Hecla Mine Outlook Is Bleak Grouse Creek Gold Runs Out

Hecla Mining Co.’s chief executive told a Denver mining convention Tuesday that the future of its troubled Grouse Creek Mine in central Idaho looks bleak.

Hecla President Arthur Brown told a group of prospective investors Monday that he was “not terribly optimistic” about the future of the mine, Hecla spokeswoman Vicki Veltkamp said.

“Frankly, the future is uncertain at this time, and we don’t like that any better than anyone else,” Veltkamp said. “For now, we intend to keep mining the Sunbeam pit until next year, when that deposit will be played out.”

Grouse Creek was to have been the star of Hecla’s growing set of gold properties, promising up to 100,000 ounces of gold each year. Permitting and building the mine took more than half a decade, costing Hecla $100 million.

Situated near Challis and near a historic mining district that has produced lots of gold, Grouse Creek seemed to be a sure hit. Mining began in 1994, and initial results were good.

But then the grade of gold in the rock dropped precipitously. Geologists realized that the mine held only half the gold their computer models had suggested.

Unable to recover the huge investment, Hecla was forced to remove the value of the mine from its accounting books, a write-down of $97 million. Overnight, the company’s value was cut by a fourth.

The property contains two major pits where gold lies. The Sunbeam pit should be mined out by early 1997, and Hecla has been studying mining the nearby Grouse pit. The economics of mining that pit, at this point, aren’t favorable, Veltkamp has said.

That could mean the mine will close next year, and with it 200 jobs.

Custer County Clerk Ethel Peck said a mine closure would be a big blow to the Challis-area economy, but people in town are used to the booms and busts inherent to the mining business.

“I think people get numb with the mines going up and down,” she said.

Veltkamp said workers should have a better of idea of where their jobs stand by early next year.

“We’re working really hard on trying to figure out what the best avenue to take … for the company, the employees and the environment, and it’s going to take some time to make that decision,” she said.

Grouse Creek demonstrates how risky mining can be for companies. Even with the most modern geologic modeling technology that can create a three-dimensional model of a mine, mistakes can be made that cost tens of millions of dollars.

Hecla’s stock, which has traded near decade-lows since the Grouse Creek write-down, closed down 13 cents at $6.63 a share Tuesday.

, DataTimes