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Hecla Mining Tanks After Lucky Friday Mine Closure Cuts 2012 Silver Production Estimate by 1.5Moz

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January 19, 2012 - 7:53pm

Top U.S. silver producer Hecla Mining Co. (NYSE: HL) announced on Wednesday, January 11th that it was lowering its 2012 silver production forecast to only 7 million ounces. This represented a 1.5 million ounce decline from the company's former 9.5 million ounce estimate.

 

The substantial production revision prompted a rapid decline in Hecla Mining's share price on the day. Hecla Mining Co.’s common stock fell by -$1.23 on Wednesday to close the day's trading session at $4.61, ending down a whopping -21.1% from its previous daily close.

 

To put this announcement in perspective, a 1.5 million ounce silver production decline roughly equates to a cut of just over 0.2% in global silver mining production that ran at 735.9 million ounces in 2011, according to the Silver Institute.  The same source estimated the total global supply of silver was 1,056.8 million ounces for the year.

 

Revised Production Forecast Due to Forced Lucky Strike Closure

 

Hecla Mining's announcement came in response to news that the company had recently suffered the closure of its key silver mining shaft at its flagship Lucky Friday mine located in northern Idaho's Silver Valley region.

 

The mile deep, high production silver shaft was ordered shut by U.S. federal investigators on January 5th after a rock burst accident occurred at the mine on December 14th of 2011 that caused injuries to seven mine workers. In addition, two fatal incidents at the mine had been reported in April and November of 2011.

 

The U.S. Mine Safety and Health Administration officials responsible for the closure reportedly required the company to clean up excess sand and concrete that had accumulated in the mining shaft after a pipe leak, and which posed a potential safety risk. 

 

CEO Says Lucky Strike Silver Production Could be Delayed Until 2013

 

If Hecla Mining is unable to successfully appeal the forced closure, company officials did not anticipate being able to resume silver production at its Lucky Strike mining facility until the first quarter of 2013.  The company will continue to operate its Alaskan Green's Creek silver mine to generate its remaining silver production.

 

In addition to anticipating having to lay off hundreds of mine workers during the cleanup, Hecla Mining's CEO and chairman Phil Baker estimated that meeting the mine's opening requirements imposed by federal officials will involve having remaining workers spend the rest of 2012 power washing the silver mine shaft to remove the undesirable accumulated material.

 

Dr. Jeffrey Lewis

www.silver-coin-investor.com

 

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About Dr. Jeffrey Lewis / Commentary Author

"In addition to running a busy medical practice, Dr. Jeffrey Lewis is the editor and publisher of Silver-Coin-Investor.com, where he provides practical information for precious metals investors".

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