MSHA orders Silver Shaft at Lucky Friday Mine closed for maintenance

January 11, 2012

The U.S. Mine Safety and Health Administration (MSHA) ordered the Silver Shaft at Hecla Mining’s Lucky Friday Mine closed for care and maintenance. The order effectively closes the shaft for a year and will cost the company and estimated 25 percent of its annual silver production.

The Lucky Friday Mine has experienced three accidents, two of them fatalities. The most recent was a rock burst at that injured seven miners.  In response to the accidents. Hecla was planning to construct a 290-m (750-ft) bypass creating a new haulage way at a significant distance from where rock bursts have occurred. That work is now on hold.

On Jan. 11 Hecla Mining shares hit a 52-week low of $4.25 as the company announced that MSHA order.  

During a conference call, Hecla officials said the closure will cost the company about 25 percent of its annual silver production forcing a reduction in 2012 silver guidance from the previous 295 t (9.5 million oz) to 217 t (7 million oz).

All of Hecla’s 2012 production will now come solely from the Greens Creek Mine in Alaska. Production at Lucky Friday is expected to resume in early 2013.

Hecla chief executive officer Phil Baker said that MSHA believes the shaft needs to be cleaned from surface to bottom to mitigate any hazards.

The Silver Shaft has generated few problems during its 30 years of operations, Baker noted. “We believe that we have operated that shaft in a completely safe manner,” he declared. The Silver Shaft is a one-mile deep shaft from the surface and the primary access to the Lucky Friday Mine. Sand and concrete material has built up over a number of years and is expected to be removed primarily by power washing, according to Hecla.

Baker said 200 Hecla employees and contractors will be impacted by the year-long closure. He hoped that some 40 to 50 of those employees will be temporarily transferred to the Greens Creek Mine, the redevelopment of the Star Mine in Idaho's Silver Valley, and at the San Juan Silver JV in Colorado's Creede District. Their work will be used to help accelerate those projects.

Hecla officials said the financial impact of the closure is minimal, but delays access to higher grader, deeper material at Lucky Friday. It was hoped that money generated from Lucky Friday could be used for new Hecla projects.

Baker said the company would not change its new silver price-linked dividend policy because of the temporary closure, which was initiated in November of last year.

During the conference call, fund managers expressed concerns that Hecla could be a potential target for a takeover since its stock price has tumbled with the closure announcement.



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