Hecla To Close Grouse Creek Mine Move Will Cost 200 Jobs In Challis
Hecla Mining Co. on Monday announced what Wall Street had long expected - the once promising Grouse Creek gold mine in central Idaho will close in 1997.
The move, which the company had hinted at for more than a year, will throw 200 people out of work at the town of Challis and immediately shave $28 million off the Coeur d’Alene-based company’s balance sheet.
The action turned a nearly break-even quarter into a disaster for Hecla, which racked up a $38.8 million net loss, or 76 cents per share, on revenue of $41 million for the quarter ended Sept. 30, 1996.
That compared with the same quarter in 1995 - another Grouse Creek landmark - when Hecla reported a $104.7 million loss, or $2.17 cents per share, on revenue of $44.3 million. It was that quarter when Hecla first disclosed the seriousness of gold reserves that never materialized at Grouse Creek and took a $97 million write down on the value of mine.
“We feel confident that this is the best decision we could make, considering the circumstances,” Arthur Brown, Hecla’s chairman and chief executive officer, said in a statement Monday. “We see a strong upturn in our future, and I’m optimistic about where we’re headed, especially on the silver side of our business.”
Investors apparently agreed, pushing Hecla’s stock price up 25 cents to $6.25 per share.
Hecla communications manager Vicki Velkamp said the board of directors Friday decided to close Grouse Creek in the second quarter of next year.
The company, which employs 1,300 people, will attempt to relocate as many workers as possible to other mines, she said. About 150 people work at the Lucky Friday silver and lead mine at Mullan, Idaho.
The board took the occasion to lump several expenses into a one-time adjustment of $38.1 million. In addition to the $28 million write down for Grouse Creek, Hecla during the quarter took an $8 million write down on the American Girl gold mine in southern California and set aside $2.3 million for the Coeur d’Alene River Basin clean up.
Before these write downs and accruals but after paying a $2 million dividend to preferred shareholders - Hecla recorded a net loss of $649,000, or 1 cent per share.
The third quarter loss was partially offset by a $1 million gain on the sale of the Apex mine in southern Utah, a $680,000 payment to the company to settle an engineering lawsuit and a $625,000 gain on the sale of a 75 percent interest in the Golden Eagle exploration project to Santa Fe Pacific Gold Corp.
Hecla said it produced 1.8 million ounces of silver and 122,000 ounces of gold during the first nine months of 1996.
Exploration into an area adjacent to the underground Lucky Friday looks promising, the company said. A main vein contains average grade of 21 ounces of silver per ton, or twice the grade currently mined.
“I’m enthused about the potential for this deposit to bring the Lucky Friday mine back to historic production levels of 4 to 5 million ounces annually, and with that, a return to profitability,” Brown said.
, DataTimes