Court Overturns Hecla Verdict Mining Firm Won’t Have To Pay $20 Million Damage Award For Terminating Lease

Overturning a $20 million damage award against Hecla Mining Co., the Idaho State Supreme Court ruled Wednesday that the company properly terminated a lease in 1990 that shut down North Idaho’s Star-Morning mine.

The 4-1 decision threw out a 1994 award from a Wallace jury that could have returned $6 million to 132 miners and 50 creditors who claimed wages and services from the bankrupt Star Phoenix Mining Co.

But it spares Hecla, which posted a $40 million net loss in 1996, from a massive fine at a time when it is struggling.

“This has been a difficult issue for everyone, including many of our North Idaho neighbors,” Hecla Chairman Arthur Brown said in a statement. “However, the State Supreme Court came to the right conclusion.”

The court also ordered Star Phoenix to pay the hundreds of thousands of dollars Hecla ran up in attorneys fees defending its termination action.

John Magnuson, Coeur d’Alene attorney for Star Phoenix and its Spokane principals, Frank and Janice Duval, called the ruling an “emotional and financial setback” for company owners and North Idaho miners.

“A lot of people went down when the Star-Morning closed,” he said. “This is a considerable blow for all of them.”

The Star-Morning is a silver and zinc mine located at Burke, Idaho, six miles northeast of Wallace.

Star Phoenix leased the Star-Morning mine from Hecla in 1989 and was at full production a year later.

Star Phoenix had arranged a contract with Cominco Ltd. in British Columbia to buy the mine’s ores and had secured $3 million in revolving credit from Cominco and West One Bank. When Hecla revoked the lease, those loans were called.

Star Phoenix challenged Hecla’s legal right to terminate the lease and charged that Hecla had exacerbated the problem by notifying creditors when it terminated the mine lease.

However, the high court found that Hecla had acted properly in terminating the lease on grounds that Star Phoenix violated the condition that it protect the mine from any liens.

The court decision boosts Hecla’s fortunes at a trying time for the producer of gold, silver and industrial metals. Low metal prices and giant cleanup bills kept the company in the red last year, and led the Wall Street Journal to rank the company’s stock as one of the worst performers in the last decade.

Hecla, however, said it is encouraged by results at its Lucky Friday expansion project in Mullan, Idaho.

, DataTimes