Hecla Mining Co (HL) 2007 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the third quarter 2007 Hecla Mining earnings conference call. My name is Stacy, and I will be your moderator for today. At this time, all participants are in a listen-only mode. (OPERATOR INSTRUCTIONS) I would now like to turn the presentation over to your host for today, Miss Vicki Veltkamp, Vice President of Investor Relations. Please proceed.

Thank you. Thank all of you for joining us today. As the operator said, I am Vicki Veltkamp with Hecla Mining Company and we're pleased to be conducting our third quarter 2007 conference call. Our call is being webcast live today at our website, that's Hecla-Mining.com. On our website you can find financial results and today's news release and we also reconciled the cash cost per ounce as required at the end of the release. Today's presentation will be made by Phil Baker, Hecla's President and CEO, and he will be joined today by Lew Walde, our Chief Financial Officer. Mike Callahan, who's our President of Venezuelan Operations, Dean McDonald, our Vice President of Exploration, and our Senior Vice President of Operations, Ron Clayton.

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

Thanks, Vicki. Appreciate everyone being on the call. As I was preparing for this call, I looked back at last few conference calls and press releases, and I really see the message this quarter to be the same. Our silver properties have great economics with the exposure that we have to base metals giving us the lowest cash cost for silver in our long history. Each quarter, generally we had lower costs as the byproduct values have gone up and for at least the last four years, we've had the lowest among the primary silver producers. This has been driven not only by these base metal prices but also by investment we made over the course of the last three or four years to improve the efficiency of our operations, so one of the things that stands out with Hecla is this low cost that we have on a unit basis and how we've been able to maintain that cost.

The second thing, second message I see us continuing to mention is the exploration that we're doing on our world class assets, and this exploration has had proven success that's creating a pipeline of projects that's going to grow production in the future, and Dean will talk more about this, but it is not just one project, and it is not just one -- a number of projects at the same place in the pipeline. There is a whole series of things that are moving down the exploration pipeline. When I see these things, I see that we have the best risk return profile among the silver producers. I say it is the best risk profile, because the silver assets are in North America and very low cost, long-lived, and it is the best return because we have properties that for 25 years have been under explored, under invested, and in an under capitalized company. The exploration and capital program we now have is investing in these properties and using new technologies, and when I say new technologies it is a bit tongue in cheek because the last time significant exploration work was done at the Lucky Friday, for example, was before the invention of the PC.

I was talking to someone today, and they thought I meant politically correct, but before the invention of the personal computer, and in the few short months that we've been investing in the Silver Valley and bringing information into our PCs, we have significantly increased our knowledge on new things that we think is going to affect how we explore and what we do going forward, and realize that the potential returns that we have with this exploration are huge, so, again, the overriding theme is a low-risk profile with a high return potential, and I think you'll hear that from each of the guys making the presentations, and so with that, what I would like to do is turn it over to Lew to talk about our financial discussions, and I will come back at the end for a few comments, and then we'll take questions. Lew?

Thank you, Phil, and welcome to everyone. Hecla silver operations turned in another fantastic quarter this third quarter. We generated over $20 million of gross profit on about 1.3 million-ounces of silver production at what was another record low cash cost per ounce with that number totaling a negative $4.91. With the higher silver price, the higher byproduct prices, included a record high lead price during the third quarter, the Lucky Friday and the Greens Creek lines continue to deliver outstanding results.

One other thing to point out about our silver operations for the third quarter was that we also benefited from the finalization of smelter terms for our concentrate production at the Lucky Friday mine. These revised terms at Lucky Friday were retroactive back to the first of the year and resulted in about a $1.3 million benefit in quarter three, and we'll continue to see some benefit going forward with future shipments. At our La Camorra Unit we saw a reduced gold production during the quarter as all production is now coming from Mina Isadora. This combined with the after effects of the roadblock from the second quarter at Mina Isadora reduced our production and impacted our cash costs from the gold operations.

Phil mentioned already about our strategy, but let's take a moment to talk further about that and what our balance sheet means to our strategy. Our strategy continues to focus on the growth via the exploration, investigating opportunities at our existing operations such as the work on the Lucky Friday pre-feasibility study, as well as M&A activities, so Hecla's ability to have a three pronged approach to growth is a result of a strong balance sheet, excellent cash generating ability of the Company's assets, so while we've already invested over $41 million in exploration and capital expenditures this year, we also increased our cash and short-term investments by over $93 million since the end of last year, and that leaves us with about $195 million on our balance sheet at the end of the third quarter. This strong position, combined with the significant cash flows will continue to allow us to advance our growth. Dean will provide more color on the growth objectives in a few moments, while I turn it over to Ron to discuss operations and productions.

Thanks, Lew. Good morning. The team at Greens Creek turned in another great operating performance during the quarter. Cash costs were $4.81 lower than the same quarter a year ago at a very low negative $7.42 per silver ounce. Cash costs per ounce of silver were $3.07 lower during the first nine months of the year compared to a year ago. Certainly byproduct metals prices have played the biggest role. However the team at Greens Creek has produced 10% more silver, 14% more gold, 5% more lead and 10% more zinc compared to the first nine months of 2006.

Last quarter, I spoke of a number of programs that the Greens Creek team has implemented to forestall the upward pressure on costs. These programs which have focused on attracting and retaining skilled employees are starting to pay dividends, and over the next quarter, will allow to us discontinue the use of a mining contractor to supplement the workforce. This will have a positive effect on the operating costs at Greens Creek next year. Optimization programs, including replacement of aging equipment, gravity and zinc circuit improvements, mine planning upgrades and additional employee training programs that have been in progress this year will continue over the next several quarters and are expected to help keep operating costs down. This is a major focus for the team at Greens Creek.

At the Lucky Friday, we continue to reap benefits of our investments over the last several years. In the first nine months of the year, the Lucky Friday team has mined and processed 20% more ore tons, produced 10% for silver, 13% more lead, and 28% more zinc compared to the first nine months of 2006. At a time when most mining operations have experienced substantial cost increases, the Lucky Friday mining and milling cost per ton of ore has actually gone down by 1.5% compared to the first nine months of last year. In addition, this group has done an extremely good job of maximizing the value of every ton they're sending to the mill. The cost decreases are primarily due to the efforts made to optimize the mining operations, improve the mill maintenance, and the investments we made in the mine, the mill, and in our people at the Lucky Friday.

I would like to give you an update on the major improvement projects that we're currently engaged in. The ventilation upgrade project is design to do achieve a modest increase in the capacity of the ventilation circuit and position the mine for deeper development and extended mine life. The project is on track for completion by the end of the year, and is a critical component of the development of the four shaft winds. Engineering and procurement for the new tailings facility to supported the extended mine life as well as potential expansion is nearly complete and some of the minor construction will begin in the fourth quarter. Construction of the pipelines and the dams will begin next summer and be completed in 2009. The Phase II mill improvements are installed and start-up is in progress. We expect to improve zinc recovery to the zinc concentrate, and the quality of both concentrates at the higher tonnage rates we achieved earlier this year. We had planned to complete this construction without an impact to production, but we encountered some unplanned down time in the mill during the third quarter as a consequence of the construction. I do not expect any further impacts to production as the major construction is complete.

Engineering for the four shaft winds is approximately 30% complete. This shaft will access production below the 6,200 level and will be capable of accessing resources as deep as the 8,000 level. Geo technical drilling has been completed, allowing completion of the general arrangements for the winds, the hoist rooms, the stations and bins. Hoist specifications have been completed, and we expect the procurement process in the hoists in the fourth quarter. The pre-feasibility study focused on mine and mill expansion is progressing on schedule. The in-fill drilling program has been completed and modeling is under way.

Consultants have developed a model for evaluating a number of mining methods that may be applicable. The model is capable of assessing the incremental impact of dilution and productivity increases on net present value for the different mining methods. The methods under consideration range from very selective to very productive. Geo technical analysis is under way, and the metallurgical tests work to support process alternatives has been completed. Ventilation and cooling analysis has just begun, and the basic design for a shaft from near surface to the 4900 level is approximately 30% complete. We expect to complete this study as scheduled in the third quarter of 2008.

Over the last three years we made significant improvements in both the mine and the mill which have allowed to us maximize our profitability and production from our existing infrastructure as well as take advantage of resource additions to extend the mine life. We will continue to optimized these improvements over the next several quarters. Next step which we have embarked upon is to determine the feasibility of expansion. As I indicated, this step is well under way, and at this early stage in the process I'm optimistic that we will be successful. With that I'll turn it over to Mike Callahan for comments on Venezuela.

Thanks, Ron, and I would like to extend my welcome to everyone on the line as well. Today I am going to keep my comments on Venezuela fairly brief. The third quarter we saw some very good grades from Mina Isadora, and in fact the graded Isadora averaged over 30 grams per ton for the quarter which is nearly an ounce per ton. However, we did see a drop in tonnage as a result of the blockade, which was resolved in July, so our cost of over $500 an ounce for the quarter primarily resulted from this lower production. We do expect costs to come down slightly in the fourth quarter, however.

Just a small note regarding the blockade. When all was said and done, we came out of this event with unanimous support from the other local communities that are in the area of the mine, and tremendous support from local government officials. As mentioned in the quarterly news release, due to the length of the blockade we have adjusted our gold production estimates for the Company down to the range of about 110,000 to 115,000 for 2007 with approximately 90 to 95,000 ounces coming from La Camorra. Looking at the political front, the focus now in the country really is on this new constitutional reform that President Chavez has proposed. It appears he has very strong support within the government to pass the amendments, but I will expect we'll continue to see demonstrations by students and other opposition groups between now and December. The elections are to be held December 2nd, I believe. Obviously the most significant amendment in this proposal is for unlimited terms for the presidential position.

Looking specifically at Hecla, we believe our relationship with the government continues to be very good, and we have weekly dialog with key members in the ministries. On another note, as you saw in our press release we had very exciting intercepts at Isadora, including an intercept 125-meters below the existing ore body, and that intercept ran 23 grams over 3.7-meters, and it is a very exciting, and I guess with that as a lead-in I will turn it over to Dean to talk about exploration.

Thanks very much, Mike. Good morning.

It has been a successful quarter in exploration with drilling programs at five of our properties. These drill programs are creating a pipeline project from definitional activity at Lucky Friday to target confirmation at San Sebastian. I think Hecla has the potential for significant increases in resources in the near term, and we are positioning ourselves as major resource additions in the future. We are continuing to have drilling success in Mexico with the focus on the new discovery in the La Roca area of the San Sebastian property and regional scale veins at Rio Grande. This 340 square miles [Saladio] property has been the focus of regional mapping and sampling programs for a couple of years with the first results of an extensive drilling campaign beginning to filter in.

High-grade silver intersections as reported in the quarter release have been drilled in a couple of Northeast trending structures, and hydro thermal breeches traversing the La Roca area of the of the Saladio property. These have been traced for over 1.5 kilometers and are open to long strike. The La Roca district is currently interpreted as an area where the entire epithermal system is preserved within Northeast trending structures. The results to date are particularly encouraging because they support the interpretation that the strong altered structures seen on surface are the shallow expression of precious metal rich veins at depth. The la rock a district also has the potential for variety of styles of mineralization, including high grade gold and silver veins, larger tonnage manto and chimney-type deposits and high grade gold and silver scarn. This spectrum of deposit types are a great recipe for multiple exploration successes.

Also on the Saladio property, drilling has been completed on mineralized veins and breeches at La Virgin, La Joya, and Nazareno targets with assays pending. As a reminder this is a very large area we're talking about, and we've identified over eight primary targets with more to come. We have now began a concerted drill program that will carry on for the rest of the year. Rio Grande, which is 50 kilometers south of San Sebastian, consists of a series of high-grade, [rezneal cell epithermal veins and breeches] that extent for over nine miles. Additional drill results from the Arcangeles vein shows that mineralization extends along strike for over a kilometer and remains open. Drilling the Concepcion, Soledad and San Martin veins will be completed before the end of the year and a major drilling program of the six different Rio Grande veins will extend into 2008. This is the start of the drilling at Rio Grande, but if you take a look at the intersections released in the last two quarters, you will see we've encountered some extremely high silver values in some of the holes. We're very excited about this project and have really just begun to drill these targets.

Hecla has 100 years of land ownership and geologic data in the Silver Valley of Idaho that we're now leveraging into a major surface and subsurface exploration program to provide resource expansion beyond the Lucky Friday mine infrastructure. In addition to looking on our own 25-square mile property position, Hecla recently signed exclusivity agreements with 33 different companies that own properties in the Silver Valley. These add up to another 11 square miles of property. With this arrangement in combination with current land holdings will make Hecla one of the largest property brokers in the Silver Valley.

The integration of surface and subsurface data in 3D models as Phil earlier alluded to has defined new exploration targets along three major trends and allowed to us to unravel complex fault structures that had put a halt to historic mining. What we are beginning to appreciate is that there is a lot of prospective ground in close proximity to these past producers that have never seen a drill hole.

Surface drilling has begun near the Lucky Friday mine to define the strike extents of the Gold Hunter deposits near the surface. Before the end of the year two drills for the deep directional surface drilling program will commence to follow up the high grade intersections in the gap zone at the Lucky Friday which was reported earlier this year. What we're really trying to do is determine whether the deposit stretches from where we're mining now at the Lucky Friday extension, which is more than a mile below the surface all the way to surface. At the Lucky Friday mine, in-fill drilling between the 4,900 and 5,900 levels upgrading the confidence level of the resource in this area and allowing for detailed mine planning as part of our expansion plans at the Lucky Friday. Drilling underway from the 5,900 level is design to do confirm the western extension of the resource to 6,900 elevation. As we have mentioned before, drilling is intersected continuations of this mineralization below 7,900 feet, so we would expect to be adding some resources to the Lucky Friday this year.

The surface exploration at Greens Creek in Alaska has been completed for the season with two diamond drills active for the entire quarter. Three holes drilled from surface successfully intersected multiple fold repeats of the mine contact that shows there is still significant areas east and west of the Galliard fault that remain prospective. Surface drilling in the North Big Sore area successfully intersected the mine contact zone with mineralization for the first time to the east of the east ore trend. This is very significant as it opens up an entire new area to explore for mine extension in close proximity to underground infrastructure. We have a lot of long-term exploration work to do at Greens Creek because the land position is large and the geology is very promising. Drilling in the fourth quarter Greens Creek will return to the underground to further expand the Gallagher zone.

Hecla continues to have exploration success in Venezuela at our operating mine and Isadora, and Mike mentioned the fantastic intersection 125-meters below the current resource. Typically our key and gold shared system shows good continuity to depth, and drilling at Isadora confirming that characteristic. Elsewhere on the block B property, drilling at the Panama project also intersected significant gold and quartz veins. The exploration emphasis for the quarter was for increased drilling activity at all of Hecla's properties. Unfortunately this increased level of drilling coincides with increased activity throughout the industry, and as a result, we'll be waiting for assay results which should be coming early in the next year as programs continue through the fourth quarter and will continue into 2008. As we advance these projects we're also continuing to look at new exploration opportunities in new jurisdictions. With that, I'll pass it back to Phil.

Thanks, Dean. Just one comment and we'll open it up for questions on the metals price, and that is the Silver Institute has come out with their mid-year update as prepared by GFMS, and it is quite positive on the outlook for the price of silver, demand for silver, and I would just encourage you going to their website to see that. Vicki, with that I think we can open it up for questions.

All right, operator, if you can give the instructions for the question and answer period, please.

(OPERATOR INSTRUCTIONS). Your first question is from Anthony Sorrentino. Please proceed.

Hello, everyone.

Hi, there.

At Lucky Friday how much will the internal shaft cost?

Well, we're still working through that with the feasibility study, but order of magnitude, and, Ron, you can give specifics is, order of magnitude $50 million plus or minus.

Yep. That includes all of the drifting to get over to the location. It includes the shaft from 4,900 all the way to 65 with provisions to get to 8,000, and that additional depth is not very expensive. That includes stations on a number of different levels, the hoists, the whole nine yards.

When the shaft is completed, would you be able to increase production at that time or could there be production increases earlier than that?

That shaft by itself does not get everything we need to increase production, so it is really a like minded extending thing but it would be installed in a way that if the pre-feasibility study on the grander scheme shows that it is feasible, that shaft, then, would be capable of supporting an increased production level.

All right. And what is exploration and capital spending expected to be for all of 2007?

Well, roughly speaking on exploration, we're talking 23, $24 million. Lew, on capital?

Capital, Anthony, remains consistent with where we were last quarter, roughly $47 million all in.

And at this early date would you expect those numbers likely to be higher in 2008?

In exploration I would expect to be at a similar level. Capital I have to ask you to give us time as we do more work on the feasibility and the pre-feasibility study. It could dramatically change the amount of capital. Let's hold off. We'll give good estimates of that at the beginning of the year. We'll have a better sense of where we're going to be.

Okay. That's fine. Congratulations on a great quarter.

Thanks, Anthony.

Your next question is from the line of Terence Ortslan.

Hi, Terry.

Good afternoon and thank you for a great update and review, guys. That's very good. Two questions. One on the deeper levels mining methods referenced to earlier, did you say selective versus productive, I assume you're talking about bulk or tonnage but more dilution and lower costs versus higher costs but better grades. Am I referring to the idea that you have, number one and number two what are the methods and at the extremes what would be the cost per ton numbers versus dilution?

Okay. I will let Ron answer that, Terry. Let me say we're in the process of evaluating these things. We've engaged Hatch Engineers to help us with this, and we've got some -- I think some excellent expertise from that firm to come up with what's the best method going forward, and we're far from finished with the work. It is going to -- it is an iterative process and an interactive process with all the other pieces of the mine, so, Ron, do you want to answer the best you can with where we are?

I guess the answer to your question, Terrance, or your questions is that you have the concept of what we're evaluating right. The mining methods range from, and at this point I guess I would tell you that because the veins at the Lucky Friday are very different in width and strike length, I suspect we're going to end up with a range of these mining methods, but what's getting looked at ranges all the way from narrow, cut and fill jack leg and 18" slusher buckets all the way up to long hole stoping with transverse even transverse longitudinal long hole stoping with several of the veins together, and the analysis that you described is exactly right. It is the trade off between the higher productivity, larger stopes and the increased dilution versus the lower productivity, higher cost but increased revenue. It is really a margin game is what we're trying to analyze. In terms of the range of the costs, I really can't give that you right now because they haven't quite got that far along, but it is what you would expect for normal stopes of those type.

Ron, if I could ask you also just to comment on the difference between the rock mechanics of the old Lucky Friday vein and that rock type, and the Lucky Friday expansion area, because I assume that has some -- creates some difference in what opportunities we might have going forward.

It does. That's a really good question. The expansion area is in the Wallace formation, which is a very soft argillitic formation, so you don't -- we don't have the rock burst issues that is we had in the rivet formation in the Lucky Friday. That opens up lots of opportunities for more productivity. Now, I guess the flip side of that coin is that the Wallace formation is almost the extreme opposite of the hard brittle rivets in that is squeezes, so you have a different type of geomechanical issues there that involve different support mechanisms that have to be installed but you can get away with bigger openings as long as you're willing to put in more expensive support mechanisms.

The feedback from Hatch and all the guys internal and all as well are you going to be able to assess this situation by the first quarter next year? Are you going to be test mining it as well --

The pre-feasibility study is a third quarter event.

Right. And one of the potential outcomes of the pre-feasibility constituted sigh a recommendation for a test stoping of a new mining method if in fact we do end up with a new one being the optimum. We're just now getting the geotechnical work input into this, so as Phil mentioned, there are lots of variable that is have to be analyzed here.

Thanks for that. One more quick question. With respect to the refining charges, obviously it has been a good year. You've been obviously doing a lot of the discussions, then, and getting feedback from the smelters. How do you expect next year to be?

Do you want me to take that, Phil?

That would be fine.

Based on the feedback we're getting, I just don't expect a whole lot of change next year in terms of terms.

And the payables and all in the contract?

Yes. In terms of the quality of our concentrates, we're actually improving those, and they were particularly the lead concentrate was already a high quality concentrate. I just don't expect to see any new penalties or higher penalties or much change in the percentage that they take or anything like that. The terms have been pretty steady for awhile.

Okay. Thanks again for a great review, you guys. Thank you.

Thanks, Terry.

(OPERATOR INSTRUCTIONS). Your next question comes from the line of Borden Putnam. Please proceed.

I second what Terrance said. It is fantastic review. I will having have to go back and read the transcript. Ron, you covered so much ground, you and Dean. The only factor I would add, Ron, to your discussion of the mining methods and the feasibility study is going to be, the thing that's going to be looking over your shoulder all the time particularly looking at a bulk method I imagine is mill capacity, because bulk methods produce a lot of tons and can offset the higher value tons you might be otherwise putting through the mill. Many factors. Interesting discussion.

Borden, part of the pre-feasibility study includes evaluation of new milling facilities.

Right. Exactly.

Or modifying the existing ones.

Right.

Right.

And to add to that, the shaft is the same issue. It is capacity from top to bottom from start to finish that has to be analyzed, so that's all in there.

And that leads me to a question I think we've talked about this, but if I have gotten an answer I have forgotten it, but is there ability for you to stuff any waste muck in the underground from your winds sinking that would relieve a lot of capacity issues the shaft for hauling ore?

Not of any significant amount. We do wherever we can already try to not hoist anything that we don't absolutely have to hoist, but there are not significant numbers of openings that you can easily access that you can put that material back in. One of the things we are looking at is can you turn some of that material into aggregate for the concrete.

Back fill, right.

The problem with that is it is very clay-rich argillites, and they don't make good backfill, and they don't make good aggregate for concrete liners for shafts, so we're playing with that but I am not optimistic we'll get a lot out of it.

Does the feasibility study include, this is a topic we've talked about lightly at one point, which is putting rail haulage on the 5900 level instead of the trucks or some sort of mass transport that relieves the trucks and some exhaust and improves ventilation?

Borden, you're talking about the pre-feasibility study?

Right. Excuse me. Right.

Go ahead, Ron.

The answer is there will be alternatives for the mining methods that will include things like that. The really best opportunity for that is going to be below the 59. One advantage that we get, one of the things we're looking at right now is sinking that shaft all the way to 8,000 so that we would get to 65 in time for the production needs, but you would get to 8,000 before you need production which would then allow you to do exactly what you're talking about.

Okay.

We're also looking at other ways to minimize the diesel impact on ventilation throughout the entire mine. Ventilation is another big piece of of this pre-feasibility study.

Agreed. Thanks, Phil, for correcting me on that. I got a little ahead of myself. On the drilling, this is between you and Dean, Ron. On the drilling you talked about that Dean mentioned between the 6,900 level and further depths, how close spaced do the piercements need to be before you're comfortable to embrace them with a resource outline and put it on the declaration?

Dean, do you remember the number?

What we've been looking at is intervals of at least 150-foot spacing before we consider an inferred category for it.

Okay. And then, Dean, same with you. On the drilling that you started from surface, how many drill piercements are you hoping for? How many drills do you have at surface on the Gold Hunter and what's your first phase of that program and when might results be available?

Sure. There is two components to it, Borden. The drill in place now and has been drilling for over a month is drilling shallower holes.

Right.

To define the strike extent of the gold hunter structure near surface, because we felt that there is a series of veins running parallel to the historic mine workings that may be equivalent to what we consider our intermediate vein.

These are not only vein that is run parallel, but they were also operations associated with them of one amount or another?

That's right, certainly to a limited degree. That step we're going through now, we've completed or nearly completed four holes, weather permitting, we want to add another four or five holes to that program, which we hope will then in impact our GAAP drilling, which is the deeper directional drilling and what I mean by impacting that drilling is that if we find that the strike extent is longer than what we currently envision, then we'll modify that program.

The directional drill program, the first drill should be turning in the next week and then we'll bring a second drill in once that's occurred. With regard to results, we should start seeing the first results filtering in in December, and of course carrying on through into the new year. With the GAAP drilling we probably -- gap drilling we probably don't anticipate the initial mother hole to intersect mineralization until probably just before Christmas.

That's assuming everything goes well, Dean.

That's right.

I would suggest that what I am hoping for is that we'll have something that we'll be able to talk about at the earnings release for year end, which will be in February.

So if I understood the shallower holes take a couple of three weeks or so to drill and complete and the deeper holes are maybe four to six weeks. Is that about right, Dean?

You're right with the shallow holes, although they've been taking longer than we thought they would. With the deeper hole, we'll start out originally with the mother hole, and the expectation is that that hole will probably take close to a month.

Okay.

To complete. The daughter holes coming off of that should -- because they'll be coming out part way, part way up from the mother hole, that assuming there aren't any difficulties, we should be getting those probably every third week and probably certainly by the first quarter of next year we'll have two directional drills going.

Last thing for me, and I apologize for dominating the call. You mentioned that the other part of your program I am very intrigued about is this GIS compilation which which is very politically correct, and on PC, and you mentioned that it has made you aware of faulting that may have offset and blinded opportunities or operators, 50 or 100 years ago. Can you give us a little more on that as best you understand it now? I am very intrigued.

What we're finding is that there are probably two or three major Northwest trends that you can essentially lineup the mineral deposits, so it is a combination of structure impacting where those deposits are and the lithologies and that really relates to the competency of those lithologies. What we're finding as we start to pull more information in that there are a number of fault systems that are almost orthogonal to those three trends that offset the mineralization. The historic method of discovery was to drift out into things. If you hit a fault, companies may try to extend the drift and so on, but they tended to essentially abandon drifting and mining once they hit some of these faults, and I think as we start to work on it, those fault solutions, we're going to see some real opportunities.

It is very exciting. I promised you references and I am reminded that I did not follow through completely. Maybe by the time you're out this week I can dig through my stuff and hand you a pile of stuff if it's of use on wrench faults.

Sure. I will like to see that.

Thanks, guys.

At this time there are no further questions in the queue. I would like to turn the call back over to Ms. Veltkamp for closing remarks.

Thanks very much and thanks, everybody, for joining us today for the third quarter Hecla Mining conference call. A replay of this call will be available at www.hecla-mining.com. Further questions can be directed to me, Vicki Veltkamp, at 208-769-4144 and that concludes our call today. I hope you all have a great day. Goodbye