Hecla Mining Company (HL, Financial) filed Quarterly Report for the period ended 2010-09-30.
Hecla Mining Company has a market cap of $1.73 billion; its shares were traded at around $6.9 with a P/E ratio of 21.1 and P/S ratio of 5.5. HL is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.
Environmental litigation represents another of our significant risks. As discussed in Note 4 of Notes to Condensed Consolidated Financial Statements (Unaudited), the EPA has released for public comment its proposed plan for cleanup of the upper portion of the Coeur d Alene Basin, a plan with an estimated present value cost of $1.3 billion. This plan represents a significant increase from the EPA s 2002 Record of Decision with an estimated cost of $359 million for both the upper and lower portions of the Basin. We do not know the extent to which the EPA s proposal will be ultimately implemented, nor its effect on our current operations in the Basin, nor how our liability could be affected. As also mentioned in Note 4, we have resumed settlement negotiations regarding matters considered in our existing accruals.
For the third quarter and first nine months of 2010, we recorded income applicable to common shareholders of $16.4 million and $48.5 million ($0.06 (basic and diluted) and $0.19 (basic, $0.18 diluted) per common share), respectively, compared to income applicable to common shareholders of $22.5 million and $25.5 million ($0.10 (basic, $0.09 diluted) and $0.12 (basic, $0.11 diluted) per common share), respectively, during the same periods in 2009. The following factors had a positive impact on the results for the third quarter and first nine months of 2010 compared to the same periods in 2009:
Concentrate sales are generally recorded as revenues at the time of shipment at forward prices for the estimated month of settlement, which may differ from average market prices. Due to the time elapsed between shipment of concentrates and final settlement with the smelters, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metal prices each period through final settlement. For the third quarter of 2010, we recorded positive adjustments to provisional settlements of $11.8 million compared to positive price adjustments to provisional settlements of $9.2 million in the third quarter of 2009. We recorded positive price adjustments for the first nine months of 2010 of $1.0 million compared to positive price adjustments of $17.6 million for the same 2009 period. The price adjustments for the 2010 periods related to zinc and lead contained in our concentrate shipments were partially offset by net gains and losses on forward contracts for those metals initiated in the second quarter of 2010 (see Note 11 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information). The net gains and losses on these contracts are included in revenues and impact the realized prices for zinc and lead. We recognized a net loss on the contracts of $5.3 million in the third quarter of 2010 and a net gain of $1.0 million in the first nine months of 2010. The differences between our realized metal prices and average market prices are due primarily to the aforementioned gains and losses on forward contracts and price adjustments included in our revenues resulting from the difference between metal prices upon transfer of title of concentrates to the buyer and metal prices at the time of final settlement.
The $13.2 million and $40.6 million increases in gross profit during the third quarter and first nine months of 2010, respectively, compared to the same 2009 periods were primarily the result of higher average market and realized prices in the 2010 periods for all metals produced at Greens Creek, with the exception of realized prices for zinc and lead in the third quarter of 2010, which were lower than those for the third quarter of 2009. Metals prices are further discussed in Results of Operations above. In addition, we achieved higher gold, zinc and lead production in the 2010 periods, partially offset by a 7% decrease in silver production for the first nine months of 2010, which was the result of lower silver ore grades compared to the first nine months of 2009. The ore grade variances are due to differences in the sequencing of production from the various mine areas as a part of the overall mine plan. As illustrated in the table above, we experienced an increase in silver ore grades during the third quarter of 2010, and we expect this trend to continue through the remainder of year. Gross profit at Greens Creek was also impacted by net positive price adjustments to revenues of $11.0 million and $0.7 million in the third quarter and first nine months of 2010, respectively. Comparatively, we
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Hecla Mining Company has a market cap of $1.73 billion; its shares were traded at around $6.9 with a P/E ratio of 21.1 and P/S ratio of 5.5. HL is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:
As a result of continued improvement in our financial condition, available capital resources, and strong operating performance, we believe that we are well positioned to seek opportunities for growth through both acquisitions and expansion of our current operations. One such opportunity involves construction of an internal shaft at our Lucky Friday mine (“#4 Shaft”), which, we believe, would significantly increase production and extend the life of mine. We have commenced with engineering and early construction activities on #4 Shaft, and management plans to seek final approval of the project by the Board of Directors no later than mid-2011 (see additional discussion in The Lucky Friday Segment section below). If approved, construction of #4 Shaft as currently designed is expected to cost a total of approximately between $150 and $200 million, including approximately $50 million that will have been spent by the end of 2010, and take an additional four years to complete. We believe that our current capital resources will allow us to proceed. However, there are a number of factors that could affect completion of the project, including: a significant decline in metals prices, a significant increase in operating or capital costs, or our inability to successfully settle or otherwise manage our potential environmental liabilities relating to historical mining activities in the Coeur d Alene Basin.Environmental litigation represents another of our significant risks. As discussed in Note 4 of Notes to Condensed Consolidated Financial Statements (Unaudited), the EPA has released for public comment its proposed plan for cleanup of the upper portion of the Coeur d Alene Basin, a plan with an estimated present value cost of $1.3 billion. This plan represents a significant increase from the EPA s 2002 Record of Decision with an estimated cost of $359 million for both the upper and lower portions of the Basin. We do not know the extent to which the EPA s proposal will be ultimately implemented, nor its effect on our current operations in the Basin, nor how our liability could be affected. As also mentioned in Note 4, we have resumed settlement negotiations regarding matters considered in our existing accruals.
For the third quarter and first nine months of 2010, we recorded income applicable to common shareholders of $16.4 million and $48.5 million ($0.06 (basic and diluted) and $0.19 (basic, $0.18 diluted) per common share), respectively, compared to income applicable to common shareholders of $22.5 million and $25.5 million ($0.10 (basic, $0.09 diluted) and $0.12 (basic, $0.11 diluted) per common share), respectively, during the same periods in 2009. The following factors had a positive impact on the results for the third quarter and first nine months of 2010 compared to the same periods in 2009:
Concentrate sales are generally recorded as revenues at the time of shipment at forward prices for the estimated month of settlement, which may differ from average market prices. Due to the time elapsed between shipment of concentrates and final settlement with the smelters, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metal prices each period through final settlement. For the third quarter of 2010, we recorded positive adjustments to provisional settlements of $11.8 million compared to positive price adjustments to provisional settlements of $9.2 million in the third quarter of 2009. We recorded positive price adjustments for the first nine months of 2010 of $1.0 million compared to positive price adjustments of $17.6 million for the same 2009 period. The price adjustments for the 2010 periods related to zinc and lead contained in our concentrate shipments were partially offset by net gains and losses on forward contracts for those metals initiated in the second quarter of 2010 (see Note 11 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information). The net gains and losses on these contracts are included in revenues and impact the realized prices for zinc and lead. We recognized a net loss on the contracts of $5.3 million in the third quarter of 2010 and a net gain of $1.0 million in the first nine months of 2010. The differences between our realized metal prices and average market prices are due primarily to the aforementioned gains and losses on forward contracts and price adjustments included in our revenues resulting from the difference between metal prices upon transfer of title of concentrates to the buyer and metal prices at the time of final settlement.
The $13.2 million and $40.6 million increases in gross profit during the third quarter and first nine months of 2010, respectively, compared to the same 2009 periods were primarily the result of higher average market and realized prices in the 2010 periods for all metals produced at Greens Creek, with the exception of realized prices for zinc and lead in the third quarter of 2010, which were lower than those for the third quarter of 2009. Metals prices are further discussed in Results of Operations above. In addition, we achieved higher gold, zinc and lead production in the 2010 periods, partially offset by a 7% decrease in silver production for the first nine months of 2010, which was the result of lower silver ore grades compared to the first nine months of 2009. The ore grade variances are due to differences in the sequencing of production from the various mine areas as a part of the overall mine plan. As illustrated in the table above, we experienced an increase in silver ore grades during the third quarter of 2010, and we expect this trend to continue through the remainder of year. Gross profit at Greens Creek was also impacted by net positive price adjustments to revenues of $11.0 million and $0.7 million in the third quarter and first nine months of 2010, respectively. Comparatively, we
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