Hecla Mining Co (HL) 2008 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the third quarter 2008 Hecla Mining earnings conference call. My name is Kim and I'll be your coordinator for at today. (OPERATOR INSTRUCTIONS)

I would now turn the presentation over to your host for today's call, Ms. Vicki Veltkamp, Hecla's Vice President of Investor Relations and Public Relations. Please proceed, ma'am.

Thank you all for joining us today. I am Vicki Veltkamp, as the operator said, and this is the Hecla third quarter conference call 2008. Our call is being webcast live today at www.hecla-mining.com. On our website you can find today's news release. Today presentation will go made by Phil Baker, Hecla's President and CEO, and he is also joined by Jim Sabala, our Senior Vice President and CFO; Ron Clayton, our Senior Vice President of Operations, and Dean McDonald, our Vice President of exploration.

But before we get started I need to remind you that any forward-looking statements made today by the management team comes under the Private Securities Litigation Reform Act. It involves a number of risks that could cause results to differ from projections. In addition to our filings at the SEC, we are 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 and we urge you to consider those disclosures that are all in our SEC filings. So now I'll turn the call over to Hecla Mining Company's President and Chief Executive Officer, Phil Baker.

Thanks, Vicki. Hello, everyone. Thanks for joining the call. This third quarter is our first full quarter of owning Greens Creek, one of the world's greatest silver mines with its low cost and long (inaudible) production, and I just want to point out what a positive impact Greens Creek is having on Hecla. This quarter it has provided Hecla with our second largest quarterly silver production in the last 20 years and that is 88% over last year, and it also has provided the most zinc production we ever had, and it's flowed to our cash flow from operations. This is our fourth highest in the last 20 years and, frankly, this is during a period when the mine is not fully optimized.

Of course, our acquisition and integration of Greens Creek is happening when we we are facing a financial tsunami. First we had a a credit crisis, then we had an unprecedented decline in the price of metals we produce. As we have done in the past, we are responding to this extraordinarily challenging time. When the long-term debt markets became unavailable, we raised $163 million in equity. So during the quarter we used those proceeds to reduce the debt from $360 million to $199 million and since the end of the quarter we reduced it another $37 million leaving us today with only about $161 million outstanding.

To repay this debt we are going to consider all our options, but given the improvements of credit market and the amount of debt we have compared to the original credit approvals, we certainly will try to restructure the remaining debt. While metals prices have declined quickly, there have been a delay in cost coming down. So we are proactively working to accelerate cost reduction from suppliers at the mines and on cost we can immediately control like capital exploration G&A. Some capital has been on hold like the deeper development at the Lucky Friday. Exploration programs are being deferred or like at [fin one] here we negotiation a new earning agreement, it will give us a longer term to earn in.

With these steps I expect further cost declines in the fourth quarter. While we are still finalizing our business plan for 2009, I expect capital exploration and G&A to be almost 50% less, that is $40 million to $50 million lower. Driving down cost is management's primary focus, so you are going to hear more about costs from Ron, Dean, and Jim as we apply the lessons Hecla has learned in its long history to this tough time.

Let me talk for a moment about metals prices. While there is a great deal of short-term uncertainty about the prices of the metals we produce, I believe that in the long term the fundamentals have never been better. Silver, like gold, should eventually perform well as a result of the impact of all the liquidity injection into the economy by the fed and Treasury and what will be the ultimate impact on the value of the US dollar. On the fundamental supply demand front, the lack of physical inventories for small denominated silver shows the broad based demand for the metal as an investment. Industrial demand for silver, while over the long term not abate given the unique properties of the metal. So the fundamentals for our business is probably the best it's ever been.

At the operations, we are in the high capital year due to tailing construction programs at both the Lucky Friday and Greens Creek that will provide capacity at both mines through their projected mine lives. If prices stay at these levels, annual capital expenditures for the rest of the mine lives will be less than half of our 2008 expenditures and these relatively low capital programs that we will experience in the future are something that is unique about Hecla.

I only want to make one comment about exploration but don't take that as an indication of limited success. We own great districts about great potential but let me focus on the Lucky Friday whose experienced extraordinary success with our deep drilling. We are not surprised to find more ore, we are surprised by the improvement in the quality of the ore body. We clearly have not mining the heart for the ore body for the last ten years. The best is yet to come. With that, Jim, let me ask you to talk about the financial results.

Thank you, Phil. During the third quarter of 2008 we made significant progress on a number of fronts in spite of extremely challenging metal and financial markets. In particular, we completed the public offering of 34 million shares which allowed us to repay $163 million of our $240 million bridge loan. The remaining $40 million has been extended to February 2009 subject to the Company providing a business plan to the bank group in December.

We completed the integration of the Greens Creek operation and to Hecla Mining company and in early October we notified [Rio Tinto] we would no longer require their services. With the acquisition of Greens Creek we increased silver production by 88%. The Company also experienced corresponding increases in lead, zinc, and gold production.

On the financial front, sales for the third quarter of 2008 increased by $24.7 million or 62%. Included in sales is a mark-to-market charge of $11.6 million relative to the difference between provisional metal pricing impacts and final settlement prices. During the quarter we realized silver, gold, zinc, and lead prices of $12.30 per ounce, $848 per ounce, $0.87 per pound and $0.73 per pound respectively compared with average spot prices of $15.03, $870, $0.87 and $0.80 respectively.

Operating costs increased to $43.2 million which is the result of increased ownership of the Greens Creek mine and a general increase in overall operating costs. Cash cost per ounce for silver produced is $4.46 for the quarter compared to a negative $4.93 in the prior year's comparable period. This increase is a result of the overall increase in cash costs including increases in treatment and freight costs and a decrease in byproduct credits during the period. Most of our operating expenses were comparable with prior periods with the exception of exploration which was $5.4 million compared to $4 million in the previous year's quarter and the provision for closed operations expense was $0.9 million compared to $2.3 million in last years comparable quarter.

Of course, our interest expense was up in connection with the financing to acquiring the Greens Creek operation with interest expense for the quarter of $6.8 million compared with 0.1 million in 2007 comparable quarter. As a result, the Company reports a net loss for the quarter of $3.8 million and a net loss applicable to common shareholders after payment of preferred stock dividends of $7.2 million. We did, however, for the quarter report significant operating cash flow of $19 million compared to $22.6 in 2007's comparable quarter.

I'd like to spend just a minute giving you an idea of the impact of changing prices upon Hecla's bottom line to give you a feel for the sensitivity of our net revenue from the smelters and cash flow to metal prices. Remember, I'm talking about on an annual basis, not quarterly. A $0.10 change in the price of zinc changes our net smelter revenue and cash flow by approximately $8.2 million a year. The same $0.10 change in lead price results in $5.7 million per year and for silver $1 change results in $9 million of incremental revenue. A $10 change in gold price changes the annual cash flow and NSR by about $540,000. I think this gives you an indication of the magnitude of the change and the tremendous leverage that can occur when metal markets recover. With that, I'd like to turn the presentation over to Ron Clayton who will discuss operating matters in further detail. Ron.

Thanks, Jim, and good morning. As Phil mentioned earlier, the two largest impacts to our margin, similar to the entire mining industry, have come in the form of prices we receive for the metals we produce and the amount of precious metals we are paid for in our concentrates. There's not much we can do about the prices, which certainly affect us, so I am going to focus my comments on some of the major components impacting our costs and what we are doing about it.

So far this year we've seen higher treatment charges that have increased our cost by $1.36 per silver ounce produced, increases in concentrate transportation have added an additional $0.20 per ounce. The good news on the smelter side is that the treatment and silver refining terms contain escalators and de-escalators that have softened the impact of the commodity prices have declined. The second major impact is we've also seen from 10% to 30% cost increases for non-diesel fuel consumables such as steel and cement, for example. Diesel fuel averaged 155% of what we paid for it a year ago. Again, there is some good news on this horizon. We are beginning to see some improvement in consumable pricing and, in some cases where it makes sense, we have escalators and de-escalators built into our arrangements with our suppliers.

From a labor cost standpoint we have also seen some increases over the last couple of years but, in many cases, our compensation programs contain a relatively high percentage of at risk pay which is tied to profitability. For example, Lucky Friday a component is tied to both profitability and the silver price, so there are some reductions that occur automatically when the silver price decreases and costs go up. Of course this has a negative impact on our employees, which is unfortunate. I hope we are able to successfully return to higher price, higher margin environment where we can return to sharing profit.

What are we doing to counter the negative impacts of declining metal prices and increases? We've been reviewing and reducing capital programs and sight expenditures over the last three months. All spending at the operations have been reduce to only those expenditures that are necessary to maintain a safe and environmentally sound working environment and maintain current production levels or very near term increases in production. Examples include, as Phil mentioned, the deep development as well as major ventilation improvement at the Lucky Friday have been curtailed.

Essential engineering and construction projects are being managed and conducted by in-house personnel and nonessential projects have been put on hold. We are reviewing assets at both operations to identify potential sales of equipment not essential to current or immediate future production. Some equipment will be rebuilt in lieu of replacing older equipment. Sustaining capital that is not essential to current or immediate future production has been delayed at both sites.

New hiring at the operations have been confined to only necessary maintain production in a safe and environmentally sound manner. We are attempting to increase production without increasing cost at both sites. Both operations are reviewing cut off grades to ensure that the maximum possible margins are being achieved without sterilizing significant quantities of economic material. We are working with our customers to identify ways to improve our smelter returns and we're working with our suppliers to identify ways to accelerate reductions in consumable costs and have begun to see some small improvements already. For example, the most recent order of diesel fuel that we have got coming is about $0.30 per gallon less than the last order that we placed.

We have implemented programs at both operations to more efficiently use power and minimize power costs. As Phil mentioned in the press release, many of our employees as well as our customers and suppliers have been through difficult times together before and while we would like for the economic situation to be better, as I said, there's not much we can do about the prices of our products. While we are facing difficult challenges we have the best people in the world when it comes to meeting these challenges. I appreciate and encourage by the effort we have had from both our employees and suppliers and we are already seeing results. With that, I'll turn it over to Dean for a discussion on exploration.

Thank you, Ron. Exploration at Hecla has been advancing on a number of fronts from near mine exploration at key operating properties to exploration initiatives that are more regional in scope. However, due to market conditions, Hecla has a planned reduction in exploration spending to about $3.5 million in the fourth quarter with programs focusing on core targets at the Lucky Friday, Greens Creek, and the San Juan joint venture. As Phil mentioned, drilling at the Lucky Friday mine focused on the east and central part of the resource to the 7100 level and confirmed veins are coalescing into larger high-grade veins at depth. These drilled intersections are some of the most impressive in the history of drilling at the Lucky Friday and represent an even better ore body below the current Lucky Friday mine workings.

As well, deep drilling below 7500 level continues to extend high-grade resources to the east. Not mentioned in the press release are the encouraging drill results to the east both above and below the 5900 level that suggests further additions to the resource near current mine workings. Drilling around the eastern extension of the 6700 level has defined discrete mineral pods beyond the reported resource boundary that could also represent future mineable areas. As you can sense, this has been a banner quarter for exploration at the Lucky Friday.

Seven deep holes into the 2500-foot gap zone above the Lucky Friday extension defined a huge envelope of continuous mineralization with zones of high grade silver. All of these holes intersected multiple veins up to 3.5 feet wide and raining in grades up to 21 ounces per ton silver plus base metal. This drilling shows strongly developed mineralized structure exists throughout much of the gap area and appear to coincide with the resource trend below 4050 level. It clearly demonstrates potential for resource extensions in up to eight veins well above the current resource.

Future drilling will build around the larger high-grade veins to the east and in the other part of the gap area. Drilling on surface at Greens Creek targeted the extension of the mine contact rocks into an area northeast of the current mine workings. The drilling successfully defined the mine contact and mineralization in bands that can be correlated for over 1500 feet. The mineralization is stronger towards the southwest and may indicate we are vectoring into a new zone.

Drilling of the east ridge target, which is eight miles north of the mine, confirms the presence of the altered mine contact rocks and sulfides and represents one of many new targets being defined on the expanded 29 square mile property at Greens Creek. Later in the quarter drilling shifted from surface back to underground where high grade extensions to the Gallagher and 9A zones were defined and will add to the resources.

In Mexico we continued to be impressed with the exploration potential at the 511 square mile San Sebastian property. Positive drilling results at the La Roca district has shown that the district holds potential or great gold and silver mineralization within multiple meter wide vein. Northeast of La Roca the [Penesquote] and Fernando Guadalupe vein systems were recently discovered on surface. Both target areas consist of multiple silver bearing vein structures that coincide with some of the strongest and largest geochem anomalies ever identified in the district. For what may have been considered a somewhat mature exploration property, we continue to identify exciting new prospects at the San Sebastian project.

As mentioned in the press release we are reducing our exploration activity in Mexico, but we'll continue to advance the new target areas with systematic low cost activities that will refine the future drill targeting. At the San Juan joint venture in Colorado the two drills focused on exploring the northern extension of the Bulldog vein system will be stopping due to the encroaching snow. Early stage drilling is showing high-grade veins that are characteristic of the mining camp. Work is advancing on the Bulldog mine 3D resource model which is based on underground production samples and drilling. This digitally recorded data will result in a new resource estimate at San Juan by year's end. As mentioned in the release, the earning period of the San Juan agreement has been extended to give us more flexibility in our timing on exploration. With the extension we don't expect to drill in 2009 unless metal prices have improved dramatically. That is the summary of exploration this quarter and I will pass you back to Phil.

Vicki, why don't we take questions.

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

Hello everyone.

Hi Anthony.

What are the payment obligations of the credit facility as currently structured?

We have an amortization schedule under the term facility that is $18 million at the end of the fourth quarter, and then roughly $40 million for each of the next two years with an $11 million in 2011, the first quarter of 2011, and we have a bridge payment that is due in the first quarter of next year. So when we think about this, we think we have a long lived asset that one of the things we'll end up doing is extending the term of the facility.

Right. Would you consider the sale of assets to reduce debt?

We are willing to consider all options, Anthony. Nothing is off the table.

All right. What has capital spending been cut to for the fourth quarter and all of 2008?

Capital spending in the fourth quarter is roughly about $18 million. We might see a bit of savings from that. So it's down from the third quarter, but we are in the midst of finishing up some programs and it doesn't make sense not to complete them. So in total for the year will be about $73 million. And for next year I would anticipate us being somewhere around half of that.

Okay. And one final question. If metals prices remain where they are today, would you be required to take an impairment charge against any of your assets?

I'll let Jim answer that question. We certainly just filed our 10-Q and we've done that analysis and we did not have an impairment but I'll let him talk about the future.

Sure. I'll talk a little bit about the process of impairment. As I think everyone is aware, impairment is measured based on a long-term forecast, so you literally have to take your business plan, put it out 10 to 15 years, and your biggest risk factor is what are metal prices. So usually the methodology is a Safe Harbor that the SEC adopted of three-year trailing prices plus looking at forward curve prices and when we do all of that at this time, we do not see an impairment. However, of course, if metal prices were to deteriorate significantly we would indicate there's a fundamental shift in the market, we would have to evaluate it again. But based on the history of metal prices and what we expect, we do not see an impairment at this time.

Okay. Thank you very much and good luck.

Thanks, Anthony.

Your next question comes from the line of Borden Putnam of Eastbourne Capital. Please proceed.

Good morning.

Hi, Borden.

And please indulge me. My computer is giving me fits today, some spreadsheets I need to access to be able to put a question together might fail in the middle of this, and I apologize ahead of time. Ron, first question to you if I may. I was looking for some increase in mining cost, a little bit at Greens Creek but hoping some of that might be offset in the way of material increases. Some might be offset with the benefit of a long haul [stopping] and I didn't see a lot of that come down. I did see a decline in grade as I might have expected. Can you flush that out a little bit for us and explain how that is going and also what proportion of ore that comes from the mine comes from the long haul stoppes?

Sorry about that. I had you on mute. I'm up at Greens Creek and there are trucks keep going by. My wife keeps me on mute, too. It doesn't hurt me. In terms of the long haul stopping board, it's not come up quite as fast as we had been hoping for but I think you will see a little bit of a difference in the fourth quarter and a little more in the first quarter. I know you are going to see it because I am already seeing it up here. That is part of what's impacting it. In terms of the percentage, this is off the top of my head and I will check it and get back to you if I'm wrong, but I think we are looking at about 60% right now is coming from long hole stopping, it may even be a tad higher than that, and it's going to go up a little bit more, particularly if we can get up and stay at the 2100 tons a day which is what we are shooting for and trying to get there. In terms of the cost, the third quarter probably saw the highest diesel fuel cost that we have seen.

Okay.

So in examine that is so that is a huge impact up here. It's tremendous. On the other hand, we were on the line power for the better part of September and we are still on it all the way through October and actually I think we are still on line power right now which is way more than what we were expecting. I'm hoping that has a pretty good impact. And, as I mentioned, we are seeing diesel fuel prices that are coming off about 30%. So I think we are going to see some improvements in the fourth quarter.

Okay. I appreciate that. You may not be able to answer this with any kind of certainty or maybe fall into guidance you don't want to give. What do you expect the head grade to look like when you are at 60% of material to the mill from the long haul stoppes? We are at a silver grade of 1332 right now. Where do you see --

With the mix that we are planning on, I'm not expecting much of a change in head grade of what you are seeing right now.

But the benefit of some cost -- okay.

And, again, a lot of that is going to be driven by two things. One is how much -- what diesel price cost us and hopefully some declining consumable cost and how much power we can get. We are not planning on getting any power from line power until probably I think late in the fourth quarter of 2009. If we get more than that, it's a huge difference. At a fix diesel cost price it could be as much as $1 million a month.

While I still got you, Ron, it may be an unfair question. Since the feasibility study has been deferred for the present time, at Lucky Friday are you looking at redirecting the attention to facilitating or removal from the mine, some of the things you and I have talked about in the past to remove exhaust, to get electric trains, is there any of that work that can be done in this period that is inexpensive and might advantage the cost structure at Lucky Friday?

Yes. When I was talking about the some of the engineering programs that we are going to continue to do in house, they are pointed at some of those kinds of things. Unfortunately, we are still not seeing anybody out there that is doing anything with small underground gear in the electric range, but we are looking at a bunch of different ways to try to get the heat and the exhaust issues, any little thing we can do as well as ways to try to figure out how to do some very big things in a more economical way.

Okay.

I got some people that are focused on that and a few select dollars that we're going to be doing exactly what you are talking about.

Great. I appreciate that. I look forward to reports of that. If I can go over to Dean, are you still on the call, Dean?

I am.

Thanks very much. Interesting resulted you talk about at Lucky Friday in particular. The wording in the press release confused me a little. These isolated intercepts, not isolated, the ones that you've broken out at bullet points, those are down to the 7100 level. Is it possible as I understand, can you give us a better understanding where these occur with respect with the gap and I guess these are not in the gap area, these are below the area of present mining? These are below the present mining?

That is right. The gap area is above 4050 which is the upper extent of our resource. The intersections that are described in the press release are at 7100 level. They are in the central to eastern part of the resource in that area. So a lot of this represents still fairly wide space infill drilling in that part of the deposit.

So all of these are at the 7100 level?

In and around 7100, yes.

Can I add a little bit to that, Dean?

Yes.

Basically these intersect range from 6200 to 7800 and to put it into perspective, while Dean said they are fairly wide space drilling, it is -- there is more drilling in that zone in terms of density of drill piercements than there was when we headed to 59. There's a -- this is a positive thing and I can't give you the numbers, but to put it into perspective, if you take out block 62 to 65, 65 to 68 and 68 to say 71, each of those zones is seeing some pretty significant increases in silver ounces per vertical foot, lead and zinc pounds per vertical food with the 65 to 68 being significantly higher, well all three are significantly higher in those statistics. So it's a combination of width and grade that is improving. The only reason I stop at 71 is that the data diminishes a little bit down there.

To either one of you, are the veins coalescing in these zones and/or are there additional veins or are they higher grades? Help us understand the character of them.

Yes.

Oh really? Oh, good.

The veins tend to be, particularly the 20, 30 and 40 tend to be coalescing along a longer strike length than we are seeing them right now. There may be, we are not sure yet, there may be overall less total veins down there but more metal in the veins.

Okay. Interesting implications for mining methods. Okay. That explains why there was the intercept at the 7500 level. I wasn't clear why that depth was being probed at this time so that leaves that question off my list. One for Jim if I could. Jim, Phil talked about it a little bit, but the maturity date on the bridge loan has been extended to when and what's the cost of that, the cost of capital on that?

Well, the bridge loan has been extended to approximately mid February with the requirement that I indicated in my comments that we provide a revised business plan to the banks and then by roughly mid December they'll evaluate that business plan and we'll work towards doing any restructuring that is necessary on the credit agreement. The bridge itself has an interest rate of LIBOR plus 600 basis points.

Okay. And what will they be looking for in the business plan, Jim? Are they going to look for cash flow coverage, normal sort of metrics or is there anything that you can --?

It will be normal metrics, Borden.

Okay. Last thing is for you Jim and I apologize on the last quarter I didn't bring it up and I'm looking for the financials this time I was reminded of it and it is on the cash flow statement? Hang on. I have to go to my spreadsheet. I apologize. It was a new line item, Jim. Maybe it's the balance sheet. Something about inventory. It must be on the cash flow statement. Yes. There it is. Let me use your wording to describe it. It's called inventory purchase price allocation adjustment.

Sure, Borden. What that was is in connection with the acquisition of Greens Creek, we had to apply purchase price accounting to all categories of the balance sheet to allocate the purchase price, and that $18 million in particular was the write up of the inventory from its historical cost basis to a fair market value on the date of purchase. So we had the pleasure of taking silver that cost us sub $3.00 and writing it up at that time probably $14.00. That was a one-shot deal. It's described more fully both in our MDA and our 10-Q for the last quarter and also in our press release but you won't be seeing that again.

Okay. I appreciate you referring me to the queue. I did not see that in there. I will look at it. Is there a risk that it would go against us? I guess that is not because it's associated with the one --

It's a value that existed at the end of the second quarter, excuse me, at the end of the second quarter and it's flushed through the P&L now.

It's not a mark-to-market sort of a thing?

No. Just one shot purchase price allocation. It's gone forever.

Very good. Excellent. Thanks you guys.

Thanks, Borden.

Your next question comes from the line of [John Timazos of John Timazos Independent]. Please proceed.

Hi, John.

Borden asked a few of my questions, very well than I could have. The volatility in the market is sort of a rough break after making the big purchase, a good purchase that you made, and one of the terrible ironies of the business is that if you right size to one environment the next thing you know the business climate is different, maybe for the better. Are there any tactics like ore grade which you discussed adequately with Borden, that might provide a 6-month fix or 12-month fix or short-term tactic that might pay down a few extra tens of million of dollars and hopefully the crisis is over by the time you made the change so you don't kill exploration projects that are really good projects and have been tough to assemble and good staff and all that sort of thing?

Let me say, John, that with respect to exploration, we are fortunate in that we have all of the ground that we are exploring on and with the change that we made in the San Juan silver joint venture we bought ourselves basically three or four years to do the earn in there. So we have quite a bit of ability to hold on to the land that we have without making expenditures unlike other situations that companies are in. But the fundamental question you are asking is do we see some easy fix where we can generate a significant amounts of new cash flow. The answer is no.

We think we just have to work hard and grind down our costs. We are fortunate in that we are seeing the cost of energy decline dramatically, and that is the -- given that we are diesel powered at Greens Creek, that is critical, and we are aggressively going after all of our suppliers because while -- we are going after those suppliers and trying to get them to accelerate their cost reductions as they see their energy costs decline and the products that they produce. I can't tell you that there's some easy fix that we have. We just have to grind the cost down. And that's what we are doing.

Good luck, and I hope this is a panic and not anything long term and that the markets solve the problems for you.

Thanks a lot, John.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of David Christie of Scotia Capital. Please proceed.

Hi guys. Just a couple of quick questions here on mostly cost at Greens Creek. I was wondering you are buying diesel fuel for that mine, of course. Are you buying it far in advance or are you buying it month to month or how does that work?

We buy it week to week, month to month. We don't have a storage capacity to hold a lot of diesel.

That's good in this case. And as far as steel and whatnot, what is your -- are you doing the same kind of thing, are you buying a year supply at the time?

I'll let Ron specifically answer that question.

Nope. We buy all of our ground support and those kinds of things are bought just as we need them. So figure month, two months' kind of supply.

Even at Greens Creek?

Yes. Greens Creek and Lucky Friday both. Frankly most of that material comes from the same supplier.

With the power coming from the grid right now, can it supply 100% of the power or do you need to supplement it?

Actually, we can run without running the generators other than you have to tune it up every couple of days to make sure that they are working and that kind of thing, but we can cover 100% of it.

What is the rate they are charging right now?

I think it's about 10.5 cents a kilowatt hour. I would have to look at that. Not very different than that. That's close.

Okay. Thank you.

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

Phil, do you have any further comments?

Yes. I thought John Timazos' question really brought to mind that yes, we are in a market condition that is quite tough, but the good news is we have in Greens Creek and the Lucky Friday two mines that have seen these sorts of conditions before. They are quality assets and we think we'll have the ability to grind costs down and where we can find that little bit of a extra production just as we've done in the past. So we think we are well positioned to see our way through this difficult market condition and we have a good relationship with the bank group. We think this sort of extension that we've done on the bridge facility is an indication of that. They worked well with us and so we look forward to further resolution of those sorts of issues and with that we thank you for attending our conference call.

We appreciate you all joining us today on the Hecla Mining third quarter 2008 conference call. Feel free to give me a call, Vicki Veltkamp, if you have additional questions. My number is (208)769-4144 and that concludes our call for today and have a good day.

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