February 13, 2008 in Idaho

Hecla purchasing silver mine in Alaska

By The Spokesman-Review
 

Silver producers

Top 10 silver-producing countries in 2006.

Peru 111.6 million ounces
Mexico 96.4
China 75.4
Australia 55.6
Chile 51.5
Poland 40.4
Russia 39.6
United States 36.7
Canada 31.2
Kazakhstan 26.1

Source: Silver Institute

Hecla Mining Co. will buy the world’s fifth-largest silver mine for $750 million.

The purchase of the Greens Creek Mine near Juneau, Alaska, will nearly double Hecla’s annual silver output, boosting company production to about 11 million ounces a year.

“It’s huge, really. We just bought something that’s almost as large as we are,” said Vicki Veltkamp, spokeswoman for Coeur d’Alene-based Hecla.

Rio Tinto, a London-based metals conglomerate, is selling the Greens Creek Mine as part of planned sell-off of $15 billion in company assets.

The mine’s sale is expected to close during the second quarter.

Hecla already owns a 30 percent stake in the underground silver mine, located on Admiralty Island, about 15 miles from Juneau.

Company officials have wanted to increase that stake for years, according to Veltkamp. However, “it hasn’t been for sale before,” she said.

In addition to silver, Greens Creek produces gold, zinc and lead. The mine’s mineral richness makes it a low-cost producer, Veltkamp said. Over a 10-year average, Hecla expects to mine silver for less than $2 an ounce.

Silver traded at just over $17 an ounce Tuesday. Over the past six months, the metal has shaken off 15 years of depressed prices to trade in the $12- to $17-an-ounce range.

Rising investor interest and increased industrial demand have helped bolster prices. In addition to jewelry, silver is used in batteries and electronics.

About 330 people work at the Greens Creek Mine, which is adjacent to Admiralty Island National Monument.

The island is home to high concentrations of brown bears. Because of the environmental sensitivity of the area, mine workers take a daily ferry to Juneau and are bused to the mine site.

Hecla will pay $700 million in cash for the Greens Creek Mine and $50 million in stock. Scotia Capital is providing $400 million in debt financing; Hecla will pay the remaining $300 million from its cash reserves.

Part of that money was raised in December through a preferred stock offering in anticipation of future mine purchases, Veltkamp said.


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