Are you able to take the money out and we're able to do both of those things. So we think that a change in perception of Venezuela will have a big impact on our valuation because we don't think the market gives us much value at all. Mike, do you want to add to that?

I think Phil's right. I think the only comment is that I just agree with Phil that if you just look at the headlines, the advantage we have is that we have the ability to sit in and talk with the government and find out exactly what they're thinking so we don't have to rely on some of the sensationalism that's out there and especially a lot of it's political bantering, so --

And so many of the headlines is for local consumption really -- is that fair, Mike?

It really is. And I agree with Phil. It doesn't really change our strategy and our view of Venezuela. We're positive on it now and I think that it would only help the market's perception more than ours.

Well, if you're in the long term and long time in the mining business, problems are opportunities and obviously may turn out to be an opportunity after all.

Well, that's right and we think with the change, there's going to ultimately be a change in the mining law, right, Mike?

Yes.

We think a change in the mining law will actually open up some opportunities for us to do things that we wanted to do even a couple years ago but because of title issues as a result of the existing -- the application of the existing mining law, we had to back away from acquiring land packages because we couldn't be assured of the title. We think the change in the mining law will change that and give us the opportunity to do things that we haven't been able to do.

Talking about another opportunity in the neighboring country, let's say Ecuador, do you see that the same possibility may exist for you -- that the uncertainty today may eventually be the exploration results from a lot of the properties in Ecuador seem to be quite prolific?

Yes, I guess what I would say, Terry, is that we're contemplating where to go to plant our flag from an exploration, operating, Corporate Development standpoint. Because we have two places that we are very geographically focused in a portion of Mexico and the Silver Valley, and so we're looking for someplace else. As we've been prioritizing those potential places, Ecuador is not at the top of the list, and I think primarily because it doesn't have the silver assets of some of the other places that we're looking at. But we certainly would not rule it out as a potential place. We're just not there yet in terms of our evaluation process.

Okay. One last question. Is there any change of destination for the Greens Creek product in 2007?

Change of destination? Lew, in terms of smelters, there's not really any -- we had a change of a couple of years ago as we changed the product and tried to reduce the amount of bulk concentrates, but I don't think --

Typically, they have some frame contracts that are multi-year contracts, and I'm not aware of any change that's occurring this year, Scott.

No. I think they deal with several smelters and in general, the list is going to remain similar.

The same smelter but the terms are different obviously.

Oh, absolutely. The terms are improving, and in our evaluation and our budgeting for this year, we have not assumed any improvement.

Okay.

So I mean, we view there to be the opportunity, the potential for even better economic results than what we budgeted and what we're projecting to the market, but we'll have to see where they come out.

Yes, and as far as the answer has any of those termed changed as of yet, the answer would be no, that those contracts, the ones that get negotiated, they get finalized over the course of the next few months.

Sort of July.

In the second, third Quarter.

Okay. Thank you, guys, as usual, thank you.

Thanks a lot, Terry.

(OPERATOR INSTRUCTIONS) You do have another question from the line of Rodney Stevens with Salman Partners.

Hello, everyone.

Hi, Rodney.

Just a quick question, Phil. You may have gone over this before, but just curious, can you just go over what sort of your acquisition criteria Would be if you're looking at another asset -- what your focus would be?

We have three sort of programs. One is the geographic base program which is a portion of Mexico and the Silver Valley -- we're very much focused on things that are in those places. Secondly is a gold acquisition program that ties into our expertise as an underground narrow vein miner. We're looking for assets & companies that have those narrow vein underground mining operations that we think we can add value to and vice versa. And then thirdly would be silver assets. Oh, and by the way, on the gold assets, we're limiting ourselves to North America and Australia to geographically jurisdictions that are considered politically secure. And then thirdly is silver assets that we're looking for that are above 100 million ounces silver equivalent and we're considering those assets really anywhere in the world. So it's three separate programs, and we're quite active in evaluating opportunities that fit into each one of them.

Okay, I'm just in Mexico, there's a number of junior producers producing under a couple million ounces per year. Is there a certain threshold of production you'd only be interested or are these potential candidates as well?

Well, yes. When we look at those types of assets, the current production is interesting and we certainly evaluate that. But what's more interesting is their land package and the exploration potential that they have and the growth in the reserve resource space. And so we're evaluating things that we think can grow in terms of the reserve resource base.

Okay. Great. Thank you very much.

Thanks, Rodney.

You have a follow-up from the line of David Bond with Platts Metal Week.

Hi, guys, just back for another quick one. Care to name any companies you're looking at intensely?

David, we look at all companies intensely.

Okay. That's a politically correct answer. I have one other question and that's for Terry Ortslan -- if he's planning to get married in Puerto Ordaz this summer.

I have no idea.

Okay. Thank you.

There are no further questions at this time. I would now like to turn the call back to Vicki Veltkamp for closing remarks.

Thank you all for joining us today for the Hecla Mining Company First Quarter 2007 Conference Call. If you have any additional questions you can call me, Vicki Veltkamp. My number is 208-769-4144. That concludes our call today and have a good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.